Question

Please review these questions and provide answers for the consumer electronics industry. The questions should be answered for the company Bose.

1. Are any changes taking place in the macro-environment that might have a positive or negative impact on the industry in which your company is based? Apply the PESTEL framework to identify which factors may be the most important in your industry. What will be the effect on your industry?

2. Apply the five forces model to your industry. What does this model tell you about the nature of competition in the industry?

3. Identify any strategic groups that might exist in the industry. How does the intensity of competition differ across the strategic groups you have identified?

4. How dynamic is the industry in which your company is based? Is there evidence that industry structure is reshaping competition or has done so in the recent past?

Answer 1

(1) Pestle is basically a framework that helps an organisation evaluate its prospects and performance on the basis of external factors like Political, Economical, Social, Technological, Legal and Environmental.

The Pestle Analysis for Consumer Electronic Industry can be summed up as follows :

· Political : The political environment of a country highly impacts the general business and trade health. If the Government is stable and efficient, manages to maintain friendly relations with other countries and formulates growth friendly fiscal policies, then any industry can bloom to its maximum. Some of the political factors that affect the consumer electronic industry are –

Ø Trade regulations

Ø Taxation Laws

Ø Customs and Export Laws

Ø Laws relating to Intellectual Property Rights

Ø Laws relating to employee benefits

Ø Anti-corruption laws

Ø Relations with trading partner countries

Ø Protection against foreign attacks

· Economical : The following economic factors affect the Electronics market -

Ø Pricing policies affecting Profitability

Ø Interest Rates affecting debt-equity structures of the proucer Companies

Ø Exchange rates affecting the foreign trade

Ø Unemployment rate

Ø Cost of labour

Ø Rate of inflation

· Social : The general structure of society, its traditions, the prevailing preferences and lifestyle highly affect the way the Consumer goods markets may function. Some of such factors are listed below –

Ø Gender ratio

Ø Lifestyle changes over time

Ø Income classes existent at a given point of time, such as Rich,Upper Middle class, Lower Middle class, Poor

Ø Entertainment Activities generally preferred

Ø Literacy rate

· Technological : The level of development in the fields of hardware science, multimedia and software significantly determine the product design and development. Some of such technological factors are –

Ø Development in the areas of Artificial Intelligence and Data Analytics

Ø Rate of obsolescence

Ø Advancement in manufacturing techniques

Ø Focus on Research and Development

· Legal : The laws governing various business aspects play an important role in shaping the economy and consumer markets. Some such laws are –

Ø Laws governing protection of patents, copyrights etc

Ø Laws governing anti-competitive agreements such as cartels

Ø Employee benefit schemes

Ø Consumer protection laws

Ø Factory and Labour laws

· Environmental : Environment protection is being given due importance while drafting various long term and short term fiscal policies at the Central Governance level. The manufacturing concerns are slapped with various types of fines and penalties under these environment protection laws for misuse of natural resources, causing pollution by inadeqaute waste management techniques. All of this, in turn affect the production levels, production techniques and costs and the ultimate market supply of goods.

Summary of Pestle Analysis for the PRESENT Electronics Consumer Market

Covid-19 has adversely affected the growth of many industries and one of the worst hit among all is the Consumer Electronics industry. The demand has substantially declined in the last quarter of the Financial Year ending 31.03.2020. The demand has drastically declined, availability of raw materials, manufacturing processes and supply chains stand disrupted indefinitely due to nation-wide lockdowns across the globe. A permanent change in the usage habits is expected to surface even after things start coming back to normal, probably by the end of Calendar year 2020.

(2) Porter’s Five Forces Model is framework that evaluates the threats prevailing in an industry at a given point of time and helps the organisation strategically work out a plan to compete, revive and grow in the dynamic business environment.

The Five Forces that threaten the growth and development of Consumer Electronics Industry are :

I. Inter-corporate Rivalry : There is a huge demand of the electronics consumer goods in the market owing to the consumers’ lifestyle and purchasing power, to fulfil which the companies keep innovating with the technology, updating the existing models of the goods and trying to attract more and more customers towards them. This intense competition keeps the Electronics companies on toes to protect their market share against competitors.

II. New Entrants : There is a constant fear of a new enterprise bringing the same product with additional new and improved features at competing prices and being able to pull the costumers towards them.

III. Product Substitutes : Due to rapid growth in the fields of software technology, hardware engineering and artificial intelligence, the Electronics industry is always facing the threat of obsolescence of the existing technology. For example, Apple Inc is always innovating in the fields of product development, due to which each time a new Apple product is launched in the market, the old ones’ market prices drop significantly.

IV. Bargaining power of Suppliers : If the suppliers are managing to restrict too much competition among themselves, maintain output levels at par with the demands and keep their products upgraded, they shall be in a better position to quote the price of their products at their discretion.

V. Bargaining power of buyers : If the suppliers are not able to curtail ante-competitive activities, keep their products upgraded in terms of technology and design or fail to meet the demand, the buyers are in better position to control the prices.

(3) Strategic Group Analysis helps an organisation classify the other market players with similar products and services, business model, marketing strategies etc under the same blanket. This further facilitates them with strategic comparison with respect to product quality and innovation, market segments covered and to be covered, prices, possibility of converging with a partner organisation to reap the results of economies of scale.

An example of Strategic group existing in the Electronics Consumer Market :

Samsung, Apple, Micromax, Xiomi, Sony are all forming a strategic group in the market of Smartphones.

(4) The Electronics Goods industry is highly dynamic owing to ever increasing competition among the suppliers due to technological innovations, launch of newer and more efficient product designs etc.

Evidently, the industry is reshaping very rapidly. For instance, Google Chrome has almost rendered Internet Explorer redundant.