SG7001 Managing Strategy Operations and Partnerships
Activity 4 A critical analysis of the industry environment.
| Identification of the industry in question | ||
| Environmental
factor |
Issue(s) pertinent to the industry. | Implications for the industry |
| Political factor | Safety regulations is one of the most prominent political factor that affect the marketing on Ghabbour Auto
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Political factors highly impact the market for automobiles in Egypt. Driving the motor cycles in a rush way can be tremendously dangerous basically for new generations (Filion, 2018). The government throughout the country implements strict safety policies to the automotive industry which affects Ghabbour Auto. Sometimes they fail to launch new designs and models due to this policy restriction.
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| Economic | Growing disposable income but less economic activity from the government can be regarded as the greatest economic factor.
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Throughout the country individuals are earning more money which automatically increases every year. They tend to invest more money on luxury goods like automobiles and motor vehicles. This seriously sometimes increases the demand for cars. Though GB auto did not sell huge items greater than their capital net profit which is EGP 120.9 million. |
| Social or sociocultural | The trends towards driving cars among consumers | These days the attractiveness of driving is increasing rapidly every day. It is observed that almost every house in a developed and quite developed country, there are vehicles in use. Though GB Auto did not sell lots of cars in a year regarding the political factors which became the reason of getting lower profit or sometimes loss as people are nowadays reduced to journey by bus.
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| Legal | Raising the cost of fuel and copyright issues of vehicles can be considered as another big issue. | Looking after the environmental impacts of petroleum base vehicles the government processed some legal actions. The cost of fuels are also high which reduces the sale of GB Auto along with some copyright issues which can keep a strong impact legally. |
| Porter’s force | strength | Justification/ reasons |
| Threat of new entrants | Moderate | In Egypt it is quite tough to open a start-up in the automobile industry because it needs a huge investment of capital, money and other factors of production. The government also imposes some types of import duties which makes it challenging for foreign firms to enter the Egyptian market. |
| Bargaining power of suppliers | weak | According to Bruijl (2018), the bargaining power of suppliers is low because GB auto has to cooperate with the rules deposited by other brands such as Volkswagen, BMW, Ford and others. |
| Bargaining power of buyers | Moderate | In any market it is natural that buyers are always price sensitive and as they are not satisfied with the charged price, they choose the way to bargain. Ghabbour Auto always tries to construct customer loyalty through offering lower prices with affordability, design and improved qualities making bargaining power moderate. |
| Threat of substitute | Quite weak | The toughest competitors of GB Auto are Bavarian auto group, Nissan, Honda etc. which also depend on the substitute design, quality and customer satisfaction along with the switching cost. The regulations regarding vehicles and environmental impact also creates a barrier for making substitutes. |
| Competitive rivalry in the industry | moderate | The competition is moderate for GB Auto as it always tries to provide best customer satisfaction so that the competitive rivalry keeps low though there are more manufacturers. |
| Stage in the industry life cycle | Ghabbour auto can be considered as entered into the growth stage |
| Implications | Ghabbour Auto can be considered to have entered in the growth stage of its industry life cycle. Being a long run industry, the company has created history and reputations. The gross profit margin is 11.1% with great gross profit where their revenue of sale increased by almost 15% which denoted the growing stage of the company in the industry life cycle (Wang, 2017). |
| issue | Survival factor | Success factor |
| Presence of Powerful suppliers | The company has to improve their negotiation skills | The company should have distinguished factors for buying their cars with minimum cost. |
| Being a Mature industry | The economies of scale of the company can be a severe factor with cost position. | Making buyer-seller relationships stronger and providing cost advantages such as discounts can be beneficial for Ghabbour Auto to survive. |
| Fast growth of the industry | Investing in the improvement of new technologies can be a big issue which can create customer’s satisfaction problems. | The company should adopt new technologies along with AI which will give them efficiency. |
| Powerful buyers with moderate bargaining | Meeting the basic minimum requirements about cars like design, mileage and other factors and help the company improve their sustainability. | Strong relationships with customers through their product satisfaction can bring great success in the long run even in the case of greater substitutability. |
| Emissions and fuel economy | Government protection acts and regulations can help the firm. | Having a greater mechanism to tackle the environmental issues with their products can be beneficial |
| Threat of substitutes | Improving the brand names should be done. | Lowering the costs can help them a lot which will decrease the risks of greater substitutability. |
Figure 1: Industry Life cycle
(Source: Created by author)
