Porter’s Five Forces Model

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Porter’s Five Forces Model:

Porter’s Five Forces Model Group 5: Piyush Goel Rohan Dawani Rohit Anand Rohit Laumas Ritu Sanjay Rughwani Shashank Jain

Threat of Entry:

Threat of Entry When the industry is Profitable – To share the growing market pie. Typical Barriers to Entry: Economies of Scale Capital Requirement of entry Access to supply & distribution channels Customer or Supplier Loyalty Product Differentiation Expected Retaliation Legislation or Government Regulation

Market Share & FDI:

Market Share & FDI

Barriers to Entry - Maruti:

Barriers to Entry - Maruti For a new company, the startup capital required to establish manufacturing capacity to achieve minimum efficient scale is prohibitive. Switching costs is not so high encourages foreign and domestic companies to bring in new models and enter the industry. Product differentiation and promotion supports new entrants – Tata Nano in a new segment. Access to distribution channels is not difficult – can be done by Joint ventures (ex. Mahindra-Renault). 100% FDI is permissible under automatic route in this sector.

Slide 5:

Sudden rise in the competitive threat index of Maruti has more to do with the slack in demand in other parts of globe. Threat comes on account of the survival instincts of the global car brands such as Ford, GM, Toyota, Honda and Volkswagen. They are placing their bets on the two fastest growing economies of the world, China and India.

Bargaining power of buyers:

Bargaining power of buyers Maruti has a decent customer base but customers don’t consider Maruti as a very high status brand and the modern customers are very worried about their social status. Hence, Maruti has to consider making a lot of changes in the design and other features. Large number of options available Well informed customers Availability of finance schemes Foreign players also coming into picture Popularity of second hand car market

(Competition)Contd.:

(Competition)Contd.

Popular Brands (Survey):

Popular Brands (Survey)

Bargaining power of buyers:

Bargaining power of buyers The bargaining power of buyers for Maruti Suzuki is moderately high. The buyers form a significant portion of the industry revenue. The buyers have a low switching cost if they are not satisfied. The reason why bargaining power is not completely high is because the number of buyers is not very large in a developing country like India.

Slide 10:

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