46 E Computer Industry Analysis Ben Mechak Bobby Petrone Mark Wilson
Industry Leaders 2011 (% Market share) • Hewlett-Packard - 27.3% • Dell Inc. – 26.3% • I.B.M Corporation – 14.9% • Apple Computer inc. – 8.5 • Oracle Corporation – 5.0 %
Rivals Magnitude: HIGH • High customer demand • Intense price competition • Foreign competitors has driven down retail prices • 4 largest companies hold 77% if market share • Increasing competition with falling production cost • (Ibisworld.com)
Buyers Magnitude: Moderate • Little differentiation among products • Can choose between more then two products • Example- Mac book pro and Mac book • Switch costs are low • Buy at some-what frequent rate • Corporate businesses have to keep up with technology while home owners do not • Customers are loyal • Need to keep up with technological changes
Threat of Entry • Magnitude: LOW • Barriers to entry are low and are expected to remain steady, but are more modest on an industrial scale • Ease of entry makes the industry extremely price-competitive • New entrants struggle with production costs and bargaining power • High component standards influence unknown brand purchasing, but • Consumers tend to be loyal and have high switching costs.
Suppliers • Magnitude: MODERATE • Industry supply chains are highly complex, with many international partners • Industry primarily assembles computers from finished parts provided by semiconductor suppliers • Ability to quickly adopt new technologies from chip suppliers is key • Corporate clients favor suppliers that can also handle all of their IT needs (including PCs, servers, IT support and implementation) • Outside of product demand, changes in component costs have the strongest effect on industry performance.
Substitutes • Magnitude: Moderate • Buyers have many options for substitutes of computers • Smartphones • Ipads • Palm Pilots
Substitutes (cont.) Smartphones are the biggest threats/substitutes for computers • Smartphones allow users to • Check finances • Send emails • View videos • Review documents • Post facebook updates • Make purchases • Use coupons (without printing them!!) • Much more • Different apps means more customization • Smartphones will be able to run multiple operating systems and be priced as standard headsets
Final Analysis • The computer manufacturing has expected profitability of business average on all KSF will be about equal to cost of capital • From the research: • Determined that computer manufacturing industry lands in industries with 2-3 low forces • Rivalry has the highest threat level: • Competitors must have a strong KSF “Economies of Scale” • Reduce costs without decreasing features (which support high average prices) • If competitor average prices fall, the lower production costs can be used to give customers a lower price
Lagesse, David. "How the Phone Is Replacing the Computer." Money: Business And Economy. US News, 2 Apr. 2009. Web. 1 Apr. 2011. http://money.usnews.com/money/business-economy/technology/articles/2009/04/02/how-the-phone-is-replacing-the-computer. • Computer Manufacturing in the U.S. N. pag. IBIS World. Web. 1 Apr. 2011. http://www.ibisworld.com/industryus/industryoutlook.aspx?indid=740. Sources