Competitive Rivalry * Industry dominance by few large firms The car automobile industry -There are various competitors in this market but the dominant ones include General Motors, Volkswagen, Chrysler, Ford, and Honda etc. Entry barriers prevent other entrants and pricing is mostly by competition and mutual understanding between top manufacturers. * Huge setup cost and complete resource ownership * Prices remain stable if a firm reduces product price others follow suit and cut down their price as well, if a firm increases product price, others do not increase their price. oyota focusing on continuously finding ways to reduce production costs. The company also optimized its processes to accelerate the various phases of production — from initial design to production — so that it could introduce new models faster than its competitors. Seek less expensive ways to produce desirable products -BMW Group and the Toyota Motor Corporation announced a collaborative effort aimed at developing new products and advanced-powertrain technologies. Toyota also has an agreement with Ford to develop hybrid systems for light trucks and sport utility vehicles. Threat of substitute products * There are a lot of substitutes in the automobile industry. When the price of the vehicles rises, the substitutes will emerge, there are many types of equipment that can take the place of vehicles, such bus, subway, bicycle and even walking. The Hybrid Synergy Drive also must be evaluated using Porter’s model factor for threat of substitute products.
Other companies could potentially enter the hybrid market by developing a similar drive and neutralizing Toyota’s advantage. In fact, Nissan and Honda have developed similar technologies for their sedan models. However, Toyota continues to dominate the market for hybrid vehicles because Honda and Nissan do not have a significant impact on the market yet. In the future, Toyota may lose their competitive advantage if hybrid vehicles take a bigger market share in the automotive industry.
However, currently Toyota is adding Sport Utility Vehicles (Toyota Highlander) to their line of vehicles using the HSD. By being the first to add SUV’s to the hybrid market, they have currently protected their competitive advantage from substitute products. Bargaining power of Suppliers Toyota Production System which developed a network of suppliers who would supply the right quality, quantity at a point just in time for Toyota to use in building its cars. This reflects weak bargaining power on the part of the suppliers in terms of our model.