Question

Please make a detailed industrial analysis of computer industry such as Dell, Asus or Sony.

Answer 1

Industry analysis of Dell:

Dell was founded in 1984 by Michael Dell and has its headquarters in Round Rock in Texas, USA. Its products include personal computers (PC’s), servers, computer peripherals and others.

There has been a downward growth in US personal computer and laptop industry due to market saturation. In spite of being an innovative technology company with excellent supply chain management practices, the market share of the company has been declining in the recent years due to intense competition.

Michael Porter’s 5-Forces Competitive Model is being used to do industry analysis of Dell. The 5 forces in the Model are as follows:

1. Threat of New Entrants:

    This is usually low in the PC industry. This is due to the reason of high entry barriers because of the need for extensive capital expenditure, good technology infrastructure and educated skilled professionals. Large investment is also often required in research and development to introduce new innovative products from time to time.

   Dell has already established itself in the US PC industry and has a strong brand image in the market. Moreover, it has the above pre-requisites to do business in this industry. Hence, it does not face much threat from new players.

2. Bargaining Power of Buyers:

    This varies from weak to moderate in this industry as the number of big players is limited. Dell has concentrated on providing exceptional customer service, thus reducing buyers’ power of bargaining.   However, in more recent times Dell has given this power somewhat back to the buyers due to use of some promotional tactics like lower prices, discounts and others.

3. Bargaining Power of Suppliers:

    This is low in this industry due to the presence of many suppliers and less number of big branded players. Moreover, Dell conducts frequent audits of suppliers to ensure high product quality and environment compliance. The audits of Dell adhere to EICC (Electronic Industry Citizenship Coalition) Audit Protocol.

4. Threat of Substitutes:

This is moderate in this industry but is on the rise due to proliferation of popular substitute products such as tablets, smartphones and others, which have many features with considerable processing capabilities. Moreover, tablets and smartphones are portable and less expensive. Further, gaming consoles are also posing a threat to use of computers and laptops.

5. Intensity of Competitive Rivalry:

There is severe competition in this industry, with the major competitors of Dell being Hewlett Packard, Apple, Lenovo, Asus and Acer. Hewlett Packard and Lenovo occupy the top two positions, with Dell in the third position. The profit margins are very tight as the product prices of different competitors are very similar. Dell has to rely heavily on innovative designs and keeping the product cost low to survive this cut-throat competition.