5 Forces (PORTER)

Industry Rivalry:

Many small manufacturers worldwide

Diffuse industry

Many competitors unidentified

Single large company with competitive advantage of economy of scale (China)

$250M industry – XTech = $24M (2003)

Product Life cycle = 4 – 5 years

Exit barriers not likely to be large

Differentiated product important in narrow product range

Threat of New Entrants:

Product quality must be high

Economies of scale low – customised product/small batch runs

Capital requirements relatively low

Differentiation important

Customer loyalty

Specialisation (EMI)

Learning advantages evident

Distribution channels internal

Threat of Substitutes:

Few substitutes available

Buyer Power:

100 Major customers (60 provide main revenue)

Recent strategic shifts caused major restructuring and will have affected stability

Price elasticity low

Swithcing costs likely to be low (generally same product with minor customisations (developed at supplier cost)

Largest customer & its CM’s applying pressure

Supplier Power:

Operating in China with CM’s

Power likely to be increasing as a result

SouthCo possible JV partner but reluctant

Nextron possible supplier & JV partner

JDI possible JV partner – pursueing XTech

Summary of a Five Forces Analysis of the Competitive Environment of XTech
Force	Threat to Competitive Advantage
Threat of new entrants	Low
Industry Rivalry	High
Buyer Power	High – as demonstrated by push to operate in China
Supplier Power	High
Substitutes	Low