CASE ANALYSIS OF POLARIS

INDUSTRIES
Analysis of the US motorcycle industry using Porter’s Five Forces
The Five Forces Analysis framework is a model developed by a professor at the Harvard
Business School, Michael Porter. This model, first published in 1979, was developed to serve as
a tool by which industries can be analysed efficiently and considering the competitive structures
in such industries (Evans & Clyde, 2008). Porter believes that the competitive strategy used
should lie in understanding the structures of the industry and how well these structures change
(Bruijl, 2018).
This framework consists of five tools and helps identify certain business powers that critically
analyse the internal analysis in-line with external factors. This framework examines the micro-
environment of the business to establish what competition the business has as well as the ability
of the business to make profits (Johnson, Scholes, & Whittington, 2008). Therefore, the primary
intent of this model is the potential of an industry to generate profits based on any one or
combination of the five forces in the model.
The five forces of this model include the buyers’ bargaining power, the threat of substitutes, the
threat of new industry entrants, the degree of rivalry between existing competition, and the
bargaining power of sellers and suppliers (Porter, 1979).

The threat of new entrants

The threat of new entrants to an industrial market mainly means a new competitor coming into
such an industry tries to gain a significant capacity and edge over existing companies in the same
industry. The extent of a new player’s threat in the market lies in the barriers already placed for
such a new entrant. When there is a difficult barrier placed over a new entrant in a market, it will
be difficult for such new entrants to gain a competitive edge over the existing companies in the
industry. They become prone to face extreme shake-off from the industry (Porter, 1979).
However, if there is a low barrier that exists for new entrants to get into an industry, it increases
the chances that new entrants into such industry will pose a higher threat to established
competition in the industry, thereby leading to a lower level of profitability for competitors in
such industry (Porter, 2008).
According to Porter (1997), some significant factors exist as barriers for new industry entrants.
These factors include the “economies of scale, product differentiation, capital requirements, cost
disadvantages independent of size, access to distribution channels and government policy.”
However, the barriers to new entrants are not limited to these six factors. The barrier factors are
extended to “the supply-side economies of scale, the demand-side benefits of scale, the ease of
costs switching, capital, unequal access to distribution channels, and restrictive government
policies” (Porter, 2008).
In the case of the US motorcycle industry, some barriers exist that affect new entrants in this
industry. Entering this industry requires huge capital to be invested in research, product design
and development, brand creation and maintenance, repair and maintenance services, and so on
(MBA Team, 2022). Hence, it is pretty not straightforward for new brands to pose a significant
threat to already established competition in the industry. Also, customers’ preferences are more
inclined to go with an already established company than a new entrant, so customers’ switching
costs increase here. Furthermore, spare parts availability is another factor that tends to be a
barrier to new entrants in the motorcycle industry. It is challenging for a new entrant’s products
to have spare parts available should in case there is a need for repair and maintenance of such
products by customers. Lastly, strict governmental policies such as licenses, taxes, and
environmental guidelines are put in place, which serves as a barrier for new entrants in the
motorcycle industry.

Bargaining power of buyers

Buyers often wield a considerable amount in determining market prices as they push to want a
better quality of service. The buyer’s bargaining power involves the buyer trying to gain more
value while paying a lower price for good product quality. Product suppliers are therefore
dependent on the buyer’s need, and this makes the buyer takes advantage of this situation to
apply pressure in prices to the product’s suppliers (Porter, 2008).
The bargaining power of buyers is dependent on varieties of factors. One factor determining how
much of a bargain a buyer has on the price of a product is the existing number of such buyers in
the market. An increase in the number of buyers of an industry’s products will decrease the
bargaining power of the individual buyer (Evans & Clyde, 2008). Also, the buyer has higher
bargaining power if the products and services purchased by such buyers are standard and not
differentiated, making the buyers subject to a much lower switching cost when changing their
suppliers. In the hope of threatening the supplier, a buyer can embark on producing products
themselves after realising the suppliers are making too many profits. However, a buyer
producing its products is only limited to some goods as a buyer cannot embark on this for a large
variety of products (Porter, 1979; Porter, 2008).
Analysing the US motorcycle industry with this force, the bargaining power of buyers is
minimal. Firstly, the buyer cannot price pressure the motorcycle suppliers as this industry has a
high standardisation level. Also, it is pretty tricky for a buyer to embark on producing
motorcycles as a single entity due to the technicalities of production. However, customers can
purchase their motorcycle products from various suppliers based on their taste, availability, and
popularity.

Bargaining power of suppliers

Porter (1979) asserted that suppliers could impact the profitability of an industry by them raising
the costs of their products and reducing the quality of the produced goods and services. In an
industry where the supplier is powerful, the supplier is presented with the ability to create value
for their business by charging higher prices for their product, limiting the quality of its product,
and shifting costs to industry participants. Suppliers also tend to exhibit high power when limited
in number in the industry. The industry offers standard and differentiated products if there is the
potential to integrate into the industry or if the industry is not solely generating revenue for the
supplier (Porter, 2008).
For the US motorcycle industry, the bargaining power of suppliers depends on various factors.
One of the factors is the supply of raw materials. This industry has a stable supply of raw
materials, making suppliers’ bargaining power minimal. Most of the motorcycle industries in the
US are more significant than the suppliers, making suppliers have minimal power to negotiate
prices. Therefore, suppliers cannot disrupt the sales of their products to most of the companies in
the industry. The switching cost of most companies in the industry is lower than the suppliers’
switching cost. Therefore, the bargaining power of suppliers is lower in the US motorcycle
industry.

