...Introduction The automotive manufacturing industry began in the late 1800’s and has undoubtedly changed mankind forever. General Motors Corporation is one of the leading automotive manufacturers in the world. GM is a corporation that designs, builds, and sells cars and trucks. GM owns 18 brands some of which include Chevrolet, GMC, Cadillac, and Buick. The company operates in 160 countries, employs roughly 207,000 people, and is one of the world’s largest vehicle manufacturers (IBIS World, 2015). The automotive industry in the United States is worth $123 billion and has $5.2 billion in annual profit (IBIS World, 2015). It is spread across 3 main competitors. Toyota Motor Corporation, which holds 17.5% of the market share, General Motors Corporation, which holds 16.3% and Ford Motor Company, holds 11.3% of the market share in this industry (Mergent Online, 2015). Over the last 5 to 10 years the automotive industry in the United States has continuously fluctuated. As a result of the economic downturn, GM filed for Chapter 11 bankruptcy in June of 2009 and was bailed out by the U.S. government. During the Chapter 11 bankruptcy, GM eliminated about one-third of its plant assets and workforce and reduced its debt from nearly $95 billion to $17 billion. GM has bounced back tremendously, by releasing brands such as Saturn and Hummer in an effort to cut costs, and in 2014 the company made $152 billion in revenue (Mergent Online). Other automotive companies have struggled...
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...THE CASE OF THE UNIDENTIFIED INDUSTRIES The analysis of the balance sheets and financial ratios enable us to match five different industries with respect to the corresponding financial structure reflected in the balance sheet. The low collection periods make B or E either one of GM retail, or apparel. That leaves Automobile, Electric Utility and Automated Test Equipment / Systems at A,C or D. Discounted general merchandise corresponds to B. The low collection periods make it one of B or E. However, the business cannot be negatively profitable. Hence it’s not E. The fast nature of the goods being sold at the retailer gives rise to quick inventory turnover. Thus matching industry is one of B. The low margin high volume gain that is common strategy in the industry gives rise to marginal profitability (1.5%) and a higher asset turnover ratio (3.25) resulting in economies of scale and rapid growth. This puts discounted general merchandise to most closely match to B. The investment in property and equipment is also second highest, owing to the investments in real estate and tools and equipment to manage the fast moving nature of the goods being sold. Additionally, this contributes to the lowest collection periods of 4 days, since the collection is upfront against the purchase of goods. Upscale Apparel : The matching industry is E. Also, the industry faces stiff competition and companies need to innovate continuously to remain profitable. This snapshot from 2009 may be representative...
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...QUESTION: Choose an industry in which you would like to compete. Use the five forces method of analysis to explain why you find that industry attractive. Porter’s Five Forces Method Industry: Car service industry Introduction Michael Porter is a professor at Harvard Business School and is a leading authority on competitive strategy and international competitiveness. Five forces uses concepts developing, Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the industry profitability. Five Forces Analysis assumes that there are five important forces that determine competitive power in a business situation. These are: 1. Supplier Power: Here you assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on. The fewer the supplier choices you have, and the more you need suppliers' help, the more powerful your suppliers are. In the car service industry, for company owned players the bargaining power of suppliers is less as it can get constant supply of spare parts including OEM parts (Vehicle manufacturer’s brand) and OES parts (reputed brands of component manufacturer’s either domestic or international, supplying to vehicle manufactures or aftermarket)....
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...Reverse Logistics in Indian Automobile Industry Reverse Logistics is a process in which a product moves in reverse through the supply chain network. It may be used for the purpose of recapturing value of a final product or for even proper disposal. It may also be termed – service, as the process of planning, implementing and controlling the efficient and cost effective transfer of raw materials, in-process inventory, finished products and related information, from consumption to the point of origin, for the purpose of recapturing value of proper disposal. While the primary sectors involved in making use of this process may be classified as the Pharmaceutical Sector, Retail sector, Automobile sector and the Electronics sector, we are mainly about to focus all our attention to the practices of ‘Reverse Logistics’ in the Indian Automobile Industry. To truly know why the whole idea of ‘Reverse Logistics’ assumes significance when considered in terms of the Automobile Industry, first we need to think of the nature of the final product i.e. Automobiles or Vehicles as we call them. The parameter one needs to look at is the life cycle of the product and what happens to the final product once it reaches the end of its useful life. By its very nature, it’s difficult to predict the life cycle of the final product. This is because; it is highly susceptible to the nuances of the human subjectivities. But even if we are unable to predict the duration of the life cycle, we have definitely...
