Omega Porter’s Five Forces analysis covers the company’s competitive landscape as well as the factors affecting its sector. The analysis focuses on measuring the company’s position based on forces like threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers and competitive rivalry. Let us start the Omega Porter Five Forces Analysis:
The threat of new entrants in the Omega Porter Five Forces Analysis can be explained as follows:
The threat of new entrants for Omega in the premium watch segment is relatively low, there are several reasons for this some of which are, the market is extremely saturated with various big players such as Rolex and TAG Heuer. Another reason for this is the fact that the barriers to entry in this segment is quite high any new entrant would need to acquire a high level of knowledge and technical skills in the same segment and the machinery required to produce such high-quality premium watches is also quite expensive. It is also a very cost intensive industry and the initial Capex required for the same is also quite high.
Any new entrant would have to overcome all these barriers and still would have to compete with several of the competitors that have established their presence in the market which is quite a humongous task. Hence, we can safely conclude that the threat of new entrants to Omega in the premium watch segment is quite low.
Threat of Substitutes:
Below are the threats of substitute products of Porter’s Five Forces analysis of Omega:
The threat of substitutes for Omega in the premium watch segment is low to moderate this is because in today’s world watch especially a premium one is almost an essential commodity for the rich and high class, especially for Omega which specializes in professional watchers there is no viable substitute. For any business professional or a person from upper middle class to upper class, a professional watch for a premium watch is a must.
Due to the lack of any viable substitute, the threat of substitutes in this segment is substantially reduced. However, the threat of substitutes is not completely removed one of the main uses for these watches is a status symbol that can be fulfilled by several other products such as a rich or premium phone. These products can be used as a substitute for a status symbol, these can act as a viable substitute, hence, we can conclude that the threat of substitute in this segment for Omega is low to moderate.
In the Omega Porter Five Forces Analysis the bargaining power of the customers can be explained as:
The bargaining power of the customers in the segment would be moderate to high as the presence of several competitors in the market give them various options to choose from. With the presence of so many competitors a company like Omega needs to ensure that they have a very testing differentiating factor that the competitors are not providing they must develop a specific domain that they are confident in. The bargaining power of the customer emerges from the fact that the presence of so many options in the market giving similar products with similar features cannot be avoided. However, since all of these brands have developed their own niche and on major dominant players in their own respective niches, the bargaining power of the customers is somewhat limited. Also, since the loyalty of Omega customers in this segment is also moderate to high this further reduces the bargaining power of the customer.
Hence overall the bargaining power of the customers in this segment is moderate to high.
Bargaining Power of Suppliers:
Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of Omega:
The bargaining power of suppliers in this segment is moderate to low, this is because of the fact that the quality of the raw material is somewhat similar in all the suppliers there is no significant differentiating factor between the suppliers hence it is very easy for the brands to switch suppliers very quickly, on the other hand it is extremely difficult for the suppliers to find a customer as big as these brands. Due to these factors the majority of the bargaining power is held by a company like Omega instead of the suppliers however, due to the presence of so many computers in the market the suppliers do hold some bargaining power because the company is one sure that they are not reducing the purchasing cost of the raw material very much because the competitors are also purchasing similar raw material if the suppliers find that one of the computers is paying more for similar raw material they would not be willing to sell the same raw material at a cheaper cost. Hence the overall bargaining power of suppliers in the segment is moderate to low.
The impact of key competitors in the Omega Porter Five Forces Analysis is as follows:
The competitive rivalry the premium watch segment is quite high with the presence of very eminent brands such as Rolex, TAG Heuer, and even Omega the market is extremely competitive however, Omega is one of the largest along with Rolex. All the companies know this fact and to avoid best they have developed their own niche such as Omega is famous for their more professional and classic looking watches on the other hand TAG Heuer is famous for its sportier looking watches. Due to these differentiating factors, they have further narrowed down the market into subsegments which each of these players dominant, but when you look on the bigger picture at the premium watch market as a whole segment you will find the competitive rivalry is on a very high side.
Hence, given the numerous competitors in the market and the specific niches that they have developed we can safely say that the competitive rivalry in this segment is quite high.
To conclude, the above Omega Porter Five Forces Analysis highlights the various elements which impact its competitive environment. This understanding helps to evaluate the various external business factors for any company.
This article has been researched & authored by the Content & Research Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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