Question

How do Porter's five factors explain the high level of industry competitive intensity in the African mobile phone market?

Answer 1

Answer :- porters five factors analysis of smart phone industries are :-

(1)Threat of new entrants .

- customers are loyal to existing brands.

- patents makes it difficult for new companies as it act like barriers for them .

- requires high capital cost for research and development and manufacturing cost of products .

- fierce battle between firms launching new innovations and new products to get more market shares .

(2)Threat of substitutes . (Moderate)

Because of presence of substitutes in the market firms have to cut prices for its product inorder to compete well in the market.

- smart phones have two basic function such as connecting people and to share information to other people . Substitutes can perform more than two or more functions such as email , newspaper ,music ,social network ,internet services etc.

-main substitutes are Apple iPhones and Android phones in the market .

- sometimes economy have low substitutes for smartphones which can be used only for calling and messaging purpose . They are cheap .

(3) Bargaining power of buyers ( high)

Bargaining power of customer is increasing as there is lots of mobile manufacturers in the country giving same features .

- lesser switching cost makes customer to change the product which they buy .

-sometimes buyers delay the purchase until the prices gets low for new mobile models . Demand is highly sensitive because of this reason.

(4) suppliers bargaining power ( moderate )

There is low bargaining power of suppliers as there is many suppliers for mobile industries. Mainly there is only two suppliers for mobile industry one is for its hardware and other one is for software. Suppliers have to follow quality standards for mobile as major companies like Samsung,apple ,Nokia have enormous financial strength and influence on market because of this it limits suppliers bargaining power .

(5)Intensity of rivalry is high in this industry.

Competition is very intense among the existing firms in the market .companies try to differentiate their product on the basis of applications and its services.

- companies are investing on R& D to maintain their market share . Samsung is top one when it comes to research investment . In recent years apple too has increased its investment of R & D . Apple which is known for its premium prices also placed its price for iPhone 11 competitive inorder maintain its market share which resulted in heavy sales .