Gaz Group Russia: Brief Introduction to the Case´s Situation

Brief introduction to the case´s situation

GAZ Group, is a Company that produces light and medium duty commercial vehicles, buses, heavy-duty trucks, passenger cars, powertrains and auto components. By 2012 was the leader of the commercial vehicles market of Russia with about 50% of the light commercial vehicles segment and nearly 65% of the buses segment. Their products were uniquely suited for the local driving conditions and usage habits in Russia, also, the group offered a large variety of automotive products in its portfolio, an extensive distribution and service network, the easy to repair technology, the customization options and the low Price were the key of its success. The Company increased the labor productivity, with a reduction of the production cost, expenses, for quality improvement and increase of the labor safely level.

The CEO refocus the company, with a model range flexibility and assembly line variability could reduce the impact of short term economic cycles by allowing GAZ group to switch quickly to products that would be in demand in the company´s target export markets. GAZ Group is cooperating with the leaders of the global automotive industry. The joint projects with the global companies allow GAZ Group to modernize its capacities and provide the personnel with training for its own product portfolio development and participation in localization of foreign brands. The CEO was pleased with the result of recent changes and the leading position of GAZ in the Russian market, but he wanted to find the best strategy to expand the market to other countries.

Porter Analysis of automotive industry

Threat of New Entrants.

The emergence of foreign competitors with the capital, required technologies and management skills began to debilitate the market share of the companies, but very few companies are capable of venturing into the automotive industry because it requires a high capital investment to set up manufacturing facilities and a distribution network. It takes many years for a new entrant to build a strong enough reputation to be competitive. These factors make the threat of new entrants in this market very low.

Availability of Substitutes.

Currently, with the higher cost of operating a vehicle, the more likely people will seek alternative transportation options; the price of the gasoline has a large effect on the decisions of the consumers to buy vehicles, they prefer buy a small and cheap car instead a big or luxury car. Most vehicle owners still agree that the convenience of using a personal vehicle offsets increases in fuel prices, however if this trend continues this treat will increase.

Power of suppliers

In this industry exist a lot of potential suppliers, auto manufacturers require parts, raw materials and services and the cost of these inputs can have a significant effect on profitability; many suppliers rely on one or two manufactures to buy a majority of their products and if the company decided to switch suppliers, it could be devastating for the suppliers,