Threat of New Entrants
An analysis of the cruiser market presents a situation with our company leading the pack by a significant portion in most regions of the world. We possess neither technological superiority nor economies of scale in production. Our success has been attributed to the brand's strength, thus suggesting that companies that desire to enter this market would have to compete in terms of brand strength. There is also high cost of entry involved in the cruiser market. A competitor, Ducati, estimates a cost of Euro 43 million for developing and producing a cruiser.
However, the evenly distributed nature of the European market suggests that no single firm has been able to gain a significant advantage over the others. This market is shared more or less evenly between us, the Japanese manufacturers, BMW and Triumph. This suggests that a threat from a new entrant who addresses the needs of the European consumers for performance and style poses a credible threat to the incumbent firms.
Threat of Substitutes
The cruiser market is typically characterized by older, wealthier consumers. Some of these consumers may choose to substitute motorcycles for cars to meet the needs of their growing families. However, given the high average income of a cruiser owner it is quite likely that he/she already owns a car in addition to a motorcycle, and thus the threat of substitution by products from different industries is quite low. There is also the small possibility of substitution by other segments of the motorcycle industry.
Bargaining Power of Buyers
The strength of our brand globally, as displayed by very high brand loyalty, implies that cruiser buyers possess significant bargaining power. This is reinforced by the fact that a number of Japanese motorcycle manufacturers have (at great R&D expense) introduced cruisers that are technologically superior to ours but have not been able to sway our customers as the perceived switching costs are too high....
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