The smartphone industry is sturdy. At an estimated value of $335 billion in revenues in 2017, the industry is attractive to those who want to join and those already in it (Kharpal, 2017). The Porter five analysis below illustrates the nature of the industry. The smartphone industry is a robust industry that has a high rivalry and customer power, low entry, medium supplier power and substitution

The threat of new entrants is low. The smartphone industry is dominated by giants like Apple, Samsung, and Huawei, which are established in the market. Competing against these behemoths may take time without any guarantee of success. Moreover, the industry requires a lot of capital. A lot of resources go into research and development of software and hardware due to rapidly changing technology (Shiu, 2017). Additionally, marketing a new brand is expensive for a new entrant because they will be competing against renowned brands.

Competitive rivalry is very high. The industry is very competitive. Of note is smartphones share a lot of similar features, which they hope will attract an almost same market. It is due to the stiff competition that companies create features like security, speed, space, and even cameras that will make their products stand out (Chen & Shen, 2017). Similarly, companies also incorporate the latest technology in the industry to have the edge over their competitors. As customers have little switching costs, they can quickly leave one brand for another especially to test out new features. Companies rely on loyalty, which they reinforce through marketing strategies. The smartphone industry is very competitive.

Comparatively, the bargaining power of suppliers is medium. The suppliers, due to the demand of smartphone technologies have some influence over manufacturers. Demand for unique and advanced software and hardware has particularly made the suppliers powerful (Revellio, 2017). Each company wants to have the latest software and hardware on their phone. Even so, companies have some control over suppliers. For one, the Android operating system is an open source, which companies can use without paying a hefty sum for it. Additionally, the switching costs are not as high as many suppliers in the market are available.

Customers have high bargaining power. There is a big market for smartphones. Nonetheless, customers demand quality and affordability when purchasing smartphones. The market is flooded with phones from different price range that clients can easily afford as many smartphones have the same features (Apiah et al., 2017). Online shopping has also made it possible for customers to compare prices and features of different phones, and pick what suits them best. Again, there is a low switching cost for customers. In this case, they can easily switch from one brand to another. Interestingly, many phones attract youths, who are open to trying out new technologies. This creates little loyalty from the population. In the wake of variety and penchant to try out multiple smartphone brands, it is clear that customers have very high bargaining power.

The threat of substitution is medium. The smartphone industry has rendered some communication substitutes obsolete, like writing informal letters. Moreover, the industry has incorporated some of these substitutes. Applications like emails are available on smartphones. Many newspapers are also available online, which people can access on these devices. Companies also create new products to outdo the rivals (Martins et al., 2019). In effect, companies always innovate to ensure their products have no substitutes. The market is also marred by counterfeit goods, which use established brand names to sell cheap versions of smartphones.

The smartphone industry is a robust industry that has a high rivalry and customer power, low entry, medium supplier power and substitution. The analysis reveals that it is not easy for newcomers, who have to contend with established firms that rival each other. It is the customer who benefits the most from the industry as they have variety.

References

Appiah, D., Ozuem, W., & Howell, K. E. (2017). Brand Switching in the Smartphone Industry: A Preliminary Study. In Global Business and Technology Association Conference, Vienna, Austria.

Chen, Y., & Shen, C. (2017). Performance analysis of smartphone industry. Routledge.

Kharpal, A. (2017). Smartphone market worth $355 billion, with 6 billion devices in circulation by 2020: Report. CBNC. Retrieved from https://www.cnbc.com/2017/01/17/6-billion-smartphones-will-be-in-circulation-in-2020-ihs-report.html

Martins, J., Costa, C., Oliveira, T., Gonçalves, R., & Branco, F. (2019). How smartphone advertising influences consumers’ purchase intention. Journal of Business Research, 94, 378-387.

Revellio, F. P. (2017). Closing Loops in the Circular Economy: A Make or Buy Analysis for the Smartphone Industry (Doctoral dissertation, Leuphana Universität Lüneburg).

Shiu, J. M. (2017). The scope of support of toolkits in the smartphone industry. Annals of Business Administrative Science, 16(2), 55-65.