Assignment Prompt & Instructions
DISCUSSION & RESEARCH
– ## ResearchProject2Instructions.html.zip
– ## WelcometoWeek8.docx
– Applying_Michael_Porters_exte.pdf
– The_Competitive_Advantage_of_N.pdf
**## ResearchProject2Instructions.html.zip**
## Research Project 2 Instructions.html
Complete your Research Project 2 in a Word document, APA formatted, and then submit it in the Assignment section of the classroom by midnight, EST, Day 7.
The instructions concerning this assignment as well as the grading rubric are reproduced below.
In 2009 the American auto industry was in a dire economic state. Chrysler was in Chapter 11, GM was on the brink of bankruptcy, and Ford's future was at best uncertain. The demise of the U.S. auto industry would have a devastating impact on our national economy and specifically the economies of Michigan and Ohio.
Economists occasionally use Porter's five forces framework when making a qualitative evaluation of a firm's strategic position. According to Porter, his model should be used at the industry level, defined as a marketplace in which similar or closely related products or services are marketed. This research paper requires the application of Porter's Five Forces Model to the auto industry.
Porter's analytical framework consists of those forces that affect a producer's ability to serve its customers and make a profit. A change in any of these five forces requires a re-assessment of the marketplace. The five forces include:
1) The threat of substitute products: The existence of close substitute products (i.e., high elasticity of demand) increases the propensity of customers to switch to alternatives in response to price increases.
2) The threat of the entry of new competitors: Unless there are significant barriers to entry, profitable markets that yield high returns will attract firms (i.e., perfect competition), effectively decreasing profitability.
3) The intensity of competitive rivalry: As in the case of oligopoly markets, rivals may choose to compete aggressively, non-aggressively or in non-price dimensions.
4) The bargaining power of customers: The ability of customers to put the firm under pressure due to availability of existing substitute products, buyer price sensitivity, uniqueness of the products, etc.
5) The bargaining power of suppliers: The cost of factors of production (e.g. labor, raw materials, components, and services such as expertise) provided by suppliers can have a significant impact on a company's profitability. As such suppliers may refuse to work with the firm or charge excessively high prices for unique resources.
References
Porter, M.E. (1979) "How competitive forces shape strategy", Harvard Business Review, March/April 1979.
Porter, M.E. (1980) "Competitive Strategy", The Free Press, New York, 1980.
Porter, M.E. (1985) "Competitive Advantage", The Free Press, New York, 1985.
Develop a detailed paper applying Porter's Five Forces Model to the American automotive industry, with a focus on the U.S. market.
Your paper needs to include at least three scholarly sources, i.e. peer reviewed articles. I strongly recommend the use of the APUS library for these sources, as most acceptable resources can only be found in protected databases.
Your paper should be about 10 double spaced pages, in APA format, and structured as follows:
1. Cover page with a running head
2. Abstract
3. Introduction to the Auto Industry
3.1. Industry Definition
3.2. Industry Profile
3.3. Industry Market Structure
3.4. Future Outlook
4. Porter's Five Forces Strategy Analysis as it applies to the Auto Industry
4.1. Bargaining Power of Buyers
4.2. Bargaining Power of Suppliers
4.3. Competitive Rivalry in the Industry
4.4. Threat of New Entrants
4.5. Threat of Substitutes
5. Conclusion
6. References
**## WelcometoWeek8.docx**
Welcome to Week 8 Research
**Assignment 2:** **Application of Porter's Five Force Strategy to the U.S. Auto Industry**
Porter's five-force strategy is a framework for qualitatively evaluating a firm's strategic position at the industry level, a marketplace in which closely related substitutable products or services are sold. Porter's analytical framework consists of those forces that affect a producer's ability to serve its customers and profitability. A change in any of these five forces requires a re-assessment of the firm position in the industry.
According to this model, business success is primarily based on managers’ knowledge of the power of customers, the power of suppliers, competition in the industry, potential entrants, and substitute products. The extended rivalry from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an industry.
This research paper must be documented in Microsoft Word, APA formatted, 10 double-spaced pages long, and includes three scholarly peer-reviewed articles. I strongly recommend using the APUS library since the most acceptable resources can only be found in a protected database.
Submit your paper in the Assignment section of the classroom by midnight, EST, Day 7. Your paper will automatically be forwarded to “Turnitin.com” for plagiarism review upon submission.
**Assignment Structure**
**1. Cover page**
**2. Abstract** **3. The U.S. Auto Industry** 3.1. U.S. Auto Industry Definition
3.2. U.S. Auto Industry Profile
3.3. U.S. Auto Industry Market Structure
3.4. U.S. Industry Future Outlook
**4. Application and Analysis of Porter's Five Forces Strategy to the U.S. auto industry**
4.1. Bargaining Power of Buyers in the U.S. auto industry.
4.2. Bargaining Power of Suppliers in the U.S. auto industry.
4.3. Competitive Rivalry in the Industry in the U.S. auto industry.
4.4. Threat of New Entrants to the U.S. auto industry.
4.5. Threat of Substitutes in the U.S. auto industry.
**5. Conclusion**
**6. References**
· Burke, A., van Stel, A., & Thurik, R. (2010). Blue ocean vs. five forces.
