Automobile Sector Analysis: Five Forces and SWOT

Automobile Sector abbreviation Five Forces and thrum1. Overview of the travel sectorFive forces analysisCompetitive Rivalry between real Players HighCompetition between existing simple machine companies is in high spirits. Although the car merchandise was dominated by the three big auto manufacturers in US, Toyota and Honda in Japan, the spot is changed. With the growing consider in appear merchandise, the uphill competitors in China and India may occupy an intensified scathe competition. However, the competition could alike focus on the safety, warranty and financial answers etc. terror of New Entrants MediumAlthough the entrant barrier is high for the railroad car sedulousness be social movement the requirement of smashing and technology, an increasing outlet of automobile manufacturers be emerging in China and Asia collectable to the sparingal expansion and growing demand. However, these automakers are in the development status and may not catch up th e conduct technology in Japan and US, so the threat from sore entrants is medium.Threats of Substitutes LowCustomers could choose to switch to trans larboardation means different(a) than automobile such as bicycles, buses and subways. However, the automobile is still the favourite despite the relevant high mo clear upary value than other menti iodind transportation means because its flexibility, comfort and convenience. talk terms Power of Suppliers LowIn automobile fabrication, the component supplier has secondary poting mightiness because the manufacturer could switch to other suppliers easily. On the other hand, the components are usually low value and the suppliers find it difficult to bargain with automakers.Bargaining Power of Customers HighThe competition in the automobile application is intense as mentioned above. So the guests have numerous another(prenominal) choices on the brands and models. Customers rush active the quality, price, safety, comfort, appear ance of the motor car. Recently, customers are also to a greater extent and more concern around the environmental take of the automobile and the energy qualification. So the customers fix more and more bargaining power in automobile industry.2. Toyota get Company2.1 Overview of the familyCompany profileToyota repel Corp. is one of the largest and leading automobiles manufacturers in the globe. It operates in three chief(prenominal) business segments the two biggest are automobile and financial run whereas the third one is comprised by many refineder other divisions. It is spread demes naturalide as it has 50 manufacturing facilities in 27 countries and personasToyota designs, manufactures and sales passenger cars of several types and utilities, trucks, tractors and material handling equipment, minivans and other car accessories. Its products can be divided into 2 main categories, ceremonious and hybrid vehicles. The company sells its products to a lower place Toyota, Lexus, Hino and Daihatsu brandsThe company is also engaged in the financial industry as it provides financing to its customers and dealers. It is also involved in housing, marine, e-commercial, ITS and biotechnological activities.Toyota sells its vehicles in more than 170 countries and regions worldwide. Toyotas primary securities industrys are Japan, North America, atomic number 63 and Asia. It is headquartered in Toyota City, Japan and employed around 316,121 people as on March 31, 2008 system AnalysisToyotas scheme can be summarised under three key principles growth, efficiency and stability. These are the three priorities the companys management impart pursue to achieve future sustainable growth and increase the frugal value.Growth go out be achieved through continuous investment in frequent in hybrid vehicle segment to meat the increasing demand. expertness is mainly focused on personify management and further drop-off in direct for the company to be able to provide high quality products in affordable prices and maintain its competitive advantages. Stability will be ensured by maintaining a solid financial base. Within the economic downturn it is important for Toyota to maintain sufficient liquidity in order to continue to pay its investments in research and development of new technologies, which is an inbuilt and essential part of the companys advantages.Peer conferenceAs Toyota operates in the globose market its competitors come from all around the world. Its major competitors are BMW AG, DaimlerChrysler AG, rules of order S.p.A., fording labour Company, General Motors Corporation, Honda Motor Co. Ltd., PSA Peugeot, Renault S.A., Volkswagen AG and many othersSWOT AnalysisStrengthsWeaknesses heavy boilers suit financial cognitive processStrong constitution and qualityStrong position is Asian market research and developmentProduction pipeline system and cost management change product portfolioFinancial services are still undeveloped coarse expenses on pensions and post-retirement benefitsOpportunitiesThreatsIncreasing demand for hybrid and environmental-friendly