Winter
Odyssey Consulting
Marissa Goldberg
Govinda Dhital
Nivasini Sampangiraj
Alex Spaulding
Alex Strack
MNGT 481 TEAM ASSIGNMENT#1 COMPUTER MANUFACTURING INDUSTRY ANALYSIS
3/4/15
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Table of Contents
Industry Analysis ................................................................................................................... 3
Threat of New Entrants......................................................................................................................................................... 3
Substitute Products ................................................................................................................................................................ 4
Bargaining Power of Suppliers .......................................................................................................................................... 5
Bargaining Power of Buyers ............................................................................................................................................... 5
Rivalry Within the Industry ................................................................................................................................................ 6
Strategic Leadership .............................................................................................................. 6
Summary ............................................................................................................................... 8
Appendix............................................................................................................................... 9
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Industry Analysis
Michael Porter developed “The Five Forces Model” to analyze an industry, and to help
them to develop a business strategy. These five forces as Porter mentioned are potential entrants,
substitute products, bargaining power of suppliers, bargaining power of buyers and rivalry
among existing firms. By analyzing these five forces, any new industry can get an overall idea
about its competitors and market value. We chose personal computer industry as our case study.
The major companies of this industry are Apple, Sony, Toshiba, Dell, HP, Samsung and
Gateway. This is the largest industry, and is continually growing despite the economic turnover.
Threat of New Entrants
It takes a lot of capital to startup a personal computer industry, so the threat of new
entrants is very low. The major companies like Dell, HP, Toshiba, Sony and Apple have taken
the majority of the market share, which will create a potential barrier for any new company to
enter and survive in the computer market. Likewise, the next barrier is that the personal
computer industry requires huge investment to continuously research and to develop new
innovative products. They also need to invest their capital in manufacturing, online services and
customer services when entering the computer market. Furthermore, already established major
computer companies have the capacity to manufacture at lower prices because of their
economies of scale. Since they produce at a large scale, the per unit cost of the product will be
low. In contrary, new company will manufacture at a small scale, and hence, will have high cost
as they lack economies of scale.
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Computer has become an essential tool for people. Therefore, customers have become
price sensitive. Any new personal computer company has to focus on the cost of a computer for
customers when entering in the market. In addition, they have to deal with the brand savvy
consumers that only buy computers from existing well-established brands for years. The new
personal computer industry will also have less innovative product and increased price for the
customers. Likewise, new entrants will have less access to the distribution channels. They have
to invest their capital more on advertising and marketing as compared to the existing brands of
personal computer companies. Furthermore, new entrants also need to deal heavily with the
government policies like licensing and permit requirement, which takes away costs and potential
profits. Thus, a new personal computer industry may not thrive well as the existing personal
computer industry can invest and produce new components and ideas for the customers in the
market.
Substitute Products
There is a high potential of threat to personal computer industry from substitute products
available in the market. The substitute products that were available in 2010 were tablets and
smart phones. Tablets and smartphones are smaller, fashionable, and work similar to laptops.
Consumers can use Internet in tablets and smart phones. They do not need to spend additional
amount to buy a laptop when they can use Internet, other applications and also communicate
with people from their smartphones that can perform all the functions in one device. Moreover,
they are very portable in comparison to laptops. These substitute products are gaining increased
popularity in the market. Consumers like them as they cost cheaper when compared to the cost of
laptop. Furthermore, if tablets and smartphones increase their memory spaces, processing speeds
and add more software, there is likelihood that the personal computer industry might have a
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long-term threat or even collapse in the future. Therefore, the personal computer industry is
trying to gain its market share by inventing the tablets in their brand names. Overall, the threat of
substitute products in the personal computer industry is very strong.
Bargaining Power of Suppliers
In all companies, including tech companies, an enormous emphasis is put on the
stakeholders, usually shareholders. Prioritizing shareholders means prioritizing profit, which
means the more net income a company has the better. As this net income is computed by
starting with revenues and then detracting expenses, it's easy to see how much of an influence
suppliers can have to a firm's bottom line. Apple, Inc. in fact stands out as a prime
example. Even after the company came back from near bankruptcy in the 1990s, Apple had to
contend with what all major companies have to contend with - the bargaining power of
suppliers. Former Apple CEO Steve Jobs wanted to prioritize the notion of cost leadership - an
idea that centers around limiting costs of production rather than limiting the price of the overall
product to customers, in this case. Jobs dealt with the problem of the high bargaining power of
suppliers (at the time) by switching some production functions from external to internal. He insourced the development and manufacturing of the CPUs for his hardware, for instance, which
resulted in huge cost savings for Apple. In this manner, Steve Jobs was able to curtail the
bargaining power of suppliers.
Bargaining Power of Buyers
In 2010, the tech world had been greatly impacted by the introduction of the iPad. In
addition to the iPad, Apple had released the iPhone in 2009 as well, its single biggest success to
date. Others in the tech industry, such as Microsoft, Google (Droid), and Samsung had not
caught up at this point, had not developed their own tablets yet. Regardless, all would eventually
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come out with a competitive product. In some ways, the bargaining power of buyers was
actually limited in 2010. Yes, many people wanted smart phones and iPods, but they also
wanted tablets, and with the competition having yet to be established, a tablet buyer would be
almost forced to contend with the iPad in 2010, unlike now. In the past five years, however,
Samsung and Microsoft have developed their own alternatives that are similar capability wise,
and even cheaper. In this light, the bargaining power of the buyer has increased in recent years.
