Australian Electronic Tablet Industry - Essay Example

?Management Executive summary A tablet computer is an electronic device which comprises of a touch screen LCD and virtual keyboard. This gadget is also known as a mobile computer as it resembles a mobile phone. But the product has all the essential features of a computer, such as internet accesses, office suite, and entertainment features. Supernova ltd. a German based firm is planning to enter the Australian market with the aforementioned product. There is a huge scope for the product to get success in Australia as the consumers are very much keen to try to new and innovative products. The main objective of the project is to analyze the demand of this particular product in Australia and to know about the consumer’s acceptance of new & innovative products. Apart from assessing the demands and wants of consumer the report will analyze the porter’s five forces with respect to the electronic computer industry within the Australian market. The report will also highlight on the cultural differences between the two countries based on Hofstede’s cultural dimension model. The key finding of the report is the existence of huge demand for tablet pc in Australia and some forecasting agencies have predicted that the sales figure will be skyrocketing in the years to come. Table of Contents Table of Contents 3 Threat of new Entrants 5 Economies of Scale 5 Brand Loyalty 5 Capital Requirement 6 Analysis 6 Threat of substitutes products 6 Switching Cost 6 Buyer Loyalty 7 Analysis 7 Bargaining power of buyers 7 Number of customers in the market 8 Availability of Substitutes 8 Analysis 9 Bargaining Power of Suppliers 9 Degree of supplier concentration 9 Availability of substitute inputs 9 Analysis 10 Existing Rivalry 10 Industry growth rate 10 Demand for product 10 Analysis 11 Recommendations 11 Hofstede’s cultural dimension 13 Cultural dimensions of Australia and Germany 13 Difference between two cultures 14 Recommendation 14 Conclusion 14 Reference 16 Threat of new Entrants New entrants are described as the companies that are presently not competing within the given industry but has the potential to compete in the industry if chooses to do so. Economies of Scale Economies of scale are about the decrease of unit cost of production when the company starts to manufacture more. Some of the sources include a) cost reduction through mass production. b) Discount availed through bulk purchase. c) Spreading fixed cost of production over volume of production. d) Same advertisement cost of large volume of production.1 Therefore Supernova limited can go for large scale production in order to grasp the cost advantage but before taking the decision they can go for a pilot test or test marketing. Brand Loyalty Brand loyalty is exhibited by consumers when they are more inclined towards the products of the established players of the industry.2Companies can create brand loyalty by using strong advertisements, superior product quality and providing after sales service. In a recent study, it has been observed that Australians do not pays extra for the sake of brand names; rather they move towards cheaper brands which offer good value for the products. Therefore, Supernova limited has to retain the loyalty by maintaining a fixed level of price and also satisfying the customer needs. 1. Gareth Jones and Charles Hill, Strategic Management Theory: An Integrated Approach (US: Cengage Learning, 2009), 44. 2. William M. Pride and O.C. Ferrell, Marketing (US: Cengage Learning, 2011), 400. Capital Requirement Capital requirement is the amount needed for the cost of production and considering the fact that the firm is a new entrant in the market, the total cost will also include the whole set up of the company to start its operation. The entire set up will include manufacturing in the factory, raw materials, labor charges and all other variable cost. Since the company does not have any restrictions in the financial segment they can undertake all the required operations. Analysis Since the company does not have any restriction in the financial segment they can go for large scale production but a small pilot test must be conducted in order to analyze its acceptance in the market. Now the most important factor is that Australians are not at all brand loyal they always move towards cheaper brands, therefore in this situation supernova ltd. must follow a penetration pricing strategy to get the initial market share. With the given favorable conditions and sound financial stability threat of new entrants in the market is high. Threat of substitutes products Substitute products are characterized by the availability of same category products, which performs the same function as the existing product.3There is no direct substitutes of electronic tablets in Australia. But there are substitutes which are having small differences in the features of the product. The substitutes which have been identified are I-pad by Apple, smart phones, mini Laptops by different companies such as Samsung, Lenovo and other market players and electronic reader by Amazon’s Kindle. 