Irobot industry analysis

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.