Poter’s 5 Forces:
Porter’s 5 forces analysis is done to understand the industry attractive of smartphone industry.
Threat of Entry:
* Huge capital requirement(Low):High,so economies of scale há to be achieved to increase profit margins.
* Produc differentiation (Low):Smartphone will become a commodity unless they are differentiated from its competitors.Moreover the bargaining power of the buyer is high,so product differentiation is an ideal way to add value to the buyer.
* Distribution channel(Low):In most of the countries,smartphones are sold through mobile operatiors and hence they exert more bargaining power.Alliance with mobile operators is an essential factor for product success in smartphones segment.
* Absolute cost advantage (Low):Recent data by Financial Times reveals that the operating margin of Nokia and Apple is above 30%,whereas the operating margin of the ...view middle of the document...
* Software provider (Moderate): There are so many open sources mobile operating system provider,option are plenty and hence the bargaining power of software providers is low.
* Hardware provider (Moderate): There are so may suppliers for hardware components too (Qualcomm,TI&Intel) and hence the bargaining power of hardware providers is aslo low
The power of substitites is moderate and it actually depends on the impact of substitute products.
Smart phones do wide variety of functions,so any product that specializes in one of those individual functions can also be termed as a substitune.Other formidable substitute products are notebooks (with smaller screens),PDAs,tablet PCs.
Buyers bargaining power is high because of the following reasons:
More choice of products and very limited differentiation of those products.
Elastic demand-Demand is highly sensitive to economy,buyers can delay buying new models.
Less asymmetric information-Buyers have all the required information.
Less switching costs:This depends on the country and type of mobile plans provided by the service provider.
Rivalry is intense among existing players.
The differentiation is terms of product features are getting diminished;however players are continuing to differentiate their products in terms of applications and services offered.
Exit barriers have to be evaluated in correlation with value chain analysis.Exit barriers are low for manufacturers that occupy only part of the value chain against the manufacturer that occupy most the value chain
Complements are critical for product differentiation and they have a very moderate bargaining power.The power of complementary products(applications) will be further subsidized with increasing netword extermalities.We do not see complements gaining more power intil all the mobile platforms converge under some common standards.
Some complements include:
Maps & GPS
-Music & other media related applications
-Internet based ect.