Relative market share Essay Example for Free

Relative market share Essay (Ratio of company share to share of largest competitor) HIGH LOW â€Å"STAR† â€Å"QUESTION MARK† â€Å"CASH COW† â€Å"DOG† Figure 2 BCG Matrix of BMW 3. 1 Porter’s five forces Porter’s Five Forces are business analysis tools that help companies to assess the environmental forces that influence a company. This business analysis tool works by dividing environmental forces into five different categories (Figure 3). The interesting feature of Porter Five Forces is it leads companies to understand the extent of challenges faced by companies within a particular industry as the framework provides a systematic way of thinking about how competitive forces work at industry level and how they determine profitability. Figure 3 Porters Five Forces 3. 1. 1 Rivalry Rivalry exhibits the intensity of competition in a particular market. In case of BMW, the company faces fierce competition since currently there are many automobile manufacturers that compete in the same premium markets. In addition, many multi segment automobile manufacturers also set up special division to target premium market like Toyota Motor that set up Lexus brand to compete with premium cars like BMW, Mercedes Benz, Rolls-Royce, and Jaguar. Figure 4 shows the global auto industry ranking by market cap as of April 2006. The figure describes that at that time, BMW is not listed in the ranking and therefore they need multi strategy to generate greater market capitals. Figure 4 Global Auto Ranking 3. 1. 2 Threat of Substitutes Substitute products are products of other industries that may have significant impact to the prices decision and other features of automobile products. In case of BMW, the product substitutions are many kinds of affordable transportations including mass transports such as intercity high-speed trains, trams, motor bikes, and bicycles. Another product substitution for BMW is the increasing demands for green technology. In automobile industry, it refers to the use of alternative technology like hybrid technology or solar cells. Although the market share of these products are still relatively low, currently BMW has not shown intense program to launch the green car. In fact, several automobile manufacturers have started their program to head for producing the future cars that use hybrid cars like Toyota Prius and Alphard and Honda Civic, and GM’s Saturn Vue Green Line. 3. 1. 3 Buyer Power Buyer power has significant impact on the producing industry. The buyer power is perceived to be strong enough if they are in the minority in numbers and there are numerous producers or automobile manufacturers. In the automobile industry the buyer is the people who purchase vehicles or cars. Buyers have considerably high bargaining power because customers usually have much information regarding the vehicle they intend to purchase. They are usually knowledgeable about cars specifications, price, and dimension since most car manufacturers identify these in brochures and on websites. Another critical decision that buyers have is about the fuel consumption of cars. This information is rarely printed in cars brochures but usually they get the information for auto magazines that conduct test drive. Buyers have other powerful forces on the automobile industry since the advanced Internet technology lets customers to shop online or design and customize their cars. A key feature of Internet is customization in which BMW also enable customers to customize some features of their purchased cars in order to suit their needs. In addition, automobile industry exhibits low switching costs because customers can easily move to one dealer to another during the selection process. They can also trade their ole cars when buying new ones since many dealers now also own or cooperate with used car divisions. Figure 5 shows the global auto production representing the demands-production capability that each brand/automobile manufacturers have. In the figure, BMW is in the 14th place. However, it does not reflect the quality of BMW since BMW like other European premium cars are well-known for their quality products. Figure 5 Global Auto Productions by Manufacturers in 2002 Source: OICA 3. 1. 4 Supplier Power Supplier power is typically low within the motor industry because a vehicle has various amounts of different components and there are a large number of suppliers available to cater for this. This means Toyota/GM can easily swap suppliers if they are not happy with the quality or price of the components ordered.