Porter’s Five Forces Model – Example: Mobile Phone Industry These five forces are a part of every industry. There are several smartphone brands in the market. January 23, 2020 November 25, 2019 by Abhijeet Pratap. “Porter’s Five Forces Analysis of Smartphone Industry.” Notesmatic, 25 Nov. 2019, notesmatic.com/2019/11/porters-five-forces-analysis-of-smartphone-industry/. The reports investig… SMARTPHONE INDUSTRY: THE NEW ERA OF COMPETITION AND STRATEGY Instructor Janne Peltoniemi Pages 43 pages Supervisor Janne Peltoniemi The thesis aim was to give a quick glance at the smartphone industry start with the ... of smartphone based on facts, analysis and expectations from users and expertise. In conclusion, competitive rivalry is very high for mobile phones, with major brand competitors such as Samsung, Apple, Nokia and Sony competing and dominating the industry. Apart from that, they also invest aggressively in research and development to make their smartphone models stand out from the competition. The report discusses that fact the smartphone industry has rapidly grown over the last two decades. It is 21st century, where consumers have high quality information available, which increases their position in terms of bargaining power. Indeed, it can be said that this element exerts the lowest force, as there are very few domestic or international competitors for China Mobile. The Five Forces Analysis on Gaming Industry. The main purpose of Porters Five Forces is to find a position in an industry where a company can defend itself against competitive forces or it can influence them in its favour. Retrieved from https://notesmatic.com/2019/11/porters-five-forces-analysis-of-smartphone-industry/MLA: Pratap, Abhijeet. Leading smartphone brands like Apple, Samsung and Huawei are comparatively larger firms with enormous financial strength compared to the suppliers. . The bargaining power of suppliers in the smartphone industry is generally low except for the few large players like Google. The threat of substitutes could be described as low, due to the added functionality that smart phones and mobile phones have over single featured technology products such as digital cameras. Products with higher quality are higher in demand. They also play a critical role in the smartphone industry and affect the profitability of individual brands. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. Five forces analysis looks at five key areas namely the 1) threat of entry, 2) the power of buyers, 3) the power of suppliers, 4) the threat of substitutes, and 5) competitive rivalry Threat of New Entrants: The markets in which Apple competes in are highly competitive and threat of new entrants is also high. MGMT-1100 September 13, 2012 The Five Forces Analysis on Gaming Industry Every man in the business uses five forces in order to progress in company’s industry.The five forces are customers, entrants, substitutes, supplies, and the nature of rivalries. One of the primary reasons behind the growing bargaining strength of the customers is the high number of substitutes in the industry. Michael Porter designed a Five Force analysis for use in exploring the environment in which a company or a product is operating so as to create competitive advantage (Rothaermel, 2015). Porter’s Five Forces is also used to evaluate the rivalry and power of the individual players within the smartphone industry. A stronger force means lower profitability, and a weaker force means greater profitability. To maintain their competitive position in the industry, smartphone companies are focusing heavily on research and development as well as marketing. The threat of substitutes in the smartphone industry mainly comes from rival brands and their products. There are several forces that affect the competitive position and success of smartphone companies. Overall while adoption and use throughout the world have grown, smartphone demand fell in 2018 and 19 compared to previous years. Porter’s Five Forces Tip #3: Understand the threat of products that customers might be able to use instead of yours 4. (Porter’s Five Forces Model). Apart from investing in technological innovation, which is essential for differentiation and market share, they also need to focus on marketing and customer experience. Overall the bargaining power of customers is moderate. These forces are illustrated in Figure 1 below: Figure 1 Xiaomi Porter’s Five Forces The bargaining power of buyers could be rated as medium, with a wide variety of mobile phones available. The leading brands in this industry with the highest market shares are Samsung, Apple, and Huawei. The focus on customers and customer experience is much higher than ever before. The top five brands with the largest market share include Samsung, Huawei, Apple, Xiaomi, and Oppo. The smartphone industry is marked by heavy competition. Most models in a category come with similar features and nearly similar processing power. However, the incumbent players aggressively invest in marketing and innovation to retain their market share and so winning a significant market share is very difficult for any new player. The bargaining power of suppliers is medium because mobile phone manufacturers rely on their key suppliers for quality component parts at competitive prices and the operating system such as android is open source. Apart from the top five, there are other brands also competing for market share. New entrants could find it very hard to compete and gain economies of scale and market share against major brand players in this industry. While the number of smartphone models has grown in the market, they are now more affordable than some years earlier. These five forces are a part of every industry. 