Daktronics (A): The Digital Signage Industry
The United States signage industry has been quite old and has been performing for ages. The industry is quite old and the players have been performing for quite a long time. The emerging digital signage industry has been representing the nexus (the intersection) between the two major industries that are the Billboard and the Sign Manufacturing Industry and the Billboard and the Outdoor Display Advertising industry.
The first industry that is the Billboard and the Sign Manufacturing Industry has been rather focused on the manufacturing hardware which includes the digital and the paper display with the outdoor billboard that are located on the highways, the digital display outdoor billboards and the in store digital displays while the second industry has been keen to focus on the development of the content which includes the images, the actual words and the graphics that look to portray and communicate the message of the advertiser.
Moreover, different companies have competed in the digital signage industry where they have integrated the hardware and the content that shall be delivered to the digital messaging to the consumer markets which look to rather change the information within the industry.
Along with this, the advertising industry is also called as the digital out of home (DOOH) market, while the companies that offer these services are called the messaging systems or the digital signage. The industry has not been a uniform one in its language and the industry has relied upon the interchangeability, billboard, sign manufacturing, out of home advertising, DOOH, outdoor, sign manufacturing which has been represented the same elements within the industry.
The industry has been quite competitive where each player has been competing with the rival firm and company based on different attributes. However, major factors for all the companies have been same where they offer high quality after sales service, retention of the customers and prices that are as per the industry standards.
The case “Daktronics (A): The Digital Signage Industry in 2010” indicates that the signage industry in 2010 has become quite complex, multi segment, multi product, multi channel and highly fragmented with the dominant players emerging rather rapidly in the market with the evolution of technology.
Moreover, the industry entry barrier is low. The firms that have actually placed themselves as dominant competitors have had higher levels of vertical integration, better financial stability and a larger product portfolio that has been able to serve multiple segments.
The increase in capabilities, the design and prices, diverse products has actually made the industry players and companies to fulfil customer needs and wants.
The section shall include the PEST analysis of the signage industry. The section shall also include the political, economical, social and the technological environment of the industry. Moreover, the analysis shall help in identifying the factors that shall be required to analyze the market position.
The political situation of the industry has been quite in favor of the signage companies. The reason is simple, as the case states, most of the firms in the market have been competing rather skillfully, the entry barriers are low which provides opportunities for new players to enter the market.
This suggests that the government has been quite supportive in actually making things in favor of the industry players. Therefore, it can be considered that after the recession of the year 2008, the political and the government support has helped organizations in this sector emerge.
Although the country and its economy has been emerging after the global recession. Industry players have been quite well equipped in the current era to provide customers with utmost results and have also installed new dimensions to their product profile, which indicates that the economic stability has actually started to come within the signage market. However, important to note here is that the interest rates have increased recently, the prices for the customers have been rather fluctuating. The industry or the customer pending patterns are still limited and they are hesitant to spend a lot on signage marketing.
The industry has shown major signs of improvement since the since the year 2010, and it is estimated that the industry shall go down in the coming period by a major amount, which is estimated to be $13.3 billion in the year 2015. This is an average increase with the percentage rise of 2.9 percent.
Moreover, the outdoor advertising is also expected to grow in the coming period where the market would grow from a total of $6.3 billion to $8.1 billion in the next five years. One major difficulty that shall remain constant along the way in spite of the growth prospect is the fact that the government controls over the outdoor display of content shall remaining in tact and firms might find it difficult to advertise and promote the brands accordingly.
The social factor in the country indicates that the consumer spending patterns have increased. Moreover, the demands, the requirements of the consumers have increased where they have become rather educated about the signage industry. This means that the spending patterns have increased too. The increasing competition has also been a major source of competition.
Technology is playing a major role in improving the process and making the production and assembly line efficiency. The technology has been a major driving force in the signage industry. They LED and the LCD lights have been a major attraction to attract the customers. Moreover, all the companies have been gauging in technical innovation to increase the overall capacity of the industry.
Furthermore, the estimated cost of technical innovation in the market has been placed at an estimated cost of $250000 per unit. The introduction of digital billboards has also been an attraction where it has increased the sales for the industry players. The introduction of 3D innovation, holographic displays, touch screen are other major initiatives taken by the industry players in the signage industry.
Porter Five Force Model
Bargaining Power of Buyers: High
The bargaining power of buyers is high in the industry. The reason it is high is because the number of manufacturers in the market are quite high. Moreover, the industry is highly price sensitive and all the major players in the market offer low prices and competitive prices to gauge in customers.
Moreover, the switching cost in the market is also low which makes the market highly competitive for the buyers. The different companies offer customized products, excessive features, and new products to convince and attract customers. Therefore, it can be said that the market is a good one for the buyers; as a result the bargaining power of buyers for the industry is high.
Bargaining Power of Suppliers: Low
The bargaining power of suppliers in the signage industry or market is low. The reason of it being low is based on the fact that the number of suppliers in the industry is quite high. The raw materials provided by the suppliers have become rather cheap which makes the bargaining power of suppliers low.
Moreover, the industry players look to achieve sales and compete in the market through the offering of economies of scale. Most of the industry suppliers look to offer high quality low priced raw material that shall help them achieve its sales target. Therefore, it can be said that the bargaining power of suppliers is low for the market.
Threat of New Entrants: Low
The threat of new entrants in the market is low for the industry players. The reason is simple, as stated in the case, the government support, low capital investment and number of customers awaiting signage industry to approach them, therefore, it can be said that the threat of new entrants is low for the signage industry.