_Harvard Business Review_,
_88_(5), 28-29.
· Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates.
_Competitiveness Review_,
_24_(1), 32-45.
· Cole, Fulton, and Akridge. Industry Analysis: The Five Forces
[https://www.extension.purdue.edu/extmedia/ec/ec-722.pdf](https://www.extension.purdue.edu/extmedia/ec/ec-722.pdf)
· Ireland, R. D., Hoskisson, R. and Hitt, M. (2008).
_Understanding business strategy: Concepts and cases_. Cengage Learning.
·
[Porter, M.E.](https://en.wikipedia.org/wiki/Michael_Porter) (March–April 1979)
_How Competitive Forces Shape Strategy_,
_Harvard Business Review_.
·
[Porter, M.E.](https://en.wikipedia.org/wiki/Michael_Porter) (January 2008)
_The Five Competitive Forces That Shape Strategy_,
_Harvard Business Review_.
Complete your Research Project 2 in a Word document, APA formatted, and then submit it in the Assignment section of the classroom by midnight, EST, Day 7.
The instructions concerning this assignment as well as the grading rubric are reproduced below.
In 2009 the American auto industry was in a dire economic state. Chrysler was in Chapter 11, GM was on the brink of bankruptcy, and Ford's future was at best uncertain. The demise of the U.S. auto industry would have a devastating impact on our national economy and specifically the economies of Michigan and Ohio.
Economists occasionally use Porter's five forces framework when making a qualitative evaluation of a firm's strategic position. According to Porter, his model should be used at the industry level, defined as a marketplace in which similar or closely related products or services are marketed. This research paper requires the application of Porter's Five Forces Model to the auto industry.
Porter's analytical framework consists of those forces that affect a producer's ability to serve its customers and make a profit. A change in any of these five forces requires a re-assessment of the marketplace. The five forces include:
1)
**The threat of substitute products**: The existence of close substitute products (i.e., high elasticity of demand) increases the propensity of customers to switch to alternatives in response to price increases.
2)
**The threat of the entry of new competitors**: Unless there are significant barriers to entry, profitable markets that yield high returns will attract firms (i.e., perfect competition), effectively decreasing profitability.
3)
**The intensity of competitive rivalry**: As in the case of oligopoly markets, rivals may choose to compete aggressively, non-aggressively or in non-price dimensions.
4)
**The bargaining power of customers**: The ability of customers to put the firm under pressure due to availability of existing substitute products, buyer price sensitivity, uniqueness of the products, etc.
5)
**The bargaining power of suppliers**: The cost of factors of production (e.g. labor, raw materials, components, and services such as expertise) provided by suppliers can have a significant impact on a company's profitability. As such suppliers may refuse to work with the firm or charge excessively high prices for unique resources.
**References**
Hopkins, H. (2008). Applying Michael Porter's extended rivalry model to the robotics industry.
_The Industrial Robot, 35_(5), 397-399.
[https://doi.org/10.1108/01439910810893563](https://doi.org/10.1108/01439910810893563)
Sölvell, Ö. (2015). The Competitive Advantage of Nations 25 years – opening up new perspectives on competitiveness.
_Competitiveness Review, 25_(5), 471-481. https://doi.org/10.1108/CR-07-2015-0068
Porter, M.E. (1979) "How competitive forces shape strategy", Harvard Business Review, March/April 1979.
Porter, M.E. (1980) "Competitive Strategy", The Free Press, New York, 1980.
Porter, M.E. (1985) "Competitive Advantage", The Free Press, New York, 1985.
Develop a detailed paper applying Porter's Five Forces Model to the American automotive industry, with a focus on the U.S. market.
Your paper needs to include at least three scholarly sources, i.e. peer reviewed articles. I strongly recommend the use of the APUS library for these sources, as most acceptable resources can only be found in protected databases.
Your paper should be about 10 double spaced pages, in APA format, and structured as follows:
1. Cover page with a running head
2. Abstract
3. Introduction to the Auto Industry
3.1. Industry Definition
3.2. Industry Profile
3.3. Industry Market Structure
3.4. Future Outlook
4. Porter's Five Forces Strategy Analysis as it applies to the Auto Industry
4.1. Bargaining Power of Buyers
4.2. Bargaining Power of Suppliers
4.3. Competitive Rivalry in the Industry
4.4. Threat of New Entrants
4.5. Threat of Substitutes
5. Conclusion
**Weekly Objective(s):**
LO1: Discuss the relationship between production and cost
LO2: Explain and contrast short-run concepts (fixed inputs, marginal product, diminishing marginal returns, etc.) and long-run concepts (returns to scale)
LO3: Identify the impact of economies of scale and scope on production decisions
LO4: Apply optimization concepts to cost minimization and optimal decision making
LO5: Identify the relationship between a perfectly competitive market structure and managerial decision making
LO6: Examine equilibrium in the short run and long run and the dynamics of entry and exit
LO7: Explain the dynamic of price and output decisions under pure monopoly
LO8: Identify contrast competitive and monopolistic outcomes
**8.12 Limitations of Market Regulation**
Although regulation offers the possibility of addressing market failure and inefficiencies that would not resolve by themselves in an unregulated free market economy, regulation is not easy or cost free.
