For ariannna Rimes

Running Head: FIVE PORTER FORCES IN MOTORCYCLE INDUSTRY 1

FIVE PORTER FORCES IN MOTORCYCLE INDUSTRY 6

Five Porter Forces in Motorcycle Industry

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Five Porter Forces in Motorcycle industry

The porter’s five forces analysis represents the competitive environment of the motorcycle industry. The five forces provide strategic foresight plan of a motorcycle firm to avoid putting the competitive edge at risk and ensure a long-term profitability of the firm’s product(Kung-Sung, 2005). This vision is very important for the motorcycle production companies as they are able to direct there innovations in terms of choice of investments and strategies. The five forces provides a perspective for analyzing and assessing the competitive strength and position of a business organization or corporation. The Porter’s five forces shape the competition of various products from different companies in the motorcycle market. The following five processes therefore will shape the competition of the available products and goods in the motorcycle market: Competitive rivalry within the industry, the threat of now entrants in the economy, the threat of substitutes, the bargaining power of suppliers, and the bargaining power of the customers (Porter, 2008).

Competitive rivalry within the industry

The competition between different firms producing same kind of product will determine the attractiveness of the industry sector. There are many motorcycle-manufacturing companies today. These companies are fighting to maintain relevance and power in the market. The competition will change based on the sector development, diversity and the existence of barriers to firms to enter. It also provides an analysis of the number of products, competitors, brands, strategies, strengths and weaknesses, and market shares. The factors that will determine how well a firm competes with other firms include the number of competitors in the market, the quality differences of the products and other differences, the switching costs, customer loyalty to a particular firm and the cost of leaving the market(Kung-Sung, 2005).

The Threat of new entrants

The new era of technological advancement has seen many new motorcycle firms entering the motorcycle industry. New firms have begun manufacturing motorcycles of various types, which brings a great threat to the existing companies. The need for more vehicles due to the increasing population has been the motivation behind the increase of new entrants in the market. New entrants will result to competition for the market of their products, which may result to lower profits if the company is beaten in the competition. Therefore, it is the interest of every company to create barriers to prevent its competitors from entering the market. New entrants may be new companies or companies that intent to diversify. The barriers may be industrial (products or single brands) or legal (patent regulations). The arrival of new entrants will depend on the size of the market (economy of scale), the cost of entry, the reputation of the company, technical standards, access of raw materials, cultural barriers among many others (Porter, 2008).

Threat of Substitute products

China has been blamed for producing substitute products, especially in the telecommunication industry. The motorcycle industry has not been left behind, with numerous motorcycle brands entering the market. New substitute cars and other motor vehicles have entered the market, increasing competition for market with the existing brands. Entry of substitutes complicates the sale of the products in the market. This is because they can be considered as alternative compared to the supply in the market. The substitute products are due to innovation or the changes in the state of technology. New products, which may be better in their performance, or cost lower replace the products of the established companies. Research shows that the products normally have better quality /price report and come from sectors with high profits. The substitute products are very dangerous and the companies should anticipate coping with this threat (Kung-Sung, 2005).

Porter Five Forces Model

( Threat of New Entrants 1. Time and cost of entry 2. Specialist Knowledge 3. Economies of scale 4. Technology protection 5. Barriers to entry )

( Buyer Power 1. Number of Customers 2. Size of each order 3. Differences between competitors 4. Price sensitivity 5. Ability to Substitute 6. Cost of Changing )

( Supplier Power 1. Number of suppliers 2. Size of suppliers 3. Uniqueness of service 4. Your ability to substitute 5. Cost of changing ) ( Competitive Rivalry 1. Number of competitors 2. Quality Differences 3. Other differences 4. Switching costs 5. Customer Loyalty 6. Costs of leaving market )

( Threat of Substi tutes 1. Substitute performance 2. Cost of Change 3. Cost of substitute )

The Bargaining power of suppliers

The bargaining power of suppliers is very crucial in a market. The motorcycle industry is highly reputed for its large number of dealers and suppliers. The motorcycle suppliers have a great impact in the performance and production of a company. Powerful suppliers will impose their terms and conditions in terms of quality, price, and quality. However, if the number of suppliers increases, there influence would be weaker. One should analyze the number of realized orders, the presence of raw materials, and the cost of changing the supplier, size of suppliers, Uniqueness of service, and the ability to substitute. If there are few substitutes, the suppliers of raw materials, labor, components and services to a company may be a source of power over the firm (Kung-Sung, 2005).

The Bargaining Power of Customers

Customers have a big say on the production and profitability of motorcycle industry. The customers’ needs and preferences need to be checked to ensure that the companies keep the clients from the jaws of their competitors. If the bargaining power of customers is high, they influence the profitability of the market by imposing their requirements in terms of service, price, quality, size and the cost of changing customers. Choosing clients remains crucial because a firm should avoid the situation of dependence at all cost. The level of concentration of customers gives them more or less power. The bargaining power of customers is inversely proportional to that of the suppliers (Porter, 2008).

Reference

Porter, M. E. (2008). The five competitive forces that shape strategy.Harvard business review, 86(1), 25-40.

Kung-Sung, T. (2005).Using Porter’s Diamond Theory and Five Force Factors to Explore the Global Competitiveness of Motorcycle Industry in Taiwan.