Introduction

Porter’s Five Forces methodology is used in this article to analyze the business strategies of
white goods makers like Samsung. This tool is a handy method to assess how each of the market
drivers impact the companies like Samsung and then based on the analysis, suitable business
strategies can be devised. Further, companies like Samsung are known to study the markets they
want to approach thoroughly and deeply before they make a move and it is in this perspective
that this analysis is undertaken.

Industry Rivalry

This element is especially significant for Samsung as the other White Goods multinationals like
LG, Nokia, and Motorola not to mention Apple are engaged in fierce competitive rivalry. Indeed,
Samsung cannot take its position in the market for granted as all these and other domestic white
goods players operate in a market where margins are tight and the competition is intense. Apart
from this, Samsung faces the equivalent of the “Cola Wars” (the legendary fight for dominance
between Coke and Pepsi) in emerging markets like India where Samsung has to contend and
compete with a multitude of players domestic and global. This has made the impact of this
dimension especially strong for Samsung.

Barriers to Entry and Exit

The White Goods industry is characterized by high barriers to entry and low barriers to exit
especially where global conglomerates like Samsung are concerned. Indeed, it is often very
difficult to enter emerging markets because a host of factors have to be taken into consideration
such as setting up the distribution network and the supply chain. However, global conglomerates
can exit the emerging markets easily as all it takes is to handover and sell the business to a
domestic or a foreign player in the case of declining or falling sales. This means that Samsung
has entered many emerging markets through a step-by-step approach and has also exited the
markets that have been found to be unprofitable. This is the reason why white goods
multinationals like Samsung often do their due diligence before entering emerging markets.

Power of Buyers

The power of buyers for white goods makers like Samsung is somewhat of a mixed bag where
though the buyers have a multitude of options to choose from and at the same time have to stick
with the product since they cannot just dump the product, as it is a high value item. Further, the
buyers would have to necessarily approach the companies for after sales service and for spare
parts. Of course, this does not mean that the buyers are at the mercy of the companies. Far from
that, they do have power over the companies, as most emerging market consumers are known to
be finicky when deciding on the product to buy and explore all the options before reaching a
decision. This means that both the buyers and the companies need each other just like the
suppliers and the companies, as we shall discuss next.

Power of Suppliers
In many markets in which Samsung operates, there are many suppliers who are willing to offer
their services at a discount since the ancillary sectors are very deep. However, this does not mean
that the companies can exert undue force over the suppliers as once the supply chain is
established; it takes a lot to undo it and build a new supply chain afresh. This is the reason why
white goods makers like Samsung invariably study the markets before setting up shop and also
take the help of consultancies in arriving at their decision.

Threat of Substitutes

This element is indeed high as the markets for white goods are flooded with many substitutes and
given the fact that consumer durables are often longer term purchases, companies like Samsung
have to be careful in deciding on the appropriate marketing strategy. This is also the reason why
many multinationals like Samsung often adopt differential pricing so as to attract consumers
from across the income pyramid to wean them away from cheaper substitutes. Further, this
element also means that many emerging market consumers are yet to deepen their dependence on
white goods and instead, prefer to the traditional forms of housework wherein they rely less on
gadgets and appliances. However, this is rapidly changing as more women enter the workforce in
these markets making it necessary for them to use gadgets and appliances.

Stakeholders

This is an added element for analysis as the increasing concern over social and environmentally
conscious business practices means that companies like Samsung have to be careful in how they
do business as well as project themselves to the consumers. For instance, white goods makers are
known to decide after due deliberation on everything from choosing their brand ambassadors to
publicizing their CSR (Corporate Social Responsibility) initiatives.

Conclusion

As the diagram above indicates the relative strengths and the weaknesses of each element, we
can now conclude this analysis with the theme that as the global economy integrates and more
emerging markets open up, companies like Samsung are at an advantage because they have
already established themselves in many markets. However, it must also be noted that each
market is unique and hence, Samsung must not adopt a one size fits all strategy and instead, must
approach each market differently. In conclusion, Samsung can take pride from the fact that being
an Asian conglomerate, it has managed to break into and hold its own against many western
multinationals that have been in this business for decades.
Competitive Rivalry or Competition with Unilever (Strong Force)

Competition is a major force in Unilever’s industry environment. This section of the Five Forces
analysis identifies the external factors that present the impact of firms on each other. The strong
force of competitive rivalry against Unilever is based on the following external factors and their
intensities:

 High number of firms (strong force)

There are many firms operating in the consumer goods industry. This external factor imposes a
strong force on Unilever. In addition, these firms are generally aggressive, further adding to the
intensity of competition. Unilever also experiences tough competition because of low switching
costs. For example, it is easy for consumers to switch from one firm to another. Thus, a high
level of competition is shown in this section of Unilever’s Five Forces analysis, highlighting the
need to consider competitive rivalry as a high-priority force in the company’s industry
environment.

