Computer Industry
Analysis
Prepared by:
Scott Billups Anne Homme
James Porter Stephan Rogers
Jerome Wade
Introduction
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Dominate Economic Characteristics
Six Forces
Competitive Position of Major Competitors
Competitive Analysis of Personal Computer
Manufactures
PC Industry Trends
Key Success Factors
Industry Prospect and Overall Attractiveness
Conclusion
Dominate Economic Characteristics
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1. Market Size
2. Scope of Competitive Rivalry
3. Stage in Life Cycle
4. Number of Companies within the Industry
5. Customers
6. Technology/Innovation
7. Product Characteristics
8. Scale Economies
9. Learning and Experience Effects
10. Capital Requirements
11. Industry Profitability
Market Size
The computer industry consists of hardware, software, service and
an endless array of products our group chose to narrow the
research to PC’s. The worldwide PC market finished 2004 on a
strong note, with double-digit percentage growth for the year,
according to research released by IDC and Gartner.
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U.S. and Worldwide PC Shipments and Growth, 2004-2008
Region
2004
2005
2006
USA (M units)
Consumer
21.8
23.6
25.6
Commercial
36.5
40.3
41.9
Total
58.3
63.9
67.5
Worldwide (M units)
Consumer
64.9
78.4
88.4
Commercial
114.4
129.4
141.9
Total
179.2
207.9
230.2
2007
2008
29.0
46.0
75.0
32.6
49.4
82.0
100.0
157.1
257.1
111.2
173.3
284.5
Scope of Competitive Rivalry
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The competition within the PC industry is
extraordinarily cutthroat. The top companies consist
of Dell, HP, Apple, Gateway and Sony.
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A few factors of competitive edge:
• New technology
• Custom built PCs
• Reliability
• Customer Service
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Stage in Life Cycle
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The stage of the PC industry life cycle can be
described as mature. However, the growth of
PC sales has not decreased due to the
globalization trend taking place within the
multinational corporations.
Number of Companies within the
Industry
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• Dell - The world's #1 direct-sale computer vendor provides a broad range
of computer and entertainment products for the consumer and enterprise
markets.
• Sony - Sony has refocused its approach to selling computers: Instead of
appealing primarily to consumers, it is now targeting business customers
(mostly small and medium-sized companies).
• HP - HP's Personal Systems Group (PSG) markets desktop and notebook
PCs to consumer, businesses, government agencies, and schools.
• Apple - Once the world's top PC maker, Apple Computer has been
relegated to niche status in a market dominated by "Wintel" machines
(computers using Microsoft Windows software and Intel processors).
• Gateway - Perhaps the purest PC play among the leading computer makers,
Gateway has been hit particularly hard by slowing sales in that industry.
Customers
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Involving interests of the PC community can be described as
diverse. Advantages consist across the board for the PC user.
Ranging from music manipulation, video enhancement, money
management, research, school, science and a myriad of others;
there are many uses for the PC. Therefore this means the
customers that buy the computers are diverse and use their
machines in a variety of ways. The computer offers an efficient
way of running a business, playing a game or managing your
calendar. The bottom line is that any person can find a useful
attribute for a computer: which provides the industry with
revenue higher than the auto and chemical industries combined.
Technology/Innovation
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Technologies as well as innovation are advancing
every year, therefore making the industry fiercer.
Ten years from now chances are there will be
few computers in home. Instead, people will be
wearing computers -- implanted, for example, in
eyeglasses, with the retina as the screen -according to IT pioneer and futurist Raymond
Kurzweil.
Product Characteristics
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Components:
• Case - The box all the parts (except monitor, keyboard, mouse, and printer) are stored in
• Mother Board - The main printed circuit board in the computer, which the CPU (see below)
plugs into
• CPU (Central Processing Unit) – The CPU is the actual "brains" of the computer
RAM (Random Access Memory) - Like pieces of scratch paper that information is
temporarily stored on ONLY WHILE you are actually working on the computer.
• Disk Controller – The Disk Controller allows your computer to interact with your disk
drive storage devices
• Hard Disk Drive - A STORAGE device, NOT MEMORY! The Hard Disk Drive is like a
filing cabinet - no more, no less. Retrieval is faster, and finding things is usually easier,
but it is still just a filing cabinet.
• Video Display Adapter - Unlike your eyes, it can ONLY OUTPUT the computer
information in the form of a video signal that is human readable (via the monitor).
• Monitor - The actual display you see the words, pictures, and data on. There are two
main types: analog and digital.
• Input Device - Keyboard, Mouse, Digitizer, Scanner, Pen, Digital Camera, etc.
• Modem - A device that hooks your computer up to the telephone line
Scale Economies
With most multinational corporations there are two separate
economies operating between the actual company and the
markets. The separate economies are internal and external.
Internal: Tech Economy, Managerial Economy, Financial
Economy, Marketing Economy, Research & Development
External: The external aspects of scale economies consist of the
distribution centers and retailers. For example; Apple, Sony or
HP manufacture computers, while retailers arrange for computer
deliveries to the customer. One exception is Dell, which has
excelled in custom-built computers delivered straight to a
consumer’s home.
Learning & Experience Effect
The computer industry is mature and here to stay. In the US
computers are found in most homes with access to the Internet.
Students are taught to use computers in school at a young age
and competency is only going to increase.
However, there are people who struggle with applications and user
activities such as installing new drivers or connecting a monitor.
One of the largest complaints within the industry is support.
Dell, once again is an exception. Dell observes great rewards
when consumers give praise in regards to customer service.
Since the industry is so mature the complaints are few due to the
reliability of the PC.
