Essay Example on Threats to Toyota: New Entrants Low, Buyers High

Threat of new entrants - Low

The automotive industry is comprised of many barriers which discourage entrepreneurs from venturing into this field. For instance, the industry requires huge initial capital to begin operations consisting of distribution channels and manufacturing facilities. Hence, Toyota is not facing significant threats from new entrants into the automotive industry (Harvard Business Review, 2008).

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Power of buyers - High

Toyota is contending with a high number of buyers around the world due to its competitive vehicles price. The buyers flog the internet to look for the best prices and information about the latest vehicle designs. Toyota undertakes competitive innovation, which is preferred by buyers (Rothaermel, 2019). Also, association with various dealers around the world produces the net effect of high power of buyers.

Power of suppliers - Low

There is a high availability of raw materials used in the manufacturing of Toyota vehicles. Hence, the suppliers have limited influence over Toyota; consequently, their bargaining power is limited (Harvard Business Review, 2008). Moreover, a significant number of suppliers present in the worldwide automotive industry lacks strong control and ownership of supplies distribution, which eventually reach Toyota.

Power of substitutes - Moderate

The Toyota customers find it easy to shift into using the substitutes, which include; bicycles and public modes transportation, which is only moderately available. That is because there are some areas where public transport is not readily available, for instance, the suburbs. Therefore, Toyota is moderately threatened by the substitutes (Harvard Business Review, 2008).

Rivalry among competitors - Strong

The automotive industry is characterized by aggression with regards to marketing and innovation. Thus, Toyota competes with other well established automotive firms having adopted differentiation strategies which prove competitive (Harvard Business Review, 2008). The differentiation strategies range from cost, design, fuel efficiency, and among other variables.

Complements - Low

Toyota has voluntarily entered into a voluntary partnership with other producers in the industry. For instance, Toyota is partnering with Tesla in the production of the powertrain. This partnership is considered non-competitive as the products from the firms are rather different. Hence, complements do not pose a threat to Toyota (Harvard Business Review, 2008).

The automotive industry is competitive, as evidenced by the five force model analysis. Moreover, the regulatory demands around the world are seen to unstabilize the status quo present in the industry. The new regulations demand cleaner automobiles to be produced; hence, vehicle manufacturing companies need to invest more in the latest technology. Also, the market increasingly needs improved vehicles, for instance, the autonomous driving mode. Such changes in the automobile industry make the operational cost huge, which impacts the profitability of some companies (Rothaermel, 2019). Therefore, the automobile industry is not highly profitably, especially in the near future.

References

Harvard Business Review. (2008). The Five Competitive Forces That Shape Strategy. Retrieved 22 August 2019, from https://www.youtube.com/watch?v=mYF2_FBCvXw

Rothaermel, F. (2019). Strategic Management (4th ed.). McGraw-Hill Higher Education. ISBN: 9781259927621.