Regulation requires expertise and incurs expenses. Regulation incurs a social transaction cost for market exchanges that is borne by citizens and the affected parties. In some instances, the cost of the regulation may be higher than the net efficiency gains it creates. Just as there are diminishing returns for producers and consumers, there are diminishing returns to increased regulation, and at some point the regulation becomes too costly.
Regulators are agents who become part of market transactions representing the government and people the government serves. Just as market participants deal with imperfect information, so do regulators. As such, regulators can make errors.
In our discussions about economics of organization in
[Chapter 5 "Economics of Organization"](https://saylordotorg.github.io/text_principles-of-managerial-economics/stengel_1.0-ch05), we noted that economics has approached the problem of motivating workers using the perspective that the workers’ primary goal is their own welfare, not the welfare of the business that hires them. Unfortunately, the same may be said about regulators. Regulators may be enticed to design regulatory actions that result in personal gain rather than what is best for society as a whole in readjusting the market. For example, a regulator may go soft on an industry in hope of getting a lucrative job after leaving public service. In essence, this is another case of moral hazard. One solution might be to create another layer of regulation to regulate the regulators, but this adds to the expense and is likely self-defeating.
When regulation assumes a major role in a market, powerful sellers or buyers are not likely to treat the regulatory authority as an outside force over which they have no control. Often, these powerful parties will try to influence the regulation via lobbying. Aside from diminishing the intent of outside regulation, these lobbying efforts constitute a type of social waste that economists call influence costs, which are economically inefficient because these efforts represent the use of resources that could otherwise be redirected for production of goods and services.
One theory about regulation, called the capture theory of regulation,The capture theory of regulation was introduced by Stigler (1971). postulates that government regulation is actually executed so as to improve the conditions for the parties being regulated and not necessarily to promote the public’s interest in reducing market failure and market inefficiency. For example, in recent years there has been a struggle between traditional telephone service providers and cable television service providers. Each side wants to enter the market of the other group yet expects to maintain near monopoly power in its traditional market, and both sides pressure regulators to support their positions. In some cases, it has been claimed that the actual language of regulatory laws was proposed by representatives for the very firms that would be subject to the regulation.
[https://saylordotorg.github.io/text_principles-of-managerial-economics/s08-market-regulation.html](https://saylordotorg.github.io/text_principles-of-managerial-economics/s08-market-regulation.html)
[https://courses.lumenlearning.com/suny-microeconomics/chapter/oligopoly-models/](https://courses.lumenlearning.com/suny-microeconomics/chapter/oligopoly-models/)
References
Samuelson W.F. & Marks S.G. (2015).
_Managerial Economics_. Hoboken, NJ: Wiley & Sons Inc.
**Applying_Michael_Porters_exte.pdf**
This file is too large to display. [View in new window](https://www.sweetstudy.com/files/applying-michael-porters-exte-pdf)
**The_Competitive_Advantage_of_N.pdf**
This file is too large to display. [View in new window](https://www.sweetstudy.com/files/the-competitive-advantage-of-n-pdf)
**The_Competitive_Advantage_of_N.pdf**
This file is too large to display. [View in new window](https://www.sweetstudy.com/files/the-competitive-advantage-of-n-pdf)
**## ResearchProject2Instructions.html.zip**
## Research Project 2 Instructions.html
Complete your Research Project 2 in a Word document, APA formatted, and then submit it in the Assignment section of the classroom by midnight, EST, Day 7.
The instructions concerning this assignment as well as the grading rubric are reproduced below.
In 2009 the American auto industry was in a dire economic state. Chrysler was in Chapter 11, GM was on the brink of bankruptcy, and Ford's future was at best uncertain. The demise of the U.S. auto industry would have a devastating impact on our national economy and specifically the economies of Michigan and Ohio.
Economists occasionally use Porter's five forces framework when making a qualitative evaluation of a firm's strategic position. According to Porter, his model should be used at the industry level, defined as a marketplace in which similar or closely related products or services are marketed. This research paper requires the application of Porter's Five Forces Model to the auto industry.
Porter's analytical framework consists of those forces that affect a producer's ability to serve its customers and make a profit. A change in any of these five forces requires a re-assessment of the marketplace. The five forces include:
1) The threat of substitute products: The existence of close substitute products (i.e., high elasticity of demand) increases the propensity of customers to switch to alternatives in response to price increases.
2) The threat of the entry of new competitors: Unless there are significant barriers to entry, profitable markets that yield high returns will attract firms (i.e., perfect competition), effectively decreasing profitability.