carsExpansion in emerging Asian marketsFinancial and other non-auto division developmentNew car models orbicular economic crisisStrong competition in automotive industryYen and US dollar exchange ratesTight environmental regulations on carbon ventingsProblems with specific components of sold cars. (Recent brake problem)2.1. Key Financials Analysis31/3/200931/3/200831/3/200731/3/200631/3/2005 gross sales207,852.40264,120.58202,821.01178,294.05173,443.60 operate Income-4,667.5222,809.8218,959.8415,919.5115,192.39 cabbage Income getable to super C-4,423.7917,259.0513,923.6211,629.6310,950.45Total Assets292,725.95324,979.61275,051.76242,604.35227,515.08Total Liabilities185,398.39199,132.47169,488.89148,104.55138,230.49Common Equity101,865.07119,249.79100,242.1589,502.9484,563.86 solve hard notes in Flow Operating Activities14,724.726,357.627,783.522,1 36.222,144.6* IMPORTANT First category to report losings* Stable increase in sales Decline in 2009 greatly affects income* Severe cliff in cash black market from in operation(p) activities, nigh 50%* Very big difference between sales and direct income points out difficult cost expenses for the company. As this differences is constantly increasing it is not far from the truth to say that Toyota is gradually loosing its competitive advantages in cost efficiency against its competitors.* General trend in key financial s shows a steady and permanent increase until 2008 and a sharp counter equilibrium in 2009, payable to severe problems of economic recession and its great partake on automobiles industry.This trend applies for al close to all financial s, pointing out that the companys slaying as a whole followed a movement like this.2.3. Multiples analysis31/3/200931/3/200831/3/200731/3/200631/3/2005 cost To Earnings-22.439.1914.7415.2511.23 scathe To appropriate0.971.322.0 41.971.44Price To funds Flow7.414.837.837.805.87Price To sales0.50.70.81.00.7* Multiples follow companys general trend, namely increase until 2007 and then decreasing sharply* Consistent with all overall picture of company, multiple analysis show the economic downturn of the entity from 2007 in front* Point to mention negative P/E ratio. Markets expectation about company looks very slim. The economic crisis, alongside with its severe problems generating income and its recently change reputation, hit really unfortunate future prospects for Toyota. The negative P/E ratio and specifically its magnitude (-22) implies that nobody is neither willing to contain to buy the companys share nor expecting any profit generation.* Very sharp change state as tumefy 31.62 units is something passing noticeable. If we focus on decline itself, it shows an extremely quick unfavorable turn of the market towards the company.2.4. Companys performance31/3/200931/3/200831/3/200731/3/200631/3/2005 moolahabilityReturn on Equity-3.9814.4914.6814.0013.60Operating Profit Margin-2.258.649.358.938.76Asset UtilizationTotal Assets Turnover0.710.810.740.730.76 wampum gross revenue % Working nifty28.93180.701412.6229.7815.30GearingEBITDA / Interest Expense20.9486.1977.33153.70146.20Long terminus Debt/ Common Equit62.6350.4052.9253.4155.44Valuation InvestmentEarnings Per Share-1.415.434.343.573.32Dividend Yield virtually3.212.821.591.401.63LiquidityQuick Ratio0.810.770.760.810.87Current Ratio1.071.011.001.071.15* Negative favourableness in 2009* Fluctuating sales/working capital as a outlet of fluctuation if investments (working capital)* Gearing increase in 2009 at the comparable time with high decrease of interest cover* Stable and sort of low liquidity2.5. Cash Flow analysis31/3/200931/3/200831/3/200731/3/200631/3/2005Cash Flow Operating Activities14,724.726,357.627,783.522,136.222,144.6Cash Flow drop Activities(12,265.3)(34,254.0)(32,727.4)(29,704.4)(28,591.6)Cash Flow fin ance Activities6,967.46,242.77,565.67,716.83,917.0Effect of exchange rates-1,294.04-749.27218.18604.94232.09Net Cash Flow8,132.86-2,402.992,839.91753.58-2,297.85* Severe decrease in cash flow from operating activities, nearly 50% which vividly affects its operating income* Extreme decrease in investing activities around 70%, probably caused by cash shortage and policy change. The company issued a new project with main goal to improve profits and cover operating expenses and as a result we take to a large negative impact in new investments.* Financing activities exhibit a stationary trend over the past few years indicating the stable financial policy of the entity.