Case Study On Adventure Works Case Analysis
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Businesses are increasingly operating in highly competitive markets. That owes to increasingly changing business environment that determines the nature of competition ranging from the ability to reach the market, sell at a suitable price and sustain their operations, in the long run. Thus, analyzing industry competitiveness is crucial for a business that seeks to enhance its market share and creates a competitive edge over its competitors. In that view, there are several analysis tools that rate applicable and that address various industry aspects. They help in determining a business’ position in the market as well as help in setting up strategies for EEE Neh cig that position. In that consideration, this report presents an overview of the Porter Five Forces and its possible application in the bicycle industry with reference to how Adventure Works can apply it to enhance its competitiveness.
Description of Porter’s Five Forces Model.
The porter five forces model is a tool for analyzing that uses five forces for determination of an industry’s profitability, as well as the factors shaping the industry’s competitiveness and strategies. Thus, the framework classifies and analyzes key factors that affect an industry’s competition, as well as profitability level. (Sengupta, 2005)
The five forces are summarized as follows
Existing rivalry: The force refers to the competition between the currently existing businesses in the industry. The factor is crucial because the current businesses strategies determine their competitors’ ability to earn market share.
Threat from substitutes: Substitutes refers to the other products that serve the same purpose as a company’s products. Their availability causes a company’s product to lose competitiveness while lack of such substitutes increases the product’s demand hence the company’s competitiveness.
Threat from new entrants: New entrants into an industry pose a threat to business competitiveness because they would be sharing the market reducing its market share. Thus, the ease of market entry determines a company’s competitiveness with businesses in industries that have high entry barriers being more competitive that those in markets with low entry barriers.
Suppliers bargaining power: various factors determine Supplier's ability to negotiate for better terms with business and in turn determines the business competitiveness. Thus, businesses operating where suppliers have low bargaining g power are highly competitive than those that face suppliers with high bargaining power.
Buyers bargaining power: Buyers are key determiners of business competitiveness. In that respect, the ability of buyers to bargain for better prices and terms determines the business margin hence its competitiveness in the market. The power is dependent on various factors including the customer switching cost. (Porter, 1980)
The Five Forces application to the bicycle industry and Janet’s Company.
The bicycle industry has direct sales worth $5.8 billion by the 2014 figures that entail retail bicycle sales, related accessories, and parts, as well as distribution channels sales. The market is expected to achieve $6.5 billion by the year 2019. (NBDA, 2014) The market’s major drivers include increased fitness and recreational. Others are the growth in traffic congestion as well as rising fuel prices in addition to the increase in demand for low-cost rampant in the developed countries. The market is also marked by electronic bicycle use in Western Europe and North America. (Research and Markets, 2014)
In view of the industry status and prospects, the following is the summary of the Porter five forces application for the existing businesses such as Adventure Works.
Existing rivalry: The industry is highly competitive, and the existing businesses compete by differentiating their brands.
New entrants’ threats: With technological advance, there is increased market entry owing to low cost of production that attracts more businesses to the industry.
Substitutes’ threats: Bicycles have various substitutes including the motorcycles. In that respect, the increased innovation that provides more efficient substitutes increases competition pressure for Adventure Works.
Buyers bargaining power: Increase in technology use makes customer switching easy hence giving them more bargaining power. In addition, the availability of substitutes and many sellers of the products provide buyers with more bargaining power hence low-profit margins for businesses.
Suppliers’ bargaining power: The industry depends on supply of components hence suppliers have significant bargaining power. However, businesses enhance their competitiveness through establishment of key partnerships with the suppliers. In that view, Adventure has more control over its components supply hence relatively more competitive. (Porter, 1980)
Recommendation for one of Porter’s three generic strategies for Janet’s consideration.
Porters’ three generic strategies are referred as generic because they can be applied to services and products across all the industries. The strategies include costs leadership, differentiation and focus strategies.
Cost leadership strategy
Generic strategies are crucial for business in seeking to gain a competitive edge over its competitors. Thus, Janet’s company should apply the low-cost leadership strategy that seeks to achieve a competitive edge over the competitors. The strategy would work by increasing the profits by reducing costs while they charge the industry’s average prices. In addition, the method would increase market share through low price charges while making acceptable and reasonable for the business. The strategy would also be suitable in seeking to enhance the business’ bargaining power against the buyers whose bargaining power is relatively high. The high power requires the business to produce its products at low cost. (Sengupta, 2005)
Two tactics the company might use to begin achieving the recommended strategy.
As a means of achieving the business’ objective of increasing market share, the company will need tactics that enhance its low-cost leadership strategy. Such tactics are those that seek to achieve a low-cost base by lowering the production and operations costs hence lowering the products prices. In that view and considering the market industry nature is enhancing the suppliers’ network and chain will be crucial. That would entail developing a good relationship with key producers of its raw material as well as the investing in innovative technologies that would lower the production and operation costs. In addition, the business should seek to enhance its logistics efficiency as a way of lowering its costs. (Sengupta, 2005)
In view of the analysis of the bicycle industry and its competitiveness, it has been identified that the industry is highly competitive. On the other hand, the Porter five forces model has been described as a crucial tool for establishing a company’s position in the market. Further, the tool has been identified as being crucial for identifying the most effective strategies and tactics for enhancing business competitiveness in the face of the five forces. In that view, Adventure works have been identified as a relatively competitive industry owing to its control of raw materials supply for its operations as well as having adopted technology that significantly lowers its costs.
Porter, M. (1980). Competitive strategy: Techniques for analyzing industry and competitors.
New York: Free Press.
Research and Markets. (2014). Global Bicycle Industry 2014-2019: Trends, Forecast,
In addition, opportunities analysis. Retrieved from, http://www.researchandmarkets.com/reports/2858123/global-bicycle-industry-2014-2019-trends
Sengupta, S. (2005). Brand Positioning: Strategies for competitive advantage. 2nd Ed. Lake
Town: Tata McGraw-Hill Publishers.
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