Marketing: Headphones and Bargaining Power

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Industry Structure
Porter’s Five Forces Model
Threat of New Entrants: MEDIUM
Skullcandy is a headphone company and the technology behind it is simplistic. Therefore, it is easy for a newcomer to enter into the headphone audio industry. However, this market is already saturated with many different kinds of audio companies. Nevertheless, Skullcandy has a huge advantage of differentiating themselves from the rest of the competitors through its technological features, which also makes the barrier of entry higher. Hence, the level of threat of new entrants is medium. Rivalry Among Established Companies: HIGH

Skullcandy targets a niche market of a young and vibrant crowd with an active lifestyle. Although it is marketing in a niche market, there are many headphone companies competing against Skullcandy for market share. Skullcandy’s major competitors are Sony, Base, Beats and other audio devices manufacturing companies. They are not only competing in the quality of audio system, but also in its special features, comfort, designs, and brand image. Therefore, the rivalry among established companies is high. Bargaining Power of Buyers: HIGH

In the market, the buyers can be either consumers or distributors, such as wholesalers. As there are many competitors in the industry, it is very easy for buyers to purchase a different headphone audio brand instead of Skullcandy. However, Skullcandy will not lower its product price to compete with others. It uses its focused differentiation strategy; which justifies it’s pricing product in the medium to high range. It is priced above the cheaper brands, but sold cheaper with brands of similar audio quality. Consequently, the cost advantage provides Skullccandy more opportunities despite the high bargaining power of buyers. Bargaining Power of Suppliers: LOW

Being that Skullcandy outsources most of it’s manufacturing offshore, the company is cost effective and able to focus on designing new products. There is a huge market of...
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