Competitive Analysis of Bentley: Porter's Five Forces

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Strategic Management Assessment
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Executive Summary
In this study, several aspects have been fulfilled in the particular case of Bentley. Competitive
strategic frameworks such as porter's five forces have been taken into consideration. In this
framework aspects such as supplier power, buyer power, competitive rivalry in the market
and others have been illustrated through various examples and statistical figures. Furthermore
comparative analysis between Bentley and other similar companies, which are present in the
United Kingdom, have been elected as well. Through this, a comprehensive knowledge about
the automobile industry has been attempted to be attained. Furthermore, recommendations
have been created for the organisation as well in order for the managerial has to know how
they can progress in the market for other and attain higher levels of differentiation. The
application of porter's five forces has been made on Bentley as well through which the ways
in which the company can benefit in the coming 5 to 10 years has been explored.
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Table of Contents
Introduction................................................................................................................................4
Main analysis.............................................................................................................................5
Overview and Critique of Porter’s models of Competition.......................................................5
Analysis of Bentley UK based on the mentioned model...........................................................7
Comparison of the theory and actual practice..........................................................................11
Conclusion................................................................................................................................13
Recommendations....................................................................................................................14
Reference List..........................................................................................................................15
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Introduction
Strategic Management assessment is the method through which a company is able to evaluate
various factors such as product differentiation, employee capability that are present within its
capability and the external market. Through this assessment, the companies are able to make
a better plan and formulate steps as to how the company should move forward in the
automobile market. In this particular report, the consideration of Bentley has been into
account. Bentley is a Britain based luxury manufacturing company that produces various
types of SUVs and similar high-end cars. H.M. and W.O. Bentley h founded the Company in
the year 1919 and its headquarters is present in Crewe, United Kingdom.
The managerial people of the business include Adrian Hallmark who is the Chairman, CEO
and John Paul Gregory who is the Head of Exterior Design. The revenue of the company is
€1,453 million as per 2018 statistics and there are over 3,600 present in the organisation
(Bentleymotors.com, 2019). The current report will highlight a competitive framework such
as Porter’s Five will be explored.
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Main analysis
Overview and Critique of Porter’s models of Competition
Porter’s Five Forces is a strategic competitive framework that helps in analysing the
environment of automobile industry and the forces that directly affect Bentley. There are five
aspects to this theory. These aspects include threats of new entrants, power of buyer, power
of suppliers, product substitution rate and competitive rivalry.
Threats of new entrants explore the degree of ease new businesses and companies have to
enter the automobile market. It investigates the level of barriers that are present to enter the
market and the economics of scale that increase its rate of profitability. In addition to that, the
amount of brand loyalty, which consumers have towards existing brands is analysed and it is
understood how difficult it is for new businesses to create their mark. Furthermore, the
amount of capital requirement in terms of land, stock and others are assessed as well. In case
there are governmental policies and regulations that cause a hindrance to the progress of the
new company that aspect is analyzed as well. Switching costs to other products and services
for new opportunities as well is evaluated as well (Hill et al., 2014).
Bargaining power of buyer investigates the number of consumers that are present in the
market and the degree of power they possess over others in the market. Along with which the
size of order, which each consumer makes, is assessed in order to understand the power over
the business. Price sensitivity and elasticity is assessed as well, through which the degree
until which it can be understood, that if rates are increased or decreased what will be the
reaction of consumers. In addition to that, the ability of the buyer to switch to other product is
assessed as well. Finally, the amount of information about the automobile product is studied;
this allows the company to determine a new angle of information that educates consumers
further.
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Figure 1: Porter’s Five Forces
(Source: Goetsch and Davis, 2014)
Bargaining power of suppliers assesses the degree of power, which parties that provide raw
materials possess. Here the number and size of suppliers is addressed and if there are many
individuals who are able to provide low prices and good grade materials. In addition to that, if
there is any differentiating factor of the suppliers product is assessed as well. This helps the
concerned company to pick particular suppliers over in a better manner. Furthermore, if the
company possesses powers to provide substitute products is addressed as well (Lasserre,
2017).
Threat of substitution product enumerates the number of similar products are prices that are
present in the automobile market and how likely consumers are to shift to them. The
propensity of the buyer to acquire new items is analysed as well through the level of income
of consumers. The level of popularity, which the consumers have, is analysed as well by
understanding how effective the marketing endeavours of the company are through the
assessment of sales turnover.
