Introduction
Development of marketing strategy of the consumer technology industry has to be based mainly on the analysis of industrial structure. The best analysis tool of the structural features of this industry is the five forces developed by the Porter. We will use these forces to design marketing strategies and develop a sustainable competitive advantage for the consumer technology industry. We will determine the attractiveness of the consumer technology industry in order to measure perceptions of the strength of the five forces. They will help to formulate effective marketing strategies and predict the future movements in the consumer technology industry.
Porter’s Five Forces
The five forces are well implemented by the established organization in the industry. The analysis is employed at the level of the organization’s strategic business unit. Although the five forces analysis is integrated from the perspective of an incumbent firm, it can be used to establish whether a firm outside an industry should enter the industry. The barriers to entry, which may be protecting the incumbents in an additional cost those outsiders, must factor into their analysis of whether to enter the consumer technology industry (Porter 47). Therefore, the Porter’s five forces are an analytical tool used to assess the competitive environment. By examining the five competitive forces, the firm will be capable to assess its ability to compete effectively in the consumer technology industry. Market concentration levels will be analyzed using the market concentration levels low, medium and high for assessing their competitive and defensive strategies.
The threat of new entrants (low)
The threats of new entrant’s analysis the extent to which new rivals may decide to enter the consumer technology industry and reduce the level of profits being generated by incumbent firms. The problem of the consumer technology industry is that they are too easy to enter due to excess capacity and intense competition. Therefore, the consumer technology industry falls into the low-market concentration category. The new entrant must analysis the risks that incumbent organizations might respond if the new firm enters the industry. The relative cost advantage is vital and will establish the extent, which the main player can reduce prices, and force a new entrant into a costly and damaging price war (Schermerhorn 67). In analyzing the threat of entry, I vital to realize that the organization can develop a competitive advantage in an industry.
Bargaining power of buyers (high)
Buyers can affect the consumer technology industry via their capability to influence the prices, bargain for higher quality and play competitors of each other. This power of buyers demonstrates the extent to which their purchase influences the overall sales of an organization. The market concentration in the consumer technology industry is high. This is so because there is a concentration of buyers and the purchasing volumes are high due to concentration of buyer compared to suppliers. Similarly, the buyers tend to purchase high volumes because there is the significance of the buyer’s business to the supplier increase. For instance, the consumer technology industry may have a capacity of exerting massive pressure on the supplier’s margin because of the size of purchases it could make in the market (Henry 65). The consumer freedom to purchase from any firm ensures the decrease in profits within the industry. However, the bargaining power of the buyers is also demonstrated by their concentration.
The Threat of Substitute (medium)
A competition that arises from products or services can achieve similar needs. The substitute products can reduce the potential return of the consumer technology industry. The existence of substitute’s products in the market can make the consumers switch to them due to the price increase in the market. This arises when the price performance ratio of substitutes is greater than the price of existing product. This price-performance determines profitability levels within the consumer technology industry. Therefore, the market concentration level of the threat of substitutes is medium because both companies can use adverting and brand image to appeal to consumers (Roy 78). Similarly, competitive pressure exerted by substitutes is generally positive for the consumer technology industry.
The Intensity of rivalry (high)
The rivalry among competitors is the determinant of the competitive state of the most industries. The profitability is based on competition among the organization within the industry. The organization in the consumer technology demonstrates a high degree of rivalry, which reduces the profit of the industry. This rivalry exists where there is a form of incumbents competing forcefully on the price (Henry 67). Rivals and the existence of lower profits for all organizations in the consumer technology industry can easily balance the price reduction. On the other hand, the product innovations, advertising and improved customer service will increase the demand in the consumer technology industry. Similarly, the market concentration for rivalry is extremely high because the competitors in the industry go for every opportunity in order to improve their market performance. However, this concentration changes when factors affecting competitive rivalry changes.
The Power of Suppliers (high)
The most predominant suppliers capture most of the values for themselves by charging higher prices based on the quality of products. These suppliers are in position of squeezing profit out of the consumer technology industry, which cannot be passed on when cost increases due to its own price. The factors that raise the supplier’s power are the mirror image of those that increase the buyer’s power. In the consumer, technology industry the buyer is the organization and the supplier is the producer of that organizational input. For instance, the consumer technology industry has contributed to the erosion of profitability among the suppliers by increasing prices on operating systems (Morden 47). Therefore, the market concentration of the consumer technology industry is high because the parties keep on switching costs and changing suppliers.
Relative Power of other Stakeholders (high)
This is the sixth force in the framework which analysis how the stakeholder can influence the organization’s competition. The stakeholder strategy matrix offers useful guidance for managers in dealing with stakeholders. This sixth force suggests that strategies for dealing with stakeholders can be established based on their ability to cooperate and threaten organizational results (Michael 1195). The market concentration level of stakeholders is extremely high because the stakeholders are the people who matters to the industry structure. It is the tool, which helps to understand how people, policies and institutions affect each other.
Conclusion
In a recap, the six forces framework helps the organization achieve the attractiveness of their industry by analyzing the market concentration level of each of the six forces on their industrial structure. The organization can benefit from understanding the forces of industry structure by analyzing a strategy, which supports their position based on the six forces. Therefore, these forces work best when used at the level of the strategic business unit.
Works Cited
Henry, Anthony. Understanding Strategic Management. Oxford: Oxford University Press, 2008. Print.
Michael, Polonsky. "An empirical examination of the stakeholder strategy matrix." European Journal of Marketing 39.9 (2005): 1199-1215. Web.
Morden, Tony. Principles of Strategic Management. Aldershot: Ashgate, 2007. Internet resource.
Porter, Michael E. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press, 1998. Print.
Roy, Daniel. Strategic Foresight and Porter's Five Forces: Towards a Synthesis. München: GRIN, 2009. Print.
Schermerhorn, John R. Exploring Management. Hoboken, N.J: Wiley, 2010. Print.
