Rishita

Sharma
43433342

Toyota Motor Corporation: Launching Prius

Q1) How attractive is the automobile industry?
The automobile industry is labour intensive and requires a high capital to operate. The main costs incurred in
producing and selling automobiles include labour as it is a labour intensive industry, despite the presence of
machines and robots in the manufacturing unit the amount of labour needed is large; Advertising is another major
cost for automobile manufacturers, they use market research to know the consumer preferences and trends and
spent large amounts of money on print and broadcast advertising. To attractiveness of the industry can be
determined by evaluating the industry according to the Five Force model, which is commonly used in strategic
planning and evaluating companys competitive position. This model includes three forces that refer to the
competition to the company from external environment and the other two refer to the internal threats.
Porters Five Force model on automobile industry
1.

Barriers to entry: Globalization is increasing and hence the tendency of companies to move from
national and domestic markets to a worldwide environment is a major factor affecting the automobile
market. It is getting easier for global firms to set up manufacturing units in various nations. Therefore
the priority of the manufacturers should be to address the needs of the consumers and businesses.

2.

Threat of Substitutes: An automobile manufacturer is not only threatened by manufacturers in his

own segment but also by the manufacturers in other segments. A consumer before deciding the mode
of transportation will always look at the convenience and the cost incurred in transportation. The price
of fuels has a substantial effect on the decision of the consumer. Therefore in analyzing the threats
posed by other manufacturers the company should always evaluate the factors such as cost, personal
preference, time etc.

3.

Competitive Rivalry: The automobile industry is considered to be an oligopoly industry i.e a market
where in the competitors are very few and hence the actions of one will substantially effect the other.
This helps in minimizing the effects of price based competition. Price based competition does not
necessarily increase the market share of the company, still the companys have started offering options
such as long term warranties, 0% interest financing and rebates.
1

Course code: MGTS 7303

Course Title: Principles of strategic management
Assignment Title: Case presentation

 Rishita Sharma
43433342
4.

Bargaining Power of the Suppliers: The suppliers of automobile parts hold very little power as
many suppliers rely on one or two automakers for buying the majority of their product. If a company
switches the supplier, the previous supplier loses all his business. Therefore they are extremely
vulnerable to the demands of the automaker and hold very little power.

5.

Bargaining Power of Buyers: Consumers have unchallenged buying powers as they can become
dissatisfied with the product and shift from one manufacturer to other.

Q2) Does the hybrid power train technology make the industry more or less attractive? Why?
The power train industry makes the automobile industry more attractive as it creates another segment in the
industry, the powertrain technology provides consumers with a cost effective and efficient alternative for
transportation and it gives the automobile companies the assured market share. The power train technology
gives fuel efficiency to the buyer, which is of utmost importance as the fuel prices are increasing rapidly. This
technology substantially eliminates the threat posed by substitutes as it gives the customers another substitute
if they feel dissatisfied with the current product.

Course code: MGTS 7303

Course Title: Principles of strategic management
Assignment Title: Case presentation