Question
What are the key five forces affecting Ferrari?
Answer
The following are key points from a five force analysis of Ferrari, the luxury car manufacturer, using Porter’s model (Porter, 2008).
Bargaining power of suppliers. A contract to supply Ferrari is very valuable for suppliers, which means there is a lot of competition to gain a Ferrari contract. This means Ferrari has a lot of choice when selecting suppliers.
Threat of substitute products. There are alternative forms of luxury transport such as private jet or yacht, but these would typically be more expensive than a Ferrari car.
Bargaining power of buyers. Buyers for luxury cars are small in number but they are often extremely wealthy.
Threat of new entrants. The vast majority of luxury car manufacturers have a long history and well-known brand names. To achieve the same level of consumer brand name awareness would take substantial investment.
Level of competition in the industry. There is intense competition in the luxury car industry. There are many established brand names who produce new models each year.
References
Porter, M.E. (2008) “The Five Competitive Forces that Shape Strategy”, Harvard Business Review, January 2008, p.86-104
