Samsung is an international conglomerate based in South Korea with a massive international presence and success. The company was founded in 1938 as a trading company which later become a manufacturing company. Samsung electronics is the core business of the company and the company is known for its electronics business that includes smartphones, LED TV, and other home appliances. There is a continuous change in the electronic industry due to changing technology which intensifies the need for conducting the external industry analysis. Porter’s five force analysis of the Samsung is presented below
Competitive Rivalry
The size of the consumer electronics manufacturing industry is massive as it collects revenue of more than 1 trillion USD annually which speaks volumes of its success and depth. There is a total number of 9,269 businesses worldwide which shows the intensity of the competition in the industry. The company has a brand value of 91.3 billion USD with total global revenue of the company has reached to 218.7 billion USD (IBIS World, 2019). The company is leading in the smartphone industry with a 21 percent share in 2018. Out of the total global revenue of the company, 18 percent was achieved in Europe (Statista, 2019). The major competitors of the company include LG, Sony, Apple, Huawei, HTC, and GoPro. Due to the presence of such strong competitors, the business has completely intensified but the companies are making a space due to their strengths. The intensity of the competition can be judged from the case of Nokia in the mobile phone industry. Nokia was the market leader in the mobile phone industry but the competitors wiped them out and Nokia has to shut down its business. This shows that companies in consumer electronics have to be proactive to remain highly competitive.
Bargaining Power of Buyers
The bargaining power of buyers is highly strong because of the options available to the customers. In the case of smartphones, Huawei, Apple, HTC, and many other reliable brands are there that offer similar features at different prices. This increases the options for the customers and the bargaining power of the buyers becomes strong. The bargaining power of the buyer is the reason that Apple lost its leadership position. Apple did not realize the competition and the strengthening power of the buyer and ultimately lost the leadership position. For the AC, the fridge and other consumer electronics items have multiple options that keep the buyer in a strong position.
Bargaining Power of Suppliers
The suppliers of the consumer products have moderate bargaining strength because the suppliers have invested massively and it is not possible for the suppliers to run the operations without supplying to these giants. The suppliers keep in mind the competition from the suppliers and bargain accordingly without being too aggressive and demanding. On the other hand, the suppliers of technical products are also not easy to switch which is the reason that the companies also show flexibility while dealing with the supplies in the consumer electronics industry (Todd, 2018).
Threat of New Entrants
The threat of new entrants is low because of many factors that are creating hurdles for the new entrants. The presence of international giants in the biggest concern of investors while deciding about entering into the consumer electronics market. Secondly, consumer electronics manufacturing does require massive level investment to build the manufacturing plant and then market the products and develop a whole distribution channel. The capital required is another hurdle in the way of new entrants. The skills are also required of the highest level which makes it difficult for the investors to make a decision in the favor of consumer electronics to start the business (Lee & Pilkington, 2017).
Threat of Substitutes
The threat of substitutes is high because the technology is continuously evolving and it has replaced and developed the substitutes of different products. The consumer electronics is completely depending on the technology and the technology always have the risk of getting replaced with the new technology. The typewriter, portable radio sets, cassettes, and many other products have been obsoleted completely. The companies have to stay proactive to reduce the threat of substitutes in the consumer electronics market. Therefore, the risks of substitutes in the technology dependant products can never be ignored and it is ways high due to emerging technological advancements (Todd, 2018).
References
IBIS World. (2019). Global Consumer Electronics Manufacturing Industry – Market Research Report. Available at: https://www.ibisworld.com/global/market-research-reports/global-consumer-electronics-manufacturing-industry/
Lee, J. H., & Pilkington, M. (2017). How the blockchain revolution will reshape the consumer electronics industry [future directions]. IEEE Consumer Electronics Magazine, 6(3), 19-23
Statista. (2019). Samsun Electronics – Statistics & Facts. Available at: https://www.statista.com/topics/985/samsung-electronics/
Todd, D., 2018. Routledge Revivals: The World Electronics Industry (1990). Routledge.