In this article, we will look at 1 types of buyers, 2 bargaining power of buyers, 3 factors that determine the strength of buyers, 4 managing the bargaining power of buyers, and 4 an example of Walmart. There are always different types of buyers and each needs to be treated in consideration of their unique behavior. Inside each market segment, there may be five different groups of buyers: Innovators are a small group of early purchasers.
It was found in Finland over years ago and is currently operating in countries worldwide. Although, still one of the market leaders in the mobile phones and smartphones industry, recent competition has decreased the market share of Nokia. In order to evaluate the micro-environment that Nokia operates in, its Porter Five Forces Model is done which takes into consideration customers, suppliers, substitutes, rivals and new entrants.
The analysis is as follows: Threat of New Entrants The threat of new entrants into the mobile phone industry is not very high. There are a number of reasons for this.
The first reason is that the technology needed to produce the latest generation of smartphones is very advanced, making it difficult for new entrants to differentiate themselves.
The second reason is that any new entrant will be required to spend a huge capital on research and development, technology, and then marketing in order to become at par and compete with the established players.
The third reason is that companies like Nokia hold major shares of the market making it very difficult for new entrants to grab onto market share. They will need a lot of time or something extraordinarily innovative and new to attract market share. In the past couple of years, new entrants such as Q Mobile, Xiaomi and OPPO with the help of huge investments and decreased production costs due to economies of scale have been able to enter the market successfully.
So overall for Nokia, this threat of new entrants is high. Bargaining Power of Suppliers Nokia holds a significant amount of bargaining power over its suppliers especially in the case of hardware. There are a large number of suppliers that are willing to supply the parts required by Nokia for the manufacturing of their products.
In case a supplier attempts to bargain with Nokia for higher prices, Nokia can easily switch to other suppliers.
Nokia holds a significant market share in the mobile phone industry making it very attractive for suppliers. Therefore, no hardware supplier would be in a position to bargain with Nokia and be lucky to have such a huge purchaser.
Some of the hardware suppliers include Ericsson, and Cisco Systems. On the other hand, for their software requirements, Nokia has recently come into an alliance with Microsoft to supply them with their required operating system software.
However, in this case, Nokia is at the lower end.
Microsoft has a higher power of bargaining over Nokia as this deal is more beneficial to Nokia than Microsoft. There are almost no other organizations that can rival Microsoft in software creation ToughNickel, Therefore, Nokia has a moderate threat from the bargaining power of suppliers.
Almost no threat from hardware suppliers but a significant threat from software supplier. Bargaining Power of Buyers Due to extensive growth and development in the mobile phone technology, the bargaining power of the buyers in this industry has increased a lot. Same is for Nokia. It has become a very competitive market where there are many choices for the buyers; making them very powerful as they can choose to easily go to any of the rivals of Nokia if products are not good enough for them.
As Nokia does not make direct sales and relies heavily on intermediaries, electronic shops and carrier stores e.
Orange have an array of options from different brands for their customers making it difficult for Nokia to impact their sales.
The primary reasons behind buyers switching is delayed adaption of new technologies, operating system is less user friendly, smartphones with very insignificant specifications as compared to competitors smartphone of similar price range and limited applications available on the Windows app store.
There are a number of other options available for buyers other than Nokia. Thus, mobile phone industry has become very price sensitive giving very high bargaining power to buyers over Nokia.
Threat of Substitute Products The threat of substitute products is very low for Nokia. This is because mobile phones are no longer just used calls and texts.
There are many other functions that are now expected from a mobile phone such as a camera, FM radio, organizer, music player etc.
Therefore, a substitute would be to buy all of these gadgets individually and keep them in your pocket at all times. This is not plausible. Since mobile phones today offer so much to the buyer, their substitution is almost impossible.
Thus, the threat of substitution is very low for Nokia. Competitive Rivalry The level of competition is extreme in the mobile phone industry. Due to the slow move of Nokia into the smartphone market, it is expected that the market share of Nokia will continue to fall.The Strategic CFO Creating Success Through Financial Leadership.
Supplier Power (one of Porter’s Five Forces) By James Wilkinson on July 24, in The bargaining power of suppliers is high if the buyer does not represent a large portion of the supplier’s sales.
If substitute products are unavailable in the marketplace, then. Bargaining power of suppliers: Moderate. The bargaining power of suppliers of Disney is moderate. Its suppliers include technology companies, media partners and the other vendors.
Most of its suppliers are influential names like Nokia, Imax, Hulu, Tumblr, Philips and ESPN. Sep 12, · Porter's Five Forces Model - Example: Mobile Phone Industry The bargaining power of suppliers is medium because mobile phone manufacturers rely on their key suppliers for quality component.
Five forces model cellphone industry 8, views. Share; Like; Download Umer Saeed, Atlas Asset Management bargaining power of suppliers in smartphone industry is a weak force based on following reasons: • High number of suppliers (weak force) • High overall supply (weak force) 33 Nokia Pankaj Saharan.
Agencytheory Bargaining power of supplier is low because there are many low-cost suppliers that can produce the phone but it will become challenging when Nokia switches to more advanced products with built-in internet and have to install microchips. Low bargaining power of suppliers: Even though Nokia is losing it’s market share and brand value seems to be on downward trend but Nokia is still leading device manufacturer and seller in some countries and among the top with narrow margins in others.