Rivalry Strategy Tool

1. Number and Relative Size of Competitors
1 2 3 4 5 Top 4 competitors combined industry market share <40% (X 40-50%) 50-60% 60-70% >70%      

The worldwide smartphone manufacturing industry is significantly competitive. The top four competitors in the smartphone manufacturing industry comprise of Samsung, Apple, Huawei and OPPO. In accordance to statistics from the 3rd Quarter of the 2016 fiscal year, Samsung was number 1 in the industry with a market share of 21 percent. Second was Apple with a market share of 12.5 percent. The third competing company was Huawei with a market share of 9.3 percent, and lastly OPPO with a market share of 7.1%. The fifth company is Vivo, which boasts a market share of 5.9 percent. The other smartphone manufacturing companies around the globe account for a combined market share of 44.2 percent. The combined industry market share of these top four competitors amounts to 49.9 percent (IDC, 2016).

2. Degree of Industry Product Standardization
High   Medium   Low
Difference between competitors in price of similar products <2% 2-5% 5-10% 10-15% (X>15%)

One of the key marketing strategies used by Samsung is having low-priced products. In turn, comparing the price of their similar products against those manufactured by Apple is apparent and significant. For instance, when the Samsung Galaxy S6 was launched in the market, it retailed at a price of £410 whereas the iPhone 6s was launched in the market at a price of £539. The price variance between these two products that are similar, technology wise is about 23 percent. Therefore, this indicates that the difference between competitors in price of similar products is greater than 15 percent (Rogerson and Peckham, 2015).

What % of industry's products is sold at discount? 100% 75% 50% (X 25%) 0%                                              
 
About a quarter of the products sold to consumers are not at the exact retail price but rather at a discount price.

Customers' ability to recognize brands from industry Low Medium (X High)

The consumer’s ability to identify and recognize brands from industry encompasses brand awareness. In delineation, brand awareness is the magnitude to which consumers are able to easily remember the brand when they opt for a product. According to research undertaken about 50 percent of consumers are able to identify the Apple brand whereas 25 percent of the consumers are able to acknowledge Samsung products. This indicates that the capability of consumers to ascertain different brands in the smartphone industry (Eom and Cho, 2015).

Degree of switching costs Low Medium (X High)
 
With respect to the smartphone industry, one of the key considerations in switching cost is the operating system. If the operating system and the app store are owned by the smartphone manufacturer, it increases the switching costs. The degree of switching costs are high in the smartphone industry. The top two manufacturers, Samsung and Apple, which have the highest number of consumers use two dissimilar operating systems and therefore the cost of switching becomes high (Cromar, 2010).

Industry Growth Rate <0% 0-1% 1-3% (X 3-5%) >5%

Statistics show that, in the past fiscal year, there was a significant slowdown in global smartphone shipments from 27.8 percent in 2014 to 10.5 percent in 2015. In particular, the shipments are anticipated to get to about 1.48 billion and later expected to grow to 1.84 billion by year 2020 (Framingham, 2016). The forecasted growth rate in the worldwide smartphone industry was 3.1 percent in 2016.

Unused Industry Production Capacity % of industry wide production capacity currently in use (X<70%) 70-80% 80-90% 90-100% >100%

The percentage of industry wide production capacity that is presently in use is less than 70 percent. This can be perceived in the recent entry and growth in production by Chinese smartphone manufacturing firms. Companies such as Huawei, OPPO, Vivo, Lenovo, and Xiaomi have entered the market and increased the production capacity. This shows that the production capacity is nowhere near being utilized (Wu, 2016).

Degree to which forms have high fixed costs or products have high storage costs or are perishable (X High)   Medium   Low 

The magnitude to which products have high storage costs or are perishable is high. Smartphones are considerably perishable as they easily become outdated and obsolete in the market. If a smartphone product is stored for a lengthy period, then other new and more cutting-edge products may develop in that period of time and this might be adverse as the consumer preferences may have changed.        

Extent of Exit Barriers High  Medium   ( X Low)

The magnitude of exit barriers in the smartphone industry is low. In particular, when exit barriers are low, it implies that weak companies have a greater likelihood of leaving the market, which in turn increases the profits generated by the firms that remain in the industry (Porter, 2008). Weak companies in the industry incur high outlays, which makes it much easier for the companies to exit. 

Overall Intensity of Rivalry   (X Fiercely Competitive) Neutral Midly Competitive

Taking into account the major factors discussed above, it can be inferred that the overall intensity of rivalry in the global smartphone industry is fiercely competitive. 

