ANALYSIS OF AUTOMOBILE

INDUSTRY OF PAKISTAN
 Introduction
 In the world trade, Auto Sector is one of the largest
segments. It is the major driver of economic growth and
business activities
 The Automobile industry has been an active and growing
field in Pakistan for a long time
 Automotive vehicle assembly operations in Pakistan started
in 1953
 The Automobile industry has a great influence on the
economy of every country, as the total production value of
this industry
 The automobile industry in Pakistan operates under
franchise and technical cooperation agreements with leading
world manufacturers and can be broadly categorized into
various segments
 The automotive industry contributed over Rs 30 billion to the
government exchequer in the form of duties and taxes in
FY03
 The industry has achieved a phenomenal growth of 50.2
percent
 Industry operates under franchise and technical cooperation
agreement with: Japan,Europe,Korea,China
 List of some Automobile Producers and Products in
Pakistan:
 Pak Suzuki Motor Comp ltd.
 Indus Motor company ltd
 Honda Atlas cars
 Deewan farooque motors ltd
 Sigma Motors
 Hino Pak motors
 Ghandhara Nissan
 Sindh Engineering
 Ghandara Industries ltd
Porters model of 5 forces

 Barriers to entry
 Threat of substitutes
 Bargaining power of buyers
 Bargaining power of suppliers
 Rivalry among the existing players
WHY?
 Important tool for analyzing an organization’s industry structure
in strategic processes.
 Porter’s model is based on the insight that a corporate
strategy should meet the opportunities and threats in the
organizations external environment.
 Competitive strategy should base on an understanding of
industry structures and the way they change.
 These forces determine the intensity of competition and hence
the profitability and attractiveness of an industry.
 The objective of corporate strategy should be to modify these
competitive forces in a way that improves the position of the
organization.
 Porter’s model supports analysis of the driving forces in an
industry.
Threat of New Entrants
 Cost and Performance Advantage for Large
Firms
 Proprietary Differences
 Customer Switching Costs
 Capital Requirement
 Distribution Channels
 Experience and Learning curve help lower
cost
 Obtaining Resources
 Proprietary features of Product
 Licenses, Insurance and Qualifications
Bargaining Power of Buyers

 Large Number of Buyers Relative to

the Firms in the Industry
 Switching cost for Customers
 Need for Additional Information
 Accepted Product Branding
 Customer’s Price Sensitivity
 Customer Businesses Profitable
 THREAT OF SUBSTITUTES

• Performance and Price Limitation in Substitutes

• Customer Switching Cost

• No Real Substitute

• Customer not Likely to Substitute

• Threat of Substitutes: LOW

Bargaining Power of Suppliers
 Differentiated Inputs
 Supplier Switching Cost
 Forward Integration
 Substitution of Inputs
 Potential Suppliers
 Business Important to Suppliers
 Influence of Cost of Purchase on Overall
Cost

 Bargaining Power of Suppliers : HIGH

Intensity of Rivalry
 Industry Growth
 Fixed Costs Relatively Low Portion of
Total Cost
 Significant Product Differences and
Brand Identities
 Specialized Competitors
 Exit and Entry Not Easy

 Intensity of Rivalry: MODERATE

 Industry Attractiveness
Five Forces Result
1 Threat of New Entrants Threat of new entrants is low

2 Bargaining Power of Buyers Bargaining power of buyers is low

3 Threat of Substitutes Threat of substitutes is moderate to

low
4 Bargaining Power of Suppliers Bargaining power of suppliers is
high
5 Intensity of Rivalry Among Intensity of rivalry is moderate
Competitors
 Recommendations
 A consistent policy should be declared by the
Government every 7-10 years in order to make the
local manufacturer more focused and more certain.
 Market expansion measures should be taken which
will definitely benefit the industry, government and
general public in terms of employment and price.
 Financing options such as leasing and car finance
scheme in collaboration with banks and financial
institutions should be extended on a wider basis so
as to increase the purchasing capacity of the buyers.
 The car manufacturers should also
encourage the use of CNG as an
alternative to fuel in order to stimulate
the demand of the cars despite the rise
in fuel prices.
 Localization should be increased and
investments should be made to increase
localization.