3. Daniel Roy, Strategic Foresight and Porter’s Five Forces: Towards a synthesis (Munich: GRIN Verlag, 2011 Switching Cost Switching cost is the cost which is borne by customers in the form of time, energy and money.4 In other words the cost one has to bear when somebody switches from using a product of the established company to the product of another company in the market. The customers get locked to the existing company when the switching cost is high. In this case electronic tablets and the other substitutes, the price difference is small. And with the availability of big brands in the substitute segment it will merely cost the customers any loss of time or energy. Buyer Loyalty Buyer’s loyalty is the measurement of how a buyer is faithful towards a brand.5Given that Australians preferred to move towards the low priced products with high product value, they can easily accept or try new forms of electronic tablets such as smart phones or I-pads. Their enthusiasm for trying new gadgets will always be high as they are considered technical savvy. Analysis With the intention of Australian consumers it can be easily stated that it will be easy for them to switch from one product to other substitute forms such as smart phones, I-pads or mini laptops. The additional factor is that the price difference between the substitute and existing product is also less. Therefore it can be concluded that the threat of substitutes is high. 4. Gareth R. Jones and Charles W. L. Hill, Essentials of Strategic Management (US: Cengage Learning, 2011), 48. 5. Bill Carey and Chantal Howel- Carey, Make Money As a Buyer's Agent: Double Your Commissions by Working With Real Estate Buyers (US: John Wiley and Sons, 2007), 173. Bargaining power of buyers The bargaining power of the buyer refers to the capability of consumers to bargain and lessen the price of the commodity or to increase the cost of the company by demanding more quality products and services.6 Bargaining power depends on how quickly the buyer identifies other sources.7 Now the main target customers for this product in Australia will be technical savvy persons and business managers. The lighter version with low cost can be targeted to student groups as well. Apart from these segments there can also be an alternative customer base which can be higher income group. They will purchase it for their satisfaction and to showcase the status in the society. Number of customers in the market This section is about the demand for the product in domestic market. In a study recently conducted by ‘tel-syte’ it has been observed that there is a huge demand for tablet pc’s in Australian domestic market. There were almost double numbers of tablets sold in Australia in 2011 compared to the preceding year. Marketers have also predicted that the sales volume will increase in the years to come. Availability of Substitutes Availability of substitutes in this context refers to the availability of substitute consumers. The product is mainly intended for retail customers. But apart from retail customers there are business clients. Therefore rigorous marketing in the in business to business segment will certainly give a competitive advantage to Supernova Ltd. Institutional clients can also be approached for the generating trade. 6. Gareth R. Jones and Charles W. L. Hill, Strategic Management Theory: An Integrated Approach (US: Cengage Learning, 2009), 64. 7. Businessmate. What are Michael Porter's 5 forces. http://www.businessmate.org/Article.php?ArtikelId=9. Analysis Australians are very much reactive to the price change of a product. Similarly they are inclined towards the value of a product. They believe in having low cost and high product values. Therefore it can be clearly affirmed that with the availability of fewer competitors in the market the bargaining power of the consumers are medium. Bargaining Power of Suppliers Suppliers are also other organizations which provide raw materials, service and sometimes even manpower to the host organization. The bargaining power refers to the capability of the suppliers to increase the price of the raw materials or to decrease the quality of goods and service with the supply of substandard quality materials for low price.8 The primary raw materials for the electronic tablets includes LCD screens, touch screen film, fan-less motherboard, flash memory, battery and other technical requirements include wires, capacitors, connectors, resistor, switches etc. The suppliers of such material in Australian market include Lacie, Mesostate LCD industries ltd, techbuy Australia and 3M Australia among many others. Apart from the domestic suppliers there are also availability of raw materials through online purchase from websites like alibaba, global source, techbuy and deals direct to consider a few. Degree of supplier concentration The number of suppliers of raw materials for manufacturing an electronic tablet computer is relatively large. The exact number of suppliers cannot be calculated but it there are several numbers. They are not exactly from the same location but scattered in different parts of Australia such as New South Wales, Sydney, Adelaide, Victoria and Canberra. Availability of substitute inputs Availability of substitute input refers to the presence of other raw materials by which an electronic tablet computer can be manufactured. But in this case such application is not possible. 