How can a smartphone company use external analysis to gain competitive advantage?
1. Apply 5 forces model for the smartphone industry
According to Hill and Jones, the five forces model serves the purpose to identify opportunities and threats in the external business environment, by analysing “competitive forces” (Hill & Jones, 2012, p. 42). Once created by Michel E. Porter this particular framework functioned as a useful tool for managers to approach the external analysis.
The following visualization of the framework gives a good overview of the framework, which will be explained further more.
(Hill & Jones, 2012, p. 43)
1) Risk of entry by potential competitors
New companies can threaten the position of the existing ones if there are no barriers or protections for the latter. These risks of potential competitors depend on factors, such as the level of protection for technology, specialist knowledge, economies of scale as well as cost advantages (MindTools, 2013).
2) Bargaining power of buyers
Buyers have the power to influence the price system, since the companies are the ones depending on the customer’s buying behaviour. The degree of influence customers have on a company depends on the amount of customers, difference between competitors, price sensitivity as well as the ability to substitute (MindTools, 2013).
3) Bargaining power of suppliers
Suppliers on the other hand use their power to provoke the exact opposite- to raise the price. The level of power the suppliers have over a company depends almost entirely on the companies’ need for or dependability on their help (MindTools, 2013).
4) Threat of substitutes
Substitution can be achieved by outsourcing or by operating a previously automatic procedure manually. The threat of substitutes depends however on its simplicity and feasibility (MindTools, 2013).
5) Intensity of rivalry among established firms
A company’s power is based on its uniqueness, which leaves its customer no other choice, but to buy a particular product or make use of a certain service from this specific company. Too many similarities with other companies threaten the sales and empower suppliers, who are then in the lucky position to choose the best deal (MindTools, 2013).
Hill, C.W.L. & Jones, G.R. (2012). Strategic Management theory: An Integrated Approach. (10th ed.). Cengage Learning MindTools, Essential skills for an excellent career. (2013). Porter’s Five Forces; Assessing the Balance of Power in a Business Situation. MindTools Ltd. From http://www.mindtools.com/pages/article/newTMC_08.htm International Data Corporation. (2013). Worldwide Mobile Phone Market Forecast to Grow 7.3% in 2013 Driven by 1 Billion Smartphone Shipments, According to IDC. IDC Corporate USA. From http://www.idc.com/getdoc.jsp?containerId=prUS24302813 Pogue, D. (2013). iPhone review: New 5S can't 'wow' in a mature smartphone market. The Globe and Mail Inc. From http://www.theglobeandmail.com/technology/gadgets-and-gear/gadgets/iphone-review-new-5s-cant-wow-in-a-mature-smartphone-market/article14394282/
2. Apply PESTEL model for the smartphone industry
(Hill & Jones, 2012, p. 74)
According to Hill and Jones the six added external forces- as displayed in the picture- are examined in a PESTEL analysis.
1) Political and legal forces:
This part deals with rules and regulations that derive from political and legal authorities. It is important to analyse the national and international legal system, to identify the transnational business opportunities and limits. (MindTools, 2013)
2) Demographic forces:
“Demographic forces are outcomes of changes in characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class.” (Hill, Jones, 2012, p. 75)
3) Global forces:
Global forces deal with situations such as international trade and investment barriers, as well as economic growth that result in...
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