Business Strategy

Business Strategy 751

Lasell University

Shiv Kapur

03/08/20

How Smart Connected Products Are Transforming Companies

The Five forces that shape Strategy

Rivalry among

existing

competitors

With the increasing use of smart, connected products, companies have been forced to

redefine their industries hence coming up with new strategies for competition. The

number of competitors is increasing and the rivalry is become intense in various

industries. There are many competitors that are offering various products for sale.

Smart, connected products has improved the features of products that are being sold to

consumers. Each company is now trying as much as possible to produce products that

will appeal to many customers. Competitors in various industries are now employing

various strategies such as pursuing new set of smart, connected product features and

capabilities, and changing their business model. All these and many other strategies

are now forming a base for intense competition among companies in various

industries.

Threat of new

entrants

With the continued use of smart, connected products, the markets are becoming

profitable. This attracting new entrants who also wants to utilize smart, connected

products in its entire supply chain. If many firms continue entering the industry,

profitability would be eroded. There are no barriers that are going to prevent new

companies from entering the industry and utilizing the smart, connected products in

all daily operations. The start-up costs for new companies that wants to take

advantage of the unprecedented data and capabilities that is provided by smart,

connected products are low. The threat of new entrants is therefore high as this makes

entry easy. The new entrants continue to join the industry to improve the customer

experience.

Bargaining power

of suppliers

It is now easy for various suppliers in the industry to drive up prices. The number of

suppliers who are supplying smart, connected products to companies are very few.

The suppliers are tasked with continuously supplying smart, connected products to

various companies. This particular input is essential in all stages of production. There

is high demand for smart, connected products because their capabilities, infrastructure

and the data they generate are now reshaping the work of virtually every function in

the value chain. Many companies have continued to outsource their products from

specific suppliers. Following the heavy reliance on suppliers to supply smart,

connected products that are on high demand, their bargaining power is on the rise.

Bargaining power

of buyers

It is not easy for buyers to drive prices down. This is because the number of buyers in

the market are many. Their bargaining power is moderate. Smart, connected are

improving the customer experience. Many consumers require quality products. The

companies using smart, connected products in its value chain know what the customer

wants. The customers therefore have a considerable bargain when it comes to the

quality of products. It is however, important to note that the products being produced

are of high quality since smart, connected products is used in the value chain.

Threat of

substitute

products or

There are a lot of close substitute products that exist in the market. This increases the

likelihood of consumers switching to alternatives in response to price increase. It is

due to this reason that companies are torn in between to fully or partially

disintermediate service networks or distribution channels. The companies however,

services would choose a strategy that would reduce the threat of substitute services or

products.

Reference

- Porter, M. E., & Heppelmann, J. E. (2015). How smart, connected products are

transforming companies. Harvard business review