Magna International is a multinational public limited corporation. It has been dealing in the Automotive manufacturing industry, offering assemblies, modules, automotive systems and other equipment parts to different car brands worldwide. The firm is considered to be the manufacturer of the most prominent part in North America. The company was created in 1957, with the location of its headquarters in Ontario, Canada, dealing in the equipment manufacture industry.
As of 2019, the company generated a strong revenue figure of 39.43 billion US dollars and has provided an employment figure of almost 165,000 individuals (Magna, 2019). From the opinion of the global automotive manufacturing industry, the assessment of Porter’s five forces would be a helpful instrument for maintaining prospect strategies to understand the current standing of the corporation in a better way.
Competitive Rivalry in The Market
The competitive rivalry in the automotive manufacturing industry is high. The competition is high due to the increasing technology mobility and meeting the advanced transportation facilities for societal and business needs. As a result of this increase, several firms and corporations have captured the market to provide the heavy pieces of equipment and assemblies required to construct and maintain the infrastructure of the automotive industry, resulting in fierce competition among established players.
The company’s major competitors in the industry in terms of revenue growth and top suppliers worldwide are Bosch, Continental, Denso and ZF Friedrichshafen. Magna is trying to lead the market with almost 35.16 Billion Euros, while others showed a revenue figure of 47, 44.47, 43.30 and 33.59 respectively (Berylls, 2019). Therefore, the presence of such big names in the industry makes the competition fiercer among each other.
Threat of Substitutes
The threat of having substitutes in the automobile industry is considered to be low. It is mainly because of the presence of so many corporations and the types of automotive pieces of equipment offered by them. This industry has become a basic need for everyone to have different modes of transportation, but there is no other form of alternative for transportation. Moreover, the production and consumption of cars and different travelling sources have increased in the modern era.
Whether these are buses or trains and cars all depend on the automotive parts reflecting that there will not be any significant substitute to the parts (Yang et al., 2015). However, on the other hand, customers’ brand loyalty is critical in the setting of substitute machinery accessible from established enterprises. Therefore, the risk of substitutes in the industry is considered to be very low.
The Threat of New Entrants
The threat of new firms in the automotive manufacturing industry is considered low. The reason being high number of existing firms in the market. The barriers to entry are placed high enough that it is challenging to meet by the entrant firms. It takes a lot of money and effort to set up an automotive equipment company and manage supply chains, making it more difficult for newcomers to comply with the requirements.
Aside from the finance barrier, emerging businesses must contend with significant equipment brands and the time required to achieve the kind of market standing that established businesses have. In addition, the established firms have maintained the economies of scale, which is another factor of hurdle (Baumers et al., 2016). Hence, such a pattern of big names leaving minimal options for new firms.
Bargaining Power of Buyers
The Bargaining power of consumers in the context of the automotive equipment industry is moderate. The reason being several firms provide automotive assemblies and equipment for the manufacturing purposes of cars and other vehicles. The buyers are usually the automotive companies that are in considerable numbers in the market. Somehow, manufacturers have to rely on them for the massive sales and growth of the parts produced by them.
On the other hand, the products are not that dissimilar from one another, although there are differences in quality and price. Furthermore, switching costs impact consumer purchasing behavior in terms of satisfaction (Ram and Wu, 2016). Keeping in view such a pattern, the bargaining power of consumers is considered moderate in the sector.
Bargaining Power of Suppliers
The Bargaining power of suppliers in the automotive equipment sector is low. The suppliers in this industry primarily provide the required materials to produce and manufacture the equipment and assemblies for automotive parts. These materials are available in abundance and do not require higher capital or investment or a high level of skills. Such a process makes the automotive manufacturer more potent in terms of negotiating contracts (Wei and Chen, 2008). Thus, in the context of the automotive manufacturing industry, the bargaining power of suppliers is low.
References
Baumers, M., Dickens, P., Tuck, C. and Hague, R., 2016. The cost of additive manufacturing: machine productivity, economies of scale and technology-push. Technological forecasting and social change, 102, pp.193-201.
Berylls, 2019. Top 100 Suppliers. [online] Berylls.com. Available at: https://www.berylls.com/wp-content/uploads/2020/07/202007_BERYLLS_Study_Top_100_supplier-2019_EN.pdf.
Magna, 2019. Annual Report. [online] Magna.com. Available at: https://www.magna.com/docs/default-source/financial-reports-public-filings/annual-reports/sedar_magna-annual-report-2019.pdf?sfvrsn=531b3449_12.
Ram, J. and Wu, M.L., 2016. A fresh look at the role of switching cost in influencing customer loyalty. Asia Pacific Journal of Marketing and Logistics.
Wei, C.M. and Chen, C.Y., 2008. An empirical study of purchasing strategy in automotive industry. Industrial Management & Data Systems.
Yang, S.S., Ngiam, H.Y., Ong, S.K. and Nee, A.Y.C., 2015. The impact of automotive product remanufacturing on environmental performance. Procedia Cirp, 29, pp.774-779.