Term Paper on "Industry Analysis the Electronics Industry Has Developed"

Term Paper 6 pages (1827 words) Sources: 7 Style: MLA

[EXCERPT] . . . .

Industry Analysis

The electronics industry has developed an interdependent relationship with the surrounding environment in the meaning that when change affects the environment, this change is also reflected in the electronics industry. Take for instance the need for increased pollution-free gadgets and environmental concerns which force the electronics producers to adapt to these requirements. On the other hand, when change occurs at the core of the industry, it is reflected in the population's behaviour and life styles, setting new trends. Take for instance the development of the DVD player, which soon replaced all VCRs within American households.

In a time which is closer and closer to cohabitating with machines in the form of robots, classic electronics remain a strong but changing force. Television sets, home audio and video and personal computers have come a long way from their beginnings and are now fashion icons. Communications have also improved significantly with the development and improvement of electronics, making now long distance face-to-face meetings possible.

But not just the gadgets themselves changed; change is also extremely visible on the electronics industry, where more and more companies arise, striving to make a difference, to come up with a high quality product incorporating a unique feature and gain the consumers' interest and through this increase their revenues. The profits realized on the electronics market are attracting numerous investors and companies. This leads to a strong battle for supremacy and extremely fierce competition among producers and retailers. Large companies encounter numerous benefits in comparison to new ones, but they stand the inconvenience of difficulty to adjust, whereas small-size companies are more adaptable.

2. NAICS classifications

NAICS, or the North American Industry Classification Systems is a measurement program used to identify the movements in 14 industries: food manufacturing; textile mills; textile product mills; apparel manufacturing; leather and allied product manufacturing; wool product manufacturing; chemical manufacturing; non-metallic mineral product manufacturing; primary metal manufacturing; fabricated metal product manufacturing; machinery manufacturing; computer and electronic product manufacturing; electrical equipment, appliance and component manufacturing and finally, transportation equipment manufacturing.

The computer and electronic product manufacturing category is organized under the 334 code and includes:

MA334A Electromedical equipment and analytical instruments

MA334B Selected instruments and related products

MA334C Control instruments

MA334D Defence, navigation and aerospace electronics

MA334M Consumer electronics

MA334P Telecommunications

MA334Q Semiconductors, electronic components and semiconductor manufacturing equipment

MA334R Computers and peripheral equipment

MA334S Electromedical and irradiation equipment

MA334T Meters and test devices

2. Industry structure

The electronics industry is characterized by a rapid pace of development, continuously changing demands and expectations from consumers, new cutting-edge technologies and an intense need to quickly adapt to market changes. The battle for supremacy in a shifting market with fierce competition is won by those companies which possess the latest technologies, the best technicians and personnel and implement the best managerial strategies.

Currently, 10,542 companies activate on the American electronics industry and fight for a leading position. The most populated state, from the view point of electronics companies, is California, with a total of 2,953 companies, followed by Texas with 807 and New York with 578 companies. The poorest populated states are Hawaii, with 7 companies, North Dakota with 9 companies and Alaska, with 10 electronics companies.

Regardless of the micro and macroeconomic forces which affect the surrounding environment, the electronics industry continues to grow. The economic downfall of 2005 has had limited impact upon the industry. In this order of ideas, it is true that some product sales have decreased, but others have increased exponentially. The conclusion is that the electronics industry is a vital one which will not get left behind but will be integrated in all social, political and economic mutations. The sales of electronic products have increased from $96.9 billion in 2000 and are expected to reach a total value of $170 billion, by 2008, as forecasted in the chart below:

The best sold product in 2006 were wireless phones and PDAs, with more than 127 million units sold; MP3 Players with more than 34 million units sold; digital cameras (32 million units), personal computers (24 million units) and digital televisions, with more than 23 million units sold. The most common products found in American households are television sets, DVD players, digital cameras, cellular telephones and desktop computers.

