There is a low threat to entry in the motorcycle industry. One, it takes a lot of time and resources to build a recognized brand. Significant resources like people with the right skills and knowledge in the industry, long term relationships with trusted suppliers and manufacturers, are all important when you want to enter the industry. Other resources include substantial capital requirements. Although actual barriers to entry is relatively low, we still need to take into account the increasing presence of foreign manufacturers. (Jaswinsky, 2018) In an article by Motorcycle.com, they compiled a list of 5 motorcycle producers with the most sales: Royal Enfield (800,000 sold), Triumph, (sold 63,404), Husqvarna (36,883), BMW (164,153), Polaris (increased its sales 20%). Although the demand for motorcycles is dying in the United States, the industry is booming in other countries, such as those in the European Union and Asia Pacific Region. It has been difficult for Harley Davidson so compete in these countries, as there are powerful presence of local brands, and high tariffs enforced by local governments. (Forbes, 2018) Because of economies of scale, motorcycle manufacturers who produce more volume are able to cut costs down. Companies like that produce more niche products like Harley-Davidson are not able to take advantage of this.
Supplier power is average in this industry. Most of the suppliers are differentiated, and rivalry against these suppliers are getting stronger as competition and technology innovation is increasing. Because a lot of motorcycle parts are manufactured and produce in other countries, tariffs are key, as it can significantly affect production costs. Although the industry has seen a growth in available suppliers, it is still essential for companies like Harley-Davidson to have long-term contracts with trusted suppliers, in order to manage prices effectively, and maintain good quality products. In the end of the day, because suppliers have low control on distribution and sale of the final product, they have low leverage against motorcycle manufacturers.
The biggest substitute for motorcycles is automobiles. As the baby boomers are getting older, and as consumers are getting older and are starting families, more and more customers are ditching motorcycles, and buying cars. In an article by the BusinessInsider, even with slight decline it is forecasted that the U.S. auto market will continue to boom. (DeBord, 2018) We also see an increasing presence of rideshare services like Uber and Lyft in the United States, and GrabCar in Asia. Other substitutes are electric scooters (Byrd, and Lime), vehicle rental companies, bicycles, public transportation, and walking.
Buyer power is high in the industry, as consumers currently have many substitute options. With the increasing use of the internet, more and more information are made available to the public, including easy price and product comparisons. We also see a trend in demographics as millennials are becoming the biggest spending power. According to an article by Brookings.edu, Millennials are the biggest demographic segment of the largest economy of the world, the United States. (Hamel, 2018) With this in mind, companies will have to adjust its production and marketing strategies to cater to this segment. With a change in demographics, the need for change in the motorcycle industry is also essential. For law enforcement agencies like local police and military, very strict specifications are required, for you to even be allowed to compete in price bidding.
Competitive Rivalry is high in this industry. In order to compete in the motorcycle industry, you need to be a known and trusted brand. Because of the changing demographics, you have to come up with a reasonable price based on the quality of your products. You may have low prices for smaller, low-end bikes, and a higher price for premium high-end bikes. In order to compete in the United States or in other emerging markets, you need to be able to withstand the increasing competition, including surging brands: Royal Enfield from India, Triumph from the United Kingdom, Husqvarna from Austria, BMW from Germany, and Polaris from America.
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