The analysis of VR industry via Porter's 5 forces

This article is aimed for analysing VR industry

Since its introduction in 1979, Michael Porter’s Five Forces has become the de facto framework for industry analysis. The five forces measure the competitiveness of the market deriving its attractiveness. The analyst uses conclusions derived from the analysis to determine the company’s risk from in its industry. So, for better understanding of what is going on the VR market we analyzed our industry via Porter’s Five Forces.

1. Threats of New Entrants/Potential competitors: Low Pressure

From our point of view entry barriers are pretty high, as for broadcasting live-music concerts, sport events, theatrical performance the special contracts have to be signed, moreover, we have to get contracts with companies, that film a video. That takes time and, moreover, capital requirements for supplying VR glasses.

However, our company doesn’t have a brand name, that may play against us, as such giants as Samsung and other may implement the same service.

2. Threat of Substitute Products: Medium to High Pressure

Even our service allows people to have easier access to concerts, matches, theatrical performances for cheap price and feel themselves like on real one event, we may face such substitutes as recorded versions and livestream on TV, YouTube. Also we have to take into consideration real entertainment events. And according to market analysis existing VR services may provide with recorded version of some music concerts and ceremonies.

3. The bargaining power of Buyers: High Pressure

The main power of our buyers lies in their preferences, if they are not satisfied by the variety of events broadcasting, they can easily refuse of our service. In addition, the amount of buyers plays also a huge role, as the price of service, the amount of glasses needed absolutely depends on them.

4. The Bargaining Power of Suppliers: Medium to High Pressure

In the list of our suppliers the organization companies of events and producers of VR glasses are included. Speaking about the first one, we are absolutely depended on them, as if something goes wrong we won’t get access to the desired livestream of particular ceremonies or matches. The second one – the producers of VR glasses. There are a lot of companies, as in Russia, as outside Russia, who are selling VR glasses. Even they may be differentiated by price and quality, there is always a possibility to find alternative. However, such VR glasses as hard paper prototype - Google Cardboard – isn’t our solution, there are other VR glasses produced by Samsung, Lenovo and etc, - what makes the power of supplier a bit lower.

5. Rivalry Among Existing Firms: Low Pressure

There are no direct competitors on the market now, however, the similar services are introduced by Samsung VR, Steam and Rift which are very popular among gamers. In addition, people may buy any type of VR glasses and get connected to various apps, which are created exactly for using VR and the number can succeed more than 1000 apps. However, it must be taken in consideration, that our service provides with broadcasting of events in real time with clear feeling of attending the concert or match in realty. And for having the access our business model is much attractive for buyers as is cheap and allows to have our service on the base of subscription.