Conflict and strategy models in automotive competing markets.

Izvercianu, Monica ; Vartolomei, Mihaela ; Staicu, Florentiu 等

1. INTRODUCTION

The bargain process supposes both the cooperation and the conflict elements. Each of the participants on automotive market should have well determined target (Izvercian, 2002) with respecting the rules known by partners, even if there are contradictory interests for them. These interactions are so called conflict situations and they're very real inside automotive industry. Understanding the automotive industry structure is essential to the strategists in the field, but understanding the competitive forces and underlying causes reveals the industry profitability and provides a framework for influencing competition and profitability (Vartolomei-M, 2009). The strongest competitive forces (that are not always obviously) determine the profitability of industry and become the most important thing in order to formulate the strategy. In the following we'll identify these five forces for a studied plant. Also, other automotive market strategy we study is Blue Ocean Strategy. Its principle is to be focused on the big picture not on the numbers. It is about growing demand and breaking away from the competition, a new and avant-garde strategy. New strategies are necessary for company strategic changes (Imbrescu, 2005).

2. GAME AND NEGOTIATION THEORY AS ELEMENTS OF CONFLICT THEORY APPLIED ON AUTOMOTIVE MARKET

This pat we offer analyses regarding conflict subjective elements on automotive industry: dislike feeling (the availability to hurt the other side), rivalry feelings (if resources are very limited, one of the parts can enhance its position by aggression; while the dislike produces a strong emotional charging conflict, rivalry leads to an essential cooling), super-confidence (the bigger the self confidence is, the less the possibilities for disgraced situations is), incapacity to impose the own accords

Figure 1 illustrates confidence and conflict situation on automotive industry for studied plant.

[FIGURE 1 OMITTED]

[I.sub.1] and [I.sub.2] represents inputs (position, territory, power or ability to gain goods consumption) of first player and respectively second player (everyone looks the other's input as bad omen--concavity of II' curve). II' represents the social opportunity curve (the combinations of inputs obtained from the two players decisions), [I.sup.0.sub.1] and [I.sup.0.sub.2] represents the expectations or availabilities considered enough undesired or being acceptable in some situations by first, respectively, second player. The first player considers that in case of a conflict, the benefit will be somewhere to [I.sup.0.sub.1] level; the second player anticipates the [I.sup.0.sub.2] point. There is also a mutual advantages area: MSS', where both sides can gain using peaceful methods and attitudes, to which we can arise only by a compromise agreement and the efficient solution is along the SS' arc, on the opportunity curve II'. There is no possibility to reach to a compromise in figure 2 because everyone is too confident in his success in case of a confrontation, there is no mutual advantage zone, so no compromise possible and a direct or indirect fight is unavoidable since the both are expecting to obtain the best results better by fighting rather than argument adjustment.

[FIGURE 2 OMITTED]

[FIGURE 3 OMITTED]

3. PORTER MODEL APPLIED TO AUTOMOTIVE INDUSTRY

3.1 Threat of New Entrants

It appears due to the new capacity and desire to obtain market share and put pressure on prices, costs and rate of investment, limiting the potential industry profit. This threat is high for automotive industry, so, incumbent plant must hold down the prices or boosts the investments in order to deter the newcomers. This threat depends on the height of entry obstacles and on the reaction of the incumbent. If entry obstacles are low and are expected little retaliations from inside, the threat is high and industry profitability is moderated. The supposed reaction of incumbents will have a great influence on likely newcomers' decision to come in or stay out of industry.

3.2 Bargaining Power of Suppliers

It captures more of the value for themselves by higher prices, limited quality or services. A suppliers group is powerful if: it is more concentrated than the industry it sells to; it does not depend heavily on the industry for its revenues; industry participants face switching costs in changing suppliers; suppliers offer differentiated products; there's no substitute for what the supplier group provides; the supplier group can credibly threaten to integrate forward into the industry.

