Threat of New Entrants

 

Profitable industries that have
high returns will attract new firms to participate. New competitors may force
existing firms to be more efficient and to learn how to compete on new level. The
threat of new entrants is high when it is easy for new competitors to enter a
market ad low when there are significant entry barriers to entering a market.
These entry barriers make it difficult for new firms to enter an industry and
often put them at a competitive disadvantage even when they are able to enter. Domestic
cars made in Malaysia are Proton and Perodua. This seems that in the automobile
industry, there have high barriers for new entrants to involve in. The
potential for new high entrants are economies of scale which Perodua is able to
produce cars in large numbers and achieve low cost in producing products and
able to provide flexible pricing when producing enterprise products, promote
product differentiation for special products, require capital requirements to
be based on high capital requirement for Automotive industry to operate. In
addition, the automotive business requires not only highly advanced technical
support for routine manufacturing activities, but also specialized technical
personnel to operate these machines

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Threat of Substitute Products

 

A substitute product is a change
that uses different technologies to solve the same economic needs. The threat
of substitute product or service is high when they are many alternatives to a
product or service and low when there are few alternatives for them to choose. The
substitute product’s quality and performance are equal to or greater than the
existing product while the selling price is lower. The factor that faced are the
number of substitute products available in the market, the intention of buyer substitute,
the relative prices, and quality of substitute and buyer’s switching costs.
Therefore, if there have a high threat of substitute products, there is higher
the possibility for Perodua to have the loss in advantage and profit of the products.
So, the threat of substitute products in automobile industry is low because the
substitute product of vehicles that have is motorcycle, bus, van and so on. Although
there have many types of transporting vehicles, cars still hardly to substitute
by other vehicles since bus and van are more consider as public transport which
means the time and distance are uncontrollable by single person. For
motorcycle, it will affect by the weather when driving and less safety than
cars. So nowadays, most of the people will buy car as their main of transportation
because of the weather which may be sunny or rainy day and capacity of
passenger that can bring compared to buying motorcycle which in rainy day, need
to wear raincoat in order to prevent get wet in rain and more comfortable than
choosing van and bus as their transport.

 

Bargaining Power of Buyers

 

The bargaining power of
buyers is the ability of buyers to influence the price they must pay for an
item. Firms can take steps to reduce buyer power by giving discount that helps companies
find out who the company’s loyal customers are. Buyers’ power is high if buyers
have many options and it is low if they have few choices given. In automotive
industry, the bargaining power of buyers is moderately strong because most of buyers are small individual
buyers that buy vehicles. Such buyers can bargain for
lower prices while every buyer can easily switch to a new brand because the
buyers are sensitive towards price and would switch to another brand that
offers lower price which is Proton. And for the consumers who more concern about
safety or speed, they may choose Volvo or BMW as their main car brand. Thus,
the Perodua need to focus on customer loyalty through design, quality and by
offering competitive prices.

 

Bargaining Power of Suppliers

 

The bargaining power of
suppliers is the supplier’s ability to influence the price they charged for
supplies which including of raw materials, labour, and services. The supplier powers
will increases when supplier’s products create high switching costs. According
to the 2013 Automotive News, there have about 20 largest companies on the
Automotive News list of the top 100 suppliers for 2012. Therefore, there seem that
many suppliers in the automotive industry have the option of obtaining raw
material. As a result, the bargaining powers of suppliers in this industry is
consider as low because Perodua can easily concerted to other suppliers that
provide additional benefits and the switching cost might be lower than other
industries.

 

Intensity of Rivalry among
Competitors

 

Rivalry among existing
competitors is high when competition is fierce in a market and low when
competition is more complacent. For most industries, the intensity of
competitive rivalry is the main determinant of the competitiveness of the
industry. Therefore, it is important to understand the industry rivals to successful
marketing of the product. Besides that, a business must be aware of its
competitor’s marketing strategy and pricing which the reactive will occur if
there have any changes made. Firms seek to differentiate their products in terms
of customers value and business competitive advantage. Common rivalry
dimensions include price, after sales service, innovation and etc. For example,
most automobile industry will launch similar car price, the similar service
after the sale in the reason to beat the competitors. As a result, the lower
the rivalry among competitors, the higher the profit that firms receives.