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1)As a department manager of a company that builds automotive engines, I will be presenting an executive summary that will address automotive manufacturing and electrical equipment manufacturing within the United States. In order to bolster company’s portfolio and increase revenue, the company is considering diversifying into other business opportunities. In this summary, we will determine whether diversification into electrical equipment manufacturing (i.e., generators) would be a good decision for our company. Generators are essential for both residential and commercial use. We will analyze the automotive manufacturing industry and the potential of the electrical equipment industry and compare descriptive statistics using quantitative and qualitative data. The data being used will be found in financial reports, industry standards and case studies throughout both industries.
2)The United Stated is one of the largest automotive manufacturing industries in the world by revenue. The automotive industry consists of a large scale of companies involved in engine and framework design, and the selling of motor vehicles. The United States automotive manufacturing industry shrank 1.5% to a value of $210 billion in 2019 (MarketLine, 2020). Approximately 1.65 million vehicles were sold in the U.S. as of December 2020 and as of May 2021, the total value of the automotive industry measured by revenue is $82.6 billion. (Egan, 2021) The U.S. automotive sales were estimated at $980 billion in 2020. California is the top region for car sales in the U.S. As of 2020, in California the sales equaled to approximately $107 billion which accounted for 10.99% of the United States car sales. The top five regions in the United States account for about 38.76% of its sales in 2020. (Knoema.Com, 2020) Gasoline fueled internal combustion engine (ICE) is the most common and most popular fuel type. Lightweight trucks filled by gasoline (ICE) has represented about 73.8% of vehicle sold in the United States. Electric vehicles sold in the United States equal to approximately 1.9 million units in 2020 and plug in hybrid vehicles estimated approximately 1.1 million units in 2020. (Statista, 2021)
3)Recently major automotive companies in the industry have focused their operations on hybrid or electronic cars. However, current market trends in the automotive industry are showing it focusing more on autonomous vehicles and Internet of Things (IoT). Studies have shown that people want more autonomous vehicles because of its potential to provide more efficient transportation, have better fuel savings and reduction of crash related incidents. some types of autonomous vehicles include the 2021 Cadillac CT4, 2021 BMW 7 Series and 2021 Tesla Model 3. (Top 10 Automotive Industry Trends to Watch in 2021, 2021)
Internet of Things (IoT) help improve road safety, reduce pollution, and solve traffic congestion. IoT connects through in car applications which provides real time driving data that can be utilized to give information to navigation. This helps drivers with traffic hazards, accidents, and bad road conditions. IoT also helps manage in car software assets that involve proper testing and accurately deploying software. (Capparella, 2021b). Trends regarding automotive vehicle body types have changed drastically over the years. As of 2021, the most popular type of vehicle sold so far are Crossovers. As of June 2021, crossovers account for over 45% of automotive sales in the United States. Some of the top sellers include the Nissan Rogue, Honda CR-V, and the Toyota RAV4 (Statista, 2021a). A couple of reasons why the crossover is so popular is because of its versatility and cargo space. They are also more fuel efficient and cheaper than larger SUV.
