The intensity of competition in an industry is neither a matter of coincidence nor bad luck. Rather, competition in an industry is ill rooted in its underlying economic structure and goes well beyond the behavior of current competitors. The state of competition in an industry depends on five basic competitive forces i.e. entry, threat of substitution, bargaining power of buyers, bargaining power of suppliers, and rivalry among current competitors.
(Porter, 1980) Daimler Chrysler's strategy rests on four pillars: global presence, strong brands, broad product range, and technology leadership. The objective of this analysis is to investigate how the organization needs to form its strategy in order to develop opportunities and protect itself against competition and other threats.
Company Introduction Mercedes Benz is firmly established as an independent brand within one of the world's leading car companies- DaimlerChrysler AG. DaimlerChrysler is a product of Daimler and Chrysler companies. Daimler motor company however came into existence as a result of the creation of a recognized internal combustion vehicle by Gottlieb Daimler.
Daimler Chrysler's strategy rests on four pillars: global presence, strong brands, broad product range, and technology leadership-Daimler being the first man to create a recognized internal combustion vehicle and the first to incorporate a practical transmission system. The company has a super network that ensures the flow and exchange of information from various departments within and between the company and it's strategic partners.
Competitive Forces The strength of the competitive forces in an industry determines the degree to which this inflow of investment occurs and drives the return to the free market level, and thus the ability of firms to sustain above-average returnsThe five competitive forces-entry, threat of substitution, bargaining power of buyers, bargaining power of suppliers, and rivalry among current competitors-reflect the fact that competition in an industry goes well beyond the established players.
All five competitive forces jointly determine the intensity of industry competition and profitability, and the strongest force or forces are governing and become crucial from the point of view of strategy formulation. The bargaining power rivalry is what keeps Mercedes-Benz on the run, as such that it can keep ahead of BMW and others, who are always there and always threatening their market share.
Power of Customers Buyers compete with the industry by forcing down prices, bargaining for higher quality or more services, and playing competitors against each other-all at the expense of industry profitability Differentiation Differentiation of product has enabled Mercedes Benz to beat down the power of its customers by offering them basically the same product (engines) at various prices under various models and class.
Innovation The versatility of Mercedes Benz enables it not only to produce a wide range of vehicle ranging from cars to trucks but it has also employed a Superior Engineering Technology in relation to other automobile manufacturers and made available the existence of a worldwide after sales service. This diversity of product programme permits consumers to make wide variety of choices and has been a determining factor in the choices made by consumers who decided to buy a Mercedes Benz product and making them a household name.
B)Power of Suppliers 1)Alliances The proliferation of suppliers coupled with the super network established ensures the flow and exchange of information between Mercedes Benz and it's strategic suppliers worldwide. 2)Growth Mercedes Benz is not relenting in it's effort at the proliferation of it's suppliers because it ensures a constant and cheap supply of parts.
Rivalry of Competitors Rivalry among existing competitors takes the familiar form of jockeying for position-using tactics like price competition, advertising battles, product introductions, and increased customer service or warranties. Threat of New Entrants New entrants to an industry bring new capacity, the desire to gain market share, and often substantial resources. Prices can be bid down or incumbents' costs inflated as a result, reducing profitability.
The threat of entry into an industry depends on the barriers to entry that are present, coupled with the reaction from existing competitors that the entrant can expect Differentiation Product differentiation means that established firms have brand identification and customer loyalties, which stem from past advertising, customer service, product differences, or simply being first into the industry E)Threat of Substitutes 1)Differentiation Mercedes Benz employs a Superior Engineering Technology in relation to other automobile manufacturers.
Diversity of product programme permits consumers to make wide variety of choices. The versatility of Mercedes Benz enables it to produce a wide range of vehicle ranging from cars to trucks has made them a household name.