Computer industry

1
Computer Industry Analysis

• Prepared by
• Scott Billups Anne Homme
• James Porter Stephan Rogers
• Jerome Wade

2
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

3
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

4
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

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

6
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.

7
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.

8
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.

9
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.

10
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

11
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.

12
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.

13
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.

14
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.

15
6 Forces

• Suppliers
• Buyers
• Rivalry among Existing Firms
• Threat of New Entrants
• Substitute Products
• Stakeholders
• Complimentary Products

16
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

17
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.

18
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.

19
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
20
Competitive Position of Major Competitors
21

• Competitor Analysis of PC Manufacturers

22
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

23
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

24
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

25
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

26
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

27
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

28
Key Success Factors

• PC Industry Services
• Technology Services
• Consulting and Integration
• Managed Services

29
Industry Prospect and Overall Attractiveness

• Factors that make the Industry Attractive
• Factors that make the Industry Unattractive
• Special Industry Problems and Issues
• Profit Outlook

30
Conclusion

• Dell Leads
• Global Market
• Diversify the Workforce
• New Innovations
• PC Improves Society