Porter’s Five Forces

1.  Rivalry among existing firms:   This force would be considered as being strong.  There is a large amount of competition evident here.  This is shown mainly through the sheer number of firms in the industry.  Also, there are a portion of firms that have not been able to keep up with the pace of others.  The competition is too great for these firms, and some of them are not going to be able to stay competitive in this industry.

2. Threat of New Entrants:  This force would be considered to be low for this industry.  There are already so many firms competing here that there is not any room for a new entrant to come in.  The fact that some firms existing in the industry are not being able to compete shows that there is a large amount of heavy competition in the industry, and that a new entrant would probably have little success in penetrating the industry.  While low, there can still be an opportunity for a new entrant if the firm has some type of strong competitive advantage that will offset the saturation of competitors in the industry.

3. Buyer Power:  This force would be considered as being medium to strong.  This is a result of the industries dependence on the consumer purchases of vehicles.  While one customer not purchasing a vehicle will not hurt the industry, if a number of consumers began not purchasing vehicles it would have an affect on the industry as a whole.  Also, the fact that the industry experiences its most success from purchases of large numbers of light-vehicles is a factor (S&P, 2004).  If the trend of consumer purchases changes it could adversely affect the industry.

4. Supplier Power:  This force would be considered to be medium to strong.  This is because the industry is very dependent on the availability of steel (Value Line, 2004).  The supply of affordable steel is not as great as it once was.  This is giving the suppliers of this commodity more and more say in the success of firms in the industry.  While steel can be found at decent prices, not as geed as they once were, internationally, any increases in the price of this material will do great harm to the financials of the industry.  This will really hinder the ability of the firms in the industry to produce their offerings at profitable rates.  A way to offset this fact would be to realize a different and cheaper alternative to steel that could be used in the manufacturing of products.

5. Threat of Substitute Product or Services:  This force would be considered to be medium.  There are many substitutes as far as transportation is concerned.  A consumer could choose to take a train, plane, or bike to get from one place to another, but the fact remains that the automobile is the main form of transportation that is used.  There are many different substitutes that could pose a problem for the industry by reducing the amount of vehicle usage.