Porter's 5 Forces
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Porter's 5 Forces
- 1. Khushboo Shah Akash Dhar Trilok Upadhyay Prajna Shetty Prasad Kadam
- 2. Born in May 23, 1947 Professor at The Institute for Strategy and Competitiveness, based at the Harvard business school Leading authority on competitive strategy and the competitiveness . Author of 18 books Competitive strategy Competitive Advantage etc. 6 times McKinsey Award winner
- 3. RIVALRY
- 5. Founded in July 7 ,1995 MNC telecom In 20 countries Services for 2G, 3G,4G • mobile s • Internet Services • Digital television • IPTV • broadband • Fixed line Founded in 1991 British MNC Services • Fixed Line, • mobile s • Internet Services • Digital television World’s 2nd Largest In 21 countries
- 6. SUPPLIER POWERBUYER POWERTHREAT FROM SUBSTITUTESTHREAT FROM NEW ENTRANTSRIVALRY Switch Suppliers, Tower Service Limited Network Equipments Providers Suppliers vodafone is a cost leader absorb price increases from suppliers Hold suppliers costs down Cut throat competition Number portability International Roaming charges Better buyer position No bulk Purchase Number portability New Connections and schemes New Plans Strong Subscribers position Heavy Capital investment Idea Cellular growing rapidly New licenses to new entrants NLD/ILD Operations Shifts from voice calls to text message Skype & voice services gain popularity Internet powered softwares Threat with 4G technology Easy Avail of Substitutes Reliance had more growth rate Services like Skype, yahoo posing threat Cheaper substitues Capital intensive Upcoming 4G costs Already striving operators Strong rivals Enhanced investment More competitors over the years Highly competitive market New packaged services like quad play Vodafone with iPhone4S
- 7. Founded in 1940 Largest chain 68 mn customers Sells • Hamburgers • French fries • Soft drinks • milkshakes • desserts Started in 1982 Subsidy Of YUM! brands Sells • Fried chicken • Hamburgers • Soft drinks • Refresher drinks World’s 2nd Largest In 18,875 locations
- 8. SUPPLIER POWERBUYER POWERTHREAT FROM SUBSTITUTESTHREAT FROM NEW ENTRANTSRIVALRY Strong supplier power Worlds largest chain Many Franchises Lower buyer strength No choice for customers Brand image thru .differentiation Many substitutes Mc Donalds products Lower threat of losing customers Competitors like Mc Donalds, pizza Hut Primary products are different Cheap substitutes like street food And home made food Difficult to enter in this business Threat of big brands High cost of entry More costs on research and development Very competitive industry Started New products like Mc Café Introduction of breakfasts Updated customer tastes Low rivalry Customers wont turn out Different target customers Strong position Lower buyer bargaining power Buyers have lesser choices High demand from buyers Helps local suppliers Tight control over expenses Fixed Rates Too many big giants like McDonalds, subway etc. Established brand name Low barriers for entrants Brand dominance
- 9. Founded in 1893 Carbonated soft dink 2nd largest manufacturer Brands in 200 countries Owns Restaurants like • KFC • Taco Bell • Pizza Hut Founded in 1886 Carbonated drink 400 brands in 200 countries Focus on selling syrup
- 10. SUPPLIER POWERBUYER POWERTHREAT FROM SUBSTITUTESTHREAT FROM NEW ENTRANTSRIVALRY Raw material, labor supply Switching costs Substitute inputs Threat of forward integration Putting firms under pressure Buyers price sensitivity Avail. Of substitutes Competing with non price competition Rate of industry growth Diversity of competitors Exit barriers Low rivalry amongst existing competitors Rate of growth in industry Costs on advertising and innovations Lower buyer bargaining power Convenience Stores Selling through Vending machines Higher entry barrier Established firms Difficult to sustain Government regulations Well brand name Switching to corn syrup Price competition Low bargaining power Lesser Alternatives Buyer switching costs Perceived level of product differentiation Substitute products Substituted by carbonated beverage Strong customers loyalty Inefficient or over profit market Barriers to entry Government regulations Licensing requirements Brand Equity
- 11. Founded in 1976 Pioneers and making Ipad, Ipod and Iphone. 2nd largest IT Company 3rd largest mobile manufacturer. Finnish Manufacturer Pioneers in early mobile industry Largest phone vendor 87k employees in 120 countries Sold To Microsoft