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...three percent of the hybrid and electric vehicle manufacturing industry.2 This report will extensively discuss the five competitive forces that influence HEV and EV manufacturing industry and how Tesla should evolve their business strategy to account for these industry forces.3 The HEV and EV manufacturing industry solely includes firms within the United States for the purposes of this report. The industry manufactures automobiles that utilize electric motors for compulsion, as opposed to traditional gas powered automobiles. It is an emerging industry currently in the growth stage. The industry is highly concentrated with just three major players, Toyota Motor Corporation, Ford, and Honda Motor Company Ltd. The industry is profitable and expected to grow another 6.3% annually the next five years.4 In this industry the threat of new entrants is weak for a variety of reasons. First, expensive and expansive manufacturing plants are utilized by all major firms in this industry, enabling leaders to produce larger volumes of HEVs and EVs than their competitors with fewer manufacturing resources. Considering firms in this industry produce relatively large volumes at lower costs, supply-side economies of scale deters the threat of new entrants. Second, capital intensity in this industry is high, these enormous capital requirements to enter the industry also deters the threat of new entrants.4 Third, major firms in the industry have incumbency advantage due to strong reputations for manufacturing...
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...shape defines the five forces that shape competitive rivalry and is relevant to industry profitability. Each new entrant to an industry faces competitive pressures from: • Buyer bargaining power and seller buyer collaboration. • Companies in other industries to win buyers over to substitute products. • Supplier bargaining power and supplier-seller collaboration. • The threat of new entrants into the market. • Rivalry among competing sellers to attract new customers. For a new entrant to the automobile industry there is generally a very low threat. In order for a new entrant to be successful they must be able to mass-produce. Due to the expense of mass production, a new entrant must have a large amount of capital to compete in the automobile industry. Buyers and customers both have high bargaining power when purchasing an automobile. Buyer power is strong when a consumer has a multitude of products to choose from. An example would be choosing to purchase a Ford Expedition or Chevrolet Tahoe. Both are similar in size, gas mileage per gallon, seating and engine size. Each vehicle is produced by a different manufacturer which gives the consumer the ability to create competition. In addition manufacturers are forced to create quality automobiles in order to maintain customer satisfaction. Supplier power for new entrants is very low. According to the Texas Automotive Industry Report automotive parts and equipment in 2004 were valued at 1.6 trillion worldwide...
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...U.S. Motor Vehicles and Parts Industry Profitability Analysis (Using Porter’s Five Forces of Competition Framework) Introduction This paper will focus on the U.S. automotive industry and the low profitability it is currently experiencing. The U.S. auto industry can be considered an oligopoly with just three main players; General Motors (GM), Ford and Chrysler – known as the Big Three. From 1999 thru 2005, this segment recorded only 9.8% ROE, ranking it 36 out of the 50 industries (on page 68), resulting in the bottom 28th percentile. The industry’s profitability can be considered low, based on its ranking in this list of U.S. industries (against Japanese rivals, the Big Three made about $3800 less per car/truck and shrinking market share, 1996 - 74%, 2001 - 65%, 2006 - 57%). Working against the industry are high labor costs (labor costs for the Big Three are about 10% more per vehicle, or $1500 per vehicle, than Japanese), rising health care costs for an ageing workforce (Toyota competitive advantage is $900-$1400 per vehicle just on healthcare per vehicle costs), rising fuel and raw material costs, ever toughening competition from Japanese and Korean manufacturers, and the struggling U.S. dollar (yen advantage in current exchange rate). The following overview will use Porter’s Five Forces to show why the auto industry is experiencing such low profitability. The two Forces working against the industry (strong forces against profits) are (1) strong rivalry among competitors...
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...41 Asia-Pacific Business Review Vol. VI, No. 2, April - June 2010 pp. 41-49, ISSN: 0973-2470 Capital Structure and Product Market Determinants: Empirical Evidence from the Indian Automobile Industry Himanshu Joshi This paper provides insights into the way in which the capital structure is determined by product market determinants, research and development activity and profitability. This paper is an attempt to test relevance of empirical evidences found in matured markets to the Indian market condition. Automobile industry is taken up for the study because of its oligopoly nature and easy availability of product prices. Some of the results are very different from the similar studies conducted in the advanced economies. It is found that the firms in the same industry can have different capital structures and there is a negative correlation between the profitability and capital structure of the companies. Interestingly, no correlation is found between R&D expenses and capital structure of the company. It was also concluded that no extra market power is attained because of high leverage. Keywords: Capital Structure, Product Market, Market Structure, Profitability, Market Power, Capital Expenditure Introduction Capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities. A firm’s capital structure is thus, the composition or ‘structure’ of its liabilities. The modern theory of capital structure began...