3) The intensity of competitive rivalry: As in the case of oligopoly markets, rivals may choose to compete aggressively, non-aggressively or in non-price dimensions.
4) The bargaining power of customers: The ability of customers to put the firm under pressure due to availability of existing substitute products, buyer price sensitivity, uniqueness of the products, etc.
5) The bargaining power of suppliers: The cost of factors of production (e.g. labor, raw materials, components, and services such as expertise) provided by suppliers can have a significant impact on a company's profitability. As such suppliers may refuse to work with the firm or charge excessively high prices for unique resources.
References
Porter, M.E. (1979) "How competitive forces shape strategy", Harvard Business Review, March/April 1979.
Porter, M.E. (1980) "Competitive Strategy", The Free Press, New York, 1980.
Porter, M.E. (1985) "Competitive Advantage", The Free Press, New York, 1985.
Develop a detailed paper applying Porter's Five Forces Model to the American automotive industry, with a focus on the U.S. market.
Your paper needs to include at least three scholarly sources, i.e. peer reviewed articles. I strongly recommend the use of the APUS library for these sources, as most acceptable resources can only be found in protected databases.
Your paper should be about 10 double spaced pages, in APA format, and structured as follows:
1. Cover page with a running head
2. Abstract
3. Introduction to the Auto Industry
3.1. Industry Definition
3.2. Industry Profile
3.3. Industry Market Structure
3.4. Future Outlook
4. Porter's Five Forces Strategy Analysis as it applies to the Auto Industry
4.1. Bargaining Power of Buyers
4.2. Bargaining Power of Suppliers
4.3. Competitive Rivalry in the Industry
4.4. Threat of New Entrants
4.5. Threat of Substitutes
5. Conclusion
6. References
**## WelcometoWeek8.docx**
Welcome to Week 8 Research
**Assignment 2:** **Application of Porter's Five Force Strategy to the U.S. Auto Industry**
Porter's five-force strategy is a framework for qualitatively evaluating a firm's strategic position at the industry level, a marketplace in which closely related substitutable products or services are sold. Porter's analytical framework consists of those forces that affect a producer's ability to serve its customers and profitability. A change in any of these five forces requires a re-assessment of the firm position in the industry.
According to this model, business success is primarily based on managers’ knowledge of the power of customers, the power of suppliers, competition in the industry, potential entrants, and substitute products. The extended rivalry from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an industry.
This research paper must be documented in Microsoft Word, APA formatted, 10 double-spaced pages long, and includes three scholarly peer-reviewed articles. I strongly recommend using the APUS library since the most acceptable resources can only be found in a protected database.
Submit your paper in the Assignment section of the classroom by midnight, EST, Day 7. Your paper will automatically be forwarded to “Turnitin.com” for plagiarism review upon submission.
**Assignment Structure**
**1. Cover page**
**2. Abstract** **3. The U.S. Auto Industry** 3.1. U.S. Auto Industry Definition
3.2. U.S. Auto Industry Profile
3.3. U.S. Auto Industry Market Structure
3.4. U.S. Industry Future Outlook
**4. Application and Analysis of Porter's Five Forces Strategy to the U.S. auto industry**
4.1. Bargaining Power of Buyers in the U.S. auto industry.
4.2. Bargaining Power of Suppliers in the U.S. auto industry.
4.3. Competitive Rivalry in the Industry in the U.S. auto industry.
4.4. Threat of New Entrants to the U.S. auto industry.
4.5. Threat of Substitutes in the U.S. auto industry.
**5. Conclusion**
**6. References**
· Burke, A., van Stel, A., & Thurik, R. (2010). Blue ocean vs. five forces.
_Harvard Business Review_,
_88_(5), 28-29.
· Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates.
_Competitiveness Review_,
_24_(1), 32-45.
· Cole, Fulton, and Akridge. Industry Analysis: The Five Forces
[https://www.extension.purdue.edu/extmedia/ec/ec-722.pdf](https://www.extension.purdue.edu/extmedia/ec/ec-722.pdf)
· Ireland, R. D., Hoskisson, R. and Hitt, M. (2008).
_Understanding business strategy: Concepts and cases_. Cengage Learning.
·
[Porter, M.E.](https://en.wikipedia.org/wiki/Michael_Porter) (March–April 1979)
_How Competitive Forces Shape Strategy_,
_Harvard Business Review_.
·
[Porter, M.E.](https://en.wikipedia.org/wiki/Michael_Porter) (January 2008)
_The Five Competitive Forces That Shape Strategy_,
_Harvard Business Review_.
Complete your Research Project 2 in a Word document, APA formatted, and then submit it in the Assignment section of the classroom by midnight, EST, Day 7.
The instructions concerning this assignment as well as the grading rubric are reproduced below.
In 2009 the American auto industry was in a dire economic state. Chrysler was in Chapter 11, GM was on the brink of bankruptcy, and Ford's future was at best uncertain. The demise of the U.S. auto industry would have a devastating impact on our national economy and specifically the economies of Michigan and Ohio.
