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Nathan Johnson
Professor Korsak
Microeconomics
30 November 2020
Porter’s Five Forces Regarding the Midsize Pickup Truck Industry
Competition is something that we cannot readily escape in life, especially as we mature
in age. Ever since the beginning of our lives, there has been competition. Who can jump the
highest or solve the multiplication table faster are just a few examples of competition some have
seen as just adolescents. As teenagers, there was competition in order to make a sports team or
club and even competition to get into college. You would think that competition would slow
down, but as adults, it only intensifies. Job interviews, social status, who makes the most money,
etc. Competition, no matter what, is a factor in everyday lives. Through analyzing the markets,
we can notice a strong sense of competition that works in determining how a company/ product
might fare. Porter’s Five Forces is a reliable and informative tool that we can utilize to do so. An
analysis into the car market of midsize pickup trucks is a suitable place to see how Porter’s Five
Forces operate with determining that market.
In our lives, almost everyone needs a type of transportation to get around. Whether it be
from school or work, transportation is useful. In the car market, there are a variety of brands that
produce cars to purchase. This leaves the consumer with a decision on which one is best suitable
for them. Along with car brands, there is also the factor of the type of car which can play a
significant part in a purchase decision. If a consumer is looking to get something fuel-efficient, a
truck would not be the finest option. On the contrary, if a consumer wants a vehicle that could
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tow a boat and function well in rough terrain, purchasing a Mini Cooper would be of no good
use. This is where competition plays a role in the market structure of the car industry. There are a
variety of brands that have vehicles that are similar in terms of functionality. For example,
Toyota, Nissan, Honda, Ford, and Chevrolet all sell midsize pickup trucks that in most cases are
capable of similar tasks. These midsize truck names include the Toyota Tacoma, Nissan Frontier,
Honda Ridgeline, Ford Ranger, and Chevrolet Colorado. Their greatest differences stem from the
MSRP of each truck. In most cases, the Toyota midsize pickup, the Tacoma, is the most
expensive truck in its class. Why might you ask? This is due to Toyota’s ability to utilize the
bargaining power of consumers. Usually, it is beneficial to the consumer when there are fewer
consumers of a certain product. In Toyota’s case with midsize pickup trucks, this power of
consumers benefits them since there are so many Tacoma’s being bought. Brand notoriety also
plays a role in Toyota’s success, since they are known to be practical and reliable. Due to this
reason, Toyota can keep their prices so high in the industry.
Toyota’s competition in its industry must figure out different ways to still have a product
that can sell and produce profits for their companies. One attempt to stay relevant in the market
includes a decrease in the price of their trucks. Cost-cutting can not only be beneficial to the car
companies, but also for suppliers looking by taking into account the bargaining power of
suppliers. Many of the products needed for trucks are supplied from different entities. Factors
like where you get leather for seats or the technology for the stereo plays a pivotal role in the
profitability of companies in the end. Furthermore, if there is ever a shortage of supplies needed
for the trucks, this benefits whichever supplier can essentially offer the needed product. This is
because if there is something scarce and in demand, people will pay top dollar to obtain the
product. For the truck industry, being able to find more cost-effective premium parts, in the end,
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is most advantageous. Some examples of cost-cutting in midsize pickup trucks include cloth
seats instead of leather and even where in the world the truck is assembled. Factors like these are
what help keep competitors of Toyota, like Nissan, Chevrolet, Ford, and Honda relevant in the
market.
Since there are already so many midsize pickup trucks on the market, it would be difficult
for another car manufacturer to gain traction with the sale of a new pickup truck. This idea stems
from the threat of new entreats, which wages the difficulty of a competitor’s entry into a market.
With midsize pickup trucks, to enter the market, a product would have to offer something
different to stand out from the rest of the pack. This increasingly gets more difficult as
technology increases, since many of the trucks now come with cutting edge tech. For instance, in
an attempt to remain competitive in the truck market, Nissan not only updated the design of the
Frontier but also came out with a new invention called the Utili-Track System in 2005. This was
an innovative and better way for consumers to fasten objects within the bed of their truck by
using adjustable tracks. Due to its success, the rest of the competition followed suit and came up
with similar designs with virtually duplicate results.
Competition in the midsize truck industry also leads to substitutes. In the market, the
Toyota Tacoma could be a substitute for the Honda Ridgeline, Chevrolet Colorado, Ford Ranger,
and Nissan Frontier. Considerations for gauging a substitute include its functionality and
effectiveness for its price. Additionally, brand notoriety, loyalty, and advertisements can assist in
determining a substitute. There must be a factor that resonates with the consumer to stop or lead
them into choosing a substitute. Market structure can be affected by this because each
manufacturer must decide what to add or take away from their truck. This is so the company
remains competitive while simultaneously bringing in monetary gain. For the midsize truck
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industry, these forces are what has led them to be profitable to the brands within it. Through
analyzing the market though, it would be difficult to disagree that both the Competitive Rivalry
and Bargaining Power of the Supplier have been crucial to the success of the market in recent
years.
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