Introduction
In this paper I will discuss the industry structure and the behavior of firms in the Personal Computer Industry. The personal computer industry has five leaders: Compaq Computer Corporation (CCC), Dell Computer Corporation, International Business Machines (IBM), Hewlett-Packard, and Gateway, (Industry Survey, Apr. 2000). The PC industry, as discussed in the paper, is comprised only of home/business use machines, not mainframes, databases, or any kind of servers or super-computers. The PC industry is a fast-growing, consumer-based oligopoly. I will prove the latter through the use of industry characteristics and firm behaviors by giving an overview of each leading firm and their behaviors', then by combining them into an industry analysis. The companies will be addressed from top leader to bottom.
Company Overviews
Compaq Computer Corporation,(CCC) is the current industry leader. CCC boasts a 1999 market share of 12.8%. However, this figure has declined slightly from its 1998 share of 13.4%. The dip is due to Dell Computer Corp.'s heavy presence in the small PC market, (Industry Survey, Apr. 2000). Compaq has a wide range of PC products from smaller, less expensive machines to more costly, high-tech systems. CCC has been most successful with their smaller machines, targeted to the home/family segment, because they are able to sell large quantities. However, Compaq has been unsuccessful in retaining customers because most of them were pleased with their smaller machines and did not upgrade to CCC's more expensive, high-tech systems,(Hamblen 1-2). Customer retention has been a problem for the forty billion-dollar company, (Hamblen 1-2). It is my assessment that Compaq does still remain the leader because their products are very easy to buy for the uneducated consumer. You may simply walk into the WIZ or BEST BUY and there are five or so Compaq machines all competitively priced with a good range of attributes, usually not the best that a veteran user would require. For instance CCC's newest product, the iPac, is a very simple-to-use, inexpensive machine. It is supposed to satisfy business workers' needs for a useful computer at low cost,(Wildstrom 1-2).
Another problem in CCC's not-to-distant future is their distribution costs. With the use of the Internet, competitors have been able to ...
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...pr. 2000). This will lower costs and possibly increase the bottom line for the computer giant.
Like IBM, Hewlett-Packard made one mistake and cost itself billions of dollars in revenues. HP is a large electronics conglomerate. HP manufactures everything from calculators to top-secret government appliances. For HP the PC market is one of many. Originally Hewlett-Packard was the standard in computer electronics; however, this is not reality today. HP's reputation declined through the `80s and early `90s because of poor quality management. To regain the respect they had lost the marketing and engineering departments at HP worked their fingers to the bone to create a new image for the company. This was very effective; today HP owns a modest 6.2% of the PC market and a very healthy reputation for quality PC's and peripherals, (Industry Survey, Apr. 2000). HP has had some growth in the past few years but has failed to match the industry growth rates. The company's years of poor quality put a considerable hurt on their future growth; while HP was busy filling in the hole it dug for itself, industry leaders like Compaq and Dell were basking in their success.
The Hefty Hardware case study presents multiple critical issues that will impact both short-term and long-term growth and development of the company. The first issue is the communication gap and lack of integration between stakeholders in business and the Information Technology division. The second critical issue is the lack of shared knowledge and each department working on projects in essentially silos. The third critical issue is internal company politics driving the executive-level decision making process. Solutions to the above issues will need to be addressed with utmost urgency to ensure Hefty Hardware’s foothold in the marketplace.
Historically the personal computer (PC) industry has sold its products at reasonably high prices yet garnered only small profit margins. One reason for this is the high competition in the PC industry which led to competitive pricing among producers. Analyzing the competitive environment of the PC industry, it is evident that there is very little barrier to entry in this market. PC's have very low physical uniqueness and are made of standard components that require very little expertise to assemble.
During the 1990s, each company experienced specific difficulties to their market share. Both companies struggled to reestablish themselves in the global consumer electronics world. As the year 2000 came around, new CEOs at both companies came up with even more complicated initiatives and reorganizations. Outsiders wondered how each company’s internal changes would affect their endless competitive battle in the industry.
