Mitigating Market Entry Barriers

penetrationPorters (1979) five forces theory highlights commercialise entry barricades as single of constraints in establishing a t blockadeer mathematical product line. Investigating market entry barriers for McLaren enables us to assess the level of competition and the possible barriers impede the progress of McLaren in the great deal machine industry.As McLaren began variegation in the 1960s it helped them greatly in averting market entry barriers to through economies of scale. By branching out into assorted industries such as McLaren racing and McLaren self-propelled, McLaren was able to benefit greatly from economies of scale. This has aided McLaren with their high gravid investment look atment for establishing a mass auto producing company. As a high judge vehicle, to purchase the parts and dumbfound the McLaren consumer railway car manufactured would be extremely expensive. However, Mclaren entered the mass car market as part of its diversification schem a which has allowed the company to utilized same value chain for its consumer car equipment. Therefore, the initial high investment capital barrier required for the market entry was successfully mitigated by McLaren.Apart from the huge capital investment requirement, product differentiation is also integrity of the market entry barriers in the mass car market. McLaren overcame this barrier quite easily because it already had established brand equity and a loyal clientele. McLaren is a known worldwide for its code one racing team in high regards so establishing raw(a) carees under its brand name wasnt difficult. McLarens cars were easily differentiated from some separate high destination car producers due to the companys already established brand image. (Fahri, K & Michael, J. 1989)A nonher barrier to market entry inside the car industry is the diffusion channels. McLaren was non required to establish its distri neverthelession channel for consumer cars because it did not pr oduce them in large numbers and most of its cars were purchased by car enthusiasts who keenly south after the brand. The strategic pull scheme for marketing its small number of high end consumer cars averted its needs to establish a distribution and sales channel (Terpstra, 1994).Another entry barrier to the mass car market and an important one is the requirement of consumer cars to adhere to safety specification and environment epscification. . The self-propelled industry is subject to government rules and regulations that include the vehicle safety and environmental matters. Vehicle safety is to learn that each car that is supplied is safe for the driver and its passengers at all times. Environmental matters include emission levels to degrade the damage each vehicle creates to destroy our environment. McLaren has its own research and development centres and state of art examination facilities and production plant where it could develop, implement and monitor its car performan ce in accordance with the legal requirements.The level of Diversification Achieved by McLarenAccording to Ansoff (1957), there are four basic corporate strategies for growth. These are market penetration market development product development and diversification (see fig1).Fig.1The first three growth strategies require a firm to change its product and/or market coordinate. Unlike these three, the forth growth strategy i.e. diversification requires a change in the characteristics of a companys product line and/or market. Diversification calls for a simultaneous departure from the present product line and the present market structure (Ansoff, 1957, p.114). Pertaining to this growth strategy classification, venturing of McLaren into several distinct agate linees can be classified as its diversification strategy. over the years, McLaren has ventured into several distinct businesses. These areMcLaren Racing involves formula one racing team that competes in formula one racing. This bus iness focuses mainly on the racing team of the company. McLaren Racing sets out to be one of the best known formula one team in the world. McLaren Racing has established its brand by pocketing 181 Grand Prix victories (William, 2009).McLaren Automotive is a business that designs and builds super cars made for the mass consumers. McLaren road cars are intentional to meet the high expectations in terms of speed, performance and endurance. As a worldwide brand, McLaren Automotive aims to not completely produce the best automotive vehicles but to continuously raise the benchmark in automotive design (McLaren, 2013).McLaren Electronic Systems (MES) creates electronic spot in systems for the McLaren Racing team. The companys electronic systems are use in formula one vehicle for non-homogeneous telemetry and sensory systems. The company also creates electronic control units for other teams in the motorsport industry to use across Europe and North America. (McLaren, 2013)McLaren Applie d Technologies (MAT) focuses on render the best technology to boost the technical support in world of sports and to enhance the performance of McLarens formula one vehicles. McLaren Applied Technologies has continued to boost McLarens paper as the forefront of British engineering and technology (McLaren, 2013). MAT has helped worldwide sports by providing technology to help advance the efficiency of the histrions performance in the best way possible. This could be something as simple as providing can bikes that weigh less without hindering the efficiency of the bike. autocratic hold is engaged in hospitality and compositors case trouble business. It serves food to McLarens customers and fans at formula one race. Absolute Taste also provides a catering service and hospitality to upper class customers around the world. They also organise events and the serve various cuisines to cater its global customers (McLaren, 2013).McLarens Horizontal DiversificationThe aforementioned div ersification strategies of McLaren can be categorized as either related or un-related diversification strategies. Related diversification strategies can be further dissever into three categories as horizontal, vertical and cross-sector diversification (Charles et. al, 2010). These related diversification strategies differ due to their different confederacy of industry similarity and value chain similarity (see fig 2). Horizontal diversification pertains to a businesss venturing into a overbold welkin which uses the same value chain as its nerve center business and falls within the same industry. Considering this definition, McLaren has not diversified horizontally as it has not acquired any other formula one racing teams.Fig.2(Source Charles et, al. 2010, p. 296)McLarens Vertical DiversificationVertical diversification refers to a diversification initiative within the same industry, but one which uses a different value chain than that of the companys union business. (Charles et, al. 2010). McLaren