Potential Entrants Entry Threat: Huge capital requirement for a firm to enter in this segment.
Lets discuss each of these points in detail: Competition in the Industry: This describes the competition between the existing firms in an industry. Greater the competitive riverly companies providing equally good products or services lesser are the profit margin.
Hence to maintain low cost, companies consistently has to make manufacturing improvements to keep the business competitive. Lets try to explore these points in more detail.
Look at the current senario, the small car market in India is very competitive with players like Maruti Suzuki, Tata Motors, Huyndai etc. But with launch of Nano the 1 lakh car the whole momentum of the market has shifted. Now to be competitive in market other companies have to either slash rates of their existing model or have to go back to the drawing board and build again.
And as mentioned earlier price is the most important thing, you have to offer lower price to the customers. Huge inital expenditure and lower price leave very less profit margin. Lets take an example of a monopoly industry.
Chocklate industry in India has just one big player Cadbury. When you go to purchase chocklate what you look for What we can conclude a monopoly and a great business!!
Potential of new entrant into Industry: Its not only the existing players in an industry pose threat to each other, a new entrant can also affect the competition. The easier it is for a new firm to enter in a business, the more cut-throat competition there will be. The factors that can limit threat of new entrant are called as Barriers to Entry.
Following are some some barriers to entry: Government Restrictions and legislations: Oil sector in India is an example. Pre liberization era it was a dominated by Public sector. However after liberization the sector has opened up for private players and FDI but it still remains highly regulated sector.
Ideas and Knowledge that provides competitive advantage over others when patented, preventing others from using it and thus creates barrier to entry. Pharma and Software sectors sees maximum number of patents being filed making it difficult for new firms to replicate their products.
If the initial cost to set up a new firm is difficult, then the chances of new entrants are very less. Once again coming back to oil sector, Exploration and Production of oil and gas involves a highly capital and technology intensive process of finding oil reserves, assessing its feasibility, drilling and extracting.
Hence creating a very high entry cost Existing loyalty to major brands: If the existing brands are very well-established, then chances of a new firm giving them competition is minimal. Pepsi and Coca Cola dominate the soft drinks industry worldwide making it difficult for any new entrant to survive in front of them.
On the other hand, if the industry uses common technology, there is little or no brand franchise and if the entry cost is low then it is very easy for a new entrant to enter into the industry. A company to manufacture its products requires raw material, labor etc.
This creats a buyer-supplier relationship in an industry.Michael Porter's Five Forces Analysis of TATA Motors • The rivalry between existing sellers in the market. • The power exerted by the customers in the market.
• The impact of the suppliers on the sellers/5(9). PORTER'S FIVE FORCE FRAMEWORK; ORGANISATIONAL CAPABILITY ANALYSIS; capitalists and underwriters generally view these types of strategic alliances as validating an early stage company’s technology and business model.
Telco (now rechristened as Tata Motors) is the leader in the commercial vehicle segment with a 54% market share in Light.
Rodrigues, G. & Khan, Z. Reza. , 'Competitiveness of clothing industry based on Porter's diamond model: SAFTA countries', Proceedings of Academics World International Conference, International Institute of Engineers and Researchers, United States, pp.
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Porter's Five Forces Model Porter's five forces analysis is the structure framework for industry analysis and business strategy development. (Porter, M.E. ) Using Porter's five forces analysis is a way to figure out the different firms competition levels and force of said "attractiveness" of a market.
Porter’s 5 Forces Analysis Porter‘s 5 competitive forces model is starting point for strategic analysis that is used for assessing the attractiveness of an industry (Johnson, et al, ) and discovering a desirable strategic innovation that improve the industry and company profitability (Wit and Meyer, ).