Porter's Five Forces Analysis Essay
Porter’s Five Forces Analysis
The strategic model of analysis of the forces of competition was described by Michael Porter in 1979. According to Porter (2008), using five structural units specific to each industry, described ways of forming a competitive advantage and long-term profitability of the goods, as well as the ways in which the company can maintain its profitability and remain competitive in the long run (Bensoussan, 2013).
Since the Tesla company is based on the production of electric cars, it is important to analyse the market in another concept, not only the compete against other luxury brands but also, they need to understand the specifics of the electric cars industry.
The competition theory of Michael Porter says that there
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Bargaining Power of Buyers – Customers have the choice; brand loyalty can help to mitigate the power of buyers. The demand for cars is very high. Cars are a commodity for private customers as well as businesses. An increased environmental awareness and the benefit of long-term savings on fuel costs, motivates more customers to switch from a conventional car to an electric vehicle. However, due to a strong competition and substitution in the industry, the power is with the buyers. Another factor that increases the power of the buyers is the limited switching costs. To switch from one model to another has little to no costs for the customer. Therefore, buyers tend to choose their model based on quality, price and service. An answer to mitigate the power of buyers is a better customer service and a stronger focus on brand loyalty.
Bargaining Power of Suppliers – Suppliers hold comparatively little power. There is a large number of companies supplying the conventional as well as the electric automotive industry. In addition to that, the automotive industry is a key market for the most suppliers. Innovations happen more often on the side of the manufacturer than on the side of the supplying vendors. All these factors result in a comparatively low threat of
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