Economists occasionally use Porter's five forces framework when making a qualitative evaluation of a firm's strategic position. According to Porter, his model should be used at the industry level, defined as a marketplace in which similar or closely related products or services are marketed. This research paper requires the application of Porter's Five Forces Model to the auto industry.
Porter's analytical framework consists of those forces that affect a producer's ability to serve its customers and make a profit. A change in any of these five forces requires a re-assessment of the marketplace. The five forces include:
1)
**The threat of substitute products**: The existence of close substitute products (i.e., high elasticity of demand) increases the propensity of customers to switch to alternatives in response to price increases.
2)
**The threat of the entry of new competitors**: Unless there are significant barriers to entry, profitable markets that yield high returns will attract firms (i.e., perfect competition), effectively decreasing profitability.
3)
**The intensity of competitive rivalry**: As in the case of oligopoly markets, rivals may choose to compete aggressively, non-aggressively or in non-price dimensions.
4)
**The bargaining power of customers**: The ability of customers to put the firm under pressure due to availability of existing substitute products, buyer price sensitivity, uniqueness of the products, etc.
5)
**The bargaining power of suppliers**: The cost of factors of production (e.g. labor, raw materials, components, and services such as expertise) provided by suppliers can have a significant impact on a company's profitability. As such suppliers may refuse to work with the firm or charge excessively high prices for unique resources.
**References**
Hopkins, H. (2008). Applying Michael Porter's extended rivalry model to the robotics industry.
_The Industrial Robot, 35_(5), 397-399.
[https://doi.org/10.1108/01439910810893563](https://doi.org/10.1108/01439910810893563)
Sölvell, Ö. (2015). The Competitive Advantage of Nations 25 years – opening up new perspectives on competitiveness.
_Competitiveness Review, 25_(5), 471-481. https://doi.org/10.1108/CR-07-2015-0068
Porter, M.E. (1979) "How competitive forces shape strategy", Harvard Business Review, March/April 1979.
Porter, M.E. (1980) "Competitive Strategy", The Free Press, New York, 1980.
Porter, M.E. (1985) "Competitive Advantage", The Free Press, New York, 1985.
Develop a detailed paper applying Porter's Five Forces Model to the American automotive industry, with a focus on the U.S. market.
Your paper needs to include at least three scholarly sources, i.e. peer reviewed articles. I strongly recommend the use of the APUS library for these sources, as most acceptable resources can only be found in protected databases.
Your paper should be about 10 double spaced pages, in APA format, and structured as follows:
1. Cover page with a running head
2. Abstract
3. Introduction to the Auto Industry
3.1. Industry Definition
3.2. Industry Profile
3.3. Industry Market Structure
3.4. Future Outlook
4. Porter's Five Forces Strategy Analysis as it applies to the Auto Industry
4.1. Bargaining Power of Buyers
4.2. Bargaining Power of Suppliers
4.3. Competitive Rivalry in the Industry
4.4. Threat of New Entrants
4.5. Threat of Substitutes
5. Conclusion
**Weekly Objective(s):**
LO1: Discuss the relationship between production and cost
LO2: Explain and contrast short-run concepts (fixed inputs, marginal product, diminishing marginal returns, etc.) and long-run concepts (returns to scale)
LO3: Identify the impact of economies of scale and scope on production decisions
LO4: Apply optimization concepts to cost minimization and optimal decision making
LO5: Identify the relationship between a perfectly competitive market structure and managerial decision making
LO6: Examine equilibrium in the short run and long run and the dynamics of entry and exit
LO7: Explain the dynamic of price and output decisions under pure monopoly
LO8: Identify contrast competitive and monopolistic outcomes
**8.12 Limitations of Market Regulation**
Although regulation offers the possibility of addressing market failure and inefficiencies that would not resolve by themselves in an unregulated free market economy, regulation is not easy or cost free.
Regulation requires expertise and incurs expenses. Regulation incurs a social transaction cost for market exchanges that is borne by citizens and the affected parties. In some instances, the cost of the regulation may be higher than the net efficiency gains it creates. Just as there are diminishing returns for producers and consumers, there are diminishing returns to increased regulation, and at some point the regulation becomes too costly.
Regulators are agents who become part of market transactions representing the government and people the government serves. Just as market participants deal with imperfect information, so do regulators. As such, regulators can make errors.
In our discussions about economics of organization in
[Chapter 5 "Economics of Organization"](https://saylordotorg.github.io/text_principles-of-managerial-economics/stengel_1.0-ch05), we noted that economics has approached the problem of motivating workers using the perspective that the workers’ primary goal is their own welfare, not the welfare of the business that hires them. Unfortunately, the same may be said about regulators. Regulators may be enticed to design regulatory actions that result in personal gain rather than what is best for society as a whole in readjusting the market. For example, a regulator may go soft on an industry in hope of getting a lucrative job after leaving public service. In essence, this is another case of moral hazard. One solution might be to create another layer of regulation to regulate the regulators, but this adds to the expense and is likely self-defeating.
