IndexIntroductionThe Automotive IndustrySensitivity of the Automotive Industry to the US Business CycleStructure and Performance of the Automotive IndustryThreat of New CompetitorsThreat of SubstitutesThreat of RivalryBargaining Power of CustomersBargaining Power of SuppliersGM Business StrategyConclusionReferencesIntroductionThe The automotive industry is made up of numerous companies that design, produce, sell and market motor vehicles. This industry is one of the largest revenue generators worldwide, with total revenues of approximately $4 trillion. The main products in this sector include passenger vehicles, light trucks (which include vans, SUVs and pick-ups) and commercial vehicles. Over the years, Chinese, Korean, American, Indian and German companies, among others, have increased vehicle production to meet the demands of a growing market. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay One such company is General Motors (GM), founded in 1908 and is now ranked among the leading vehicle manufacturers, designers, and marketers worldwide. GM is currently ranked among the top revenue generators in the United States. It has 173,000 employees and in 2018 generated revenues of $147.049 billion and net income of $8.014 billion. The company produces its products in 37 countries, under brands such as Cadillac, Buick, Chevrolet and GMC. GM also produces hybrid electric vehicles, extended-range electric vehicles, flexible fuel vehicles, and military hydrotech vehicles. This broad product offering has enabled GM to become a world-renowned vehicle manufacturer and seller and thus consolidate its position in the automotive market. The Automotive Industry Companies in this industry produce, design and sell their vehicle products globally. However, the automotive industry does not include organizations such as service stations and vehicle repair shops, which are responsible for maintaining vehicles. The industry was founded in 1860, with the United States leading in production. Demand for vehicles has increased since 1929, when there were approximately 32,028,500 vehicles worldwide, most of which were produced in the United States, but by 2010 the number had reached 1 billion vehicles. For many decades the United States led other countries in production, but over time countries such as China and Japan surpassed the United States and sold more units of vehicles than before. Additionally, there are many more vehicle models in the United States than in previous decades. Most individuals in developed economies use vehicles as their primary mode of transportation and thus the demand for vehicles has been high. However, a report by McKinsey & Company (2013) found that vehicle profits and sales will increase by 50% and there would be growing demand for vehicles from BRIC (Brazil, Russia, India and China) markets. In contrast, the sector has slowed down in developing countries and this trend may continue for the foreseeable future. It is therefore important for industry organizations to realize that challenges based on changing consumer trends, divergent markets, digital demands, cost pressures due to platform sharing and regulatory pressures will significantly affect the industry. The major vehicle manufacturers in the industry rely on production are Toyota, Volkswagen Group, Hyundai, GM, Ford, Nissan and Honda. Many manufacturers in the automotive industry usually enter into partnerships in order to improve their owneconomies of scale, increase brand recognition and increase profits and revenues. For example, Daimler AG has a stake in Mitsubishi Fuso Truck and the Renault-Nissan Alliance, while GM has a stake in SAIC Group and GM Korea. This has ensured that the industry produces diverse and unique vehicles, satisfying diverse consumer demands. Sensitivity of the automotive industry in the US business cycle Although the automotive industry contributes significantly to the GDP growth rate in the US business cycle due to its linkages with other sectors of the economy, it represents a very small fraction of total GDP (OECD , 2009). The business cycle and this sector work in unison, but the impact of the cycle is greatest in the automotive sector. Therefore, the sector is more volatile than other manufacturing sectors in general because it is highly dependent on the economic cycle. Therefore, the automotive industry has been significantly affected by recessions that have reduced consumers' spending power. However, a positive change in market conditions should also improve auto sales. During the financial crisis of 2008-2010, many American, European and Asian auto manufacturers were affected. Furthermore, rising fuel prices due to the 2003-2008 energy crisis, poor real estate market and tight credit conditions have further weakened the sector (Das, 2008). As a result, the sale of SUVs and pickups has declined in American companies such as GM, Ford and Chrysler (The Big Three) due to the high fuel consumption of their vehicles as consumers have switched to using hybrid vehicles and other fuel-efficient vehicles. This resulted in reduced sales, and in 2008 the credit crunch worsened the industry's ability to obtain raw materials at affordable prices. Automakers have therefore implemented creative marketing strategies to retain old customers and acquire new ones during the trough of the economic cycle. The Big Three and other manufacturers offered significant discounts on their products, but this did not increase sales. In