This document discusses Porter's five forces model and its application to analyzing various industries, including electronics, computer, and transportation industries. It analyzes the bargaining power of suppliers and buyers in industries like CPU manufacturing, bus makers, and couriers. It also discusses strategies used by companies like Sony, Dell, and FedEx to manage competitive forces and reduce the bargaining power of suppliers or buyers.

1. Ali Tehraninasr 1071200112 Reza Sigari Tabrizi 1071200031 Payam Ansari 1071200084 Supervisor: Dr. Anisah Multimedia University , Malaysia Savvy entrepreneurial firm

2. M ilestones of Sony

3. M ilestones of Sony

4. Sony today “ Sony is one of the most important companies in the world of business ”

5. TV & Audio Equipment Mobile Phones & Music Computer Game Consoles Movie & Video Equipment Financial Services Product Range

6. Electronics Industry Analysis Porter’s five forces model (a framework for analyzing a particular industry)

7. Porter’s Five Forces Model of Competition Threat of New Entrants Threat of New Entrants

8. Threat of New Entrants (Low) Government Policy Economies of Scale Product Differentiation Capital Requirements Switching Costs Technology, Know-how and Innovation Barriers to Entry

9. Bargaining Power of Suppliers (Low) Big global supply chain management (Suppliers are not concentrated) Suppliers are forced to cut their prices or go out of business Direct negotiation with suppliers in order to encourage: Reliable supply Faster delivery Lower prices Many OEMs start to produce their own components in-house Suppliers exert power in the industry by: * Threatening to raise prices or to reduce quality Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases

10. Bargaining Power of Buyers (Rather High) Products are fairly undifferentiated Buyers face few switching costs Online shopping has increased the bargaining power of buyers Buyers are price sensitive and demand high quality Buyers compete with the supplying industry by: * Bargaining down prices * Forcing higher quality

11. Threat of Substitute Products (Low) There are few substitutes from other industries, if any. Most of them seem to be obsolete or have one foot out of door. For example: Digital Camera in the place of Film Camera Fax machines in place of overnight mail delivery Products with similar function limit the prices firms can charge

12. Threat of Substitute Products Threat of New Entrants Threat of New Entrants Bargaining Power of Buyers Bargaining Power of Suppliers Porter’s Five Forces : Model of Competition Rivalry Among Competing Firms in Industry

13. Rivalry Among Existing Competitors (High) Numerous and rather equally balanced competitors Short product life-cycle High R & D costs Lack of differentiation or switching costs Imitation of technology Counterfeit products Low profit margins High exit barriers

14. Threats for Electronics Industry Intense competition Numerous and diverse competitors Short product life-cycle Expected slow down in global economy especially in the US and Japan

15. What Sony is doing to deter the threat

16. What Sony is doing to deter the threat (Conglomerate Diversification)

17. What Sony is doing to deter the threat Ongoing process/product innovation and Advanced R & D Strengthening Profits (through lower materials cost and greater operational efficiency) Forming joint-ventures (e.g. Sony-Ericsson)

18. Q2

19. Dell Factors influencing the bargaining power of buyer Buyers are powerful in the markets of servers, storage and networking because of: Small size of market & concentrated buyers Standard products High competition buyers are also powerful in other computer markets because: Dell's products are not unique Number of competitors are high Switching costs are low

20. Dell Reducing the bargaining power of buyers Increasing their loyalty through selling directly to customers Increasing the inherent or perceived value of its products by adding innovative features

21. FedEx Factors influencing the bargaining power of buyer in courier industry Significant pressure from corporate buyers Low switching costs contribute to buyers bargaining power Strong competitors like UPS , DHL National postal services

22. FedEx How FedEx managed to reduce the bargaining power of buyers: FedEx’s ability to leverage new technologies that add operational efficiencies and impose switching costs upon buyers The supper tracker system To improve operational efficiency by lowering costs and decreasing package delivery time. The FedEx’s introduction of Powership3 Customers who implement this technology into their environment would face the costs of retraining employees if they decide to change shipping software.

23. FedEx How FedEx managed to reduce the bargaining power of buyers: Innovation leader in the courier industry Its ability to find unfilled opportunities in the market before competitors Its ability to identify technologies that strengthen the company’s strategic position

24. Recommendation Dell Concentric diversification of products Wider range of available hardware options Establish service kiosks in shopping malls FedEx Expansion its warehousing and logistics divisions

25. Positioning strategy Sony’s electronic segment: Cutting edge technology company Game: Play station 3 Leading-edge computer entertainment systems

26. Positioning strategy Sony-Ericson Most attractive and innovative global brand C 702 ………………………. Any angle. Any weather C 902 ………………………. Getting the picture W 760i ………………………. Fill it up with songs Z780a ………………………. The web is where you are

27. Positioning strategy: BCG Matrıx High Low High Low Market Share Industry sales Growth Rate VAIO CRT-TV Walk man CD player Sony-Ericson PC LCD Digital Camera DVD player play station Music Player

28. Q4

29. Who are the Powerful Customers? Customers (buyer groups) are powerful when They purchase a LARGE portion of an industry’s total output (Sony’s initial customers at 1946). The sales of the product being purchased account for significant portion of the seller’s annual revenue. e.g. Some of the automakers’ suppliers They could switch to another product at little, if any, cost. e.g. Airline industry

30. Bus Makers’ Industry (Specifically city-bus Makers) There are few dominant buyers and many sellers in the industry The buyers: Government, Travel agencies, Organizations. The sellers: Volvo(Sweden), Scania(Sweden), Iveco(Italy), Mercedes-Benz(Germany), Alexander Dennis(UK), Drögmöller Karosserien(Germany), Leyland Bus(UK), Quebec(Canada), Neoplan (Germany), …

31. Products are standardized

32. The switching cost is very low Suppliers do not threaten to integrate forward into the buyer's industry : The buyers’ industry is totally different and unrelated to the suppliers’. In most countries the biggest customer of this industry is Government!

33. Who is a powerful Supplier? A supplier group is powerful when : It is dominated by a few large companies and is more concentrated than the industry to which it sells. Satisfactory substitute products are not available to industry firms. Industry firms are not a significant customer for the supplier group. Suppliers’ goods are critical to buyers marketplace success. The effectiveness of suppliers’ products has created high switching costs for industry firms. The threat of forward integration.

34. CPU Manufacturing Industry There are many buyers and few dominant suppliers The buyers: All the players computer industry. The dominant suppliers: Intel, AMD

35. There are undifferentiated, highly valued products

36. They threaten to integrate forward into the industry

37. There is not any substitute product!

38. So Suppliers’ goods are critical to buyers marketplace success. And also There is a high switching cost for buyers in this industry.

39. How Can an Entrepreneur Enter to These Markets? Finance point of view: Accessibility to financial resources, Appropriate NWC Marketing management point of view: Increase market share through Aggressive Advertising, Promotions, After sale service, etc. Operation management point of view: Mass production, Lean production Strategic management point of view: Cost Leadership Strategy Blue Ocean Strategy (e.g. Ford model T, Cirque de Soleil) Strategies which can reduce customers’ & suppliers bargaining power (M&A, Gorilla Attack)

40. Thank You!