what does it take to succeed in this industry? economic sociocultural global technological political...

What Does it take to Succeed in this Industry?

• Economic• Sociocultural• Global• Technological• Political / Legal• Demographic

General Industry Competitor

• Threat of new entrants

• Power of suppliers• Power of buyers• Product substitutes• Industry rivalry

• Future Objectives• Current Strategy• Assumptions• Capabilities

Environmental Analysis


• Economic• Sociocultural• Global• Technological• Political / Legal• Demographic

General Industry Competitor

• Threat of new entrants

• Power of suppliers• Power of buyers• Product

substitutes• Industry rivalry

• Future Objectives• Current Strategy• Assumptions• Capabilities



General


Opportunities Threats

Automakers reducing their number of suppliers in favour of larger T1 suppliers

Prolonged economic downturn reduces production

Purchase distressed T1 and T2 suppliers

Tight liquidity could stifle leveraged short term growth or if not enough cash on hand survival

Divest into other industries Prolonged economic downturn reduces Consumer demand and higher gas prices reduces dependency on automobiles, people look to mass transit

Economic Environment


General



Foreign exchange fluctuations Foreign exchange fluctuations

Sustain economic downturn could move consumer preferences to cost based low value added options.

Economic Environment - Continued


General



Diversification into mass transit parts Green revolution and concerns for global warming could move transportation preferences to non auto options

SocioCultural Environment


General



Developing countries increasing auto production particularly China and Eastern Europe – expand into these markets

Developed countries decreasing auto production – Focus on product development to extend parts content per car

Pursue market development strategy in emerging these new markets

Cheap labour in foreign markets

China 1.5% of car cost = labour

Prolonged economic downturn reduces Consumer demand and higher gas prices reduces dependency on automobiles

Global Environment


General



Increase in demand for:

Green technologies

GPS technologies

Materials and alternative fuels

•Technological Environment


General



Governments willingness to come to the aid of OEM’s so that they do not fail

Government ownership of Ford and Chrysler could affect decisions around suppliers. Buy American sentiments

Governments willingness to subsidize alternative technologies development

Governments willingness to contribute to job training programs to offset labour costs in manufacturing sector

•Political Legal


Industry



The Auto parts market continues to consolidate at a diminishing rate. Large parts suppliers do well

Smaller parts suppliers

Parts suppliers can enter the market to supply new technologies

OEM emerging in Uzbekistan, Hungary, Ukraine , Indonesia, Slovenia

Argentina all over 25% growth 2008

T1 emerging in these markets as well

•Threat of New Entrants


Industry



Weakened buyers may be more willing to renegotiate deals

Increased power of unionization

Weakened buyers may sell off divisions providing acquisition opportunities

Increasing raw materials costs

Few number of major players leaves non integrated firms exposed to individual firms failure

•Strength of Suppliers


Industry



Further auto parts industry consolidations increases market power of suppliers

Relatively small number of OEM’s

Strong market power

Drive prices down

Forced to comply with JIT

Common practice to renegotiate pricing after commitments mad

•Strength of Customers


Industry



Low perceived value of name brand replacement products

Counterfeiting estimated at $12B in Global market for American cars alone

•Threat of Product Substitutes


Industry



As consolidation decelerates industry rivalry will increase

Margins should remain low

•Industry Rivalry



•Future Objectives

Competitor

Large T1 competitors are looking to survive short to medium term, and where possible continue to vertically integrate into strategic T2 firms and even forward into OEM market

Large T1 competitors may look to restructure sell domestic operations and pursue further market development strategy into emerging markets in order to maintain market power and not fail.

Smaller T2 firms may look to diversification and product development strategy to move away from cost based competition and focus on differentiation in emerging and novel solutions

what does it take to succeed in this industry? economic sociocultural global technological political...

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