Porter’s Five Forces Analysis
Threat of Substitute Products (LOW)
The possibility threat of substitutes is moderately low; since there are few substitutes from other industries (if any); and most of them are seemed to be obsolete or have on foot out of the door, e.g. digit camera in the place of film camera and fax machines in place of overnight mail delivery. Consider that Sony has built a good reputation and strong customer loyalty, it effectively position the company’s products against product substitute to some extent; this is a surplus for the company. 2.
Bargaining Power of Buyers (HIGH)
The power of buyer is high due to almost no switching cost for customers to switch from one brand to another. The access to the internet also allows customers to have all the information on prices charged by the different companies. The possession of this information may cause price sensitive buyers to switch to buying from companies that offer cheaper prices. On-line shopping has also increased the bargaining power of buyers. 3.
Bargaining Power of Suppliers (LOW)
The suppliers do not have an upper hand (low bargaining power) due to large number of suppliers and customers. Moreover, Sony operates in big global supply chain management and its suppliers are not concentrated. Comparatively, they are also much small in size and thus normally have weak bargaining power. Sony usually engages indirect negotiation with its suppliers in order to secure reliable supply at lower prices. 4.
Threat of New Entrants (LOW)
Threat of new entrants is low as the entry into the industry requires high capital, economies of scale, product differentiation as well as technology and innovation know-how. Moreover, the industry is regulated that every potential entrant is required to obtain approval from the relevant authority of the particular country before the company is allowed to be operated. Every new entrant that infringed into the big players’ territories can expect strong retaliation from them. Therefore, it also serves as a deterring effect to potential entrant. 5.
Intensity of Rivalry (HIGH)
Industry rivalry is high due to relatively intense competition and high exit cost. The high intensity of rivalry is also largely due to the numerous and equally balanced competitors in the markets, generally short product life cycle as well as high R&D, fixed and storage costs. The industry growth is slow and thus further heightens the intensity of competition. From the analysis above, it can be deduced that competition in the consumer electronics industry is intense and therefore will not be attractiveness (i.e. profitability) to potential entrants. However, the overall industry attractiveness does not imply that every company will return the same profitability. If Sony is able to apply its core competencies, business model or network well, the company can still achieve a profit above the industry average. A clear example of this is the airline industry. As an industry, profitability is low and yet individual companies, by applying unique business models, have been able to make a return in excess of the industry average. SWOT Analysis
With such huge reserves means that Sony is capable of generating internal funds to finance any expansion. •
Possession of the necessary physical resources is likely to help Sony generate value-creating competitive advantage. •
Ability to leverage on technologies well and ahead of its competitors to create innovative and high quality products for its customers so as to increase sales and profit margins. •
Ability to motivate and improve productivity of the staffs. •
Ability to innovate and come up with revolutionary innovations that mesmerize customers into buying them. •
Positive perceptions of Sony’s reputation that help to boost sales and revenues. •
Ability to manage the complex and geographically dispersed in-bound and out-bound logistics activities well. •
Possession of a world-class marketing acumen...
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