In this article analysis of automobile industry for Poland and Turkey covered in-depth using the Porter’s five forces model.
Threat of New Entrants
The threat of new entrants in the automobile industry in Poland is moderate. Since the country illustrates a feasible business environment for the automobile manufacturers, the leading car manufacturing firms have established set ups in the country. This situation can make it challenging for the new entrants to successfully enter in the market, nevertheless the supportive regulations from the Polish government balance out this problem to some extent (Buliński, 2010). Poland is focusing on obtaining economic development through making the country appealing for investors; therefore the policies and regulations offer flexibility to the new entrants. Moreover the availability of labor in affordable rates also determines the favorableness of the industry. In case of Poland, high unemployment and cheap labor can offer the new entrants access to the workforce while maintaining the cost of operations in terms of human resource (Ministry of Foreign Affairs, 2011).
The government of Turkey intends to position the country among the top 20 regions which are favored by the automobile manufacturers thus the government is offering affordable tax framework to the companies. Keeping this into consideration, the government has taken some steps which created an influx of the vehicle manufacturers such as Toyota and Hyundai (Culpan and Gursoy, 2009). This has decreased the entry barriers for new entrants, thus the large scale car manufacturing companies can set up manufacturing units in Turkey.
Bargaining Power of Buyers
The bargaining power of buyers in moderate as the customers can analyze the utility offered by various automobiles and make a decision that seems to be most feasible. In this case, vehicles manufactured by one firm may become a preferred choice due to the combination of utility and affordability, thus depicting some level of bargaining power of buyers. The changing dynamics of Polish industries specifically automobile industry has altered the purchase behavior of the consumers. The shift from state managed to privately managed vehicle manufacturers offers the consumers with wider list of alternatives of making the purchase decision.
The numbers of buyers of vehicles in Turkey are expected to grow in the coming years (Investment Support and Promotion Agency of Turkey, 2014), while similar increase is expected in the exports of cars manufactured in Turkey. The vehicle manufacturers hold power over the consumers as they can decide the price structure of their cars. Nevertheless, the availability of different vehicles in varied price range, features and styles could increase buyer power. It can be stated that the buyers have moderate bargaining power in Turkey.
Bargaining Power of Suppliers
The suppliers of raw material and distributors hold low level of power in Polish automobile industry. Large scale companies such as Volkswagen hold greater degree of power over the suppliers and can opt for contract with suppliers that fulfill their quality and price requirements. The suppliers on the other hand value their contract with such large scale automobile manufacturers. The vendors delivering components of vehicles hold contracts with several large scale companies such as Nissan, Toyota, Honda etc (Ministry of Foreign Affairs, 2011).
In Turkish industry, the suppliers hold low bargaining power as the vehicle manufacturer’s decision to end the contract can have significant effect on suppliers’ sales and profitability. The rising number of automobile manufacturers has exerted pressure on increasing the quality thus the suppliers have to meet the quality standards as well.
Threat of Substitute Products
The second hand or used cars pose some level of threat to the automobile manufacturers. The target market can opt to purchase used cars rather than buying the new vehicles thus creating a moderate level of threat for the substitute products. The rival firms also serve as a source of substitute products as consumers can opt to purchase the vehicles that bring them maximum amount of utility. In a similar manner, the Turkish market has a moderate level of threat of substitute products as the availability of used cars and public transportation system offers viable alternatives. In case of new vehicles, the presence of various firms making the different automobiles also offers the consumers with a wide range of choices.
Rivalry Among Existing Firms
There are several leading automobile manufacturers that have set up their production units in Poland. A few of these firms include General Motors (GM), Toyota, and Volvo. In case of the local companies Solaris is the key firm operating in the industry (Buliński, 2010). Majority of the automobile manufacturing plants have been established in Katowice, Wrocław, Poznań and Warszawa (Ministry of Foreign Affairs, 2011). Based on this discussion it can be stated that there is a high degree of rivalry among the existing firms.
There are 6 leading car manufacturers in Turkey, which add to the intensity of rivalry in the industry. These firms include renowned car manufacturers such as Toyota, Hyundai, Honda, Ford etc (Investment Support and Promotion Agency of Turkey, 2014). The presence of these companies has augmented the degree of competition in the Turkish automobile industry.