<p style="text-align: justify;">Subaru is the automobile manufacturing corporation and a division of Japanese Conglomerate Subaru Corporation. The company was incorporated in 1953 and is headquartered in Shibuya, Japan. The company is the seventh-largest car manufactures in Japan based on sales; in 2020 company has sold approximately 105,540 units (Gorka, 2021). The boxer engine layout is the Subaru&#8217;s signature for all vehicles above 1500 cc; it also offers the turbocharged versions of its legacy cars, Legacy GT and Forester XT. The company takes an active part in community development, and it&#8217;s embedded in the corporate culture; it has a comprehensive community initiative by the name of Love Promise. This company contributes to ecological causes, pet adoption, and the community (Subaru, 2021). ). Porter&#8217;s five forces model is an appropriate analytical tool to evaluate threats faced by Subaru and the opportunities it can potentially explore.</p>
<h2 style="text-align: justify;">Competitive Rivalry in The Market</h2>
<p style="text-align: justify;">The Japanese automobile industry is fiercely competitive, and the increase in demand for Japanese vehicles is one reason. There are many world-renowned automakers, which are originated from Japan. The major competitors for Subaru are Toyota Motor Corp., Nissan and Honda. Toyota motors are the largest automobile company in Japan; they reported revenue of $256.6 billion and earned a profit of $45.5 billion in 2020 (Nikkei Asia, 2021). Subaru has reported $30.7 billion in revenues and profit of $1.4 billion in the 2020 financial year, with an 8.1% increase in revenue and a 10.1% increase in yield (Fortune, 2021). In the same period, Nissan has posted a revenue of $74.1 billion with a gross profit of $9.3 billion (Nikkei Asia, 2021). Honda reported gross profit and revenue of $24.3 billion and $124.1 billion, respectively, in the financial year 2020 (Nikkei Asia, 2021). Therefore, it can be deduced that the Japanese automotive market is highly competitive.</p>
<h2 style="text-align: justify;">Threat of Substitutes</h2>
<p style="text-align: justify;">The threat of substitutes is considered moderate for the short-term horizon. The global awareness regarding environmental protection is increasing the pressure on the industries to comply with the improved standards. The burden is on carmakers to protect the environment from developing environmentally friendly vehicles. There is a growing pressure on the industry to go green and switch from combustible engines to electric ones. The industry&#8217;s global carbon footprint equalled 9% of greenhouse gas emissions (Green Peace, 2019). The electric vehicle market is already picking up, and the demand is increasing. The significant problem that limits their adoption is the lack of a charging network. However, companies are putting dedicated resources and researching durable batteries. Therefore, the threat of substitutes remains strongly moderate in the foreseeable future.</p>
<h2 style="text-align: justify;">The Threat of New Entrants</h2>
<p style="text-align: justify;">The threat of new entrants is assessed to moderate to high in the industry. It depends on the following factors capital intensity, regulatory environment, existing competition in the market and potential for growth. The industry requires high capital to start a business. However, this problem is addressed through better financing options and tax credits for electric vehicles producers. Moreover, there is a favorable regulatory environment that supports the manufacturing of eco-friendly vehicles. The market is highly competitive, and incumbents hold a strong position in the market; however, there is enormous potential for growth in the electric vehicle domain. The global electric vehicle market would reach 985.72 billion by 2027, exhibiting a CAGR of 17.4% (Global Newswire, 2021). Therefore, the threat of new entrants is strongly moderate.</p>
<h2 style="text-align: justify;">Bargaining Power of Buyers</h2>
<p style="text-align: justify;">Generally, buyers&#8217; can exercise moderate bargaining power in the auto industry. Excessive competition and the crowded market space hand over buyers&#8217; significant leverage in the industry. Many renowned carmakers manufacture cars and compete for the market share; it provides buyers with many options and, thus, increases bargaining power. Moreover, buyers are very informative and therefore purchase vehicles after thorough research; the ease of information access has increased their awareness and gave them more leverage over the manufacturer. There is low-switching cost, and potential buyers are price-sensitive, therefore, a minor negative movement affects their decision. There is a low switching cost among producers; consumers can easily switch among brands. Low-switching cost makes the customer exit ease and negatively affect the producer (El-Manstrly, 2016). Low switching cost coupled with high market competition results in strongly moderate bargaining power.</p>
<h2 style="text-align: justify;">Bargaining Power of Suppliers</h2>
<p style="text-align: justify;">Suppliers risk is associated with the importance of supplier for the business, risk of forward integration and suppliers&#8217; concentration. There is a high risk of forward integration in the auto industry, enterprises are over-relying on the suppliers, and they can move into the marketplace. In the auto manufacturing industry, suppliers are concentrated, and they can negatively impact the supply chain; thus, they seek favorable terms for their supplies. There are only 20 mega suppliers in the industry, and hyper concentration has significantly increased the supply chain risk. Suppliers&#8217; contribution in the auto industry rose from 56% from 1985 to 83% now (Kallstrom, 2015). Therefore, suppliers have moderate to high bargaining power.</p>
<h2 style="text-align: left;">References</h2>
<p style="text-align: left;">El-Manstrly, D. (2016). Enhancing customer loyalty: critical switching cost factors. Journal of Service Management.<br />
Fortune. (2021). Subaru. Available at: https://fortune.com/company/subaru/<br />
Global Newswire. (2021). Available at: https://www.globenewswire.com/news-release/2021/04/12/2208243/0/en/Electric-Vehicles-Market-Size-2021-Is-Expected-to-reach-985-72-Billion-by-2027-exhibiting-a-CAGR-of-17-4.html<br />
Gorka, D. (2021). Leading car manufacturers in Japan in 2020, based on sales. Available at: https://www.statista.com/statistics/348427/car-sales-in-japan-by-brand/<br />
Green peace. (2019). Car industry’s 2018 carbon footprint exceeds EU greenhouse gas emissions – Greenpeace .Available at: https://www.greenpeace.org/international/press-release/24131/car-industrys-2018-carbon-footprint-exceeds-eu-greenhouse-gas-emissions-greenpeace/<br />
Kallstrom, H. (2015). Suppliers’ power is increasing in the automobile industry. Yahoo Finance. Available at: https://finance.yahoo.com/news/suppliers-power-increasing-automobile-industry-190607186.html?guccounter=1&;guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&;guce_referrer_sig=AQAAAMyR_QJ4w-8YYbdvLXdX02z9ujeitRevjPz3a9tL1AVITeuPXZF-EWLJSdZldZw1lb5_WSRnXhTu4pgcf8DC1JuYnCN0hA1T3vMJYJSPIg1yAEke3aXSk9j3cGWvydsBR1d9fo2W_60et5dJKh1OAl5As7eBU-WtWHy67higlh_p<br />
Nikkei Asia. (2021). Honda Motor Co., Ltd. Available at: https://asia.nikkei.com/Companies/Honda-Motor-Co.-Ltd<br />
Nikkei Asia. (2021). Nissan Motor Co., Ltd. Available at: https://asia.nikkei.com/Companies/Nissan-Motor-Co.-Ltd<br />
Nikkei Asia. (2021). Toyota Motor Corp. Available at: https://asia.nikkei.com/Companies/Toyota-Motor-Corp<br />
Subaru. (2021). Love Promise. Available at: https://www.subaru.com/love-promise.html</p>