Rivalry Within the Industry
As has been the case for over twenty years, the personal computing industry has been
dominated by the few and by the powerful. Microsoft and Apple are still the big dogs in terms of
software. In hardware, it is more diverse - firms like Hewlett Packard, Dell, Acer, Toshiba, and
others all fight for dominance - notably; most of these hardware providers design their computers
to run Microsoft's Windows. Apple products stand alone, in many ways. Since the biggest
splash in personal computing over the last five years has been the release of the tablet,
competition for that device has skyrocketed along with its demand. Rivalry in the industry in
2010, after the iPad's release, was slim, as competitors did not have a product yet. It has grown
considerably in the years since.
Strategic Leadership
Steve Jobs the leader was demanding, innovative, and controversial, and motivated his
employees continuously to achieve his goals for the company. He focused heavily on innovation
and combined this with customer expectations to create new products to that would become
benchmarks for the industry. Although, Steve Jobs may have been difficult to work with at
times; he did however understand the power of cultural influence in sustaining the strategic
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capabilities when implementing his creative vision for Apple products. His vision for the Apple
was to have employees believe in creating a quality product, as stated by him “an enduring
company where people were motivated to make great products...a company that will stand for
something a generation or two from now. (Katzenbach, 2012)” Whenever Steve Jobs worked in a
team; he would always challenge teams to think outside the box and would always give someone
his undivided attention when listening to a new idea. His blunt answers to a new idea on the
other hand were a turn off for most people, this caused many employees to become frustrated
and discouraged.
Steve Jobs was the very definition of an effective strategic leader, although his tactics
were very unorthodox; he led Apple to become the top companies in the technology industry.
Strategic leaders view employees as an important factor in innovation, for instance when the
Iphone came out in 2005 it revolutionized the way cell phones were made. Without Steve Jobs
implementing his cultural philosophies to all employees at Apple, the Iphone and even the entire
company wouldn’t be successful today. Creating the Iphone allowed for instant financial success
but the values of the company create long term soundness for the Apple’s future. Allow he
might have been difficult to work with, Steve Jobs demanded perfection. This in turn, rubbed off
on his employees because they came to work every day knowing every aspect of their job.
Although his leadership style did frighten his employees, thinking they would be fired if they
didn’t know the answer to a question; this was one of the few flaws in his leadership style
causing a stressful work environment.
Now in 2015, Apple is still more profitable than ever, the new CEO Tim Cook is still
using the same values that Steve Jobs implemented in the company. Tim Cook is using a calmer
and thoughtful approach when getting his message across while still allowing for the company to
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add value in many ways similar to Steve Jobs. He has been able to help build Apple from $360
billion market capitalization to $600 billion – the highest in the world (Kaipa, 2012). Steve Jobs
is still having an impact today, even four years after his death; Apple is constantly innovating
and working to give the customers what they want.
Summary
Overall, the defining factors that outline the challenges in the personal computer industry
include high research and development costs, substitute products, established brands, and less
access to distribution channels; all of which are threats to new entrants. Established brands will
have already had to pay start up costs in addition to R&D. These brands will also have their
marketing and advertising channels set. Furthermore, substitute products such as tablets and
smart phones with fast Internet capability and storage may cause an issue with entering the
market.
However, some opportunities in the industry include that of the integrated technology
where the companies take advantage of the bargaining power of buyers. This lets the companies
know what the consumers really want in a product. In this technological age with social media,
the integration of these platforms onto personal computers are an example of a great opportunity
in 2010.
We believe that Apple Inc. has a sustainable competitive advantage in the personal
computing industry in 2015. In the 1990s, Apple Inc. was on the verge of bankruptcy, but was
able to step up. More than twenty years later, Apple Inc. is one of the leading companies in the
technological industry. Part of the reason that Apple will sustain competitive advantage is
because of its core values that Steve Jobs had drilled into the company. This leadership paved the
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way for the company. The value for perfection is definitely exhibited in Apple’s
products. Differentiation also set Apple apart as Apple’s products such as the MacBook, iPod,
iPhone, and iPad looked and had a different feel in comparison to other products by Dell, and HP
at the time. As a result, Apple has now set the bar for innovation, design, and efficiency for
personal computers and will continue to do so.
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REFERENCES :
Kaipa, Prasad. "Ivey Business Journal." Ivey Business Journal. N.p., May 2012. Web. 02 Mar.
2015.
Katzenbach, Jon. "The Steve Jobs Way." Strategy+business. N.p., 29 May 2012. Web. 01 Mar.
2015.
The Editors of Encyclopædia Britannica. "Odysseus | Greek Mythology."Encyclopedia
Britannica Online. Encyclopedia Britannica, 10 Oct. 2014. Web. 23 Feb. 2015.
Alami, D. (2012, January 1). Http://www.financialanalystwarrior.com/apple/. Retrieved from
http://www.financialanalystwarrior.com/app
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APPENDIX A
Our organization is called Odyssey Consulting based on the Greek hero Odysseus and his
adventures home after the fall of Troy. Homer portrayed the hero Odysseus as a man of
“outstanding wisdom and shrewdness” (Encyclopedia Britannica, 2014) we choose to reflect this
wisdom and cleverness in our analysis and problem solving for our clients.
Our mission is to take a fallen city and build an empire. We seek to use our wealth of
knowledge to bring about change for our clients, and our world. We believe in taking on every
problem with innovative solutions that best suit our customers needs. Our strengths lie in
creativity, bravery, and the willingness to work together to create a personalized solution for the
company. We use analytical thinking, evaluation, problem solving, ethical practice, writing,
leadership, and management skills to create solutions that will benefit the client, our people, and
society as a whole. We will take a look at the general environment demographic, psychographic,
as well as political and legal factors. Those components coupled with the global environment's
sociocultural factors, technological factors, global factors, and physical trends will help us
provide you with a unique perspective on your situation.
Our competitive advantage lies in our willingness to go where no company has gone
before because we believe that the consulting process does not have to be monotonous. In fact, it
can be an epic adventure!