- Portable A/C
C.2. Competitive environment. Thoroughly analyze and discuss Porter’s Five Forces of Industry Competition. Explain effects on costs and profitability.
1. Bargaining power of suppliers.
The bargaining power of the supplier is directly related to the cost composition and profit proportion of the manufacturing enterprise. For example, for manufacturing brand enterprises with relatively large production scale, the more stable the orders are, the stronger the bargaining power of the enterprises will be. We can purchase the same or better quality raw materials at a lower price than other competitors. The proportion of the cost of the product directly reduced. Some enterprises strengthen their bargaining power through M & A / acquisition or investment in suppliers. In addition, we can also provide the patented technology to the supplier and ask for exclusive supply. In those ways, we also have the ability to lower the price, and the party whom technology belongs to has the advantage of negotiation.
2. Bargaining power of buyers.
The bargaining power of buyers will also directly affect the profit ratio. If orders from branded customers and OEM partners,manufacturer bargaining power is relatively weak, profit is relatively low,while comparing with factories that including R & D and sell their own brand.When facing consumers, the market acceptance of price is often related to competitors, bargaining power should be weak, and the cost of retail market is also high.
3. Threat from new entrants
If the new entrants have enough capital resources and optimize the management cost, the price they provide to the market will be lower, which will have an impact on the sales volume and profit of the previous brands.
4. The threat of substitutes
The home appliance industry belongs to the science and technology industry, and the update technology improved very fast. The innovative products have a certain impact on the old consumer goods.And the decline in sales leads to an increase in costs, which will lead to the final decline of the product until it disappears in people's lives.
5. Barriers to entry
Once the enterprise enters the barrier in the industry environment, the price and the product core advantage are not obvious, which will affect the rise of cost and the decrease of profit. Most of the time,enterprises will reduce prices to prevent competitors from seizing the market, resulting in a decline in profits. It can also play the role of complementary value by cultivating team competitiveness, improving service ability and strengthening customer loyalty.
We should strengthen our core competence to make up for the price loss.We can also only focus some competitive models and reduce production cost this is call Cost focused strategy.
R&D some New and innovative products can replace old ones and specialize in market segmentation, and move all the resource to this kind of products,which can also help maintain price.I think it should be the differentiation focus strategy.（to be continued)