- 12. SUPPLIER POWERBUYER POWERTHREAT FROM SUBSTITUTESTHREAT FROM NEW ENTRANTSRIVALRY Strong Competition Exorbitant prices Getting less popular Expensive Softwares Rivals are way ahead Rigid behavior Slow pace Samsung’s consumer base Large no. of suppliers Very strong bargaining power Strong market share Microsoft power Lower supplier power Changeable ,supplier power Favorable Pricing Buyers have less choices Apple is the best in its graphics Strong brand loyalty Habitual Customers Wide choices for the consumers Consumer power Price In-differentiation Consumer attachment Available Substitutes Price Differences Cheap Hardware Strong Brand Position Strong brand recognition Substitutes like Skype, Facebook Cheaper Handsets Durability Higher entry barrier Established firms Difficult to sustain Government regulations Brand Identity Difficult to sustain Lowering prices
Editor's Notes
- He was Born on May 23, 1947Age 66 curently he is a Professor at The Institute for Strategy and Competitiveness, based at the Harvard business school He is a leading authority on competitive strategy and the competitiveness and economic development of nations, states, and regions. Michael Porter is the author of 18 books and numerous articles including Competitive Strategy, Competitive Advantage, Competitive Advantage of Nations, and On Competition. A six-time winner of the McKinsey Award for the best Harvard Business Review article of the year, Professor Porter is the most cited author in business and economics.[2]
- The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving intoSupplier Power: Here you assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on. The fewer the supplier choices you have, and the more you need suppliers' help, the more powerful your suppliers are.Buyer Power: Here you ask yourself how easy it is for buyers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to your business, the cost to them of switching from your products and services to those of someone else, and so on. If you deal with few, powerful buyers, then they are often able to dictate terms to you.Competitive Rivalry: What is important here is the number and capability of your competitors. If you have many competitors, and they offer equally attractive products and services, then you'll most likely have little power in the situation, because suppliers and buyers will go elsewhere if they don't get a good deal from you. On the other hand, if no-one else can do what you do, then you can often have tremendous strength.Threat of Substitution: This is affected by the ability of your customers to find a different way of doing what you do – for example, if you supply a unique software product that automates an important process, people may substitute by doing the process manually or by outsourcing it. If substitution is easy and substitution is viable, then this weakens your power.Threat of New Entry: Power is also affected by the ability of people to enter your market. If it costs little in time or money to enter your market and compete effectively, if there are few economies of scale in place, or if you have little protection for your key technologies, then new competitors can quickly enter your market and weaken your position. If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it.
- So we here presenting porter forces of these 4 set of companies
- AirtelSunil Bharti Mittal founded the Bharti Group. In july 7 1995BhartiAirtel Limited, commonly known as Airtel, is an Indian multinational telecommunications services company headquartered in New Delhi, India. It operates in 20 countries across South Asia, Africa, and the Channel Islands.Airtel has a GSM network in all countries in which it operates, providing 2G, 3G and 4G services depending upon the country of operation.It also provides services in Fixed line and mobile telephony, broadband and fixed-line internet services,digital television and IPTVVodafoneVodafone was founded in 1991, by Ernest Harrison, Gerry Whent Vodafone Group plc is a British multinational telecommunications company headquartered in London. It is the world's 2nd-largest mobile telecommunications company.The are into Fixed line and mobile telephony, Internet services,digital televisionVodafone owns and operates networks in 21 countries and has partner networks in over 40 additional countries.
