SUBMITTED TO: KASHIF LUQMAN

SUBMITTED BY: AHMED AITSAM GUL

STUDENTS ID: BBA-FA08-005

TOPIC: The analysis of five forces for motorcycle industry of Pakistan

COMSATS INSTITUTE OF INFORMATION TECHNOLOGY. LAHORE

The analysis of five forces for motorcycle industry of Pakistan

Background of industry:

The motorcycle industry faces the tremendous growth in past year. Pakistan stands at number 7 in top manufacturers of motorcycles by producing 751,000 units about 2% of worlds total production. In Pakistan motorcycle assembly started 1964 by Atlas group and Honda motor company. Currently with Honda there are other Japanese brands (Suzuki, Yamaha) as well as Chinese brands (pak hero, ravi, eagle). Chinese brand enter in industry in late 1990 after the tremendous success of 70cc of atlas Honda.

COMSATS INSTITUTE OF INFORMATION TECHNOLOGY. LAHORE

PAMA Pakistan automotive manufacture association which includes majors players of industry atlas Honda, Suzuki, and Yamaha and others.

The entry of the Non-PAMA OEMs with a competitive price difference of approximately 25% (Rs.52,000 Vs. Rs.68,000 for the Honda 70CC in 1999) and continuous price reductions (2006 price for average Non-PAMA OEM 70CC clone is Rs.40,000 Vs. Rs.54,000 for a Honda 70CC). This has seen the total motorcycle market increase from 120,627 in 2001 02 to 751,667 in 2005 06. (competitive support fund, 2006) And this goes continue till 2011 with leading seller Honda 70cc price 65500.

COMSATS INSTITUTE OF INFORMATION TECHNOLOGY. LAHORE

Potential of new entrants:

High growth in tough economic conditions in Pakistan encourages the new investors in this industry as well as existing players are investing more for expansion. Significant increase in production volume and transfer or increase in technology remains low. Yamaha to invest $15 million in motorcycle industry. Yamaha Japan has proposed to invest $15 million for the manufacture and sale of motorcycles of advanced functions, high quality and sophisticated designs in the 125cc and 150cc categories in Pakistan. (the dawn newspaper, Saturday, March 27, 2010). This industry is going toward maturity so creating a barrier. So to compete new entrant should have economies of scale and low cost production which is another barrier. The new entrants should be aware of buying power of customers, energy crisis, raw material resources and competition from existing strong players like atlas group. Buying power reduces due to inflation and other reason but demand of motorcycles increases because of high prices of fuels .so people switching from cars to motorbikes.

Suppliers power:
Suppliers in this industry posses low power. Large number of suppliers are there for small number of bike manufactures. many suppliers depend on a particular manufacturer for a large part of their revenue like ATLAS Honda develops their own suppliers who are dependent on ATLAS Honda for their business. thus, the manufacturers' bargaining power is high and suppliers usually try to accommodate the manufacturer's wishes. Labors their bargaining power varies according to the position they hold within the company assembly line worker vs. hightech engineer (knowledge and innovativeness key resources)

Threat of Substitutes:

COMSATS INSTITUTE OF INFORMATION TECHNOLOGY. LAHORE

Its low in Pakistan. At present, train, planes, public transport, walking, cycling, roller skating, etc. can be considered substitutes. Willingness to substitute largely depends on two factors: convenience distance (different substitutes for different distances, e.g. Roller skates vs. Planes). time other factors: passengers, luggage, cost the higher the cost of buying and also operating (!) an automobile, the higher the likelihood that people will look for substitutes thus, the cost of complementary products, in particular petrol has a considerable influence on people's willingness to substitute.

Intensity of Rivalry among Competitors

Ita very high in this industry. Its quite Mature Industry which includes Increasing one's market share only possible by taking away someone else's. Economic crisis increase the pressure for consolidation of industry. It can be results in decrease in profitability even further consolidation to be expected. Its has competition both on price and non-price dimensions. So having low costs is not enough by itself and brand image is not enough by itself either to compete successfully. There should be combination of both. So to win over customers, manufacturers started offering value-added services e.g. Easy low-interest finance options, extended warranties etc. but these decreases profit margins further rising oil price effect on competitors. Players started finding new markets like ATLAS Honda exporting bike to Afghanistan, Bangladesh, and srilanka.

Power of Buyers
Power of buyers is relatively low because of High in numbers. But their collective power is high, therefore big consumer trends e.g desire for more energy efficiency have considerable influence over manufacturers. A special power in this industry in these days is Low switching costs because of entry of Chinese bikes. Buyers of a larger volume can have a considerable influence on product development and design e,g Police, fire brigades, military. (staff, 2011)

COMSATS INSTITUTE OF INFORMATION TECHNOLOGY. LAHORE

REFERENCES:

competitive support fund. (2006, december 12). policy Analysis on the competitive advantage of motorcycle industry of pakistan;problrm and prospects. staff. (2011, 9). www.paperscamp.cpm. Retrieved from www.paperscamp.cpm. (Saturday, March 27, 2010). the dawn newspaper.

COMSATS INSTITUTE OF INFORMATION TECHNOLOGY. LAHORE