Analyzing NVIDIA Corp: Applying Porter's Five Forces & PESTEL Model

This case study provides a strategic analysis of NVIDIA Corporation using Porter's Five Forces and PESTEL frameworks. The PESTEL analysis examines the political, economic, social, technological, environmental, and legal factors impacting NVIDIA's microenvironment, including taxation policies, inflation rates, demographics, technological awareness, climate considerations, and data protection laws. The Porter's Five Forces analysis assesses competitive rivalry, the threat of new entrants, the threat of substitutes, bargaining power of suppliers, and bargaining power of buyers. The analysis identifies key factors influencing NVIDIA's profitability and competitive edge. The study concludes with recommendations for NVIDIA to navigate the market effectively, focusing on legal compliance, cost management, and continuous monitoring of environmental and technological trends. Desklib provides access to this document and many other resources for students.

Running Head: NVIDIA PORTER’S AND PESTAL ANALYSIS 0
nvidia cORPORATIONS
NVIDIA CORPORATIONS
PORTER’S AND PESTEL’S ANALYSIS
System04122
2/9/2019

NVIDIA PORTER’S AND PESTAL ANALYSIS 1
Contents
1.0 Introduction................................................................................................................................3
2.0 PESTEL Analysis......................................................................................................................4
2.1 Political:.................................................................................................................................5
 Taxation policies...............................................................................................................5
 New government and change in policies..........................................................................5
2.2 Economical:...........................................................................................................................5
 Inflation rate:.....................................................................................................................5
 Exchange rate:...................................................................................................................5
 Economic growth:.............................................................................................................5
2.3 Social......................................................................................................................................5
 Demographics:..................................................................................................................5
 Societal norms and hierarchy:...........................................................................................6
2.4 Technological.........................................................................................................................6
 Technological awareness:.................................................................................................6
2.5 Environmental........................................................................................................................6
 Climate:.................................................................................................................................6
2.6 Legal.......................................................................................................................................6
 Data protection:....................................................................................................................6
 Environment Laws and guides:............................................................................................6
3.0 ANALYSIS OF PORTERS FIVE FORCE ANALYSIS..........................................................6
3.1 Competitive Rivalry...............................................................................................................7
3.2 Threat of new entrant.............................................................................................................7
3.3 Threat of substitutes...............................................................................................................8

NVIDIA PORTER’S AND PESTAL ANALYSIS 2
3.4 Bargaining power of suppliers...............................................................................................8
3.5 Bargaining power of buyers...................................................................................................8
4.0 Recommendations for NVDIA Corporations............................................................................8
4.1 Recommendation 1................................................................................................................8
4.2 Recommendation 2................................................................................................................8
4.3 Recommendation 3................................................................................................................9
4.4 Recommendation 4................................................................................................................9
Conclusion.......................................................................................................................................9
References......................................................................................................................................11

NVIDIA PORTER’S AND PESTAL ANALYSIS 3
1.0 Introduction
NVIDIA Corporation is an American technological firm, it is basically a graphic
designing firm, it designs for the gaming market, and it is one of the leading markets in the
media and communication industry. It includes- 2D, 3D, video and audio communication,
NVIDIA Corporation was founded in 1993 by Jen- Hsun Huang. The companies gaming sector
have 3- dimensional software and provides special effects for the games. The company works
with professional visualization market for independent software dealers. The company is also
working with automotive associates to bring co- pilot in the cars. It is working with automakers,
high definition mapping companies, and the startups to grow the AI systems for the self-driving
vehicles. Product family of NVIDIA includes (NVIDIA, 2018)
 GeForce, consumer-oriented and graphics processing products
 The Multi-displays and business graphics
 A system and the chip series for mobile devices
 high-end image generation in the applications for the professional and scientific fields
 Motherboard for Intel microprocessors
 NVIDIA Grid, is a set of hardware and services for the graphics virtualization
 NVIDIA Shield, a range of gaming hardware including the Shield Portable, Shield Tablet
and, most recently, the Shield Android TV
In addition of the GPU manufacturing, NVIDIA delivers parallel processing capability to the
researchers and the scientists. This allows the company to work efficiently and run very high-
performance applications. They are organized in the supercomputing sites as well in the world.
In the recent years, it has totally moved to the mobile computing market as well, in which it
produces a mobile processor named Tegra for tablets and smart phones and also vehicle
navigation and other entertainment systems. Its main competitors are Qualcomm, Arm and Intel.

