Porter’s Five Forces Model for German Automotive Industry.
The threat of new entrants.
Threat of Substitutes.
The threat of competitive rivalry.
Bargaining power of buyers.
Bargaining power of suppliers.
Business Intelligence and Analytic Tools.
Balanced Scorecard and critical Success factors.
Learning and Growth Perspective.
Internal processes perspective
Porter’s five forces model is the strategic management tool that analyzes the competitiveness of the industry. It further analyzes the attractiveness of an industry and helps the companies to analyze an industry before entering it based on five forces. These are named as the threat of substitutes, threat of rivalries, barriers to entry, bargaining power of buyers, and bargaining power of suppliers (Öneren, Arar & Yurdakul, 2017).
The attractiveness of the German Automotive Sector or Industry can be analyzed using Porter's five forces model. Germany is the sturdiest nation in the globe in terms of innovative and superior automotive products (GTAI, 2020). The analysis is as follows:
This force describes the likelihood of novel participants to enter the market. This threat relies on the current barricades to entry and the foreseeable responses of the recognized contestants. In the German Automotive Sector, the threat of novel entry is much low since there are numerous barriers to enter this sector. The major reason behind the same is the presence of a high level of competition that restricts the threat from novel participants. Moreover, any new company that wants to enter the German Automotive market will require an enormous amount of capital, knowledge, and competent human resources. Furthermore, it is evident from the industry overview of the German Automotive sector that there will be a high requirement of investments in the R&D. It is also true that the existing firms in this industry have attained substantial economies of scale and thus the new entrants will have to struggle a bit for positioning themselves and achieve greater economies of scale.
All the companies operating within an industry indeed compete in terms of substitute products. It is an essential factor that affects the demand and effectiveness of the automobile product in the industry. The more the availability of substitutes, the more is the threat of demand of the consumer for any automotive product. The threat of substitutes is moderate in the German automotive sector due to factors like innovation and technology. Today, most of the companies are making differentiated products that can give a better customer experience. Furthermore, many sources could be substituted for one of the brands within the industry. For example in the case of Audi, the threat of substitutes arises from products of competitors. Additionally, it may come from public transportation like car-sharing companies and others.
There is intense competition available in the German Automotive sector. The market for automotive products in Germany is well established. In this sector, all the vendors' offers for about 70% of value-added within the native auto industry that ensures the German Automotive industry remains onward of rivalries. There is high competition as there is a diversity of companies lively in this sector including large and medium-sized automobile producers similar to be found in this sector. The key players in this sector are ford, Audi, BMW, MAN, Iveco, Mercedes, Neoplan, Porsche, Opel, Volkswagen, and more. All these companies compete and continuously focusing on digitization and technological innovation (Mennicken, Janz & Roth, 2016).
The bargaining power of the customers is an essential factor that can affect the effectiveness and sales of any international business. The bargaining power of the buyers in the Automotive Industry of Germany is quite high. It is due to the fact that there are numerous substitutes available in this sector and hence customers look for the best car their money can purchase. All of them are investing heavily in R&D activities and marketing. They have strong power as they can bargain for higher quality and reasonable prices in the highly competitive market (Krzywdzinski, 2014).
The bargaining power of suppliers in the German Automotive sectors is moderate. It is because of the fact that there are negligible amounts of suppliers in the industry and due to which they hold a decent amount of power in the sector for the vending of the raw materials to the OEMs in Germany. It is a fact that around 85% of the suppliers for the German automotive sector are medium-sized companies. Certain suppliers are Bosch, KSPG, Getrag, Leoni, and more (Petrović-Ranđelović, 2019).
Business Intelligence can be defined as the technology and processes that help in transforming raw data into useful information that further helps the businesses in effective decision making (Fan, Lau & Zhao, 2015). There are numerous tools of BI and analytics that help the business to know the market trends. These systems are data mining, OLAP, dashboards, ETL, visualization, and more. Additionally, analytics and BI tools extract the essential insights from massive unstructured data and convert them into useful information that can be used for optimizing operational efficacy and improve productivity. Furthermore, the customer interactions in the form of email, chat, and voice call support can be assessed by using these tools in order to know their tastes, desires, buying patterns, and the current market trends (Khan & Quadri, 2014). Moreover, it assists businesses to enhance their competitive position using data effectively analyzed by BI tools. After analyzing the data, businesses can know the desires of customers and can tailor their needs accordingly by customizing the products and services.