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...3 Industry Analysis: The Fundamentals When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact. —Warren Buffett, Chairman, Berkshire Hathaway The reinsurance business has the defect of being too attractive-looking to new entrants for its own good and will therefore always tend to be the opposite of, say, the old business of gathering and rendering dead horses that always tended to contain few and prosperous participants. —Charles T. Munger, Chairman, Wesco Financial Corp. OUTLINE n n n n n INTRODUCTION AND OBJECTIVES FROM ENVIRONMENTAL ANALYSIS TO INDUSTRY ANALYSIS THE DETERMINANTS OF INDUSTRY PROFIT: DEMAND AND COMPETITION ANALYZING INDUSTRY ATTRACTIVENESS Porter’s Five Forces of Competition Framework Competition from Substitutes Threat of Entry Rivalry Between Established Competitors Bargaining Power of Buyers Bargaining Power of Suppliers APPLYING INDUSTRY ANALYSIS Describing Industry Structure Forecasting Industry Profitability Strategies to Alter Industry Structure 66 INTRODUCTION AND OBJECTIVES 67 n n n n DEFINING INDUSTRIES: WHERE TO DRAW THE BOUNDARIES Industries and Markets Defining Markets: Substitution in Demand and Supply FROM INDUSTRY ATTRACTIVENESS TO COMPETITIVE ADVANTAGE: IDENTIFYING KEY SUCCESS FACTORS SUMMARY NOTES INTRODUCTION AND OBJECTIVES In this chapter and the next we explore the external environment of...
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...From a humble origin as a ‘horseless carriage’ manufacturing industry dating back to 1890s, the automobile industry has come a long way emerging as market leader in manufacturing activity, providing employment to one in seven people, either directly or indirectly. Hailed as the ‘industry of industries’ by the Management Specialist, Peter Drucker, the automobile industry (US) set standards in manufacturing activity by contributing mass production techniques during early 1910s. The Japanese soon followed by offering lean production techniques in the 1970s. Riding high on economical revival in many developing countries in Asia and Europe, the industry’s global output touched 79,9 million vehicles in 2011. But with a downward slide in market share, the Big Three, Ford Motor Company (Ford), General Motors Corporation (GM) and DaimlerChrysler (DC), was fast losing their dominant position to Toyota, Honda, and Nissan, thereby setting the ground for the emergence of New Six. The report on “Automotive Industry Analysis” consists on a comparison between the Big Three and New Six. Ford, General Motors and Toyota are taken as examples. I. Industry Overview Hailed as ‘the industry of industries’ by Peter Drucker, the founding father of the study of management, in 1946, the automobile industry had evolved continuously with changing times from craft production in 1890s to mass production in 1910s to lean production techniques in the 1970s. The prominent role played by the US till...
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...3 Industry Analysis: The Fundamentals When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact. —Warren Buffett, Chairman, Berkshire Hathaway The reinsurance business has the defect of being too attractive-looking to new entrants for its own good and will therefore always tend to be the opposite of, say, the old business of gathering and rendering dead horses that always tended to contain few and prosperous participants. —Charles T. Munger, Chairman, Wesco Financial Corp. OUTLINE n n n n n INTRODUCTION AND OBJECTIVES FROM ENVIRONMENTAL ANALYSIS TO INDUSTRY ANALYSIS THE DETERMINANTS OF INDUSTRY PROFIT: DEMAND AND COMPETITION ANALYZING INDUSTRY ATTRACTIVENESS Porter’s Five Forces of Competition Framework Competition from Substitutes Threat of Entry Rivalry Between Established Competitors Bargaining Power of Buyers Bargaining Power of Suppliers APPLYING INDUSTRY ANALYSIS Describing Industry Structure Forecasting Industry Profitability Strategies to Alter Industry Structure 66 INTRODUCTION AND OBJECTIVES 67 n n n n DEFINING INDUSTRIES: WHERE TO DRAW THE BOUNDARIES Industries and Markets Defining Markets: Substitution in Demand and Supply FROM INDUSTRY ATTRACTIVENESS TO COMPETITIVE ADVANTAGE: IDENTIFYING KEY SUCCESS FACTORS SUMMARY NOTES INTRODUCTION AND OBJECTIVES In this chapter and the next we explore the external environment of...
