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Porter Five Forces Analysis for Siemens AG

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It is evidently clear from the discussion that in the industrial electrical equipment industry, buyers are generally commercial users, engineering companies, and governments of different countries. Products are highly technical in nature and specialized knowledge is required in order to evaluate purchased items. Generally, buyers need to sign the contract with companies in order to purchase equipment. Bargaining power of buyer has been reduced by three factors which are, 1- an absence of electrical equipment sellers who can meet a specialized need of buyers, 2- high switching cost and 3- a need of buyers to maintain the relationship with sellers throughout the project lifecycle for implementation of technical equipment.

Large electrical equipment companies buy electronic parts and raw materials from the variety of suppliers situated in different geographic locations. Due to the presence of multi-channel sourcing model and abundance of sourcing partners, companies do not rely on any particular supplier. On the other hand, many MNE electronic and engineering companies have their own production facilities to produce technical components that can be used in manufacturing complex electrical systems. Therefore, these MNE electronic and engineering companies have little dependency on suppliers.

The electrical equipment industry has been dominated by global players like Siemens AG and General Electric (GE) for more than 20 years. A new entrant needs to invest the huge amount of capital for establishing production plants, workshops, distribution channel and research & development (R& D) centers. Moreover, new entrants need to have sufficient resource capability, credentials and connections with government and big companies in order to sell their products. Presence of such entry barriers decreases the attractiveness of the industry among new entrants.

Within last 10 years, many small level companies and entrepreneurs have established the market for green technologies that can be classified as the potential substitute for electrical equipment being offered by existing companies.

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preview essay on Porter Five Forces Analysis for Siemens AG
  • Pages: 13 (3250 words)
  • Document Type: Essay
  • Subject: Business
  • Level: Undergraduate
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