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Literature search on reasons behind the relation between incumbents and challengers

Discuss about the Analysis of Incumbents and Challengers for Assembly Plants.

The incumbent with respect to the business perspective is the leader in the industry which has large share in the market as compared to the other organizations. The incumbent organization is much more powerful in the industry in comparison to the others who have their operations in the same area. The different business relationships and standings are thereby defined with the help of the term incumbent. The relationships that are develop within the suppliers and the organizations are defined with the help of term incumbent. The incumbents in this case are those suppliers who have been able to capture the market before the others. The challengers in the business are those who are able to challenge the incumbents. The organizations which challenge the share that is held by the incumbent organizations in the market are thereby termed as challengers (Ashworth, de Mesquita & Friedenberg, 2017).

The report will be based on the thorough research based on the ways by which the incumbents are provided tough competition in the market by the challengers. The two organizations which are considered for analysis in the report based on the relationship between incumbents and challengers are Tesla and Toyota. Tesla is an American multinational organization that was established in the year 2003 and has its base in Palo Alto California. The organization mainly specialises in the production of electric vehicles and its supply all over the world. The best-selling car of Tesla in the world is Model S. The company operates many production plants and assembly plants. Tesla is a challenger in the market with respect to the production and supply of electric cars (Tesla., 2018). Toyota Motor Corporation or Toyota is a Japanese multinational automobile organization. The company has been able to acquire the position of the first automobile organization in the world to have acquired the position of selling the highest number of vehicles within a year. Toyota has also started its operations in the production of electric vehicles and has been able to challenge Tesla Motors with the help of variety of models (TOYOTA MOTOR CORPORATION GLOBAL WEBSITE., 2018).

As discussed by, Ban, Llaudet and Snyder Jr (2016), the challengers who enter the industry with the help of new and innovative products for the customers are often capable of providing tough competition to the incumbents or the leaders in the market. The incumbent position that is held by an organization in a particular industry is not constant in nature and is vulnerable to change that take place in the external environment. The success that has been experienced by the organizations is not able to prepare them for the changes that can rapidly take in their position in the market. The incumbents in the market are therefore highly vulnerable to the disruptive innovators who enter the market.

Examples of incumbents and challengers

As argued by, Biersack, Herrnson and Wilcox, (2016), the disruptors who are able to gain success in industry are able to create a profitable position within a short period of time. These organizations are further able to bring something new to the market as well. The disruptive innovators are thereby capable of challenging the dominating position that is held by the incumbent in the industry. The challengers can thereby shake up the market position that has been held by the incumbent and then acquire the same position with the help pf products and services. The challengers also provide something new to the industry in which the organizations operate. The incumbents in the industry always have an advantage over the other organizations who are entering the market (Christensen, Raynor & McDonald, 2015).

The market leaders however always have to think about the ways by which they can save their shared in the industry with the help of different strategies, products and services. The incumbent organizations thereby cannot fall prey to the challengers who enter the market in an easy way. The market leaders have huge advantages that are provided to them by the industry in which they have their operations. The source of the advantage that is provided to the organization by the incumbent position include, deeper insights which the management has in the needs and desires of the customers. The market leaders are able to understand the profitability of serving the customers in a better manner as compared to the challengers.


According to, Eckles et al., (2014), the most important advantage that has been gained by the incumbent organization is based on the knowledge that the management has based on the profitability levels of the different customer segments. The incumbent organizations thereby need to exploit the advantages that are provided by the industry in order to face the challengers in an appropriate manner. The accounting system of the organization can also play an important role in the ways by which it is able to compete with the challengers. The challengers tend to bring new technologies in the industry which can attract the customers in an effective manner. The marketing related activities of the organization are important for the ways by which it can challenge the incumbents (Klašnja, 2015).

Research and development also plays a major role in creating a profitable position of the challenger in the industry. The research and development can help the challengers to introduce new technologies and methods that can be helpful for the successful operations of the challengers. The position of the market leader can be shaken easily by the challenger organization with the help of new and improved technologies. However, the challengers are not able to judge the needs of the customers like the incumbents. The challengers thereby need to gain the trust of the customers before it aims at challenging the market leaders with the help of its products (Kumaraswamy, Garud & Ansari, 2018).

The resources that have been gained by the market leaders with the help of their operations in the industry also acts as their strong advantage in the industry. The challengers also face a substantial lack of resources which acts as a major factor in the lack of profits. The advantage that is gained by the incumbents in the market is not used in an effective manner by many organizations in the industry. This provides a huge advantage for the challengers to capture the market and gain a significant share in the market. The resources which are possessed by the incumbents are not used optimally which further opens up new chances and avenues for the challenger organizations in the industry. In this manner, the challenger organizations are able to beat the incumbents in the industry (Layton, 2015).

The situation which has been created in the automobile industry currently depicts that Tesla is far behind the other organizations in the manufacture of supply of cars. The largest competitor of Tesla in this case is Toyota which is considered to be a market leader in the electric car manufacturing industry. The gap that has created by the low production rates of Tesla can be slowed down further with the help of entry of Tesla in the mid-priced market with the help of its product named Model 3. The quality of the products that are manufactured by Tesla in the market can be an important factor which will affect the operations of the organization and its profitability as well (Rey-García & Mato-Santiso, 2017).