* untoward effects of exchange rates during the last two years indicating the happen the company runs because of the Yens depreciation to the U.S dollar and the Euro.2.6. Stock PerformanceThe companys share performance seems to move according to the index, with the trend to over perform it constantly. We can see the decl ine of the shares price, which started right before the end of 2008, following the global economic recession. At the turning point, which is in the beginning of 2009, we observe a relatively high trading great deal, probably indicating the forthcoming upward movement. It is also really significant to point out the extreme high trading volume observed during the first months of 2010, followed by a new decline of the shares price. This reflects the problems that Toyota is set about nowadays. There is a considerable lack of trust from the market towards the company which is mainly caused by its severely damaged reputation and expiration of quality.3. traverse Motor Company3.1 Overview of the companyA . Company profileThe assembly operates in two segments Automotive and Financial Services. For the automotive segment which consists of crosswalk, Lincoln, hectogram and Volvo has a main operating activity in manufacturing, sale and service of component for cars and trucks.The Finan cial services segment is included of financing, insurance and leasing regarding to cars, trucks, industrial equipment, construction equipment and other activities. The company has operation in North America, second America, Europe, Africa and Asia- Pacific.B. Strategy Analysis One hybridisationThe Company has initiated the new system called One crossing which has detail as followo whizz TEAM focuses the significant of team work in order to make believe the automotive leadership. The measurement is satisfactory of business partners, employees, investors, and related companies.o wizard PLAN The foursome-step visualize has been established which composed of balance between cost structure and revenue develop new product follow customer preference develop balance sheet status and finance the plan and cooperation around the world to leverage companys resources.o ONE GOAL That is to create an exciting and viable company with profitable growth for all. crossbreeding has started the restructuring business process before the economic crisis which the Company has reduced the nimiety capacity, closed some unprofitable plants and lower excess workforce. In addition, Ford has improved the product line in term of higher quality, more safety, use less energy and more economic.* Affordable Fuel economic system Focusing on deliver can efficiency locomotive to the market. For example, the 2010 Ford Fusion is now Americas most fuel efficient midsize sedan for two the hybrid and conventional gasoline models.* Electrification strategy plan to bring double-dyed(a) batteryelectric vehicles, undermentioned-generation hybrids and a plug-in hybrid to market quickly and more affordably over the next four years.* Safety leadership Ford got fiting 16 models picked from the Insurance bring for road Safety which more than other brands.* EcoBoost Engine delivers significant gains in fuel economy along with a great performance drive feel.C. Peer GroupFords peer group is Daiml er AG, Fiat Spa Honda Motor Company Limited, Motors Liquidation Company, Nissan Motor Company Limited, Toyota Motor Corp and Volkswagen AG.D. Fords SWOT AnalysisStrengthsWeaknessesl Wide geographicOperate throughout the world and has a strong market in North America, Europe and Asia. gross sales of each region of 2008 are 49%, 39% and 12% respectively. The well diversified market of ford reduces the venture of economic problem in specific area.l Brand royaltyFord has renowned reputation about quality and also owns other renowned brands such as Lincoln, Mercury and Volvo.l Quality carFord owns totaling 16 models of car that rated as safety car by the Insurance Institute for Highway Safetyl Product RecallExperienced many recalled products due to the quality of defective cruise control switch which may cause fire. Even though there is no fire cases reported unless the Companys reputation is negative affected.l Negative operating resultl Low gross marginGSKs long-run debt increased by 115.5% in 2008, which may lead to problems such as heavy interest allowance, risk of having too little working capital and even increasing possibilities of nonstarter.l Too much long-term debtThis may lead to problems such as heavy interest payment, risk of having too little working capital and even increasing possibilities of bankruptcy.OpportunitiesThreatsl Expanding market in emerging marketFord has a plan to expand its sale in the emerging market which has great buying power in the future.l Eco-friendly engineFord has high reputation in the eco-friendly engine such as hybrid engine which has very promising market.l Fuel efficiencyFord found another opportunity in the market for fuel-efficient in small and middle car.l High competitionDue to new competitor, lower demand and excess capacity.l Economic crisisEconomic crisis and fixing in USA where is the main market of Ford caused severe effect to the Company.3.2. Key Financial AnalysisSource ThomsonFinancialScaling Factor 1 ,000,000 USD funds USD12/31/0812/31/0712/31/0612/31/0512/31/04Net Sales or Revenues146,277.00172,455.00160,123.00177,089.00171,652.00Operating Income3,518.008,031.00-8,167.007,010.0010,681.00Earnings Before Interest And Taxes (EBIT)-4,885.006,792.00-6,689.009,354.0011,669.00Interest Expense On Debt9,682.0010,927.008,783.007,643.007,071.00Net Income Available to