Five Forces Analysis-AUTO INDUSTRY

The automotive manufacturing market will be analyzed taking manufacturers of cars, trucks and motorcycles as players. The key buyers
will be taken as car, truck and motorcycle dealerships, and manufacturers of raw materials (steel, copper, aluminum, and various plastics)
and ready made components as the key suppliers.

Summary
Figure 7: Forces driving competition in the automotive manufacturing industry in India, 2015

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The presence of strong incumbents boosts the severity of competition within the Indian automotive manufacturing industry.
Substantial growth in industry value in recent years decreases the severity of rivalry, which is assessed as strong overall.
Buyer power in this industry is weakened by the high switching costs faced by dealerships and customer loyalty with respect to dominant
brands.
Amongst the suppliers there are providers of commodity items such as metals, and their power is boosted due to their large size,
consolidation of the industry and the fact that automotive manufacturers account for only a small proportion of their revenues.
For new entrants to the industry, setting up a production facility involves large capital outlay thus constituting a significant entry barrier
and high fixed cost. The latest round of emissions regulations moves the industry much closer to western standards and ramps up
development and manufacture costs. An increasing focus on city environments will only fasten the pace of change.
Substitutes exist for manufacturers in the form of other companies' products being stocked by dealerships, but this is often negated by
contractual agreements and difficulty of changing stock.

Buyer Power
Figure 8: Drivers of buyer power in the automotive manufacturing industry in India, 2015

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In 2015, India outgrew Brazil to become the fifth-largest auto market. Japan-based broker Nomura, in a report on the auto industry,
projected India's market to expand 15.6% in 2016, far swifter than the estimated global growth of 3.2% and emerging market growth of
4.5%. Dealerships are proven to be the most vital buyer within this industry. From the ground level, three powerful forces are roiling the
auto industry: shifts in consumer demand, expanded regulatory requirements for safety and fuel economy, and the increased availability
of data and information. Consumers are once again rethinking the way they shop for automobiles, viewing cars more as a means for
transportation than for anything else. This is not likely to have a huge effect on sales volume although it will affect how much consumers
are willing to pay for an automobile. The key players within this industry include large domestic players such as Hero MotoCorp and Bajaj
Auto Limited, with the motorcycle manufacturing industry having a predominant presence in India. The dominance is explained by the
manufacturers lower price points, and ability to produce reliable and economic automobiles. There is a relatively large number of buyers
within the industry which, coupled with a high level of product differentiation, weakens buyer power further. In general, this gives buyers
a lower concentration surrounding the brands and therefore less choice. While profit margins on new cars remain low for these
dealerships, they are forced to sell cars that consumers will buy hence weakening the buyer power. This means that buyers face a
relatively low concentration of players, indicating a lower level of choice. In addition to this, profit margins on new car sales are usually
low. In the US, for example, a new car dealer may mark up a car by less than 2 per cent over the manufacturers invoice.
In addition to this, many of these manufacturers are forward integrating thus limiting the buyer independence within this industry. As a
whole, the buyer power remains relatively moderate in this case.

Supplier Power
Figure 9: Drivers of supplier power in the automotive manufacturing industry in India, 2015

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The manufacturers of automobiles often reach out to further suppliers who produce and deal the raw materials that are used in the build
of an automobile (metals, fabricated components). While it may be assumed that manufacturers build the car in-house, it is often the case
that the individual components involved in the initial build would seem impossible to conjure without the presence of these external
suppliers. In the past decade, automobile manufacturers expanded significantly in the international markets in emerging countriesLatin
America, China, and Asia-Pacific. In order to have a reliable supplier base, they encouraged their European and American suppliers to set
up their own factories in these emerging markets. This also minimizes the cost of production, however they must consider the quality of
their goods in order to continue trade with these large automobile manufacturers. However, the new Bharat Stage IV emissions
regulations came into effect in 2016, strengthing supplier position. The number of potential large scale suppliers remains small.
With global commodity prices fluctuating over the years, the sudden dip in prices in the 2015 period, specifically for the steel market,
further increased pressure on supplier margins. Naturally, the raw material supplied is homogenous in respect to the type of good used to
build a car. With that said, suppliers are left to compete constantly on price on the assumption that manufacturers are able to buy based
upon price. This again weakens supplier power. However, if trade deals remain constant between the large manufacturers and the
suppliers are able to provide quality in large quantities then there is little reason to switch. To add, switching costs are high because
establishing part designs and specification requires a fair initial investment. Manufacturers such as Volkswagen and General Motors who
own multiple brands and car types in the automobile industry are likely to use the same supplier for each of their own brands providing
the supplier with slight strength. To end, supplier power remains fairly moderate.

New Entrants
Figure 10: Factors influencing the likelihood of new entrants in the automotive manufacturing industry in India, 2015

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Brand strength and reputation are highly important in the automotive manufacturing industry, and it is therefore quite difficult for new
players to directly enter a particular country's market. Those that succeed often do so through the introduction of successful foreign and
domestic brands.
Due to the high fixed costs in automotive design and manufacture, as well as the economies of scale gained from mass production, new
start-up companies are rare: the capital requirements for a manufacturing facility of feasible scale are simply too high.
In addition to this, the global tightening of emission standards is ramping up costs further as vehicle redesigns are required to conform to
new emissions laws. Such a trend can trigger the demand for newer, more economical engines, involving higher costs of R&D spending.
From April 2016, Bharat IV laws were implemented, further tightening emissions regulations of Bharat III. 13 major cities had already
adopted Bharat IV in April 2010. In 2017 Bharat IV will also apply to old motorcycles as well as new.
The extra budget required to comply with the new laws may deter new entrants; the primary manufacturers of cars recently raised prices
as their margins have been put under pressure. However, the new standards also provide opportunities to create fresh demand by
creating vehicles that satisfy the new rules.
A burgeoning middle-class and upper-class has fueled the desire for luxury vehicles, which to a certain extent shielded the industry from
the global recession as its economy continued to grow. Resultantly, growth has been continuous for several years, making the Indian
market an attractive target for successful international companies. The new emissions regulations improve the viability of the market for
foreign companies, creating a better environment for new entrants.
Overall, the likelihood of new entrants is assessed as weak.

