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
Key Success Factors
Industry Prospect and Overall
Attractiveness
Conclusion
 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
The computer industry consists of hardware, software,
service and an endless array of products our group chose
to narrow the research to PCs. 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
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
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
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.
 Customers
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
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
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
consumers home.
 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
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
The fact remains that the PC industry doesnt
produce only PCs. Every company that creates
PCs 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
Suppliers
Buyers
Rivalry among Existing Firms
Threat of New Entrants
Substitute Products
Stakeholders
Complimentary Products
 Suppliers / Buyers
Intel and Microsoft are the two most dominate suppliers in the
PC industry.
Suppliers: Intels 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
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
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.
 Substitute Product
Functionality PC/Notebook Cell Phone Handheld devices

PowerPoint X X

Camera X X

Mp3 player X X X

Spreadsheets X X

Word processor X X

GPS navigation X X

Email X X X
 Competitive Position of
Major Competitors

4B
Dell

3B

Net
Income
2B Hewlett-Packard

Apple

Gateway
1B
Soya

25 B 50 B 75 B 100 B

Market Capital
Competitor Analysis of
PC Manufacturers
 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
Hewlett-Packard:
Founded in 1939
HPs mission: To invent technologies and
services that drive business value, create social
benefit and improve the lives of customerswith
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:
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:
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.:
Founded in 1999
The mission statement of Soyo is, To
capitalize on Soyos 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
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
PC Industry Services
Technology Services
Consulting and Integration
Managed Services
 Industry Prospect and
Overall Attractiveness
Factors that make the Industry
Attractive
Factors that make the Industry
Unattractive
Special Industry Problems and
Issues
Profit Outlook
 Conclusion
Dell Leads
Global Market
Diversify the Workforce
New Innovations
PC Improves Society