Analysis of Porter’s Five Forces

Samsung is a well-known brand who has gained its popularity due to their advancement in technological innovation for smartphones, televisions and other electronic devices. The Porter’s five forces play an important role in the industrial competition which would impact the company. The Porter’s five forces analysis of Samsung electronics consists of five forces which are a competitive rivalry, bargaining power of customers, bargaining power of suppliers, the threat from new entrants and threat from substitutes. Firstly, the intensity of competition in the electronics industry is very high due to the existence of several brands who compete in the same position as Samsung Electronics. Brands such as Sony, Apple, LG and others play a significant role in the market and provides stiff competition to Samsung. These large players make it difficult for Samsung to get the complete hold in the market and therefore, Samsung would have to adopt new ideas and technologies to ensure that they can maintain their foothold in the market (Van Alstyne, Parker and Choudary 2016). There would always exist a fight for dominance in the market between these top brands in the electronic market, and the brand who will be able to achieve customer satisfaction would be able to stand out in this intense competition.

Secondly, the bargaining power of customers is also an important element which creates an impact on Samsung (Johnson 2014). In current times, the bargaining power of customers has seen drastic growth due to the availability of immense information about any brand. In the case of Samsung, the bargaining power of the customers is moderately high. The customers can easily get their desired information about the brand from other users of the same brand and also has the potential and opportunity to switch brands if they are not satisfied with Samsung. The customers can compare brands and the different products that the brand has to offer along with the feedbacks of different customers. There are several other reasons behind the increase in the bargaining power of the customers such as intense competition between the brands, extensive use of technology and others. Samsung invests a lot of their money on advertising and marketing so that they can attract several new customers. Due to the intensity of the competition in current times, brands are taking the aggressive way to advertise their products and to ensure that customers do not switch their brands. This proves that customers do have a high bargaining power for Samsung Electronics.

1. Competitive Rivalry

Thirdly, the bargaining power of the suppliers in the case of Samsung Electronics is low. Suppliers are an important part of any business since companies derive raw materials from them which is necessary for the manufacturing of the finished goods which is ultimately going to reach the customers (E. Dobbs 2014). It is very important to purchase good quality raw materials for manufacturing a good quality product. This is why the bargaining power of the suppliers affects the company to a great extent. If the bargaining power of the suppliers is high, then the company’s competitive edge will be low, and if the bargaining power of the suppliers is low, then the company’s competitive strength would be high. Samsung has a low bargaining power of suppliers due to the size of the company which makes it easy for them to switch to another supplier if they are not satisfied with the current one. Several suppliers all over the world provide the raw materials which are needed by the company. Therefore, the current supplier’s main source of income would be Samsung which would be hampered if the supplier does not follow the terms that are laid down by the company. Samsung has a set of rules and terms which are to be followed by the supplier extensively. These rules are set in areas of product quality, labour welfare, sustainability and others which the company is serious about. These are the factors which lead to the low bargaining power of the suppliers in the aspect of Samsung Electronics.

Fourthly, Samsung has a very low threat of new entrants. This is because Samsung is a large brand which has grown, developed and strengthened over the years. The company had to make several investments in many sectors of the business such as advertising, marketing, recruitment, human resources and others to ensure that a strong brand is being built with time. Due to these reasons, the barrier to new entry of companies in this sector is very high, and Samsung does not have to face much threat of any new company taking their place or even establishing themselves in the market. Smaller business can enter the market as local brands. However, they would not be able to reach the position and the competition level which is enjoyed by Samsung. The new brand would be lesser as compared to Samsung which will not be seen as a threat by the company. If the new brand wants to reach the level of business that is enjoyed by Samsung, then they have to invest more in their business and marketing to make themselves visible among the people. However, this is not always possible by the new brands and remains a rare case scenario (Porter and Heppelmann 2014). There are other factors as well the which can act as a barrier to the entry of new companies such as legal and regulatory issues.

2. Bargaining Power of Customers

Lastly, Samsung has several competitors in the global market which provides a threat to them to a great extent such as LG, Sony, Apple and others. This competition between the brands leads to a high level of threat in case of substitute products. Along with these high end global brands, there are also certain international and local brands as well which might prove to be a great competition for the company. The competitive threat that is possessed by these different brands puts a great impact on Samsung (Jarzabkowski and Kaplan 2015). Therefore, the customers have a huge choice of brands and products to choose from, and this possesses a threat to Samsung. They would have to ensure that they can retain their customers so that they do not substitute the products of other companies for their own.

Samsung Electronic could adopt different strategies which would help them to create a sustainable competitive advantage in the global market. Firstly, Samsung is well-known for their technological innovations and advancement through their products. Samsung could put this to the use by ensuring that the products that they manufacture have the budding technological innovations that they have promised to the customers. This would help them to stay in the same position in the market (Lasserre 2017). Secondly, they should adopt good customer service relations so that their customers would be able to get prompt services in an emergency. Since the products of Samsung are relatively of high price, it is of utmost importance to ensure that the issues are handled with care so that the customers do not feel dissatisfied with the company and their service. Thirdly, the people who are working in the company should be extremely knowledgeable and trained so that they can manufacture extremely high-value products which would be favoured by the customers. The good quality of products would be able to appeal to the customers and would help them to make a choice which consists of purchasing the products of Samsung Electronics over other brands. Lastly, Samsung Electronics should always follow their core values which have been expressed by them so that the customers have complete faith over the brand and therefore their products (Samsung.com 2018). Following the core values would lead the company to become a global success with the faith and the trust of the people.        

Reference

1. Dobbs, M., 2014. Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.

Jarzabkowski, P. and Kaplan, S., 2015. Strategy tools?in?use: A framework for understanding “technologies of rationality” in practice. Strategic Management Journal, 36(4), pp.537-558.

Johnson, M.L.L.S.F., 2014. The five competitive forces framework in a technology mediated environment: do these forces still hold in the industry of the 21st century? (Bachelor’s thesis, University of Twente).

Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.

Porter, M.E. and Heppelmann, J.E., 2014. How smart, connected products are transforming competition. Harvard business review, 92(11), pp.64-88.

Samsung.com (2018). Strategy | Sustainability | Samsung US. [online] Samsung.com. Available at: https://www.samsung.com/us/aboutsamsung/sustainability/strategy/ [Accessed 15 Nov. 2018].               

Van Alstyne, M.W., Parker, G.G. and Choudary, S.P., 2016. Pipelines, platforms, and the new rules of strategy. Harvard business review, 94(4), pp.54-62.