Threat of substitutes
Figure 11: Factors influencing the threat of substitutes in the automotive manufacturing industry in India, 2015

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The main substitutes threatening players in this industry are used vehicles. Dealerships, which sell both: new and used vehicles, are likely
to have sold more of the latter during the global economic downturn as consumers avoided making expensive purchases, e.g. new cars.
On the other hand, new emission standards, together with technological solutions, may lead to a situation where it may be more
economical in the long run (e.g. in terms of tax, fuel costs etc.) to purchase a new vehicle.
Alternative modes of transport also pose a threat of substitution. For public transport can be used by individual consumers, as opposed to
having a personal vehicle; similarly, for businesses road or rail transport of goods is an alternative to owning a truck.
However, in terms of the relationship between manufacturers and dealerships, there are fewer potential substitutes.
Vehicle manufacturers should be wary of the possibility of dealerships agreeing to sell cars from rival manufacturers. Indeed, car
manufacturers that have long-standing contractual agreements with loyal car dealerships will be better protected from this threat.
However, those with short-term contracts or those where agreements are close to expiry are more vulnerable.
It is, however, difficult for car dealers to switch between manufacturers, not least because of contractual agreements, but also because of
the switching costs which would involve completely re-branding the showroom and physically removing existing stock and replacing it. In
fact, new vehicle dealerships are generally franchises associated with only one manufacturer, which reduces this threat to some extent.
Additionally, manufacturers can stipulate in contracts with dealers that only new vehicles may be sold, eliminating the threat posed by
used cars.
Overall, the threat of substitutes is moderate.

Degree of rivalry
Figure 12: Drivers of degree of rivalry in the automotive manufacturing industry in India, 2015

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The automotive manufacturing industry in India is characterized by the presence of large multinational and domestic players such as Hero
MotoCorp and Honda. A small number of players usually reduces rivalry; however, this effect is mitigated by their large size. Furthermore,
the motorcycle manufacturing industry is less consolidated and this, in turn, further increases the level of rivalry as motorcycle
manufacturing is the core automotive industry in India at present.
Rivalry can be reduced slightly due to a degree of differentiation, with several different segments within the market, such as luxury and
budget.
Companies utilize a high level of design and marketing to promote their product and some companies occupy more than one segment by
utilizing different brands. For example, Tata Motors services both the budget market, as well as the premium market through its interest
in Jaguar Land Rover. Rivalry is not likely to increase given the growth forecasts and likely increase in the population able to make such a
purchase.
The industry has seen healthy growth recently and is expected to contrinue with strong results, which may reduce the competition level.
Overall, the degree of rivalry is assessed as strong.

Five Forces Analysis- IT

The IT services market will be analyzed taking providers of it outsourcing & processing, it consulting & support and cloud computing
services as players. The key buyers will be taken as businesses and government agencies, and providers of hardware devices and software
tools, as well as skilled employees as the key suppliers.

Summary
Figure 5: Forces driving competition in the IT services industry in India, 2015
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The IT services market is evolving from offering services that improve productivity and efficiency such as outsourcing, which has been the
key driver of export-led growth in India, to providing value-added services such as analytics consulting; this increases rivalry as players
seek to capture market share in higher margin sectors.
Services have become increasingly globalized, with India at the forefront of reducing IT services labor costs, and are likely to become
increasingly automated, particularly with the adoption of cloud computing services. The Indian IT industry has been vital to developing
India's international competitiveness.
The industry is fragmented with small players competing alongside large, multinational companies. India is one of the few countries with
its own strong market players such as Infosys, Tata Consultancy Services and Wipro.
Buyers range in size; larger buyers, with greater financial muscle, exert more buyer power.
Brand recognition is likely to be of significant importance to customers and they therefore often look to a reputable company for services.
This is particularly the case for players involved in IT outsourcing and data processing, where consistent quality and security are key factors
in winning contracts.
Skilled employees, as suppliers of technical knowledge and expertise, are an important input. Other inputs include hardware components,
which tend to be purchased from a sole supplier, thus increasing their power. On the other hand, some companies show some backwards
integration with their own hardware and software capabilities, which reduces their reliance on external suppliers.
Regulation in this industry is varied and largely dependent on the service offered and the type of buyer involved.
Strong industry growth in recent years offers an attractive prospect to potential new entrants and alleviates rivalry to an extent. Rivalry
between industry players is further alleviated with larger players operating in other markets.

Buyer Power
Figure 6: Drivers of buyer power in the IT services industry in India, 2015
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Buyers range in size from small businesses to multinational companies and government agencies. Larger buyers, with greater financial
muscle, exert more buyer power. The Indian industry is dominated by external buyers seeking low-cost IT outsourcing services, making the
domestic market relatively small in comparison. Large multinational corporations therefore exert substantial financial muscle as buyers. As
the Indian government seeks to develop domestic IT infrastructure, the public sector will become an increasingly important buyer.
Contracts between industry players and buyers vary according to the service provided. Some IT service contracts can last for several years,
which can translate into substantial switching costs for buyers should they wish to terminate the agreement early. However, consulting
contracts tend to be shorter and there is a growing trend towards contracts which have a shorter duration. Contracts with large customers
are often secured after a bidding process. Consequently, such customers enjoy greater buyer power.
Brand recognition is likely to be of significant importance to customers, particularly when it comes to electronic data processing. Buyers
will often look to a reputable company for such services; this is especially so for government contracts, which have heightened media
scrutiny in terms of IT failures. The services offered by industry players can often be highly important to the successful operation of a
business, which reduces buyer power considerably. Full backwards integration by buyers is rather unlikely even where in-house IT services
may be developed. This may decrease buyer power, however, it is mitigated by the fact that players are reluctant to integrate forwards
into the buyer area of operation as buyers tend to operate in completely different business areas.
Services are relatively undifferentiated, which has given rise to strong price competition and driven reductions in labor costs and the
subsequent relocation of multinational providers to low-cost locations. This shows the power that buyers have in influencing player
practice. Major players seek to differentiate themselves in terms of customer relations and are likely to become increasingly differentiated
as they develop more complex offerings (IBM for instance, has developed a 'Watson System' cognitive computing offering), which will
serve to weaken buyer power.
Overall buyer power is assessed as strong.

