Porter Five Forces Analysis Essay

Paper Type:  Essay
Pages:  7
Wordcount:  1783 Words
Date:  2022-04-04
Categories: 

Introduction

Technology has made things much easier, it's also made the impossible possible. I chose Samsung as my corporation. It belongs to the technology industry. The technology sector deals with electronics, software, or services relating to Information Technology. The sector is innovative as it modifies its products once in a while to make better models. I am going to perform a Porter Five Forces analysis on Samsung. Porter Five Forces is a tool used to analyse competition of business. The review is necessary because a better understanding of the working environment will increase profitability. The five forces include Barriers to entry, rivalry, Supplier, Buyer power, and Threat of substitutes (Asad, 2012).

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The foremost factor is rivalry. Here we look at the strengths of the competitor, the quality of their products or services and how the products or services compare to our competitors. We look at why other companies may decide to lower their prices to attract customers. There are many rivals Samsung has to deal with for example Apple, Huawei, Xiaomi, Techno, Oppo, Infinix, among others. Each year they strive to release new electronic gadgets with very advanced features. With every launch a customer is gained or lost depending on the kind of device is launched.

If you look at techno, it recently produced the Camon CX. It has 16 MB internal memory, 2GB RAM, 16 megapixels and it can support two sim cards. Camon CX is designed to look like iPhone 7. The phone's selfie camera is advanced and can take very clean and clear photos. The Oppo Company in 2017 integrated A.I to the front camera thereby making it produce awesome selfies.

Supplier power looks at how suppliers increase their prices. Here one looks at the price, and the product to determine whether it is worthwhile (Krishnamurthy, 2010). One needs many suppliers so that they may have a choice from plenty of suppliers. This way, you can easily find a cheaper alternative. If a supplier realises that you need their help very much, they may charge more.

Buyer power looks at how buyers can drive the prices down. You research how many buyers there are and how big their orders are. If the customers are few and they know it, they may squeeze you out because they know you would do anything to retain (Asad, 2012). If the customers are many, the power is restored back to you because you won't be willing to compromise. The customers won't dare dictate terms because you are not afraid of losing them. For example, people see Apple products as more efficient and reliable. The only problem is that the Apple products are costly and so they are mostly purchased by the upper class. If Apple were to lower its prices, most of the customers would migrate from Samsung to Apple. Apple lowering their prices will force Samsung to reduce its budget even lower than they are to avoid bankruptcy.

Threat of substitution is concerned about the possibility of your customers finding other survival means. If there is a possibility of substituting a product with something of a lower price it may affect the profits (Krishnamurthy, 2010) For example, Samsung and Huawei launched a smartphone with similar features. Huawei decides to sell that particular smartphone an amount lower than that Samsung is charging its customer; most consumers will immediately shift to Huawei because they won't see the need of spending a lot of money on buying a phone that functions the same way as a phone going for less. The only difference being the brand name.

Barriers to entry concern how the company maintains its position in the market. Samsung should be in a place to compete effectively. The harder it is to get a foothold in the industry, the easier it will be for the rivals to weaken your position in the field. By blocking all the barriers and all underlying threats, Samsung can effectively compete against the other competitors (Krishnamurthy, 2010). For examples, it should continuously come up with innovative ideas that will make their products more popular. Samsung should strive not to surpass it while it works towards becoming the best electronics manufacturer in the industry

Samsung faces vital competitive forces from its rivals. These are; first, the market is full of innovative ideas. Buyers just want something of value, and if they feel that Samsung cannot give it to them, then they move to the next brand. Sometimes Samsung launches a phone, but it does not receive much attention. Here the power always goes back to the customer. The company is forced to drop the prices of the phones thereby ending up with losses. The phones used during the launch may have been faulty resulting in the loss of trust by customers who then move to another brand.

Samsung suffers from the threat of substitution because sometimes they produce phones that are similar to other phone brands. The other brand may be selling the phone at a much lower price, and so customers decide on buying the other phone. The phone may also be useful but lacking specific features thereby sending customers to other brands.

Samsung only deals with best suppliers. Finding those who can distribute the products at a lower price is difficult. The suppliers end up dictating terms because they know that the Samsung will listen to their demands. Cheap suppliers often deliver products whose quality is questionable. The company ends up paying the supplier a lot of money. This result is that the company profits go down making it hard for it to compete with other companies in the same industry.