3 Porter’s Five Forces. It is why suppliers have to follow the quality standards set by the smartphone makers and their bargaining power remains limited. The report considers whether the market segment is controlled by a few major players . For example, smartphones with higher processing power and efficient cameras are higher in demand compared to other models. How To Download Movies On Windows Mobile Phones – App, The Role Played By Media Companies in Oklahoma City, Why No Small Business Should Ignore SEO Services Even in 2020. Analyse the global smartphone industry and how the five forces have affected Huawei and rival firms and the impact on industry structure, attractiveness, and profitability. Competition has grown stronger because of the low scope for differentiation and demand having grown stagnant in recent years.CITE THIS:APA: Pratap, A. Xiaomi and Oppo have also maintained competitive prices to retain their market share. We will further discuss the purpose of this market analysis in the next section. ... Maruti the Porter’s Five Forces Analysis Is Designed to Evaluate the Competitive Forces in the Industry the Firm Operates. The main purpose of Porters Five Forces is to find a position in an industry where a company can defend itself against competitive forces […] All these factors together limit the threat that arises from the entry of new players in the market. Porters Five Forces Model. External environment – Smartphone industry Smartphones are not only revolutionizing the mobile phone industry. Porter’s Five Forces on the Smartphone Industry Published by yanggu at 12:47 am under Uncategorized RIM’s stock dipped below $20 per share today , but that’s just one company. LG and Vivo have also maintained impressive market shares. Porters Five Forces Model. Recently, the ban on Huawei related to the use of Android OS caused its sales to fall. He graduated with a Hons. Driving Forces Dominant Features Five Forces Strategy Group Map Key Success Factors Company Analysis Overview Value Chain Analysis SWOT Analysis Competencies Business Analysis Competitive Strategy Recommendations 3. The threat of substitutes emerging from competing products also grows higher because differentiation has become difficult. Achieving differentiation is difficult and so apart from technology, companies focus on their pricing strategies and customer experience. The leading companies are also among leading spenders on research and development. The company has a brand value of 91.3 billion USD with total global revenue of the company has reached to 218.7 billion USD (IBIS World, 2019). Google is one of the largest suppliers in the smartphone industry. Chinese Smartphone Industry Five Force Analysis. The number of substitutes is already high in the market since there are several models in each segment. To overcome the threat from substitutes brands invest in marketing and product innovation. There are several forces that affect the competitive position and success of smartphone companies. Industry analysis is crucial for sound business management. In 1998, the Industry was in a state of Duopoly, with the only players being Eircell, with 330,000 customers, and Esat Digifone, with 80,000. The intensity of rivalry in the smartphone industry is very high. By using the information in Huawei five forces analysis, strategic planners will be able to understand how different factors under each of the five forces affect the profitability of the industry. The analysis of the industry should give an understanding of the driving factors and the attractiveness of the smartphone market. While it is still not a leading player in the industry, still the market share of Pixel in the US market has increased over time. Low switching cost (strong force) Companies like Samsung and LG aggressively compete with Apple. In recent years, the demand for smartphones has plateaued. However, some factors that can moderate the threat from substitute products include product quality and brand image. Porter’s five forces model is an analytical tool to analyze the competitive position of businesses and the profitability of a particular industry. This component of Porter’s Five Forces analysis model determines the intensity of the influence that competitors have on each other. Threat of substitute products or services for each product category offered by Samsung is substantial.Samsung smartphones can be substituted with ordinary mobile phones at any time with no additional costs for customers. (March/April 1979). Five Forces Model Analysis of the SmartPhone Market The Five Forces Model (Porter, 2008) provides a useful framework for evaluating the dominant competitive forces that influence the size, direction and intensity of competition in a given industry. Moreover, most suppliers lack forward integration capability which also leads to lower control. Understand how Huawei has managed to defend against intense competition and the strategies it uses to create 'blue oceans' that are defensible, helping it capture market share and maintain competitive advantage. In addition to that it should answer the question, which strategy