Michael Porter five competitive forces that explain the superior or inferior performance/economic returns of an industry. The five forces are: bargaining power of suppliers, threat of new entrants, rivalry, substitutes, bargaining power of the buyers. This model provides firm level insights in terms of: where power lies, areas where the business can venture into to capitalize on its strength and areas of weaknesses which firms can improve on. Overall, these forces help businesses to make informed decisions. The industry that Beats in is the premium audio device industry since its featured products range from $100 or more. The distinction compared to traditional audio device industry is important because the higher pricing range entails a sound
…show more content…
For example, 50 Cent partnered with Timbaland to create its own products. However, there are significant barriers to entry; economies of scale are important to to reduce costs and expand nationally and internationally; and the cost to access distribution is high due to established relationships of incumbent firms with its online, brick-and-mortar retailers, and consumers. Lastly, brand loyalty is big factor in the industry. To counter the threat of new entrants, Beats is emphasizing its strategy on brand loyalty by endorsing top-tier athletes and musicians to increase brand exposure and retain its current …show more content…
The increasing number of competitors also decreases switching costs because there more brands to choose from. The low price sensitivity and product differentiation are positive factors that decrease buyer power. Product differences is moderate as audio devices are also considered fashion items. Moreover, brand loyalty is important for younger consumers who look for audio equipment also as a fashion accessory. Lastly, the ability of buyers with high capital, such as Apple, to backward integrate in the audio equipment industry increases buyer power. To minimize the impact of the increasing buyer power, Beats is focusing on differentiating its brand by emphasizing that the fashionable aspect of its products through their sleek
For example, 50 Cent partnered with Timbaland to create its own products. However, there are significant barriers to entry; economies of scale are important to to reduce costs and expand nationally and internationally; and the cost to access distribution is high due to established relationships of incumbent firms with its online, brick-and-mortar retailers, and consumers. Lastly, brand loyalty is big factor in the industry. To counter the threat of new entrants, Beats is emphasizing its strategy on brand loyalty by endorsing top-tier athletes and musicians to increase brand exposure and retain its current …show more content…
The increasing number of competitors also decreases switching costs because there more brands to choose from. The low price sensitivity and product differentiation are positive factors that decrease buyer power. Product differences is moderate as audio devices are also considered fashion items. Moreover, brand loyalty is important for younger consumers who look for audio equipment also as a fashion accessory. Lastly, the ability of buyers with high capital, such as Apple, to backward integrate in the audio equipment industry increases buyer power. To minimize the impact of the increasing buyer power, Beats is focusing on differentiating its brand by emphasizing that the fashionable aspect of its products through their sleek