Now we will see each force in more detail:
Rivalry: this force shows the competition between existing firms that offer the same product or service, and even have the same strategy. If there is many competitors, then you should have a little power over them by adopting a strategy that may be based on price, quality, innovation, advertisement, like differentiation, cost leadership, or the focus on a narrow segment.
Threats of new entrants: new firms entering the industry will bring new competition, in order to gain the market, and decrease profitability for existing firms, above all those firms who have little protection and barriers to entry, then expecting some firms to exit the market.
Threats of substitutes: the ability of customers to find other alternative ways and products with lower prices and better quality that must satisfy the same needs. There is a product for product substitute, substitute needs and also generic substitute that relates to something that people can do without.
Buyers bargaining power: determines the ability of buyers to impose pressure on the firm either by switching to another company or having other substitutes, or cutting down prices. They can also affect the conditions under which all the firms operate.
Suppliers bargaining power: determines the ability of suppliers to drive up prices which put pressure on firms if there is a few number of suppliers, or by the uniqueness of their products and the control they have over firms.
By analysing and understanding each force, and how it affects the strategy of the firm, it provides the opportunity to identify the strengths of the firm and the ability to modify some points of the strategy to make sustainable profits, and being successful in achieving and establishing appropriate strategies.
Porter's five forces on Honda Motors:
Rivalry: competition in the automobile industries is very high, because there are many firms in this industry which offer many choices for the customers, so each firm try to do its best to make more profit than others, and make its products the more sellable in the market.
Toyota, Ford, General Motors are the main competitors of Honda, so it should keep on innovating, improving, researching, and developing to stay effective in this sector.
"The degree of rivalry in the automotive industry is further heightened by high fixed cost associated with manufacturing cars and trucks and the low switching cost for consumers when buying different marks and models"
Source: http://www.scribd.com/doc/44521940/Tata
Threats of substitutes: there is not a huge threat of substitute in the automobile industry that offers utility, independence and no wasting time, even if there is a large number of transportation. There are bicycles, subways, buses, trains and airplanes that could make our life easier, but that can be less convenience than automobiles. The price of fuel have a large effect on the consumer's decision to buy vehicles, also the maintenance and the insurance of the car, but the automobile still has an important use in our personal and daily life.
Barriers to entry: it is not easy for an entrant to enter into the automobile industry easily, because of the brand loyalty of the consumers. It is substantial for established companies to have barriers to entry to protect themselves, because some companies are entering into foreign markets by buying an existing company or either merging with it and then realising a huge profit. With local knowledge and expertise, companies have the potential to compete in the market in which they operate against the domestic firms.
"Honda took the risk of entering into a long and complex relationship during the 80s with a European company universally considered to be one of the least capable automobile manufacturers in the west "British Leyland".
Source: the case study of Honda
Buyers bargaining power: consumers have many choices and brands, but the factors that affect more the consumer to buy a certain brand from another are: the appearance, quality, price, design. Consumers want always something new and nice looking with the latest technologies. The car had to be efficient, by saving fuel, protecting the environment, and running fast.
Since there are lot of competitors, people have more choices to select the less costly, and better in quality, for being loyal to a certain brand, that's why Honda tries to make its cars unique.
Find out more from UK Essays here: http://www.ukessays.com/essays/commerce/porters-five-forces-effecting-honda-motors-commerce-essay.php#ixzz3Xv60W4cR
Now we will see each force in more detail:Rivalry: this force shows the competition between existing firms that offer the same product or service, and even have the same strategy. If there is many competitors, then you should have a little power over them by adopting a strategy that may be based on price, quality, innovation, advertisement, like differentiation, cost leadership, or the focus on a narrow segment.Threats of new entrants: new firms entering the industry will bring new competition, in order to gain the market, and decrease profitability for existing firms, above all those firms who have little protection and barriers to entry, then expecting some firms to exit the market.Threats of substitutes: the ability of customers to find other alternative ways and products with lower prices and better quality that must satisfy the same needs. There is a product for product substitute, substitute needs and also generic substitute that relates to something that people can do without.Buyers bargaining power: determines the ability of buyers to impose pressure on the firm either by switching to another company or having other substitutes, or cutting down prices. They can also affect the conditions under which all the firms operate.Suppliers bargaining power: determines the ability of suppliers to drive up prices which put pressure on firms if there is a few number of suppliers, or by the uniqueness of their products and the control they have over firms.By analysing and understanding each force, and how it affects the strategy of the firm, it provides the opportunity to identify the strengths of the firm and the ability to modify some points of the strategy to make sustainable profits, and being successful in achieving and establishing appropriate strategies.Porter's five forces on Honda Motors:Rivalry: competition in the automobile industries is very high, because there are many firms in this industry which offer many choices for the customers, so each firm try to do its best to make more profit than others, and make its products the more sellable in the market.Toyota, Ford, General Motors are the main competitors of Honda, so it should keep on innovating, improving, researching, and developing to stay effective in this sector."The degree of rivalry in the automotive industry is further heightened by high fixed cost associated with manufacturing cars and trucks and the low switching cost for consumers when buying different marks and models"Source: http://www.scribd.com/doc/44521940/TataThreats of substitutes: there is not a huge threat of substitute in the automobile industry that offers utility, independence and no wasting time, even if there is a large number of transportation. There are bicycles, subways, buses, trains and airplanes that could make our life easier, but that can be less convenience than automobiles. The price of fuel have a large effect on the consumer's decision to buy vehicles, also the maintenance and the insurance of the car, but the automobile still has an important use in our personal and daily life.Barriers to entry: it is not easy for an entrant to enter into the automobile industry easily, because of the brand loyalty of the consumers. It is substantial for established companies to have barriers to entry to protect themselves, because some companies are entering into foreign markets by buying an existing company or either merging with it and then realising a huge profit. With local knowledge and expertise, companies have the potential to compete in the market in which they operate against the domestic firms."Honda took the risk of entering into a long and complex relationship during the 80s with a European company universally considered to be one of the least capable automobile manufacturers in the west "British Leyland".Source: the case study of HondaBuyers bargaining power: consumers have many choices and brands, but the factors that affect more the consumer to buy a certain brand from another are: the appearance, quality, price, design. Consumers want always something new and nice looking with the latest technologies. The car had to be efficient, by saving fuel, protecting the environment, and running fast.Since there are lot of competitors, people have more choices to select the less costly, and better in quality, for being loyal to a certain brand, that's why Honda tries to make its cars unique.Find out more from UK Essays here: http://www.ukessays.com/essays/commerce/porters-five-forces-effecting-honda-motors-commerce-essay.php#ixzz3Xv60W4cR
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