Rivalry Among Existing Competitors
The industry’s competitive rivalry is high, as many brands on the global market have established strong brand names. This creates a robust competitive environment, which, for Changan and Geely, manifests in these companies being less well-known. The expansion of these brands’ presence does not have a sufficient impact at this stage.
The companies have a strong position in their home market in China. However, the company currently holds a 0.69% share of the global market (Statista, 2023a). For Geely, circumstances have turned out slightly better, and the organization has 0.82% of the global car market (Statista, 2023b). Considering these facts, we can say that competitive rivalry is quite intense and manifests itself through rivalry with major suppliers.
Threat of New Entrants
Potential entrants in the car market are somewhat complex due to technical and production factors. The emergence of new brands requires significant investment and development to deliver high-quality products. One of the companies that is proliferating and can achieve the required volume is BYD Auto (Feng & Li, 2019). The company is investing significant efforts in developing electric vehicles, which sets it apart from its competitors. This also contributes to the trend for such cars in the United States, which is a potential danger for Changan and Geely.
Less likely is Great Wall Motors entering the American market. The company’s products enable optimizing resources to adapt production to the American market. Thus, potential entrants pose a medium threat, requiring serious preparation.
Threat of Substitute Products
The threat of substitute products is moderate since electric vehicles as an alternative to conventional ones are developing quite slowly. They cannot sufficiently provide all the same characteristics as vehicles with an internal combustion engine (Feng & Li, 2019). Thus, this leads to the presence of one main competitor, Tesla. In the United States market, this manufacturer has a reasonably strong position and can pose a threat. However, offering an alternative still cannot fully cover the capabilities of conventional cars.
Bargaining Power of Buyers
The bargaining power of buyers is significant, as customers have a wide choice of brands, some of which have proven themselves to be reliable manufacturers. Thus, buyers will view new brands with a critical eye. This situation can be corrected through high-quality brand storytelling that helps the audience learn more about the company (Paul, 2019). The bargaining power of automakers will be pretty low if awareness-raising measures are not taken. This is also affected by competition, as evidenced by the constant, gradual emergence of new technologies.
Bargaining Power of Suppliers
The bargaining power of suppliers is moderate, as Geely and Changan have extensive supply networks that do not depend on any third-party suppliers. When entering a new market, organizations do not need to seek new suppliers, as production facilities in China are well established (Feng & Li, 2019). The supply of cars from a given country can significantly boost sales, as there is no need to build local factories or establish new production facilities. In addition, given the current political situation and the complex relationship between China and the United States, the optimal solution would be to maintain production in China. Supplier diversification is also important, as their extensive network can be more effective.
References
Feng, K., & Li, J. (2019). Challenges in reshaping the sectoral innovation system of the Chinese automobile industry. In Liu, K. & Racherla, S. (Eds.). Innovation, Economic Development, and Intellectual Property in India and China: Comparing Six Economic Sectors, 415-438.
Paul, J. (2019). Marketing in emerging markets: a review, theoretical synthesis and extension. International Journal of Emerging Markets, 15(3), 446-468.
Statista. (2023a). Changan report 2022.
Statista. (2023b). Geely report 2022.