- Supplier PowerAirtel:The supplies in Mobile sectors primarily comprise of Switch Suppliers, TowerService providers and the Handset providers..Network Equipments: There are limited Network Equipment providers like ZTENokia Siemens, Ericsson, Huawei. Providers: Though the new sharing technology has helped in utilizing the sharingTowers but still the coverage remains a problem due to few Tower provider Suppliers: Nokia, Samsung, LG, Sony, iPhone and numerous other players. The bargaining power of Handset Suppliers is less as they are also iningcompeting amongst themselves.Vodafone:Suppliers of the mobile telephony industry are strong. Vodafone, by being a cost leader, operates with margins greater than its competitors, which, in turn, allows them to absorb price increases from its suppliers easier than its competitors. By being a large, focused player of the mobile telephony industry, Vodafone could hold suppliers costs down, and it could make a profit even if its competitors are making only average returns.Buyer PowerAirtel:Although subscribers are not concentrated, not purchase in bulk but still can easily switch for better quality,coverage and rates. New connections are coming up with attractive schemes which forces the existing players to adapt them too.Number portability has also had negative impact on the company as it makes easy for the customers to switch the mobile operator for a better deal.New schemes like night calling, mobile to mobile free calling etc. and plans have to be introduced just into meet the demands of the buyers In this context subscribers’ position is strong. However, in term of net additions during the quarter, Idea recorded the highest growth of 7.66 million, followed by Bharti (6.29 million) and Vodafone (4.88 million)Vodafone:Although the mobile industry of UK is dominated by only 4 large players, the buyer power is quite high. This can be attributed to cut throat competition in the industry which has resulted in shrinking profit margins. Number portability has also had negative impact on the company as it makes easy for the customers to switch the mobile operator for a better deal. This makes buyers even more powerful and forces the company to offer better and more attractive bundled offers to keep them loyal. Moreover, the regulatory environment with lowered MTRs and International Roaming charges has also shifted the power from the mobile providers to the customers. The business customers have relatively better buying power as compared to the individual customers.Threat to SubstitutesAirtel:Presence and easy availability of substituted products is a great threat for the successful survival.The growth rate of reliance is morethan Bharti and that of Vodafone is almost comparable to BhartiMany voice services like skype yahoo etc. are posing a threat to. Even video conferencing is getting much popular. The threat from substitutes is high as the subsitutes services are much cheaper. Although there are many substitutes like skype,gtalk, yahoo, video conferencing.. although these doesn’t pose a threat to airtel.Vodafone:Vodafone and Ofcam statistics reveal that there has been a shift in trend from voice calls usage to texting and data usage. The data also showed a rise in data usage. These statistics show that VoIP services like Skype are gaining popularity when it comes to voice calls. Voice calls and text messages are being substituted by internet powered apps and soft wares that offer better and cheaper alternative to calls from the mobiles. This is leading to a gradual decline in ARPU for the company as well. The threat of substitutes will rise even further with the introduction of 4G technology across the UK as it will lead to the development of more cheaper and better ways of communication through the data bundles.Threat from new entrantsAirtelSince current telecom technologies involve heavy capital investment so chances of success for new entrants arevery limited. Still it is seen that few new entrant like Idea is growing very rapidly and the growth rate is muchhigher than the top service providers.The government is also issuing many new licenses for the new entrants.many mobile players are also entering the enterprise business by launching NLD and / ILD operationsVodafoneThe mobile industry is highly competitive and capital intensive, which renders the threat of new entrant quite negligible. The recent merger of Orange and T-Mobile also shows that the industry structure does not allow new payers to enter the market in the face of shrinking margins and already established big players. Moreover, the upcoming 4G spectrum license is going to be a new cost for the existing mobile operators. In such a situation, it is highly unlikely that a new operator will enter the market since there already are a number of small operators who are striving to make their place in the marketRivalryAirtelBhartiAirtel has strong rivals in telecommunication sector of India like BSNL and Vodafone. Initially, it hadonly two competitors but now this figure has jumped to more than ten. All these companies are providingsimilar services with the same capabilities. Although it has enhanced its investment in last few years andworking hard to expand its network yet the presence of strong competitors is a major threat for its successfulsurvival. The detail data are available in the first section.VodafoneThe mobile industry is highly competitive with lower margin of revenues in voice calls and international roaming. The industry is dominated by 4 major players including Vodafone, O2, Orange and T-Mobile (Everything Everywhere), and 3. Although mobile penetration is already relatively high in the UK as compared to other European countries, the growth is expected in data services and bundled services and packages. In order to remain profitable, new packaged services like quad play and attractive data bundles are being offered by the company to its customers. One such example is the offer by Vodafone to buy iPhone 4S to customers via preorders before any other mobile operator, which resulted in addition of 174,000 new contract customers in the Quarter ending December 2011.