The products that are developed early in the market are not the best which are offered by the company. Tesla is thereby aiming at improving the levels of product so that it is able to compete with Toyota in the electric car industry. The incumbent position that has been gained by Toyota in the market can be utilised by the company so that is able to maintain the shares that it has gained in the industry. The marketing based activities that have been conducted by Tesla is an important part of the entire operations of the organization (Snihur, Thomas & Burgelman, 2017). The company has been aiming at creating a profitable position in the automobile industry. The most important functions that have been planned by Tesla to provide competition to Toyota is include many different steps which are include,

  • Keeping number of models which are to be designed by the company to the minimum amount.
  • The number of parts that are used by the organization to the design different elements are also kept at a minimum.
  • The production of the parts is done within the organizational premises in an internal manner (Snihur, Thomas & Burgelman, 2018).
  • The normal aspects based on quality assurance of the organization are skipped.
  • The creation of worker unions is prevented so that the company does not have to face any issues.
  • The organizational processes are automated in an effective manner.

Tesla, as a challenger has been able to cause high levels of disruption in the industry and has always tried to exploit the advantages that are provided to a niche manufacturer. This process will be helpful for Tesla to create a leading position in the industry. Toyota on other hand has also exploited the advantages and the resources that have been created by the company over the years of its operations in the automobile industry. The organization has constantly invested in the marketing and research and development based activities so that it is able to compete with the challengers in the market (Svensson & Persson, 2016).

The topmost position which has been acquired by Toyota in the industry is a huge advantage that has provided opportunities to the organization to succeed. Tesla, is a challenger in the industry to Toyota and the organization is going forward fast enough to acquire the position of incumbent in the industry. Tesla has the full capability to capture the automobile market and beat the successful operations of Toyota Motor Corporation in the automobile industry. Toyota has however shown high levels of focus on the manufacturing of excellence and also delivering outstanding quality to the customers (Vecchiato, 2017).

The company has valued the customers highly and further tried to fulfil their needs and demands. The manufacturing process of Toyota is considered to set a standard in the industry. However, the manufacturing process of Tesla is capable of disrupting the operations of Toyota and further to become the largest automaker in the world. The number of cars that are sold by Toyota are quite high as compared to Tesla. However, the Tesla cannot be judged properly with the help of these numbers as the company is quite new to the operations. The market capitalisation that has been gained by Tesla in the automobile industry is quite low (Yin, Ansari & Akhtar, 2017). The recent numbers of Tesla have been quite disappointing which can be improved with the help of the products and services that are offered by the company to the customers. Tesla has the entire capability to beat the operations and profitability of Toyota Motor Corporation in the industry and create its topmost position in the market as well. This is the most important part of the entire discussion which is based on the research of the ways by which the challengers in the industry are able to beat the incumbents (Svensson & Persson, 2016). 

Conclusion

The report can be concluded by stating that the literature research of the relationship between the incumbents and the challengers has been able to support the statement that they are able to beat the market leaders. The two organizations which have been considered for the analysis in the report are Toyota and Tesla. Toyota is the leader in the market and Tesla is the challenger. Toyota has created a strong in the international automobile industry with the help of its products. However, the challenger has been able to provide tough competition to the operations of Toyota with the help of marketing activities and manufacturing processes as well. The research has further been able to reveal that Tesla Motors has the capability of beating Toyota Motor Corporation in the automobile industry in the future. The electric car industry is thereby based on the huge competition that has been given by the challengers to the leaders in the market.  

References

Ashworth, S., de Mesquita, E. B., & Friedenberg, A. (2017). On the Incumbency Advantage.

Ban, P., Llaudet, E., & Snyder Jr, J. M. (2016). Challenger quality and the incumbency advantage. Legislative Studies Quarterly, 41(1), 153-179.

Biersack, R., Herrnson, P. S., & Wilcox, C. (2016). Risky Business: PAC Decision Making and Strategy: PAC Decision Making and Strategy. Routledge.

Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation. Harvard Business Review, 93(12), 44-53.

Eckles, D. L., Kam, C. D., Maestas, C. L., & Schaffner, B. F. (2014). Risk attitudes and the incumbency advantage. Political Behavior, 36(4), 731-749.

Klašnja, M. (2015). Corruption and the incumbency disadvantage: theory and evidence. The Journal of Politics, 77(4), 928-942.

Kumaraswamy, A., Garud, R., & Ansari, S. S. (2018). PERSPECTIVES ON DISRUPTIVE INNOVATIONS.

Layton, R. A. (2015). Formation, growth, and adaptive change in marketing systems. Journal of Macromarketing, 35(3), 302-319.

Rey-García, M., & Mato-Santiso, V. (2017). Business-led social innovation in the work integration field: the role of large firms and corporate foundations. Business and Management Research, 6(1), 1.

Snihur, Y., Thomas, L. D., & Burgelman, R. A. (2017). The Disruptor's Gambit: How Business Model Disruptors Use Framing for Strategic Advantage. In Academy of Management Proceedings (Vol. 2017, No. 1, p. 11155). Briarcliff Manor, NY 10510: Academy of Management.

Snihur, Y., Thomas, L. D., & Burgelman, R. A. (2018). An ecosystem?level process model of business model disruption: The disruptor's gambit. Journal of Management Studies.

Svensson, R., & Persson, L. (2016). The advantage of selling an invention instead of turning it into a business. LSE Business Review.

Tesla. (2018). Retrieved from https://www.tesla.com/

TOYOTA MOTOR CORPORATION GLOBAL WEBSITE. (2018). Retrieved from https://www.toyota-global.com/

Vecchiato, R. (2017). Disruptive innovation, managerial cognition, and technology competition outcomes. Technological Forecasting and Social Change, 116, 116-128.

Yin, E., Ansari, S., & Akhtar, N. (2017). Radical Innovation, Paradigm Shift and Incumbent’s Dilemma The Case of the Auto Industry. Future Studies Research Journal: Trends and Strategies, 9(1), 138-148.

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