Porter’s 5 Forces Analysis
Rivalry is low.
The mobile device and data solutions industry is highly concentrated,characterized by a few large competitors and numerous smaller competitors. As a result, the industryrivalry is lessened.
The growth in this industry has been extremely fast-paced, as Cisco has predictedthat global mobile traffic of data will grow 78% over the next five years.
This means that firms cansimply keep up with t
he industry’s growth to keep their
respective positions and improve theirrevenues.
Although there are numerous fixed cost components to this industry: office space,production facilities, and employees; there has been an increasing trend of firms shifting to just-in-timeproduction.
This allows smartphone manufacturers to have relatively low inventory and subsequentlylow storage costs, which reduces the pressure to fill capacity.
Firms in this industry compete onproduct differentiation, not just price. For instance, Apple wants to be revolutionary in user experienceand friendliness, while Microsoft wants to be extremely functional.
In addition, there are other areaswhere incumbents can differentiate themselves, including application markets and phone designs.Switching cost in this industry is quite high as people need to learn the different interface.
Threat of entrants is low.
The smartphone industry is very capital intensive due to highresearch and development (R&D) costs and expensive manufacturing facilities. This raises the barrierof entry and makes it difficult for small companies to enter. Many of the firms that compete in thisindustry have existing long-term contractual relationships with mobile carriers and benefit from theirsignificant brand equity. These companies also have a great deal of knowledge and experience througheconomies of learning, which gives them a major cost advantage over smaller entrants. New entrantswill have difficulty getting carriers to adopt their phones because many carriers are already in profitabledeals with the large mobile phone manufacturers.
In order to achieve scale in this industry, new