4.0 Porter Five Forces Analysis
4.1 Threat of Entry of New Competitors
According to Jim Wilkinson (2013), threat of new entrants refers to the threat of new competitors pose to existing competitors in an industry. For Panasonic, the threat of entry of new competitors into the technology industry is high due to the large scale of economies, such as Samsung, LG and Sony which have strong brand awareness over the years. This results in high entry barriers as large capital is required to purchase necessary equipment for setting up their company. Moreover, the creation of a brand identity that differentiates a product or service from the competition and encourages loyalty can help to create a barrier of others (The Open University 2007). Therefore, it is hard for the new competitors to enter into the technology industry.
4.2 Bargaining Power of Buyers
“The relative strength of buyers is affected by buyers’ price sensitivity” (The Open University 2007). The bargaining power of Panasonic’s buyers is high because of the electronic products which are highly price sensitivity. In today’s world, electronic products are considered to be luxury good and demand for the electronic products is getting higher because of the modern lifestyle (Lancaster 2002). Thus, this forces the Panasonic to reduce prices in order to maintain their customers.
4.3 Bargaining Power of Suppliers
The suppliers’ bargaining power is low. As we know that Panasonic has been established for a very long period and this brand is familiar among the people, so the suppliers cannot afford to lose such important customer. Additionally, Panasonic usually purchases high volume of goods produced by the suppliers and most of the raw materials are imported. Thus, the local Panas...
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...ssing Engine for crisp and clear moving pictures even during the fast-paced action. The upgrade on Panasonic plasma TV features has led the Panasonic Company to be the top of the food chain among the other competitors (Ian White 2013).
Furthermore, Panasonic is also committed to creating the products which are environmental-friendly. “In line with this commitment, all VIERA plasma display panels are free of both lead and mercury. This reduces the impact on the environment years down the road when the TV is recycled or retired from use.” (Panasonic Middle East 2012). Additionally, Panasonic also emphasizes on ecological consciousness during the product development process (Panasonic and the Environment 2014). This will finally attract more environmentally-conscious customers who support green environment and differentiate Panasonic products with their competitors.
The reason for this is that there are barriers to entry and exit to potential clients to the firm. Examples of these barriers would be, high capital. costs i.e. start up costs for new firms because the existing firms are already operating in a large market and are well established, they. would have created a brand image and would have brand loyalty. therefore, new firms will find it hard to capture the market.
Porter’s Five Forces is defined as threats of new entrants, bargaining power of suppliers, power of buyers, the threat of substitutes and rivalry among existing competitors. New entrants into the industry aim to gain market share from rivals, so the intensity of competition may require to make changes on current strategy of marketing to maintain existing market share. The bargaining power of suppliers is one of the threats on the industry where price changes or product quality by suppliers can impact the profitability. Therefore, it is important for the companies to keep alternate suppliers or a contract to ensure prices, quality and quantity of the product so to avoid the company's supply from falling behind. The power of buyers can force the companies to lower the prices and offer different type products and service. Buyer can threaten the company with the competitors which may cause a negative impact on the bottom line to the companies. Thus, it is important to create a loyalty market share to avoid this threat. The threat of substitutes increases when another industry offers a similar product or services to customers within the same industry with a lower price. In this case, the industry profitability sinks since the product is available at a better price. This threat forces most competitors to price match or better performance. Rivalry among existing competitors ...
Threat of new entrants is relatively high. Companies forming alliances are potential rivals. Even if earlier such company was not considered to be a threat, after merging with some research and development company or forming alliance with another pharmaceutical company it would become a rival to Eli Lilly. The threat is however weakened by significant research and development costs necessary to successfully enter the business. Eli Lilly’s focus on a relatively narrow market of sedatives and antidepressants weakens the threat of new entrants, but other products that form lesser part of company’s sales such as insulin and others are exposed to high threat of new entrants. The need of obtaining certificates and licenses also weakens the threat of new entrants. Discussed above leads to the conclusion that threat of new entrants is medium.
