Also a danger within substitutes is the potential emergence of disruptive

Also a danger within substitutes is the potential

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by focusing on the brand. Also, a danger within substitutes is the potential emergence of disruptive innovations, because these innovations have the ability to destroy an entire industry. The threat of new entrants is always a risk. Although the automobile market is not sensitive to “small” price change, it is still relatively expensive to buy and maintain a car. When the price or maintenance of an automobile is relatively expensive, people are likely to explore substitutes. Some substitutes for driving a car would be public transportation, riding a bike or car sharing. The use of public transportation as a substitute depends highly on the area one is living in. When a geographical location has a very good public transportation infrastructure, people have an easy choice between having a car or using public transportation, thus, the demand for a car may decrease. On the other hand, when a geographical location does not have a good or convenient public transportation system, people rely heavily on car, thus, increasing the demand for cars within that area. Another substitute for owning a car is car sharing, such as Car2go and Zipcar. The use of Car2go and Zipcar is becoming more and more common, thus, it is a direct threat to VW. Public transportation has been a substitute for automobiles in the past 100 years, however, car sharing is a relatively new concept and should be explored further as a potential threat to the market. 3.3 Income and Wealth of Buyers The income of buyers is what allows purchasing power, thus, it is directly correlated to effective demand. When income of an individual rises, demand increases. On the other hand, when income of an individual decreases, demand decreases. The perception of the value of money is determined by the income of buyers. It is important to note that the future expectation of income also plays a role in the determinants of demand. If an individual expects to earn more income in the future, that individual may spend more now. However, if an individual expects to earn less income in the future, an individual might cut back on spending and focus on vital needs. Wealth is determined by the total sum of individual cumulative savings, comprised of cash in the bank, property, investments and other liquid assets. Income and wealth are closely related, however, there is a difference. Wealth is something that an individual already has, and it is not something that one is waiting for to receive once or twice a month. Although income and wealth
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are different, they are closely related, since majority of wealth is accumulated through income. Income and wealth are one of the most important determinants of demand, along with price. The income and wealth of buyers is very important within the automobile market, since cars are not considered to be a “cheap” product. Generally, when income increases, demand for cars increases, thus, more automobiles are sold. When looking at income and wealth, it is really important to concentrate on different markets, because different income and wealth has a wide range within the global market. Income of buyers and wealth may be a barrier of entry into a new
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  • Winter '18
  • Renault, Volkswagen, Porsche, Volkswagen Group, Scania

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