Industry Analysis: PORTER’S 5 FORCES MODEL
Threat of New Entrants : LOW
In the Indonesia motorcycle market, several significant barriers to entry exist, making it difficult for new competitors to enter the market easily.
The Political/Legal barrier to entry is perhaps the most significant one. Unlike other industries in Indonesia, the automotive industry is highly regulated. The Indonesian Government imposed a complete ban on foreign imports, which was only lifted in 1993, subsequently introducing high tariffs of 175 – 275% in lieu of the ban. The industry was even exempt from the ASEAN Free Trade Area agreement (AFTA), drafted in 1992. In addition, even domestically located foreign companies are required by law to purchase/manufacture certain parts or components locally.
Highly dominant industry players like Honda, Yamaha and Suzuki, who hold a cumulative market share of 96% of motorbike sales from 2003-2008 would also discourage new entrants, given also the fact that Honda, the dominant player in the market, has had a history of being willing to conduct price wars to protect its market share. In addition, the distribution and repair network is crucial in the motorbike industry due to servicing and maintenance needs. Based on this aspect, it would be difficult for new competitors to enter the market due to a lack of distribution network and service centers.
Bargaining Power of Suppliers: LOW
Due to restrictions set in place by the Indonesian Government, mandating that certain parts and components has to be procured from local sources, the major motorbike companies like Honda, Yamaha and Suzuki have set up local factories to manufacture parts that they require for production. This form of backward integration has led to a lower dependence on suppliers for parts, allowing them to have better control over their supply chain.
Furthermore, due to these restrictions, the increase in demand... [continues]
Cite This Essay
(2011, 03). Ymki 5 Forces Analysis. StudyMode.com. Retrieved 03, 2011, from http://www.studymode.com/essays/Ymki-5-Forces-Analysis-638133.html
"Ymki 5 Forces Analysis" StudyMode.com. 03 2011. 2011. 03 2011 <http://www.studymode.com/essays/Ymki-5-Forces-Analysis-638133.html>.
- MLA 7
"Ymki 5 Forces Analysis." StudyMode.com. StudyMode.com, 03 2011. Web. 03 2011. <http://www.studymode.com/essays/Ymki-5-Forces-Analysis-638133.html>.
"Ymki 5 Forces Analysis." StudyMode.com. 03, 2011. Accessed 03, 2011. http://www.studymode.com/essays/Ymki-5-Forces-Analysis-638133.html.