SAIC Motor Corporation Limited is the biggest auto-company in China’s A-share market and owns the total equity of about 11.683 billion of shares. The company strives hard to grasp the merging trend of the industrial development along with speeding up the process of innovation and transformation. It is working hard to grow the complete range of vehicles services and products from traditional manufacturing companies. The company’s business covers the production, sales and research of both commercial vehicles and passenger cars. It is actively working towards promoting the energy vehicles and exploring the intelligent driving technology methods and industrialization. The company always engage in R&D, chassis system, sales and production of motor drive systems, battery, exterior and interior decoration, and several other things (SAIC Motors, 2019). The managers of the company have to analyze the industry in order to remain competitive, and this could be done by using Porter five forces model, which helps in determining the competitiveness in the industry. And helps the company in making effective decisions. Here is the detailed Porter five force analysis of the SAIC Motors;
Bargaining Power of Buyers
The bargaining power of SAIC Motor’s customers is high. In china, the automakers have been increased significantly, which makes the services and products supply more as compare to the demand. There are both domestic and global brands competing with each other for satisfying the needs of the consumers and strive hard to achieve the market share. The Chinese government has also increased the turnover and wage rate of customers, which give them the chance to decide the brands as price sensitivity is low now. Customers will buy what they want in their decided price. This affect the price range of the SAIC motors and in order to stay in market, prices need to be decrease (Seka, 2017).
Bargaining Power of Suppliers
Similarly, as above, the bargaining power of suppliers is also high because of the numerous automakers available in the China market who are willing to buy from them. This increases the supplier’s control over prices. SAIC Motor has to make sure that it has good and strong stable relationship with its suppliers, to achieve the cost advantages and economies of scales. This is important that SAIC Motors should not rely on few suppliers but build an efficient supply chain so that its profitability level does not affect negatively (Wenku, 2016).
Threats of New Entrants
Threats from the new entrants in the automobile industry is moderate and so little ease for the SAIC Motors, but still very competitive environment, as companies enter in China market through joint-venture or mergers with domestic companies. It is the policy of the government as this reduce the incentives for new entrants to 50% to 80%. However, the brand awareness and the customer loyalty are difficult to achieve as already 170 automakers are present in the industry, and attracting their customers are difficult for the new comer (Seka, 2017).
Threats from the Substitute Products
However, the threats from the substitutes are high for SAIC Motors, because Chinese public transport is quite efficient and affordable for the public, and they prefer to travel in that. Also, Chinese prefer using bicycles, or motorcycles, taxi or railway to avoid the parking hassle. However, those who prefer convenience and accessibility, owns and use the automobile. It is necessary for the SAIC Motors to innovate consumer friendly and environmentally friendly vehicles, which becomes the need of the consumers. It is also important for SAIC Motors to diversify its market segment geographically to spread the risk (Pratap, 2018).
Rivalry of Existing Players
The competition level in the industry is high, because of the presence of domestic, international, state-owned and private automobile companies in the industry. This increased competition has decreased the prices of the cars globally. Brands are competing on the basis of design, quality, prices, technology, customer services, and many other factors. The exit barriers are very high, which force the companies to strive hard in the China industry and attract more customers. SAIC motors have to concentrate on promotions and its marketing strategies to be on the number one in industry (Qiu, 2005).
References
Pratab, A. 2018. AUTOMOTIVE INDUSTRY FIVE FORCES ANALYSIS. [Online], Available at: https://notesmatic.com/automotive-industry-five-forces-analysis/, [Accessed on: 9th July, 2019].
Qiu, L. 2005. China’s automotive industry. [Online], Available at: file:///C:/Users/CC/Dropbox/Business%20Law/18112598.pdf, [Accessed on: 9th July, 2019].
SAIC Motors, 2019. Company Profile. [Online], Available at: https://www.saicmotor.com/english/company_profile/about_us/index.shtml, [Accessed on: 9th July, 2019].
Seka, 2017. SAIC Motors. [Online], Available at: https://www.slideshare.net/gerodstrivaneseka/saic-motor-71373880, [Accessed on: 9th July, 2019].
Wenku, 2016. Five Competitive Forces in China’s Automobile Industry. [Online], Available at: https://wenku.baidu.com/view/759dd4126edb6f1aff001faa.html, [Accessed on: 9th July, 2019].