Supplier Power
Figure 7: Drivers of supplier power in the IT services industry in India, 2015

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An important input to this industry is staff with appropriate technical knowledge and expertise. Industry players rely on the continued
service of qualified employees, and high rates of staff turnover can be detrimental to the business. This can be regarded as a high
switching cost, with employees viewed as suppliers of such expertise. Competition for talented developers is strong amongst the major
players. Global IT outsourcing and a strong export market has played a key role in developing Bangalore and Hyderabad as technology
hubs, which has increased the availability of qualified workers and thus weakened supplier power in this area.
Suppliers of technological infrastructure play an important role in developing markets, as their progress is closely linked to the ability of
players to expand. Government initiatives in India have sought to develop the country's IT infrastructure. For example, a 20km free Wi-Fi
zone has been introduced in Patna, there are plans to develop a national policy on cloud computing, and the industry association
NASSCOM helped to create start-up incubation centers in Mumbai and Chennai in 2014.
Inputs such as hardware components are often purchased from sole suppliers. Such suppliers are often large companies offering
differentiated products with high quality, resulting in significant supplier power. On the other hand, companies such as IBM show some
backwards integration with its own hardware and software capabilities, which reduces its reliance on external suppliers. In addition,
although alternative solutions exist for most software and network suppliers, given that IT outsourcing is a major part of the Indian IT
sector, suppliers can be heavily reliant on the industry and specific players.
Suppliers of software may begin to forwards integrate once more complex software is required to provide IT services linked to powerful
computers, offering parallel processing and advanced analytical techniques, which will increase supplier power. Microsoft for example,
runs a predictive analytics service based around its Azure cloud platform.
Supplier power in this industry is strong overall.

New Entrants
Figure 8: Factors influencing the likelihood of new entrants in the IT services industry in India, 2015
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Entry on a small scale is achievable in the IT consultancy market; smaller players have experienced increased growth as both government
and commercial institutions increasingly turn to third parties to provide specialized IT support. Similarly, buyers seek to cut costs wherever
possible and data processing and other business processes have increasingly been outsourced to specialists, allowing clients to focus on
core activities. Newly developing niche markets will offer opportunities for smaller players in areas such as green IT and the 'Internet of
Things'. Equally, industry specialists operating in key markets such as healthcare and finance have significant opportunities. Large
companies in this industry have significant economies of scale in processing and can offer more services; smaller companies can compete
by specializing in particular verticals, and offering customized services. However, established companies, relying on an existing business
image, may be unwilling to trust smaller, less established companies, offering larger industry players an advantage. Nevertheless, as an
economy in the process of development, new entrants may have more opportunities as brand recognition is not as strong in the domestic
Indian market; the opposite is the case for the export market where major brands such as Tata and Wipro take the lion's share of external
demand. Large multinational players such as Accenture, HP and IBM are increasingly entering the Indian market, with the creation of data
centers and outsourcing facilities; this will put pressure on smaller domestic new entrants.
Regulation in this industry is varied and is largely dependent on the service offered and the buyers involved. For example, data processing
services for financial institutions are often stringently regulated. Restrictions on data flows between different countries, with data centers
often needing to be located within a particular country may restrict the expansion capabilities of new entrants.
The markets in which companies operate are subject to technological advances, developing industry standards and changing customer
needs and preferences. Success of a company is highly dependent on the ability to anticipate and adapt to such changes. Large companies
are therefore becoming more acquisitory as they seek to obtain the technological advances of small and innovative firms. IBM for
example, as stated in its 2015 annual report, has spent over $15bn since 2010 on more than 20 acquisitions relating to big data and
analytics.
Distribution is often limited by technological infrastructure meaning new entrants to developing markets will find difficulties in expanding.
The World Economic Forum ranks India 89th out of 143 countries in terms of network readiness, which suggests that the market has
plenty of room for development in IT infrastructure and the evolution of its domestic market. Access to distribution channels may
therefore be difficult for new entrants. Intellectual property is likely to become increasingly important as the industry shifts to more
complex service offerings; IBM for example has obtained over 4,000 analytics patents. These factors weaken opportunities for new
entrants.
Having sustained dynamic levels of growth in recent years, potential new entrants will be enticed to the market.
The likelihood of new entrants to this industry is assessed as moderate, though this is likely to become stronger as the domestic market
improves.

Threat of substitutes
Figure 9: Factors influencing the threat of substitutes in the IT services industry in India, 2015

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An alternative to a number of services offered in this industry is to employ and train in-house staff to provide such services. In times of
economic difficulty, some companies may rely on existing staff rather than third-party service providers. However, services offered by
industry players provide businesses with several key advantages. Key employees may be released from performing non-core or
administrative processes, allowing a company to concentrate wholly on its core activities.
The increasing automation of IT services will pose difficulties for many players as buyers seek to bring more and more services in-house.
This will also allow the service arms of hardware and software suppliers to act as substitutes for traditional IT services players. Equally,
professional services firms such as KPMG are increasingly offering IT services due to the relative ease of replicating service models.
Furthermore, business can be more flexible by not investing in assets and reducing response time to environmental changes. However,
using outsourcing or consulting companies can result in a loss of internal business process know-how, and consequently result in
dependency on the service providers.
Overall, there is a moderate threat from substitutes in this industry.

Degree of rivalry
Figure 10: Drivers of degree of rivalry in the IT services industry in India, 2015

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The industry is fragmented despite the presence of large, international, India based incumbents (Tata Consultancy Services, Infosys, Wipro
and HCL Technologies). Large players attempt to differentiate themselves through a number of initiatives in an effort to boost their
competitive edge. Companies such as IBM offer a variety of services and products including hardware and software, which serves to ease
rivalry as they are not solely reliant on the revenues generated from this industry. In addition, developments in social network, mobile,
analytic and cloud technologies have begun to allow players to offer more value-added services, which has increased rivalry in terms of
intellectual property and the need for perpetual innovation.
The globalized nature of the industry increases rivalry with regard to cost reduction, which has driven the rapid expansion of export
services in countries such as India, where competitive contractual terms are key success factors. This has historically been linked to labor
costs but may develop into data storage costs as increasing amounts of data are being created and restrictions on data flows mean that
data centers will proliferate. Having said that, security and secrecy are also key factors in terms of data storage, which is perhaps why
traditional tax havens top the list of countries with the most secure internet servers per one million people (Liechtenstein, Bermuda,
Monaco, Switzerland, Luxembourg, the Isle of Man and the Cayman Islands are all in the top ten).
As IT infrastructure is not fully developed in India, costs of expansion are likely to be high in certain cases, particularly where fast and
reliable data processing and IT services are required. Services offered by most industry players are essentially similar and companies are
highly reliant on revenues from the industry. Rivalry within this industry is alleviated to an extent by good growth in recent years, which
helps to prevent zero-sum gains.
Overall there is a moderate degree of rivalry in this market.

