Hyundai Porter Five Forces Analysis
Five Forces analysis of Hyundai covering threat of new entrants & substitutes, bargaining power of buyers & suppliers and competitive rivalry.
Threat of New Entrants:
Hyundai is a leading automobile brand having a strong global footprint. The threat of new entrants is low due to high barriers of entry as the initial capital investment required to enter the business is very high. A strong supply chain network is required for operating in the automobile industry business similar to Hyundai. There are also strict rules and regulations for safety mandated by the countries, which further decreases the threat of new entrants. The companies also look for product differentiation by innovation and unique design to create a good brand image among the customers. Even a huge brand with ample resources will require time to develop itself since capital alone will not be enough to help a brand prevail in today's hypercompetitive market and industry which will further decrease the threat of new entrants. The government also puts restrictions on the foreign players by putting taxes, trading rights etc. Hence, we can conclude that the threat of new entrants is low in this industry.
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This concludes the threat of new entrants in the Hyundai Porter Five Forces Analysis.
Threat of Substitutes:
Below are the threats of substitute products of Porter’s Five Forces analysis of Hyundai:
The threat of substitutes for a brand like Hyundai is high as people can choose public transportation or other cheaper mode of transportation. However, the experience of owning and driving is something the customers might miss.
The ride-sharing business like Uber, Ola etc., has also increased the threat of substitutes. People can now rent a car for a few days by using apps like Zoom Cars which would further increase the threat of substitutes. Several automakers sell contemporary and elegant automobiles, ranging from the lower-end small car sector to the luxury market. Hyundai also caters to a significant client base. Brand image, financial strength, and a focus on technology innovation and driving safety are all characteristics that reduce the threat of substitutes for Hyundai. Hence, we can conclude that the threat of substitutes is moderate in this industry.
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Bargaining Power of Customers:
In the Hyundai Porter Five Forces Analysis the bargaining power of the customers can be explained as:
The bargaining power of customers of Hyundai is high as a lot of similar products of different companies are available in the market. The number of brands available in the market is high, and there is stiff competition between the brands. The threat of backward integration is very low in this industry. The buyers of Hyundai cars have a lot of information available about the product over the online channels; hence can compare between two products and choose the best one, which further increases the bargaining power of customers. Since the products of the automobile industry come in the luxury spending of the family, they also try to gather more information about the product to make informed decisions. Some of the factors that reduce the bargaining power of the customers are the brands' image, its financial strength, and innovation.
Hence, we can conclude that the overall bargaining power of customers is high in the automobile industry.
Bargaining Power of Suppliers:
Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of Hyundai:
In the automotive industry, the bargaining power of suppliers is usually low. In recent times there has been a shortage of chips which is increasing the bargaining power of suppliers. But since most of the suppliers of the industry are spread out across the globe and are smaller in size, the overall bargaining power of suppliers is low. The threat of forward integration is low in the automobile industry, which further reduces the power of suppliers. In the automobile industry even, the suppliers compete with one another in terms of pricing so that they can get the contract. The business is very fragmented, and suppliers depend on a few firms only. The supplier's products are not that differentiated, and they haven't, in all cases (except chips), built a cost for the buyer, so we can conclude that the overall bargaining power of suppliers for is low for Hyundai as well as the industry.
Competitive Rivalry:
The impact of key competitors in the Hyundai Porter Five Forces Analysis is as follows:
In the automobile industry, all the firms go for competitive pricing, and a lot of equally balanced competitors are also present. Companies like Hyundai focus a lot on product differentiation by innovation and technological advancements. The firms in the automobile industry spend a huge amount of money on marketing activities. All these activities increase the competitive rivalry in the industry. The initial capital required to start the business is very high. Not a lot of new firms are entering the market. The industry is also growing at a fast pace due to the rising income of the people, but the strict lockdowns imposed during the Covid crisis has impacted it negatively. The exit barriers of leaving the industry are also high. Hyundai is in a highly competitive market and faces brands like Honda, Toyota, Nissan, Ford etc to name a few.
So overall, we can conclude that competitive rivalry is high in this industry.
To conclude, the above Hyundai Porter Five Forces Analysis highlights the various elements which impact its competitive environment. This understanding helps to evaluate the various external business factors for any company.
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