Porter's Five Forces In The Automobile Industry

In the world of business, change is always happening. Business has to deal with so many events both inside and outside the business on a daily basis. Factors such as customers, suppliers, government, distributors etc. can all affect the business in different ways. These factors are divided into two parts, macro-environment or micro-environment. Macro-environment factors are those external factors which are beyond the firm 's control, whereas micro-environment are controllable factors internal to the business.

In ‘Modern Management’ by Tiernan et al (1), they say “The external business environment consists of two main elements” These elements would be the PEST environment (Political/Legal, Economic, Socio-Cultural, Technological) and secondly the competitive environment ‘Michael Porters 5 forces (Threats of new entrants, Bargaining power of buyers, Threat of substitute products, Bargaining power of suppliers and rivalry among existing competitors) PEST (Appendix 1) Michael Porters Five Forces (Appendix 2)

For a company developing a strategy on Political factors

It’s important for companies to keep on top of this and develop new technologies in fear of been left behind or be beaten to being the first with the new technology. Here’s where Porters ‘the threat of substitute products or services’ (1) really comes into effect for any company. The existence of new technology or development outside the common boundaries can attract new customers and be a strength of any company. The new technology from a rival can be a threat and also a weakness as it puts a company at risk of falling behind and losing customers for good to another company, if they can 't reach the same level. In the car industry, the biggest challenge coming up will be the self-drive car. For the big names like Volkswagen, they could see new entrants (1) to the market with Google setting up the project ‘Google X