Page 16 - MCS August Day 1 Suggested Solutions

CIMA AUGUST 2018 – MANAGEMENT CASE STUDY

particularly dangerous during disposal e.g. lead, mercury and cadmium These chemicals
are not only notorious carcinogens and endocrine disrupters, they are also eminently
replaceable. Sony, Nikon and Samsung all publicly state that they are phasing them out,
but only Sony has target dates for doing so.

 legal influences – are another important factor that affects the profitability and
performance of the product. Products used in the international market are subject to
laws related to product quality. The pollution laws have grown stricter and products
have to pass strict controls plus laws related to product safety which can have an
important impact on the acceptability of products. Apart from this, there are
environmental laws that worldwide companies have to deal with while operating in
the international market. Changes in laws and regulations, the damaging effects of
compensatory claims for failed, faulty or poor quality products as well as intellectual
property, advertising legislation and employment law must be considered. Similarly
data protection law affecting the treatment of customers and staff needs to be
considered. Ignoring such aspects can only serve to damage the MONTEL brand.

Porters Five Forces:

 New entrants – (low threat) it will be made difficult because of barriers to entry such as
the large R&D investment required, cost advantages (economies of scale, economies of
scope), the distribution networks of the major players and to hire skilled staff. Another
major barrier is the level of competition from the existing brands. Unless a new provider
brings an innovative and differentiated product to the market, chances to gain a market
share are low with brand image and reputation major challenges for new players. Brand
image is a major competitive advantage for the existing brands. Moreover, penetrating
new markets is not easy either. Some governments have policies and taxation that
discourage foreign brands. So, there are several factors that minimize the threat from any
new players

 Rivalry amongst competitors – (high threat) despite the fact that Kira (MONTEL’s single
largest competitor) and MONTEL dominate the market for professional DSLR cameras,
competition will be high between the two suppliers. The other competitors are relatively
small operators and are not considered to be a major threat. The number of recognized and
influential brands is therefore low and exit barriers will be very high with any brand trying
to exit having to bear very large losses. The level of brand loyalty is unstated but is likely to
be high as the industry is large, mature, therefore intensifying the competition for market
share. Different brands tend to target different market segments but this distinction is less
defined in this industry. Brands compete on the basis of price, design, quality, technology,
innovation etc. Competition in the camera manufacturing industry is therefore likely to be
high.

 Substitutes – (high/low threat depending on the product) there are several different
markets, some with substitutes and some without. For example, the professional DSLR is
unlikely to have many alternatives but compact and bridge cameras will have many e.g.
mobile phones. Owning a camera is both a matter of prestige, convenience and finance for
many. So as a result, the threat of substitutes is slightly weakened in that context

60 KAPLAN PUBLISHING