Porter’s Five Forces Analysis of Volkswagen
Volkswagen has been one of the biggest vehicles manufacturers in the world since its inception. The company owns more than 31 industrial units of mega-level with a workforce of around 600,000. The company deals with the design, production, and distribution of passenger as well commercial vehicles including cars, motorcycles, and engines besides heavy turbo engines. The company further offers services in the direct sale, finance, and management of the fleet. The company faces intense competition as there are other rivals like Toyota, Honda, Ford, Tesla, etc. This analysis is crucial as its analysis of the external forces acting on the company and helps the company devise the future policy accordingly. The analysis in detail is discussed in succeeding sections.
Buyers’ Bargaining Power
Buyers’ bargaining power relative to the Volkswagen Group is weak due to many factors. The first factor in this regard is the prevalent costs of the products and the assurance as well as provision of high-quality products. The customers of Volkswagen are loyal because they know the quality and taste the company is providing to them are not easily available from the other brands. Other brands like Toyota or Ford provide vehicles that are low in cost, but the customers of Volkswagen put a deaf ear to them. The ability of the company’s customers to buy expensive cars is another factor. These customers are more concerned with the features and quality of the premium products rather than the price. The company’s provision of differentiated cars has enabled them to attract the loyalty of the customers and thereby, increased the prices without any effect on the sales.
Bargaining Power of Suppliers
This force is weakly affecting the company due to special reasons. The specialized suppliers tend to create the parts and materials which are relevant to the few automobile industries in the market. Therefore, these suppliers do not afford to lose their market in the automobile industry. In contrast, the items are parts that are general and are available from a number of suppliers, the suppliers do not aim to lose their contract with such a giant automobile industry like Volkswagen at any cost. Consequently, it gives an upper hand to the company whereby the company can increase its profits by purchasing parts at a low price.
Novel Entrants Threat
The entry of a new industry into the automobile market is not an easy step. Instead, there are challenges or barriers large and diverse in range to cope with. The most common barrier is the start-up value and the maintenance of a large-scale economy to operate the automobile business. Therefore, the force of this threat, as revealed by Porter’s Five Forces Analysis, is not intense. The development of new channels for distribution and the maintenance of supply and demand chains makes it difficult for the novel companies to create and retain. Moreover, brand value is significant in the retail business of the automobile industry. The customers are more probably to buy the product of their former likeness than the adoption of the new brand. The development of brand value and image is not an easy process. Hence, the company is facing the weak threat of novel entrants in the industry.
Product Substitutional Threat to Volkswagen
The company has two forces of threat in this regard. The first threat in this regard is the promotion of the use of alternatives by the government and the environment conservation agencies. The rising gas prices are another factor contributing to this threat. People are more likely to use public or shared transportation instead of owning their own vehicles. On the other hand, there are many consumers who are shifting their priority from fuel consumptive vehicles to electric cars which are more economical and are more suitable for the environment. These trends, therefore, are putting a moderate force on the threat of product substitution on the company.
Rising Competition in The Existing Market
The competition in the market is intense and it is rising with the passage of time. Volkswagen faced price-hushed threats from its competitors like Toyota, Nissan, Ford, etc. These rivals are nowhere insignificant in terms of the competition as they have captured a great share of market customers. The company needs to advise a smart strategy and investment in the advertisement and innovation to take the cutting-edge in the competitive market. The harsh consequences in the case of quitting the automotive industry have furthered completed the rivals to devise aggressive competitive strategies. To demonstrate, the exit of Toyota from the Australian market has caused the loss of 2500 jobs with extensive losses in the market besides resources.
+447462439809