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Computer Industry Analysis Prepared by: Scott BillupsAnne Homme James PorterStephan Rogers Jerome Wade.

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Presentation on theme: "Computer Industry Analysis Prepared by: Scott BillupsAnne Homme James PorterStephan Rogers Jerome Wade."— Presentation transcript:

1 Computer Industry Analysis Prepared by: Scott BillupsAnne Homme James PorterStephan Rogers Jerome Wade

2 Introduction Dominate Economic Characteristics Dominate Economic Characteristics Six Forces Six Forces Competitive Position of Major Competitors Competitive Position of Major Competitors Competitive Analysis of Personal Computer Manufactures Competitive Analysis of Personal Computer Manufactures PC Industry Trends PC Industry Trends Key Success Factors Key Success Factors Industry Prospect and Overall Attractiveness Industry Prospect and Overall Attractiveness Conclusion Conclusion

3 Dominate Economic Characteristics 1. Market Size 1. Market Size 2. Scope of Competitive Rivalry 2. Scope of Competitive Rivalry 3. Stage in Life Cycle 3. Stage in Life Cycle 4. Number of Companies within the Industry 4. Number of Companies within the Industry 5. Customers 5. Customers 6. Technology/Innovation 6. Technology/Innovation 7. Product Characteristics 7. Product Characteristics 8. Scale Economies 8. Scale Economies 9. Learning and Experience Effects 9. Learning and Experience Effects 10. Capital Requirements 10. Capital Requirements 11. Industry Profitability 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. 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 U.S. and Worldwide PC Shipments and Growth, 2004-2008 Region 2004 2005 2006 2007 2008 Region 2004 2005 2006 2007 2008 USA (M units) USA (M units) Consumer 21.8 23.6 25.6 29.0 32.6 Consumer 21.8 23.6 25.6 29.0 32.6 Commercial 36.5 40.3 41.9 46.0 49.4 Commercial 36.5 40.3 41.9 46.0 49.4 Total 58.3 63.9 67.5 75.0 82.0 Total 58.3 63.9 67.5 75.0 82.0 Worldwide (M units) Worldwide (M units) Consumer 64.9 78.4 88.4 100.0 111.2 Consumer 64.9 78.4 88.4 100.0 111.2 Commercial 114.4 129.4 141.9 157.1 173.3 Commercial 114.4 129.4 141.9 157.1 173.3 Total 179.2 207.9 230.2 257.1 284.5 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. 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: A few factors of competitive edge: New technology New technology Custom built PCs Custom built PCs Reliability Reliability Customer Service 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. 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. 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). 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. 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). 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).Intel Gateway - Perhaps the purest PC play among the leading computer makers, Gateway has been hit particularly hard by slowing sales in that industry. 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. 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. 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. 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: Components: Case - The box all the parts (except monitor, keyboard, mouse, and printer) are stored in Case - The box all the parts (except monitor, keyboard, mouse, and printer) are stored inCase Case Mother Board - The main printed circuit board in the computer, which the CPU (see below) plugs into Mother Board - The main printed circuit board in the computer, which the CPU (see below) plugs intoMother BoardMother Board CPU (Central Processing Unit) – The CPU is the actual "brains" of the computer CPU (Central Processing Unit) – The CPU is the actual "brains" of the computerCPU (Central Processing Unit)CPU (Central Processing Unit) RAM (Random Access Memory) - Like pieces of scratch paper that information is temporarily stored on ONLY WHILE you are actually working on 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. RAM (Random Access Memory) RAM (Random Access Memory) Disk Controller – The Disk Controller allows your computer to interact with your disk drive storage devices Disk Controller – The Disk Controller allows your computer to interact with your disk drive storage devicesDisk ControllerDisk Controller 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. 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.Hard Disk DriveHard Disk Drive 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). 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).Video Display AdapterVideo Display Adapter Monitor - The actual display you see the words, pictures, and data on. There are two main types: analog and digital. Monitor - The actual display you see the words, pictures, and data on. There are two main types: analog and digital.Monitor Input Device - Keyboard, Mouse, Digitizer, Scanner, Pen, Digital Camera, etc. Input Device - Keyboard, Mouse, Digitizer, Scanner, Pen, Digital Camera, etc.Input DeviceInput Device Modem - A device that hooks your computer up to the telephone line Modem - A device that hooks your computer up to the telephone lineModem

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 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 Suppliers Buyers Buyers Rivalry among Existing Firms Rivalry among Existing Firms Threat of New Entrants Threat of New Entrants Substitute Products Substitute Products Stakeholders Stakeholders Complimentary Products 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. 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. 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 FunctionalityPC/NotebookCell PhoneHandheld devices PowerPointX X Camera XX Mp3 playerXXX SpreadsheetsX X Word processorX X GPS navigation XX EmailXXX

20 Competitive Position of Major Competitors Net Income Market Capital 1 B 2 B 3 B 4 B Dell Gateway Hewlett-Packard 25 B75 B100 B Apple 50 B Soya

21 Competitor Analysis of PC Manufacturers

22 Dell Inc. Dell Inc. : Founded in 1984 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. 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 Next day delivery No middlemen or intermediate retailers No middlemen or intermediate retailers Current Situation: Revenue over $56 billion Revenue over $56 billion Net income of $3.4 billion Net income of $3.4 billion

23 Hewlett-Packard Hewlett-Packard: Founded in 1939 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. 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 First product was an audio oscillator Multi component system model Multi component system model Current Situation: $86 billion in revenue $86 billion in revenue net income of almost $2.4 billion net income of almost $2.4 billion

24 Apple Computer Apple: Founded in 1976 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. 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 Stylish product innovation Entrepreneurial Entrepreneurial Current Situation: $14 billion in revenue $14 billion in revenue Net income of almost $1.3 billion Net income of almost $1.3 billion

25 Gateway Inc. Gateway: Founded in 1985 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. Mission statement of Gateway Inc. is, To invest in our communities and future by providing state-of-the-art technology and technical support. 3 rd largest personal computer company in the United States 3 rd largest personal computer company in the United States Ranked in the top ten worldwide Ranked in the top ten worldwide Profit pyramid model Profit pyramid model Current Situation: $4 billion in revenue $4 billion in revenue Net income of almost $6 million Net income of almost $6 million

26 Soyo Group Inc. Soyo Group Inc.: Founded in 1999 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. 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 Computer peripheral devices Current Situation: $38 million in revenue $38 million in revenue Net income of almost $540 thousand Net income of almost $540 thousand

27 PC Industry Trends Increasing Clock Speed Increasing Clock Speed Mass Customization Mass Customization Outsourcing Outsourcing Electronic Commerce Electronic Commerce Current Trends and Issues Current Trends and Issues Demand Dynamics Demand Dynamics Changing Profit Dynamics Changing Profit Dynamics Market and Distribution Trends Market and Distribution Trends New Product and Technology Directions New Product and Technology Directions New Business Strategies New Business Strategies

28 Key Success Factors PC Industry Services PC Industry Services Technology Services Technology Services Consulting and Integration Consulting and Integration Managed Services Managed Services

29 Industry Prospect and Overall Attractiveness Factors that make the Industry Attractive Factors that make the Industry Attractive Factors that make the Industry Unattractive Factors that make the Industry Unattractive Special Industry Problems and Issues Special Industry Problems and Issues Profit Outlook Profit Outlook

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


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