8. Mike W. Peng, Global Strategy (US: Cengage Learning, 2008), 41. Analysis Considering the fact that there is availability of a large number of suppliers of raw material for the manufacturing of electronic tablets, the bargaining powers of the suppliers are relatively low. Existing Rivalry This force reflects the competition within the industry.9 Rivalry among industry is about the intensity of competition among the organizations of the electronic tablet computer industry. The competitors also manufacture the same kind of product to sell in the market. Competitors within this industry are Samsung, Apple, HTC, Dell, Asus, Toshiba, Acer, Pandigital etc. Industry growth rate According to a marketing research firm in Australia there were more than 1.4 million tablets sold all over the country. They are predicting that within 2012 the sales volume will touch 2 million and the most encouraging data provided by them is that within 2016 there will be 5 million tablets sold i.e. half of the population of Australia will be using tablet pc. The industry growth rate is calculated to a mammoth 330% per annum. Demand for product The country is considered as a lucrative market for tablet pc manufacturing companies. With the high growth rate of the industry it is confirmed that there is a huge demand of the product in Australia. Tablet Pc’s has been considered as the revolutionary gadget in the electronics market. According to ‘Australia tablet PC and market forecast opportunities, 2016’ the tablet PC market in Australia is expected to grow exponentially with the increasing acceptance of the product. Most importantly it is quiet successful in filling up the gap between a smart phone and a laptop. Another reason of success is the number of internet user in Australia is large and this application is successfully supported by a tablet a pc. 9. Porters Five Forces. Rivalry among existing firms in the industry. http://www.portersfiveforces.org/rivalry-among-existing-firms-in-the-industry/ Analysis The Australian market has a large number of tablet manufacturers as well as substitute products like smart phones, mini laptops. Therefore it can be clearly stated that the competition within the industry is high. Recommendations After conducting the analysis of porters five forces in the Australian market the following are the findings:- Threat of new entrants in the market is high. Threat of substitute products is also on the higher side. The bargaining powers of the customers are medium. The bargaining powers of the suppliers are low. The competition among the industry is also high. Based on the above findings the following recommendation can be drawn:- The company must enter the Australian market with penetration pricing strategy, considering the fact that Australian consumers prefer brands that offer low price but gives good value of the product. They must also use product differentiation in the form of some extra flash memory or a preloaded useful application like YouTube downloader, face- book, twitter and online share trading software. The second recommendation is that the company before going for a large scale production must go for a small scale venture by conducting a pilot test of test marketing. This will give them an idea of the acceptance of the product. The company must develop its advertising campaign keeping in mind the Australian culture and some catchy taglines which may help in grabbing customer attention. The focus should be on the segments such as higher income group, businessmen, technology savvy persons and a lighter version for the students. In order to have more insights of the electronic tablet industry and also to have an internal assessment a SWOT analysis is also conducted to know the Strengths, Weakness, opportunities and threats of the company. The analysis is shown below:- Strengths The company is financially strong enough to compete in the market. Supernova Ltd. focuses on product differentiation. Previous experience in the particular product line. Weakness The company lacks exposure in foreign markets. Lack of brand name, brand image and customer base. Initially the company has to spend a lot in setting up the infrastructure. Opportunities Tablet pc’s have great demand in Australia. Australian consumers move toward the new brands which offer subsequent product value. Penetration pricing will give high market share. Threats Availability of substitute products like smart phones and mini laptops. Competitors like Samsung, dell and Lenovo will give stiff competition. The