The threat of entry depends on the presence of entry barriers and the reaction that can be expected from existing competitors. Firstly, economies of scale in the production of tires represent an entry barrier for potential competitors, as the market leaders have high levels of production allowing scale economies, especially in research and distribution.
The tire industry requires high capital investments which is necessary to build manufacturing sites, to invest in R&D and advertising. Moreover, it seems essential for companies competing in the industry, to own their main raw material plants (vertical integration). These huge capital requirements limit the pool of likely entrants.
In addition, the threat of entry is lowered by product differentiation and innovations. The latter is essential in the tire industry in order to maintain market shares, as tires are commodity products,. The reputation, brand and image of a firm are important sources for differentiation. As the industry is mature, strong brands established distribution networks, patent ownerships, and achieved cost advantages in production operations and processes due to experience, indicating high barriers to entry. Important evidence is given by the fact that the five biggest tire producers of today have been dominating the industry for many years (Case Exhibit 1).
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Sommaire de l'étude de cas
Analyse, using Porter's Five Forces Model, the structure of the global tire industry.
Analyse, using an appropriate model, the competitive/business strategies of the major players in the global tire industry
Assess the pressures for global integration and for local responsiveness in the tire industry.
Appendix
Extraits de l'étude de cas
[...] it is an oligopoly structure: Bridgestone, Michelin and Goodyear held 54% of market shares in 1998 (Case Exhibit 3). Thus, the industry is now consolidated, in which firms struggle to differentiate their products from the competition. At this stage, price and innovation has become dominant; competitive drivers leading to high competitive rivalry. Also, Asian low cost manufacturers competing on a global scope intensify the price competition. In contrast, small private tire brands do not represent a threat for the market leaders (Case page 8). [...]
[...] The latter is essential in the tire industry in order to maintain market shares, as tires are commodity products,. The reputation, brand and image of a firm are important sources for differentiation. As the industry is mature, strong brands established distribution networks, patent ownerships, and achieved cost advantages in production operations and processes due to experience, indicating high barriers to entry. Important evidence is given by the fact that the five biggest tire producers of today have been dominating the industry for many years (Case Exhibit 1). [...]
[...] and Ghoishal, S. (1999), Strategic Process', Revised European Edition, London: FT Prentice Hall. Wheelen, T. L. and Hunger, J. D. (2000), ?Strategic Management Business Policy', 7th edition, London: Prentice Hall. [...]
[...] Minimized value creation costs through low cost production sites (e.g. in Asia and Central Europe), through design in domestic markets, alliances or joint ventures abroad and through lower transportation costs in order to achieve high cost advantages which is essential for surviving high competitive global rivalry on price. Large volume production (scale economies) and productivity are essential. As tires are a complementary product to automobiles and other transportation industries, the tire industry is closely linked to the global automobile industry (referring to the OEM, cars' and trucks' segment). [...]
[...] In contrast to its low cost approach, Bridgestone's marketing and distribution strategy increases the company's brand awareness: it renamed its North American MasterCare auto service centres to ?Tire Zone at Firestone? selling Michelin tires and acting as a wholesaler. The service centres now include the well-known ?Firestone' brand, showing Bridgestone's differentiation approach in relation to services and brand identity (Bridgestone was unknown in the US, as it was a Japanese company). Consequently, Bridgestone's competitive strategy can be summarized as ?cost-differentiation' on a broad competitive scope based on its product diversification. ( Michelin Michelin's competitive strategy to both focus and differentiate its products gives it a niche position in the tire industry. [...]
Marketing & marques