A conceptual framework that identifies the potential threats to the company using Porter’s 5 forces strategic model are as follow;
a. Threat of Substitutes
Is the product generic or is it branded? If the new Hand-held computer is a branded product, it could gain brand loyalty from the consumers. The more brand loyalty, the less the threat of substitutes and the higher the incumbent’s profitability will be. Advertising also plays an important role in this context in order to create product differentiation from rivals. Personal computers probably would be the closest substitute for this product. As such supplier of hand-held should conduct product awareness to educate consumers on their product benefits over other substitutes. In such a way , the threat of substitute could be minimize and the company could gain market share of the industry.
b. Threat of Entry
The higher the barriers to entry the industry, the more profitable the incumbent will be. Generally in hand-held computer industry, high capital costs are required to produce such product. Thus few potential entrants with the necessary capital could implies a lesser threat of entry and higher incumbent profitability . If the barrier to entry is low , more players will enter the market and in the long run , the competition will be come more stiff and this will lead to decreasing in profit margin.
c. Power of Buyers
Buyers of hand-held computer can be fragmented. Such fragmented market could eliminate customers bargaining power as the quantity purchase is generally in small volume. It therefore raises the chance for the company to earn a better profitability. If the consumers fail to differentiate the new product with other establish brand , the company will loses some of it potential market share . Therefore aggressive promotions, advertising as well as product features should be enhanced in order to differentiate their product with other brand... [continues]
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