Nov 02 2011

Porter’s Five Forces on the Smartphone Industry

Published by at 12:47 am under Uncategorized

RIM’s stock dipped below $20 per share today, but that’s just one company. How is the rest of the industry doing with Porter’s Five Forces?

"Source: http:// www. theglobeandmail. com/ globe-investor/ key-events-in-rims-very-bad-year/ article2215083/ ?from =2221802

Rivalry is medium

  • small number of companies develop operating systems (Nokia, RIM, Google, Apple) but more companies develop hardware
  • Smartphones, are highly perishable products that depreciates quickly in the market. Producers need to sell quickly, which intensifies rivalry.
  • The industry is still growing.

Threats of Substitutes is high

  •  While brands differentiate between different Smartphones to an extent, Smartphones in the same price range have mostly the same functions.

Buyer Power is medium to weak

  • Weak: buyers are not concentrated and can not influence the price.
  • Medium: Buyers can purchase from a rival, but a rival will not necessarily present the buyer with better incentives or prices.
  • Weak:  Some producers’ influences extend to their distribution channels. An example is Apple’s stores.

Supplier Power

  • (omitted due to word count limitations)

Threats of New Entrants is low

  • Diffcult to enter: Smartphone production involves many patents and proprietary knowledge. Even established companies are embroiled in legal battles over patent issues.
  • Difficult to enter: New entrants lack popoular brands, which are important to sales.

Sources:

El Akkad, Omar. “Key events in RIM’s very bad year.” The Globe and Mail.  26 Oct 2011. 1 Nov 2011. <http://www.theglobeandmail.com/globe-investor/key-events-in-rims-very-bad-year/article2215083/?from=2221802>. Online.

Marlow, Iain. “RIM stock falls below $20 a share.” The Globe and Mail.  1 Nov 2011. 1 Nov 2011. <http://www.theglobeandmail.com/globe-investor/rim-stock-falls-below-20/article2221802/>. Online.

“Porter’s Five Forces A Model for Industry Analysis.” QuickMBA.com. 2010. 31 Oct 2011. <http://www.quickmba.com/strategy/porter.shtml>. Online.

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