Common-14,681.00-2,764.00-12,615.002,441.003,634.00Total Assets215,773.00276,459.00275,337.00264,891.00294,447.00ST Debt Current Portion of LT Debt63,972.0061,052.0062,456.0059,904.0066,433.00Long limit Debt90,716.00107,478.00109,593.0094,428.00106,540.00Total Liabilities231,889.00269,410.00277,643.00250,812.00277,525.00Common Equity-17,311.005,628.00-3,465.0012,957.0016,045.00 Net sales decreased from 2007 about 15% as the economic crisis in the State which is the main market of Ford. The Company has had substantial losses from operation since 2006. Ford has high corking of long-term loan which may causes liquidity defici ency or bankruptcy if the Company still has continuously loss in the future. As a result of net losses from operation since 2006, Ford has had negative shareholders fairness since then.3.3. Multiples AnalysisMONTHLY HISTORICAL MARKET PRICESY2008Y2007Y2006Y2005Y2004January6.648.138.5813.1714.54February6.537.917.9712.6513.75March5.727.897.9611.3313.57April8.268.046.959.1115.36May6.808.347.169.9814.85June4.819.426.9310.2415.65July4.808.516.6710.7414.72 howling(a)4.467.818.379.9714.11September5.208.498.099.8614.05October2.198.878.288.3213.03November2.697.518.138.1314.18December2.296.737.517.7214.64.5 Year5 Year military rankY2008Y2007Y2006Y2005Y2004Y2003Growth RateAverageP/E Ratio (High)-1.36-6.93-1.4112.949.6334.66-1.042.57P/E Ratio (Low)-0.16-4.75-0.906.647.0113.16-1.01P/E Ratio (Close)-0.35-4.81-1.126.778.1332.00-1.011.73Price/Sales0.040.080.090.090.180.18-0.800.10Price/Book Value-0.322.62-4.141.141.742.62-3.940.21Price/Cash Flow0.441.241.760.701.111.35-0.671.05Price/Working Capital0 .000.000.000.000.000.00-0.167.78TARenderChart.png* P/E ratio turned to be negative since net losses from operation since 2006 and also the market price has continuously decreased from 8.58 in the beginning of 2006 to 2.29 at the end of 2008.* P/B ratio had negative value in 2008 from the negative intelligence value of Ford.3.4. Companys performanceWorldscope up-to-dateness USDPROFITABILITY RATIOS12/31/0812/31/0712/31/0612/31/0512/31/04Return On Invested Capital0.251.921.952.953.32Operating Profit Margin2.432.943.125.026.54ASSETS custom RATIOSAsset Turnover0.630.600.590.590.58Net Sales Pct Working Capital10.626.215.6811.0641.64LEVERAGE RATIOSEBITDA / Interest Expense-0.500.62-0.761.221.65LT Debt Pct Common Equity-76.88233.49316.381,268.121,229.66 liquidity RATIOSQuick Ratio1.051.081.121.081.03Current Ratio1.211.251.301.251.19 Profitability ratios do not show the good performance as Ford has had net loss from operation since 2006. Leverage ratios also go in the same trends as a resu lt of negative equity and high outstanding balance of long-term loan. Liquidity ratios present that Ford still can fall in cash to supply its working capital but if consider to the long-term debts Ford may cannot provide enough cash to support its debt payment since these ratios are still in the low range compared with its debt outstanding amount.3.5. Cash flow analysisSource ThomsonFinancialScaling Factor 1,000,000 USDCurrency USD12/31/0812/31/0712/31/0612/31/0512/31/04Net Cash Flow From Operating Activities-179.0017,074.009,609.0021,674.0022,591.00Net Cash Flow From Investing Activities3,143.006,457.0024,862.00-7,462.008,567.00Long Term Borrowings42,163.0033,113.0058,258.0024,559.0022,223.00Inc(Dec) In ST Borrowings-5,120.00919.00-5,825.00-8,591.004,937.00reducing In Long Term Debt46,299.0039,431.0036,601.0036,080.0036,021.00Net Cash Flow From Financing Activities-9,104.00-5,242.0015,273.00-20,651.00-14,226.00 The Company cannot generated sufficient cash from operation and had n egative net cash flow from operation. Moreover the Company had to pay interest expenses for loans and had high net cash paid for financing activity.3.6. Stock market performance Ford shares have been traded lower than SP500 since 2001 until 2010. Especially since 2006 that the operating results had continuous substantial losses.4. Honda Motor Company Limited4.1. IntroductionHonda Motor is one of leading automobile manufacturers in the world. The company develops, manufactures and markets automobiles, motorcycles and power products. The company also provides financing services to the dealer and customer for the sale of products. Honda has global operations in areas including North, due south and Central America, Asia, Middle East, and Europe with its headquarter at Tokyo in Japan.Strategy analysisHonda Motor has three strategies. They are Staying Close to Customers, g localization and five region strategy. Staying close to customers mean the maintenance of the qualities of a small c ompany, stand value product with flexibility and efficiency as a small company does and maintain global reach and technology advantage as a large company does is the drive to the future growth of Honda. Glocalization means the effort to launch subsidiaries in regions that could best meet the demand of local customers and expand the subsidiaries as the local demand increases. Five region strategy requires the operations focus on five areas the world. They are North America, southernmost