3.3 Bargaining Power of Buyers

It can capture more value by forcing down prices, demanding better quality or more service and generally playing industry participants off against one another, influencing industry profitability. A customer group has negotiating leverage if there are few buyers, or each one purchases in volumes that are large relative to the size of single vendor.

3.4 Threat of substitutes

Substitute performs the same or similar function as industry's product. When the threat of substitute is high, the profitability and growth potential suffer. This threat is high if: it offers an attractive price-performance for automotive products; the buyer's cost of switching to the substitute is low. Technological changes or competitive discontinuities in some business can have major impacts on industry profitability. Improvement in advanced materials, for instance, allowed them to substitute steel in many automotive components.

3.5 Rivalry among competitors

It takes familiar forms: price discounting, new product introduction, advertising campaigns, and service improvements. As Porter said (Porter, 2008), this strength reflects the intensity of competition but also the basis of competition. Profitability is influenced by dimensions on which competition takes place, if rivals converge to compete on the same dimensions. Furthermore, rivalry is especially destructive to profitability if it gravitates solely to price because price competition transfers profits directly from an industry to its customers.

4. BLUE OCEAN STRATEGY VERSUS RED OCEAN STRATEGY ANALYSES IN AUTOMOTIVE INDUSTRY

The Blue Ocean Strategy is created by Chan Kim W. and Mauborgne Renee and wants to challenge companies to break out of the red ocean of bloody competition by creating uncontested market space that makes the competition irrelevant. Blue Ocean strategy is about growing demand and breaking away from the competition. The comparison between aed Ocean and Blue Ocean Strategy is shown in table 1. aed Ocean is represented by existed industry (known market space) and Blue Ocean is represented by the industries that does not exist (unknown market). The companies from aed Ocean followed a conventional approach, racing to beat the competition by building a defensible position within the existing industry order. Contrarily, the creators of blue oceans didn't use the competition as their benchmark, but they follow a different strategic logic so called "value innovation" (Chan Kim, W. & Mauborgne, R. 2005), the cornerstone of Blue Ocean Strategy.

5. CONCLUSION

The strength of the five competitive forces affects prices, costs, and investment required to compete. The forces are directly tied to income statements and balance sheets of automotive industry plants. This paper helps to understand industry structure. It guides manager toward good possibilities for strategic action, such as: positioning the company to better cope with competitive forces; anticipating and exploiting shifts in the forces; and defining and shaping the balance of forces to create a new industry structure that is more favourable for the company. The strategic profile with high blue ocean potential has three complementary qualities: focus, divergence, and a compelling tagline. In conclusion companies should build their Blue Ocean Strategy in the sequence of customer utility, price, cost, and adoption. These criteria form an integral whole in order to ensure trade success.

6. REFERENCES

Chan Kim, W., Mauborgne, R. (2005): Blue Ocean Strategy How to Create Uncontested Market Space and Make the Competition Irrelevant, Harvard Business School Press, Boston, Massachusetts, ISBN 1-59139-619-0

Imbrescu, M.C. (2005). Reorganization and dissolution of companies, Mirton Publisher, ISBN 973-661-770-X, Timisoara

Izvercian, M. (2002). "Marketing Elements"; Solness Publisher, ISBN 973-8472-19-9, Timisoara

Porter, M. (2008). Leadership and Strategy. The Five Competitive Forces That Shape Strategy, Harvard Business Review, pg. 78-93, London

Vartolomei-M, M. (2009). Contribution to the management of change and energy in military industry in the frame of suprastate play, Politehnica Publisher, ISBN 978-973-625803-9, Timisoara

Tab. 1. RO Strategy vs. BO Strategy for industry

Read Ocean Strategy Blue Ocean Strategy

Compete in existing market Create uncontested market
space space

Beat the competition Make the competition
 irrelevant

Exploit existing demand Create and capture new
 demand

Make the value-cost Break the value-cost
trade-off trade-off

Strategic choice of Differentiating and low cost
differentiation or low cost