Competitive rivalry illustrates the level of completion an organisation has with local as well
as foreign players that are present in the automobile market. It is also evaluated how
diversified the competitors are and how varied their abilities are. In terms of geographic
location, it is also attempted to be ascertained how many competitors are present in a place.
This helps a business to know what the company to reach out to other consumers where there
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is lower access can do. As per the needs of the consumers and industry’s potential rate is also
attempted to be understood as well (Goetsch and Davis, 2014).
Analysis of Bentley UK based on the mentioned model
Threats of new entrants (Low) – Owing to the high degree investment that is required to set
up land, materials and machines it is difficult to even consider entering the market. It is
difficult for new businesses to raise capital from the market as well through the way of
individual business incubators and private investors as. This is because these parties do not
invest in new companies unless they can observe and evaluate past experiences. In terms of
brand loyalty, companies such as Mclaren, MEV Ltd, Metrocab are UK companies that have
high goodwill. This prevents the companies from being able to establish themselves quickly
and gain recognition. It is estimated that in order to establish a new business a minimum of
1.5 million is required in order cover all areas such as operations, marketing, human
resources and others (Stead and Stead, 2014). In addition, if a company such as Bentley plans
to diversify to other businesses such as car repair. Then there are high chances the focused
efforts of a new company would help the enterprise to attain distinction in the market quicker.
In the case of Bentley to combat new companies, various pathways can be taken by the
enterprise. Primarily the company should focus on innovating and diversifying the range of
its products, this will allow the company to increase the product line of the company. Bentley
can bring chances to its economies of scale as well and the prices at which commodities are
available through chances in the fixed cost per unit rate. This would allow the company to
attain a larger base of middle class band consumers. The company can aim to improving their
capabilities; capacities as through spending higher on training and learning programmes and
helping the expansion process and storage facilities. This will help in having more stock than
the market players have.
Bargaining power of buyer (High) – It has been estimated that in the automobile industry
there is sales of over 1,237,608 units. Since most of the individuals buy vehicles for
themselves as well as family or staff members, it has been said the number of consumers is
well 1.5 million. This high level of customer base provides them with an extreme degree of
power as well. This allows there to be scope of higher price sensitivity too. This is because
companies such as Bentley, Aston Martin, and Jaguar Cars all provide similar vehicles in a
similar price bracket of £200,000 and £300,000 (E. Dobbs, 2014). This implies that the
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consumers have a specific bracket too within which they look into in order to attain a
product. In case if companies such as Bentley alter their pricing too much, they stand at the
risk of driving off consumers as well. Furthermore, the company puts a lot of money into
their marketing endeavours as well in order to become visible in the eyes of the consumers.
In the event, the needs of the consumers alter; high level of switching costs is involved. This
implies that for Bentley, other transport services such as flights, cabs and others are a threat.
Bentley may deal with the different threats that the consumers and their choices present in
several ways. Firstly, better relationships must be established with consumers and this can be
attained through putting emphasis on consumer relationship and communication. The sales
process of the company must attempt to be streamlined as well along with production
process; this will allow the company to provide cars quicker. The company can develop a
better consumer service programme as well where various discounts, offers and facilities can
be made available to customers.
Bargaining power of suppliers (High) - It has been detailed that there are small 2500 base
of active British car suppliers that are present in the UK. Due to the concentrated pool of
individuals who provide materials in UK, the likelihood that, their margin of profit when
trying to sell products is high. In addition to that, companies such as Marlin, Noble and others
offer differentiated and quality products that give them a competitive edge when compared to
other companies. The automobile suppliers are present in United Kingdom provide their
facilities beyond the sphere of their present location. This allows them to have a wide net of
consumers. This implies that for companies such as Bentley has a lower amount of scope of
negotiation with suppliers, since these businesses have other clients as well (Sreejesh, 2014).
In order to combat the above-illustrated situation Bentley can focus on creating its own
supply chain and process where it can have several suppliers that engage in the process of
material acquisitions. Furthermore, the company can experiment with different types of
product material, designs that have lower costs. This will allow the company to find better
alternatives and have a better point of negotiation. In addition to that, the Bentley can build
relations with specific suppliers of materials; this will allow the company to create bonds
beyond the professional sphere for a prolonged. This will allow there to be scope for more
discounts and faster deliveries.
