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Competitive Market Analysis to Determine the Product's Potential Success
Issues that the automobile industry faces that affect its competitiveness and long-term profitability
The relevance of a competitive strategy for Car Company A is to establish a position within the 4-cylinder engine car market. This will help the company to compete with Toyota Corolla (LE) 1.8L four-cylinder engine competitive forces. As a potential entrant, Car Company A is at a disadvantage in capital markets. Unless it penetrates the Cylinder engine market through diversification, its four-cylinder car will be at an inherently riskier position than the established (LE) 1.8L four cylinder engine of Toyota (Maxton & Wormald, 2013). This will be reflected in the risk premiums Car Company A will be forced to pay to attract capital.
Car Company A will face barriers because other players like Toyota enjoy economies of scale in the industry. This means a decline in a product's unit costs leads to an increase in volume produced. Economies of scale will deter the entry of Car Company A by forcing the company to either accept a cost disadvantage or enter at large scale, which risks strong reaction from Toyota's established brands. Both options are undesirable for Car Company A's...
For instance, economies of scale in marketing, research, and production are the key barriers to entry in the mainframe Auto industry as Car Company A discovered.
Competition between the four cylinders of Car Company A and Toyota Corolla's (LE) 1.8L four cylinders takes the familiar shape of jockeying for positions. This requires the use of tactics like advertising battles, price competition, increased warranties, and product enhancements. Rivalry will occur because Car Company A or Toyota will see the opportunity and feel pressured to improve their positions in their niches. In the Auto industry, competitive moves by Car Company A may have notable impacts on its rivals and incite retaliation. The two firms are left with no option but become mutually dependent (Maxton & Wormald, 2013). Since numerous competitors exist in this industry, it is possible that mavericks will touch off competition. This is because Car Company A and Toyota Company believe they can make moves without being noticed. On the contrary, if Car Company A enters and dominates the industry, relative power will be apparent…
Reference
Maxton, G. & Wormald, J. (2013). Time for a model change: Re-engineering the global automobile industry. Cambridge: Cambridge Univ. Press
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