Business intelligence and analytics tools assist businesses in making decisions like entering a novel market. It helps them understand the market by identifying newer prospects and building a strategy with useful data about market trends. Furthermore, it helps the company in supporting the strategic planning process as it offers all data linked with the turnover, budget ideas, future ideas, and more of the target company. By knowing the market, a company can make more effective strategies to be competitive in the market. These tools usually can gather customer-related data from social media platforms, email campaigns, CRM, website traffic, and more (Holsapple, Lee-Post & Pakath, 2014).
The challenges that may come while the implementation of business intelligence and analytics tools are numerous. Some are demonstrated as follows:
The balanced scorecard is the strategic management tool that looks at strategic processes along with the traditional financial events so that there can be a balanced view of performance. According to a balanced scorecard, there are four major perspectives namely learning & growth; financial; customer; and internal business processes (Malgwi & Dahiru, 2014).
This perspective considers the intangible drivers of the performance of the company. There are three main components entailed in this perspective. These are human capital, organizational capital, and information capital. Human capital includes the talent, skills, and knowledge of human resources in the company. Further, information capital includes information systems, infrastructure investments, and privacy systems. Organizational capital means leadership, culture, teamwork, worker alignment, and more. Two critical success factors needed in this perspective are continuous innovation of processes, and developing employees through training and leadership (Ivanov & Avasilcăi, 2014).
This perspective focuses on the goals and methods of a company's efficiency in bringing shareholder value, raising revenue, and increasing productivity. The main goals are linked with the financial health and the performance of the company. The two critical success factors in this respect are improved and enhanced revenue, and cost savings and efficiencies.
This perspective emphasizes the people who really purchase the company's products and services. The major aim of the company in this respect is the development of novel products, form customer partnerships, preferred supplier, and responsive supply. The two major critical success factors for achieving the customer perspective goals are increasing the % of sales from novel products, and brand awareness that can be checked via social media platforms.
This perspective emphasizes recognizing and regulating methods to ensure value for the stakeholders of the company. The major goals of the business in this respect are manufacturing excellence, the introduction of novel products, and technology capacity. In order to achieve these goals, two critical success factors in this respect are quality optimization, and process improvements (Narayanamma & Lalitha, 2016).
It is a graphical representation that demonstrates a connection between the strategic goals and assists the company to promptly communicate how value is formed by the business.
Fan, S., Lau, R. Y., & Zhao, J. L. (2015). Demystifying big data analytics for business intelligence through the lens of the marketing mix. Big Data Research, 2(1), 28-32.
GTAI (2020). The automotive industry in Germany. Retrieved from https://www.gtai.de/resource/blob/64100/817a53ea3398a88b83173d5b800123f9/industry-overview-automotive-industry-en-data.pdf
Holsapple, C., Lee-Post, A., & Pakath, R. (2014). A unified foundation for business analytics. Decision Support Systems, 64, 130-141.
Ivanov, C. I., & Avasilcăi, S. (2014). Measuring the performance of innovation processes: a balanced scorecard perspective. Procedia-Social and Behavioral Sciences, 109(8), 1190-1193.
Khan, R. A., & Quadri, S. M. K. (2014). Business Intelligence: An Integrated Approach. International Journal of Management & Innovation, 6(2).
Krzywdzinski, M. (2014). How the EU’s eastern enlargement changed the German productive model. The case of the automotive industry. Revue de la régulation. Capitalisme, institutions, pouvoirs, (15).
Malgwi, A. A., & Dahiru, H. (2014). Balanced Scorecard financial measurement of organizational performance: A review. IOSR Journal of Economics and Finance, 4(6), 1-10.
Mennicken, L., Janz, A., & Roth, S. (2016). The German R&D program for CO 2 utilization—innovations for a green economy. Environmental Science and Pollution Research, 23(11), 11386-11392.
Narayanamma, P. L., & Lalitha, K. (2016). Balanced Scorecard-The Learning & Growth Perspective. Aweshkar Research Journal, 21(2).
Öneren, M., Arar, T., & Yurdakul, G. (2017). Developing competitive strategies based on SWOT analysis in Porter’s five forces model by DANP. Journal of Business Research-Turk, 9(2), 511-528.
Petrović-Ranđelović, M. (2019). Sustainable development as an advantage and obstacle for the global automotive industry. TEME: Casopis za Društvene Nauke, 43(3).
Thamir, A., & Poulis, E. (2015). Business intelligence capabilities and implementation strategies. International Journal of Global Business, 8(1), 34.
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