1.1 (ii) Porter’s Five Forces Analysis
Threat of Entry: Threats of entry in this case is moderate. There is low brand loyalty of existing firms. Consumers usually compare the prices with different brands when they decide to purchase PCs. They think that every PC has the same price and has the same function no matter what brand it is, which means low product differentiation. There is medium capital requirements, no government regulations and low economies of scale in manufacturing. There is low investment for independent stores. Decreasing profitability indicates that there is a threat of new entrants Threat of Substitutes: Threat of substitute products is low. HP believes in standards-based technology, which represents the opportunity to decide in the item of much preferance. HP tries to eliminate barriers by continuous updating processes and presenting new products to remain in the top of the industry. The Power of Buyers: Bargaining power of buyers is high. Consumers are very price sensitive because they like to buy cheap and high quality products. If they see a hardware or software or PC with similar functions but different brands and price, they will tend to buy a cheaper one. The buyer power for HP can be low since product demand is high, this means that the company has power to control the amount of production and also its products price. On the other hand, customers have lots of substitutes. Moreover there is not a huge difference between products which are produced in the market. The Power of Suppliers: HP bargaining power of suppliers is high. There are large number of suppliers for every component parts of the PC, for example, one can make a PC by using component parts from different suppliers, including hard disk, DVD drive, monitor, etc. Microsoft and Intel have tremendous bargaining power against the PC manufacturers. There are high switching costs. Competitive Rivalry: Rivalry is high. For instance, price, when one company acts to protect its position by lowering the price of PCs, it will affect other companies. This means all other firms may want to lower their price in order to attract the customers. There is also decreasing profitability. Since the firms sell their PCs in a low price, they will make less profit.
1.2. Opportunities And Threats
1.2. (i) Opportunities
Expanding presence in cloud computing market – In July 2008, HP along with Intel Corporation and Yahoo, created a global multi-data centre, open source test bed for cloud computing research and education. The goal of the project was to promote collaboration among industry, academy and governments by removing the financial and logistical barriers. In 2009, HP announced HP Cloud Assure, a new SaaS offering designed to assist businesses to safely and effectively adopt cloud-based services. The increasing demand for cloud computing is likely to create demand for HP’s solutions in coming years. The global spending on cloud computing is forecast to cross a value of over $40 billion by 2012. Expanding portfolio of imaging and printing solutions – HP has made several strategic acquisitions and introduced new products in the imaging solutions segment in recent times. Its imaging solutions strategy entails the commercial markets, from print services solutions to new growth opportunities in commercial printing. HP has launched several retail photo printing solutions and services that provide consumers the tools to personalise their photos and publish customised creative output. 1.2. (ii) Threats
Projected decreases in the IT markets – Forecasters predict a decrease in the worldwide demand for various IT products offered by HP. The economic slowdown has negatively affected many market segments, including information technology. HP has experienced this decline not only in the U.S. but also in its global markets. Hyper-competitive Environment – Although HP recently overtook Dell in sales, the latter remains a formidable competitor, as are other...
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