Toyota Industries is a Japanese public limited corporation dealing in the different fields like automobile, heavy machinery and materials handling equipment manufacturing industry, with several subsidiaries working under the corporation, including Denso and Toyota motors. The corporation was created in 1926, with the location of its headquarters in Aichi, Japan, dealing in the automobile manufacturing industry. As of 2020, the company generated a strong sales figure of 21.71billion Japanese Yen and has maintained total asset figures of almost 52.79 billion Japanese Yen (Toyota, 2020). From the perception of the global automobile manufacturing industry, the assessment of Porter’s five forces would be a fruitful framework 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 because of the increasing transportation and mobility needs for societal needs. As a result of this outcome, most firms across the globe stepped into the market to provide heavy pieces of material handling equipment, assemblies and other parts for the manufacturing purpose in the automotive industry, resulting in intense competition among operating players. The firm’s major competitors in the industry based on the growth of revenue and biggest suppliers worldwide are Bosch, Continental, Denso and Magna. Toyota is trying to lead the sector with almost 11.68 Billion Euros, while others showed a revenue amount of 47, 44.47, 43.30 and 35.16 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, primarily due to the large number of companies present and the many sorts of automotive equipment they provide. This market has become a primary demand for everyone to have various kinds of transportation, yet there is no other way to get around. Furthermore, in the present society, the production and use of automobiles and different modes of transportation has increased. Whether these are minibuses, locomotives, or cars, they all rely on automotive parts, indicating that there will be no meaningful substitutes (Yang et al., 2015). However, in the context of substitute machinery available from existing companies, client brand loyalty is crucial. 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 because of the market’s large number of current enterprises. The entry barriers are set too high enough that entering firms will find it challenging to overcome them. Setting up an automobile component corporation and managing distribution networks involves much money and work, making it much more difficult for entrants to fulfil the requirements. Aside from the financial constraint, growing enterprises must deal with significant equipment brands and the time it takes to acquire the market position incumbent firms enjoy. Furthermore, established enterprises have retained economies of scale, which is another sticking point (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 because a number of companies produce automotive components and equipment for the production of automobiles and other vehicles. The buyers are usually large automobile firms with a significant presence in the market. Manufacturers must rely on them in some way for the vast selling and distribution of the parts they make. On the other hand, the products are not that distinctive from one another, despite variances in price and performance. Furthermore, switching costs influence consumer purchasing behavior as many of them are very prudent while buying automobiles (Uzwyshyn, 2012). 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 automobile manufacturing sector is low. The components necessary to create and produce the equipment and parts for automobile components are primarily provided by the suppliers in this industry. These resources are plentiful and do not necessitate a large amount of capital or investment, nor do they necessitate a high talent level. Therefore, such a procedure strengthens the vehicle manufacturer’s negotiation position. However, the failure of vital suppliers may cause an interruption in supply chain disruption and pose a severe risk (Sharma and Bhat, 2012). Thus, in the context of the automobile 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.
Sharma, S.K. and Bhat, A., 2012. An empirical investigation of the contribution of supply chain design characteristics on supply chain risks in Indian automobile industry. International Journal of Business Continuity and Risk Management, 3(2), pp.117-135.
Toyota, 2020. Financial Highlights | Toyota Industries Corporation. [online] Toyota-industries.com. Available at: https://www.toyota-industries.com/investors/earnings/summary/index.html.
Uzwyshyn, R., 2012. The US Auto Industry in 2013: Five Forces to Consider. Automotive Industries, 191(3), pp.14-16.
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.