Samsung porters 5 forces analysis

Running head: GROUP PROJECT 1

GROUP PROJECT 2

Group Project

Tally McIntosh

Liberty University

Existing business model

An organization’s business model is often referred to as the blueprint of the business. A business model is needed for the business to be successful and to remain successful in the future. Ultimately, an organization creates a business model for the purpose of being able to describe how their business will create, deliver, and capture value (Osterwalder & Pigneur, 2013).

iRobot is a corporation that designs and builds robots for the government, industrial markets, as well as consumers. iRobot started by selling packbots to the military sector as a cheap source of technology. These packbots were used by the United States Army in war zones in order to assist the Army with locating traps, bombs, as well as possible ambushes. iRobot has expended their customer base to include the industrial market and everyday consumers. They have become most successful with their in-home appliances with their robotic series which provides robots that self-clean. They offer items such as floor vacuuming robots, floor washing robots, pool cleaning robots, programmable robots, and gutter cleaning robots. They also sell a 1Ka Seaglider which is an underwater vehicle that is designed for missions in the ocean to measure oceanic temperature, salinity, and depth-averaged current.

iRobot has recently corned the home robotics market with the Roomba series of vacuum cleaners. iRobot corporation currently have patents in place that permit them to take legal actions against anyone that uses similar technology. Currently, the robotic market is extremely competitive. This is due to changing technologies that are continually evolving.

Competitive Forces Analysis

The Porter Five Forces Analysis is a tool that is used to analyze the industry as well as understand underlying levers of profitability. There are five different competitive forces that impact the business industry (Rothaermel, 2013). These forces are the threat of new entrants, threat of substitutes, bargaining power of suppliers, bargaining power of buyers, and rivalry among existing competitors.

Managers at the iRobot Corporation can use the Porter Five Forces analysis to determine how these forces influence profitability. They can then develop a strategy to enhance iRobot Corporation’s competitive advantage. They can also examine the long-term profitability in the appliance industry.

Threats of New Entrants

New entrants within the appliances market will put pressure on the iRobot Corporation to lower their pricing strategy, reduce costs, and provide new value propositions to the customers. In order to continue to be successful, iRobot Corporation must manage these challenges and then build barriers to protect their competitive advantage.

iRobot can do this by building economies of scale so that they would be able to lower the fixed cost per unit. They can also use innovation to make new products and services. Ultimately, new products not only bring new customers but also gives their current customers a reason to continue buying their products. Another way that they can combat the threat of new entrants is by spending more money on research and development. It is not likely that a new entrant will want to enter such a dynamic industry where the established players, such as iRobot, keep redefining the standards on a regular basis.

Threat of Substitutes

Industry profitability suffers any time that a new product or service is designed that meets similar customer needs, but in a different way. The threat of a substitute product or service would be high in the robotic market. This is if the substitute were to offer a value proposition that is uniquely different from what is currently being offered.

However, iRobot can tackle the threat of substitutes if they were to do a few things. To be successful over substitutes, iRobot would need to be service oriented instead of just being product oriented. They can also be successful if they were to increase the switching cost for the customers. Also, iRobot can continue to be successful over the industry substitutes if iRobot took the time to understand the true core need of their customers instead of just focusing on what the customer is buying.

Bargaining Power of Suppliers

In the appliance industry, most companies purchase their raw materials from various suppliers. It is possible that suppliers in dominant positions can decrease the margins that iRobot is able to earn within the market. Overall, the impact of higher supplier bargaining power is that it causes the profitability of appliances to decrease.

There are different ways in which iRobot would be able to overcome the power of suppliers. This can be done by building efficient supply chain with multiple suppliers. Another way that they can be successful would be by experimenting with different product designs using different materials, so if the prices of one raw material go up then the company would be able to use a different raw material that would be cheaper. iRobot would also be able to be successful over the bargaining power of suppliers by developing dedicated suppliers whose business depends upon iRobot for their success.

Bargaining Power of Buyers

Buyers are often considered to be demanding. They want the best product available at the most minimum price that they can find. Ultimately, this puts pressure on iRobot profitability in the long run. The smaller as well as the more powerful the customer base is, the higher the bargaining power of the customer would be and the higher their ability would be to seek discounts.

iRobot can challenge the bargaining power of buyers by building their customer base to be large. This would reduce the bargaining power of the buyers as well as provide an opportunity for iRobot to streamline their sales and production process. Another way that iRobot can be successful over buyers is by having quick innovation of new products. If new products are created, then it limits their bargaining power.

Rivalry Among Existing Competitors

iRobot Corporation operates in a very competitive appliance industry. When rivalry in the industry is intense, it will drive down prices as well as decrease the overall profitability of the industry. Competition ultimately takes a toll on the overall long-term profit of the organization.