Moreover, the competitors are trying to outclass one another which make the market highly competitive, still the response of new entrants has been a positive one and the customers have actually preferred working with new signage companies as well. Therefore, this makes the threat of new entrant low for the industry.
Threat of Substitutes: Low
The threat of substitutes for the signage industry has been quite low for all the industry players. The reason is simple, although there are quite a few methods and ways of reaching out the customers and promotion, branding it, but the repose which companies get through outdoor advertising and billboard adverting is a unique experience. The customers and the companies feel rather comfortable to look upon sign boards to learn about the new brands available and the promotions they shall offer the customers.
The major substitutes for the industry players shall be all the other mediums of advertising such as the television advertisement social media marketing, direct marketing, etc. In spite a number of substitutes in the market, still it does pose threat to billboard market because of all the other alternatives being either high priced or sometimes in effective.
Competitive Rivalry: High
The competitive rivalry in the signage industry has been quite high and intense. The reason it is high because of the number of rival companies competing in the market. Moreover, the different competitors offer lower prices, high quality and customized products to attract customers and to gauge in more market share. Therefore, it can be said that the market is highly competitive.
The major strength of the market has been the high quality offerings offered by all the major players in the market. Moreover, each and every market player has been offering innovative technology to attract customers which again has been strength for the industry.
The financial stability and the market share are also major strengths for the market players. Along with this, another major strength within the industry has been the vast product profile available for the customers. The option of customization is also a strength.
The major weakness is the fact that the market has been facing increasing recession effects. Along with this, the high prices of the different or the most technically advance technologies has been a weakness where all the companies do not offer it.
In addition, another major weakness for the market has been the limited scope. The number of customers is also quite limited because of the alternative options available in the market.
The major opportunity for the market competitors is to expand their reach and enter new markets. This is one of the major opportunities for all the players in the market. Moreover, another major opportunity for the competitors is to offer new technology and diverse products to the customers. Along with this, another major opportunity for the companies in the signage industry is to increase their profile by offering traditional marketing themes also.
The major threat for the industry has been the ever increasing competition in the market. Moreover, the low entry barrier makes it more difficult for the players to compete in the market. Along with this, the government rules and regulations and the restrictions have also been a threat for the players in the signage market.
Based on the analysis provided above, the alternatives for the industry and all its major players shall be to look to follow the following alternatives. The alternatives for the industry shall be as follows:
- Expansion into international market
- Increase the products in the profile
- Beyond sports
Expansion into the international market:
The first alternative for the industry and the company is to expand itself in the international market. The reason for this recommendation is based upon the fact that by expanding in the international markets such as the Asian market and the Far East market, the companies competing in the signage industry can overcome the increasing threat of competition.
As the case states, the market has become quite saturated and all the industry players have been competing by decreasing their profit margins and revenues. This has actually made the market quite mature and the players find it difficult to increase the sales.
In such a scenario, the first alternative for the industry players shall be to enter new markets and explore the market share and growth prospects. By doing so the customers shall increase, profits will increase and also, the competition which is available in the current market shall be eliminated.
Increase the products in the profile
The second alternative based on the information provided in case for the different competitors shall be to increase the products offered to the customers. As the case states, most of the signage companies in the industry or market have been offering similar products such as the billboards, electronic billboards etc. This has actually limited the sales and the customers feel that all the major companies in the market do not differentiate themselves from the rivals. Therefore, the profit margins have again become limited and organizations find it difficult to overcome the challenge of staying ahead of the competition.
With this aspect, the second alternative for the industry players shall to be to increase the products offered to the customers. For instance, the companies can look to offer customized products and products to the customers. This shall attract them to work with a brand for a longer duration which shall help the payers to quote the prices they rather want to achieve from the rivals.
Moreover, the idea of staying aligned with customer or the client requirement is the only way and the only method of increasing benefits for the customers which shall result in customer satisfaction. Lastly, the second alternative for the company shall be to increase the products in the profile.
The third alternative for the industry players shall be to increase the scope of business. The idea behind this alternative is based upon the fact that as for now all the industry players have been offering signage products for the sports industry. However, in the future, the companies shall expand their reach and should look to enter into new businesses also.
For instance, other industries where this signage can be used shall be the retail market. By entering in to this market, the companies shall be able to overcome the threat of competition. Moreover, the idea being this move is solely reliant upon the fact that by entering into new markets, again the element of competition might decrease, the profits shall increase and eventually the firms operating in the market might be able to quote prices as per their needs and wants.
Based on the three alternatives provided above, the recommended solution is to overcome the issues where the competition has been immense in the market. The industry has been saturated, profits have declined and the profit margins have reduced, therefore, based on the above facts, the recommended solution for the industry shall be to expand itself and the business into new markets.
The reason for this recommendation is based upon the fact that the current United States market has become saturated and most of the industry players have been competing over a small market share. Along with this, the entry barriers are also low which again attract more companies to enter the signage industry of the United States.
Based on the fact, the companies should expand their reach into the global market and look to entertain the needs of the international customers. By doing so, the company shall be able to increase the customer base, expand its reach and attract more audience towards the business. Therefore, the ideal situation or the most suited recommendation for the firms shall be to expand and enter the less or the emerging markets of the Asia and the Far East.
By doing so, the sales shall increase, the customers shall be able to overcome the threat of competition and eventually the profit margins will grow significantly. This is the most ideal situation for the industry players; therefore, the recommended solution shall be to opt for the expansion into new and diverse markets.