What Is Bad For The American Automotive Industry

fact is good and bad for the American automotive industry. Good because cheaper parts and supplies can be found. Bad because with cheaper parts comes cheaper quality. Manufacturers must be careful not to jeopardize the quality of the end product for cheaper costs. One way that a firm can apply the analysis from the bargaining power of suppliers is to understand that currently there is no real threat, however with the possibility of new technology, firms need to get out ahead of innovation and build relationships and partner with suppliers who are developing the new supplies and parts for new technology. If a firm allows their rivals to make the first move on suppliers, it is possible it will take some time for new suppliers to manufacture

Many of these name brand companies like the “Big Three” have also established secure supply chains throughout the United States and in some cases the world making it even more difficult for new companies to find suppliers and even if startup companies did find a work around solution, the larger size of the few companies controlling the market would use economies of scale to find cheaper supply sourcing options than the smaller companies. A recent article discussed that increases in flexibility have caused a number of foreign companies, or outsiders to the market, to make significant gains on the American automotive industry. (Husan, 1997) A great example would be Honda’s recent change in American factories to allow multiple vehicle models to be produced within a single day, an option never before seen. (Chappell, 2002) The article argued that despite the greater flexibility of manufacturing, economies of scale remain crucial for competitive production. (Husan, 1997) Although many foreign automotive companies are just as large if not larger than some American automotive companies it just reemphasizes the fact that economies of scale play a significant role in competition within the American automotive