The Power of the Customers in the Automobile Industry Essay

1. The power of Customer There are two categories of customers in the automobile industry: final customer, the actual users of the end product and industry’s customer, for instance manufacture company buying the necessary items from the supplier. The power of customer is the extent of an impact that the buyer has on a supplier or manufacturing business. Buyers are powerful if: †¢ Purchase of large volumes †¢ The product is standardized †¢ Low switching costs †¢ Price sensitive †¢ Threat of backward integration 1.1. Ultimate customer Private customer is price sensitive. The cost of purchasing the car represents a significant percentage of consumer budget, therefore the price will become very important factor while choosing a product. Consumer†¦show more content†¦1.2. Industry’s buyers There are many different items needed, in order to manufacture a car. Therefore, the firm has to have very high control and insight on their supply chain. Kraljic’s matrix is a tool that helps to segment suppliers into 4 categories. By using the matrix, it is possible to differentiate items based on the their availability on the market and the extent of significance for the company. For instance, if there are only few alternative suppliers for an item and it is of high value for the company, possibly because of the large purchase volumes or nature of the item is of high complexity, it is categorized as a Strategic item on a producers market. In this case, the company faces potential shortages of future deliveries also the threat of losing control over supplier. There are two available strategies that the company could perform in order to secure deliveries and to gain the customer power. First option is to develop a close relationship with the supplier, to sign a long-term coo peration contract. Second solution is to use backward integration strategy, which is when the manufacturer enters the supplier’s business. Ford Motor Company experienced tough times during the early 20th century. Many suppliers could not survive low economical situation, therefore Ford faced shortages in deliveries and could not produce the quantity of cars demanded. First thought that Henry Ford tried to implement wasShow MoreRelatedEnvironmental Challenges Facing The American Auto Industry Essay775 Words   |  4 PagesChallenges facing the American Auto Industry The American Auto Industry has evolved for many decades with pioneers such as Ford Motor Company. The United States Auto Industry was once upon a time a global leader in the automotive industry but due to knowledge and skills acquisition by other automobile manufacturers such as Toyota, the once American Auto Industry leadership has been surpassed. I will give discuss this following paragraphs. 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