- McdonaldsThe business began in 1940, with a restaurant opened by brothers Richard and Maurice McDonald.Their introduction of the "Speedee Service System" in 1948 furthered the principles of the modern fast-food restaurant that the White Castle hamburger chain had already put into practice more than two decades earlier.The McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving around 68 million customers daily in 119 countries.[4][5] Headquartered in the United States, the company began in 1940 as a barbecue restaurant operated by Richard and Maurice McDonald; in 1948 they reorganized their business as a hamburger stand using production line principles. McDonald's primarily sells hamburgers, cheeseburgers, chicken, french fries, breakfast items, soft drinks, milkshakes, and desserts. In response to changing consumer tastes, the company has expanded its menu to include salads, fish, wraps, smoothies, and fruitKFCHarland Sanders was born in 1890 and raised on a farm outside Henryville, Indiana.[5] When Harland was five years old, his father died, forcing his mother to work at a canning plant.[6] This left Harland, as the eldest son, to care for his two younger siblings.[6] After he reached seven years of age, his mother taught him how to cook.[5]KFC (the name was originally an initialism for Kentucky Fried Chicken) is a fast food restaurant chain that specializes in fried chicken and is headquartered in Louisville, Kentucky, United States (US). It is the world's second largest restaurant chain (as measured by sales) after McDonald's, with 18,875 outlets in 118 countries and territories as of December 2013. The company is a subsidiary of Yum! Brands, a restaurant company that also owns the Pizza Hut and Taco Bell chains.
- Supplier PowerMCD:Power of suppliers within the fast food industry would be relatively small, unless the main ingredient of the product is not readily available.It is theWorlds largest restaurant chain in sales and is spread world and in in every nook and corner of the worldMost of the franchises of MCD owe themselves for their own existenceKFC:The suppliers, like the buyers, have very little bargaining power.In terms of food.KFC also began helping local suppliers bygiving them technological support to improve their products. With this strategy, KFCcreated competition among its suppliers, lowering the supplier bargaining power.With so little buyer andsupplier bargaining powers, KFC is able to have a very tight control over itsprices and expenditures.Also Fixed rates Threat of intense segment rivalry • Low entry barriers • Too many big giants in the market like McDonalds, Subway, etcBuyers PowerMCD:Relatively strength of buyers is low in this industry.Customers don’t have much of a choice, there are hardly any equivalent products with the same taste and appearance.So there are Less chances of switching, high brand image thru differentiation and uniqueness KFC:The customers of KFC, especially as individual buyers, have almost nobargaining power because if only one customer has lesser choices of finding an alternative for it.The store is not going to lower its price because of which the buyers, have very little bargaining power.Although there is high demand for fried chicken which cannot be underlookedThreat of substitutesMCD:There are many substitutes in this industry. Since there are a wide variety of products that people can choose, MCD products can be substituted by their MCD Burgers, Beverages, dairy products, and others.There is no as such threat of customers moving to some other product.KFC: There are a few major competitors in the fast-food industry like the McDonald’s, Pizza Hut, and Subway. The substituteproducts, in this case, would be burgers, pizza, and sandwiches. Though they arecompetitors, their primary products differ greatly from each other, in that they sell,chicken, burgers and fries, pizzas, and sandwiches, respectivelyThereare also substitutes, as families could choose any one of these over fast food for ameal. Even foods from street vendors count as substitute goods.Threat of new EntrantsMCD:Although it is hard to enter the restaurant business, it is hard to establish a distinct brand name. when already such big brands existsThere is also high cost of entry in the market and there is \ high research and development costs.KFC:For the current Chinese market for fast food, it is not difficult for a fast-foodrestaurant to enter the market. However, it would be extremely difficult to takeover KFC’s dominancy in China The brand name is already establishedWhile smallneighborhood restaurants generally have low barriers to entry, these are thebarriers to entry for similar restaurant businesses to enter the fast-food chainmarket.RivalryMCD:Restaurant industry is highly competitive industry. There are many small fast food businesses in the industry who fight with each other to improve their customer base; McDonalds is not an exception to this. Since its establishment in 1940, MCD has excelled in the sector. Nevertheless, to stay in the competition, it started with McCafé. This helped the company to stay in the business as a major fast-food business.Another major step came out when McDonald started Breakfast to compete with the existing business serving breakfast. Hence, this industry is extremely competitive and the MDC should be up to date with customer taste & preferences.KFC:Unlike what one would expect, KFC has little rivalry with similar fast-food chainsin China. The primary reason is that their core products are different, as in theysell different kinds of fast-foods with very different tastes and styles. Forexample, if KFC raised its price for chicken by a small amount, Chinese chickenlovers who may not be as accepting to pizzas are not going to switch to Pizza Hut just because theprice for KFC increased. In addition to that, these restaurants have such differenttarget customers that the fluctuation of price for one restaurant is not going toaffect the others.