is executed by Apple, Sony and Xiaomi in this highly competitive industry and show what advantages or disadvantages these strategies have. The company is leading in the smartphone industry with a 21 percent s… Apple faces the strong force of competitive rivalry or competition. Porter’s Five Forces is an analytical framework developed by Michael Porter (1979). Porter’s Five Forces Analysis of Smartphone Industry. The five forces developed by Porter include threat of entry, power of suppliers, threat of … Porter’s Five Forces Analysis of Smartphone Industry. The switching cost to the consumers are very low, which means, consumers can easily switch to other brands after gaining more information for that product. Except, Apple’s iPhone rest of the smartphones run on the Android OS. In Samsung Electronics’ case, the overall bargaining power of the consumers is moderately high. Stagnating demand also works as a barrier to entry for new brands since they will have trouble winning customers for new products. In 1979, Harvard Business Review published How Competitive Forces Shape Strategy by a young economist and associate professor, Michael E. Porter. Customers have major brand choices and don’t mind paying higher prices, for the latest smart phones and mobile phones. Market penetration was a mere 11%, having grown by … Michael Porter developed the Five Forces method of analysis in 1979. The bargaining power of buyers in the smartphone industry has increased owing to several factors. This five forces analysis is just one part of the complete Porter strategic models. Moreover, companies have to deal with some major challenges to strengthen their competitive advantage in the industry. [mobilixshortcode] Porter’s Five Forces Model – Example: Mobile Phone Industry In 1979, Harvard Business Review published How Competitive Forces Shape Strategy by a young economist and associate professor, Michael E. Porter. What is Five Forces Analysis? Summary Of Recent Research Into Mobile Phones. Reference: Porter, M.E. If we look at the mobile phone industry worldwide, the five forces could be rated as follows. 1  The Five Forces model aims to examine five key forces of competition within a … There is a total number of 9,269 businesses worldwide which shows the intensity of the competition in the industry. Moreover, while Samsung and Huawei have managed competitive pricing strategies, Apple which is known for its premium prices also priced the base model of the iPhone 11 competitively in order to maintain demand. A strategist can analyse, any market by rating each competitive force as high, medium, low in strength and rate as follows. While Apple makes only premium models, its products compete with the premium offerings from Samsung and Huawei as well as Xiaomi. As China Mobile operates in a heavily regulated market where the government limits competition, the power of this element is not high. However, large players with a strong image and sufficient investment can still enter. Currently, rapid transformation is taking place and competition to control the lucrative market has increased. (2019, November 25). Further, the fact that China Mobile is a monopoly player coupled with the large market share it has means that it faces little or no competition from existing or as we shall discuss, new players. The chosen market for this market analysis example is the smartphone industry. Required fields are marked *. Higher the competition level, advanced the technologies will be, and prices will be competitive, which greatly impa… Capital requirement: - Constant innovation on technology - Large capital investment Threat: MID to LOW Threat: MODERATE - Force threat: moderate to low - Market: attractive because low competition Porter's 5-forces model analysis Learning curve effect Competitive structure: These include the bargaining power of suppliers and buyers, barriers to entry, threat of substitutes, and the competitive rivalry of firms already in the industry. Figure 1 Samsung Porter’s Five Forces . Moreover, customers are well informed and have several choices before them. Following is a five forces analysis of the smartphone industry. Smartphones have become a part of everyday life for many, and their relevance is only growing as prices drop and access to new technology spreads. Apple has its own operating system and so in its case, the bargaining power of suppliers is even limited. Such aggressiveness, observable in rapid innovati… Analysis Of Porter's Five Forces Attractiveness Of Telecommunications Industry. Analyse the smartphone industry and how the five forces have affected Xiaomi, as well as global rivals and the impact on industry structure, attractiveness, and profitability. Low differentiation of products (strong force) 3. They also play a critical role in the smartphone industry and affect the profitability of individual brands. The barriers to entry are not very high and generally, you do not need to invest very large capital to enter the market. In Apple’s case, this influence is based on the following external factors: 1. The size of the consumer electronics manufacturing industry is massive as it collects revenue of more than 1 trillion USD annually which speaks volumes of its success and depth. Porter’s five forces: Porter’s five forces analysis is done to understand the industry attractiveness of the smart phone industry. 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