PC Industry - Structural Analysis: (Using Michael Porter's Model) Based on the information provided in the case, we can do a structural analysis of the PC industry which will help us in better analysis of the case. Threat of New Entrants: Entry was easy in the industry due to its huge potential. However, the major market share was held only by a few players. Rivalry: Stiff competition among a few major players having equal strength and potential.
Christensen, C. M. (2006). Hewlett-Packard: The Flight of the Kittyhawk (A). Case Study, 5, 8.
Topic A (oligopoly) - "The ' An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies.
IBM is one of the most effective and popular computer in the industry. The reason the threat of entrant is low because the rate is enormously high for software services, products, and industrial R&D (Murdick, 2001). The threat of entrant in industry came out to be low for the above reasons that I explained. For example, IBM companies is very popular and expensive compared to other computer companies. Their prices are flexible and less than IBM prices. Thus, the way IBM is set up is very large firm and ranked the highest amongst all other computer industries. In general, the threat of entrant is low due to the co...
To meet and respond to its customers needs, IBM creates, develops and manufactures many of the worlds most advanced technologies, ranging from computer systems and software to networking systems, storage devices and microelectronics. Indeed, IBM has various product lines and services a few of which are: the Personal Computer that was first created in 1981, AS/400 business system, RS/6000 family of workstations and server systems, S/390 enterprise server, groundbreaking ThinkPad notebook computer; the award-winning IBM Netfinity and finally, PC Servers. It is an important supplier of hard disks, random access memories, and liquid crystal monitors.
Let’s take a trip back in time and review the evolution of a computer company. It’s not IBM or Microsoft. This company is Apple Computers, Incorporated. In the year 1976, before most people even thought about buying a computer for their homes. Back then the computer community was only a few nerds building simple computers from hobby kits. When Steve Wozniak and Steve Jobs sold a van and two programmable calculators for thirteen hundred dollars and started Apple Computers, Inc., in Jobs garage, the reach for success seemed far.
We often dream of owning the best computers in the world. However, various options from the wide range of manufacturers tend to make it difficult to do a selection. Therefore, picking a reliable model that is stupendous is inevitable; a computer that even after four years, it will still be outstanding. Knowing the chances of its success is fundamental. This means that a good machine should break less often. Additionally, a company that has a great technical support, which helps a computer owner to receive timely and reliable customer support services. What is ignored are the outliers. There are companies that have had awful record of accomplishment of crappy and extremely expensive computers. One must ensure they purchase from established and genuine dealers.
Referring to current issue Computron is bidding $622,400 to sell its 1000x digital computer to Konig, which is 43% higher than least bid. A new manufacturing plant in Frankurt plant might have to sit idle for a couple of months if Computron couldn't win bid. Also Computron 1000X is purpose-built computer while Konig needs machine with less accuracy and flexibility.
"Technology is like fish. The longer it stays on the shelf, the less desirable it becomes." (1) Since the dawn of computers, there has always been a want for a faster, better technology. These needs can be provided for quickly, but become obsolete even quicker. In 1981, the first "true portable computer", the Osborne 1 was introduced by the Osborne Computer Corporation. (2) This computer revolutionized the way that computers were used and introduced a brand new working opportunity.
As apple came off to a great start in manufacturing PC’s making the 1 billion mark in the first three years, it has given them great self-confidence within the industry. Few years down the road, as competitors started to arise they were experiencing greater setbacks. For example,
In the future our firm could offer, the facility to make computers to consumers tastes, needs and budget. This is what the Gate Way Computer Company, which was very successful.
Dell’s initial competitive strategy, when it was founded in 1984 by Michael Dell, was to focus mainly on differentiation. Its strategy was to sell customised personal computer systems directly to customers, which was a rapidly emerging market at that time (1). This was done by targeting second-time customers, those that already understand computers and know what they wanted. Meanwhile other companies at the time was selling “’plain brown wrapper’ computers” (2). By offering customisations, Dell gained a better understanding of customers’ needs and wants. This helped the organisation position itself differently against the more popular brands, such as Compaq and IBM.