Industry Analysis
Threat of New Entrants
Threat of Substitute Products
Bargaining Power of Buyers
Bargaining Power of Suppliers
Rivalry among Existing Competitors
Due to expensive production machinery, the industry has high start-up costs, which make it a costly affair to establish a new competitive company. Furthermore, entering
the market is accompanied with high development costs because the products require sophisticated technology and design.
The brand strength of the established companies is also a critical factor for new entrants, because it will require huge marketing budgets to establish their own brand.
However, the new entrance company can outsource the production activities and distribution, and therefore minimize the start-up costs.
Substitute products have challenged the audiovisual industry within the recent decade. Powerful multimedia entertainments products such as tablets, computers and phones are now likely to substitute some products in the industry. For example, Apple is likely to become a strong competitor in the future because they also offer audiovisual products with unique design and high functional quality. This can result in lower demand for B&O´s products.
B&O find itself in the audiovisual industry, which is characterized by fierce competition due to a lot of competitors. However, B&O has a unique design and quality, which differentiates them.
Porter's Five Forces Analysis
The industry has a lot of suppliers and the switching costs between the products are low. From these facts, the buyers will therefore have a high degree of bargaining power in the industry. However, B&O´s customers are very loyal to the brand because it is associated as a unique and premium brand. Furthermore, the customer don’t see any other products in the industry, which have the same signal value and prestige. With other words, B&O is minimizing the buyers bargaining power by differentiating through an exclusive combination of design, sound-and picture quality, ease of use and innovation.
Big electronic manufactures as B&O have many core competences in-house and can therefore produce some components themselves. The activities and components they need to outsource are often to a market with many suppliers (electronic components and assembly), for which reason the bargaining power should be low. However, B&O requires the very best quality from the suppliers and often these suppliers are the major ones in this industry. This pushes the bargaining power towards the supplier because B&O does not form a big part of the manufactures turnover. For example, Philips considers B&O as a medium customer even though they buy most of their LCD panels from them.
The intensity in this industry is distinctive marked by five major manufacturers of consumer electronics in audiovisual. These are: Samsung, Sony, Philips, Panasonic and LG. Among these manufacturers is Samsung the closest competitor because they have differentiated their product designs in recent years. In a broad perspective, the industry is characterized by perfect competition because there are many suppliers of the same product. In narrow competition perspective, the industry is an oligopoly because few major manufacturers is dominating. B&O´s closest competitor is Loewe because they are similar in both design, quality and price. Furthermore, Apple is a future competitor to B&O as they develop more sophisticated audiovisual designs, which are similar to B&O.