Threat of substitution product (High) – Car products such as Jaguar XJ, XE, F Pace or
Aston Martin DB11, Vanquish and others are examples of some vehicles that are direct
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substitution to the products of Bentley. Some of the models of Bentley against whom, these
cars are a competition of include vehicles such as Continental GT, Bentayga, Flying Spur,
and others (cgma.org, 2013). Apart from substitutive products, substitutive services are
present in the United Kingdom as well. These services include transport services such as
facilities provided by British airways, luxury bus services by UTC services and others. The
income and propensity of the UK buyers would also determine the rate at which they would
change to another product as well. Since the consumers of Bentley usually high-income
individual, these consumers have a tendency to procure cars on the whim rather than when
the need arises. The marketing efforts of the company are aimed towards pushing and
elevating the marketing towards class elevation advertisement.
Multiple methods are present through which the Bentley can deal with present threat of
market substitution. Bentley can shift its focus towards providing service-based jobs as well.
Since there are more limited businesses that are focused towards this particular business,
there is higher scope of success. Apart from this, the company may focus towards increasing
their knowledge about the products and services preferences of consumers. This would allow
the enterprise to obtained information about they could do to improve the commodity that is
being provided (Thompson et al., 2015).
Competitive rivalry (High) – It is estimated there are over three thousand companies that
are involved in improving and providing a better automotive vehicle in the markets. These
companies include companies such as Aston Martin, Daimler AG, Jaguar Cars and others that
sell similar luxury products in the automobile market. All of these companies have similar
and high priced differentiation strategy. There are certain quality differences that are present
between these companies as well. Companies such as Jaguar focus on style and speed while
companies such as Bentley aim towards providing better quality of parts so that there is an
elevated degree longevity the consumers gets as well. Some consumers have particular
loyalty to specific businesses as well; this makes it harder for Bentley penetrate a larger base
and attain wider consumer chain (Ncbi.nlm.nih.gov, 2019).
In order to combat the above presented situation, Bentley must present the higher
sustainability aspect into market towards consumers through unique advertisement strategy.
The company can attempt to implement a better quality checking mechanism through which
every aspect of the development of individual engines, motors and other parts will be
evaluated. Bentley can aim towards establishing a collaborative process as well with other
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companies as well. This would mean that through the process or merger or other technique,
the company would be able to unite labour forces, investment and other capabilities to
improve better.
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Comparison of the theory and actual practice
Different companies in the market utilise the five forces framework in a varied manner.
Companies such as Jaguar attempt to obtain the loyalty of consumers while a company such
as Aston Martin focuses towards collaborating with other companies. In the case of Bentley,
the aspect in which the company excels the most is providing remarkable car services to the
consumers. However, the price rate of the company is much higher when compared other
competitive players. Owing to this factor, the number of cars that are sold by the company is
much lower than other competitive players in the automobile industry (Robson, 2015).
In addition to that, it stands as a large opposing force when new companies try to enter the
market obtains the same differentiation. The actual practice of the five forces entails making
difficult decisions for the betterment of Bentley. Using the framework, the company can
implement different strategies such as performing acquisition, merger, increasing marketing
efforts and others. These efforts are taken in increase the productivity and profit rate by at
least 25% in coming year and enhance overall performance. In order to collection information
for this framework, different research methods such as primary and secondary approaches
must be utilized in order to understand the activities that are prevalent in the market (Dälken,
2014).
The success chances of the Five Forces application in the coming years
There is a moderate level of success chance for Bentley in the coming years if they are able to
implement this framework in the future as well. Since this is a situational framework, an
environmental analysis would always be beneficial for the company. However, this
framework does not have ability to predict aspects such as inflation, market changes and
other aspects. The success rate would rely on the abilities of the managerial heads as well as
their ability to properly deal with the changing circumstances in the market (Cadle et al.,
2014).
The limitations or failures of the Five Forces for Bentley
Multiple limitations are present in the five forces framework that includes the following.
These limitations explore all the other areas that can be explored by Bentley.
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 The five-force analysis does not provide a clear-cut pathway, which can be taken
through implementation of price and quality can be taken like with strategies such
Porter’s Generic and other frameworks. This strategy focuses on understanding the
situation in which the company is present and how to best deal with these threats
through understanding and collaborative effort (Porter and Magretta, 2014).
 This framework fails to provide an in-depth analysis of the internal capabilities of
consumers, which frameworks such as McKinney 7s model and SWOT analysis
might help to illustrate. An assessment of the internal capabilities would enable the
company to understand short fallings as well. This enables Bentley to know how it
can mitigate it through different opportunities and actions (Bell and Rochford, 2016).
 This strategic framework does not take into the possibility the company must expand
in overseas market as well. It limits the amount of scope and decreases the chances of
business growth in other markets where there might be higher profits (Porter and
Magretta, 2014).
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