Bang & Olufsen Case Study
1. Analyse the competitive structure of B & O’s markets using Porters Five Forces Model (see Section 2.3 and Figure 2.2).
Michael Porters five forces framework helps identify the attractiveness of an industry in terms of the five competitive forces: the threat of entry, the threat of substitutes, the power of buyers, the power of suppliers and the extent of rivalry between competitors (Johnson and Scholes 9e P 54). This framework will be used to conduct the analysis of B & O’s markets.
Threat of New Entrants
The first element in Porters model is the threat of new entrants. Looking at the audio visual industry it is difficult for a new company to come in to an already dense market with many brands with the intention of penetrating the market. There are several barriers to entry, firstly the level of investments required to produce these products, secondly there is already very fierce competition within the existing market for audio visual items, thirdly there is brand loyalty with some of the brands that have existed for decades, a new brand will need to first establish itself to compete in this arena especially with a niche brand like B & O and lastly the profit margins are under pressure due to many television producers all trying to gain market share. This also leads to another barrier in the form of economies of scales, Sony and Toshiba have been leveraging on the aspect of economies of scale to penetrate and monopolise LCD technology in the market (Johnson and Scholes 9e P671).
B & O is unlikely to be threatened by a new company entering the market; it is the current existing companies that are concentrating on different market segments that could potentially be the biggest threat as nothing stops them from adopting a differentiation strategy and thereby entering the high end niche market which is B & O’s only focus area (Brand Republic, Alex Brownsell)
The trends of consumers seem to focus around intangibles hence product
Michael Porters five forces framework helps identify the attractiveness of an industry in terms of the five competitive forces: the threat of entry, the threat of substitutes, the power of buyers, the power of suppliers and the extent of rivalry between competitors (Johnson and Scholes 9e P 54). This framework will be used to conduct the analysis of B & O’s markets.
Threat of New Entrants
The first element in Porters model is the threat of new entrants. Looking at the audio visual industry it is difficult for a new company to come in to an already dense market with many brands with the intention of penetrating the market. There are several barriers to entry, firstly the level of investments required to produce these products, secondly there is already very fierce competition within the existing market for audio visual items, thirdly there is brand loyalty with some of the brands that have existed for decades, a new brand will need to first establish itself to compete in this arena especially with a niche brand like B & O and lastly the profit margins are under pressure due to many television producers all trying to gain market share. This also leads to another barrier in the form of economies of scales, Sony and Toshiba have been leveraging on the aspect of economies of scale to penetrate and monopolise LCD technology in the market (Johnson and Scholes 9e P671).
B & O is unlikely to be threatened by a new company entering the market; it is the current existing companies that are concentrating on different market segments that could potentially be the biggest threat as nothing stops them from adopting a differentiation strategy and thereby entering the high end niche market which is B & O’s only focus area (Brand Republic, Alex Brownsell)
The trends of consumers seem to focus around intangibles hence product
Bibliography: Bang & Olufsen, Annual Report, 2007/2008, http://bang-olufsen.com Bang & Olufsen, Annual Report, 2010/2011, http://bang-olufsen.com Bang & Olufsen, 2011,Press Release: Bang & Olufsen launches new strategy to boost top-line growth. Pia Lundanes, Mette D Krummling, 2009,Strategic Accounts Analysis and Valuation of Bang & Olufsen. Exploring Strategy (Johnson and Scholes 9e)