Tata Motors Limited: Porter Five Forces Model

Bargaining power of the customers (LOW)

Due to the rising competition in the Indian market, the bargaining power of the customers is high
because the switching costs are very low. Tata Motors has been facing intense competition from
Maruti Suzuki and other new entrants like Volvo. Due to its differentiation and innovativeness
Tata Motors has managed to compete in the industry and maintain its margins.

Bargaining power of supplier (LOW)

With the increasing number of manufacturers setting up shop in India, the demand on OEM
manufactures who supply the automobile industry has increased. Thus the bargaining power of
the supplier in the industry is very high which has affected the margins of manufacturers like
Tata Motors.

Threat of substitute (HIGH)

There are very few substitutes available for the products that are produced in the industry in
which Tata Motors operates. The very few substitutes that are available are also produced by low
profit earning industries. This means that there is no ceiling on the maximum profit that firms
can earn in the industry in which Tata Motors operates. All of these factors make the threat of
substitute products a weaker force within the industry.

Internal Rivalry (HIGH)

Tata Motors if faced with fierce competition in the domestic market dominated by Maruti Suzuki
and Hyundai Motors. The company is also facing competition in its commercial vehicle segment
from Volvo and Daimler who have also started manufacturing trucks. This has resulted into a
loss of market shares and a decline in its turnover.

Threat of new entry (MEDIUM/HIGH)

In the automobile industry, barriers to entry are very high considering the fact that incumbents
like Tata Motors have already reached high scales of production which will be very expensive
for new entrants to match. Barriers to entry into this industry are high due to the very high
investment required for entry. Not forgetting that incumbents have gained experience with time
and know how to operate efficiently which gives them an added advantage.