Substitutes’ threat
Substitutes also constitute a threat to companies in any industry. Substitutes offer products that
are different from industrial products. However, the substitutes’ products most times perform
similar effect as the industry’s products hence why they are called substitutes (Porter, 2008). The
industry’s profitability will be low when the threat of substitutes is high in such an industry. This
is because substitutes offer their products at a lower price. In the words of Porter (2008),
substitutes do not only limit the profitability of companies in the industry in the typical business
season, but they also tend to cut out surpluses to companies in time of overflow. The threat of
substitutes is significantly high if there is an offering of an attractive price-performance trade-off
to the industry’s product and when the buyer’s switching costs are low (Porter, 2008).
The threat of substitutes is medium in the US motorcycle industry. Various products are
substitutes for motorcycles, including smaller cars and bicycles. People can be willing to
purchase a vehicle instead of a motorcycle due to the comfort it provides for a slight increase in
the price of the car to the motorcycle. However, customers are always looking for fuel-efficient
options that motorcycles tend to provide for them. According to a study carried out by the
Motorcycle Industry Council, an 8.02% increase in motorcycle owners was recorded in the
United States in 2018. The jump in these statistics was attributed to customers’ preference for
fuel-efficient transportation options provided by motorcycles (Motorcycle Council, 2019).
Therefore, this indicates that the threat of substitutes in the US motorcycle industry is medium.

Competitive Rivalry
When an industry is subjected to extreme competition and rivalry, there will be a limit in the
industry’s profitability (Porter, 2008). There is an increase in rivalry among competitors in an
industry when there are many competitors and if these competitors share a similar market size
and market share. The rivalry in an industry is intense if slow growth leads to arguments and
variance in inheriting market shares. Furthermore, there is intense competitive rivalry in an
industry if the exit barriers out of the industry are high (Porter, 2008).
The US motorcycle industry is incredibly competitive as there are various competing brands. The
different companies are mostly trying to create a competitive advantage through product design
and how well they serve their customers. Due to the high competitiveness in the motorcycle
industry, these competitors are striving to gain customer loyalty, thereby edging out other
competitors (MBA Team, 2022). Generally, the competitive rivalry as Porter’s force used in
analysing the motorcycle industry is exceptionally high.
From the above, through extensive evidence, it can be shown that the motorcycle industry in the
United States is an attractive industry due to the intensity of the competitive forces that exist in
the industry.
Also, it can be deduced from the above discussion that the most significant forces that face the
US motorcycle industry in the future include the threats of substitutes, extensive competitive
rivalry, and the bargaining power of suppliers. The US motorcycle industry will face the threats
of substitutes in the future. The modern development of vehicles such as electric cars and
autonomous driving cars is both fuel-efficient and relatively cheap to purchase and maintain,
which poses a threat to purchasing motorcycles. Furthermore, the competitive rivalry will get
pretty intensive due to the modernisation of production and service delivery of companies in this
industry. Finally, the US motorcycle industry will be faced with more bargaining power of
suppliers due to the recent global happenings, notably the effects created by the COVID19
pandemic in the supply chain industry. Due to the challenges created by the pandemic, the
supply of raw materials such as semiconductors has become more expensive. This has given
more bargaining power to the suppliers of materials for the US motorcycle industry.

Internal Analysis of Polaris Industries capabilities

Polaris industry, Inc. is a company that specialises in the design, fabrication, and manufacture of
snowmobiles, All-terrain recreational and utility vehicles (ATVs), motorcycles, and off-road
vehicles. They also distribute these products through distributors located in the United States,
Canada, and Europe under brand names such as Victory, Indian, Ranger, Sportsman, and others
(Hitt, Ireland, & Hoskisson, 2016). The Polaris industry started producing and distributing
motorcycles in 1997. As at the time when this case study was conducted, Victory motorcycles
are considered lighter, possess more torque, have a better engine performance, and have a lower
centre of gravity compared with other competitor bikes in the market.
This section undertakes an internal analysis of the motorcycle section of the Polaris industries,
analysing the capabilities of this industry in the market and evaluating the core competencies of
the motorcycle division of this company.

Victory’s Strengths
Victory motorcycles is a company known to maintain a significant amount of strength. The
company is known to have a high rate of customer satisfaction. Also, victory motorcycles is a
company that experienced executives govern, and this is considered a significant level of
strength of the company. Ultimately, Victory motorcycles is a subsidiary company of Polaris
Industries, reputed as one of the leading off-road vehicle companies.

