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Competitor analysis is an assessment and examination of the firm’s internal analysis of current and potential competitors (Whittington, 2001). This analysis provides both an offensive and defensive strategic context through which to identify opportunities and threats. Competitor profiling coalesces all the relevant sources of competitor analysis in the support of efficient and effective strategy formulation, implementation and adjustment (Ehlers and Lanzenby, 2010). The strategic rationale of competitor analysis is powerfully simple. Superior knowledge of rivals offers a legitimate source of competitive advantage (Wootton and Horne, 2010). The raw material of competitive advantage consists of offering superior customer value in the firms, chosen market.
Pannash Air-conditioner is in the air-conditioning distribution market. As a relatively new company in the market it faces lots of challenges and this section critically examine these challenges particularly those pose by competing in the air-conditioning distribution market. Michael Porter designed a framework for analysing the competitors of the firm. He defined five forces to analyse potential entry of new competitors, potential development of substitute products, rivalry among competing firms, bargaining power of suppliers and bargaining power of buyers. (David, 1999) Pannash Air-conditioners is a distribution agent for multi-billion company Reutech solutions. Reutech is the only company in South Africa with the rights to bring in Panasonic and Nashua air conditioning units in the country. Pannash only distribute or sell to business only in KwaZulu Natal. The following list, list all Air-conditioners distribution companies in KwaZulu Natal: • Samsung air (Only distributors of Samsung air conditioning units in the province). Samsung air is based in Durban. • Daikin- is the distribution company only distributing daikin air conditioning units. • Haier air conditioners- distributors of Haier units. • Gree Air Conditioning- distributors of air-conditioning units. • Capital Air Conditioning-distributors of aux air conditioning units. • LG Electronics- distributors of LG air-conditioning units • Defy- based in Durban manufacture and supply Defy branded air-conditioning units.
2010).g. Buying power of buyers is directly related to inflation rates. Bargaining power of buyers Buyers are customers who buy the products or services (Ehlers and Lanzenby. Panasonic has reputation for quality and performance. Pannash has few vans and for large order they outsource. demographic trends. Pannash Air-conditioning only sells to businesses and not to the public. To compete in a new industry Pannash requires huge considerable resources. Pannash has limited capital with only 4 shareholders and limited funding. Pannash air-conditioning is the only agent in KwaZulu Natal distributing Panasonic and Nashua brands. and this will result in lower profit margin or even loss for Capital Air Conditioner. Organisations . Switching costs are low since companies like Haier air conditioners and Capital Air Conditioning lower their prices to attract more customers because most customers are not familiar with their brands. this has enabled and capacitated Pannash to differentiate themselves on the bases of brands they supply to the Natal market. air-conditioning units and capital to carry out marketing activities absorbs all the start up cost. Hence profit of the existing companies gets reduced.Application of Michael Porter 5 forces Barriers to entry threat of new entrants New entrants are the potential threat to the market share of existing companies by bringing additional different branded air-conditioning units into the market. Despite its recent entrance into the market. the company has managed to secure a huge ware house in Mkondeni. 2010). Pietermaritzburg to store air condition units. Switching costs are a once-off cost that customers incur when they switch from one supplier’s product or services (Ehlers and Lanzenby. Capital to buy more vans. interest rates. New entrants coming in the market with less familiar Chinese brands e. Securing the warehouse has resulted in the company achieve economies of scale by having large number of units in their premises. This has enhance the organisation’s flexibility to take huge customer orders and keep prices constant by spreading costs over large number of units ordered. Aux units have come in to the market at cheaper prices. Pannash is a relatively new business that started in 2010.
i. This does not make Pannash Air-conditioning immune to the competition. As a result they purchase significant proportion from Pannash than any other company distributing in KwaZulu Natal. Ben Booysen. thus taking competition edge of Pannash. (Ehlers and Lanzenby. lower prices and better services to reduce their cost (Ehlers and Lanzenby. Air-conditioning dealers in Pietermaritzburg. Pannash is supplying air controlling units or air-conditioner. Rivalry among competing organisations This is the strongest of all forces. and therefore there are weak buyers to exert some bargaining power. therefore buyers bargain for higher quality.want to maximise their sales and profit. This make it feasible for Ben Booysen. They are all fragmented. different types of blankets and heater to warm people. The air conditioning industry is not standard. 2010). These companies or buyers can posse a credible backward integration. different air-conditioning units are produced which caters for different customers. 2010). It is one of the most important and potentially most threatening forces that an organisation can confront in its industry environment. Most of these substitute products are cheap and large proportion of the population buy them because of their affordability and low switching cost. Duzi Air-conditioning. Competitors are organisations that produce goods and services similar to a particular organisation’s goods and services and compete for patronage of the same customers. Coolrite and Fine air all favour Panasonic brand for their upmarket customers and Nashua for their low end market. 2010) . can negotiate with Reutech to buy from them directly. Threats of substitute products Substitute products are products or services from other industry which can be used to perform similar functions to the products or services in the industry (Ehlers and Lanzenby. Duzi air-conditioning and other companies to switch to different brands and with Pannash Air-conditioning supplying only two types of brands make it easier for customers to exert some bargaining power. Within all the companies supplied by Pannash Air-conditioning not one has any particular influence on the number of orders or sells.e. substitute to its products are different types of fans to cool air. whereas buyers want to spend less on the services and products in the market.
there is increased rivalry because all competitors fight for the same amount of customers and market share. Bargaining power of suppliers Pannash Air-conditioning has a signed three year contract with Reutech Solutions who are the sole suppliers of the Panasonic and Nashua Aircon. n. Pannash Airconditioning has to deal with Reutech Solutions no matter how bad the service is or how high their prices are. on the other hand Pannash Air-conditioning negotiates prices with Reutech Solutions based on the quantity. there are price wars and each competitor trying to outdo the other. Pannash Air-conditioning has an advantage as they the only company that keeps Panasonic and Nashua air-conditioning. This makes switching costs high and implement large legal costs. Strategic stakes are high. Rivalry is intense. (Quickmba. so the bulk purchases are an attractive sale to the suppliers and they negotiate comparatively.Pannash Air-conditioning competes amongst a high number of competitors in KwaZulu. therefore competitors increase rivalry during the other months. Therefore the bargaining power of the supplier is high. when a firm is losing market power or has potential for great gains. There is an influx of cheap Chinese air-conditioning and this adds to the competitive environment as customers can switch to using these cheap Chinese brands. there has to be enough stock during those months because when shortages are experienced customers switch to suppliers who have stock.) Air-conditioning sales are not high during the winter months. . they intensify rivalry. also switching suppliers will be time consuming. which also increases rivalry as customers don’t have to stay with Pannash Air-conditioning. There are low switching costs.d.