Analysis of German Luxury Cars using Porter's Five Forces

This document provides an analysis of the German Luxury Car industry using Porter's Five Forces to determine its attractiveness and competitive rivalry. It discusses the competitive rivalry within the industry, bargaining power of suppliers and customers, threat of substitutes, and threat of new entrants. The analysis concludes that the industry is highly attractive with high competition.

Tutorial Assignment

Table of Contents
QUESTION 1...................................................................................................................................1
Analysis of mini case regarding German Luxury cars using the five competitive forces to
determine the attractiveness of the industry.................................................................................1
QUESTION 2...................................................................................................................................2
Description of risks David Jones faced with the differentiation strategy....................................2
QUESTION 3...................................................................................................................................3
Analysis of multiple risks for Walmart while expanding business in China...............................3
QUESTION 4...................................................................................................................................3
Advantages and disadvantages of international cooperative strategies of General Electric........3
QUESTION 5...................................................................................................................................4
Organisational capabilities of Starbucks and the way in which all of them translate core
competencies that give Starbucks a sustainable competitive advantage in the industry.............4
QUESTION 6...................................................................................................................................5
The way in which strategic direction of Alibaba Group is shaped by Jack Yun Ma...................5
REFERENCES................................................................................................................................6

QUESTION 1
Analysis of mini case regarding German Luxury cars using the five competitive forces to
determine the attractiveness of the industry
Porter's five force analysis is used for the purpose of analysing the competitiveness
within the industry along with it attractiveness (Direction, 2019). All of them were developed by
Michael Porter for facilitating businesses to analyse that the industry in which they are operating
is competitive or not. All the key elements of it are discussed below in context of German
Luxury Cars:
Competitive rivalry within the industry: This force is used to analyse competition
within the industry so that the businesses can get aware of all the key players which may pose
competition for them. Some of the major players in the German Luxury Cars are Mercedes Benz,
Audi, BMW etc. All of them are the competitors for each other and the competitive rivalry
within the industry is very high.
Bargaining power of suppliers: The external stakeholders that are delivering goods to
the companies to carry on business are known as suppliers. As the number of Luxury car seller in
Germany is very high and according to size of them there are end number of suppliers for the
industry. It demonstrates that for whole industry the the bargaining power of supplier will be low
because of large number of them.
Bargaining power of customers: All the individuals who are buying goods from the
manufacturers are known as customers. When there will be high level of competition within the
industry then it will result in higher level of bargaining of the customers as they will bargain with
the companies to buy the product on lower price. As the number of German Luxury car sellers is
very high therefore the bargaining power of purchasers within the industry is very high.
Threat of substitute: When one product could be replaced by other or two products will
be offering same benefits to the individuals then they will be considered as substitute for each
other. Luxury cars are bought by upper class of customers and if they want to buy a luxury car
then they will not consider any other option like non luxury cars. It demonstrates that the threat
of substitute for the German Luxury cars is very low.
Threat of new entrant: When a new company introduces itself in an industry then it will
be known as new entrant. As the luxury car industry of Germany is very large and an entity
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needs huge funding to enter in it. It shows that the threat of new entrant for all the car sellers in
Germany is very low because of barriers to enter within the sector.
By analysing the all the five competitive forces it has been assessed that the German
Luxury Car industry is very attractive and the level of competition within it is also very high.
QUESTION 2
Description of risks David Jones faced with the differentiation strategy
David Jones always operates its business with differentiation strategy. It is a type of
growth approach which is used by businesses for the purpose of attaining growth for business.
When it is adopted by the entities then they introduce a new product in a new market so that
business could be expanded and developed in different market places. Main purpose of it is to
attain competitive advantage within the industry so that all the long as well as short term goals
could be accomplished. As David Jones is using differentiation strategy for its business and it has
faced different risks because of it. The discussion of all of them is as follows:
No guarantee for revenue enhancement: It is one of the main risk which was faced by
David Jones because of the differentiation strategy. By using it the organisation was not able to
make sure that it will generate the desired revenues in the new locations where it will be
operating its business in future. Due to this risk, it may face failure in future to carry out
operations in systematic manner. Apart from this, it may also have to deal with huge losses in
upcoming years if it will not generate the revenues in new locations where it will be operating
business.
