The Porter Model is a very good tool to analyze the attractiveness of a certain industry. By attractiveness, I don't just mean entering an industry, but staying and competing inside it. It describes what kind of pressures a company will face from buyers, suppliers and its competitors. I think this is a relatively effective tools for determining whether an industry is worth penetrating since it helps you realize how profitable your company can be within that industry. However I also think that it leaves out the pressure a company can feel from a government or political groups. Are there any specific regulations for that industry? Any extra costs that will have to be incurred? What is this government's stance on monopolies or price setting? Etc. Aside government, I think the Porter Model does a good job describing the forces effecting an industry.
I think the automotive industry has high barriers for entry. The capital requirements for starting up a car manufacturing company have to be very high since you need the plant or plants and the expensive equipment used in auto manufacturing. Brand loyalty is in my opinion very strong. There are many people who only buy specific brands of cars. If a new brand of car comes out, people will be very skeptical about since there are already brands in existence that they know and trust. Also people switch cars once in a several years and the cost of switching is high since you're likely to be selling an old depreciated vehicle and buying a new and more expensive car. So customers will likely not want to switch to a new expensive product that they haven't heard of before.
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I agreed. I think that the Porter Model is a good tool used to analyze the attractiveness of a certain industry. It is pretty interesting that you used the automobile industry as your example. Knowing the barriers that it has, would you yourself go into the automobile industry?
I export cars right now, but I would never get into manufacturing them even if I had the start-up capital.
It is true that brand loyalty is one of the biggest barriers that car companies have. Another issue that each companies face is that buying a car is a big decision most people make, unless of course they had loads of money. So if someone was to buy a new car, that would probably be the car that he woudl keep for many many years.
Definitely agree that Porter model is effective. I found it to be systematic and objective approach while being broad enough to be applied to multiple industries.
Car manufacturing is not an easy industry to enter. But China is making it's way through and I'm looking forward to seeing what they're going to come up with (and how good their cars are going to be)
I sgree with your thoughts that the Auto industry has high barriers of entry. But like you say that you wont enter it even if you had the caoital, I beg to differ on that since my opinion is a little different from yours.. I by nature am a risk taker and this i think would be an extremely clculated risk to get into Auto manufacturing as it does have high returns . I also know that there are 2 extremes to it. A company as big as GM is in bad shape right now but hey, Thats business...
Also I think we should think to do something different or uses any of the strategies and enter a competitive industry .. China and Japan are excellent examples. They came into the industry at a time when there were Auto giants sitting in the industry. But look at today's market, they own a majority of the market share..
"Neccesity is a mother of all inventions :)
I sgree with your thoughts that the Auto industry has high barriers of entry. But like you say that you wont enter it even if you had the caoital, I beg to differ on that since my opinion is a little different from yours.. I by nature am a risk taker and this i think would be an extremely clculated risk to get into Auto manufacturing as it does have high returns . I also know that there are 2 extremes to it. A company as big as GM is in bad shape right now but hey, Thats business...
Also I think we should think to do something different or uses any of the strategies and enter a competitive industry .. China and Japan are excellent examples. They came into the industry at a time when there were Auto giants sitting in the industry. But look at today's market, they own a majority of the market share..
"Neccesity is a mother of all inventions :)
Yes, you have the same industry as mine. People, in fact, are getting richer and more and more people have their own car. More over, people are changing their car. Nevertheless, as you say. People who change their cars are most likely to buy well known brands instead of those that unknown. As a result, new competitors are hard to survive in this industry.
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