ABSTRACT
The industrial organization approach states that firms compete in industries. Firms are assumed to act rationally and given that the industry structure is the same for every firm that competes in an industry. A high threat of new entrants means that outside firms can enter easily as soon as the industry becomes more profitable. Porter defined the industry structure as consisting of five different forces: the threat of new entrants, the threat of substitutes, the bargaining power of suppliers, the bargaining power of buyers, and the rivalry between competitors. The automotive industry has developed into a value system of global proportions. Once the strategist knows about the industry and strategic group the firm is competing in, the strategist knows about the firm's value chain and how it compares with the value chains in the wider value system regarding delivering the value that end consumers want.