Capital Requirements
The capital required to enter and actually compete with the big
names in the computer industry are ridiculous. Taking into
account that HP spent 3.9 billion on research and development
last year alone makes a person think twice about embarking in
the industry. New components and ideas are always being
developed by the large companies, which few can compete.
Furthermore, the brand name products distributed by Apple,
Dell and HP are household names.
However, if a person is technologically savvy and creates new
language or some sort of new innovation they could sell the idea
to the large companies. This would be the most probable
situation when attempting to create a profit within the PC
business.
Industry Profitability
The fact remains that the PC industry doesn’t produce
only PC’s. Every company that creates PC’s also has its
hand in other industries and markets. An important
question to ask is how profitable is the industry. And
the answer is billions upon billions upon billions of
dollars. The industry is constantly redefining itself as
well as every other business on the world due to its
deep routes within every industry. As for what
company ranks the highest in profit at the moment is
Apple, but the numbers are skewed due to other
hardware Apple provides. The industry is extremely
competitive and profitable.
6 Forces
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Suppliers
Buyers
Rivalry among Existing Firms
Threat of New Entrants
Substitute Products
Stakeholders
Complimentary Products
Suppliers / Buyers
Intel and Microsoft are the two most dominate suppliers in the PC
industry.
Suppliers: Intel’s microprocessor chips are used in approximately
80% of personal computers.
Microsoft operating systems are used in 90% of computers,
giving it substantial bargaining power.
Given that Microsoft and Intel control the majority of the PC
supplier market of major component parts, the business world
has named the two “Wintel.”
Buyers: The strength of the PC buyer has basically evolved from
the personal computer becoming a commodity-like item.
Backward integration is also a factor in the strengthening of the
PC buyers bargaining Power because more and more people are
building their own computer systems
Rivalry Among Existing Firms
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The competition the personal computer industry
is also an industry that resembles ‘follow the
leader.’ Follow the leader occurs when industry
leaders are mimicked by competitors; and those
competitors that do not follow will fall off by
the wayside.
Price Wars: Ex. In 1999 the average PC cost $
1,699. Now the average price of a PC is under a
thousand dollars.
Threat of New
Entrants/Stakeholders
TNE: The chances of a new PC vendor entering into the market
and gaining significant market share is pretty slim, entry barriers
are higher now than they every have been. Two of those entry
barriers that are making entry into the PC market so tough are
cost and distribution.
Concentrated: it is estimated by analysts that in the near future
the top 5 vendors may control 70% of the global personal
computer market.
Stakeholders: Environmentalists and E-waste are the major
stakeholders for the PC industry; the dumping of high-tech trash
like computers in landfills.
Hewlett-Packard, IBM and Dell have recently started up a
computer recycle program, recycling in all computer brands for a
small fee.
Substitute Product
Functionality
PC/Notebook
PowerPoint
X
Camera
Cell Phone
Handheld devices
X
X
X
X
X
Mp3 player
X
Spreadsheets
X
X
Word processor
X
X
GPS navigation
Email
X
X
X
X
X
Competitive Position of Major
Competitors
4B
Dell
3B
Net
Income
Hewlett-Packard
2B
Apple
Gateway
1B
Soya
25 B
50 B
Market Capital
75 B
100 B
Competitor Analysis of PC
Manufacturers
Dell Inc.
Dell Inc. :
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Founded in 1984
Mission Statement: “To be the most successful computer company in the
world at delivering the best customer experience in markets we serve.”
Next day delivery
No middlemen or intermediate retailers
Current Situation:
 Revenue over $56 billion
 Net income of $3.4 billion
Hewlett-Packard
Hewlett-Packard:
 Founded in 1939
 HP’s mission: “To invent technologies and services that drive
business value, create social benefit and improve the lives of
customers—with a focus on affecting the greatest number of
people possible.”
 First product was an audio oscillator
 Multi component system model
Current Situation:
 $86 billion in revenue
 net income of almost $2.4 billion
Apple Computer
Apple:
 Founded in 1976
 Mission statement of Apple is as follows: “Apple will
be a leader in providing simple, powerful, high-quality
information products and services for people who
learn, communicate, and create.”
 Stylish product innovation
 Entrepreneurial
Current Situation:
 $14 billion in revenue
 Net income of almost $1.3 billion
Gateway Inc.
Gateway:
 Founded in 1985
 Mission statement of Gateway Inc. is, “To invest in our
communities and future by providing state-of-the-art technology
and technical support.”
 3rd largest personal computer company in the United States
 Ranked in the top ten worldwide
 Profit pyramid model
Current Situation:
 $4 billion in revenue
 Net income of almost $6 million
Soyo Group Inc.
Soyo Group Inc.:
 Founded in 1999
 The mission statement of Soyo is, “To capitalize on
Soyo’s market position as a leading distributor of
computer and networking products by increasing
penetration of existing markets through acquisitions
and expanding into new markets.”
 Computer peripheral devices
Current Situation:
 $38 million in revenue
 Net income of almost $540 thousand
PC Industry Trends
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Increasing Clock Speed
Mass Customization
Outsourcing
Electronic Commerce
Current Trends and Issues
Demand Dynamics
Changing Profit Dynamics
Market and Distribution Trends
New Product and Technology Directions
New Business Strategies
Key Success Factors
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PC Industry Services
Technology Services
Consulting and Integration
Managed Services
Industry Prospect and Overall
Attractiveness
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Factors that make the Industry Attractive
Factors that make the Industry Unattractive
Special Industry Problems and Issues
Profit Outlook
Conclusion
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Dell Leads
Global Market
Diversify the Workforce
New Innovations
PC Improves Society