product is only meant for higher income groups which may reduce the sales volume. Hofstede’s cultural dimension Cultural dimensions of Australia and Germany Greet Hofstede has proposed a systematic process for distinguishing the national cultures of different countries with respect to the organizational culture. The theory is known as cultural dimension theory. The theory is a bit complex but still it is widely used.10 The dimensions identified by Greet Hofstede in his theory include Power distance index, Individualism vs. collectivism, uncertainty avoidance index, quality vs. quantity of life and time orientation.11 Dimensions Australia Germany Power distance Low Low Uncertainty Avoidance Practical Higher, by using expertise Collectivism vs. Individualism Individualism Individualism Quality vs. Quantity of life Quality Quality Time Orientation Short termed Short termed (Source: Author’s Creation) 10. Ralph Johann, Cross-Cultural Management: The Case of the DaimlerChrysler Merger. (Munich: GRIN Verlag, 2008), 5. 11. Businessmate. What are Geert Hofstede's 5 Cultural Dimensions. http://www.businessmate.org/Article.php?ArtikelId=4. Graphically it is shown below:- (Source: http://geert-hofstede.com/australia.html) Difference between two cultures It can be easily identified that the cultural difference based on Hofstede cultural dimension between Australia and Germany is very less or negligible, apart from the fact that there is a small amount of difference between the two countries in dimension of uncertainty avoidance index. The Australians are more practical thinkers than the Germans. Recommendation The difference between the two countries in respect of their culture is very less except for the fact of uncertainty avoidance index. In Australia there is a need of both generalist as well as experts. This factor can be overcome by the use of proper planning. Conclusion The research has been conducted to know about the Australian consumers, suppliers, their culture and also their take on the new innovative technologies and products such as electronic tablet computers. The research tools which are used in the process include Porter’s five forces and Hofstede’s cultural dimension model. After going through all the research processes the following are the findings:- 12. Geert Hofstede. What about Australia. http://geert-hofstede.com/australia.html. In Australian electronic tablet industry there is a healthy competition among the market players. There is also availability of substitute products in the form of smart phones and mini laptops which also gives a stiff competition. The bargaining power of consumers is low because the customers are getting a limited list of alternatives. While on the other hand the bargaining power of suppliers is low because there is many suppliers of raw-materials are already present in the industry. Apart from this the threat of a new entrant in this market is also on the higher side, as the industry offers favorable conditions. Therefore it is highly recommended that companies must have tight entry barriers. By analyzing the cultures dimensions of two countries, it has been observed that there is a small cultural difference in the country in the form of uncertainty avoidance. Australians are very much practical in this scenario than the Germans. After doing all the analysis of the given factors it can be stated that Supernova Ltd. can easily enter the Australian market with their product. But there are some preventive measures that need to be adopted such as to observe cautiously the price fluctuations in the industry and accordingly adjust the price. With the advantage of having negligible cultural differences of two countries the business may become well established in Australia. Reference Businessmate. What are Geert Hofstede's 5 Cultural Dimensions. http://www.businessmate.org/Article.php?ArtikelId=4. Carey, Bill. And Chantal H. Carey. Make Money As a Buyer's Agent: Double Your Commissions by Working With Real Estate Buyers. US: John Wiley and Sons, 2007. Ferrell. O. C. and William M. Pride. Marketing. US: Cengage Learning, 2011. Geert Hofstede. What about Australia. http://geert-hofstede.com/australia.html. Geert Hofstede. What about Germany. http://geert-hofstede.com/germany.html. Johann, Ralph. Cross-Cultural Management: The Case of the DaimlerChrysler Merger. Munich: GRIN Verlag, 2008. Jones, Gareth R. and Charles W. L. Hill. Essentials of Strategic Management. US: Cengage Learning, 2011. Jones, Gareth. And Charles Hill. Strategic Management Theory: An Integrated Approach. US: Cengage Learning, 2009. Peng, Mike W. Global Strategy. US: Cengage Learning, 2008. Porters Five Forces. Rivalry among existing firms in the industry. http://www.portersfiveforces.org/rivalry-among-existing-firms-in-the-industry/. Businessmate. What are Michael Porter's 5 forces. http://www.businessmate.org/Article.php?ArtikelId=9. Roy, Daniel. Strategic Foresight and Porter’s Five Forces: Towards a Synthesis. Munich: GRIN Verlag, 2011. Read More