Vizio Strategy
Strategy Paper: Vizio
1. Analyze competitive forces in the US LCD TV industry.
Porter’s Five Forces
Intensity of Rivalry – rivalry intensity is very high as evidenced by the severe price competition as the case references (24% decline from 2006 – 2007 alone). Competition comes from the plethora of players, both established ones such as Phillips, Sony and Panasonic as well as upstarts such as Syntax-Brillian Corp.
Threat of Entry – traditionally the barriers to entry for this industry have been very high as distributors were vertically integrated (a la` Sony and Panasonic) and had high capital investment costs. However, the Vizio model has proved that executing a contract-manufacturing, asset light model dramatically reduces the barriers to entry. Similarly the incumbency advantage of the brand identity of landmark players is becoming less important as customers sacrifice brand recognition in exchange for a price. This perhaps can be bolstered by a belief by some consumers, that the products have little differentiation or that Visio’s products better value (‘bang for your buck’).
Threat of Substitutes – substitutes are generally low as at the time the case was written the “computer as TV” trend was in a nascent stage and broadband internet was not as cheap or ubiquitous as it is today. As well, it can be argued that the living room or prime TV purchase isn’t going away in the near to medium term at least. This model can also be viewed as compatible with LCDs as computers can be connected to the TVs with greater ease with each passing year. Non-LCD or ordinary TVs can be thought of as substitutes though the rapid price reduction in LCDs probably offsets the threat of this TV product segment being an enduring threat.
Supplier’ Bargaining Power – the case intimates that panel technology has become commoditized and thus supplier power has been reduced, essentially legitimizing Vizio’s business model by allowing the firm to enter the business with
1. Analyze competitive forces in the US LCD TV industry.
Porter’s Five Forces
Intensity of Rivalry – rivalry intensity is very high as evidenced by the severe price competition as the case references (24% decline from 2006 – 2007 alone). Competition comes from the plethora of players, both established ones such as Phillips, Sony and Panasonic as well as upstarts such as Syntax-Brillian Corp.
Threat of Entry – traditionally the barriers to entry for this industry have been very high as distributors were vertically integrated (a la` Sony and Panasonic) and had high capital investment costs. However, the Vizio model has proved that executing a contract-manufacturing, asset light model dramatically reduces the barriers to entry. Similarly the incumbency advantage of the brand identity of landmark players is becoming less important as customers sacrifice brand recognition in exchange for a price. This perhaps can be bolstered by a belief by some consumers, that the products have little differentiation or that Visio’s products better value (‘bang for your buck’).
Threat of Substitutes – substitutes are generally low as at the time the case was written the “computer as TV” trend was in a nascent stage and broadband internet was not as cheap or ubiquitous as it is today. As well, it can be argued that the living room or prime TV purchase isn’t going away in the near to medium term at least. This model can also be viewed as compatible with LCDs as computers can be connected to the TVs with greater ease with each passing year. Non-LCD or ordinary TVs can be thought of as substitutes though the rapid price reduction in LCDs probably offsets the threat of this TV product segment being an enduring threat.
Supplier’ Bargaining Power – the case intimates that panel technology has become commoditized and thus supplier power has been reduced, essentially legitimizing Vizio’s business model by allowing the firm to enter the business with