NVIDIA PORTER’S AND PESTAL ANALYSIS 4
2.0 PESTEL Analysis
NVIDIA Corporation analysis of PESTEL is a strategic tools that analysis the micro
environment for an organization. Basically PESTEL stands for - the Political, Economic, Social,
Technological, and the Environmental and the Legal factors that impact the micro environment
of NVIDIA Corporation.
The changes in the micro-environment factors of any industry can directly impact the
business. In this case not only the NVIDIA Corporation but it can also impact other players of
the Semiconductor industry. They can impact on both the individual firm’s competition and also
the overall profitability of the industry in this it is explained how NVIDIA have been affected by
the environmental factors.
ECONOMIC
LEGAL
TECHNOLOGICAL
SOCIAL
ENVIRONMENTAL
POLITICAL

NVIDIA PORTER’S AND PESTAL ANALYSIS 5
2.1 Political:
Taxation policies
Over the last 2 years NVIDIA has had a lot of benefit due to the lower taxation
policies; it has resulted in high profits and increased its spending in development and
research, although sue to inequality United States is going to change its tax policies also
the government is soon planning to change the tax policies for the semiconductors
industry which will have a direct effect on NVIDIA Corporations ( BBC News, 2018).
New government and change in policies
There is no threat to the United States from the disturbances in the business
sector, because of the military policies, political unpredictability. Apart from this
NVIDIA Corporations have an experience all handling all of these problematic
circumstances.
2.2Economical:
Inflation rate:
Political
1. taxation policy
2. Armed conflict
Economic
1. Inflation rate
2. Exchange rates
3. Economic growth
Social
1. Demographics
2. Societal norms and hierarchy
Technological
1. Technological awareness
Environmental
1. climate
Legal
1. Data protection law
2. Environmental laws and guides

NVIDIA PORTER’S AND PESTAL ANALYSIS 6
Due to the easy liquidness in the market due to the great recession of 2018, it will
lead to high increase in the inflation rate of the United States (Forbes, 2018).
Exchange rate:
The unpredictable exchange rate of united stated can influence NVIDIA
Corporation plan such as investment plans not only in the short period of time but also in
the long run (BBC News, 2017).
Economic growth:
Performance of NVIDIA Corporation has a direct impact on United States
economy; it can either increase or decrease the economic performance of the country.
The economic growth from the last two years is due to increase in globalization and
utilization of local resources.
2.3 Social
Demographics:
NVIDIA Corporations has a benefit because of demographics, As United States is
a young and a growing country and NVIDIA can use this thing to target various sectors
or segments of the population.
Societal norms and hierarchy:
United State has different society than the home market of NVIDIA. NVIDA
needs to have a local team who has knowledge of the market in US, tobe able to manage
in the Market and to serve in a better way to its customers.
2.4 Technological
Technological awareness:
NVIDIA is a semiconductor industry and the technology and these industries have
not reached the maturity level, new innovations are entering the market. Every now and

NVIDIA PORTER’S AND PESTAL ANALYSIS 7
then, it is very important to have knowledge of the new upcoming innovations in
technology.
2.5 Environmental
Climate:
Agreement of Paris has placed some real targets for the national government of
United States to stick to to. This can upshot in greater inquiry of the environmental
standards for NVIDIA.
2.6 Legal
Data protection:
Over the last few years data protection has become an important part of intellectual
property rights. NVIDIA needs to check with United States if it has a robust mechanism
to protect data or not.
Environment Laws and guides:
There are lots of new environmental laws; NVIDIA needs to learn the level of
environmental laws to stay in the US market.
3.0 ANALYSIS OF PORTERS FIVE FORCE ANALYSIS
Analysis of Porters Five Forces" observes the five forces that have a very important and
significant impact on a firm's profitability. The Porter’s Five Forces are:
 The Threat of New Entrants
 The Bargaining Power of Suppliers
 The Bargaining Power of Buyers
 The Threat from Substitute Products
 The Rivalry among the existing players.
Porter 5 Forces is an universal strategy and a framework that takes all the decisions related to
strategic management, apart from the study of competition of an industry. In this the Porter Five
Forces has the focuses on - how NVIDIA has built a competitive edge in the industry with the

NVIDIA PORTER’S AND PESTAL ANALYSIS 8
entry of new industries and existing substitutes and competitors, and how NVIDIA can cope up
with these. Even though a lot of companies look totally different from outside while industries
seem to be tremendously different when analyzed closely these five forces closely determines the
profitability and competition of NVIDIA Corporations( Porter, 2009).
3.1 Competitive Rivalry
In case of rivalry between players existing in an industry is high in that case it is
important for the industry to reduce its prices and the prices. NVIDIA Corporation functions in a
very competitive manner and the competition does not affect the long term profitability and
productivity of the organization. NVIDIA Corporation focuses on the competitive advantage,
continuous innovation and advertising for removing this barrier (Porter, 2012; Kamukama &
Kyomuhangi, 2017).
3.2 Threat of new entrant
New entrants brings innovations and new ways to do things, this puts pressure on
NVIDIA Corporation by using the low price strategy, reducing the cost and also providing with
new deals to the customers. NVIDIA needs to manage every challenge and also build strategy to
protect its competitive edge. As NVIDIA has a very high profit, many new entrants try to enter
the market which decreases the profit of the industry, it is hence very important to block the new
BARGAING POWER
OF SUPPLIERS
THREATS OF
SUBSTITUTES
RIVALARY AMOING
EXSISTING PLAYERS
BARGAING POWER
OF BUYERS
THREATS OF NEW
ENTRANTS

