All industries need raw materials as inputs to their process. This includes labor for some, and parts and components for others. This is an essential function that requires strong buyer and seller relationships.
The manufactures of all the different luxury car companies have set expectations of what type and quality the materials need to be for their vehicles. If the inputs materials, labor, and services were standard across the board than the differentiation between many vehicles would be nonexistent.
The unique inputs do not only make the supplier dependent on the firm, but can be reciprocated from the firm to the supplier.
Due to the differentiated inputs that each luxury car manufacturer requires and provides, it would not be easy or quick for them to switch between suppliers; this would incur many switching costs.
After answering several questions pertaining to the bargaining power of suppliers, our group has found that there is a moderately low threat of the suppliers.
This conclusion is reinforced by the facts: New firms or manufacturers trying to enter this industry may find it very difficult to try and capture some of the market share because some of the existing brands and reputations that has been well established.
Firms that are already established within the industry have a significant advantage over the newcomer because of the firsthand experience and knowledge they have acquired. For the new entrant they must establish themselves as a reputable manufacturer that can differentiate itself in a new way compared to the already existing firms.
From the consumer perspective, the newcomer must also show a low switching cost compared to their competitors in order to gain attention; the consumer is taking an inherent risk by moving to a new company that may not have a verified reputation yet so the lower switching cost reduces the risk somewhat.
Recently, there has been a new entrant to the luxury car industry: Hyundai has already established itself in the economy car industry as a reputable Korean manufacturer and has distribution networks to go along with that. Although Hyundai is new to the industry and lacks brand power, it is making up for its shortcomings with some very unique and innovative marketing ideas.
Rather than competing with Mercedes and Acura dealerships to see who has the most granite, Hyundai is bringing the consumer the car if they want to test drive it or buy it or they will come and get it from the customer if it needs servicing Special Report: Luxury Automotive Outlook, Based on the assessment in our analysis, we have found that there a high threat for substitution for luxury cars.
As shown in the charts at the end of the document, there are a vast amount of options for the consumer to choose from if they are not satisfied with their current brand. The probability of a competitor having a similar product, based on performance and standard features, is relatively high due to the number of firms established in the market.
Many of these products also have similar price tags if they are relatively comparable. From a statistical standpoint though, the majority of people would rather buy something that they know is quality and has a reputable name behind it.
Rivalry Among Competitors The luxury car industry is not rapidly growing, but is on the upside for growth. Figure 1 Special Report: Luxury Automotive Outlook, Based on the chart above, it is apparent that the market is trending upward, but clearly not as quickly as the industry would like.
The rivalry among the firms within the industry is also intensified by the fact that there are reasonably low switching costs for the end consumer if they are unsatisfied by the product that previously purchased.
The competitiveness in the market is also increased by the lack of consumer to producer interaction required to functionally operate the product. In addition to the preceding contentions about increased rivalry, the fixed costs of manufacturers in the industry are relatively low in proportion to the total costs.
This is appeasing to the end consumer because it means that the selling prices are going to be consistent and comparable across the industry as a whole.
The rivalry among the competitors within the luxury car industry is quite high due to the slow trend, the savvy consumer, and the sluggish global economy. Analysis Assessment After careful review of our industry analysis, our group has found that the overall attractiveness of the luxury car industry is not very appeasing.
The five forces that contribute to the analysis — Bargaining Power of Buyers and Suppliers, Potential Entrants, Substitutes, and Rivalry Among Competitors — displayed a fairly even spread among low and high threats, but the high threats were slightly greater.
Some things that would make the attractiveness of the market shift would be: These are all ways to shift the attractiveness of the luxury car industry to make it more or less appeasing to many individuals and companies looking at the distinguished industry of luxury cars.The bargaining power of suppliers is one of the forces that shape the competitive landscape of an industry and helps determine the attractiveness of an industry.
Bargaining Power of Suppliers bmw Volume is critical to suppliers (BMW) When suppliers are reliant on high volumes, they have less bargaining power, because a producer can.
Porter Strategy & the Bargaining Power of Customers example: Imagine a small business consisting on one owner operator who is a cleaning contractor, they have only one customer, this customer is a . The bargaining power of suppliers comprises one of the five forces that determine the intensity of competition in an industry.
The others are barriers to entry, industry rivalry, the threat of substitutes and the bargaining power of buyers. Search Results for 'bmw bargaining power of suppliers' Bargaining Power Of Supplier And Threat Of Substitue Suppliers are powerful if: * Suppliers are concentrated or differentiated: If there are only a few suppliers (or one) in the market, the suppliers will.
An important force within the Five Forces model is the bargaining power of suppliers. All industries need raw materials as inputs to their process. This includes labor for some, and parts and components for others.
This is an essential function that requires strong buyer and seller relationships. If.