Analysis of Five

Forces
Cell Phone Industry

1
Five Forces Model

2
Competitors

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Competitors
1. Who are the main competitors?
Companies Market Share
Samsung* 24.8%
Apple 17.7%
Huawei** 8.4%
Xiaomi** 5.6%
Lenovo 5.4%
LG 5.3%
* Strong Competitor **Emerging Competitors
4

Source: www.smartphonemarketresearch.com
Competitors
3. What are the key value
propositions of the main
competitors?

Key value proposition of Samsung:

Quality high technology products at a reasonable
price
Quality: reliable, fully featured, good products
High Tech: TVs, cell phones, camera, etc.
Reasonable Price: they are not the cheapest but also
not expensive
5

Source: www.Qoura.com
Competitors
4. What customer segments do they
focus on?

Samsung is focusing:
Upper-middle and upper class technology savvy
customers are target of high-end phones

People between ages of 15-25 because their

spending power has increased during last decade

People between ages of 26-50 because they have 6

the ability to purchase high-end phones
Competitors
5. What do you think their cost
structure looks like?

Samsung is spending considerable percentage of

profits on R&D

Samsung is also spending on various advertising

and marketing activities

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Analysis
According to our analysis, competition in
smartphone industry is a strong force based on
following reasons:

High aggressiveness of firms (strong force)

Low switching cost (strong force)

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New Entrants

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New Entrants
1. Who are the new entrants in your
market?

Xiaomi, a Chinese cellphone manufacturing

company

Producing cellphones, android smartphones and

tablets

Became world's 4th largest smartphone maker in

2015 by selling 70.8 million units 10

Source: www.smartphonemartketresearch.com
New Entrants
2. How are they different?

Xiaomi is producing high quality phones at much

cheaper costs than major players of the industry
by making use of:
Cheaper factors of production
Low advertising costs

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New Entrants
3. What competitive advantage or
disadvantage do they have?

Cost advantage is the main competitive

advantage of Xiaomi

Brand recognition is the main disadvantage of

Xiaomi

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New Entrants
4. Which barriers must they
overcome?

Customer preferences, brand recognition are the

main barriers in smartphone industry

Xiaomi needs to focus on brand development

13

Source: www.Wikipedia.com
New Entrants
5. What are their value
propositions?

Xiaomi wants to provide high quality products to

its customers. This involves improving product
value and lower customer cost.

Unique Features:
MIUI System
Big Screen
CPU
14

Source: www.justforfans.wix.com
New Entrants
6. Which customer segments are
they focused on?

Currently, they are focusing on low-end

technology savvy customers

Most of its sales are in China and the developing

countries

However, with high quality phones at low prices,

they can challenge major players of the industry 15
New Entrants
7. What is their cost structure?

Xiaomis cost structure includes low R&D costs,

low advertising costs

Xiaomi is taking advantage of cheap factors of

production because it is based in China

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Analysis
According to our analysis, entry of new players in
smartphone industry is a moderate force based on
following reasons:

High capital requirements (weak force)

High cost of brand development (weak force)
Capacity of potential new entrants (strong force)

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Substitutes

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Substitutes
1. Which products or services could
replace the products or services of
this industry?

Within same industry, best substitutes of

Samsung include:
iPhone
HTC One M9
LG G4
Motorola Moto G3

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Substitutes
1. Which products or services could
replace the products or services of
this industry? (continued)

Outside this industry, potential substitutes of

smartphones include:
Wearable devices e.g. smartwatches

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Substitutes
2. How much do they cost as
compared to products of our
industry?

Current versions of smartwatches are relatively

inexpensive (but used as bundled product with
smartphones)

In future, standalone smartwatches are expected

to be cheaper
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Substitutes
3. How easy is it for customers to
switch to these substitutes?

2015 has been a year of popularity for wearable

devices

Standalone smartwatches developed with same

specifications and performance as of smartphones
can gain popularity

Behavioral change might take a decade to

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completely replace smartphones
Analysis
According to our analysis, threat of substitutes in
smartphone industry is a weak force based on
following reasons:

High availability of substitutes (moderate force)

Low performance of substitutes (weak force)

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Suppliers

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Suppliers
The majority of Samsung suppliers are based in
Asia and accordingly, 79.4% of its supply-chain
expenses occur in Asia. This is followed by
Americas (14.8%), Europe (4.4%) and other
places.In order control inbound logistics aspect of
the business more effectively, Samsung owns a
number of logistics firms as its subsidiaries. The
most notably, Samsung Electronics Logistec,
established in 1998, is an integrated enterprise
logistics management agentthat serves logistics
needs of the company with 540 employees and
8,600 partner employees around the globe.
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Suppliers
Samsung manufacturing operations comprise the
following:
General manufacturing: semiconductors and
components;
System manufacturing: applications and software;
Device assembly packaging: batteries and other
components, label assembly.
The company heavily relies on Six Sigma
methodology in its business operations.

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Analysis
According to our analysis, bargaining power of
suppliers in smartphone industry is a weak force
based on following reasons:

High number of suppliers (weak force)

High overall supply (weak force)

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Buyers

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Buyers
1. What customer segment is your
company focusing on?

Upper Middle and Upper class technology savvy

customers

High school, college and graduate students

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Buyers
2. What is the bargaining power of
your customer?

Low bargaining power because of high customer

loyalty

Although, switching costs are low and individuals

buyers are smaller in number, buyers replace old
iPhone with new and expensive models

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Buyers
3. How likely is your customer to
switch to competitors/substitutes?

Customers are less likely to switch to other brands

because of:
Product differentiation
High customer loyalty
Apples customers are conscious about image and
recognition

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Analysis
According to our analysis, bargaining power of
buyers in smartphone industry is a moderate force
based on following reasons:

Customer loyalty (strong force)

Low switching cost (strong force)
Small size of individual buyers (weak force)

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