- In the image of pepsi:Indrakrishnamorthynooyi who is the CEO of the company since 2001Pepsi (stylized in lowercase as pepsi, formerly stylized in uppercase as PEPSI) is a carbonated soft drinkthat is produced and manufactured byPepsiCo. Created and developed in 1893 and introduced as Brad's Drink, it was renamed as Pepsi-ColaPepsico is the 2nd largest soft drink manufacturer in the world.Pepsico brands are available in nearly 200 countriesPespsico also sells snacks, beverages and also has its own restaurants like KFC, Taco Bell and Pizza HutIn the image of coke:Muhtar Kent CEO of the companyCoca-Cola is a carbonated soft drink sold in stores, restaurants, and vending machines throughout the world.[Coca cola nearly has 400 brands and offers drinks in nearly 200 countriesCoca cola focuses on selling the syrup to different distributers and franchisees around the world
- Supplier PowerPepsi:Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work with the firm, or e.g. charge excessively high prices for unique resources.supplier switching costs are relative to firm switching costsdegree of differentiation of inputs and presence of substitute inputssupplier concentration to firm concentration ratioemployee solidarity (e.g. labor unions)threat of forward integration by suppliers relative to backward integration by firmscost of inputs relative to selling price of the product (profit margins)Coca Cola:The suppliers are powerful if they are in the position of well brand name, less competitors and high product differentiated. (Mike W. Peng, 2006). The main inputs of soft drink making are sugar and packaging. Sugar can be obtain from many sources and if the price of sugar increase, soft drink manufacturers can alternatively switch to corn syrup.Thus, suppliers of nutritive sweeteners do not have much bargaining power to soft drink manufacturers. Soft drink are packaged by aluminum can and bottle. The manufacturers of aluminum can and bottle are almost similar and therefore they engaged in price competition to survive in the industry. With more competitors vying for supply contract with large soft drink manufacturers, soft drink manufacturers are able to negotiate extremely favorable price and thus suppliers’ bargaining power is weakBuyers PowerPepsi:The ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes.buyer concentration to firm concentration ratio anddegree of dependency upon existing channels of distributionbargaining leverage, particularly in industries with high fixed costsbuyer volumebuyer switching costs relative to firm switching costsability to backward integrate availability of existing substitute productsbuyer price sensitivitydifferential advantage (inimitable characteristics) of industry productsCoca Cola:Buyer power is determined by switching costs, the relative volume of purchases, the standardization of the product, brand identity, and quality of service. Companies are not merely selling their products to consumers, but large proportions of products are distributed to retailers such as supermarkets. Coca-cola and Pepsi-cola mainly distributed their soft drink products to supermarkets such as Tesco and Sainsbury. Although these retailers purchase soft drinks in large quantity, they do not have much bargaining power because they need different kind of soft drink products to generate consumer traffic, especially the popular brand name like Coke and Pepsi. Vending, basically deals with fixed price, was the most profitable channel for the soft drink industry. With no buyers to bargain, Coke and Pepsi bottlers could sell directly to consumers through machines owned by bottlers. Therefore, the position of buyers in soft drink industry is weak because companies are not heavily relied on single distribution channel, but other route like vending machine or fast food chainThreat of substitutesPepsi:The greater the number and the closer substitute products imply an increase the propensity of customers to switch between alternatives (high elasticity of demand).Pepsi currently has lesser no. of substitutes like coke.buyer propensity to substituterelative price performance of substitutesbuyer switching costsperceived level of product differentiationExample: Coke and Pepsi are (propensity to substitute, "brand loyalty" aside) cost about the same. In a convenience store, there is no cost to switch from one to the other and there may be some small differentiation between brands. The threat of substitution is high. Test this by going into a restaurant that only serves Pepsi and ask for a Coke. Chances are your server will ask "Is Pepsi, ok?" (if they ask at all)Coca cola:When the use of product can be wholly substitute by products out of the industry, customers will switch to substitute if the price of the product goes up. To the extent that switching costs are low, substitutes