Michael Porter is famed for his competitive force model that has been used to analyze the competitive environment with the sole aim of crafting an effective competitive strategy. Porter identified five variables that can be used to evaluate a firm’s competitive force. These variables are;
- The bargaining power of the suppliers.
- The threats posed by new entrants.
- The bargaining power of buyers.
- Threats posed by substitute products.
- The degree of industry rivalry (Fleisher and Bensoussan 45).
For this assignment, the five forces will be applied to the Cell phones manufacturing industry in general.
The Bargaining Power of the Suppliers
This is an important aspect to consider in this industry. The concentration of cell phone manufacturers in the industry is very high and new ones are still coming up. Thus, any company that needs to remain competitive in this industry must be ready to face this concentration.
Selling in masses remains an important variable in this industry. This makes this variable to have an immense weight in the quest to craft a competitive strategy.
There is little input differentiation in the industry. This means that the differentiation of end products is also minimal.
Switching costs are either too low or non-existent. This makes this variable an important consideration for effective strategy crafting.
Threat of Forward Integration
There are little chances that the suppliers can integrate to influence the pricing supplies. This is because the industry inputs vary in a great way and thus the suppliers are drawn from a wide base of other industries.
Threats of New Entrants
There are no restrictive government policies for this industry. Thus, the threat posed by new entrant is very high.
Initial Capital Outlay
To establish a big firm for mass production of recognizable brands is an expensive venture. This means that the market share is protected as new entrants may not necessarily have the huge initial capital outlay.
Brand Royalty and Identity
Established brands such as Apple, Nokia and Samsung among others are widely known across the globe. This means that new entrants must come with an extremely important advantage to get a sizable market share.
These are non-existent. There are no huge sunk costs to make the switching costs too high in the industry.
Any firm that joins the industry has an access to the industry. Thus, there are no absolute advantages to those firms that have established distribution channels.
Threats Posed By Substitute Products
These are non-existent as buyers can easily opt to use the substitute’s products at no costs. There are no key lock strategies that are attached to the concept of costs.
Price of products in the cell phone industry varies tremendously. Cell phones remain expensive compared to fixed-line phones that are the main substitutes as well as VoIP services.
Buyer’s attitude towards substitutes
This depends on the extent of specialization that has been put forth by the product manufacturers. Most cell phone users have low inclination towards the substitutes.
These are numerous. The advent of smart phones has tremendously added value to the cell phones which make the industry to have a comparative advantage compared to its competitors.
Some of the substitutes are of superior quality. Firms within the industry must ensure that they maintain high standards for their products.
There are limited barriers for exit. Firms must remain vigilant to ensure that they are not pushed out of business.
The industry is highly concentrated. There are no absolute advantages for being early entrants into the industry.
Differentiation Level of the Products
Products have in the cell phone industry has little differentiation (Fuld 85). This makes it easy for customers to switch to competitors.
Rate of Growth
As noted by Hill and Jones (77) the rate of growth experienced by the cell phone industry is phenomenal. This attracts new entrants thus posing a threat to the existing firms.
Some brands are widely recognized. However, most of these brands such as Apple have expensive products which erode their identity advantage.
Brands that are widely recognized are too expensive to the ordinary buyer. This erodes the advantage of these recognized brands.
Availability of Substitutes
There are numerous substitutes in the industry. Buyers can decide the products they are interested in.
Sensitivity to Price
Buyers are not very sensitive to the prices of the industry products. Firms can utilize this to its advantage.
Levels of Differentiation
There are few differentiation instances in the modern cellphone market. This denies firms that seek to differentiate their products the differentiation advantage.
These are non-existent in the industry. Buyers can choose the products they want from a wide selection of available products.
Fleisher, Craig and Bensoussan, Babette. Business and competitive analysis: effective application of new and classic methods. New York: FT Press, 2007. Print.
Fuld, Leonard. The Secret Language of Competitive Intelligence: How to See Through and Stay Ahead of Business Disruptions, Distortions, Rumors and Smoke Screens. New York: Dog Ear Publishing, 2010. Print.
Hill, Charles and Jones, Gareth. Strategic Management Theory: An Integrated Approach. 9th Ed. Upper Saddle River: Cengage Learning, 2009. Print.