Changing dynamics of the CE industry: a study of the industry's structural dynamics and competitive scenario

Abstract

Digital advances are fundamentally changing the Consumer Electronics (CE) industry and forcing companies to alter their business models. An example worth mentioning is that of the DVD Players. The fastest-growing consumer product ever, DVD players, which have seen explosive growth with penetration levels in diverse markets, are at all-time high sales wise and that too in very short timeframe. Contrast this with CD players and VCRs, which roughly took 8-12 years to achieve a similar scale. Two things matter the most to CE companies namely market share and growth. The market is big (Refer Figures in Appendix for market volumes), but the gross margins are really thin. The winners are frequently the innovators and ones who hit the market early and appropriate the mind share of their consumers. A case in point is that of the all too familiar success story of the Apple iPod, albeit Apple being a PC and OS maker. In the recent past, software giants are getting into the same pit as the entrenched CE biggies viz. the PHILIPS, SONY, SAMSUNG et al. Companies which dominated the PC world such as Intel, Microsoft, DELL, APPLE are picking at the market earlier ruled by the CE companies. By no stretch of imagination, can we treat these incumbents as CE companies because it is not their core business. Their strategy is to focus more or less on platforms, processors, the core software and concepts rather than manufacturing per se. With the exception of XBox, neither Intel nor Microsoft directly participates in the CE battlefield. The case is not very different from the PC industry