Daikin Industries is a Japanese multinational air conditioning manufacturing company headquartered in Osaka, Japan. The company was established in 1924. the company has two main business segments: air conditioning and refrigeration; the Second is the chemical industry. The Air Conditioning and Refrigeration Business segment provides residential air conditioners, residential air purifiers, commercial-use air conditioners, commercial-use air purifiers, large-sized chillers, marine container refrigeration units, and marine vessel air conditioners (Forbes, 2021).
It has operations in Japan, China, Australia, United States, India, Southeast Asia, Europe, Middle East, Latin America, and Africa. Its products are available in over 150 countries in the world (Daikin, 2021). Daikin Industries is one of the biggest electronics manufactures in Japan. Porter’s five forces model is used to identify threats and business opportunities faced by Daikin Industries.
Daikin Industries – Competitive Rivalry in The Market
Japan is home to multiple leading electronic conglomerates. The electronic appliance industry is multiplying in this region of the world for the last two decades. The electronics industry in this part of the world is saturated and very competitive. The country is home to companies Hitachi, Panasonic, Mitsubishi, Sony, and Toshiba. Its main rival is local companies Hitachi and Panasonic. The annual revenue of Daikin Industries, as compared to its rivals, was $23.509 Billion (Nikkei Asian, 2021), with an income of $1.473 Billion (Nikkei Asian, 2021).
The company needs to diversify its products to compete with other companies. The competition is increased recently to new heights due to the saturation of products in the region and worldwide. Chinese companies such as Gree in the region are developing new electronics products and posing new challenges to well-established companies.
Daikin Industries – Threat of Substitutes
The evolution in the electronic industry happens every day. The technology keeps on improving, which results in a higher threat of substitution. On the other hand, alternative products are available in the market. Daikin is investing a lot of capital in establishing research and development centers in the world. It has spent around $300 M on the Technology and Innovation Center (Daikin, 2021).
Now it is leading the change by making eco-friendly products. Consumers are testing the products against the strict benchmark of efficiency. The threat of substitution is moderate shortly, but local Japanese and Chinese companies can pose a higher-level threat in the long run.
Daikin Industries – The Threat of New Entrants
The evolution in technology makes the electronic appliance industry exposed to the threat of new entrants. The lower capital requirement with a higher profit margin on investment makes it perfect for newcomers. The vast number of consumers in developing countries makes this industry a suitable investment. The new entrant can bring a better product which is technological advance to disrupt the market leader.
It can increase the competition in the market, resulting in a decline in the profit margin for the industry leader. New entrants can force the existing firms to be more effective and efficient. It forces them to explore the new business channel (Oregon State, 2021). Daikin can keep its clientele by innovating new products and quality products. It holds the market share in major countries with good distribution channels. Therefore, the threat level is medium at the moment.
Daikin Industries – Bargaining Power of Buyers
The buyer’s power is high in this case. It depends on various factors. The availability of the other products, price, and efficiency are a few of those factors. The consumer holds power when there is plenty of available options in the market, and they can switch easily. (Martin, 2019). Energy-efficient electric appliances are in demand due to rising concerns about carbon emission by climate activists.
The deciding factor for any consumer is cost and efficacy. There are plenty of options available in the market, and you can find alternative products very easily. The customer can switch between the products easily. To compete in this business environment, companies should keep their quality at best but keep their price as low as its rival. The buyer power is higher because of the market saturation and availability of the product.
Daikin Industries – Bargaining Power of Suppliers
The supplier can be divided into two groups: the raw material providers and the second is the supplier of the human resource. The raw material used in the industry is of various types. The quality of the products directly influences the quality of finished products; therefore, it dictates the bargaining power. The supplier can exert its power if its future is integrated with the company and other options are available for its supplies (Porter, 1979). Multinational companies operate through different regions with multiple suppliers.
Companies don’t want to change suppliers mainly because of the integration cost and product quality. Suppliers can use these factors for bargaining and can reduce the overall profit of the company. In that case, the market is already saturated with producers. It provides an extra edge to the supplier. The supplier holds significant bargaining power in this case.
References
Oregon State. (2021). Strategic Management. Available at: https://open.oregonstate.education/strategicmanagement/chapter/3-analyzing-the-organizations-microenvironment/
Nikkei Asian Review. (2021). Producer Manufacturing– Daikin Industries Ltd. Available at: https://asia.nikkei.com/Companies/Haier-Electronics-Group-Co.-Ltd
Porter., E. M (1979) How Competitive Forces Shape Strategy. Available at: https://hbr.org/1979/03/how-competitive-forces-shape-strategy
Martin., M (2019) How Porter’s Five Forces Can Help Small Businesses Analyze the Competition. Available at: https://www.businessnewsdaily.com/5446-porters-five-forces.html
Daikin. (2021). Around the World with Daikin Products Available at: https://www.daikin.com/
Forbes. (2021) Daikin Industries. Available at: https://www.forbes.com/companies/daikin-industries/?sh=6c2c47b13680