When regulation assumes a major role in a market, powerful sellers or buyers are not likely to treat the regulatory authority as an outside force over which they have no control. Often, these powerful parties will try to influence the regulation via lobbying. Aside from diminishing the intent of outside regulation, these lobbying efforts constitute a type of social waste that economists call influence costs, which are economically inefficient because these efforts represent the use of resources that could otherwise be redirected for production of goods and services.
One theory about regulation, called the capture theory of regulation,The capture theory of regulation was introduced by Stigler (1971). postulates that government regulation is actually executed so as to improve the conditions for the parties being regulated and not necessarily to promote the public’s interest in reducing market failure and market inefficiency. For example, in recent years there has been a struggle between traditional telephone service providers and cable television service providers. Each side wants to enter the market of the other group yet expects to maintain near monopoly power in its traditional market, and both sides pressure regulators to support their positions. In some cases, it has been claimed that the actual language of regulatory laws was proposed by representatives for the very firms that would be subject to the regulation.
[https://saylordotorg.github.io/text_principles-of-managerial-economics/s08-market-regulation.html](https://saylordotorg.github.io/text_principles-of-managerial-economics/s08-market-regulation.html)
[https://courses.lumenlearning.com/suny-microeconomics/chapter/oligopoly-models/](https://courses.lumenlearning.com/suny-microeconomics/chapter/oligopoly-models/)
References
Samuelson W.F. & Marks S.G. (2015).
_Managerial Economics_. Hoboken, NJ: Wiley & Sons Inc.
**Applying_Michael_Porters_exte.pdf**
This file is too large to display. [View in new window](https://www.sweetstudy.com/files/applying-michael-porters-exte-pdf)
**The_Competitive_Advantage_of_N.pdf**
This file is too large to display. [View in new window](https://www.sweetstudy.com/files/the-competitive-advantage-of-n-pdf)
**## ResearchProject2Instructions.html.zip**
## Research Project 2 Instructions.html
Complete your Research Project 2 in a Word document, APA formatted, and then submit it in the Assignment section of the classroom by midnight, EST, Day 7.
The instructions concerning this assignment as well as the grading rubric are reproduced below.
In 2009 the American auto industry was in a dire economic state. Chrysler was in Chapter 11, GM was on the brink of bankruptcy, and Ford's future was at best uncertain. The demise of the U.S. auto industry would have a devastating impact on our national economy and specifically the economies of Michigan and Ohio.
Economists occasionally use Porter's five forces framework when making a qualitative evaluation of a firm's strategic position. According to Porter, his model should be used at the industry level, defined as a marketplace in which similar or closely related products or services are marketed. This research paper requires the application of Porter's Five Forces Model to the auto industry.
Porter's analytical framework consists of those forces that affect a producer's ability to serve its customers and make a profit. A change in any of these five forces requires a re-assessment of the marketplace. The five forces include:
1) The threat of substitute products: The existence of close substitute products (i.e., high elasticity of demand) increases the propensity of customers to switch to alternatives in response to price increases.
2) The threat of the entry of new competitors: Unless there are significant barriers to entry, profitable markets that yield high returns will attract firms (i.e., perfect competition), effectively decreasing profitability.
3) The intensity of competitive rivalry: As in the case of oligopoly markets, rivals may choose to compete aggressively, non-aggressively or in non-price dimensions.
4) The bargaining power of customers: The ability of customers to put the firm under pressure due to availability of existing substitute products, buyer price sensitivity, uniqueness of the products, etc.
5) The bargaining power of suppliers: The cost of factors of production (e.g. labor, raw materials, components, and services such as expertise) provided by suppliers can have a significant impact on a company's profitability. As such suppliers may refuse to work with the firm or charge excessively high prices for unique resources.
References
Porter, M.E. (1979) "How competitive forces shape strategy", Harvard Business Review, March/April 1979.
Porter, M.E. (1980) "Competitive Strategy", The Free Press, New York, 1980.
Porter, M.E. (1985) "Competitive Advantage", The Free Press, New York, 1985.
Develop a detailed paper applying Porter's Five Forces Model to the American automotive industry, with a focus on the U.S. market.
Your paper needs to include at least three scholarly sources, i.e. peer reviewed articles. I strongly recommend the use of the APUS library for these sources, as most acceptable resources can only be found in protected databases.
Your paper should be about 10 double spaced pages, in APA format, and structured as follows:
1. Cover page with a running head
2. Abstract
3. Introduction to the Auto Industry
3.1. Industry Definition
3.2. Industry Profile
3.3. Industry Market Structure
3.4. Future Outlook
4. Porter's Five Forces Strategy Analysis as it applies to the Auto Industry
4.1. Bargaining Power of Buyers
4.2. Bargaining Power of Suppliers
4.3. Competitive Rivalry in the Industry
4.4. Threat of New Entrants
4.5. Threat of Substitutes
5. Conclusion
6. References
**## WelcometoWeek8.docx**
Welcome to Week 8 Research
**Assignment 2:** **Application of Porter's Five Force Strategy to the U.S. Auto Industry**
Porter's five-force strategy is a framework for qualitatively evaluating a firm's strategic position at the industry level, a marketplace in which closely related substitutable products or services are sold. Porter's analytical framework consists of those forces that affect a producer's ability to serve its customers and profitability. A change in any of these five forces requires a re-assessment of the firm position in the industry.