NVIDIA PORTER’S AND PESTAL ANALYSIS 9
entrants. NVIDIA Corporation takes the following steps to be stable in the market, it maintains
customer loyalty, it has a low switching cost and it has access to the suppliers and distributers.
NVIDIA Corporation keeps the following things in mind, it studies the price performance of its
substitute and the switching cost of its buyer(George & Carraher, 2012).
3.3 Threat of substitutes
When any new product or service enter the market which fulfill all the needs of customer,
the profitability of the industry suffers. For example: Google drive and drop box are both
hardware drives that are known for storage purpose. There can be a threat of substitute product in
this case, if any one of these companies offers uniquely different services.
3.4 Bargaining power of suppliers
Many industries buy the raw material from a number of suppliers, sometimes suppliers
who are more dominant can decrease their margins and this way NVIDIA Corporation can have
a high earning in the market. Most of the influential suppliers usually use their negotiate power
to abstract high price from the firms. The impact of the high supplier barraging power is that it
reduces the productivity and profitability of the company, just like in the case of NVIDIA
Corporation. It focuses on the impact of cost distribution, the strength of distributor and the
substitutes available to remove this barrier.
3.5 Bargaining power of buyers
Buyers are always the one who are demanding. Buyers always go for one of the best
offerings available in the market. These things put a lot of pressure on NVIDIA Corporations and
its profitability in the long run. If the customer base of NVIDIA Corporation would be small and
strong than NVIDIA Corporation will have a higher bargaining power of the customers and the
higher will be their ability to get increasing offers and discounts, for this NVIDIA Corporation
focuses on the switching cost of the buyer and also the competitive advantage of the company.

NVIDIA PORTER’S AND PESTAL ANALYSIS 10
4.0 Recommendations for NVDIA Corporations
4.1 Recommendation 1
 NVIDIA should focus on the following laws before entering the market the anti-
trust law, discrimination law, copyright and property law, employment law, data
protection, health and safety law and most importantly consumer protection law.
 When entering a particular market NVIDIA should focus on the following things:
the level of corruption in the technological sector, tax rate, wage legislation,
pricing regulations, military invasion risk, mandatory employee benefits and
product labeling or any other requirements.
 It should check the impact of technology on the product offering, rate of
technological diffusion (Chandler, 2009).
4.2 Recommendation 2
 NVIDIA should have a good study of the Inflation rates
 It should reduce the Cost of labor and productivity
 It should focus on the Unemployment rate
 It should have knowledge about the Interest rate
 It should focus on the Attitudes( such as health, environmental and so on)
 It should study the nature of the society and encourage entrepreneurship
 It should have a good knowledge of demographics and the level of population
 It should focus on the pollution and air regulations of the industry
 It should support renewable energy and recycling
 It should have a knowledge of climate change and weather reports
4.3 Recommendation 3
 NVIDIA can become one of the low cost producer in the semiconductor industry,
it’s becoming a cost leader totally depends on the structure and forces of
technology industry, to have a cost leadership, company should assess, supply
chain management options and propriety technology.

NVIDIA PORTER’S AND PESTAL ANALYSIS 11
 it should build economic scale and reduce the cost per unitit should build a good
supply chain with ,multiple supplier’s
 it should focus on building a large customer base, as it would reduce the bargain
power of buyers
 it should launch new products , will reduce the switch cost of customer and it will
help in a competitive advantage over its competitors
4.4 Recommendation 4
 NVIDIA should focus on differentiation strategy. In this strategy it can try to be
unique in the semiconductor industry by providing value to the customers,
NVIDIA can select products and services that a customer values the most. The
goal should be to have premium price because of the differentiation and offerings
should be unique
 It should collaborate with the competitors to be able increase its market place
rather than just competing with the small market
 It can focus on being a service oriented industry rather than just focusing on
products
 It should understand the needs of the customer rather than just focusing on what
customers buy (NVIDIA, 2018).
Conclusion
In the year 2018, NVIDIA had reported US$3.047 billion as its earning and its annual
revenue of US$9.714 billion, there was an increase of 40.6% in comparison to the previous
years. NVIDIA's trades were around $245 per share, and the market capitalization was valued at
around US$120.6 billion. Some of the thing which effects the environment of NVIDIA
Corporations are-economic turndown, trade wars between U.S. and China. Another thing is the
increased competition with is the major threat to its market share, another factor is the exchange
rate of currency, it lowers NVIDIA'S profits. Another major problem is it is not highly successful
at integrating firms with different work culture (NVIDIA, 2018). Inventory of this company very
is high as compared to its competitors, which makes the company invest more in its channel and