Vizio's Competitive Advantage

1. Analyze competitive forces in the US LCD TV industry.

The US LCD TV industry is highly competitive and fast-changing. The industry transitions from cathode-ray tubes to flat panels and provides Vizio a great opportunity to tap into the market. Vizio’s innovation business model through lowering price while maintaining high quality products shifts industry dynamics substantially and made it a strong player in the LCD TV market. A five-force analysis is performed below to further assess the LCD TV industry dynamics in the US.

Rivalry (high) – Leading TV brands including Sony and Samsung have strong presence in the market. They adopt vertical-integrated business model by investing in technology and manufacturing key TV components such as display panels, creating high entry barrier for entrants and providing them with bargaining power against Vizio’s upstream manufacturing partners. However, their business model requires heavy upfront costs and focuses on certain TV models, causing less flexibility to lower product costs and manufacture different TV models.

Threat from new entrants (very high) – After Vizio’s success in the market, the entry barrier to the industry created by large brands previously lowered down significantly. New players can pursue similar strategies as Vizio’s by partnering with TV manufacturers and key component makers to lower costs. They may dilute Vizio’s competitive advantage – cost advantage (discussed in Q2) and challenge Vizio’s market position in the LCD TV industry directly.

Bargaining power of customers (high and rising) – US customers are not brand-conscious in the LCD TV market and are sensitive to price change. Given the overall TV quality among different brands is more or less the same, LCD TV companies including Vizio have to attract customers by slashing prices. With more low-cost players entering into the market, it is expected that Vizio will face intensifying competition in winning customers.

Bargaining power of...