According to this model, business success is primarily based on managers’ knowledge of the power of customers, the power of suppliers, competition in the industry, potential entrants, and substitute products. The extended rivalry from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an industry.
This research paper must be documented in Microsoft Word, APA formatted, 10 double-spaced pages long, and includes three scholarly peer-reviewed articles. I strongly recommend using the APUS library since the most acceptable resources can only be found in a protected database.
Submit your paper in the Assignment section of the classroom by midnight, EST, Day 7. Your paper will automatically be forwarded to “Turnitin.com” for plagiarism review upon submission.
**Assignment Structure**
**1. Cover page**
**2. Abstract** **3. The U.S. Auto Industry** 3.1. U.S. Auto Industry Definition
3.2. U.S. Auto Industry Profile
3.3. U.S. Auto Industry Market Structure
3.4. U.S. Industry Future Outlook
**4. Application and Analysis of Porter's Five Forces Strategy to the U.S. auto industry**
4.1. Bargaining Power of Buyers in the U.S. auto industry.
4.2. Bargaining Power of Suppliers in the U.S. auto industry.
4.3. Competitive Rivalry in the Industry in the U.S. auto industry.
4.4. Threat of New Entrants to the U.S. auto industry.
4.5. Threat of Substitutes in the U.S. auto industry.
**5. Conclusion**
**6. References**
· Burke, A., van Stel, A., & Thurik, R. (2010). Blue ocean vs. five forces.
_Harvard Business Review_,
_88_(5), 28-29.
· Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates.
_Competitiveness Review_,
_24_(1), 32-45.
· Cole, Fulton, and Akridge. Industry Analysis: The Five Forces
[https://www.extension.purdue.edu/extmedia/ec/ec-722.pdf](https://www.extension.purdue.edu/extmedia/ec/ec-722.pdf)
· Ireland, R. D., Hoskisson, R. and Hitt, M. (2008).
_Understanding business strategy: Concepts and cases_. Cengage Learning.
·
[Porter, M.E.](https://en.wikipedia.org/wiki/Michael_Porter) (March–April 1979)
_How Competitive Forces Shape Strategy_,
_Harvard Business Review_.
·
[Porter, M.E.](https://en.wikipedia.org/wiki/Michael_Porter) (January 2008)
_The Five Competitive Forces That Shape Strategy_,
_Harvard Business Review_.
Complete your Research Project 2 in a Word document, APA formatted, and then submit it in the Assignment section of the classroom by midnight, EST, Day 7.
The instructions concerning this assignment as well as the grading rubric are reproduced below.
In 2009 the American auto industry was in a dire economic state. Chrysler was in Chapter 11, GM was on the brink of bankruptcy, and Ford's future was at best uncertain. The demise of the U.S. auto industry would have a devastating impact on our national economy and specifically the economies of Michigan and Ohio.
Economists occasionally use Porter's five forces framework when making a qualitative evaluation of a firm's strategic position. According to Porter, his model should be used at the industry level, defined as a marketplace in which similar or closely related products or services are marketed. This research paper requires the application of Porter's Five Forces Model to the auto industry.
Porter's analytical framework consists of those forces that affect a producer's ability to serve its customers and make a profit. A change in any of these five forces requires a re-assessment of the marketplace. The five forces include:
1)
**The threat of substitute products**: The existence of close substitute products (i.e., high elasticity of demand) increases the propensity of customers to switch to alternatives in response to price increases.
2)
**The threat of the entry of new competitors**: Unless there are significant barriers to entry, profitable markets that yield high returns will attract firms (i.e., perfect competition), effectively decreasing profitability.
3)
**The intensity of competitive rivalry**: As in the case of oligopoly markets, rivals may choose to compete aggressively, non-aggressively or in non-price dimensions.
4)
**The bargaining power of customers**: The ability of customers to put the firm under pressure due to availability of existing substitute products, buyer price sensitivity, uniqueness of the products, etc.
5)
**The bargaining power of suppliers**: The cost of factors of production (e.g. labor, raw materials, components, and services such as expertise) provided by suppliers can have a significant impact on a company's profitability. As such suppliers may refuse to work with the firm or charge excessively high prices for unique resources.
**References**
Hopkins, H. (2008). Applying Michael Porter's extended rivalry model to the robotics industry.
_The Industrial Robot, 35_(5), 397-399.
[https://doi.org/10.1108/01439910810893563](https://doi.org/10.1108/01439910810893563)
Sölvell, Ö. (2015). The Competitive Advantage of Nations 25 years – opening up new perspectives on competitiveness.