Five Forces Analysis- Online Retail

The online retail market will be analyzed taking online retailers as players. The key buyers will be taken as end-consumers, and ict systems
and suppliers of merchandise as the key suppliers.

Summary
Figure 5: Forces driving competition in the online retail sector in India, 2015

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Healthy market growth as well as plenty of space for further expansion help to alleviate the rivalry caused by the large number of players
and low switching costs for consumers.
The recession has induced many shoppers to buy online rather than from traditional stores. The fact that internet search is comparatively
easy and predictable has made online retailing very attractive for a wide range of products. Retail focus on the growing use of mobile
technology is an additional factor in making online retailing attractive and convenient.
Operating a retail business online is significantly easier and less costly than running a traditional brick-and-mortar retail chain. This
increases the likelihood of suppliers forward integrating into the online retail market, which places significant pressure on online retailers.
New entrants are enticed to the sector by healthy growth and low fixed costs. Barriers to entry are small and online retail can be a good
way for an already established brick-and-mortar retailer to boost sales and gain presence in other markets.
Substitutes exist in terms of traditional bricks-and-mortar retail outlets. However, online retail has grown at a much quicker pace than
traditional retail.
In less developed regions of the country, the sector growth is limited by a lack of trust with regards to credit cards and online payments, as
well as lack of sufficient infrastructure and logistic issues.

Buyer Power
Figure 6: Drivers of buyer power in the online retail sector in India, 2015
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Buyers are small in size and large in number. The number of buyers using online retail channels is continually increasing, which detracts
somewhat from overall buyer power. The internet is increasingly accessible to individuals. According to Internet World Stats, internet
penetration in India was 36.5% as of June 2016. The Indian sector still has significant room for future growth.
Switching costs are virtually non-existent in this sector. Additionally, buyers display a high tendency to switch, as they are price sensitive.
These factors significantly increase buyer power. Furthermore, most players offer fairly undifferentiated products, meaning that price
sensitive buyers can shop around to find the cheapest product on offer. This has become especially relevant in recent years, as economic
difficulties have given rise to more price conscious consumers.
Despite this, many consumers are concerned about the security of online transactions, which has the effect of increasing loyalty to wellknown and trusted retailers. However, tighter regulations and increased security controls has led to a rise in consumer confidence in India,
which is reflected in the increased level of online card transactions.
Online retail offers an incredibly diverse variety of goods. Many larger retailers have diversified in a number of sectors, thereby reducing
their reliance on any particular sector, increasing their customer base, and reducing overall buyer power.
In many countries consumer law is being properly adjusted to incorporate online retail selling and, by doing so, protect prospective and
existing online consumers. Overall, buyer power is assessed as moderate.

Supplier Power
Figure 7: Drivers of supplier power in the online retail sector in India, 2015

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Due to the nature of the sector, a reliable and secure ICT infrastructure is a necessity for players. This increases the power of providers of
such services. Additionally, providers able to satisfy a large retailers requirements will almost certainly be large themselves. For these
suppliers, power is boosted.
Those supplying specialist products tend to experience stronger power than for those supplying commodities. Specialist products usually
only have one supplier (for example, a book publisher may be the only supplier of a particular book). These suppliers experience higher
power.
Most suppliers sell their products to a number of different retailers. This boosts their power as they are not reliant on the revenues
brought in from one player. However, the loss of revenues from a very large player, such as Amazon, could significantly affect a suppliers
revenues.
Many internet retailers, particularly larger ones, sell a wide variety of goods from a large number of suppliers. This means their reliance on
any particular supplier is reduced, which detracts from overall supplier power.
Operating a retail business online is significantly easier and less costly than running a traditional brick-and-mortar retail chain. This
increases the likelihood of suppliers forward integrating into the online retail market, which places significant pressure on online retailers.
While large online retailers usually have their own in-house delivery service, smaller companies rely on forwarding companies with the
delivery of their products. Suppliers of delivery services are usually large and diversified and can exert strong power. Delays and missing
products can negatively affect online retailers sales. In India, state owned postal services companies are still operating. As such companies
have government support it is more difficult for other logistic companies to compete in this segment, which also limits online retailers
choice of such suppliers.
Overall, supplier power is assessed as moderate.

New Entrants
Figure 8: Factors influencing the likelihood of new entrants in the online retail sector in India, 2015

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Entry to the online retail sector may be achieved by a brand new company or by an existing bricks-and-mortar retailer diversifying its
operations to include internet retail. There are a growing number of pure-play companies (companies that operate exclusively through the
internet), such as Flipkart.
Many large traditional stores have already diversified to include online retail. The opportunity for growth in India is significant and
increasing disposable incomes, coupled with increased internet penetration, mean that many consumers have changed their buying
habits. The allure of cost savings, coupled with the increased convenience, of online retail has meant that many consumers have started to
buy more goods online as opposed to through more traditional retail channels. As a result, the Indian online retail sector is thriving, which
significantly increases the likelihood of new entrants.
However, the ease of search facilities and price comparison websites mean that the sector is highly competitive. The leading online
retailers are able to reduce prices significantly by virtue of their high sales volumes and economies of scale. Large companies in this sector
can benefit from scale economies in terms of purchasing, inventory management and customer service. Furthermore, many consumers
are concerned about the security of online transactions, which results in increased loyalty to well-known retailers. The strength of large
incumbents may, therefore, act as a deterrent for prospective new entrants.
The e-commerce sector in India remains small at present, despite its strong growth. The sector has been slow to develop due to a lack of
internet access for the majority of the population and government regulation. The Indian government currently does not allow direct
foreign investment (FDI), meaning that foreign companies can only currently operate in the country as a marketplace for locally sourced
goods. This is how Amazon operates in India. However, there have been indications that FDI may begin to be allowed in India, starting with
the e-commerce sector. As such, the potential for foreign players wishing to enter this sector looks likely to increase going forwards.
Overall, the likelihood of new entrants is assessed as strong.