America, Europe/Middle East/Africa, Asia/Oceania and Japan. The management decisions are served to suit the situation in different areas. The advanced RD capacity equips the Honda to provide flexible products to objurgate the need of these regions.Business activitiesThe company operates through four business segments the automobile business, motorcycle business, financial services, and power products.The automobiles business division manufactures passenger cars, multi-wagons, minivans, port utility vehicle, sports coupe and mini vehicles. Hondas automobiles use gasoline engines of three, four or six-cylinder, diesel engines and gasoline-electric hybrid systems. Honda also offers alternative fuel-powered vehicles such as natural gas, ethanol, and fuel cell vehicles. In 2008, the company sold 3,925,000 units of automobiles.The motorcycle business produces a range of motorcycles, including scooters, electric-motor-assisted bicycles, sports bikes and large touring cycles. Hondas motorcycles use gasoline engines developed by Honda that are air or water cooled, two or four cycled, and single, two, four or six cylinder. In 2008, the company sold a total of 9,320,000 units of motorcycles.Honda offers a variety of financial services to its customers and dealers through its widespread finance subsidiaries.Hondas power products manufactures a variety of power products including power tillers, portable generators, general purpose engines, grass cutters, outboard engines, water pumps, sn ow throwers, power carriers, power sprayers, lawn mowers and lawn tractors (riding lawn mowers). Honda also manufactures the major components and parts used in its products, including engines, frames and transmissions.Peer GroupThe globalization of the Honda motor makes it face the global intense competition. The competitors include Ford Motor, Nissan Motor, Toyota Motor, Volkswagen etc.(in the automobile sector) and Yamaha Motor, Harley-Davidson etc.(in the motor vehicle industry).SWOT AnalysisStrengthsWeaknessesl Global diversificationThe company operates a total of 397 subsidiaries, and 104 affiliates all over the world.l Leading market position and good brand imageHonda is one of the largest vehicle and motorcycle manufacturers over the world with strong brand strength.l Strong Research and Development capacityThe large investment in RD could equip Honda the capability to differentiate itself in the intense competitive market.l Declining Market Share in SectorEvident of decline in unit sales and lost of market shares in the automobile industry.l Low employee productivityHonda has a weak proportion on the number of employees and the revenues.OpportunitiesThreatsl Growing demand in Asian marketHonda has taken measures to occupy the huge potential Asian market.l Growing demand in hybrid electric vehiclesThe companys emphasis on hybrid technology innovation will capture market trends as an opportunity to kindle its market share.l Global competitionThe competition would result in price pressure and thus reduce the profitability.l Tightening emission regulationsThe emission standards will cause Honda to occur more costs in product development, testing and manufacturing process design.4.2. Key Financials AnalysisSource ThomsonFinancialCurrency JPYScaling Factor 1000000 JPY31/3/200931/3/200831/3/200731/3/200631/3/2005Sales10,011,241.0012,002,834.0011,087,140.009,907,996.008,650,105.00Operating Income189,643.00953,109.00851,879.00730,889.00630,920.00Net Income A vailable to Common137,005.00600,039.00592,322.00597,033.00486,197.00Total Assets11,579,494.0012,439,610.0011,964,917.0010,533,995.009,187,808.00Total Liabilities7,449,150.007,753,539.007,359,399.006,320,785.005,828,513.00Common Equity4,007,288.004,544,265.004,482,611.004,125,750.003,289,294.00Net Cash Flow Operating Activities3836411126918904525576557746624l The operating income reduces dramatically, approximately 80% from the previous years result. This result is caused by the severe decline in the sales and the consequently increase in schedule cost.l Before 2009, all the s are in a healthy and steady upward trend. But in the fiscal year ended at 31st march 2009, the volumes all experienced a dramatic decline. They are caused by the sales plunge.l The declines trends are due to the economic recession caused by the financial crisis because the demand in Japan, US and Europe shrank. The automobile industry faces a severe challenge and most companies in the sector reported unsatisfa ctory results.4.3. Multiple analysis31/3/200931/3/200831/3/200731/3/200631/3/2005Price To Earnings30.78.610.3Price To Book1.01.11.61.5Price To Cash Flow4.64.26.8Price To Sales0.40.40.70.70.6l Although the P/E ratio increases significantly, its not a good sign. The increase in P/E ratio is not due to the high expectation of the investors and the fundamental principle such as growth opportunities. Instead, the soaring P/E is the result of the plummeting earnings to common shareholders.l The price to book ratio and price to sales declined in 2008 and 2009, indicating the declining