Market Analysis of Auto industry in Saudi Arabia

Auto industry in Saudi Arabia

Saudi Arabia knows for its oil and gas production in the world. Now the market of the Saudi is booming and growing towards the automotive industry. The car manufacturing is growing in the Saudi Arabia and it becomes hub of the Middle East in this sector. The government is supporting this sector therefore; there is great potential in this sector (Automotive Report, 2015). The current situation of this market is very attractive and feasible for the car manufacturing business. On the other hand, there is also potential for the business and entrepreneur relating with automotive business in the market. According to the officials of government, the King Abdullah Economic City (KAEC) has made agreement and giving the land of 225,000 sq m in KAEC’s Industrial Valley to Renault Trucks and Volvo for their plants. This agreement is very encouraging for the other car manufacturers and businesspersons to invest in the car manufacturing. There is a complete analysis of from the business point of view. For this purpose, Porter’s five forces model is used. The other working companies in the market are General Motors, Ford, Nissan and Isuzu in trucking and buses (Business Monitor International , 2015).

Porter’s Five Forces Analysis of Saudi Market

There are five forces of porter’s five model that are applying to the market of the Saudi Arabia in car manufacturing. These are the threats of new entrants, bargaining power of suppliers, bargaining power of customers, threat of substitute and rivalry. These all factors give a short and detail insight about the market conditions of Saudi Arabia (Legget, 2012). Other factors like economy, politics, technology and GDP of the country affects the business in the market. More important are the rules and regulations of government and ration of taxes levy on luxury by the government. This affects the business in different ways. Therefore, market analysis is important for starting of the new business in new market. Porter’s Five Forces help in the market analysis of industry.

Threat of New Entrants

The market of the Saudi automotive is growing. Therefore, the threat of new entrants is very high. Another reason for new entrants is that government of Saudi Arabia is promoting and supporting this business. Therefore, this market is going to become a hub in the Middle East in this industry. The rules and regulations of the government are not strict and these are feasible for the foreign investors to invest in the market. The recent agreement with Volvo and Renault Truck depicts that completion in that market will be higher as compare to others because this industry is at its introductory stage (Roberts, 2013). There is not hurdle for the new business to start the work there.

