SG7001 Managing Strategy Operations and Partnerships
Activity 4
A critical analysis of the industry environment
| Identification of industry in question | Automotive industry | |
| Environmental Factors | Issue(s) pertinent to the Industry | Implications for the
industry
|
| Political factor | ● Many military rules affect various important decisions
● The government is addressing climate change by banning plastics, fostering renewable sources of energy and electric vehicles
● The government has a VETO power to discard and abandon any project which are on riverside as the country highly depends on river water for many purposes ● The political environment of the country is unstable this there is no security of existing laws and regulations |
● GB Auto must take its ventures with flexible dimensions so that it can adjust to the drastic political environment of the nation. Besides it should be aware of issues regarding the middle-east cold war.
|
| Economic factor | ● The per capita income of citizens has reduced between 2016 and 2017 due to which the purchasing power of consumers have been hampered. Disposable income, as a result, has also reduced significantly (Macrotrends, 2021)
● Like the political environment, GDP is unstable too. Thus investments in large projects, consumption by buyers and export and import can also be said to be very unstable and poor for a business to operate |
● Economic stability is important for GB Auto to analyse market trends and plan investment in projects thus in this situation, the company might face issues
● The company’s vision is to provide customers the satisfaction of highly productive and technologically superior cars but with low per capita income, it is difficult
|
| Social factor | ● Fuel shortage
● Increasing unemployment in Egypt ● Trend of sharing instead of ownership |
● GB Auto will have to keep a low price so that people can afford its vehicles and want to buy them
|
| Technological factor | ● Competitors like TESLA has introduced auto driving in cars which has raised expectations of customers
● AI technology is advancing constantly in the automobile industry |
● GB Auto is trying to implement the best of AI however it does not have access to sufficient resources for self driving features which can be an issue
|
Table 1: PEST analysis
(Source: Developed by author)
| Porter’s five force | Strengths | Justification |
| Bargaining power of the consumer | High |
In Egypt, there are adequate numbers of Car Companies available in the market. So the bargaining power of suppliers is usually high for Ghabbour Auto because the customer can easily switch to any other company for higher performance. |
| Bargaining power of the supplier | Low |
In Egypt, there are multiple numbers of suppliers who can provide essential business equipment for Ghabbour Auto with a cheap price and improved quality. This situation of multiple suppliers reduces the bargaining threat of the company from the suppliers. |
| Threat of substitutes | Low |
As a motor company, Ghabbour auto has some threat from the substitution fear though the only substitution of oil based car is electric based automated cars which is not popular in Egypt. So the threat of substitution in Egypt is lower for Ghabbour Auto. |
| Threat of new entry | Moderate |
Along with some national income problems, the Government of Egypt does not roughly encourage the motor vehicle industry which is a reason for moderate risk for the company. |
| Competitive rivalry | High | In Egypt, there are some companies such as General Motor corps, Volkswagen that are tough competitors of Ghabbour Auto which increases the risk of competitive rivalry. |
Table 2: Porters’ Five Force
(Source: Developed by author)
| Stage in the industry life cycle | Start up, Growth, Maturity, Shakeout, Decline
|
| Implications | GB Auto was started by Kamal and Sadek Ghabbour in the 1940s (Ir.ghabbourauto.com, 2021).
In the 1990s, the company became exclusive distributors of Bajaj motorcycles, Hyundai passenger cars in Egypt and also Volvo buses and trucks. In 2020, GB Auto launched the new Chery Tiggo 7 1.5 Turbo 2020. It introduced its brand portfolio in Iraq. It collaborated with Coca cola Egypt and also became an Authorised Distributors of Goodyear Tired in Egypt (Ir.ghabbourauto.com, 2021). The company undergoes a certain period of slowdown and low expenses whenever the political and economic conditions become too drastic in the country. The company has still not entered the decline stage. |
Table 3: Industry life cycle
(Source: Developed by author)
Figure 1: Industry life cycle
(Source: Created by Author)
| Issue | Survival factor | Success factor |
| Unsupportive government of the country | Government of Egypt does not encourage or support motor companies due to some economic fluctuating factors such as unstable GDP, business share problems etc (Black et al. 2020). | Investment in new types of businesses and sectors which can get the support of the government is beneficial for Ghabbour Auto for tackling their business smoothly. |
| High competition rivalry | Ghabbour Auto has several competitors in the market for which they need to improve their research and designing skills. | Though in Egypt, the use of electric cars is not popular at all, some people are looking for self-driving cars with AI technology as the disposable income also increases. Ghabbour Auto can invest in AI technology infused cars for better generation. To compete with others, they can innovate new ideas of shared riding, electric cars which fit in the budget and other modern world technological gadgets. |
| Well maintained financing | Ghabbour Auto needs to operate through rough cash in the market with a maintained framework. | Proper strategic financing can be a beneficial choice for the company to operate more efficiently (Wagdi et al. 2017). They should know proper mobility and utilization of their capital in the market to resolve their obstacles. |
| Budgetary support
|
People with low income are not willing to use private cars | The company can invest time to innovatie cars with low budget aru support for increasing sale. |
Table 4: Major issues
(Source: Developed by author)
Reference List
Black, A., Roy, P., El-Haddad, A. and Yilmaz, K., 2020. The political economy of automotive industry development policy in middle income countries: A comparative analysis of Egypt, India, South Africa and Turkey.
Ir.ghabbourauto.com, 2021. GB Auto – Our History. [online] Ir.ghabbourauto.com. Available at: <https://ir.ghabbourauto.com/en/our-history> [Accessed 31 July 2021].
Macrotrends, 2021. Egypt GDP Per Capita 1965-2021. [online] Macrotrends.net. Available at:
<https://www.macrotrends.net/countries/EGY/egypt/gdp-per-capita#:~:text=GDP%20per%20capita%20is%20gross%20domestic%20product%20divided%20by%20midyear%20population.&text=Egypt%20gdp%20per%20capita%20for%202018%20was%20%242%2C537%2C%20a%203.8,a%2030.56%25%20decline%20from%202016.> [Accessed 31 July 2021].
Wagdi, O., Amin, A., Ayman, A., Nagi, M., Osama, M. and Hosny, M., 2017. The Impact of investment recommendations on stock return: Comparative study between International and Emerging markets. Available at SSRN 2971712.
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