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Computer Industry Analysis. Prepared by: Scott Billups Anne Homme James Porter Stephan Rogers Jerome Wade. Introduction. Dominate Economic Characteristics Six Forces Competitive Position of Major Competitors Competitive Analysis of Personal Computer Manufactures PC Industry Trends

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computer industry analysis

Computer Industry Analysis

Prepared by:

Scott Billups Anne Homme

James Porter Stephan Rogers

Jerome Wade

  • 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
Dominate Economic Characteristics
  • 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
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.

  • U.S. and Worldwide PC Shipments and Growth, 2004-2008
  • Region 2004 2005 2006 2007 2008
  • USA (M units)
  • Consumer 21.8 23.6 25.6 29.0 32.6
  • Commercial 36.5 40.3 41.9 46.0 49.4
  • Total 58.3 63.9 67.5 75.0 82.0
  • Worldwide (M units)
  • Consumer 64.9 78.4 88.4 100.0 111.2
  • Commercial 114.4 129.4 141.9 157.1 173.3
  • Total 179.2 207.9 230.2 257.1 284.5
scope of competitive rivalry
Scope of Competitive Rivalry
  • The competition within the PC industry is extraordinarily cutthroat. The top companies consist of Dell, HP, Apple, Gateway and Sony.
  • A few factors of competitive edge:
  • • New technology
  • • Custom built PCs
  • • Reliability
  • • Customer Service
stage in life cycle
Stage in Life Cycle
  • 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
Number of Companies within the Industry
  • • 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.
  • 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
  • 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
Product Characteristics
  • 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
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
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
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
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
6 Forces
  • Suppliers
  • Buyers
  • Rivalry among Existing Firms
  • Threat of New Entrants
  • Substitute Products
  • Stakeholders
  • Complimentary Products
suppliers buyers
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
Rivalry Among Existing Firms
  • 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
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.

competitive position of major competitors


4 B


3 B

Net Income


2 B


1 B


50 B

25 B

75 B

100 B

Market Capital

Competitive Position of Major Competitors
dell inc
Dell Inc.

Dell Inc. :

  • 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


  • 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 Computer


  • 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 Inc.


  • 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.

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
PC Industry Trends
  • 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
Key Success Factors
  • PC Industry Services
  • Technology Services
  • Consulting and Integration
  • Managed Services
industry prospect and overall attractiveness
Industry Prospect and Overall Attractiveness
  • Factors that make the Industry Attractive
  • Factors that make the Industry Unattractive
  • Special Industry Problems and Issues
  • Profit Outlook
  • Dell Leads
  • Global Market
  • Diversify the Workforce
  • New Innovations
  • PC Improves Society