Porter’s competitors to enter a market ad low

 

Porter’s Five Forces
Framework Model analyses the competitive forces within the environment in which
a company operates, to assess the potential for profitability in an industry. Porter
consists of the threat of new entrants, the threat of substitute, buyer power,
supplier power, and rivalry among existing competitors. The change in any
forces normally requires firms to observe the market
and make the decision in the overall change of industry information.

 

Threat of New Entrants

 

Profitable industries
that have high in returns will attract new firms to take involved. New
competitors may force existing firms to be more efficient and to learn how to
compete on new dimensions. The threat of new entrants is high when it is easy
for new competitors to enter a market ad low when there are significant entry
barriers to entering a market. These entry barriers make it difficult for new
firms to enter an industry and often place them at a competitive disadvantage
even when they are able to enter. The domestic cars that have produced in
Malaysia are Proton and Perodua. This can seem that in the automobile industry,
there have high barriers for new entrants to involve in. The potential factors
that cause the high barriers of new entrants are economies of scale which is Perodua
is able to produce automobiles in huge amount and gain low cost in producing
company’s products and able to provide flexibility in pricing, differentiation
of product which promote special products, requirements of capital refer
according to cars industry which requires high capital capability to open and
operate the business. Furthermore, automobiles business not only need high
advanced technologies support daily manufactures activities, but also requires
professional technical staff to manipulate those machines.

 

 

 

 

 

 

 

 

Threat of Substitute Products

 

A substitute product is a
change that makes which used a different technology to solve the same economic
needs. Threats of substitute products or services are high when they are many
alternatives to a product or service and low when there are few alternatives for
them to choose. The substitute product’s quality and performance are equal to
or greater than the existing product while the selling price is lower. The
factor that confronts is the number of substitute products available in the
market, the intention of buyer substitute, relative price, and quality of
substitute and buyer’s switching costs. Therefore, if there have a high threat
of substitute products, there is higher the possibility for Perodua to have the
loss in advantage and profit of the products. So, the threat of substitute
products in automobile industry is low because the substitute product of vehicles
that have is motorcycle, bus, van and so on. Although there have many types of
transporting vehicles, cars still hardly to substitute by other vehicles since
bus and van are more consider as public transport which means the time and
distance are uncontrollable by single person. For motorcycle, it will affect by
the weather when driving and less safety than cars. So nowadays, most of the
people will buy car as their primary transportation because of the weather
which may be sunny or rainy day and capacity of passenger that can bring
compared to buying motorcycle which in rainy day, need to wear raincoat in order
to prevent get wet in rain and more comfortable than choosing van and bus as their
transport.

 

Bargaining Power of Buyers

 

The bargaining power of
buyers is the ability of buyers to affect the price they must pay for an item.
Firms can take measures to reduce buyer power such as given discount by helps
the company to find out which is firm’s loyal customers. Buyers’ power is high
if buyers have many alternatives and it is low if they have few choices given. While
in automotive industry, the bargaining power of buyers is moderately strong because large parts of buyers are the small
individual buyers that buy vehicles. Such buyers are in a position to bargain for lower prices while
every buyer can easily switch to a new brand in the fact of buyers are
sensitive towards price and would switch to another brand that offers lower
price which is Proton. And for the consumers who more concern about safety or
speed, they might chose Volvo or BMW as their primary car brand. Thus, the
Perodua need to focus on building customer loyalty through design, quality and
by offering competitive prices.

 

Bargaining Power of Suppliers

 

The bargaining power of
suppliers is the supplier’s ability to affect the price they charged for
supplies which including of raw materials, labour, and services. The supplier powers
will increases when supplier’s products create high switching costs. Based on
Automotive News in 2013, there have about 20 largest companies on the
Automotive News list of the top 100 suppliers for 2012. So, there seem in
automotive industry, there gave many suppliers that firms can choose to get the
raw material. Therefore, the bargaining powers of suppliers in this industry is
consider as low since Perodua could easily switch to other suppliers that
provide more benefits and the switching cost might be lower than other
industries.

 

Intensity of Rivalry among
Competitors

 

Rivalry among existing
competitors is high when competition is fierce in a market and low when
competition is more complacent. For most industries, the intensity of
competitive rivalry is the major decision of the competitiveness of the
industry. Therefore, having an understanding of industry rivals is important to
promote a product smoothly. Besides that, a business must be aware of its
competitor’s marketing strategy and pricing which the reactive will occur if
there have any changes made. Firms seek to differentiate their products in ways
that customers value and in which the firms have a competitive advantage.
Common rivalry dimensions include price, service after the sale, innovation and
etc. For example, most automobile industry will promote the similar price of
the car, the similar service after the sale in the reason to defeat the
competitors. So, the lower the rivalry among competitors, the higher the profit
that firms can gain.

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