Threat of substitutes
Figure 9: Factors influencing the threat of substitutes in the online retail sector in India, 2015

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Substitutes for online retail exist in terms of catalog retail and traditional brick-and-mortar shopping. Many customers prefer the
experience of traditional shopping and like to enjoy the benefits of trying the product, such as clothes. Moreover, many consumers worry
about the security of online transactions, which may lead them to favor catalog or traditional retail methods. This is particularly evident in
India where the majority of consumers prefer to pay cash on delivery.
In India, the e-commerce sector is still developing. It is not as advanced and established as it is in the more developed regions of the world.
e-commerce in India accounted for less than 1.7% of total retail sales in the country in 2015, while this figure was around 14% for China,
7.4% for the US and about 5.7% for Canada, while in parts of Europe this percentage is higher, standing at around at around 15.2% for the
UK and 11.6% for Germany. As such, other substitutes to retail pose a greater threat in this country.
The downside of online retailing is the fact that it usually takes a few days for the ordered goods to be delivered to customers, which may
act in favor of more traditional means of shopping. In India, where the distribution network is inconsistent, delivery times can be longer,
increasing the threat of substitutes.
Overall, the threat of substitutes is moderate.

Degree of rivalry
Figure 10: Drivers of degree of rivalry in the online retail sector in India, 2015

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The online retail sector is heavily fragmented, with a number of large companies, such as internet giant Amazon operating alongside much
smaller, specialized incumbents. A number of these larger companies have a global presence. The existence of large competitors, as well
as the absence of consumer switching costs and low cost of sales capacity, increases rivalry. This is further increased by the ease of using
search facilities and price comparison websites.
Amongst major players, products are largely undifferentiated in this sector, with most retailers offering the same brands. This enables
customers to purchase products on the basis of price alone, which boosts rivalry. This is less of the case with more niche retailers;
although the sheer number of players increases the chance that they will likely still have significant competition.
Despite this, low fixed costs and dynamic market revenue growth in recent years alleviate rivalry to an extent.
Overall, rivalry is assessed as moderate.

Five Forces Analysis Aero space and defence

The aerospace & defense market will be analyzed taking manufacturers of aerospace and defense equipment, products, and systems as
players. The key buyers will be taken as government organizations, militaries, airline companies, and space programs such as nasa, and
entities providing raw materials and parts for manufacture as the key suppliers.

Summary
Figure 5: Forces driving competition in the aerospace & defense sector in India, 2014
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Rivalry within the aerospace and defense market is strong with large organizations competing intensely for government and commercial
contracts.
Players within the aerospace and defense market are generally large, integrated multinational companies. There has been a tendency
towards consolidation recently in the market, buttressing larger companies positions. This scale makes it difficult for new companies
wanting to enter the market in a significant way, a problem further exacerbated by the high capital outlay and expertise needed for
market success to be achieved. This capital outlay places such players in a powerful position, providing them with strong bargaining power
with both buyers and suppliers. However, the financial muscle of typical buyers (particularly governments) dilutes this to some extent.
Furthermore, despite suppliers' smaller scale relative to market players, high quality inputs are very important to the manufacturers'
businesses, strengthening supplier power in the supply chain.
There are no real substitutes to the manufacture of defense systems; however, alternatives to commercial aircraft include different modes
of transport, such as rail and sea. However, these can be impractical or time-consuming.

Buyer Power
Figure 6: Drivers of buyer power in the aerospace & defense sector in India, 2014

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The commercial aircraft sector is dominated by The Boeing Company and the Airbus Group (formerly EADS), with some countries favoring
local incumbents (such as India's Hindustan Aeronautics). The defense sector also exhibits similar oligopolistic tendencies, with indigenous
firms favored for strategic reasons. As a result, buyers choice is limited. Companies produce modestly differentiated offerings instead of
competing head to head. Although there are more manufacturers within other aerospace and defense sectors, consolidation has led to a
declining number of players. The emerging larger firms will be in a position of strong bargaining power against buyers.
However, buyers in the defense segment have considerable financial muscle, as they are typically government organizations or large
multinational companies. This power is diluted somewhat as aerospace and defense products and systems are highly important to buyers.
Players typically not only provide military aircraft and hardware like missiles, but also cater for the repair and logistics needs of their
buyers, which increases switching costs and decreases buyer power. Manufacturers are able to differentiate their products through
innovation, which weakens buyer power further. Overall buyer power is moderate.

Supplier Power
Figure 7: Drivers of supplier power in the aerospace & defense sector in India, 2014

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The quality and availability of these inputs is highly important to the quality of the end-products in the aerospace and defense industry,
increasing the power of suppliers. Commodity prices still remain volatile; in recent years, increased oil prices have impacted company
margins and had an adverse effect on the market. However, the recent sharp drop in oil prices has lowered production costs and may
encourage expansion. Despite the oil price drop, players continue to invest in new technologies and innovations, and demand for more
fuel-efficient aircraft has stayed high.
Other primary raw materials used include metals such as aluminum and steel. As most developed economies still struggle to achieve
strong consistent growth, demand from emerging markets accounts for the majority, although concerns about overheating will see this
tempered. Demand-pull inflation will continue to increase prices globally. Suppliers often provide to a wider range of industries such as
automotive and rail, and this reduces their dependence on the aerospace and defense industries. However, there are also a large number
of suppliers to choose from which increases players' choice and bargaining power. Supplier power is moderate overall.

New Entrants
Figure 8: Factors influencing the likelihood of new entrants in the aerospace & defense sector in India, 2014

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Incumbent companies are long established and have very strong brands, representing a challenge for potential new entrants. Entrants
would also require large capital reserves to compete effectively, via investments in necessary equipment, materials etc. Expertise and
knowledge is crucial to the success of companies, as the work is highly specialized. Aerospace and defense markets are becoming
increasingly consolidated, which could lead to fierce competition between a small cohort of large players, making it harder for potential
new players to enter.
Companies in the industry are obliged to adhere to strict regulations involving national security, export restrictions and licensing for
military goods, accounting rules and safety requirements. India is one of the largest arms importers globally, particularly from Russian
firms. However, India is currently undergoing a multi-billion-dollar upgrade of its military hardware and Prime Minister Narendra Modi's
"Make in India" initiative has aimed that 70% of the procurement budget go to domestic firms in the next five years, up from the current
40% (as of 2015.) Though firms will be in competition with one another to win contracts, this may provide increase the number of new
entrants in this market, looking to win a lucrative contract. Strong historical growth in the market will entice significant numbers of new
entrants. Overall the threat of new entrants is weak.

