External analysis
External analysis
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
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