Victory’s Weaknesses
Aside from the strengths Victory motorcycles possesses, there exist some areas where this
company is weak and will need to improve. One of such areas is the dealership. Victory is only
sold and distributed in Polaris dealerships, making it available in only some specific areas in the
Americas and Europe. This weakness makes the Victory motorcycle brand fall behind other bike
brands in Shopper’s satisfaction with dealerships. The graph below shows the measure of
dealership satisfaction among consumers.

Figure 1: Rank of Top Motorcycle Brands concerning Dealership’s Satisfaction

Source: http://www.piedpiperpsi.com/pdf/documents/169.pdf
Furthermore, another weakness that the Victory Motorcycle brand faces is the brand’s strength.
Victory is a much weaker brand when compared with the Polaris brand. Due to this, Victory has
not gained much market share. Therefore this gives other motorcycle brands in the market a
competitive edge over the Victory brand in terms of Competitive rivalry. The figure below
shows the market share rank of companies in terms of available vehicles, motorcycles, off-road
vehicles, and snowmobiles.
Figure 2: Rank of Companies according to their market share
Source: file:///C:/Users/cshrader/Downloads/PII%20Investor%20Pres%20Nov-2014%20(1).pdf
(presentation to investors, November 2014)

Identifying Polaris Industries Core Competencies using VRIN/VRIO analysis

The VRIO framework is a strategic tool developed to analyse a company’s internal resources and
capabilities. This tool helps determine the advantages the company has in the industry and
measure the company’s competitiveness. The core competence of Polaris industries will be
measured through the lens of how valuable it is, the rareness of its service and product in the
market, how costly it is to imitate this company, and if the company is organised to capture
value.
Valuable
Value is one of the core competencies that assists Polaris Industries and, most significantly,
Victory motorcycles to efficiently take hold of the opportunities presented to the firm in the
market. Valuable competencies help this company stand against the threats that arise from the
internal and external environment. This allows the business to grow and develop further in the
long run.
One of Polaris Industries’ core competencies is its strong belief in its employees’ ethics and
values (Hitt, Ireland, & Hoskisson, 2016). Its employees define the values of this company. This
company also has a program set-up that evaluates the performance of its employees based on
how well they represent the values of the company and based on their performance.
Polaris Industries is also a company known to have a reputation in terms of corporate social
responsibility. The companies ensure that it engages in CSR activities to build a non-
substitutable competency to have a competitive edge over threats of substitutes and ensure to
operate in the best transparent way possible in service delivery.
Another core competence shown by Polaris Industries is its innovation. Polaris and the Victory
motorcycle industry is highly innovative in developing the products it offers to its customers.
This innovation has also helped the company’s marketability in the industry. It has also allowed
the company to lower its operation costs (Hitt, Ireland, & Hoskisson, 2016).
Rare
Rare competencies help a company to stay competitive in the market. Polaris Industries happens
to be one of the handfuls of companies that showcase rare competencies in the motorcycle
industry. One rare competency is problem-solving (Hitt, Ireland, & Hoskisson, 2016). Polaris
Industries is a company that engages in problem-solving amongst its employees and
management. This problem-solving culture possessed by the company increases the level of
teamwork and innovation in the company. This increased level of innovation gives it a high level
of competitive advantage that directly benefits the company’s products in the market. This
problem-solving skill is a rare competency possessed by the company helping it against potential
market threats.
Inimitable
A company’s inimitable competencies give the production and service delivery of such a
company uniqueness, which is often complex and costly to imitate. Polaris Industries provides
high-quality products to its consumers, which serves as a brand appeal. This quality product
offering purchases the company’s product repetitive as customers are always satisfied with the
company’s level of products. The high level of product offering also provides customers with a
unique customer experience (Hitt, Ireland, & Hoskisson, 2016). Polaris Industries makes sure
this unique customer experience does not go to waste. It regularly engages its customers with a
relevant content generation that broadens the brand’s reach in the long run. Therefore, this is a
unique competency provided and enjoyed by Polaris Industries.
Organisation
Polaris Industries uniquely develops its products and services for the company’s usage.
Therefore, another company cannot use these resources in the competitive market. One of such
organisation competencies Polaris Industries has is its financial strengths. Polaris Industries is a
pretty financial heavyweight. Its financial strength helps the company explore new opportunities
to develop its new products. It also helps the company realise underlying possibilities and
opportunities in the industry.
Furthermore, one of the organisation competency Polaris Industries has is the training of its
employees. This company provides extensive training to its employees for different job roles,
helping boost productivity in the workplace. This investment in employee training culminates in
a strong commitment in the organisation, which is a valuable competency for Polaris Industries
both in the short term and long term.

Conclusion
This report has analysed the US motorcycle industry through Porter’s Five forces model. The
different factors that affect various companies in the industry were extensively analysed.
Furthermore, critical analysis on the Polaris industries’ internal strategic factors and capabilities
was carried out. This helps identify the core competencies this company has in the motorcycle
industry. The value chain linkages were carried out using Barney’s criterion, which is the VRIO
analysis of the organisation.
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