Samsung risks being surpassed by other products because of its laxity. Its rivals are scaling so fast while Samsung remains at the same place. Its market share is dropping while those of its competitors are rising. Its decline can be blamed on the lack of proper marketing strategies by the company. The reduction can be because their products are becoming less reliable. Customers are shifting to other brands, for example, Apple for more efficient are reliable electronic products.

Samsung External Factors of Evaluation Matrix (EFE)

MAIN FACTORS AFFECTING THE COMPANY EXTERNALLY VALUE RANK VALUE SCORE
Chances for improvement
There is a growing need for mobile phones especially smartphones in third world countries such as India and Africa 15.2 30
The number of middle class people are growing in countries still under development thereby increasing the demand for mobile phones among other electronics 10.4 40
The growing online market 15.1 15
New technologies 15.4 60
Increased need for tablets 10.3 30
Dangers
Apple is the leading in the production of quality phones and tablets in countries such as USA 10.3 30
Apple's reputation for sophistication, quality and reliability grow each day 15.3 45
The company sales may decline because of the reduction of the income of the middle class in certain regions of the United States of America 05.2 10
Huawei and Xiaomi are growing by the day while Samsung is declining. These two brands may rise to become close rivals of Samsung 10.2 20
The operating system used in Android phones is yet to gain momentum like its counterpart IOS 20.1 20
Apple could start producing other electronic products such as cameras and home appliances and still be a serious rival to Samsung 10.3 30
TOTAL 1.45 3.30

The External Factors of Evaluation Matrix

The External Factors of Evaluation Matrix is a tool that is used to analyse how external forces affect the company (Capps III & Glissmeyer, 2012). It looks at the social, technological, political, legal, government and information on the company's competitors. The External Factors of Evaluation Matrix looks at the chances for improvement and dangers the company may face. Opportunities give an overview of the chances existing outside the company while threats show the factors that may bring the company down if not resolved in time (Schroder, 2012).

There are various opportunities and threats Samsung as a company may experience. First I will discuss the opportunities and later the threats. The opportunities include: First, there is a growing need for mobile phones especially smartphones in third world countries such as India and Africa. The company can distribute mobile phones to those regions. The demand for more mobile phones will increase productivity thereby increasing profits. Since there will be plenty of customers, the power will be in the company and not the buyer. The company can dictate the terms of the transaction without having to compromise. This kind of power will result in even much higher profits.

The money earned from this project may be used to fund other projects the company may have in mind. For example, if they want to upgrade a model, there will be a need to invest a lot of money. The money earned from selling mobile phones in Africa and India will be used to fund the project.

Besides, the number of middle class people is growing in countries still under development thereby increasing the demand for mobile phones among other electronics. The middle class are the individuals between the working class and the upper class (Lee, 2008). They include business people, working professionals for example lawyers. These people are in need of electronics to carry out their day to day activities. To service these need, Samsung will need to increase productivity. The company will have found the market for its products. These people will also need to buy the same electronic products for their family members to communicate effectively with them. The schools that their children attend are also sophisticated schools that may be using eLearning as the primary method of teaching. These children will need personal computers to effectively learn.

The online marketplace has grown tremendously over the years. People prefer shopping from the comfort of their homes. People buy even for products one thousand miles away. Samsung can put to use this marketplace and grow its customer base. The electronics shopped online are much more than those bought in shops because people rarely have time to go shopping. The company should put its products online. Embracing this technology will help the company grow its profits.

Every day there is a technological advancement made. These new technologies will help the company be at the same level with its rivals. An example is the wearable tech. Wearable tech devices are technological devices that are worn. They are often used to track a person's health, for example, sugar levels, blood pressure level, cholesterol level among others. If Samsung were to embrace these new technologies, it would have broadened its market thereby bringing in more revenue than expected. It will also have built trust with its customers because they can always depend on it to get new products.

Tablets are gadgets that can do more than what a phone can do. The demand for tablets provides an opportunity for the company to b...

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Porter Five Forces Analysis Essay. (2022, Apr 04). Retrieved from https://proessays.net/essays/porter-five-forces-analysis-essay

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