particular, the Big Three were accused of selling expensive vehicles at a time when fuel prices were a challenge, and this forced consumers to switch to smaller, more affordable vehicles from Europe and Japan. As a result, the US government stepped in to save the market. the automotive industry costing $80.7 billion between 2008 and 2014 (Amadeo, 2019). This helped GM and Ford stay in business and prevent job losses for their employees. The industry believed that the losses were caused by external business factors that they could not control. This shows that when corporate markets suffer, automotive companies suffer too. During the recession, auto sales in the United States declined, which impacted both domestic and international manufacturers. However, GM filed for bankruptcy in June 2009, but soon emerged from this bankruptcy the following month. It is evident that the US economy and business cycle largely affect the industry. A reduction in consumer credit during the recession resulted in reduced vehicle sales as the average consumer with limited credit was unable to obtain a loan to purchase a vehicle. In 2012, vehicle sales in North America were 17 million units, up from the previous period. years. This is because by this point the effects of the economic downturn had mitigated, so consumers had better spending power.Additionally, instabilities in the American job market and consumer finances discouraged consumers with a working car from purchasing another at the time and this affected the production of most manufacturers. Therefore, vehicle sales are cyclical because they rise and fall over time. The economic downturn was very severe until American vehicle sales fell below the replacement rate of 15 million, but this figure improved to 17 million in 2015. However, there are now concerns that sales of vehicles worldwide have reached their peak again and may decline in the coming years. years. The economy is strong at the moment, but industry analysts are concerned because vehicles are expensive and the industry employs a large number of people (Business Insider, 2019). Therefore, the above factors are now considered a recession indicator that the industry can follow to determine its position in the business cycle. Companies in the industry have gone bankrupt and faced challenges during the recession, but routine recessions do not have a significant impact on the industry. The idea that vehicle sales are now peaking and can only decline is gaining traction, as analysts speculate that car sharing and alternative transportation have reduced the need for people to own cars. This means that even during a positive economy, consumers continue to shift to alternative modes of transportation, and this will affect the industry. However, the US credit cycle is countercyclical, which allows vehicle manufacturers to make profits globally even in the event of a recession in the US. Currently, the American auto industry represents 28% of the total GDP, or $518.1 billion. Vehicle manufacturing in the United States ranks second globally, thanks to its annual production of approximately 11.19 million units (Investopedia, 2019). The market then rises and falls based on the booms and busts of the American economic cycle. This means that the industry and its consumers perform well when the economy grows and reaches its peak and vice versa. Primarily this is due to the fact that, similar to all discretionary habits, organizations and consumers spend more when they have a surplus and vice versa. Structure and performance of the automotive sector Threat posed by new entrants This threat is very limited because the sector is capital intensive and therefore has significant barriers to entry and exit. Manufacturers invest significant financial, human, and infrastructure resources in the industry, and the legal and compliance costs for the industry are prohibitive. Therefore, new companies have difficulty entering the industry and building customer trust and loyalty in the same way that Mercedes and GM enjoy brand loyalty. Threat of Substitutes This threat is moderate for GM because customers may switch to GM's competitors or use alternative forms of transportation. Several manufacturers sell luxurious and elegant vehicles, but in this case the risk of substitutes is mitigated because GM is a well-known brand and customers trust the company's products. Therefore, even though the companies in the industry pose a threat to each other, their different product offerings allow them to reach and retain loyal customers. Customers will therefore look for manufacturers that sell less expensive, fuel-efficient or durable products. However, replacement companies try to get price-sensitive customers of vehicles. Threat of Rivalry There is strong competition among companies in the industry because they offer a wide range of products based on the application oftechnology, pricing strategies, design and style and branding. image. All companies make significant investments in innovation, research and development, as well as brand and sales marketing. Competition means that companies are very aggressive as they seek competitive advantage and greater market share. The sector is predominantly oligopolistic because there are around 10 producers who control 70% of the market. Rivalry is very strong among the top five manufacturers, but could increase due to globalization forcing companies to enter new developed and developing markets. GM operates