Analysing Competition Barriers for the Aftermarket : The Case of Volvo Cars’ Air Filter
Sammanfattning: Original equipment manufacturers (OEMs) spend plenty of resources in developing products and establishing a profitable market. This includes time-consuming investigations, costly research and development processes, as well as a great deal of risk-taking. In comparison, certain companies specialise in fitting aftermarket merchandise to established markets of products. These companies copy existing aftermarket products as they supply the consumer an alternative that is often cheaper. These are regarded as ‘will-fitters’. Not only do will-fitters act within the market without the need for a lengthy R&D process, or exposure to high risk, but they also seize market share and thereby compromise OEM part sales. Will-fitters pose a concrete competitive threat to an automotive OEM in the aftermarket. The aftermarket is considered highly lucrative, as profitability is relatively high when compared to the car sales market. As will-fitters are active in the market, spare part market share is lost and pieces of a highly profitable market are seized by such competitors. This study investigates relevant OEM competition barriers for will-fitter deterrence and analyses the effects of implementing these barriers. The findings are based upon a case study performed at an automotive OEM, i.e. Volvo Cars. The case focuses on the OEM’s engine air filter, which is currently highly exposed to competition from alternative suppliers. Through combining theory regarding product development and entry barriers along with empirical findings at the case company, the study concludes six competition barriers that are relevant for the OEM as it faces will-fitters. These barriers are: patenting a utility, increasing the level of product complexity, raising the necessary financial investments, delivering additional value offerings, obtaining a strong customer value perception, and pricing competitively. The study concludes each of the barriers’ potency in competition deterrence and discusses the effects of implementing those barriers on the products’ underlying costs. Finally, it is concluded that these barriers could be implemented in order to deter competition. However, none of the discussed competition barriers has shown to yield complete market dominance for the OEM, i.e. a market without competitors. Rather, an effect in the form of decreasing the amount of competitors has been noted. Admittedly, reducing the sheer quantity of active market players seems favourableto the OEM, but a direct correlation with increased market share cannot be concluded.
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