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All industries are characterized by trends and new developments that gradually or speedily produce changes important enough to require a strategic response from participating firms. Industry and competitive conditions change because forces are enticing or pressuring certain industry participants to alter their actions. These driving forces are those that have the biggest influence on the changes underway in the industry’s structure and competitive environment.
Shifts in industry growth are a driving source for industry change, affecting the balance between industry supply and buyer demand, entry and exit, and the character and the strength of the competition. Strengths An upsurge in buyer demand triggers a race among established firms and newcomers to capture the new sales opportunities. Such is the case in the Chinese auto market. “The urge to splurge” on luxury represents a new phase for China’s car industry, the world’s second largest auto market.
As overall sales in China are swelling, it is a particular concentration of prestigious brands that care causing the high end of the market to expand twice as fast as the industry average. Opportunities The market demand for cars in China relates to a wide variety of variables: the health of the broader economy, personal income, the price of autos, and the availability of financing. As China’s economy continues to grow at a rapid rate, so do the income levels of the population. This income increase has left buyers wealthy and ready to spend big for prestige, quality and excellence.
Shifts in buyer demographics alter the state of competition by opening the way to market an industry’s product through a different mix of dealers and outlets, prompting producers to broaden or narrow their product lines, bringing different sales and promotion approaches to play, and forcing adjustments in customer service offerings. Global automakers have been quick to expand their presence in the emerging markets of China in order to take advantage of the enormous market size. As wealthy customers continue to be in a buying mood, there continues to be a sizable demand, and continuous rivalry.
For instance, General Motors has continued to push its Cadillac brand, while Daimler/Chrysler offer Mercedes-Benz, with Toyota promoting its high-end Lexus, and Volkswagen, Toyota, BMW, Porsche, Nissan and Honda inducing a threat towards competition with their own brands. Even automakers that do not have a luxury brand are hoping to establish themselves as high-end players. With the increasing desire for individuality and personal expressiveness, automakers are fighting for their chance to improve sales and deliver better product quality. Weaknesses.
With the opportunity to be established as a premium brand in China, companies must understand the factors that influence customers when considering the purchase of a luxury car. For example, Chinese consumers consider price as an important factor when purchasing luxury cars. The reliance on price as an indicator of quality is critical in the case of purchasing a luxury car. With a high price, consumers’ expectations of the product will be higher. Automakers must insure innovations such as a sleek design and navigation systems, as quality and appearance are vital in the consumer’s eye.
Chinese consumers are looking to upgrade their personal appearance by paying top dollar for product quality in terms of safety, design, reliability and performance. Threats Rivals racing to be first to introduce one new product or product enhancement always affect competition in an industry. An ongoing stream of product innovations tends to alter the competition. Successful new product innovations strengthen the market positions of the innovating companies, at the expense of the companies that have continued to stick with their old products, or slow to develop new models.
What does the future entail for car manufactures in the China market? To stay ahead of competition, product improvement is continuously needed, as the long-term growth will depend on the quality and convenience of service offered to Chinese customers. The distinctions of the brand name or logo of luxury cars, the information implied in the brand, the perceived quality, and the added value the brand offered to the consumers are all important for luxury cars to be successful and demanding in the market.