CREATING A FIVE FORCES INDUSTRY MODELThe five forces model is designed to betterunderstand the competitive forces in an industryin which a firm competes. This exercise is designed to utilize youranalytical skills inregards to competitive forces within an industry, in this case the automotive industry.The Instructor has selectedAmerican automobile manufacturer Tesla and is requesting you rankthe forces for the automobile industry, and how those forcesaffect the profitability of theselected manufacturer.You may find the following article about Tesla's role in themarket and surprising success useful as a discussion point:http://blogs.wsj.com/speakeasy/2013/08/09/teslas-success-far-has-some-analysts-eating-crow/?KEYWORDS=tesla(Links to an external site.)

1) Threat of New Entrants.How might things like capitalrequirements, brand equity,government policy (things like safety, EPA and emissions regulations), access to distributionchannels, etc. influence a new entrant to themarket? This article onTesla's direct-salesapproach may be useful:http://www.huffingtonpost.com/2013/06/28/tesla-direct-sales-auto-dealers-petition_n_3516836.html(Links to an external site.)

2) Threat of Substitutes.How does depreciation of new vehicles play into switching costs?How does the used car market influencethe threat of substitute products? Masstransportation? What othersubstitutes exist and how do they influence the industry?

3) Bargaining Power of Suppliers.Suppliers may be small are large ranging from small carcomponents, tires, electronicsto unionized assembly line workers. How does influence theautomobile industry? How do automobile raw materials such as steel and aluminuminfluence the power of suppliers?

4) Bargaining Power of Buyers.To what degree can buyers push down the price of newvehicles? What does the unheard-of-pricingand discounts offered by dealers suggest?

5) Intensity of Rivalry.How competitive is the industry?Consider things such as fierceadvertising campaigns, and product developments.