4)The electrical equipment manufacturing industry in the United States is an important part of many industries. Power generators have a broad spectrum of using both commercial and personal or residential facilities. It is essentially an important part of many industries allowing energy solutions to penetrate additional markets such as health care and hospitality. The portable generator market is projected to reach $2.5 billion by 2026 from an estimated $1.8 billion in 2021. The frequent power outages due to weather (i.e., hurricanes, tornadoes, and snowstorms) are the main forces for the portable generator industry. It is critical that infrastructures such as hospitals and emergency service providers must always have a dedicated source of electricity. “Increasing adoption of dual fuel and inverter portable generators or expected to offer lucrative opportunities for the power generator market during the forecasted period. However, limited power generation capacity of portable generators act as a restraint for the product.” (Business Wire, 2021)
5)The global portable generator market is expected to show strong growth during 2021-2026. Low-
end models of portable generators support few basic home appliances, whereas the high-end
models can provide power backup to the whole house and small businesses. Today, portable generators are gaining traction among the who use the generators as they are cost-effective and
can be easily moved from one place to another. Consumers are now depending on generators for
much more. Items that were considered “essential”, as in washer/dryer, refrigerators, and
cooling, have now evolved into internet and electronics. “Looking forward, the publisher expects
the global portable generator market to grow at a CAGR of 6.8% during the forecast period
(2021-2026).”(Markets, 2021)
6)GENERATORS:
There are several environmental regulations depending on the state or local government for generators. Generators can release several different error pollutants such as carbon monoxide carbon dioxide sulfur dioxide in xylene to name a few. Also depending on the state or local government air, parading and/or construction permits may be needed. It is typically difficult for new entrants to gain entry into the generator market. However, existing companies in the automotive manufacturing market should not have many issues breaking into the generate a market.There is a large number of competitors in the generator industry within the United States. With this, the market is fragmented and overall, the risk or the generator industry is low. Some of the markets biggest competitors are Briggs & Stratton Corp. (US), Caterpillar Inc. (US), Cummins Inc. (US), DuroMax Power Equipment (US) to name a few. (Markets, 2021) There are a number of firms that may be considered suppliers of portable generators. The cost for a company that is diversifying is usually not an issue. Most companies have investors for a new startup and the risk of bankruptcy for utility companies or really low. There is not much threat to the generator industry at this time. The demand for generators have increased drastically over the years and is projected to continue to increase well until 2024. The bargaining power for buyers are limited. Second bargaining power for buyers has much to do with their projected needs and alternative options. If load growth is low or generators are
expected soon, buyer bargaining power is stronger. However, if buyer load growth is higher or
products are at capacity, the buyer’s bargaining power can be weak.
7)AUTOMOTIVE:
Although the market for automotive manufacturing supply of engines is controlled by a few companies, there is a strong presence of rivalry in the automotive industry market because there is a large number of firms competing throughout the industry. There is a moderate chance of being acquired by competitors because of the risk of bankruptcy. There are very few legal barriers to protect any existing companies from new entrants. New entrants could easily access suppliers and distributors within the automotive industry if they are able to bring modern products and new ideas to the industry. However, new entrants would have to focus more on engineering and product quality, and there is a large amount of cost required for startup. Bargaining power for suppliers is weak due to the large number of suppliers and materials being widely accessible. The top vehicle brands hold extensive value because raw material is always available and their relationship with suppliers allow them to switch from one to another without difficulty.
There are many different substitute products for transportation which include trains, buses,
bicycles, and planes. However, these substitutes do not always provide the same amount of
convenience. For this reason, the threat of substitutes is weak, but they can sometimes be more
affordable. Bargaining power for buyers are strong due to the large number of buyers being individuals.
There is also a threat which comes from corporations that buy fleets of vehicles. When
corporations are buying vehicles by the fleet, they are in a position to bargain versus individuals.
Buyers have the choice to use alternative brands and are very sensitive to brands and pricing.
Manufacturing companies tend to use their design and quality and focus more on customer
loyalty.
8)COMPARISON:
Rivalry is low in the generated industry because of the number of
competitors and due to its fragmented market versus the automotive
industry which there is a strong presence of rivalry because of the large
number of firms competing throughout the industry. For the generator
industry, is difficult for new entrants to gain entry into the market because of
its existing companies. The automotive industry does not have a threat of
diversifying into the generator industry because of its reputation. Bargaining
power for Suppliers for both the generator and automotive industries or low
due to startup cost and the widely accessible number of suppliers and
materials available.
In reference to the threat of substitute products for both the automotive and
generated industries are low. The demand for generators has increased
drastically and is projected to continue to increase in the near future. Also,
the threat for substitute products in the automotive industry because of the
convenience of these substitute products that are available. The bargaining power for buyers are different within the industries because bargaining power is limited for generators. This is due to the projected needs
and alternative options available for generators. The bargaining power for
the automotive industry is strong due to the large number of buyers
available, which include individuals and corporations having the ability to
bargain their prices and brands.After conducting research about the automotive manufacturing industry and the electrical equipment manufacturing industry, I have determined that the
generator industry would be a great industry to diversify into. It’s demand
and accessibility has been increasing and it is predicted to continue to
increase throughout the near future. There is a low number of big
competitors due to the fragmented market and there should be no issues
with the automotive company breaking into this industry because of the
reputation it carries. The cost of diversifying into the generator industry can
be large, however, the risk of bankruptcy is low. Since the demand for
generators have been increasing the threat of substitute products are
limited.