may have significant impact on the profitability of an industry.Through industry innovation, incumbents are struggling to produce diversity beverages to satisfy different consumers’ taste. The soft drink seems gradually substituted by carbonated beverage. In responding to the competition of substitute, Coca-cola expanded its business through alliance and acquisitions like Coke-Nestea and Coke –Minute Maid. Yet, Coca-cola had builds extremely strong customers’ loyalty in the flavor of Coke since the early 1960’s, there are no visible beverages can substitute Coke and it has been the top-selling soft drink over centuries. (Coca-cola, 2010). Briefly, substitutes become less of a threat because of the concentrated manufacturers’ effort in diversification.Threat of new EntrantsPepsi: Inefficient or overly profitable markets will attract more firms and capacity investment. More capacity results (for under served markets) results in decreasing profitability. The markets will always seek equilibrium even if that equilibrium is artificially imposed by barriers.the existence of barriers to entry (patents, rights, etc.) - Note the expiry of patents can trigger new a equilibrium and competition rivalry movements in the industrysize - capital requirements and economies of scopebrand equityaccess to distributionlearning curve advantages - required skillgovernment policies, regulations and licensing requirementsCoca cola:A high barrier to entry benefits the existing players in an industry because the competition is stable and established companies can take advantage of this opportunity to raise prices and generates favorable returns. The established companies who run a larger production may benefit from economic of scales and create barrier to the new comer. Others, the government regulation can also be a barrier to entry. (Johnson G., Scholes K., Whittington R., 2008)The barrier to entry can be created by existing companies by build strong brand loyalty. Although there is no significant restriction from government towards soft drink business, the efforts of Coca-cola and Pepsi-Cola to built brand loyalty have significantly threatened new companies to enter the business. (Kolter p., Armstrong G., 2008). Further, when the new companies intend to enter the market, both companies have take retaliate action by cut down the prices and forcing the new entrant to curtail expansion plans. (M. Grant R., 2008). Since the barrier to entry is high based on strong market leaders, the industry is considered attractive.RivalryPepsi:For most industries, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc.number of competitorsrate of industry growthintermittent industry overcapacity (like the service industry)exit barriersdiversity of competitorsinformational complexity and asymmetryfixed cost allocation per value addedCoca Cola:Porter described the rivalry amongst existing competitors is ‘jockeying for position’, where they compete in the form of products price, products innovation and differentiation, advertising and promotion as well as after-sales services slugfests for purpose of scramble for market share and earn superior profits. The degree of rivalry in an industry is determined by several variables; they are the degree of competitors’ concentration, the level of rivalry, product’s differentiation, the industry growth rate and exit barrier. (G. H. Richard., 1983)Soft drink industry considered a consolidated industry, where the industry is leading by few large companies, such as Coca-cola, Pepsi-cola and Cadbury Schweppes. These companies who seize large proportion of market share had earned superior profit. In order to gain competitive advantage from competitors, Coca-cola and Pepsi-cola have spent large investment in advertising and promotion to build strong brand identify among consumers and become a barrier for new entrants. Coca-cola build customer loyalty by it unique coke recipe while Pepsi-cola serving different soft drink to capture market share of Coca-cola. The unique recipe of soft drinks had gained many loyal customers which uneasily duplicate by competitors. In the position of market leader, they can determine the price of soft drink and thus avoid price war. (M. Grant R., 2008)According to Agarwal and Gort (1996), the late entrants have relatively lower survival rates because the exit barrier is formed in competitive intensify. (Dixit A, K. Chintagunta P., 2007) The exit barrier in soft drink industry is significant because firms require large capital investment to achieve economic of scale in order to compete with strong competitors. Yet, according to the average return on invested capital (ROIC) of US industries, the profitability of soft drink industry increase consistently indicates that the market value of soft drink tends to grow in future. (Kindly refer to Appendix V).