in an oligopolistic market structure, with very few manufacturers using a similar structure. As a result, customers easily substitute one product for another, but their purchases are limited to the few companies in the oligopoly. However, any action taken by GM (for example, launching a new product or reducing the price) usually provokes a reaction from other companies. This keeps competition intense between companies, who must predict how their rivals will respond. According to Nash equilibrium, one player's strategy is usually the most effective response to another's strategies. For example, GM and Ford have given discounts on popular SUVs. This resulted in discount wars with each company having a one-sided discount incentive, but ultimately neither gained a pricing advantage. Bargaining Power of Customers This is a significant threat because customers may switch to other companies that sell cheaper products. Customers nowadays are price sensitive and are able to seek information before making a purchase, so that they can easily select the best vehicle option (Menon, 2017). However, vehicle manufacturers usually offer customer services and discounts to individuals and companies, and this ensures customer loyalty. GM has been embroiled in antitrust lawsuits over the years as the federal government has campaigned to ensure customer safety. For example, the Federal Trade Commission (2016) found GM guilty of false advertising and ordered the company to recall its certified pre-owned vehicles due to safety issues. This empowers customers and ensures that all products purchased are durable and safe for long-term use. Furthermore, such checks enable customers to make better purchasing decisions. In United States v. General Motors Corp (1966), GM and three Chevrolet dealer associations were found guilty of colluding to restrain trade and eliminate a class of competitors, thereby demonstrating a monopolistic market strategy. Bargaining Power of Suppliers This threat is low because manufacturers can select raw materials from a wide range of suppliers in the market who ultimately sell their materials at affordable prices. Additionally, some companies produce their own components, thus reducing the need for a supplier. Therefore, manufacturers are able to insist on concessions from suppliers because they have numerous options. GM's Business StrategyGM is still the largest automaker in the United States, accounting for 17% of total industry sales. However, in terms of the global market, GM is not among the leaders but holds 9.5% of the market share because it is a highly competitive and diversified market. As emerging markets continue to develop, GM has the opportunity to establish a presence in these markets and thus increase its market share in local and global markets. GM's business strategy is based on innovation, safety and quality, delivering value, creating impactpositive difference and customer loyalty. These factors aim to promote sustainability at GM and ensure customer satisfaction through offerings based on renewable technologies, innovation and efficiency parameters. The company uses a generic strategy that allows it to gain a competitive advantage in a dynamic industry. GM uses its economies of scale as a strength and also uses intensive growth strategies. Its cost leadership strategy means that GM is able to sell its products at lower prices than its competitors such as Mercedes and this meets most consumer needs and leads to a competitive advantage. The company also uses product differentiation by producing energy-efficient vehicles to meet changing consumer needs and demand for fuel-efficient vehicles. This means that GM must ensure that its brand image remains positive and that it offers intuitive and innovative features in its products. Furthermore, the company has a market penetration strategy that ensures that GM has a large number of dealerships around the world that allow easy customer access to its products. GM also uses vehicle financing and leasing as part of its business model in order to increase revenues and profits through General Motors Financial Company. Please note: this is just an example. Get a custom paper from our expert writers now. Get a Custom EssayConclusionGM must therefore ensure that its business and marketing strategies enable it to increase its market share and maintain a competitive advantage. Careful assessment of the internal and external environment should serve as factors to exploit opportunities and mitigate threats in the automotive industry. This is because the sector is expected to continue to grow but also evolve following industry trends as the market also changes over time. References Aichner, T., & Coletti, P. (2013). Customer online shopping preferences in mass customization. Journal of Direct, Data and Digital Marketing Practice, 15(1), 20-35.Amadeo, K. (2019, June 25). “Saving the automotive industry”. Retrieved from https://www.thebalance.com/auto-industry-bailout-gm-ford-chrysler-3305670Alliance. (2015). "Fact Sheet: Daimler and the Renault-Nissan Alliance." Retrieved from https://www.alliance-2022.com/wp-content/uploads/2017/08/89933.pdfBureau of Transportation Statistics. (2017, May 23). "Table 1-23: Global Motor Vehicle Production, Selected Countries (Thousands of Vehicles)." Retrieved from https://www.bts.gov/archive/publications/national_transportation_statistics/table_01_23Business Insider. 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