Ymki 5 Forces Analysis

Only available on StudyMode
  • Download(s): 494
  • Published: March 26, 2011
Read full document
Text Preview
Market, Industry and Competitive Analysis of Yamaha Indonesia 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 for locally produced parts has led to numerous suppliers in the market, allowing ease of switching from one supplier to another, especially by the major players in the market who can afford to be more selective of their suppliers.

Degree of Substitutability: LOW
Several available substitutes for motorcycle transportation exist, such as cars and public transportation. However, due to the inefficiency of the public transportation system, according to a survey conducted, most respondents indicated that they would choose private over public transportation. Reasons given were that of flexibility and speed, as public transportation was seen to be unreliable. The bulk of public transportation users were students who cited financial reasons for not owning private transport, which would suggest that price was a large factor in deciding the means of transport. Coupled with the Indonesian Government’s policy of subsidized fuel, it would appear that motorbikes would be the prime choice for the average Indonesian and hence, substitutability would be low. Bargaining Power of Consumers/Distributors: Moderate

While the ratio of suppliers to consumers is small, which normally would indicate less bargaining power; it is important to note that sensitivity of consumers to price is high, with the cheapest range of motorcycles taking the vast majority of the market share of total motorcycles sold. However, while price is one consideration, another crucial factor would be the proximity of service and repair centers catering to the motorcycles, especially during the warranty period. Hence, while consumers are free to choose between the various motorcycles that offer a more or less homogeneous product, they are still limited by other constraints, reducing their bargaining power. In addition, much of the information obtained about motorcycles comes through the local distributors and dealers, which would give them considerable influence over customer’s demands and preferences. The major...
tracking img