Failing stores: David Jones is also dealing with the risk of failing departmental stores of
it in different locations. This risk took place because of differentiation strategy which is adopted
by the organisation to carry out all the operational activities (XU and HOU, 2019). Its stores
were facing failure because it was not able to offer those products to clients that they were
willing to buy (Widyasih, Kaltum and Komaladewi, 2018). If an enterprise is willing to adopt
differentiation strategy then it is required to conduct market research so that success could be
acquired. David Jones would have dealt with this risk if the entity have conducted proper
research and analysed the markets where business was expanded by it.
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QUESTION 3
Analysis of multiple risks for Walmart while expanding business in China
Walmart is one of the large retailers around the world which is operating business in
different countries. It has expanded its operation in various nations for the purpose of capturing
larger market area (Kamun, 2019). The main countries where it has faced challenges while
expanding business are Mexico and China. However, the issues that were dealt in China were
much deeper as compared to Mexico. All the risks that were faced while expanding business in
China are listed below:
Lack of understanding of buying behaviour of customers: It is one of the major risk
which is faced by Walmart while expanding business in China. The managers within the
enterprise had improper information about the taste and preferences of the customers as their
choices were not price driven (Nickols, 2016). Apart from this, lack of such details resulted in
issues for the organsiation to establish itself successfully in China. When an enterprise expand its
business in a new country with new or existing products it is very important to make sure that it
is having proper and accurate information of client's preferences. If the entities get failed in
generating such details then it may result in failure of operations in the country. This risk is also
faced by Walmart as it was not having proper information of buying behaviour of Chinese
consumers as their choices are not price driven. If it would have paid attention towards
generating of details then it would have benefited the enterprise.
Operational risk: It is another risk which was faced by Walmart while expansion of
business in China because it was not operating its operational activities in systematic manner
because of improper information of Chinese market (Mostert and Luttig, 2018). This risk
resulted in inappropriate expansion of the organisation in China because when the entity gets
failed in executing operations properly in a new country then it results in negative impacts.
QUESTION 4
Advantages and disadvantages of international cooperative strategies of General Electric
The international cooperative strategy which was selected by general Electric was Merger
and Acquisition (Mukaffi, Rozi and Arazona, 2019). By adopting it, the entity will be required to
deal with all the advantages and disadvantages of it. The detailed description of all of them is as
follows:
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Advantages of merger and acquisition: All the benefits which could be acquired by
General Electric with the help of its international cooperative strategy are as follows:
 It provides economies of scale to the businesses which can facilitate the large business
such as General Electrics to become more efficient and work with higher level of
productivity.
 With the help of international cooperative strategy the enterprise will be able to generate
more profits which can help it to spend more money on research and development
activities. With the help of it, General Electric will be able to analyse the taste and
preferences of the targeted customers and attain growth as well as success for business.
Disadvantages of merger and acquisition: All the disadvantages of international
cooperative strategy of General Electric are described below:
 When the market share of the organisation will be increased then it may lead it towards
monopoly power and higher prices for the customers and because of it they may switch to
other entities. Due to this, General Electric may loose its market share and its number of
customers may get decreased.
 When two different types of firms will select this strategy then it may result in struggle
for them because it will be very difficult for them to survive and sustain in the market.
For example, if General Electric will merge with such a company which is from totally
different industry then it will result in struggle for the enterprise to carry out operations
collaboratively as it will be difficult to collaborate.
QUESTION 5
Organisational capabilities of Starbucks and the way in which all of them translate core
competencies that give Starbucks a sustainable competitive advantage in the industry
Starbucks is an international leading coffee brand that mainly focus upon its consistency
of quality of products, excellent supply chain management, consumer service and more.
Furthermore it has been evaluated that with its effective organisational capabilities Starbucks
efficiently translate its core competencies in order to have access of more competitive
advancements as compared to other rivals in industry (Hermina and Saudi, 2020). It has been
evaluated that company basically emphasise upon selling experience and building relationship in
order to retain customers for long period of time. By making their services different form other
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rivals Starbucks effectively deliver greater value to consumers. Along with this, it has been
analysed that respective organisation offer high quality coffee with the improved speed of
delivery to customers that distinct itself from other competitors. Furthermore, it has been
underlined that in order to assure more competitive advancements compared to other rivals
Starbucks roasting process plays most important part through this they deliver high quality and
authentic coffee. It is being underlined that Starbucks mainly emphasise upon ' dark roast' in
order to brings out full flavour coffee. Company also assures that brand is having effective
relationship with its loyal base of consumer for which they continuously keeps of asking
feedbacks from their customers. Starbucks serve their customers with its high quality services of
which company hire right people while making sure that they have high passion and
commitment towards goals.
