Porter Five Forces Analysis

Nowadays, the demand of vehicle is increasing in UK or even in the world. This news made me started interested on vehicle industry. After I learnt porter’s 5 forces analysis, I was thinking about is it possible to join into this market and what is the competition of this vehicle market. Here will mainly focus on Traditional Private Vehicle industry.

First of all, according to Porters theory, the 5 forces include the threat of new entry, the competitive rivalry, supplier power, buyer power and the threat of substitute. Each of them also directly affects the profitability of company, because it represents possibilities of increased competitor, substitute product and the prospects of future.

Firstly, the threat of new entrant will show the possibilities that the new entrants get in this market. Recently, for traditional private vehicle industry, even if there still some advantages to let the new entrants easier to join the market, they are still very hard to entry. Based on increased demand of British vehicle, vehicle industry has a good access of distribution of luxury vehicle such as China and Russia. However, the increased demand is only represent the requirement of luxury British brands. There is not good for the new entrant to get in and increase their market share.

Secondly, there is a high intensity of competitive rivalry, a large number of competitors in vehicle market. For instance, there are Bentley and Mini in UK. For the world, there are Toyota, BMW, Ferrari and other else. Even if there is a growth of industry, the low diversity of competitors and the low substitution switching cost, it still leads a negative representation of the competition. Moreover, because of the quality of the product of the old brand company, it leads a high customer loyalty, and makes new entrants harder to survive in this market.

Thirdly, a positive buyer power, there is an increased number of customers in the world. This means the growth of the industry will still continue. The buyer can very easily to get the information from the internet such as facebook, youtube, Google and online news. The convenient of internet makes buyer easier to get to find out their favorite product.  Also, the ability to substitute is not very strong, and the substitutions are including buses, trains and vans. According to BBC news, the production of commercial vehicle was felling last year while car was increased.  

Finally, a strong supplier power and a weak threat of substitute products or services, represent the market power is still strong in the world. There are high number of supplier with low cost changing, generally, companies can change they supplier. For threat of substitution, the biggest concern is the public transport also is some kind of substitution. When during some financial problem or the hard time of economic, people will change to use public transport for some reason such as saving money or cutting cost. Moreover, there are some country will provide a reduced tax for the driver if they purchase and drive a electric vehicle.

To sum up, based on the high demand of vehicle, there are still have profitability to entry this industry.