The threats of new entrants in the computer hardware industry, which is dominated by PC's, are currently low in the U.S. domestic markets but are capable of achieving market share in foreign markets.
In the fourth quarter of the PC market in 2006, the U.S. domestic industry recorded 3% unit growth. Although the industry is providing positive numbers, it is controlled by 5 key manufacturers that construct a barrier to entry for smaller computer manufacturers. Each firm has strong brand names and has the right mixes of resources and capabilities. Small firms lack the resources and capability of acquiring enough capital to compete with the larger firms.
In the industry's "rest of the world category" which includes Eastern Europe, Latin America, Asia Pacific region, and the Middle East, PC market share expanded by 22.2%. The top five firms own 50.9% of market share while the other 49.1% are held by smaller firms throughout the world. Any smaller firm with the right resources and capability may be able of achieving economies of scale given the openings of the foreign market.
The bargaining powers of suppliers
In the industry, the suppliers such as Intel and Microsoft hold a significant amount of power. Dislocations with these suppliers would lead to an industry-wide disadvantage.
Due to cutthroat competition such as price wars, the price for computing power has decreased while the demand for computer hardware has increased. Although demand has increased, the pace of growth is expected to vary by segment. Product life cycles are short, and to remain competitive, vendors must develop new products and services.
Lower prices should continue to limit revenue growth for vendors. To become profitable, vendors must request lower costs from suppliers with a combination of efficient distribution channels.
For suppliers to completely understand consumer demand, they must collaborate with the entire supply chain network... [continues]
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