STRATEGY, BUSINESS INFORMATION, AND ANALYSIS

Strategy, Business Information and Analysis

Strategy, Business Information and Analysis

Introduction

Michael Porter is a well-known expert in the field of strategic management, whose contributions to the field of strategic management has made long-lasting effects on the field of strategic management. One of his most important contributions is the five forces model, which he developed for the analysis of an industry and takes into account the five major forces that are making an impact on the performance of a company (Porter 2008, pp. 78). In this report, we will apply the five forces model of Michael Porter on the automotive industry of UK then we will discuss most important forces for organizations in the automotive industry, and finally we will discuss contributions of Michael Porter in the field of strategic management. According to the statistics, the UK auto industry has employed approximately one hundred and ninety thousand people from all over the country (See figure below). This industry generates revenue of around ten billion pounds per year in 2007. The contribution from the automotive industry accounts for about 5.6% of the total GDP of UK. The automotive industry is one of the most important industries of UK (Johnson and Whittington 2006, pp. 7).

Figure 1: Employment in automotive industry

An overview of UK automotive industry

After a period of sluggish growth, followed by a decline in value, the Western European automotive aftermarket sector is expected to stop contracting this year and grow at a stable rate through the forecast period. The wear & tear parts segment will contribute revenue of $4.3 billion in 2011, equating to 20.1% of the sector's aggregate value. The performance of the sector is forecast to accelerate, with an anticipated compound annual growth rate (CAGR) of 2% for the five-year period 2011-2015, which is expected to drive the sector to a value of $23.5 billion by the end of 2015. Comparatively, the French and German sectors will grow with CAGRs of 1.8% and 2.1% respectively, over the same period, to reach respective values of $25.6 billion and $40.7 billion in 2015 (Parker and McGinity 2006, pp. 93).

Five forces analysis of UK automotive industry

The automotive aftermarket market will be analyzed taking manufacturers of replacement automotive parts, such as service parts, wear & tear parts, mechanical parts, tires, crash repair and consumables & accessories, as players. The key buyers will be taken as those operating in the independent aftermarket, i.e. garages, fast fit businesses and tire specialists, or vehicle manufacturer networks (franchised dealerships of automotive manufacturers), and providers of metals, plastics and equipment for manufacture as the key suppliers (Harrison 2000, pp. 1).

Summary

Image 1: Summary of Porter analysis

Buyer power in the automotive aftermarket has decreased in recent years, with the liberalization of the sector, which has disrupted the near monopolistic dominance of vehicle manufacturing networks. New entrants need to operate scale economies to achieve success within this sector, with the need for extensive distribution networks and efficiency in production to compete against large ...