diversified vertically through its automotive business as it operates within the same industry but has different customers and marketing channels. Likewise, McLarens electronic systems and applied technology business can be termed as vertical diversification as it operates within the same (formula one racing) industry, but it requires a distinct value chain i.e. production, distribution and customer network (McLaren, 2013).McLarens Cross Sector DiversificationCross sector diversification occurs refers to diversification within a different industry, but one which has a same value chain (Charles et, al. 2010). McLarens venturing into the catering, hospitality and event management business (Absolute Taste) can be classified as cross-sector diversification. Absolute Taste shares the same value chain as McLarens core business as it is an extension of the companys own marketing activities and thus uses the same managerial and other resources. However, Absolute Tast e also operates in a complete different hospitality industry a field all different from car racing business. Similalry, McLarens applied technologies can be termed as cross-sector diversification in that it also operates in other industries such as medical science apart and sports (other than car racing).McLarens Unrelated DiversificationUnrelated diversification is referred to a firms engagement in a completely un-related business (Charles et, al. 2010). McLaren, diversification strategies so far do not include any un-related diversification as the company achieves economies of scale and synergies through all of its diversification strategies.McLaren has developed this portfolio of companies to boost the Groups reputation and to expand. The development of the production centre improved McLarens chances of increasing economies of scale. By having so many of the McLaren companies organism managed under the same roof, it allows each company to make the most of tangible and intangible resources and materials that wouldnt have been used otherwise (McLaren, 2013). The joint use of inputs means that different McLaren subsidiaries share the transaction cost of machinery and other possible production costs for the vehicles that are produced.Once the McLaren production centre was built, it meant that the internal process of vehicle production would change. Within the production centre research is continuously gathered on how to improve the everyday performance of McLarens Racing and Automotive vehicles. As the car is built they can then put up it off to be spray painted by hand within the same facility which not only saves time but reduces errors that may have been made on the paint work by machines.Managerial ambition is the drive of many businesses. McLaren has a reputation to withhold as the forefront of British engineering (McLaren, 2013). McLaren are always attempting to produce the best. By diversifying into so many subsidiaries it creates new targets for the groups as a whole. The diversification strategy allows the company to increase its business profile and spread risks accordingly.McLarens Diversification strategy as a Reflection of Historical Trends in Corporate StrategyThroughout the midst of twentieth century till the early 1990s, there were several dominant logics of strategic management. During 1950s, there was an emphasis on general management skills, along with widespread un-related diversification moves by corporates. It was followed by the prevalence of requiring specific management skills for different industries in the 1970s and 1980s. This was coincided with the requirement of portfolio planning. It was not until 1990s, that the focus of management practitioners and academics was led to prevailing themes of core competencies and dominant management logic view to achieve synergies through growth and diversification strategies (Goold and Luchs, 1993).During this time (i.e. 1990s) McLaren embarked upon its diversification i nitiative as part of its growth strategy. McLarens growth strategy precisely coincided with the prevailing business view of achieving synergies through diversification. Once the new McLaren production centre was built it allowed McLaren Automotive to increase their passing(a) production and enabled them to introduce new road cars such as the MP4-12C sports car. The production centre has not only boosted the production rates but has also got a production line which allows McLaren to test its vehicles (Fosters plus partners, 2013). The production centre is also connected to the McLaren technology centre which is connected by a subterranean walkway, lie with interactive exhibition spaces (Fosters plus partners, 2013). This connection allows the technology centre to provide for the McLaren Automotive department by coming up with new McLaren electronic systems for their vehicles. With the production centre in place it allows the diversification of the McLaren industries to take advanta ge of the ability to share machinery. With the connection of the Production centre and the Technology centre it allows McLaren to develop new technology to be used by MES for McLaren Automotive and McLaren Racing to use in their formula one vehicle. To either improve the vehicle performance in some way or to generally improve the safety of the racing car. Absolute taste provides food for the McLaren racing team and other clients such as Mercedes-Benz at all grand Prix races worldwide (McLaren, 2013). Igor Ansoff defined synergy as Exploitation of similarities between different lines. Two plus two equals five (Ansoff, 1957). This analogy is saying that when similar industries combine such as McLaren Racing and McLaren Automotive it increases the production levels beyond the predicted rate. This synergy was improved greatly once McLaren has built the new Production centre. It allowed the McLaren group to all operate in the same vicinity roof which inevitably improves synergy amongst t he different industries. All of each others resources are at the disposal of whoever wishes to use it.ReferencesAnsoff, I. (1957) Strategies for Diversification. Harvard vocation Review. Vol. 35 Issue 5.Charles E., Bamford, G. and West, P (2010). Strategic Management. Cengage Learning.Fostering plus Partners, (2013) ProjectsMcLaren Technology Center lendable from http//www.fosterandpartners.com/projects/mclaren-technology-centre/ (cited on 5th, March, 2013)Goold, M. and Luchs, K. (1993) Why Diversify Four Decades of Management Thinking. Academic of Management Executive. Vol. 7 No. 3McLaren (2013) Vodafone McLaren Mercedes. Available from http//www.mclaren.com/formula1/page/mclaren-group (cited on 5th, March, 2013)Nye, D. (1988) McLaren The Grand Prix, Can-Am and Indy Cars. Guild Publishing.Porter, M.E. (1979) How Competitive Forces Shape Strategy, Harvard Business Review, March/April 1979.Terpstra, V. (1994). International Marketing, the States The Dryden PressWilliam, T. (2009) . McLaren The Cars 19642008. Coterie Press.