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PEST Analysis:
Political Factors: The laptop and PC industry is expected to grow at a faster rate in developing countries compared to the developed countries. Therefore, changes in government policies in developing countries like India and China can affect the potential growth rates in their markets. For instance, the removal of import duties on laptops in India in 2005 was one of the factors that resulted in a growth of 94% in laptop sales in 2005 [6]. Increasing focus on the environmental impact of high-tech trash has lead to more stringent environmental regulations on the electronics industry such as the RoHS (Restriction of Hazardous Substances) and WEEE (Waste Electrical and Electronic Equipment) Directive. The additional testing and certification involved directly affect the supply chains for laptop and PC manufacturers, resulting in increased costs. For instance, in Canada, the enforcement of the WEEE Directive will increase the cost of computers by $15 [7]. The increase either affects the consumer or reduces profitability for manufacturers. Economic Factors: The global economy influences various different factors that affect the growth of the PC industry. Since early 2008, the slowing global economy is one of the reasons for the decrease in 1
business capital spending for small and large corporations, resulting in reduced demand for PCs. Gartner, Inc. forecasts a decline of 3.8% in global IT spending, of which computing hardware spending is expected to decrease by 14.9% in 2009[8]. Though this decline in IT spending is likely to recover slowly during 2010 [8], the global PC market is expected to face declining growth rates in terms of market value, from an expected 5.4% growth in 2009 to 4.1% in 2012 [3] Most laptop (and PC) manufacturers such as Dell, HP, Acer, Lenovo, and Apple generate sales throughout the world and therefore currency exchange rates are an important factor as well. The strength (or weakness) of the US dollar versus other currencies can directly affect a companys bottom line [9],[10]. The economies in developing countries such as China, India, Brazil, and Latin America are growing at a much faster rate than developed countries and therefore provide better growth opportunities for computer manufacturers, since developed countries like the US and Japan have become saturated. This trend is reflected in the slower single digit growth in the last few years as opposed to the consistent double digit growth in the developing markets [9]. Social: Social factors such as education, preferences, income levels, and other cultural factors influence demand patterns in the different regions and therefore affect how a company operates in each region. The education and income level of users affects the brand perception of the computer manufacturers. As shown in Figure 5, households with higher income have higher percentages of Apple computers. Such households are also more likely able to afford (and want) Apple computers [11]. This has allowed Apple to continue its strategy of premium pricing and performance compared to Windows PCs, while at the same time increasing its market share of the total laptop and PC market [12]. At the other end of the education spectrum, new devices such as the rugged and ultraportable OLPC (One Laptop Per Child) have been developed for underprivileged users in developing countries like Africa. Thus, education levels affect both product demand as well as preference. Cultural aspects of different regions affect the occurrence of seasonal sales, which significantly affect the performance of the computer industry as a whole [9]. For instance, in the U.S., the periods from November-December (Thanksgiving / Christmas) and August (back-toschool) are significant earnings period. Technological: Technological advances over the past decade, such as increased processing power with reduced power consumption and reduced cost, or the standardization of Windows and Intel in laptops, are one of the main reasons for the increase in market share of the laptop segment compared to the overall PC industry. For instance, the netbook categorys average selling price (ASP) of $300 was made possible by the low cost Intel Atom microprocessor, released in 2008. New technologies, such as hosted virtual desktops (HVD), threaten to completely change the industry dynamic, due to the possibility of cheaper computers along with lower software costs [13]. HVDs involve centralized computing in which the processing is done on servers instead of individual clients. Gartner, Inc. estimates that the HVD market will grow in revenue from $1.3 billion in 2008 to $65.7 billion in 2013.
advances in computing power and as well as communication technologies (3G, WiMax, etc.) have enabled devices such as smartphones (iPhone, Blackberry, etc.) to compete with laptops by providing similar capabilities. For instance, iPhone apps reduce the need for laptops by providing similar functionality.
Appendices
Table 1. Weighted Competitive Strength Assessment
KSF / Strength Measure Financial Resources Reputation and image Technological Skills Global Distribution Network Netbook segment Global Market share Weight 0.15 0.15 0.15 0.15 0.2 0.2 HP 7 / 1.05 7 / 1.05 8 / 1.20 6 / 0.90 6 / 1.20 8 / 1.60 Dell 8 / 1.20 8 / 1.20 8 / 1.20 5 / 0.75 4 / 0.80 7 / 1.40 Acer 5 / 0.75 6 / 0.90 6 / 0.90 8 / 1.20 10 / 2.00 6 / 1.20 Lenovo 5 / 0.75 5 / 0.75 6 / 0.90 7 / 1.05 4 / 0.80 5 / 1.00 ASUSTek 6 / 0.90 5 / 0.75 8 / 1.20 6 / 0.90 9 / 1.80 5 / 1.00 Apple 9 / 1.35 10 / 1.50 10 / 1.50 3 / 0.45 0 / 0.00 3 / 0.60
Rating Scale: 1 = Very Weak; 10 = Very Strong The weights and values are based on the authors opinions and beliefs
Figure 1. Growth of Laptops is higher than desktops (In millions of units) [9]
Figure 3. Global PCs Market Volume Forecast: Units millions, 2007-2012 [3]
Figure 4. Percentage of users of different brands that have attained a 4-year degree or higher [22]
2006
2007
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Aditya Shah, Abhinav Dalal Table 4. Netbook PC Volume and Market Share, Q3-2008 [16]
Netbook PC Brand Acer Asus HP MSI Dell OLPC (One Laptop Per Child) Medion Kohjinsha Intel (Classmate Reference Design) Lenovo Toshiba All Others Total
Volume (millions) 2.15 1.7 0.33 0.32 0.16 0.13 0.13 0.06 0.06 0.04 0.03 0.51 5.61
Market Share 38.30% 30.30% 5.80% 5.70% 2.80% 2.30% 2.30% 1.00% 1.00% 0.70% 0.50% 9.10% 100.00%
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References
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Rodriguez, S., (2009), Consumer Behavior Report: Economic Climate Shifts Consumers Online, PriceGrabber.com, https://mr.pricegrabber.com/Economic_Climate_Shifts_Consumers_Online_March_2009 _CBR.pdf. Ogg, E., (2009), Pc Shipments to Decrease 4.5 Percent in 2009, http://news.cnet.com/8301-1001_3-10189362-92.html. Metafacts, (2009), Educational Level by Mobile Pc Brand, http://metafacts.wordpress.com/2009/03/23/educational-level-by-mobile-pc-brand/. Datamonitor, (2007), 'Pcs Industry Profile: Global', Datamonitor Plc, http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=25767069&site=bsilive.
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