- It was co- founded by Steve Jobson April 1, 1976 to develop and sell personal computers. It was incorporated as Apple Computer, IncApple Inc. is an American multinational corporation headquartered in California, that designs, develops, and sellsconsumer electronics, computer software and personal computers. Its best-known hardware products are the Mac line of computers, the iPod media player, the iPhone smartphone, and the iPad tablet computer.Apple is the world's second-largest information technology company by revenue after Samsung Electronics, and the world's third-largest mobile phone maker after Samsung and Nokia.[NOKIAStephen ellop CEO of nokiaNokia is a Finnish communications and information technology multinational corporation that is headquartered in Espoo, Finland.They are the pioneers in early mobile industry and it was one time what was once the world's largest vendor of mobile phones Nokia employed more than87k people across 120 countries, conducts sales in more than 150 countries and reported annual revenues of around €30 billionHowevercurrenly it is sold to microsoft… and with the acquisition we are the world is hoping to see a better productive output from the duo
- Supplier PowerApple The company has entered into agreements with supply of key components like RAM, Flash memory and LCDS and DRAM.But there is no guarantee that the company will be able to continue or extend these agreement on some favourable termsProbably after it expires. Sometimes quality components become a struggle for the pc as industry competitors try to obtain these technologies and make sure that competitors cannot use such technologies… very famous one is apple patents its each and every product..And apple processors cannot be used by any other manufacturers directly.Considering this, a supplier’s power could be changed because of this situation. Thesedays, “declining average selling pricesare problematic for the suppliers, which in turn could lead to a decrease in new technologies as these suppliers will have lower incomes and thus less revenues to spend on R&D. NokiaAlthough Nokia rely on its suppliers to supply equipment for their advanced mobile phones there are actually a number of large equipment makers, which Nokia could switch to.The software suppliers for their Smartphones are now Microsoft, who will have a very high bargaining power.As the leading mobile phone company in the industry they are in a very strong position when bargaining with their suppliers.Nokia are in the position where they can bargain and negotiate with any mobile phone hardware maker because there is a high number of equipment suppliers that are readily available to them should their current suppliers attempt to bargain for more money with them. Nokia’s main argument would be the fact that they are a global organisation that has the highest market share in the industry, so the suppliers would not want to lose such an illustrious organisation. On the other hand, Nokia have recently created an alliance with Microsoft for their software which would be considered a major coup for Nokia more than Microsoft. As a result, Microsoft will have a lot of power when negotiating a price and share because the deal is more beneficial to Nokia than Microsoft.Buyers PowerApple There are a number of different entities to which Personal Computer industry caters: large companies, normal households, governments and so on.However, Apple’s target includes people who have special demands for a computer. For example, in the publishing industry; Apple’s computer was the only effective machine as it allowed companies to edit things digitally. Apple still remains in that industry, because of the fonts, the system, and options it brings. Many companies continue to use Apple’s computers as it is expensive to change the entire system, thus companies are afraid to switch to other systems. However, average sales continue to decline. “Combined, HP, Dell, Lenovo and Apple’s unit sales decreased only 5% year-over-year, however, their collective ASP dropped 13%, causing an 18% decline in PC revenues.”