Porter's Five Forces Model of Global Home Appliance Industry

Home appliance industry is mainly consisting of the following players Whirlpool, Maytag, Electrolux Haier, General Electric (GE) and Bosch-Siemens. All these players produce wide range of quality products. Vikings and Sub-Zero are niche players, each producing one exclusive premium quality product line.

Porter's five forces model is a tool to analysis the industry framework. Two forces in this model refer internal threats and other three forces refer to external sources of competition. These forces determine the competitiveness of the overall industry which represents the attractiveness of the industry. Here is the example of US home appliance industry.

Threat of new entrants

Threat of new entrants is very low because heavy investment and sophisticated R&D is required in appliance market and industry is matured with intense competition, profitability is not lucrative for the new entrants. Brand loyalty also plays an important role and big distribution network is required. Due to the intense competition existing players will retaliate the new entrance. There are many threats for new entrance to enter the home appliance industry.  

Exit barriers

Because of the heavy investments in specialized fixed assets and sophisticated machinery, it is not easy for any existing player to quit the industry. Each product require the special technology and investment, it is not easy to leave the entire setup.

Power of buyers

Power of buyers is very high, not only final consumers drives the quality and innovation, also the middle-men and builders can and do exercise pressure on the supplying firms to provide energy efficient, environmentally safe and high quality products in low cost. Buyers want to place only high quality and well known brands in their stores.

Power of suppliers

Power of suppliers is low, appliance companies dictate the terms. They are forcing the suppliers quality products and to follow JIT concepts. Manufacturers have the exclusive contracts and alliance with suppliers.

Threat of substitute products

Threat of substitute products is very low, there are not much substitutes available. Even if they are (e.g. Laundromats, fan industry) they are not powerful.

According to the Porter's five forces analysis, US home appliance industry is moderately favorable or attractive. New player can enter the market and enjoy profits.