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COMPETITIVE FORCES The U. S. computer hardware industry is one of the biggest in the world with Compaq, IBM, Dell, Gateway and Hewlett-Packard being the main players. This was one industry that was selling 150 million units in one year, (jpmorgan. com) but with economy not looking so good, things are likely to change for PC makers too. Now more than ever before, the companies in the computer industry are competing as fiercely as possible to make things better for their firms.
They are fighting for new customers and are targeting markets they were not willing to exploit before. Traditional approaches and market strategies are giving way to newer ideas and innovative moves. RIVALRY AMONG EXISTING COMPANIES Rivalry among competing firms The competition among the firms fighting for market shares has been intense Just as growth was slowing in the computer industry, Dell launched an all out price war in the fourth quarter of 2000 to gain market share. Hewlett Packard and IBM responded to this by saying the price war was irrational, (fortune.
com). This helped Dell leap to number one in the worldwide market share and has left its competition scrambling to catch up. The only player to follow Dells lead has been Gateway and they lost 523 million in the first half of this year, laid off 3000 workers and closed 37 stores (Business week online). The implications of this intense competition are that companies have no room for error or inefficiency's.
International Data Corp said that the price war has driven down prices on average 25 % this year. This means shrinking profit margins and layoffs at all major companies, (Dell 5700, HP 6500, Compaq 8500. ) Even though consumers are benefiting from lower prices now, in the long run they may see less technological advancements in their computers and peripherals as companies cut cost to try to earn a profit. IBM: International Business Machine has been in operation since last many decades and offers a whole range of solutions from technologies, systems, products, and services to software and financing. The company has been divided in a three-tier structure of Technology, Personal Systems and Enterprise Systems. Other major services offered by the world leader in technology innovation are divided in segments such as GLOBAL SERVICES SEGMENT, a SOFTEARE SEGMENT, A GLOBAL FINANCING SEGMENT AND AN ENTERPRISE INVESTMENT SEGMENT. The Financial position of the company has been strong for many years though the recent slow-down may affect this technological giant too.
Total revenues were estimated at $ 42. 61 billion after and an increase of 10 % in the period ending June 2001. Net income also rose reaching a huge $ 3. 79 billion due to better revenues from Global services. The good financial position reflects lower interest rates offered by the firm in its Global Financing Segment. HEWLETT-PACKARD: Hewlett-Packard Company is a big name in the computer industry because of its wide range of computing and imaging products. Think of a printer and the first name that pops up is that of H-P. The imaging segment of this firm excels in such products as copiers, scanners, ink-jet and laser printers, print servers, network-management software and all-in-one devices.
The Computing segment on the other hand is responsible for offering a wide range of computing systems for commercial and consumer markets. The information technology services segment is also world famous with for its consulting and Internet services. The financial position of this company has been pretty stable but the nine-month period ending July 2001 saw the company's revenues falling some 5 % coming down to $ 33. 7 billion. Net income suffered tremendously and reaching an all time low of $ 463 million showing an 82 % decline.
GATEWAY: Gateway Inc. is no small name in computer hardware industry with its personal computers and related products reaching every household and business. Its products range from desktops to laptops to servers and workstations, which are made available to individuals and businesses including governmental organizations and educational institutions. The company has also been providing Internet service and software solutions along with diversified range of peripherals for some time now. The financial position of the company at present is not all that positive with revenues falling some 23 % after a six-month period ending June 2001. The revenues came down to $ 3. 53 billion with Net loss estimated at $ 449. 8 million versus an income of $ 249. 7 million.
DELL: Dell Computer Corporation is a big name in the computer hardware industry with a whole wide range of products in the market. They manufacture and distribute everything from desktop computers, laptops, and MP 3 players to hardware peripherals and services. After a 13 -week period ending in May 2001, the company reported a 10 % rise in revenues while the net income fell some 12 % to $ 462 million. This shows increased sales of servers and laptops with reduced profit margin. NEW ENTRANTS IN THE INDUSTRY: Though it is believed that big players like Dell, Compaq, IBM, H-P etc are too secure in their market shares that they dont need to worry about new entrants in the field, it would be unwise not to take into account the fact that many new firms are emerging. It is true that many new companies may emerge and die before they have had a fair share of chance because surviving in this field is not as easy as they make think.