(X-bit, 2009).Needless to say, Apple’s competitors have control over Apple’s former market share. NokiaThe power that customers have is rising because of the increasing number of choices in the mobile telecommunication industry.With a lot of the Nokia competitors all offering similar packages (e.g. unlimited texts and calls) the industry is very price sensitive with customers seeking out the best value for money.Many of the consumers will also be tied into long term contracts so switching from one handset to another will be difficult and expensive for the consumer, as a result they may not want to change until the contract is finished.Threat of substitutesAppleOther PC’s from other companies are treated as substitutes for Apple’s computers, the same is true the other way around. Thus in this market there are a number of substitutes which have an influence on the sales of each producer. Apple products are very costly and often argued that apple products are way over priced that the normal rates.There are local Taiwanese manufacturers which provides the same hardware at minimal cost so this will pose a threat to the sales of apple productsBut there are again customers who are loyal enough. And donot switch to substitutes presuming bad quality products.NokiaMobile phones are an everyday essential in people’s lives today and people would find it hard to replace, as customers would not be able to be in constant contact when away from the house.On the other hand, it could be said that customers would be able to contact people through others types of media such as social networking websites, email and home telephones. Although staying in constant contact would be hard in customers’ day to day life.However, smart phones are capable of a lot of functions so there are many substitutes if the substitute focuses on one of the functions, e.g. digital camera can take better photos then smart phones, notebooks can surf the web just as effectively and PDAs can plan a day the same way a smart phone can.Durability is always been one plus point of nokia… nokia products are well known for their durabilityThreat of new EntrantsApple More than 60% of the market share is occupied by Hewlett-Packard, Dell, Acer, Lenovo, Toshiba (“PC Market Still Strong in Q4 With Solid Growth Across Regions, According to IDC”, 2008). Brand identity is a large enough barrier to make it difficult for new companies to enter this market. Producers continue to lower their prices to try and attract new customers. This is a large barrier that makes sure that new entrants cannot easily start a business. Hence, Entry Barriers are so high that threat of new entrants entering the market is low. NokiaThe mobile phone industry is already a well established market and the threat of a new entrant is quite low, as the technology needed to rival the devices already available is quite advance if they want to differentiate from themThe barriers to entry in the mobile phone industry is high because any new entrants will need high investments in R&D, technology and marketing in order to compete with the established organisations.New entrants want to take market share from the larger organisations but Nokia hold 29% of the market share in the industry, the highest market share in the industry.RivalryAppleCombined, HP, Dell, Lenovo and Apple’s unit sales decreased only 5% year-over-year, however, their collective ASP dropped 13%, causing an 18% decline in PC revenues.”(X-bit, 2009) Competition has always been fierce within the personal computer industry and this is only increasing. Cutting costs is required to survive in this a situation. Moreover, Apple is facing three aspects of conflict in the Personal Computer industry.a) PC hardware Needless to say, there are many companies which provide PC hardware. In 2007, Apple had only 2.6% share in global personal computer market (“PC Market Still Strong in Q4 With Solid Growth Across Regions, According to IDC”, 2008).b) Operating SystemMac OSX has minor share comparing to Windows OS. Some important applications do notsupport Mac OSX. c) Software Apple provides software for Mac OS, but most of Apple’s software and the softwaredeveloped by third-parties for Apple could only be used on an Apple Computer in the past.Apple’s computer used to play a role as digital creative tool, but now, other softwareproducers have reached same level and these software programs can be used on multiple operation systems and competition has occurred. For example, Final Cut Studio 2 – AdobeCreative Suite 4 Production Premium, iWork 08 – Microsoft office, iLife 08 – Blog, AdobeDreamweaver, flicker, and picasa, and Logic Studio – DTM software. Considering this output of five force analysis, two strong forces could be found: a strong decrease is price and severe competitive environment in PC industry. Especially, a conflict of software is important because existence of similar software as all competitive software can be used with the Windows OS, means that there is nothing we can only do with Apple’s computer.NokiaNokia rivals have moved to smart phones and androids while Nokia have only just recently released their first smart phones leaving them trailing their rivals such as Apple and HTC.There is also very little differentiation between the competitors which means any new smart phones in the market, like Nokia Lumia, will find it difficult to tempt existing iphone and HTC customers to switch.Intense competition from large companies such as; Apple, HTC, Blackberry, Sony Ericcson and LG, ect.