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China Auto Logistics Inc. Porter Five Forces Analysis
Strategic Management Essays, Term Papers & Presentations
Porter Five Forces Analysis is a strategic management tool to analyze industry and understand underlying levers of profitability in a given industry. China Auto Logistics Inc. managers can use Porter Five Forces to understand how the five competitive forces influence profitability and develop a strategy for enhancing China Auto Logistics Inc. competitive advantage and long term profitability in Auto Dealerships industry.
Brief overview of China Auto Logistics Inc.
China Auto Logistics Inc. is one of the leading firms in the Auto Dealerships. Over the years China Auto Logistics Inc. has redefined the ways of doing business in Services. China Auto Logistics Inc. is listed at New York Stock Exchange (NYSE) and have a market cap 8.30M USD.
What are Porter Five (5) Forces
- Threat of New Entrants
- Bargaining Power of Suppliers
- Bargaining Power of Buyers
- Threat from Substitute Products
- Rivalry among the existing players.
Porter Five Forces is a holistic strategy framework that took strategic decision away from just analyzing the present competition. Porter Five Forces focuses on - how China Auto Logistics Inc. can build a sustainable competitive advantage in Auto Dealerships industry. Managers at China Auto Logistics Inc. can not only use Porter Five Forces to develop a strategic position with in Auto Dealerships industry but also can explore profitable opportunities in whole Services sector.
China Auto Logistics Inc. Porter Five (5) Forces Analysis for Services Industry
Threats of New Entrants
New entrants in Auto Dealerships brings innovation, new ways of doing things and put pressure on China Auto Logistics Inc. through lower pricing strategy, reducing costs, and providing new value propositions to the customers. China Auto Logistics Inc. has to manage all these challenges and build effective barriers to safeguard its competitive edge.
How China Auto Logistics Inc. can tackle the Threats of New Entrants
- By innovating new products and services. New products not only brings new customers to the fold but also give old customer a reason to buy China Auto Logistics Inc. ‘s products.
- By building economies of scale so that it can lower the fixed cost per unit.
- Building capacities and spending money on research and development. New entrants are less likely to enter a dynamic industry where the established players such as China Auto Logistics Inc. keep defining the standards regularly. It significantly reduces the window of extraordinary profits for the new firms thus discourage new players in the industry.
Bargaining Power of Suppliers
All most all the companies in the Auto Dealerships industry buy their raw material from numerous suppliers. Suppliers in dominant position can decrease the margins China Auto Logistics Inc. can earn in the market. Powerful suppliers in Services sector use their negotiating power to extract higher prices from the firms in Auto Dealerships field. The overall impact of higher supplier bargaining power is that it lowers the overall profitability of Auto Dealerships.
How China Auto Logistics Inc. can tackle Bargaining Power of the Suppliers
- By building efficient supply chain with multiple suppliers.
- Developing dedicated suppliers whose business depends upon the firm. One of the lessons China Auto Logistics Inc. can learn from Wal-Mart and Nike is how these companies developed third party manufacturers whose business solely depends on them thus creating a scenario where these third party manufacturers have significantly less bargaining power compare to Wal-Mart and Nike.
Bargaining Power of Buyers
Buyers are often a demanding lot. They want to buy the best offerings available by paying the minimum price as possible. This put pressure on China Auto Logistics Inc. profitability in the long run. The smaller and more powerful the customer base is of China Auto Logistics Inc. the higher the bargaining power of the customers and higher their ability to seek increasing discounts and offers.
How China Auto Logistics Inc. can tackle the Bargaining Power of Buyers
- By rapidly innovating new products. Customers often seek discounts and offerings on established products so if China Auto Logistics Inc. keep on coming up with new products then it can limit the bargaining power of buyers.
- New products will also reduce the defection of existing customers of China Auto Logistics Inc. to its competitors.
Threats of Substitute Products or Services
How China Auto Logistics Inc. can tackle the Treat of Substitute Products / Services
- By being service oriented rather than just product oriented.
- By understanding the core need of the customer rather than what the customer is buying.
- By increasing the switching cost for the customers.
Rivalry among the Existing Competitors
If the rivalry among the existing players in an industry is intense then it will drive down prices and decrease the overall profitability of the industry. China Auto Logistics Inc. operates in a very competitive Auto Dealerships industry. This competition does take toll on the overall long term profitability of the organization.
How China Auto Logistics Inc. can tackle Intense Rivalry among the Existing Competitors in Auto Dealerships industry
- By building a sustainable differentiation
- By building scale so that it can compete better
Implications of Porter Five Forces on China Auto Logistics Inc.
By analyzing all the five competitive forces China Auto Logistics Inc. strategists can gain a complete picture of what impacts the profitability of the organization in Auto Dealerships industry. They can identify game changing trends early on and can swiftly respond to exploit the emerging opportunity. By understanding the Porter Five Forces in great detail China Auto Logistics Inc. 's managers can shape those forces in their favor.
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