Threat of substitutes
Figure 9: Factors influencing the threat of substitutes in the aerospace & defense sector in India, 2014

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Source: MARKETLINE
There are no real substitutes to the manufacture of defense systems; however, there are alternatives to commercial aircraft. End-users of
air transportation (passengers and companies wishing to transport their goods as air freight) may opt for alternative modes of transport,
such as rail. Despite the convenience of faster delivery provided by air transportation, but with increasing fears about global warming and
carbon footprints, it is possible that alternative modes of transport may become attractive nationally. However, alternatives to
intercontinental travel, such as shipping, take much longer to reach their destinations than air travel, whereas crossing an ocean by rail is
impractical. Therefore, innovations to make aerospace products more fuel efficient and environmentally friendly will probably prevail over
possible substitutes. Overall, the threat of substitutes is weak.

Degree of rivalry
Figure 10: Drivers of degree of rivalry in the aerospace & defense sector in India, 2014
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The aerospace and defense market is dominated by large companies, some of which are highly diversified in their product offerings and
geographical presence. This reduces dependency on particular markets, which alleviates rivalry. In contrast to developed economies, India
is aiming to increase its military expenditure to ensure it is similar to its economic weight. However, the company lacks a strong domestic

industrial defense base, so is one of the largest importers of arms globally. Russian defense firms benefit most from this relationship, but
any international firm looking to enter the market must be prepared to face barriers such as technology sharing agreements, which will
intensify the rivalry.
In contrast, civil aerospace has experienced mostly higher growth since 2010. Despite ongoing problems in the global economy, as well as
dropping oil prices in the last year, ongoing demand for new, more fuel-efficient aircraft continues to buoy the segment, reducing rivalry
between incumbents. What's more, there has been a global increase in orders from commercial airlines as companies consolidate or
invest to rationalize costs. Competition is also intense in terms of winning defense contracts and companies use innovation and new
technology to differentiate their service.
The country's "Make in India" initiative, which aims for 70% of the procurement budget go to domestic firms in the next five years, up
from the current 40% (as of 2015), means that though firms will be in competition with one another to win contracts, the extra money
being ploughed into the market will help to alleviate rivalry, overall. The strong growth experienced by the market in recent years will also
help to alleviate rivalry slightly.
Overall, rivalry in this market is assessed as strong.

Five Forces Analysis

The car manufacturing market will be analyzed taking car manufacturers as players. The key buyers will be taken as car dealerships, and
suppliers of commodities such as metals as the key suppliers.

Summary
Figure 7: Forces driving competition in the car manufacturing industry in India, 2015

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Rivalry in the car manufacturing industry is reduced through differentiation, with several defined segments within the market such as
luxury and budget vehicles. A majority of companies service a number of different segments, either through different models or through
different brands, in order to diversify their product portfolio and reduce competition.
Car dealerships are the intermediaries between car manufacturers and end users, with car dealerships generally having exclusive
contractual agreements with one particular manufacturer which serves to reduce buyer power. Key inputs required by car manufacturers
are typically commodity items, such as metals, and more differentiated inputs like fabricated components. Typical suppliers are likely to
sell to a wide variety of manufacturing companies, with the car market likely to be contributing only a small share of total supplier
revenues, thus shifting power towards the supplier. Brand strength, goodwill and reputation are exceptionally important in the car
manufacturing industry, and it is therefore quite difficult for new players to directly enter a particular country's market. Where there is
already a strong manufacturing presence, it can be particularly off-putting for potential new entrants. Used cars form the main substitute
to the car manufacturing industry, however initiatives such as scrappage schemes, which have been offered in many countries,

incentivized customers to purchase new cars. This mitigating factor reduced the threat posed by used cars, although they were only shortterm solutions.

Buyer Power
Figure 8: Drivers of buyer power in the car manufacturing industry in India, 2015

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Car dealerships are the intermediaries between car manufacturers and end users (consumers). Car dealerships generally have exclusive
contractual agreements with one particular manufacturer. In this sense, dealerships can exercise some degree of buyer power over
manufacturers. However, they are weakened in the sense that once they have agreed to sell a particular manufacturers cars, it is difficult
for them to renege on that agreement: either they can attempt to negotiate with the manufacturer in an attempt to back out, or simply
wait for the contract to expire. If they choose to do the former, they will incur significant switching costs again weakening buyer power.
Furthermore, dealerships are wholly dependent on manufacturers the product is indispensable to them, which further undermines
buyer power. Buyer power is assessed as weak overall.

Supplier Power
Figure 9: Drivers of supplier power in the car manufacturing industry in India, 2015

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Source: MARKETLINE
Key inputs required by car manufacturers are typically commodity items, such as metals, and more differentiated inputs like fabricated
components. These items are often produced by other companies rather than being manufactured in-house, although some of the larger
players do operate component production factories. When this is the case, reliance on third party suppliers is reduced and so supplier
power is weakened. With fairly low differentiation of raw materials, there is often little to distinguish between suppliers, which reduces
supplier power. However, the importance of high quality raw materials and components to manufacturers (particularly in relation to
safety concerns) can increase supplier power. Globally, prices of primary raw materials (like steel and aluminum) have been fluctuating in
the past few years, placing pressure on manufacturers' margins. The upstream competitive landscape is relatively fragmented, although
recent consolidation in the steel industry could boost supplier power. Typical suppliers are likely to sell to a wide variety of manufacturing
companies, with the car market likely to be contributing only a small share of total supplier revenues. This further strengthens the position
of suppliers. Overall, supplier power is moderate.

New Entrants
Figure 10: Factors influencing the likelihood of new entrants in the car manufacturing industry in India, 2015
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Brand strength and reputation are highly important in the car manufacturing industry, and it is therefore quite difficult for new players to
directly enter the country's market, especially given the strength of incumbents like Suzuki and Hyundai. Due to the high fixed costs in car
design and manufacture, as well as the economies of scale gained from mass production, new start-up companies are rare: the capital
requirements for a manufacturing facility of feasible scale are simply too high. The global economic downturn had a negative impact on
car sales as consumers avoided making expensive purchases like new cars, making new entrants to the industry increasingly unlikely. India
was shielded from this to a certain extent as its economy continued to grow and consequently the industry has grown uninterrupted for
several years, with the exception of decline in 2013. This, coupled with a forecast for further growth, makes the market attractive to new
entrants either looking to serve the domestic market or to use India as a base for exporting due to lower production costs. Nevertheless,
domestic demand is likely to be tempered by the low percentage of the population able to afford new cars.
The emergence of electric car technology has recently given rise to the prospect of some major new entrants. Tesla Motors, an electric
vehicle manufacturer in the US that may expand elsewhere, has been a PR success for a number of years with a line of premium cars and it
is looking to obtain a significant increase in market share following the successful pre-order release of its cheaper Model 3 in 2016. Nissan
Motor Company (currently the seventh largest producer in India) has been in discussions with the Indian government to bring electric and
hybrid technology to India, so there may be a certain level of production expansion in relation to new technologies even if this does not
come from a new player.
Overall, given the power of incumbents and the capital costs of creating a new plant, the threat of new entrants is weak.