QUESTION 6
The way in which strategic direction of Alibaba Group is shaped by Jack Yun Ma
Alibaba is a multinational technology company which is specialised in retail, e-
commerce, technology and internet. This company is measuring continuous growth and
development which is being duly shaped by Jack Yun Ma (Farajpouri Haghigh and Yazdifar,
2019). It has been evaluated that Jack Ma mainly emphasise upon trust of consumer as he
believes that an organisation can only assure long term sustainability if they serve customers
with best. Furthermore, it has been underlined that with having charismatic leadership style Jack
Ma develop positive workplace environment in which employees are effectively encouraged
towards company goal. In addition to this, employees are also motivated to engage in decision
making process that enhances Alibaba competency in market as compared to other rivals in
industry.
In addition to this, it has been evaluated that Jack Ma strategic decisions also focus upon
utilization of attractive advertisement, keyword bidding and consumer' data for higher
profitability (Echchakoui, 2018). Alibaba is continuously growing because of Jack's emphasise
upon values and trust. Entity also conduct internal investigation through which some certain
fraudulent practices is being overcome by company. These practices or strategic direction
facilitate growth and development of Alibaba in a well define and effective manner. Jack Yun
Ma believes that consumer trust is most important element for company growth and long term
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sustainability. Thus, to ensure this for long period of time Jack Ma undertake consumer centric
approach that allows entity to assure more growth and development
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REFERENCES
Books and Journals:
Direction, S., 2019. How a firm’s competitive strategy can improve performance: The key
influence of quality management practices.
Echchakoui, S., 2018. An analytical model that links customer-perceived value and competitive
strategies. Journal of Marketing Analytics. 6(4). pp.138-149.
Farajpouri Haghigh, H. and Yazdifar, H., 2019. The effect of managers’ optimism on
competitive strategy and final cost models. Religación. Journal of social sciences and
humanities.
Hermina, N. and Saudi, M. H., 2020. Industry Attractiveness, Competitive Strategy and
Company Performance in the Internet Service Provider in Indonesia. International
Journal of Psychosocial Rehabilitation. 24(2).
Kamun, M. A., 2019. Effect Of Competitive Strategy And External Environment On Performance
Of Food Processing Companies In Nairob (Doctoral dissertation, University of
Nairobi).
Mostert, P. and Luttig, T., 2018. Relationship intention and service quality as combined
competitive strategy. International Journal of Management and Enterprise
Development. 17(1). pp.76-92.
Mukaffi, Z., Rozi, C. and Arazona, R., 2019. Competitive strategy for micro, small business and
medium food industry sector. In Atlantis Press (pp. 179-186).
Ni, J., Chu, L. K. and Li, S., 2018. Financial hedging and competitive strategy for value-
maximizing firms under quantity competition. Annals of Operations Research. 264(1-
2). pp.391-407.
Nickols, F., 2016. Competitive Strategy and Industry Analysis.
PAN, M. Z., 2019. Review of Environment Influence on Virgin Australia’s Competitive
Strategy. DEStech Transactions on Social Science, Education and Human Science,
(ermis).
Shuguang, G. U. O., 2019. Modularty: New Competitive Strategy of Virtual Maritime
Enterprises. The Frontiers of Society, Science and Technology. 1(9).
Widyasih, R. A., Kaltum, U. and Komaladewi, R., 2018. Business Environment and Company
Reputation in Formulating Competitive Strategy of Rural Bank in West Java. Academy
of Strategic Management Journal. 17(2). pp.1-12.
XU, Z. C. and HOU, J. C., 2019. Innovation Investment, Competitive Strategy and Enterprise
Performance Level——An Empirical Analysis Based on Chinese Manufacturing Listed
Companies. Modern Finance and Economics-Journal of Tianjin University of Finance
and Economics. (9). p.5.
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