MANTA, the website for essential business information on demand, has conducted an extensive market research and identified the top 20 competitors on the American electronics industry. Some of them are: Intel Corporation, Texas Instruments Incorporated, Sanmina-Sci Corporation, Jabit Circuit Inc., Tyco International, Nvidia Corporation or Benchmark Electronics Inc.

All companies compete against each other and numerous other manufacturers for local, regional, national and international supremacy. The major competitors for the U.S. companies are the Japanese companies, which possess skilled workforce and cutting edge technologies alongside with adaptable features. And the shifting nature of the market is a nurturing environment for more and more companies to arise. The national and international markets are highly active and far from reaching maturity.

Directly linked to the competition is the economic model Porter's Five Forces. The model is composed of five forces which affect companies differently, based on the particular features of the companies', the customers, the purveyors and the market; the forces are graded to have a low, medium or high influence.

Threat of new entrants - High: Especially in the it sector, where students open small firms which end up international conglomerates

Bargaining power of buyers - Medium: Buyers set the trend and make demands for new and improved products. Their demands are most felt in the it and telecommunication sectors, which are highly interactive.

Threat of substitute products - High: New products can be developed on daily basis and replace the old ones. For instance, the TV set could be replaced with personal computers with incorporated TV tuners.

Bargaining power of suppliers - Medium: The purveyors set the prices for electronics components and influence the retail price to the end user. An increase in prices can easily generate a decrease in demand or vice versa.

Rivalry among competing firms - High: The large number of competing firms forces producers to constantly improve their existent products, develop new ones and search for new and more efficient technologies.

The technologies used represent the key to a successful business outcome. Generally, companies have equal access to technologies, which are either free of charge, open source or they must be purchased and used under license. Numerous companies however develop their own technologies in the attempt to possess a comparative advantage as the technologies used do indeed represent a dominant force. Take Microsoft and Apple for instance. They solely produce it gadgets and are therefore no major electronics competitors on the U.S. market; but they are key players on their segment. Microsoft is the undisputed leader, but Apple producer higher quality products. Gates' company possess cutting-edge technologies which they use to create a user friendly interface, whereas the technologies used by Apple are more focused on architectural structures. And these technologies represent the highest costs registered by manufacturers. Aside from them, costs derive from purchasing commodities, employee remunerations, public relations and marketing strategies and taxes to the state budgets.

The actions conducted by the companies in the electronics industry fall under the direct supervision of the U.S. government and other regulatory institutions and bills, such as the Federal Environment Regulations Affecting the Electronics Industry or the Electronic Industry Code of Conduct.

3. Financials for 2005 and 2006

NAICS found the following in regard to several electronic products; the figures are presented in millions of U.S. dollars.

Product Product 2006

2004 2003

Code Name

3343102 Television 3,429.5

3,039.0 Receivers

3343104 Speakers 1,507.2

Other consumer 1,949.3 audio and video

334111 Electronic 37,657.4

Computers

The television industry appears to have constantly grown to a maximum value of shipment of 3,835.6 million dollars in 2005. 2006 however has been marked by a decrease in the shipment of televisions sets. This increase can easily be explained by the replacement of old sets with new ones, increased desire to spend the leisure time in front of the TV or increased wages which support new purchases of electronics within households. The decrease on the other hand could be blamed on two forces. First, the development of new products could drive consumers into replacing the TVs with substitute products, such as personal computers with incorporated TV tuners. The second explanation could reside in the development of hi-tech TV sets, such as LCD or plasma television, which are sold at rather high prices. The practice on the electronics industry has however thought us that product prices drop from a week to another and that is today's cutting-edge, will be a matter of the past tomorrow.

Speaker shipments have also decreased in 2006 relative to 2005. Like in the case of televisions, the explanation could reside in the development of complementary products which incorporate high quality speakers. The shipment of electronic computers has as well decreased in 2006 compared to 2005, leaving other audio and video systems the… READ MORE

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