Question

Write in essay format

Using Michael Porter's Five Forces model as a framework, analyze Dell's competitive landscape.

Answer 1

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DELL's five forces analysis

The threat of new entrants -LOW: the threat of new entrants is low due to high entry barriers. Apart from capital investment, there is a need for technical knowledge and highly skilled professionals. Moreover, there are strong brands already in the market and hence it will be difficult for a new brand to establish itself

Bargaining power of customers - LOW to MEDIUM: Since there are very few strong brands, customers have only low to medium bargaining power. PC is a high involvement product and customers prefer to buy from reliable brands with strong customer service. DELL is one of the few with good reputation of customer service

Bargaining power of suppliers - Low: There are many suppliers available in the market. Also, customer loyalty is towards the PC brands and brands of the suppliers are hardly known to the customers. Hence the PC brands can pressurize the suppliers to reduce prices competitively

Threat of substitutes - MODERATE: Over the years PC market has witnessed a decline, even across the major brands like DELL, APPLE, ASUS. This is because operations that were previously only feasible on a PC are now possible on smartphones and tablets. Handheld devices are increasingly substituting PC applications and position risk to replace them substantially

Industry Rivalry- HIGH: The market is dominated by equally big brands and relative market shares of the players are comparable. Moreover, the industry is shrinking due to substitution by handheld devices. Hence the competition among these players to eat on each other's market share is very intense.