Johnson Controls is an Irish public limited firm dealing in the conglomerate industry, which includes different industries like HVAC and security equipment and controls, offering climate control products, fire alarms, and facility management. Dealing in the fire security industry, the firm was created in 1885, with the location of its head operations in Cork, Ireland.
As of 2020, the company produced a strong figure of revenue of 22.31 US billion dollars and has occupied a workforce number of almost 97,000 individuals (Johnson, 2020). Therefore, from the viewpoint of the global networking industry, the assessment of Porter’s five factors would be a helpful system for maintaining prospect strategies to better understand the business’s standing position.
Competitive Rivalry in The Market
The competitive rivalry in the networking industry is high because of several facilities providers available globally due to the increase in safety and security awareness and compulsion of security equipment in the working places. As a result of this outcome, several companies and institutions have captured the market to provide fire and security alarm services, ultimately resulting in increased competition among existing firms. The company’s major competitors are Emerson, Honeywell, Schneider Electric, and Lennox International in terms of market capitalization in the industry.
As of 2020, with a market share of 33.2 billion, Johnson Control is trying to lead the market, while at the same time, others are accounted for 47.9, 147.8, 64.9, and 10.6 billion Dollars (Craft, 2020). Thus, the presence of such firms enables the environment of the industry more competitive.
Threat of Substitutes
The threat of having substitute products is considerably low in the fire and security industry, mainly because the sector is occupied with plenty of firms providing security and safety equipment. For the purpose of safety and security of the buildings and homes, different fire alarm systems and climate control equipment are provided by the big firms operating in the market. However, there is little risk of replacements in terms of self-made methods and procedures, or one can follow independently in case of emergency. Still, all these facilities require almost the same equipment in general.
Moreover, HVAC systems and security equipment are also in abundance, and the advancement and innovation in technology for better environment can only change the process or shape of the equipment and cannot be termed as replacements (Mcconahey., 2020). Therefore, the risk of substitutes in the security industry is low.
The Threat of New Entrants
The threat of new entrants in the fire and security business is considered to be low as many companies already exist in the country and around the world, but the entry barrier is high enough to keep newcomers out. It’s no coincidence that capital investment is the most significant barrier to entry in the security sector.
The considerable costs of developing the network infrastructure usually necessitate a large sum of money from potential applicants. Apart from the financial barrier, growing enterprises must fight with the existence of significant security brands as well as tight government guidelines governing operations, access to services, and economies of scale (Deneen et al., 2010). Hence, minimizing the threat to enter the industry.
Bargaining Power of Buyers
The Bargaining power of consumers in the context of the fire and security industry is moderate due to a large number of equipment providers and the breadth of their offerings. Regardless of which firms offer security alarm systems and climate control equipment, the options are essentially the same. Necessities are viewed as a product in most cases. As a result, they expect fair prices from companies that provide reliable service. Purchasing power, on the other hand, may differ slightly between market segments.
Furthermore, customers who have low switching costs have more bargaining power (Porter and Heppelmann, 2014). Keeping in view such patterns, the bargaining power of buyers is high in the security industry.
Bargaining Power of Suppliers
The Bargaining power of suppliers in the fire and security industry is moderate. Security equipment manufacturers have a lot of leverage when it comes to negotiating with service providers. Indeed, without high-tech fire management facilities, security alarms, devices, and equipment, such businesses will be unable to transmit the safety concern and awareness among the industry.
However, because there are so many manufacturers with varying resources, firms’ bargaining power is limited when it comes to negotiating terms (Gaona Leon., 2013). Thus, in the context of the security industry, the bargaining power of suppliers is moderate.
References:
Craft, 2020. Competitors. [online] craft.co. Available at: https://craft.co/johnson-controls/competitors.
Deneen, M.A., Gross, A.C. and Mapes, J.L., 2010. Indoor climate control: the global demand for heating, ventilating, and air-conditioning equipment. Business Economics, 45(2), pp.126-134.
Gaona León, J.M., 2013. Value Proposition Enhancement in Retailers of the HVAC Industry.
Johnson, 2020. Johnson Controls SEC Filings. [online] Investors.johnsoncontrols.com. Available at: https://investors.johnsoncontrols.com/financial-information/johnson-sec-filings.
Mcconahey, E., 2020. Counting Carbons and Circular Diets. ASHRAE Journal.
Porter, M.E. and Heppelmann, J.E., 2014. How smart, connected products are transforming competition. Harvard business review, 92(11), pp.64-88.