For one the industry is highly competitive with several giants swimming in the ocean with great authority. Their products have been around for years and are somehow imprinted in the minds of the consumers. Secondly these sharks are only too willing to swallow any smaller fish they find in the ocean; most young successful companies are bought out even before they have tasted the fruit of success completely. And often times buy-out seems to be the only option left to the smaller firms when swimming upstream becomes difficult and in some cases downright impossible. With this recent decline in the computer industry, it is very unlikely that any new companies would step into the market.
This is because these days are dangerous even for those who have literally ruled the technological world for decades, so its only too obvious how the smaller firms would fare. New entrants will have to be very careful if they decide to enter the industry, if they dont have a clear marketing strategy they can just forget about surviving. The survival of the fittest is the rule in this industry, and as many companies around the world are emerging, it just goes to show how competitive the market is and how each passing day would lead to tighter competition. SUBSTITUTE PRODUCTS: So how will the companies fare with this looming speculation of computer industry's downfall? Wall Street is sure that the industry will still see a growth of 16. 6 % but this is not a big number for an industry that had been enjoying a 20 % each year for a decade now. (jpmorgan. com) With the market for PCs facing a decade low, tech industry on the whole may not suffer as much from the struggling economy.
There are still products such as MP 3 players, Digital Cameras, Laptops and handheld computers, which are more likely to grow in the years to come. It is only obvious then that many computer companies can bask in the success generated by these devices and the peripherals required with them. Some five manufacturers were in the business of digital music players just a year ago and none of them were highfliers. But today, 50 or more companies have entered this field including such big shots as Dell Computer Corporation which has a $ 300 digital jukebox in the market and Compaq is planning to introduce its own MP 3 player built in its handheld computer. Intel Corporation did not stay behind when it became clear that the market for this device is likely to grow some 595 this year to a huge $ 1 billion, Intel is now working on its own digital music player.
But they may face fierce competition because the best known MP 3 brand Rio by SonicBlue Inc. is available at a very economical price of just $ 200. The companies will now be focusing more intensely on the production of handheld computers because the market will grow for this device in this year. Hewlett-Packard and Compaq will be competing with Palm, Casio and rising star, Handspring. It is said that the sales of this device are likely to grow some 31 % touching the gigantic figure of 8. 7 million units this year.
Handspring Visor is likely to see lots of growth because of economical price at which its device is offered, $ 149 and also because the device can be turned into a MP 3 player and a cell phone. (jpmorgan. com) It is also reported that server market will see some growth too this year in spite of the recent dot-com failures around the globe. The server working with e-commerce and Internet, costing from $ 100, 000 to $ 1 million and running on Unix platform will see positive growth, according to Forrester Research. This is due to the fact that some giant companies such as Citibank Corporation and General Motors need powerful servers to run their thriving online business. This will benefit Sun Microsystems which will see a growth of some 40 % in sales and 43 % increase in profits in the fiscal year 2001. The industry for this product is estimated to grow some 20 %, which is a positive piece of information for all those in the server manufacturing business. (jpmorgan.
com) CONSUMER BARGAINING POWER: With so many brands available in the industry, it is clear that consumers have a wide range of options. Therefore to attract new customers, every computer firm must offer something of value which is hard to ignore. This is why consumers have a good bargaining power in this industry, choices are wide and manufacturers are only to keen to attract as many customers as possible. The current slow-down in the industry has given consumers even more power than they had before. They are now in demand, more than ever before and they can certainly cash in on this.
SUPPLIER BARGAINING POWER: Suppliers are not necessarily as powerful in this industry as in some other. This is due to the fact that the interest of new people in this industry is ever-increasing which leads to creation of new firms and availability of wider range of products. This leads to a reduced bargaining power of the suppliers and gives consumers leverage. Though certain companies with their strong position may dictate terms in the industry, setting down trends, which are followed by others in the industry, still they can not exercise this power beyond a certain limit. A clear example if that of Microsoft in the software industry. When this firm went a little too far with their powers, other in the industry jumped in to safeguard their rights and thus cutting down Microsoft's powers to half.
Same applies to hardware industry, even if one firm is setting all the trends, it is unwise to drag other firms along without proper consultation and not all consumers are impressed with a companys big name unless its offering quality products. HEWLETT-PACKARD AND COMPAQ MERGER: On September 4, 2001, Hewlett-Packard Company and Compaq Computer Company announced that they would merge the two companies thus creating a $ 87 billion global technology gia...
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Research essay sample on Dell Computer Corporation Mp 3 Player
