Tablet Market Analysis Using Porters Five Force Model
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Porters Model analyzes an industry with the aim of helping develop a business strategy. The five forces in the model have been identified to categorize industries as intensely not competitive or competitive. The categorization helps determine the attractiveness of the market. Industries have many features in which a company’s compete and this features are vital in determining the level of competition the company faces and the expected profits, Grant (2005).The widely known classification was done by Michael Porter, who helped companies to determine the potential profit by observing the five sources of competitive pressure.
This article focuses on performing the porters Five Forces analysis on the Tablet industry to identify the state of this segment of the market.
Porter’s five Forces – Tablet market
Threat of New Entrants
Threat of new entrants to the tablet industry is weak. The market is currently dominated by other major competitors who have nearly the entire market share. This market domination discourages new companies with potential from entering the market. Another barrier to entry is that the tablet market requires significant investment in research and development. The investment will help in developing innovative products, as well as large fixed start-up costs for customer service, employees and manufacturing.
The new entrants into the market will not only experience high prices, but they will likely acquire less innovative products. This situation arises because the new entrants do not enjoy equal funding for research and development as the other established brands. They will have to overcome the customers that are loyal and have trusted the existing players in the industry for many years. New entrants should focus investments more on marketing and advertising than the existing brands. There is the likelihood of new players into the tablet market not faring well as the larger companies are likely to develop innovative products more rapidly due to their many competitive advantages.
Tablet market share by vendors
Bargaining Powers of suppliers
Suppliers in the Tablet industry can be categorized into three major groups; software suppliers, hardware suppliers and service suppliers. The products cores are standardized and compete by focusing much energy on creating advanced products at better prices. Firms within the industry can switch easily between their suppliers. The strategies that will determine whether or not to utilize a high or low-end supplier are always in the hands of the firms.
Since the quality of tablets are determined by their application system and micro-processors installed within them, suppliers of software and hardware within the tablet industry plays a critical role in the products pricing. A firm following high strategy quality expects the prices to be high to reflect the higher prices paid to the suppliers.
The services that can be offered by suppliers within the tablet industry include tech support, internet and repair services. The supplier focuses mostly on rational and operational performance in order to increase customer’s satisfaction. The suppliers in addition offer a variety of customer loyalty programs in an attempt to expand customer base while trying to gain competitive edge over competitors existing within the table service industry.
Bargaining Power of Buyers
Tablet industry is somehow vulnerable against bargaining powers of buyers. Customers in the past have had more alternative options to tablets; Smartphone’s, IPods and other hand held devices have most of the same capabilities as tablets. Because of the sleekness, low price, availability of these alternatives, they have become more popular making tablets more rare to obtain. Therefore for tablets to compete with the alternatives, it must differentiate itself in order to regain market share. Despite the ways in which producers differentiate their products, and find ways in increasing costs, customers still view units as similar and thus base their choice on price. The bargaining power of buyers can, therefore, be concluded to be strong.
Rivalry among Existing Firms
There is a great competition between the top manufacturers in the tablet industry. The manufacturers are all fighting to produce powerful and low cost tablets with efficient operating system. Manufacturers specialize on areas to gain competitive edge over their rivals. Some focus on innovation in order to bring the newest technology to the market first while others may focus on their services and distribution throughout their firms.
Main manufactures like Samsung; Micromax Apple and HCl are in direct competition to produce the most efficient and least expensive tablets. Fujitsu, Sony, NEC and Toshiba are other Japanese companies with large market share in the tablet industry. Regardless of the large number of companies; tablet industry will remain competitive and continue to expand. The threat to industrial rivalry is thus strong.
Threats of substitutes and Compliments
Although it is very difficult for new entrants to join the tablet industry, there are currently other industries such as the Smartphone’s and IPods which affect the sales of tablets. The IPods and Smartphone’s have similar benefits to customers that a tablet has. Therefore, their increase in popularity and performance means decline in tablet sales as customers will see the products as alternatives for one another. Forecasts show that by 2017, 87% of connected devices will be Smartphone’s and IPods thus substitutes are strong in the tablet industry.
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