Industrial Background
Throughout the modern era, the technology has become a strategic tool for organizational success and necessity for customers. In context to businesses, none of the sector can operate and survive without the institution and usage of information technology (IT). By the utilization of IT, businesses tend to enhance their competitive advantage in the industry. Discussing the customers, they use IT for purposes such as socialization, acquisition of information, entertainment, and educational means. However, this paper aims to use Porter’s Five Forces Model to study the strategic position of Samsung before making a takeover decision. By definition, Michael Porter introduced this systematic micro economic model in order to analyze the tendency of competition that influences the strategic development of an industry and/or business (HBR, 2014).
Threat of New Entrants
The industry of IT is extremely attractive for new entrants due to rapid growth, expansion, and promising chances of revenue generation. Besides, the customer base of the industry is highly appealing for the newcomers within the industry. However, the industry is unattractive for new entrants to penetrate because of various conditions of survival. Samsung has a cost-advantage that is least possible for new entrants to accomplish. A new player would require a large-scale investment before industrial penetration. Since the barrier to entry is higher and barriers to exit are lower, our acquisition would kill another industrial competition and strengthen the industrial positioning. New players would not risk a large amount of capital to survive the existing hold on industry, as our monopolistic strength would be capable of sabotaging their existence. However, we need to consider the existing nature of competition that could harm the sustainability of our company. Due to strict retaliation from current players, new companies follow ‘hit and run’ technique of penetration. This refers to the appearance with newer ideas, generate lucrative profits, and run away from the industry (Mohapatra, 2014). As result, these short spans could harm our market share regardless the strength of industrial position after the acquisition.
Threat from Substitutes
The element of substitutes is extremely higher in the IT industry since customers are flooded with the alternatives in choosing products and services. In context to services, the distinction is comparatively low since the digital applications operate on similar platforms. However, the products are distinct in nature and difficult to acquire with hardcore loyalty from customers. Besides the monopolistic nature after the takeover of Samsung and least possible chances of encountering new players, our company needs to offer different prices and unique selling points (USPs) to customers in order to retain the market share. The threats of substitutes are higher in the IT industry (Evans, 2015).
Bargaining Power of Supplier
The suppliers of the IT industry are the prime players such as LG, Apple Inc, and Microsoft. These organizations provide equipment to the firms and general target audiences for regulating their conducts. The distinct features could be speed, internal memory, lifespan of the product, and general updates at regular intervals. Precisely, the featured inputs of the products and relationships with the customers are standardized. We would face least issues related to bargaining as industrial suppliers since our penetration is stabilized. However, new players would find it impossible to penetrate the industry with similar or improved standards because of existing relationships between target audience and sustained players (Bauer, 2013). The bargaining power is higher for our company after the acquisition.
Bargaining Power of Buyers
In context to the IT industry, buyers are referred to each person that is living in complete senses. Besides the nations that are unequipped with the technological enhancements, the products and services offered by the IT industry are utilized by mass scale consumers. Due to immense scale of buyers, the control over the bargain for customers is stronger. However, the power of bargaining becomes weaker since the gadgets are expensive, which results in difficulties while dumping a brand. The products offered by Samsung and our company comprise with higher value. After the acquisition of Samsung, our products would result in difficulties for customers to switch the collaborated brand in a prompt manner. Nonetheless, we still need to consider that the customers are not shackled with single entity and have a tendency of power to switch brands. The bargaining power of buyers is mix in nature, which is a combination of both strong and weak.
Rivalry among Existing Players
The industry has fewer players that regulate the entire sector and mass scale customer base. Their regulation and control over the industry is a core reason for non-penetration of new players. The IT industry is prominent for rapid expansion, efficiency, and competition. Large-scale organizations, which include our organization namely Apple Inc., and Samsung, Nokia, and Motorola gain industrial sustainability through economies of scale (EOS). For new entrants it is difficult to attain promptly after the penetration. Moreover, the market share of the sector is distributed unevenly between the present entities that are indulged in cutthroat battles of promotions among each other. As result, the tendency of rivalry with existing players is extremely high and sensitive even after the acquisition. We need to consider the financial backups for facing the competition and retaining the market share after acquiring Samsung.
References
Bauer, C. (2013). Porter's Five Forces Model - Information Technology Industry. Google. Retrieved 24 August 2016, from https://sites.google.com/site/computerindustryadmn703/home/porter-s-five-forces-model
Evans, N. (2015). How digital business disrupts the five forces of industry competition. Computer World. Retrieved 24 August 2016, from http://www.computerworld.com/article/2976572/emerging-technology/digital-disruption-from-the-perspective-of-porters-five-forces-framework.html
HBR,. (2016). The Five Competitive Forces That Shape Strategy. Retrieved from https://hbr.org/video/2226587624001/the-five-competitive-forces-that-shape-strategy
Mohapatra, S. (2011). IT and Porter’s Competitive Forces Model and Strategies. Researchgate, 265-281. Retrieved from https://www.researchgate.net/publication/226349758_IT_and_Porter's_Competitive_Forces_Model_and_Strategies