Threat of substitutes
Figure 11: Factors influencing the threat of substitutes in the car manufacturing industry in India, 2015

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Used cars form the main substitute to the car manufacturing industry. Car dealerships which sell both new and used cars are likely to have
sold more of the latter during the global economic downturn as consumers avoided making big purchases such as new cars. However, it is
important to keep in mind initiatives such as scrappage schemes, which have been offered in many countries, incentivized customers to
purchase new cars. This mitigating factor has the potential to reduce the threat posed by used cars, although they are only a short-term
solution. In addition to this, car manufacturers should be wary of the possibility of dealerships agreeing to sell cars from rival
manufacturers. Indeed, car manufacturers that have long-standing contractual agreements with loyal car dealerships will be better
protected from this threat. However, those with short-term contracts or those where agreements are close to expiry are more vulnerable.
It is, however, difficult for car dealers to switch between manufacturers, not least because of contractual agreements, but also because of
the switching costs which would involve completely re-branding the showroom and physically removing existing stock and replacing it.
Additionally, manufacturers can stipulate in contracts with dealers that only new cars may be sold, eliminating the threat posed by used
cars. Overall, the threat of substitutes is weak.

Degree of rivalry
Figure 12: Drivers of degree of rivalry in the car manufacturing industry in India, 2015
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The car manufacturing industry in India is characterized by the presence of large multinational and domestic players such as Suzuki,
Mahindra & Mahindra, Hyundai and Honda. A small number of players usually reduces rivalry however this effect is mitigated by their
large size. Rivalry can be reduced slightly due to a degree of differentiation, with several different segments within the market, such as
luxury and budget. Companies utilize a high level of design and marketing to promote their product and some companies occupy more
than one segment by utilizing different brands. Strong volume growth in 2015 helps alleviate rivalry. Overall, the degree of rivalry is
assessed as strong
Five Forces Analysis- Publish Sector
The publishing market will be analyzed taking publishers of books, newspapers, and magazines as players. The key buyers will be taken as
retailers of books, newspapers, and magazines, and commercial printers; office space & it equipment suppliers; authors, journalists, and
designers as the key suppliers. as the key suppliers.

Summary
Figure 5: Forces driving competition in the publishing market in India, 2015

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Source: MARKETLINE
The products in this market are fairly differentiated, which decreases rivalry.
Buyers are large and wield a great deal of financial power; however, some players can forward integrate, which decreases buyer power
considerably. Suppliers to the publishing market are numerous, and some are experiencing increasingly decreased power. For example,
self-publishing is growing, and many larger conglomerates have their own printing operations. New entrants may be put off by the
existence of large, incumbent publishing companies; however, with advent of digital publishing technology and flexibility of print on
demand, new entrants can enter this market without the large overheads traditionally associated with it. Most buyers in this market are
fairly diversified, and often sell food, electronics, films, and other products alongside books, newspapers, and magazines.

Buyer Power
Figure 6: Drivers of buyer power in the publishing market in India, 2015
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In this B2B publishing market, buyers are numerous and vary in size, from large retailers such as Amazon, to smaller independent shops
and bookstores, and niche websites. The larger buyers wield significant financial muscle and negotiating power, which increases buyer
power.
Switching costs are relatively low buyers are required to purchase products that will sell to the end-consumer and so buyers will
purchase from numerous different suppliers and switch between them.
Products are relatively differentiated, which weakens buyer power. The wide range of books, newspapers, and magazines on offer mean
that the choice of provider becomes a more complex matter for buyers, and they have to take more parameters into account. This
weakens buyer power.
To an extent, buyers have a low level of customer loyalty, with increased choice and lesser dependence on individual market players.
However, there are products that buyers are obliged to stock, and this reduces buyer power. For example, a store selling newspapers is
obliged to stock the best-selling newspapers else it might lose customers. This also applies to stores selling certain magazines, or newlyreleased or popular books.
Buyers are relatively price sensitive in this market, as technology is driving consumers away from physical formats. As the e-books market
is growing and end-users are increasingly reading news on online, buyers are obliged to sell physical books, newspapers, and magazines at
low prices to gain custom.
Buyers are very unlikely to backwards integrate into the operations of the player, which decreases buyer power. However, players may
forward integrate into the operations of the buyer by selling directly to the end-user.
Depending on the buyer, players' products can be dispensable. Many larger retailers generate revenues through the sale of other products
such as food, electronics, personal care products, home ware, and apparel. These buyers experience significantly higher buyer power than
the buyers which rely on books, newspapers, and magazines.
Overall, buyer power is assessed as moderate.

Supplier Power
Figure 7: Drivers of supplier power in the publishing market in India, 2015

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Source: MARKETLINE
Suppliers to newspaper publishing companies are varied, and include paper merchants, printers, and authors and journalists. These
various suppliers vary in size and number depending on the specific supply. Paper is a key resource to this market and the price of specific
varieties of paper varies depends on quality, which increases the supplier power of paper merchants to an extent.
A further input to this market is a labor force, including journalists and writers. Since this work generally requires a good standard of
education and training, wages can be a fairly big outlay for market players. The quality of the work produced by the labor force is very
important in this market, and thus supplier power is increased.