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...US AUTOMOBILE INDUSTRY ANALYSIS [pic] Written By: Jennifer Duhaney & Presented to: Professor Kurt Wurthman March 17th, 2011 MAN 4720 1. Industry Overview The US automobile industry has evolved over the years from steam engines, to internal combustion engines, to gas powered engines, and presently the newest innovations, alternative fuel engines, and electric cars. Henry Ford built the first car in 1896, (Gale, 2003). and then revolutionized the industry when he invented the assembly line.(David Highfill, Matt Baki, Sean Copus, Matt Green, Jennifer Smith, Matt Whineland). This invention allowed mass production which lowered the costs of automobiles for consumers. The industry includes a number of car manufacturers competing with each other in their competitive priorities, and competitive capabilities to capture market share. The major players in the industry are, the big three US automakers, Ford Motor Company, DaimlerChrysler, and General Motors. The major Japanese players who are also a part of the US auto industry are Toyota, Nissan and Honda. Ford, Chrysler and GM account for approximately 76% of US passenger Vehicles, Toyota, Nissan and Honda, Subaru and Mitsubishi account for 18%. The European automakers, BMW and Mercedes makeup nearly 2%. (Global Foresight, Inc. 2006 Report on Industry Trends). Over the years several mergers and acquisitions occurred within the industry and contributed to this global view. Some of the mergers and...
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...COMPANY REPORT: TATA MOTORS Chapter 1 INTRODUCTION India has been one of the largest automobile industry in the world. The growth of this industry had been one of the fastest globally but due to various reasons the growth has unacceptably declined in the present day. Passenger car and commercial vehicles manufacturing industry of India stands in the sixth position in terms of volume, 3.9 million units were produced in 2011. India saw a growth from 16 to 18 percent of sales during 2011 to 2012.Earlier Brazil was ahead of India in terms of volume production. India managed to surpass the old and new auto makers such as Belgium, United Kingdom, Italy, Canada, Mexico, Russia, Spain and France. India managed to beat Thailand in 2010 and came forward to third position from fourth position the previous year in being Asia’s largest exporter of passenger cars. By 2015, the Society of Indian Automobile Manufacturers predicted that the annual vehicle sales will increase to 4 million. India’s car manufacturing industry can be largely divided into three hubs i.e. the south, west and north. Chennai in the southern cluster contributes 35% of the share of revenue. Mumbai and Pune in the western cluster is responsible for contributing 33% of the revenue and the National Capital region in the northern hub contributes 32%. Ford, Hyundai, Daimler, BMW, Hindustan Motors, , Nissan, Caparo, Mini, Renault, Mitsubishi, and Datsun have their operating station in Chennai. General Motors, Tata Motors...
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...was combining of forces that was supposed to take the automobile industry in storm and it would turn off work customers the best luxury and affordable cars under one company name. However, why is it that simple Google search of DaimlerChrysler produced such results that have the world failed merger and merger problems. Why is it that just eight short years after the merge became final that this match made in heaven resulted in a divorce made in hell. To understand the organizational culture clash the Daimler&Chrysler face to times the merger we must first step back and look how these two companies shape their cultures. In 1886 the Gottlieb Daimler was faced with the unique challenge of revolutionizing the current form of transportation which at that time was horses and wagons. Daimler’s original focus was on the quality of the automobile as shown to German engineering. To prove this to weary customers he created the motto “The best or nothing”. By the mid 1990’s the Daimler midnames were synonymous with wealth, luxury, quality performance. Daimler was able to achieve this in part mainly because they are highly renowned research and development teams. In 1996 they spent a total of 8.8 billions of dollars on research and development alone. Chrysler had a relative more humble upbringing the net of Daimler. From young age Walter Chrysler was fascinated machinery and engineering. While working at Buick (American automobile division of the American manufacturer General Motors)...
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...Motors 1. Describe the economic characteristics of the global motor vehicle industry. The characteristics of the global motor vehicle industry are a boom in certain places and a bust in others all due to economic conditions in different nations. Four years after tow of Detroit Michigan’s big three went into bankruptcy American car makers are going “full throttle” with sales in August hitting an annual rate that if substantiated can take them back over 16 million and that is a rate that was last hit before the economic crisis and 80% higher than 2009 when GM and Chrysler went into bankruptcy. The opposite is happening in Europe being in its sixth year slump now and with a weak economy, high petroleum prices and an aging population being weighing factors on mass market car makers. This has led to cost cutting and over capacity for European car makers. This seems to be a trend worldwide as well as car makers are depending on there luxury brands to make them profitable. Tata has seen a profit due to Jaguar and Land Rover surging there net sales up 71% to 566 million dollars and raising revenues 31% to 568.82 billion rupees. This came dispute as the company said “a weak operating environment in the India business which was more than offset by increasing wholesale volumes and richer product and market mixes at JLR”. This is similar to Renault depending on Nissan and sales of cars produced in low cost factories in Romania to cover domestic losses. Mercedes and BMW are generating...
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