Porter’s five forces for electronics industry in India

1. Potential Entrants (Entry Threat):-
The potential new entrant in the electronics market is Low due to following reasons.

• Huge capital requirement for a firm to enter in this segment.
• Rapidly evolving technology is another entry barrier as for a new entrant; it is very difficult to build technology advanced products right from the start as they will need time to understand the actual evolutions in this field.
• Major firms like LG, Samsung, and Sony etc have efficiently built their supply chain and hence it will be very difficult for a new entrant to compete with them on price. E.g.  these firms can get displays, panels etc at a very less price due to efficient supply chain.
• Major players i.e. LG, Samsung, Sony, Videocon etc have already developed their huge brand equity which will be very tough for a new entrant to establish in this market.
• Brand loyalty to existing firms. Since brand loyalty is moderate in this sector, hence this also imposes entry threat on new entrants.

2. The Bargaining Power of Suppliers:-
According to present market conditions, in electronics sector also the bargaining power of supplier is on Low end because of following reasons.

• Product differentiation is very low. Since most of the companies are developing similar kinds of products, therefore the power is very less. Like in the TV, each of LG, Samsung, Sony etc have similar product range in LCD, LED, Plasma and Smart TV’s; hence they have less power to bargain.
• Since there is no or very negligible switching cost, hence this again makes the supplier power to be on lower end.
• Impacts on inputs on cost:- Since in this sector by changing the inputs i.e. input technology or other raw material, the firms cannot drastically differentiate on prices in order to be competitive, hence this also leads to reduced in supplier power.

3. The Bargaining power of customers (buyers):-
The bargaining power of buyer is High because of following reasons.

• Use of internet to get all the information: - Buyer has a power to go online and compare the prices and features of various products online. Hence buyers are more informative and educated regarding products and this leads to increase in their power.
• Mid to High price sensitivity of buyer. Since buyer are generally very price sensitive, so this also leads to increase in buyer power.
• Feedbacks and suggestions available over internet. With era of internet, there is also increase in buyer power as buyers can now easily read the feedbacks and suggestions regarding the products. So they are more informed and also influence buying decisions of other powers.
• Buyer switching cost is very less; hence this also leads to increase in buyer power.

4.  Threat of substitute products or services
Threat of substitutes are again from Mid to High.

• Due to changing technology, there is high threat of substitute products in this industry. E.g. before 2010 consumer used to use CRT televisions. But after the innovation of Plasma, LED and LCD TV’s consumers and shifted to the newer generation products.
• Buyer have huge propensity to substitute if any firm provide more technologically advanced product.

5. Intensity of competitive rivalry

The competitive rivalry is again very High in this industry due to following reasons.

• There is continuous innovation in this industry making an intense competitive rivalry. Hence innovation leads to sustainable competitive advantage.
• Powerful competitive strategy: - If LG is to be evaluated on the competitive strategy then it will be that Samsung is more focussing on product innovations and diversification and they are quickly launching new products in market. Sony is focussing on both quality and technology. Hence every firm has a different strategy and core competencies which make their rivalry even more intensive.