Porter’s Five Forces Analysis of Yamaha (Five Forces in the Motorcycle Industry)
Yamaha is among one of the most famous bike makers of the world. Apart from its great technology, the brand is known for its unique style. Not just bikes, the brand makes other products too like boats, outboards and several more. Headquartered at Japan, the brand was founded in the year 1955. It achieved a total sales of 1,502, 834 million yen in 2016. The largest part of its sales revenue 930.1 Billion Yen came from motorcycle sales. A five forces analysis helps determine the attractiveness of an industry and can be helpful at strategy and planning. These five forces are a critical part of any industry and market and help at determining its future attractiveness and it is why it can be a useful tool for the managers. This is a five forces analysis of Yamaha.
Key points:
- Bargaining power of suppliers: Low
- Bargaining power of buyers: Moderately high
- Threat of substitutes: Low
- Threat of new entrants: Low
- Level of competitive rivalry: High
Bargaining power of buyers:
Bargaining power of buyers depends in several factors including prices, marketing, market size and more similar factors. Size of competition is the most important factor among these. In the automobile and motorcycle industries, the competition has grown high and it has led to price competition between the rival brands.
As such the bargaining power of the buyers has grown. Moreover, the buyers or customers have become the central focus of businesses which has led to increased clout. Customers have several choices before them and they are more well informed and have grown quality conscious. A factor that helps brands is their brand image. Quality is also an important factor and marketing that has helped brands maintain their clout. Yamaha is a well known brand that makes motorcycles and other products.
Its clout is high due to its technology and brand image and the brand has also focused on being customer oriented. While this has managed the bargaining power of customers to some extent, competition still gives customers higher bargaining power.
In the sports bike industry, Yamaha is among the best brand names and holds some strong bargaining power. Combination of great technology with excellent style helps them moderate the buyers’ bargaining power. It is 21st century and the overall bargaining power of the buyers in the motorcycle industry is moderately high. Brands are focused on attracting customers using lower prices and better technology.
Bargaining power of suppliers:
Bargaining power of suppliers has reduced due to several reasons. Some of them are their high numbers, geographical spread and increased need for quality. Quality and brand name have become important factors that determine the power of the suppliers. Brands want that their suppliers have a good brand image, great quality and follow the right rules and laws. Legal compliance has also become an important factor based on which brands decide the eligibility of a supplier. In the motorcycle industry, the suppliers are spread all over the world.
Yamaha has its suppliers in several countries all around the world apart from Japan. It has established cooperative relationships with them for a smarter supply chain management. This partnership is based on a relationship for mutual benefit. Yamaha’s clout comes from its market presence and size. Its suppliers are scattered all over the world and are smaller in size which does not allow them much control. Their bargaining power remains limited and based on their availability, Yamaha has very large number of choices. This gives Yamaha a very high leverage in terms of suppliers. Their overall bargaining power remains limited and low.
Threat of substitutes:
There are two factors that have grown the threat from substitutes. One is the increase in number of brands making small cars and the second is competition. Small cars have created pressure on the demand for motorcycles. Moreover, the number of local and international brands making bikes has grown. The threat of substitutes has grown for the motorcycle brands. In several parts around the world, people use bicycles for low distance fares and as a substitute for the motorcycle. However, motorcycle industry has a very large customer segment globally.
Yamaha is also a highly appreciated brand throughout the globe for its technology and efficiency. The threat of substitutes may grow in the wake of higher fuel prices. People are looking for fuel efficient bikes and Yamaha has released several in this segment. In the developing countries, the need for such bikes is higher. The overall threat from substitutes gets moderated by the style, technology and efficiency of Yamaha bikes. Other transportation systems like ride sharing companies also act as a substitute and are a threat for the motorcycle industry. Overall threat from substitute products for Yamaha is low because motorcycles are still a preferred mode of transportation in most parts of the world. Â
Threat from new brands:
New entrants do not pose any major threat for the existing brands. The most important factors behind it are the high level of investment and marketing and HR expenses. There is a very high level of financial investment required to erect a new brand. Marketing and skilled HR are also an important requirement that have led to higher costs in the motorcycle industry.
Any new player trying to enter the brand faces several barriers. Law is also an important barrier that can reduce the pace of growth or become a costly hindrance to the growth of a brand. Legal compliance increases operational costs for motorcycle brands. In this way, the barriers to entry in the motorcycle industry are very high making entry of new brands difficult. So threat from any new brand remains minimised. In this way, the overall threat from a new brand remains low.
Rivalry between competing brands:
The rivalry between competing brands is higher in the 21st century. The number of brands in the market is high and each one is focussed on quality, technology, customer convenience and pricing. All these factors are essential to creating customer loyalty. Yamaha has several competitors in the lower, middle and higher price range. From Ducati to Honda, Hero and many more there are several competitors in the market.
Some facts that have helped Yamaha overcome this threat are its brand image, focus on technology, customer service and other important strengths like skilled human resources. Yamaha has maintained a good brand image throughout the world by investing in social projects and by its technological efficiency and focus for customer service. However, the number of brands with greater technology, efficiency and quality is high which makes the overall competition high.
Conclusion:
Analysing the overall strength of Yamaha based on Porter’s Five forces model gives the picture of a strong brand. It has managed most of these forces favorably. It shows its strong competitive position is a result of its financial strength, brand image, technology and some more factors like skilled human resources and an efficient supply chain. The five forces model is a smart tool for strategic planning and can be used to analyse the overall competitive strength of a brand and how attractive its market position is. Yamaha’s five forces model can help you conclude that the brand has some major strengths which will retain its strong market position in the long term.
Sources:
Yamaha Annual Report
yamaha Supply Chain Management