Mgt 495-02: Skullcandy

Roshan Thapa

MGT 495-02

Skullcandy

Background/Problem statement

Founded in 2003 by Rick Alden, Skullcandy grew from a simple idea to a world-renowned audio company with product distributed in approximately 80 countries and generating just under $300 million in revenues annually. By 2005, the company broke$1 million sales, and in the following year sold almost $10 million worth of headphones and accessories. From 2007 to 2011, revenues grew over 700% from $35 million to $232 million.

The strategic issue of Skullcandy is not being able to gain the competitive advantage over the new headphone company (Beats by Dr. Dre), which entered in to the market by observing the Skullcandy’s success.

Porter’s Five Forces Model

1. Rivalry (High)

• Many competitors in the marketing.

• Larger market share of Beats by Dr. Dre.

• Barriers to entry are low.

2. Risk of Entry (Medium)

• Highly competitive market.

• Low cost of manufacturing.

• Growing market of expensive headphones.

3. Threats of substitutes (Low)

• Low switching cost.

• Fewer substitutes.

• Difficult to substitute.

4. Bargaining power of suppliers (Low)

• Large economy of sales.

• Multiple suppliers