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5 Tata Motors’ Michael Porter’s 5 Force Analysis

1. Rivalry Amongst Competitors

 Auto Industry of any nation faces a stiff competition, that is why companies have to
be price efficient and come up with new technologically advanced cars and features.
The industry is very large and the exit cost is also very high as a lot of asset
investment is being done, which intensifies the competition. Also, be it any range of
car price, companies have to deeply focus on R&D.

2. A Threat by Substitutes

 With the increasing fuel prices and online booking of tickets, people find cabs and
other modes of transport as a substitute to a personal vehicle. Moreover, they do
not have to spend on maintenance too. Still, owning a personal four-wheeler is a sign
of prestige and convenience for the most.

 In the commercial vehicle segment, road transport is still very much dominated
(59%) as it can be connected to the mountains and to seashores unlike trains, which
makes substitutes for commercial vehicle highly unfavorable.

3. Barriers to Entry

 Auto Industry requires continuous innovation, proper raw materials, skilled labor
and huge initial capital investment which makes it very difficult for new entrants to
step their foot in this industry.

 Other barriers are government policies which have become very strict in the recent
period especially focusing on environmental safety and high import taxation.

4. Bargaining Power of Suppliers

 In Auto Industry, the bargaining power of supplier depends on the size of the
supplier as few small suppliers are totally dependent on few auto players, so they
have to play according to the rules and regulations set by the vehicle companies, and
switching from one supplier to another is very easy for big players.
5. Bargaining Power of Customers

 Customers are very price-sensitive and would switch to other brands that offer a
better car at the cheapest price as there is no switching cost involved in this industry.
So, customers enjoy a high bargaining power in the auto industry. However,
companies try to increase customer loyalty by offering better quality and post
service.