There are some methods that iRobot can use which can help them overcome the threat of rivalry. iRobot can build a sustainable differentiation. They can collaborate with their competitors in order to increase the market size rather than just competing for a small market. iRobot can also work to build scale so that it can compete better.

CPM and Analysis

The Competitive Profile Matrix (CPM) of iRobot Corporation will provide an in-depth analysis of their strengths and their weaknesses compared to their biggest competitors. Two of their biggest competitors would be Samsung and Dyson. The Samsung Navibot and the Dyson Eye Robot are both robotic vacuum cleaners that are very similar to the iRobot Roomba.

Within the CPM between iRobot, Samsung, and Dyson, iRobot holds the competitive edge over the competition, please see Appendix __. It is not expected that this will change soon. As competition for robotic vacuums increases, iRobot’s competitive edge will continue to come from the company’s well-established brand recognition, reputation, as well as innovation. In the comparison between the three companies, iRobot received a total CPM score of 3.16. Dyson would come in second place with a score of 2.58 and then Samsung in third place with a score of 2.49.

iRobot

Samsung

Dyson

Critical Success Factors

Weight

Rating

Score

Rating

Score

Rating

Score

Advertising/Marketing

0.09

2

0.18

3

0.27

3

0.27

Market Penetration

0.09

4

0.36

2

0.18

2

0.18

Customer Service

0.08

3

0.24

3

0.24

3

0.24

Brand Image

0.08

4

0.32

2

0.16

3

0.24

R&D

0.08

2

0.16

3

0.24

3

0.24

Employee Dedication

0.08

3

0.24

3

0.24

3

0.24

Financial Profit

0.08

3

0.24

2

0.16

2

0.16

Customer Loyalty

0.09

3

0.27

2

0.18

2

0.18

Market Share

0.08

4

0.32

2

0.16

2

0.16

Product Quality

0.09

3

0.27

2

0.18

3

0.27

Top Management

0.08

4

0.32

3

0.24

3

0.24

Price Competitiveness

0.08

3

0.24

3

0.24

2

0.16

Totals

1.00

3.16

2.49

2.58

Competitor’s ratios and analysis

The Samsung Navibot is one of the key competitors of iRobot. Samsung Navibot is owned by the Samsung Electronics Company. In addition to making the robotic cleaners, they also make TVs, tablets, smartwatches, computers, printers, and security systems. The Samsung Electronics Company’s current ratio is 2.92 (Samsung Electronics Co, 2019). Due to the ratio being above .1.0, the Samsung Electronics Company can meet their short-term financial obligations successfully.

The Dyson Eye Robot is owned and operated by a British Technology Company called Dyson. Dyson makes items in addition to the robotic vacuum such as other vacuum cleaners, air purifiers, hand dryers, bladeless fans, hair dryers, heaters, and lights. Dyson’s current ratio is 2.46 (Dyson, 2019). Since Dyson’s current ratio is above 1.0, they, too, can meet their financial obligations.

Alternative Strategies

Increase Research and Development

iRobot Corporation is one of the most successful robotic manufactures in the world today. However, the organization does remain a small company in an asset-intensive business. iRobot competes against businesses with more well-known names, such as Samsung. Their competitors have more money as well as more expansive research and development capability.

In order to stay competitive with these well-known business organizations, it is imperative that iRobot spend more money on research and development then what they have been accustomed to spending on it. By doing so, it will help them be more innovative which will lead customers to stay with them and for new customers to decide to try their products. A disadvantage to this would be that innovation costs money. This would cause iRobot Corporation to operate with less money until the new designs are perfected and tested.

Increase Marketing

Although iRobot Corporation has been successful throughout the years, their marketing of their products has left a lot to be desired. Their positioning as well as selling proposition has not been clearly defined. Due to this, they are open to attacks in this segment from their competitors.

It would be beneficial to their organization to increase the amount of time and finances that are put into their marketing department in order to keep iRobot at the forefront in the market. A disadvantage to this would be the initial cost that it would require to build their marketing department to a higher standard. However, if done properly, they will see an increase in sales which would later make up for the initial loss in revenue.

References

Dyson (DYS). (2019). Retrieved October 4, 2019 from

www.advfn.com/stock-market/london/DYS/financials

Osterwalder, A., & Pigneur, Y. (2013). Designing business models and similar strategic object:

The contribution of IS. Journal of the Association of Information Systems, 14(5), 237-244. doi:10.17705/1jais.00333

Rothaermel, F. T. (2013). Strategic management concepts and cases. New York, NY: McGraw-Hill.

Samsung Electronics Co Current Ratio. (2019). Retrieved October 4, 1019 from

https://www.gurufocus.com/term/current_ratio/SSNLF/Current-Ratio/Samsung-Electronics-Co-Ltd