_Competitiveness Review, 25_(5), 471-481. https://doi.org/10.1108/CR-07-2015-0068
Porter, M.E. (1979) "How competitive forces shape strategy", Harvard Business Review, March/April 1979.
Porter, M.E. (1980) "Competitive Strategy", The Free Press, New York, 1980.
Porter, M.E. (1985) "Competitive Advantage", The Free Press, New York, 1985.
Develop a detailed paper applying Porter's Five Forces Model to the American automotive industry, with a focus on the U.S. market.
Your paper needs to include at least three scholarly sources, i.e. peer reviewed articles. I strongly recommend the use of the APUS library for these sources, as most acceptable resources can only be found in protected databases.
Your paper should be about 10 double spaced pages, in APA format, and structured as follows:
1. Cover page with a running head
2. Abstract
3. Introduction to the Auto Industry
3.1. Industry Definition
3.2. Industry Profile
3.3. Industry Market Structure
3.4. Future Outlook
4. Porter's Five Forces Strategy Analysis as it applies to the Auto Industry
4.1. Bargaining Power of Buyers
4.2. Bargaining Power of Suppliers
4.3. Competitive Rivalry in the Industry
4.4. Threat of New Entrants
4.5. Threat of Substitutes
5. Conclusion
**Weekly Objective(s):**
LO1: Discuss the relationship between production and cost
LO2: Explain and contrast short-run concepts (fixed inputs, marginal product, diminishing marginal returns, etc.) and long-run concepts (returns to scale)
LO3: Identify the impact of economies of scale and scope on production decisions
LO4: Apply optimization concepts to cost minimization and optimal decision making
LO5: Identify the relationship between a perfectly competitive market structure and managerial decision making
LO6: Examine equilibrium in the short run and long run and the dynamics of entry and exit
LO7: Explain the dynamic of price and output decisions under pure monopoly
LO8: Identify contrast competitive and monopolistic outcomes
**8.12 Limitations of Market Regulation**
Although regulation offers the possibility of addressing market failure and inefficiencies that would not resolve by themselves in an unregulated free market economy, regulation is not easy or cost free.
Regulation requires expertise and incurs expenses. Regulation incurs a social transaction cost for market exchanges that is borne by citizens and the affected parties. In some instances, the cost of the regulation may be higher than the net efficiency gains it creates. Just as there are diminishing returns for producers and consumers, there are diminishing returns to increased regulation, and at some point the regulation becomes too costly.
Regulators are agents who become part of market transactions representing the government and people the government serves. Just as market participants deal with imperfect information, so do regulators. As such, regulators can make errors.
In our discussions about economics of organization in
[Chapter 5 "Economics of Organization"](https://saylordotorg.github.io/text_principles-of-managerial-economics/stengel_1.0-ch05), we noted that economics has approached the problem of motivating workers using the perspective that the workers’ primary goal is their own welfare, not the welfare of the business that hires them. Unfortunately, the same may be said about regulators. Regulators may be enticed to design regulatory actions that result in personal gain rather than what is best for society as a whole in readjusting the market. For example, a regulator may go soft on an industry in hope of getting a lucrative job after leaving public service. In essence, this is another case of moral hazard. One solution might be to create another layer of regulation to regulate the regulators, but this adds to the expense and is likely self-defeating.
When regulation assumes a major role in a market, powerful sellers or buyers are not likely to treat the regulatory authority as an outside force over which they have no control. Often, these powerful parties will try to influence the regulation via lobbying. Aside from diminishing the intent of outside regulation, these lobbying efforts constitute a type of social waste that economists call influence costs, which are economically inefficient because these efforts represent the use of resources that could otherwise be redirected for production of goods and services.
One theory about regulation, called the capture theory of regulation,The capture theory of regulation was introduced by Stigler (1971). postulates that government regulation is actually executed so as to improve the conditions for the parties being regulated and not necessarily to promote the public’s interest in reducing market failure and market inefficiency. For example, in recent years there has been a struggle between traditional telephone service providers and cable television service providers. Each side wants to enter the market of the other group yet expects to maintain near monopoly power in its traditional market, and both sides pressure regulators to support their positions. In some cases, it has been claimed that the actual language of regulatory laws was proposed by representatives for the very firms that would be subject to the regulation.
[https://saylordotorg.github.io/text_principles-of-managerial-economics/s08-market-regulation.html](https://saylordotorg.github.io/text_principles-of-managerial-economics/s08-market-regulation.html)
[https://courses.lumenlearning.com/suny-microeconomics/chapter/oligopoly-models/](https://courses.lumenlearning.com/suny-microeconomics/chapter/oligopoly-models/)
References
Samuelson W.F. & Marks S.G. (2015).
_Managerial Economics_. Hoboken, NJ: Wiley & Sons Inc.
**Applying_Michael_Porters_exte.pdf**
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**The_Competitive_Advantage_of_N.pdf**
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