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Porter 5 Forces Analysis of Computer Industry

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Porter 5 Forces Analysis of Computer Industry

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  • April 17, 2012
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Porter’s five forces analysis of the Personal Computer (PC) industry In his article “The five competitive forces that shape strategy“, Michael Porter (2008) updates and extends his “five forces” framework he first introduced in 1979 and which has influenced the academic and business research for decades. He reaffirms that “THREAT OF ENTRY”, “THE POWER OF SUPPLIERS”, “THE POWER OF BUYERS”, THE THREAT OF SUBSTITUTES”, and “RIVALRY AMONG EXISTING COMPETITORS” are the forces that shape every single industry, and a thorough understanding of such forces help analyze everything from the intensity of competition to the profitability and attractiveness of any industry. The framework has two dimensions; the vertical dimension that connects the raw material to consumers, and the horizontal dimension that reflects the way in which connection can be made. Both dimensions intersect in existing competitive rivalry. In this section, we try to gain insights about the PC industry by describing its key elements before undertaking a five forces analysis of the industry. Further discussion of the strongest forces in this industry follows in the next section. The top PC manufacturing companies consist of HP, Dell, Apple, Acer and Lenovo. Its market is highly concentrated with top five companies controlling about 70% of the global PC market. Competition within the PC industry is extremely intense and significant price competition is playing a major role in the industry's performance. Advancements in technologies and new innovations are making the industry’s competition fiercer. The PCs market includes consumers, businesses, government agencies, schools, etc. Hence, the PC users are diverse and they use their machines for different reasons. The PC is used to run businesses as well as to play games and listen to music or watch movies. The stage of the PC industry life cycle can be described as mature and companies are trying to diversify and / or...