The Porter’s Five Forces model examines and analyses the competitive environment of Sharp Corporation. According to Porter (2004) there are five forces, which are discussed below in turn, that determine industry attractiveness and profitability in long-run.
Threat of Entry of New Competitors
Lynch (2006) states that in general threat of entry of new competitors in electronics industry is high as the new entrants can overcome entry barriers by investing in facilities, advanced technology or outsourcing the same electronic components from suppliers.
However, Johnson and Scholes (2006) argue that the strong brand and large scale of economies the company built over the years with the use of advanced technologies resulted in high entry barriers such as large capital requirement, high switching costs, need for advanced technology, know-how knowledge and innovation, preventing new competitors entering into market.
Threat of Substitute Products
Although Sharp has strong brand equity associated with high quality and reliable products allowing the company to sell its products at premium, with increasing number of products being manufactured in China and Malaysia the company is struggling to reduce the impact of cheaper substitute products on most of its marketing segments (Datamonitor, 2010).
Moreover, while certain products of Sharp such as TVs are considered to be the best in the market, many other products the company manufactures including PCs and mobile phones falls short from meeting high customer expectations indicating that it is high likely that there are direct alternative products available for these market segments.
Bargaining power of Buyers
Considering the nature of the electronics industry it is argued that the bargaining power of buyers is rather high. This is because electronic products are highly price sensitive as majority of them are considered to be luxury goods rather than essential and today’s consumers tend to demand high quality (Lancaster, 2002).
Moreover, Kotler and Keller (2009) argue that the company’s most of the products in the market are fairly undifferentiated and due to availability of alternative products buyers face few switching costs. In addition, the dramatic increase of online shopping has further increased the bargaining power of buyers increasing pressure on the company to reduce prices.
Bargaining Power of Suppliers
According to Gray et al (2007) the power of suppliers over the company is limited due to number of reasons. First of all, Sharp has significant market presence and share in global electronics market indicating its suppliers cannot risk losing such a big customer. Secondly, as Sharp purchases high volume of goods suppliers forced to reduce prices, offer discounts or face risk of going out of business.
Moreover, the fact that most of the company’s purchases are made up of standardised products that can be produced by many suppliers adds pressure on suppliers and reduces further their bargaining power. Finally, in order to diversify its product portfolio, Sharp not only has started to manufacture most of electronic components in-house, but recently begun supplying those components to other businesses operating in the market (Datamonitor, 2010)
Intensity of Competition
It is generally accepted that there is fierce competition in both Japanese and global electronics market. Therefore, the threat Sharp faces from competition is a significantly high.
As Kotler and Keller (2009) discuss highly competitive environment in electronics market, they point following factors as reasons behind the intense competition:
- Large number of equally positioned competitors
- Rapid change in technologies
- Short product life-cycle
- High research and development costs
- Low profit margins
- High exit barriers
Therefore, this intense competition requires Sharp to constantly focus on research and development, increase its innovativeness and efficiency, and employ right marketing strategies in order not to lose the battle to its competitors.
- Datamonitor Business Information Center, 2008, “Sharp Corporation” Company Profile
- Kotler P. and Keller K.L, 2009, Marketing Management (13th edn). Pearson Education International, Prentice Hall
- Lancaster G., Massingham L. And Ashford R, 2002, “Essentials of Marketing”, McGraw-Hill
- Lynch R, 2006, Corporate Strategy (4th edition) Financial Times Prentice Hall
- Porter M, 2004, “Competitive Strategy: Techniques for Analyzing Industries and Competitors”, Free Press, London
- Johnson. G, Scholes. K and Whittington. R, 2006, “Exploring corporate strategy”, Prentice hall, UK, Seventh Edition