What Does it take to Succeed in this Industry? Economic Sociocultural Global Technological Political / Legal Demographic GeneralIndustryCompetitor Threat of new entrants Power of suppliers Power of buyers Product substitutes Industry rivalry Future Objectives Current Strategy Assumptions Capabilities Environmental Analysis

What Does it take to Succeed in this Industry? Economic Sociocultural Global Technological Political / Legal Demographic GeneralIndustryCompetitor Threat of new entrants Power of suppliers Power of buyers Product substitutes Industry rivalry Future Objectives Current Strategy Assumptions Capabilities Environmental Analysis

What Does it take to Succeed in this Industry? General Environmental Analysis OpportunitiesThreats Automakers reducing their number of suppliers in favour of larger T1 suppliers Prolonged economic downturn reduces production Purchase distressed T1 and T2 suppliers Tight liquidity could stifle leveraged short term growth or if not enough cash on hand survival Divest into other industriesProlonged economic downturn reduces Consumer demand and higher gas prices reduces dependency on automobiles, people look to mass transit Economic Environment

What Does it take to Succeed in this Industry? General Environmental Analysis OpportunitiesThreats Foreign exchange fluctuations Sustain economic downturn could move consumer preferences to cost based low value added options. Economic Environment - Continued

What Does it take to Succeed in this Industry? General Environmental Analysis OpportunitiesThreats Diversification into mass transit partsGreen revolution and concerns for global warming could move transportation preferences to non auto options SocioCultural Environment

What Does it take to Succeed in this Industry? General Environmental Analysis OpportunitiesThreats Developing countries increasing auto production particularly China and Eastern Europe – expand into these markets Developed countries decreasing auto production – Focus on product development to extend parts content per car Pursue market development strategy in emerging these new markets Cheap labour in foreign markets China 1.5% of car cost = labour Prolonged economic downturn reduces Consumer demand and higher gas prices reduces dependency on automobiles Global Environment

What Does it take to Succeed in this Industry? General Environmental Analysis OpportunitiesThreats Increase in demand for: Green technologies GPS technologies Materials and alternative fuels Technological Environment

What Does it take to Succeed in this Industry? General Environmental Analysis OpportunitiesThreats Governments willingness to come to the aid of OEM’s so that they do not fail Government ownership of Ford and Chrysler could affect decisions around suppliers. Buy American sentiments Governments willingness to subsidize alternative technologies development Governments willingness to contribute to job training programs to offset labour costs in manufacturing sector Political Legal

What Does it take to Succeed in this Industry? Industry Environmental Analysis OpportunitiesThreats The Auto parts market continues to consolidate at a diminishing rate. Large parts suppliers do well Smaller parts suppliers Parts suppliers can enter the market to supply new technologies OEM emerging in Uzbekistan, Hungary, Ukraine, Indonesia, Slovenia Argentina all over 25% growth 2008 T1 emerging in these markets as well Threat of New Entrants

What Does it take to Succeed in this Industry? Industry Environmental Analysis OpportunitiesThreats Weakened buyers may be more willing to renegotiate deals Increased power of unionization Weakened buyers may sell off divisions providing acquisition opportunities Increasing raw materials costs Few number of major players leaves non integrated firms exposed to individual firms failure Strength of Suppliers

What Does it take to Succeed in this Industry? Industry Environmental Analysis OpportunitiesThreats Further auto parts industry consolidations increases market power of suppliers Relatively small number of OEM’s Strong market power Drive prices down Forced to comply with JIT Common practice to renegotiate pricing after commitments mad Strength of Customers

What Does it take to Succeed in this Industry? Industry Environmental Analysis OpportunitiesThreats Low perceived value of name brand replacement products Counterfeiting estimated at $12B in Global market for American cars alone Threat of Product Substitutes

What Does it take to Succeed in this Industry? Industry Environmental Analysis OpportunitiesThreats As consolidation decelerates industry rivalry will increase Margins should remain low Industry Rivalry

What Does it take to Succeed in this Industry? Environmental Analysis Future Objectives Competitor Large T1 competitors are looking to survive short to medium term, and where possible continue to vertically integrate into strategic T2 firms and even forward into OEM market Large T1 competitors may look to restructure sell domestic operations and pursue further market development strategy into emerging markets in order to maintain market power and not fail. Smaller T2 firms may look to diversification and product development strategy to move away from cost based competition and focus on differentiation in emerging and novel solutions

What Does it take to Succeed in this Industry? Environmental Analysis Future Objectives Competitor Large T1 competitors are looking to survive short to medium term, and where possible continue to vertically integrate into strategic T2 firms and even forward into OEM market Large T1 competitors may look to restructure sell domestic operations and pursue further market development strategy into emerging markets in order to maintain market power and not fail. Smaller T2 firms may look to diversification and product development strategy to move away from cost based competition and focus on differentiation in emerging and novel solutions