According to Griffin and Shen(2013), the automotive industry generated an annual domestic revenue of $2.3trillion USD and annual global revenues of $9 trillion USD. As of the December 2017, the industryemployed over 2.
9 million people in areas such as manufacturing and retailtrade (“National Employment,” n.d., Seasonally Adjusted Table). The following five industry forceswithin the automotive industry are the most important factors that executivesshould consider:1. Bargainingpower of buyers: As buyers get more sensitive to prices, they would switch toany other brand that would offer greater value for the money they are willingto spend. 2.
Bargainingpower of suppliers: nowadays, car manufacturers are becoming systemintegrators, thus relying heavily on their suppliers 3. Rivalrybetween established competitors: competition is fierce and car makers should pay great attention to theircompetitors. 4. Threatof entry: The costs of entering the market is very high, which would create abarrier to new entry. 5.
Threatof substitutes: Other availabletransportations don’t impose a great threat to the car’s market, since they arenot as convenient as cars. To optimize their return on capitalemployed (ROCE) and increase profit margins, CEOs need to consider investing innew technologies to address the increase in regulations with respect to theenvironment and safety standards (Mohr et al., 2013, page 10); maximize theirbuying powers to minimize the cost of goods by partnering with varioussuppliers; maximize their inventory turnover using electronic data interchange;and minimize their capital deployment through outsourcing (Grant, 2016, page 62)A report by KPGM (2017, page 9),indicates that 50% of automotive executives believe that battery electricvehicles to be the #1 trend, followed by connectivity and digitalization, andTesla seems to be leading the industry in manufacturing electric vehicles. Tesla is well positioned in themarket for electrical vehicles (EV) automakers; currently, it offers fourmodels that cater to different needs and classes.
It offers the Roadster, which is a high-endcar that starts at around $200,000, and it also offers the Model 3 car thatstarts at $35,000. To demonstrate theirsuccessful position, Tesla’s Model S held the first position in EV sales in thefirst half of 2017, where the company sold 11195 Model S (Klippenstein, 2018) Steinbuch (2015) lists seven reasonson why Tesla has been so successful, and others may have failed:1. Technology:Tesla’s battery technology is so advanced that other companies use theirbatteries. 2. Timing:Tesla’s entry to market was at the right place at the right time.3.
Monopoly:Tesla is moving towards dominating the high-end electric sports car by theirRoadster model.4. Team:Their team is a diversified team that has great engineering and sales skills.5. Distribution:Tesla’s is working on expanding their factory to the Gigafactory, which will beable to produce cars at much higher rates.
6. Durability: It seems that a 2014 Tesla Model S has beenin taxi services for over three years and surpassed the 250,000-mile mark,which is uncommon to in the EV market (Szymkowski, 2018) 7. Secrets:Tesla knew that it needed to design cool EV for the famous eco-consciousdrivers As population increases, the demandfor a more efficient and affordable car that meets regulations and standards ison the rise, and the auto manufacturer that capitalizes on this idea willdevelop a competitive advantage and increase their market share in this area ofmanufacturing.
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com/electric-vehicle-sales-united-states-2017-half-year-update/Accessed 14 Jan. 2018.KPMG. (2018). Global AutomotiveExecutive Survey 2017. online Available at:https://home.kpmg.com/xx/en/home/insights/2017/01/global-automotive-executive-survey-2017.
htmlAccessed 14 Jan. 2018.Mohr, D., Müller, N., Krieg, A.,Gao, P., Kaas, H.
, Krieger, A. and Hensley, R. (2013). The road to 2020and beyond: What’s driving the global automotive industry?.
online Availableat:https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/the-road-to-2020-and-beyond-whats-driving-the-global-automotive-industryAccessed 14 Jan. 2018.National Employment. (n.d.
).Retrieved January 12, 2018, from https://www.bls.gov/iag/tgs/iagauto.htm#emp_nationalSteinbuch. (2018). 7 ReasonsWhy Tesla Has Been So Successful.
online Available at: https://steinbuch.wordpress.com/2015/01/22/7-reasons-why-tesla-has-been-so-successful/Accessed 14 Jan. 2018.Szymkowski, S.
(2018). TeslaModel S durability: cars with 250K and 300K miles still humming along happily.online Green Car Reports. Available at: https://www.greencarreports.
com/news/1112465_tesla-model-s-durability-cars-with-250k-and-300k-miles-still-humming-along-happilyAccessed 14 Jan. 2018.