Intensity of Supplier Power within the Smartphone Manufacturing Industry

There is high intensity with respect to supplier power within the smartphone manufacturing industry. To begin with, it is imperative to note that the entry into the smartphone manufacturing industry encompasses numerous barriers. This is because there is a high amount of capital required to enter the industry. Therefore, this implies that there are very few rivals in terms of suppliers. For that reason, if the smartphone firm makes the decision to alter the components and materials provided by the supplier, it means that the operations and performance of the company will significantly change. This is a decision that the smartphone company will not be willing to take. For instance, in the case of Apple, Samsung is of great importance as it is one of the major suppliers for the company. Samsung was Apple’s major iPhones supplier from the start, creating the A-series mainframes and providing both NAND flash as well as DRAM memory chips. Some of the costliest constituents of an iPhone consist of the display panel and memory chips, which include the combination of NAND flash and DRAM. With respect to the production of the iPhone 7, these constituents together have a value of more than a quarter of the entire bill of materials (Kang, 2016).

Importance of Correctly Identifying and Choosing a Firm’s Industries and Markets

There is great significance in the identification and selection of a company’s markets and industries. These factors determine the revenues and profit generated by a company as well as its growth and development. For instance, with respect to competition, if an industry or market faces substantial competition already, a company might be at an advantage selecting an industry or market that is less intense and with less number of rivals. Another importance of selecting the market takes into account the level of demand. By analyzing a market and industry, it becomes possible to understand the overall market size, the rate of growth, reception towards the product, and the market status – growth or decline in its present market share. Another key aspect that needs consideration in the ascertainment and selection of a market includes any trade barriers. A company might enter a market and face severe trade barriers that may substantially hamper the company’s products from being retailed in the market. Therefore, ignoring these elements into consideration might lead a company to select the wrong market and this might hamper the growth, development and success of the company (Manzella, 1997).

Impact of Accounting for Gaining and Sustaining Competitive Advantage on the Success of Business Strategy Development

In the framework of competitive international setting and technology-centered establishments, managers of organizations are increasingly stressed to obtained different ways of sustaining their competitive advantage. Competitive advantage is attained when a company gains possession of attributes that enable it to perform at a higher level compared to other companies in the similar industry. These benefits are not easily imitative and therefore can be maintained for lengthy periods of time (Beheshti, 2004). Accounting has a positive impact in gaining and sustaining competitive advantage on the efficacy of business strategy development. One of the key ways in which accounting helps in developing business strategy is through the identification and collection of fundamental information measuring and analysing information, examining such information and communicating the findings to the executive managers. Strategic decisions take into account the direction sought for sustainable growth. This implies that if accounting forecasts are accurate, then the strategies developed will be fitting and the business will grow and thrive. However, if the accounting forecasts are wrong, aspects such as budgets may be poor and this might be detrimental to the performance of the organization. Based on research undertaken by Beheshti (2004), activity-based accounting can aid a company with a strategic perspective of the activities that are necessary to the competitive nature of the organization. 

References

Beheshti, H. M. (2004). Gaining and sustaining competitive advantage with activity based cost management system. Industrial Management & Data Systems, 104(5), 377-383.
Cromar, S. A. (2010). Smartphones in the US: Market analysis.
Eom, J., Cho, Y. (2015). Exploring Brand Awareness and Purchase Intention on Complete and Ingredient Brands of Smartphone. Journal of Marketing Thought, 2(2): 73-84.
Framingham, M. (2016). Worldwide Smartphone Growth Forecast to Slow to 3.1% in 2016 as Focus Shifts to Device Lifecycles. International Data Corporation. Retrieved from: http://www.idc.com/getdoc.jsp?containerId=prUS41425416
International Data Corporation (IDC). (2016). Smartphone Vendor Market Share, 2016 Q3. Retrieved from: http://www.idc.com/promo/smartphone-market-share/vendor;jsessionid=4FEF1AE2A2536FA2DFA0F869920EEA6F
Kang, J. (2016). Samsung Will Be Apple's Top Supplier For iPhones Again In 2017. Forbes. Retrieved from: http://www.forbes.com/sites/johnkang/2016/12/16/samsung-will-be-apples-top-supplier-for-iphones-again-in-2017/#277f27077ce3
Manzella, J. (1997). Assessing Foreign Markets: Selecting the Right Markets Can Make Your Company a Fortune. The Manzella Report. Retrieved from: http://manzellareport.com/index.php/strategies-section/311-assessing-foreign-markets-selecting-the-right-markets-can-make-your-company-a-fortune
Porter, M. E. (2008). Competitive strategy: Techniques for analyzing industries and competitors. Simon and Schuster.
Rogerson, J., Peckham, J. (2015). iPhone 6S vs Samsung Galaxy S6. Tech Radar. Retrieved from: http://www.techradar.com/news/phone-and-communications/mobile-phones/iphone-6s-vs-samsung-galaxy-s6-1302630/2
Wu, A. (2016). Global Smartphone Production Volume Rose 8.9% Between First and Second Quarter to Reach 315 Million Units. Trend Force. Retrieved from: http://press.trendforce.com/press/20160720-2551.html