Bargaining power of suppliers in the industry is low as they are generally small companies from underdeveloped countries. Apple and Google have their own software and hardware manufacturing, which limits bargaining power of suppliers even further. The case is especially relevant to Apple as the company provides technological advances to which suppliers must comply. Larger brands set standards for physical qualities of their products which suppliers have to follow.
Bargaining power of buyers is moderate, and it has been rising due to the increasing number of substitutes. Therefore, modern customers have several choices with similar characteristics and functions from different brands. It is also important that cell phones have become more affordable. Companies invest in research and development, as well as marketing. However, brand image, prices and difference in quality limit bargaining power of customers.
The threat of substitutes is high as there are several large brands in the industry which offer products with similar processing power and functions. Product innovation and marketing investments can help decrease the threat of substitutes. Phones manufacturers focus primarily on customer experience and pricing strategies in order to gain competitive advantage. However, product quality and brand image can help in moderating the influence of this factor.
The threat of new entrants is moderate as the company does not need large investments to enter the market. However, existing brands invest heavily in marketing and development, which makes it hard to gain competitive advantage. Legal constraints, as well as limited demand for phones can pose additional challenges for entry. There are already several different products offered in each segment, which makes attracting customers a problem.
The intensity of rivalry in the industry is very high as the demand for phones has been stagnating for recent years. Modern manufacturers focus on customer retention and innovations to keep existing buyers. Large brands maintain competitive advantage through pricing strategy as features of their products are often similar. Thus, large phone manufacturers currently try to keep their market shares through investment in marketing and research.
The innovation that has been recently introduced is the use of augmented reality in smartphone apps which allow users to put virtual objects into real space through their cameras (Leswing, 2021). The innovation leads to even lower bargaining power of suppliers as large brands have their own applications and hardware. Bargaining power of buyers can be decreased as such innovation is available in the products of large brands. The threat of substitutes remains high as the technology can be implemented by competitors. The threat of new entrants decreases as technology makes it harder to develop unique products. The intensity of rivalry in the industry remains very high as large brands offer their products with the same features.
The innovation which is on the horizon is pressure sensitive screens (Stein, 2019). Bargaining power of suppliers will decrease further as the technology is already patented by large brands. Bargaining power of buyers will remain moderate as the quality of manufacturers will be limited due to introduction of the technology. The threat of substitutes will remain high as large brands will all implement the technology making their products similar. The threat of new entrants will decrease more as the technology will be costly and will require special equipment for production. The intensity of rivalry in the industry will remain very high as competition between major brands will strengthen.
The innovation that I can envision is holographic displays in smartphones. Bargaining power of suppliers will fall even further as major brands will develop their own production. Bargaining power of buyers will stay moderate as the number of brands will reduce leaving only large brands in the market. The threat of substitutes will remain high as major brands due to their investment in research and development will implement the technology in all their products. The threat of new entrants will be even more limited as the production will be more expensive and will require extensive technological resources. The intensity of rivalry in the industry will remain high due to the competition of large brands.
References
Leswing, K. (2021). The tech industry is looking to replace the smartphone — And everybody is waiting to see what Apple comes up with. CNBC. Web.
Stein, S. (2019). Touch screens are old news. Your next phone could be pressure-sensitive everywhere. CNET. Web.