The Industry Factors: The Electronic Product and Service Industry

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Buyer Power

The second factor is buyer power; companies have a higher amount of buyer power. This is due to the variety of outlets consumers can use to buy new electronics such as in store outlets, online retailers, and direct from manufacturer companies as well. Because of these options for purchase, buyers in this market have a relatively high power. There is a near limitless amount of people to buy the new products and thus, buyers have the control because they can virtually take their business to any other company. Buyers thus have an ability to drive down market prices because there will be competition for business between this consumer group.

Competitive Rivalry

The third, competitive rivalry, is very apparent when it comes to the electronic products and service industry. There are several big names within the industry that produce nearly identical products. It is between these larger name companies such as Gamestop, Conn’s, Bestbuy, and many more. Because these companies offer nearly identical products at nearly the same cost, there is almost no barrier to switching from one company to another for purchase of these goods. These companies frequently have ad wars which could be described as trying to offer the lowest price or the best deals and spreading these advertisements over a variety of media to push their products or services.

Threat of Substitution

The fourth factor is threat of substitution. There is a very high threat of substitution in the electronic product and services industry; this is due to the ease of switching from one company to another in order to purchase the goods or services that are needed. These firms all offer very similar products and services and they cannot truly differentiate them on the price because by one lowering a price, another company then also follows, thus driving down the price of these products or services as a whole in the market, and virtually eliminating profits for these firms. The firms of this industry cannot differentiate their product usually either because the firms in this industry generally are not the manufacturer, but rather are the retailers. The only way to truly differentiate for these firms is to achieve exclusive selling rights to certain products or to figure out ways to add convenience and value to the consumer by more convenient logistics for these consumers.

Threat of New Entry

The fifth and final factor is threat of new entry. Threat of new entry in the electronic products and services industry becomes quite difficult. Because of the large, and highly established firms in this industry, new retailers and service providers struggle to make a name for themselves. These new entrants also lack the economies of scale that these large enterprises can achieve, thus keeping their costs lower than any new entrants who are not large enough to acquire a large enough network to produce an economy of scale. Because these larger companies have these economies of scale, they can afford the advertisement necessary to get their name out when their products are almost completely identical to everyone else. These large companies have saturated the market and have left almost no market share or name recognition for smaller firms. Although the industry of electronic products and service industry may seem complicated at first, it becomes quite easy to analyze by just applying several different factors to break up the information.

IV. Conclusion

In conclusion, it can be seen that the electronic product and service industry is a saturated market, with little room for entry. There are highly established firms that control the majority of the market share. Products produced in this industry are very similar and thus are retailed for similar prices and consumers have a variety of choices of which firm suits their needs best. It is through differentiating the product and adding value that firms are truly able to compete in this arena.

Footnotes:

1.

Vitez, O. (2015, August 15). What is the Retail Value Chain? Retrieved August 31, 2015, from http://www.wisegeek.com/what-is-the-retail-value-chain.htm

2.

Hanks, G. (2015). Steps in the Retail Value Chain. Retrieved August 31, 2015, from http://smallbusiness.chron.com/steps-retail-value-chain-69900.html

3.

"Stay Connected with CGMA." Porter's Five Forces of Competitive Position Analysis. Chartered Global Management Accountant, n.d. Web. 01 Sept. 2015.

4.

http://finance.yahoo.com/