Influential Factors from Michael Porter's 5 "Forces"

After reading Michael Porter’s "Five Forces" article, discuss the five environmental factors that will most strongly influence the cellular phone (handset) industry. Justify how you have arrived at your conclusions. Present evidence if you have any.

There are many environmental factors that will influence the cellular phone industry, but after reading Michael Porter’s “Five Forces” article, there are five factors that most strongly influence this industry. The first force Porter talks about is threat of entry, discussing how it “depends on the height of entry barriers that are present...” (Porter, 2008). The first environmental factor that strongly influences this industry is a company-specific factor: demand-side benefits of scale, or in simpler terms, brand loyalty. There are already major players in the cell phone industry such as Verizon and AT&T. As Porter points out, “buyers may trust larger companies more for a crucial product” (Porter, 2008). This factor makes the entry of new phone company competitors difficult, as consumers may be hesitant to purchase a phone service from a smaller, new company versus a larger well-known company. While this may be a negative factor for new companies looking to enter the industry, it is a positive factor for those companies entered as the threat of entry is small. These companies evaluate their position in the industry, and use that analysis to make marketing decisions.

Another force Porter discusses is rivalry among existing competitors. This force explains the second and third influential factors. Competition in the cellular phone industry is the second factor, and is a company-specific factor. Porter discusses the intensity of rivalries, or competition, within the same industry. Within the cellular phone industry, rivalry between competitors would be considered intense because “competitors are numerous or roughly equal in size and power” (Porter, 2008). While the competitors in the industry may not...