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Dell Pc Market Strategy Essay

4510 words - 19 pages

Dell’s Challenges in Tough Global PC Market
Since 12th Aug, 1981 when IBM introduced the first 5150 personal computer, the PC industry has been changed greatly. August 2009 marked the 28th Anniversary of the release of the original personal computer. The number of personal computers in use worldwide hit one billion on June 2008, while another billion is expected to be reached by 2014.[1] IDC worldwide PC shipments in 2009 are 313 million compared to 40 thousand in 1981 and are expected to grow 3.8% compared to last year.[2] Commerce is growing in a tremendous way and usage on the internet is skyrocketing. Although global PC industry is expected to experience slow ...view middle of the document...

[3] In this paper, the competition in the personal computer industry is analyzed by Porter five forces analysis. (See the exhibit “The Five Forces That Shape Industry Competition.”)
1.    Bargaining Power of Buyers (Strong)
Customers of personal computers are general businesses, public institutes, and consumers. Commercial businesses such as large and medium businesses, public institutes, and schools purchase computers in high volumes, have the power to get a competitive discounted price. On the contrary, consumers who buy personal computers are price-sensitive but they have less power when the product changing costs and brand-loyalties are high. Thus, personal computer manufacturers can lower a threat of buying power by differentiating their products. Although manufacturers have some ways to differentiate their products and found ways to increase product changing costs, customers still do not see much differences between products and thus select mainly on price.
2.    Bargaining Power of Suppliers (Moderate)
Personal computers are composed of computer case, central processing unit, motherboard, main memory, hard disk, video card, and peripherals such as keyboard and mouse, with bundled software. These hardware parts are very much standardized and easily available from a number of suppliers. Therefore, suppliers of those hardwares do not have much selling power. However, software manufacturers have high power compared to PC makers that want to sell their products with bundled software.
3.    Competitive rivalry (Strong)
Competition in PC market is very high. The main PC makers are Hewlett-Packard, Dell, Lenovo, Acer, Fujitsu, Toshiba, Sony and Apple. In 2009, Dell’s second quarter U.S. market share tumbled 19 percent from a year ago to 26.3 percent, but that was good enough to regain No. 1 in the U.S. over HP, according to IDC. Meanwhile, Acer and Toshiba’s market share improved in the second quarter as Apple’s slipped to 7.6 percent, down 12.4 percent from a year ago.
Overall, PC shipments fell 3.1 percent in the second quarter 2009, but that’s better than the 6.3 percent decline IDC expected. Gartner’s tally has PC units falling 5 percent, an improvement from the 9.8 percent expected decline. Analysts observed that competitors had found ways to duplicate much of Dell's operations.[4] All the companies are connected with complicated competition. For example, Apple focuses more on product design and innovation while Dell focuses on direct delivery strategy and service. The primary area of competition between the two companies is the field of education. Both companies aggressively target schools and students in an attempt to be the choice for back to school.[5] As the PC has become a more commodity-like product, price-competition has become severe in the industry. Many PC manufacturers in the United States now earn more than 40% of their revenues in the global...

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