Mitsubishi Electric Corporation is a Japanese Multinational Corporation headquartered in Chiyoda, Tokyo, Japan. The company was established in 1921. The company is the core company of Mitsubishi. It is specialized in electronics and electrical equipment manufacturing. It has a central 8 division Power System, Transportations System, Building system, Factory Automation System, Automotive System, Space System, Power Semiconductor Devices, Air Conditioner & Refrigeration System (Mitsubishi Electric, 2021). Its building system division is known for elevators and escalators. It operates through its 203 subsidiaries in the world, including 95 in Japan. Mitsubishi is one of the biggest electronics manufactures in East Asia. Porter’s five forces model is used to identify threats and business opportunities faced by Mitsubishi.
Competitive Rivalry in the Market
The East Asian region is home to multiple world-leading electronic conglomerates. The electronics industry in this part of the world is saturated and very competitive. The companies include Sony, Nikon, Canon, Hitachi & Toshiba. Due to diversified divisions and wide range of products, its main rival is local companies Hitachi and Toshiba. Hitachi generated a revenue of $82.306 Billion (Nikkei Asian, 2021) with an income of $20.699 Billion (Nikkei Asian, 2021). Toshiba posted revenue of $31.178 Billion (Nikkei Asian, 2021) with an income of $8.491 Billion (Nikkei Asian, 2021). The annual revenue of Mitsubishi Electric, as compared to its rivals, was $39.520 Billion (Nikkei Asian, 2021), with an income of $11.073 Billion (Nikkei Asian, 2021). The competition is increased recently to new heights due to the saturation of products in the region and worldwide. Chinese companies in the area are developing new electronics products and posing new challenges to well-established companies.
Threat of Substitutes
The electric industry evolves with the need of time. The companies keep on innovating new technology to bring new products for the customers. Mitsubishi is investing a lot of capital in establishing research and development centers in the world. It has set up Maisart and Sustie center to take advantage of artificial intelligence and machine learning (Mitsubishi Electric, 2021). They need to innovate new products to compete with the ones available in the market. It can decrease their profit margin but can keep them ahead in the industry. The threat of substitution is moderate in the near future, but Chinese companies can pose a higher-level threat in the long run.
The Threat of new Entrants
The threat of new entrants is medium for now, but the threat is always there because of the evolving technology in the electronic industry. The new entreat can easily penetrate the market if it can bring a good quality product with better client costs. It can force the existing member to decrease their profit to keep their clientele intact. The startup needs a considerable amount of capital investment to set up its brand and keep attracting customers. New entrants can force the existing firms to be more effective and efficient. It forces them to explore the new business channel (Oregon State, 2021). The loyalty of the customer can also go against startups. Mitsubishi can keep its clientele by innovating new products and quality products. The threat level is medium at the moment.
Bargaining Power of Buyers
The buyer’s power is high in this case. The consumer holds power when there is plenty of the option available in the market, and they can switch easily. (Martin, 2019), which paves the way for buyers to hold the bargaining power. There are plenty of electric appliances companies, and you can find alternative products very easily. It increases the competition between the industry and decreases the price for the buyer. The buyers can switch between the products easily. To compete in this business environment, companies should keep their quality at best but keep their price as low as its rival. It can hold its clientele intact. If they can do it, it will provide them business safety in the market. The buyer power is higher because of the market saturation and availability of the product.
Bargaining Power of Suppliers
The electronics industry depends on the raw material and parts from the suppliers. The sector is horizontally integrated. The supplier can exert its power if its future integration with the company and other options are available for its supplies (Porter, 1979). Companies don’t change suppliers mainly because of the integration cost and the quality of the product. Suppliers can use these factors for bargaining and can reduce the overall profit of the company. In that case, the market is already saturated with producers. The region is saturated with the Electronic Industry. It provides an extra edge to the supplier. The supplier holds significant bargaining power in this case.
References
Mitsubishi Electric. (2021). About. Available at: https://www.mitsubishielectric.com/en/about/index.page
Mitsubishi Electric. (2021). R&D. Available at: https://www.mitsubishielectric.com/en/about/rd/index.page
Oregon State. (2021). Strategic Management. Available at: https://open.oregonstate.education/strategicmanagement/chapter/3-analyzing-the-organizations-microenvironment/
Nikkei Asian Review. (2021). Producer Manufacturing–Hitachi Ltd. Available https://asia.nikkei.com/Companies/Hitachi-Ltd
Nikkei Asian Review. (2021). Electronic Technology– Mitsubishi Electric Corp. Available https://asia.nikkei.com/Companies/Mitsubishi-Electric-Corp
Nikkei Asian Review. (2021). Consumer Durables– Toshiba Corp. Available https://asia.nikkei.com/Companies/Toshiba-Corp
Porter., E. M (1979) How Competitive Forces Shape Strategy. Available at: https://hbr.org/1979/03/how-competitive-forces-shape-strategy
Martin., M (2019) How Porter’s Five Forces Can Help Small Businesses Analyze the Competition. Available at: https://www.businessnewsdaily.com/5446-porters-five-forces.html