The Five Forces

The five forces is a tool raised by M. Porter in 1979 to help a firm to achieve industry attractiveness so as to gain profitability. Five forces decide the profitability of an industry due to they have an impact on prices, costs and required investment of firms (Porter, 2010).

Though Porter's five forces model is recognized as a quite useful analysis to explore competitive strategy within an industry, Lever (2008) found out some weaknesses of industry sector analysis. He pointed out that five forces analysis is too focus on every industry to forget to consider industry sector which means similar characteristics between two industries. This may cause companies to miss out some issues come from the whole industry sector.

Additionally, it is argued that Porter's theory has its major limitation in the market today because it has no consideration into contemporary new market model and dynamics of market (Articlesbase, 2007). Grundy (2006) supports this and suggests better understanding of dynamics and explores key interdependencies between and within each force can help to use Porter's model in a more practical way. I find though Porter's model has limitation and out of date, it still has its own value which cannot be ignored and is helpful to analyze industry structure and profitability. However, it's also important to apply Porter's model with other complementary frameworks to fit the modern businesses.

In smart phone industry, the whole competitive environment is moderate. It is because that though the competition among competitors is comparatively high and consumers have alternative substitutes, the new entry into the market is low because of the cost for smart phone manufacturing is high.

Threats and Opportunities

Threats

Strength of rivalry: It causes intense competition and companies have to squeeze profit to compete in existing market. Recognition of different brands also pushes the competition.

Rapid changing in technology: Companies have to follow the latest technology in coming years to produce products based on customers' needs. Otherwise, it will lose market share. With the development of technology, different kinds of substitutes do threaten the smart phone industry.

Patent is a resource for a company to compete but there is always lawsuit between companies and it costs too much.

Opportunities

The smart phone market is growing and will continue to grow in future years, so it makes companies to produce more devices to meet the consumers' needs.

It is difficult to enter this industry due to comparatively high cost of investment. This ensures existing companies only to consider the existing competitors and focus on winning the market share.

As the global economy is in gloom, some regulation and policy