2. Durable Household industry overview The home appliance industry is a multi-billion dollar industry which includes the Major Appliances (refrigerators, cookers, dishwashers, washing machines & dryers), Small Appliances (Vacuum cleaners, iron, & accessories) and Home Comfort products (air conditioners, water heaters). Home appliances industry competes on the basis of: Cost structure that impacts the ability to compete on price. Product features that can provide a competitive advantage, through innovation & Brand names recognition as a strong basis in the consumer-driven appliance market. Kahn (2015) states that over the last five years the Industry revenue increased 5.5%, reaching $191.3 billion in 2015, expecting an annualized 3.8% grow over the next five years, representing industry revenue of $230.3 billion in 2020. As it is illustrated in figure 1, the industry consists in five major players that account for about 39% of industry market share in a low level of concentration industry that varies between market segment and by region, experiencing consolidation mainly due to company efforts to build economies of scale and scope, with significant merger activity (Kahn 2015). To increase profit margins, home appliance manufacturers are aiming to build sales volume especially in emerging markets, increasing productivity and moving production to regions with lower-cost labour; and/or through the acquisitions of local companies. 3. Companies background Knowing the
industry covers services and platforms with a vast variety of focal markets. The portion of the
The industry is dominated by a few large companies. For example, the A&D industry is dominated by the top players
Traditionally, USA has been major market followed by Europe and Japan. The top 20 companies account for 77% of the market share (see figure 1). The HHI index is 378 indicating a highly competitive market. Porter’s 5 forces analysis indicate that:
Therefore this industry is a pretty good one to already be in, but would be very tough to try and break into. Since established firms do not have to worry about threat of entrants or substitution, they can focus on making their core business practices cost efficient and profitable. Although firms have to deal with high buyer and supplier power, every firm has to deal with these issues. Therefore this leaves only rivalry to compete on, which forces firms to stay sharp, observe the competition, and provide excellent service to the firm’s customers to generate profit.
the world. " The Big Three" hold nearly 75% of the market and produce over 8
As stated earlier, the home improvement industry takes in $755 billion annually. However, due to the softening of the housing market and declining home sales, companies in this industry has had to
In order to stay competitive in an industry with an increasing number of players, companies have to be
The framework used in this note is organized around the estimates of industry demand, market share, costs, and performance. All data
Draw upon market data which is available, to support your conclusions on “Market Structure” with in this industry sector.
EPS Growth Rate: These values are also found in exhibit 6, leading to g = 5.55%
What driving forces do you see at work in this industry? Are they likely to impact the industry’s competitive structure favorably or unfavorably? (Did we answer this question?)
1. Think about size, growth, locational aspects and segmentation 2. Market Structure 3. Performance metrics used 4. Trends
|the industry and its challenges it is important to understand its various phases of growth so far. |
Companies have to strife for a competitive advantage over its rivals. Industry concentration is measured through concentration ratios. A higher concentration
The main differences between Matsushita and Sony’s products are that, Matsushita product line is more involved in the household appliances market as it is the world leader in this category, while Sony strives to be the globe’s technological leader and has a product line that is driven by advanced consumer electronics. “While companies such as Matsushita concentrates on being customer intimate, Sony has differentiated itself by focusing on product leadership.” Matsushita is the largest home appliances and household equipment (HAHE) producer in the world. Some of Matsushita’s products include: microwave ovens, refrigerators, irons, fax machines, air compressors, automatic washers and dryers, vacuum cleaners, air