Historically the personal computer (PC) industry has sold its products at reasonably high prices yet garnered only small profit margins. One reason for this is the high competition in the PC industry which led to competitive pricing among producers. Analyzing the competitive environment of the PC industry, it is evident that there is very little barrier to entry in this market. PC's have very low physical uniqueness and are made of standard components that require very little expertise to assemble.
High barriers to entry that restrict new firms to enter the industry e.g. control of technology
One of the factors contributing to the barriers to entry is the high capital requirements that are needed in order to compete in the market. Large investments are required in acquiring facilities and maintaining them, along with purchasing the expensive equipment relative to manufacturing welding products. Purchasing the equipment is not enough, but new companies are also required to develop the advanced technologies before effectively competing in which is really time consuming. With these asset specificities, potential entrants are discouraged from committing to obtaining these specialized assets that have no other means of use or profitability if the venture fails. When existing firms acquire these specialized assets, they are more inclined to resist efforts by other competitors from stealing market share, therefore enhancing the competitive disadvantage for new entrants.
Rivalry among established firms is fierce. There are several factors that illustrate this: established market players (6.1). The product is highly standardized and the switching costs of the customers are low. Players are aggressive (6.2)
ABC Electric is facing several issues that needs to be address in order to stabilize their competitors growth as well as increasing their market share and profitability. These issues are closely related to their external competitive strategy, which seems to be non-existence on a whole. Base on my brief discussion above, I believe that ABC Electric has in-voluntarily allows, one of its competitors to make advancement by improving its quality and service of their product without increasing price. Due to the fact that, ABC perceived its customers to be immune to price thereby remaining loyal to its product because of the quality and reliability that comes with the product image. As a result, this perceived brand loyalty created a threat to the company. The second issue facing the company is, a supplier of whom ABC purchases its electric motors from for its welder has raised the price by almost 10%. In looking at this, the bargaining power of the supplier is very strong because the switching cost might be very high. Moreover, it will become damaging to the company based on the current reduction in price within the industry if the problem is not solved.
Gome Electrical Appliances: Competing for Channel Leadership tell us a story about the legendary development of Gome Electrical Appliances. Its low price sales strategy and the countermeasures toward the price control of the color television price alliance to maintain channel leadership. This case analysis identified two major problems of market strategies Gome took in the channel leadership battle, provided two recommendations, and then analyzed the feasibility of the recommendations.
The pricing strategy will start out rather high for this product upon its release in order to draw a more selective crowd such as the upper class members of the urban society. Once the product has succeeded within this market there will be a development of additional variations of the product which will allow for certain models, with less features, to be sold at a lower price point in order to attract the members of society who are less willing to pay the high asking price for the top of the line version of the
price as the major decision-making tool for customers (“Global Consumer Electronics”, 2013). This lack of
Threat of substitutes in market as best quality is not always a priority for some customers as they are price sensitive.
After a 4 P analysis of the company one found that it found itself in a luxury market where product quality and constant innovation are key points for the success. That is why the production process and its design can take even months. Product line is extensive however it is only conformed of high priced products. Price in this case is a guarantee of the quality present in the product. Moreover, high pricing represent an element of differentiation that the customer appreciates. However this is not a setback, LVMH has managed to have world wide presence and success. To accomplish it its selective retailing division is of high importance. Nevertheless, promotion posses the major challenge since its through this that the image of the product its transmitted that is why the company poses a major part of its budget in this section. It is Important to note that the percentage allocated is higher than those of most competitors.
The system adopted by 7-eleven maximizes the threat for new entrants. That’s means that threat of new entrants of 7-Eleven is low. It is because 7-Eleven has already reached economies of scale through maintaining a strong customer base and brand loyalty. Over the years, 7-Eleven has increases their customer and brand loyalty. The access to latest technology and capital investments in the same ensures that the barrier for entries for new entr...
Panasonic Case Study (Graphics Not Included) Panasonic operates under the umbrella of the Matsushita Electric Industrial Co.