Bargaining Power of Unilever’s Customers/Buyers (Strong Force)

Unilever’s business and industry environment depend on the response of consumers to its
products. The influence of buyers on business performance is considered in this section of the
Five Forces analysis. Unilever must address the following external factors that lead to the strong
force of the bargaining power of customers:

 Low switching costs (strong force)

The low switching costs make it easy for consumers to transfer from Unilever’s products to other
companies’ products. This external factor contributes to the strong intensity of the bargaining
power of buyers. In addition, consumers have access to high quality of information about
consumer goods, making it even easier for them to decide when transferring from Unilever to
other providers. For example, buyers can compare products based on online information. The
small size of an individual consumer’s purchases has minimal impact on Unilever’s profits.
However, the low switching costs and high quality of information outweigh this third external
factor in the industry environment. Based on this section of the Five Forces analysis, the
bargaining power of customers is one of the strongest forces affecting Unilever’s consumer
goods business.

Bargaining Power of Unilever’s Suppliers (Moderate Force)

Suppliers impact Unilever’s industry environment by affecting the level of supply available to
firms. This section of the Five Forces analysis presents the influence of suppliers on companies.
The following are the external factors that contribute to the moderate force of the bargaining
power of suppliers on Unilever:

 Moderate size of individual suppliers (moderate force)

While Unilever has large suppliers like foreign firms that supply paper and oil, the average
supplier is moderate in size. This external factor imposes a moderate intensity force on the
consumer goods industry environment. In addition, the moderate population of suppliers enables
them to impose significant but limited influence on firms like Unilever. Similarly, the moderate
level of the overall supply adds to such significant but limited influence of suppliers. For
example, any supplier’s change in production level leads to significant but limited change in the
availability of raw materials used in Unilever’s business. Other firms in the industry are similarly
affected. As shown in this section of the Five Forces analysis of Unilever, the bargaining power
of suppliers is a significant but moderate consideration in the consumer goods industry
environment.

Threat of Substitutes or Substitution (Weak Force)

Substitutes can reduce Unilever’s revenues and the strength of firms in the consumer goods
industry environment. The impact of substitution is determined in this section of the Five Forces
analysis. In Unilever’s case, the following external factors are responsible for the weak force of
the threat of substitution:

 Low switching costs (strong force)

The low switching costs enable consumers to easily use substitutes to Unilever’s products. This
external factor imposes a strong force on the company and the consumer goods industry
environment. However, the overall impact of substitution is weakened because of the low
availability of substitutes. For example, it is easier to access Unilever’s Close-Up toothpaste
from grocery stores than to obtain substitutes like homemade organic dentifrice. In relation, most
substitutes have low performance with minimal or insignificant cost difference when compared
to consumer goods readily available in the market. This condition makes Unilever’s products
more attractive than substitutes, thereby further weakening the intensity of the threat of
substitution. This section of Unilever’s Five Forces analysis shows that the threat of substitutes is
a minor issue in the business.

Threat of New Entrants or New Entry (Weak Force)

Unilever competes with established firms as well as new firms in the consumer goods market.
This section of the Five Forces analysis considers the influence of new firms on the industry
environment. The following external factors create the weak force of the threat of new entrants
against Unilever:
  Low switching costs (strong force)
 High cost of brand development (weak force)
 High economies of scale (weak force)

The low switching costs enable new entrants to impose a strong force against Unilever. For
example, consumers can easily decide to try new products from new firms. However, it is costly
to build strong brands like Unilever’s. This external factor weakens the intensity of the threat of
new entrants against the company. Also, Unilever takes advantage of high economies of scale,
which support competitive pricing and high organizational efficiencies that new firms typically
lack. As a result, the company remains strong despite new entrants. Based on this section of the
Five Forces analysis, the threat of new entry is a minor concern in Unilever’s industry
environment.