Competitive Rivalry 

In the watchmaking industry, there is a strong competition between firms, which are mainly portfolios brands. These firms as The Swatch Group, own different brands, covering several segments of the market. Each brand tries to develop its image, concept and storytelling. Also, firms compete through costly marketing campaigns to increase their influential power over their customers and new potential customers.

Potential Entrants

Highly competitive, divided between powerful firms, the watchmaking industry presents lots of barriers which represent big steps to overcome for potential new entrants on the market. The financial barrier is one of the most important. In fact, to create and design a range of watches requires to raise funds. Linked to this barrier, the technological part can be also a problem for potential entrants because a watch is a complex object. But it seems that the main difficulty for potential entrants is to compete with brands, as Swatch, which have a well-established brand image worlwide.

Bargaining Power of Buyers

On the watchmaking industry, it exists a large offer of very different watches. Due to the strong differenciation of the products between brands, customers don't switch easily from a product to another. In fact, it seems impossible for someone wanting to buy a breguet to finally switch for a Rolex, because, even if they are both luxury brands, they sell very different types of watches, in relation to their own positionning and story.

Bargaining Power of Supplier

In concret terms, it exists 2 types of situations concerning the suppliers in the watchmaking industry. The first one is brands as The Swatch Group which own their factories to create and assemble mecanisms. The second case is brands as Gucci, or Ice Watch which are not watchmakers and which need to order mecanims to (external) suppliers. In this situation, suppliers have a certain power of negociation about prices and schedules.

Substitutes

We can say that it doesn't really exist substitutes for watches, but the increasing development of the smartphones is evolving the situation. People become used to read the clock on their mobiles, it is why the watchmakers have to motivate them to wear watches, otherwise it could be a threat, especially for the low-cost segment.

JVS.


References

http://maven.wordpress.com/2008/01/11/a-new-version-of-porters-five-forces-model/