Porter’s Five Forces Analysis of Asus

 

ASUS Five Forces Analysis

ASUS is among some of the most well known names in the PC world.  The well known PC brand devotes a heavy investment to R&D and innovation which is one of its primary focus areas. 2016 was remarkable for several economic and political changes globally. Industry trends have also changed and the rise of mobile computing has led to decline in PC business. Thin and lightweight are trendy now. Apart from higher product value the consumers also seek a better user experience.  However, both computing and smart phone industry have reached a situation of standstill and that can make the situation difficult for the brand.

It has focused on cost efficiency and product innovation to achieve higher profits.  The brand also has an excellent pool of talent which offers a source of competitive advantage. This is a Porter’s Five Forces analysis of the brand highlighting its competitive position and how it is affected by these forces.  These forces are a part of every business and industry and affect competition and attractiveness of the industry.

Key points:

Bargaining power of suppliers: Low

Bargaining power of buyers: High (moderately)

Threat of substitutes: Moderate

Threat of new entrants: Low

Level of competitive rivalry: High

Bargaining power of suppliers:

The bargaining power of Asus suppliers is low because they are scattered globally and because of their smaller size. A large number of Asus suppliers are positioned in China. Apart from it, they are scattered in several other parts of world too. Most of these suppliers in the PC industry are small in size and do not hold enough financial clout.  ASUS forms the rules and regulations for the suppliers and they are required to follow. However, the brand also takes care to train the suppliers regarding important issues and holds regular seminars to educate them. The overall bargaining power of suppliers remains limited wing to all these factors. ASUS has several options and can switch easily from one supplier to another without incurring any major costs. If some of the suppliers hold some clout then it is because of their quality of products and service.

 

Bargaining power of customers:

Customers hold significant bargaining power in the 21^st century. It is because they are flooded with options whether in terms of efficiency or quality. They are well informed and have all the information they require to make their buying decisions at their finger tips. There are several factors that have together led to an increase in the bargaining power of the customers. The first important factor is competition. Next is the rise of mobile technology. Switching costs for the customers are also low because they can get matching quality and efficiency from other brands too. The factors that moderate their bargaining power are brand image and technological innovation.  Still, the overall bargaining power of the customers remains high.

 

Threat from substitute products:

The main threat of substitute products comes from the products made by the rival brands. Since all brands are focusing on technological innovation and doing their best to respond to the changing trends. Since a large number of brands provide great quality and cater to similar needs, the threat from substitutes remains moderately high. The level of innovation, quality, efficiency and price become important differentiators that influence the level of customer loyalty any brand enjoys.

 

Threat of new entrants:

The threat of new entrants is low because for any brand to gain entry into the PC industry, it is important that it makes a large financial investment. New brands also find it difficult to gain foothold the existing businesses are highly competitive and leave very less space for any new player to enter the market field. They use their competitive advantage to retain their customers and engage them. They are also able to enjoy economies of scale which is not possible for new entrants. The barriers to entry are high and exit barriers also. Legal and regulatory barriers also act as threats for new entrants.  These barriers add to the operating costs and for the new entrants situation can be tough giving them less space to play.

 

Competitive rivalry between the existing players:

The level of competitive rivalry between the existing brands is high. The market has grown saturated and with trends changing, the market for PC and laptops has declined. This has made the intensity of competition grow. Rivalry has increased for other reasons too. PC market has grown saturated and businesses are now investing more in R&D and innovation to grow. Every customer is valuable and brands are focusing on innovation and investing in marketing to grow market share. Overall these factors lead to a very high level of competitive rivalry between the existing laptop and PC brands.

Sources :

ASUS Annual report 2016