Case Study 2: Dell
Tuesday, March 12, 2013
1. How and why did the personal computers industry come to have such low average profitability?
* Using Porters Five Forces to explain the profitability of the computer Industry.
* Defining the industry:
* The PC industry consists of manufacturers and suppliers of personal computers and computer parts respectively. Some PC manufacturers include: Dell, HP, Compaq, Gateway etc. * The current industry consist of proprietary standards in operating systems and microprocessors supplied by Microsoft and Intel Respectively.
* Bargaining Power of Suppliers
* Bargaining power in any market is a crucial factor that influences the level of competition within an industry. * The most important components of a PC are supplied by companies with a near monopoly, these suppliers Microsoft for their Windows OS and Intel for their Microprocessors. * It is crucial for hardware to work with software and Intel and Windows is the best choice for the average consumer.
* Bargaining Power of Buyers
* The power of Buyers is equally as important as that of the suppliers. Consumers expect an upgrade each time they purchase a different computer but also expect the prices to remain low. In the PC industry buyers have low brand loyalty and tend to make purchases based on best offer for the price.
* Threat of Substitutes
* The threat of substitutes in the PC industry is more on the low than high side. Every household in contemporary times consist of at least one PC but with modern inventions such as smartphones and Tablets consumers tend to stray a little from PC's but ultimately cannot give it up completely.
* Rivalry in the PC industry is very high due to presence of proprietary standards. * Similarities in the hardware and software installed on different PC manufacturers’ computers is similar which therefore makes for price wars...
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