Assignment on Market Analysis of Auto industry in Saudi Arabia By ABC Dated: Auto industry in Saudi Arabia Saudi Arabia knows for its oil and gas production in the world. Now the market of the Saudi is booming and growing towards the automotive industry. The car manufacturing is growing in the Saudi Arabia and it becomes hub of the Middle East in this sector. The government is supporting this sector therefore; there is great potential in this sector CITATION Aut15 \l 1033 (Automotive Report, 2015). The current situation of this market is very attractive and feasible for the car manufacturing business. On the other hand, there is also potential for the business and entrepreneur relating with automotive business in the market. According to the officials of government, the King Abdullah Economic City (KAEC) has made agreement and giving the land of 225,000 sq m in KAEC’s Industrial Valley to Renault Trucks and Volvo for their plants. This agreement is very encouraging for the other car manufacturers and businesspersons to invest in the car manufacturing. There is a complete analysis of from the business point of view. For this purpose, Porter’s five forces model is used. The other working companies in the market are General Motors, Ford, Nissan and Isuzu in trucking and buses CITATION Bus15 \l 1033 (Business Monitor International , 2015). Porter’s Five Forces Analysis of Saudi Market There are five forces of porter’s five model that are applying to the market of the Saudi Arabia in car manufacturing. These are the threats of new entrants, bargaining power of suppliers, bargaining power of customers, threat of substitute and rivalry. These all factors give a short and detail insight about the market conditions of Saudi Arabia CITATION Dav12 \l 1033 (Legget, 2012). Other factors like economy, politics, technology and GDP of the country affects the business in the market. More important are the rules and regulations of government and ration of taxes levy on luxury by the government. This affects the business in different ways. Therefore, market analysis is important for starting of the new business in new market. Porter’s Five Forces help in the market analysis of industry. Threat of New Entrants The market of the Saudi automotive is growing. Therefore, the threat of new entrants is very high. Another reason for new entrants is that government of Saudi Arabia is promoting and supporting this business. Therefore, this market is going to become a hub in the Middle East in this industry. The rules and regulations of the government are not strict and these are feasible for the foreign investors to invest in the market. The recent agreement with Volvo and Renault Truck depicts that completion in that market will be higher as compare to others because this industry is at its introductory stage CITATION Gra13 \l 1033 (Roberts, 2013). There is not hurdle for the new business to start the work there. Therefore, the market of Saudi Arabia is feasible for doing business without any other concern. Moreover, the competition is at its stake therefore, there might be little problems and issues faced by the new entrants in the market of Saudi Arabia. High finical investment and technology needs to compete and sustain the position in the market CITATION Sau15 \l 1033 (Saudi Arabian Business Counci, 2015). Bargaining Power of Suppliers The market of the Saudi Arabia is more on quality and innovation focus not on price. The reason is that population of Saudi Arabia has well established and rich therefore, they do no compromise on the quality of the product. For the quality in the production, there is need of those suppliers who are delivering good quality material. As there are other companies also potential customers for the quality raw material, so the prices of the raw material must be higher. There are few suppliers like Polyim Limited, United Spare parts and few others. Therefore, bargaining power of the suppliers May high if the company made few contracts with little companies. More suppliers in data base means the bargaining power of the suppliers will low. Therefore, this recommended that make contracts with number of suppliers so that the bargaining power will low. The number of suppliers is suitable for the company CITATION Chr141 \l 1033 (William, 2014). Bargaining power of Customers The average of the customers in Saudi Arabia includes the elite class. They prefer innovation, unique features and quality in the product. Therefore, customers in Saudi Arabia go for customization of the product. As discussed earlier, they are not concerning about the price; moreover, government is calling the new investors so bargaining power of the customers in Saudi’s market will high. If the company goes for the customized products, then there will be good profit margin for the company CITATION Gra13 \l 1033 (Roberts, 2013). On the other hand, there is lot of migrants there. They are usually from the Asian countries and developing countries. Therefore, the barging power of them is low if the company provides it cars at low price. However, this will not a feasible idea because company has to target a single segment at initial step. If the company provides the good quality as compare to the competitors then the barging power will be low. In the customization, the bargaining power on price will be low of the customer because he orders what he likes CITATION Aut15 \l 1033 (Automotive Report, 2015). Threat of Substitutes This is the important analysis of the market. The customers are always going for the product with good quality and low price. The products fulfilling the requirements and according to perception of the customer, then they ready to buy that product. However, the market where there are more substitutes and choices are available then this is hard for them to choose the right option. Moreover, this will also difficult for the business to remain in the competition. At the current there, the top car manufacturers in Saudi Arabian market are the Volvo, Renault and General Motors. At the current scenario, the customized cars are not manufacturing gin the market. Customers have to order them and import them from other countries CITATION Chr141 \l 1033 (William, 2014). This can be a good opportunity for the company to give facility of the customization in the country. This will save lot of money and cost for the customer. Royal Royce is one of the famous customized car manufactures. The customers used to buy cars from them. If the company provides the manual cars and customized cars for the customers then there will be no threat for the substitute at least for a definite period. As long as, company will maintain the quality of the products it sustain its competitive advantage in the market CITATION Bus15 \l 1033 (Business Monitor International , 2015). Rivalry The potential and possible competitors in the market are Renault, Isuzu, Volvo and General Motors. Renault and Isuzu are not much considered-able as they are dealing in the trucks. Therefore, the bit competitors are General Motors and Volvo. Both are famous for their quality products and innovation in market. The other competitors in Saudi Market include the Ford motors, Nissan, Porsche and others CITATION Bus15 \l 1033 (Business Monitor International , 2015). These are also very big and strong business entities. Therefore, there is intense competition in the market of Saudi Arabia. The unique resources, quality, cost, design and innovation in features are the common and important grounds for the company to meet the requirement and sustain the competition. The high completion between these rivalries based on price and quality. The use of technology and efficient utilization of resources can be a competitive advantage for the company. The introductory stage is more important for the company or business. The first impact is very necessary to grow or expand the business in future CITATION Sau15 \l 1033 (Saudi Arabian Business Counci, 2015). Overall, the market analysis of automobile industry in Saudi’s market is feasible for the business of car manufacturing. The main reason is support by the government in this sector. References BIBLIOGRAPHY \l 1033 Automotive Report. (2015). Saudi Arabia Automotive. Retrieved March 3, 2015, from http://store.eiu.com/product.aspx?pubid=317112231&pid=1957096795&gid=317112231 Business Monitor International . (2015). Saudi Arabia Autos Report Q1 2015. Retrieved March 3, 2015, from http://www.marketresearch.com/Business-Monitor-International-v304/Saudi-Arabia-Autos-Q1-8706530/ Legget, D. (2012). SAUDI ARABIA: Isuzu to build trucks locally. Retrieved March 3, 2015, from http://www.just-auto.com/news/isuzu-to-build-trucks-locally_id109162.aspx Roberts, G. (2013). SAUDI ARABIA: KAEC to build Volvo/Renault truck plant. Retrieved March 3, 2015, from http://www.just-auto.com/news/kaec-to-build-volvorenault-truck-plant_id140216.aspx Saudi Arabian Business Counci. (2015). Saudi Arabia Spearheading Development of Middle East Automotive Market. Retrieved March 3, 2015, from http://www.us-sabc.org/i4a/pages/Index.cfm?pageID=4079#.VPVtUfmUdnM William, C. (2014). Saudi Arabia – A Booming Market and New Auto Manufacturing Hub for the Middle East . Retrieved March 3, 2015, from http://www.us-sabc.org/files/public/automotive_industry_feature_article.pdf

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