Threat Of New Entrants
The barriers to entrants deter new competitors from entering the market and creating more competition for established firms. Profitable markets attract new entrants, which erodes profitability, unless incumbents have strong and durable barriers to entry. There are several major barriers to entry and they include economies of scale, the capital requirements, and product differentiation, switching cost and government policy. In regards to our Eco Powered Engines, the most crucial barrier to enter this business is patent protection. In China, there are 3 forms of patent protection that include Invention patent, design patent and utility model patent. While using invention patent, EPE would impose a 20-year patent protection. EPE would ask for the right granted for a fixed period with a minimum 20 years for the invention protection. This would reduce or eliminate competition with potential and existing firms who would be pose a threat of entrants. Included the patent protection is the methods used in manufacturing, the manufacturing materials etc. Another major barrier to entry is the capital requirement for starting a new business like the Eco Powered Engines, which include the cost of building or purchasing facilities and equipment, and creating inventories. In addition, product differentiation would also be a problem for new companies because our firm would have already marketed our product and have a number of loyal customers. Any new would have to spend lot of money to get their name out there and would have to convince the customer to begin to buy their own engine.
Another major problem for new business to compete is getting their products distributed. This is a new industry a getting the product distr...
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...ry profitable in the long run.
RIVALRY AMONG EXISTING COMPETITORS
The degree of rivalry or the intensity of competition is the final force for EPE five-force theory. This point is crucial in evaluating the completion that exist among current firms in the industry. Although, EPE manufacture a unique type of Diesel engine for motor vehicles, there are other manufacturers out there who are competing based on product type. Existing competitors include: Anhui Quanchai Co. ltd (manufacturer and distributor of diesel engine) and Hebei Energetic-Ox Motor Group (enterprise consisting of 12 branch factories. Their main products include: electric motors, car oils and filters. Although there are competitors in the industry competing, EPE offer product quality guarantees, price guarantees based on materials, components and protection processes, environmentally friendly.
Increasing environmental awareness, coupled with a responsible American government and improved technology, have all contributed to the comeback of low-and zero-emissions vehicles in the US. It remains to be seen whether the automakers and oil companies will once again work to halt this progress, or embrace it as the technology of a more responsible future.
Compare to the pure competitor, the monopolist has a longer lifetime and therefore it allows the firm to have more opportunities for research and development from which the firm will reap the benefits. This might bring production cost down, lowering prices, increase production rates and raise the quality of goods (Ulbrich, 1990). The development of technological innovation will overcome technology barriers and allowing the growth of a new era of prosperity, hence fortifying why economy would benefit from monopolies that conducting research and
The 5-Force Industry Analysis first introduced by Michel Porter, Harvard Business School professor, a quarter-century ago. This theory examines the suppliers, buyers, product substitutes, existing firms’ rivalry and new entrants in a firm’s product market.
Distribution channels for when, how and where an organisation’s products are distributed to their consumers. [REFERENCE] The organisation needs to carefully place where they want to distribute their products. For instance, they may have an expensive handbag, so they it would make sense to place it in upmarket department stores and boutiques so that the product is seen as being more exclusive and it also makes it more difficult to obtain if they aren’t available everywhere. [REF] However, if the product is seen as too difficult to obtain, it could affect the overall opinion of the product, which could result in less sales as consumers in developing countries would not consider it a necessary purchase so may choose to go without it.
Highly competitive industries normally enjoy less profits as a result of the high costs associated with trying to compete. The automobile industry is considered to be an Oligopoly (much like a monopoly,however, instead of one company exerting total control of the market, there are at least two firms doing so), which helps to minimize the effects of price-based competition. Historically automobile manufacturers have tried to avoid price-based competition, but more recently the com...
When a business aims to be as successful as possible in selling its products and services, it must examine in detail whether or not the products will be attractive and necessary; if the price is optimal; if the product is being distributed in the best locations; and finally, how interest and awareness can be created for the products. In order for a business to target all of these elements at the right people at the right time, it must employ the right type of marketing mix: Product, Price, Place and Promotion.
While being employed in the retail industry for over three years I established a love for learning the different ends and outs to the industry. The industry is currently growing for the Follett Bookstore Company which was founded in 1873, in the state of Illinois. In most businesses I am positive that Porter’s five competitive forces has been use in more than one way.
General Motors’ direct competitor is the company that operates in SIC (Standard Industrial Classification) code 3711 – Motor Vehicles & Passengers Car Bodies. In this paper, the direct competitor of General Motors is the big three automobile companies with similar market share and accounted for total 60% of market share in the United States. Therefore, General Motors’ direct competitors are Ford Motor Company, Toyota Motor Corporation, and Fiat Chrysler. (See Exhibit 4)
I choose to do the porter’s five forces analysis over the automotive industry. But before I start talking about the automotive industry I would like to talk about what the porter’s five forces model is and what it does. “The porter’s five forces model is a tool for examining the industry level competitive environment, especially the ability of firms in that industry to set prices and minimize costs” (McNamara, 2012). This model describes the competitive environment in terms of five basic competitive forces. “These forces are: the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products and services, and the intensity of rivalry
The threat of new entrants is moderately strong. Incumbents do not strongly contest entry of newcomers, but existing industry members are consistently looking to expand their geographic reach and offer a broad product assortment. Brand awareness and customer loyalty are high and greatly important i this industry.
There are a variety of challenges that firms may face when attempting to be the best in their specified industry. Economic and political challenges can make it difficult for companies to maintain a competitive advantage. In addition to maintaining a competitive advantage, some firms also find difficulty in keeping its branding alive and by attracting customers as their strategies, products, and management change over the course of time. Industries such as the automotive industry, healthcare industry, retail industry, and many more experience a variety of challenges based on their competition. Firms must create successful strategies in order to maintain competitive with their competition and in order to gain advantages in their industry (Hitt, 2013).
The Capital investment, skilled and licensed labour force, technological advancements, working with good quality suppliers is considered big barriers of entry into this industry. The future requirement of electric cars and hybrid vehicles has opened this industry to some new entrants like Tesla.
Understanding the changes in the market and the growth of e-commerce prompted the organization to invest heavily in its supply chain management forecasting and management system. The development of a network of distribution centers and Direct Fulfillment Centers to position the company to capitalize on the growing e-commerce market indicate a strong understanding of the need to adapt to changing market forces. The company spent over $300 million on new distribution center facilities in 2014 alone, and continues to expand to maintain efficiency in product movement (Cassidy,
Distribution- work on alternatives of outsourcing the distribution network or transportation routes. Should focus on outsource this non-core business activities if it is non-profitable. It is costly by not understanding the multi distribution network in standard line delivery (Multiple drop off points through retail channel sales)
...ations in host countries. Some problems that BMW face is going global into the Asian market for example china does not permit BMW to sell its products directly to its public it must go through government organisation for distribution. It also wants BMW to manufacture at least 80% of its parts in China, which is not possible as they don’t have a plant in China. And in India the tariff is too high, which makes it hard for BMW to import painted body into the country. According to India’s regulation BMW is not allowed to import more value than they are exporting.