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Unit 2 Porter's Five Forces Model Level 5 Higher National Certificate

Answer :

Introduction

Porter’s five forces model is a tool which is helpful in analysing market conditions in quite prominent and adequate manner. By taking help of this method, manager of company can comprehend range of competition and effect of other factors like availability of substitutes, supply power etc. on business operations. This assignment is based upon Mercedes Cars that is operating its business operations in UK.

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Task

Porter’s Five Forces Model

This tool consists five criteria which is explained below:

Supplier’s Bargaining Power between Low & Medium

There are various suppliers that are found in automotive industry. Numbers of suppliers are low in size on the other size number of car manufacturers are wide. So in this case suppliers are not in position to negotiate with Mercedes Company because suppliers have sufficient power to influence price or can change and set price according to them.

Competitive Rivalry

Luxury and premium car companies always show high competition in automotive car industry. Main competitors of Mercedes car company is BMW, Audi, Volvo, Jaguar etc. main difference among all brands are technical aspects like capacity of engine etc., design, functions, luxury facilities etc. Cost of Mercedes cars are higher than its rivals because this function makes this corporation more valuable than other competitors like Porsche, Range Rover etc.

Threat of New Entrant

Mercedes venture is having high brand equity and this organisation is quite able in availing advantage of its brand value in market. As it is clear that automotive industry requires larger amount to get invested if any firm wants to enter in this market section. According to discussed viewpoint, it is clear that risk of new entrant is low because every companies do not have sufficient amount to put into automobile industry. In market, Mercedes has become symbol of prestige, status and it is quite difficult to other firms that they imitate or generate this thing in their products and associated services.

Bargaining Power of Buyers

There are many manufacturers that are operating their business functions in automobile industry like BMW, Lexus, and Porsche etc. and all these firms are serving variety of brands, designs, functions etc. so on the basis of this, it is shown that buyers are having larger choice options that provides them adequate bargaining power to make choice over more than 10 brands whom are also having sufficient brand equity in marketplace. In this section, Rolls Royce cars are giving great competition to Mercedes cars because Rolls Royce is offering fully customised cars that can hit actual need of every customer and client retention could become easy for corporation. This action ensures bargaining power of buyers who have potential to purchase and maintain a luxury car.

Threat of Substitute

Numbers of competitors are very and due to this section, it is clear that there are many organisations are present in marketplace which is providing great models and options which is a threat for Mercedes Benz cars and to deal with this issue, corporation has to acquire new market segment and should always try to position their product with appropriate market target strategy.

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Conclusion

This report is concluded as porter’s five forces models that presents five criteria are having great study on market condition analysis and this factor is very useful in analysing situation of new market in novel industry.

References

  • Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry analysis templates.Competitiveness Review.24(1). pp.32-45.
  • Yunna, W. and Yisheng, Y., 2014. The competition situation analysis of shale gas industry in China: Applying Porter’s five forces and scenario model.Renewable and Sustainable Energy Reviews.40. pp.798-805.
  • Porter, M. E. and Heppelmann, J. E., 2014. How smart, connected products are transforming competition.Harvard Business Review.92(11). pp.64-88.
  • Mathooko, F. M. and Ogutu, M., 2015. Porter’s five competitive forces framework and other factors that influence the choice of response strategies adopted by public universities in Kenya.International Journal of Educational Management.29(3). pp.334-354.
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