Switching costs in this market are largely dependent on the supplier, but tend to be quite high. For example, changing computer software
can be expensive when the cost of training staff on new systems is considered. Switching costs with regards to the labor force include the
cost of advertising job roles, and the time and money spent on the recruitment process and training new staff.
Despite limited differentiation between printing companies, their reputations are important and long-standing contractual relationships
are often observed with publishers.
Supplier power is weakened by the backward integration of some larger publishers, who often have their own printing operations, thereby
reducing their dependence on external services. Printers are unlikely to forward integrate into publishing operations, which increases their
reliance on players to market and sell their products. However, printers will often have a range of customers, reducing their reliance on
one particular publisher.
One way in which supplier power can be increased for authors and journalists is through self-publishing, in which a book or other media
can be published by the author without the involvement of a publisher. Technology has made it both easier and cheaper to self-publish.
For example, the wildly successful trilogy by E.L. James, Fifty Shades of Grey, which has sold over 125 million copies worldwide as of June
2015, was originally published online as Twilight fan-fiction before being picked up by Australian publisher, The Writer's Coffee Shop.
On the whole, supplier power in the newspapers market is assessed as moderate.

New Entrants
Figure 8: Factors influencing the likelihood of new entrants in the publishing market in India, 2015

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Source: MARKETLINE
The Indian publishing market top players include News Corp and Roli Books. The larger players of this market typically wield a great deal of
power and financial muscle, and benefit from good relationships with suppliers. These players operate alongside smaller publishers who
focus on niche or specific areas such as academia. One way that new entrants can compete is by offering a niche product.
In this market, switching costs are low, and buyer purchases are driven by consumer demand. This means that a new entrant offering a
sought-after product can experience success in this market. With brand loyalty directed towards authors, rather than retailers, publishers
will find success if they can produce a sought-after product. In the case of newspapers, consumers have much stronger brand loyalty
customers are more likely to be 'locked in', as they will not be strongly motivated to forego their existing brand preference for the sake of
an unknown quantity.
Products are fairly differentiated: newspapers cater to different audiences in terms of political stance and content; magazines can range
from the widely-read to the very niche, and books cover numerous genres and reading levels. Publishers may find success with a niche
product; for example, producing books of a particular genre, or magazines based around a particular topic.
In this market, scale is relatively unimportant. Companies can enter this market without a significant initial investment, particularly if they
start on a small scale. With the advent of digital publishing technology and flexibility of print on demand, new entrants can enter this
market without the massive overheads of production infrastructure and cost challenges of volume print runs associated with the
traditional publishing houses. What's more, consumption of books, newspapers, and magazines is increasingly moving online, with e-

books gaining market share and most newspapers having a website. This opens the market up to new entrants. It is still essential for
publishers to get good access to suppliers: access to talented authors, journalists, and designers as well as being able to negotiate a good
deal with commercial printers, if publishing physical products, is vital to a publishing company's success. However, this can be difficult.
Established authors are often represented by a literary agent to market their work to publishers and negotiate contracts. Even
experienced publishers may find it difficult to judge how successful or otherwise a book may be in the marketplace. This is only likely to be
a significant problem where a publisher has paid a very large advance (for, say, a celebrity autobiography) that is not recouped by sales.
One aspect of the market which may put off potential new entrants into the newspaper and magazine segments is the 'sale and return'
business model. This arrangement between publisher, distributor, and retailer means that the publisher pays for any unsold newspapers
or magazines if the retailer returns them. This means that potential new entrants will have to think very carefully about where their
products are retailed, providing a barrier to entry.
Adhering to regulation is more of a consideration for new entrants to the newspaper segment than the books or magazines segments. The
Indian press is currently self-regulating but has, in recent years, had growing calls for external regulation amid concerns about the
independence of the press. This acts as a barrier to new entrants.
Access to retailers is also vital. A small book publishing company may find it difficult to persuade a major bookselling chain to stock its
publications. The bookseller might demand discounts, and sale-or-return distribution is common, which means that the risk of poor sales is
borne by the publisher not the retailer. Alternatively, publishers can seek to get their books stocked by an online retailer, such as Amazon,
or even sell through their own website.
The market has experienced strong, double digit growth in recent years. This will attract new entrants.
Overall, the threat of new entrants is assessed as moderate.

Threat of substitutes
Figure 9: Factors influencing the threat of substitutes in the publishing market in India, 2015

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Books, newspapers, and magazines are sold by a wide range of buyers, and many of these buyers have different substitutes open to them.
Retailers which generate most of their revenues through the sale of books, newspapers, and magazines have more limited substitute
options to them as their business depends on these products. However, these types of stores can diversify slightly by selling toys, games,
films, music, and confectionery.
Other retailers which sell books, newspapers and magazines include large diversified stores. These retailers have many more options and
often generate much of their revenues from the sale of food, electronics, clothes, and homewares.
Online retailers such as Amazon sell a wide range of products and could substitute with a wide range of alternative leisure or educational
products. One important substitute sold by Amazon is the e-reader, the Amazon Kindle. This has gained market share quickly and, in the
future, may represent an increasing threat to the book market in particular.

The greatest threat to these products is the switchover to digital versions of these products. Although individual consumers are
increasingly switching to digital, the demand is still there for the physical formats. Retailers can protect themselves against revenue loss by
offering these products in their digital form.
Switching over to digital may incur higher initial costs; e-readers are much more expensive than printed books. However, retailers will see
a decrease in printing, transportation, and storage costs.
Overall, the threat from substitutes is assessed as moderate, but there may be major differences in what particular retailers experience,
depending on their business model.

Degree of rivalry
Figure 10: Drivers of degree of rivalry in the publishing market in India, 2015
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The main players in this market are large and formidable, which increases rivalry. For example, News Corporation and Bertlesmann are
both multinational corporations that wield a great deal of power. These players are able to invest in brand building and advertising, and
can build good relationships with buyers and suppliers. Competition can be fierce between these players, although niche publishers will
find this rivalry lessened.
Buyers can switch relatively easily; however, if a particular player publishes a popular book, newspaper, or magazine, buyers will buy it to
meet consumer demand. This lessens the threat of low-cost switching somewhat.
Products are relatively differentiated: for example, newspaper publishers can differentiate in terms of content, style, and political
persuasion; magazines can differ in terms of target age and topic; and books can differentiate in terms of target age and genre. This
reduces rivalry, as it means that buyers are more likely to decide to buy the product in terms of merit, not price.
Market players can expand their output fairly easily, as once the product is written it is a matter of printing more copies. This increases
rivalry between players. What's more, the market is relatively easy to exit. However, storage costs can be high. Newspapers have limited
lifetimes, and consumers are unlikely to purchase yesterday's edition, even at a discount.
The players in this market are fairly diversified, which reduces rivalry. For example, News Corporation publishes books and newspapers, as
well as cable network programming, real estate, and digital education.
Overall, rivalry in this market is assessed as moderate.