Hp Case Study
1.1 (ii) Porter’s Five Forces Analysis
Threat of Entry: Threats of entry in this case is moderate. There is low brand loyalty of existing firms. Consumers usually compare the prices with different brands when they decide to purchase PCs. They think that every PC has the same price and has the same function no matter what brand it is, which means low product differentiation. There is medium capital requirements, no government regulations and low economies of scale in manufacturing. There is low investment for independent stores. Decreasing profitability indicates that there is a threat of new entrants
Threat of Substitutes: Threat of substitute products is low. HP believes in standards-based technology, which represents the opportunity to decide in the item of much preferance. HP tries to eliminate barriers by continuous updating processes and presenting new products to remain in the top of the industry.
The Power of Buyers: Bargaining power of buyers is high. Consumers are very price sensitive because they like to buy cheap and high quality products. If they see a hardware or software or PC with similar functions but different brands and price, they will tend to buy a cheaper one. The buyer power for HP can be low since product demand is high, this means that the company has power to control the amount of production and also its products price. On the other hand, customers have lots of substitutes. Moreover there is not a huge difference between products which are produced in the market.
The Power of Suppliers: HP bargaining power of suppliers is high. There are large number of suppliers for every component parts of the PC, for example, one can make a PC by using component parts from different suppliers, including hard disk, DVD drive, monitor, etc. Microsoft and Intel have tremendous bargaining power against the PC manufacturers. There are high switching costs.
Competitive Rivalry: Rivalry is high. For instance, price, when one company acts to protect
Threat of Entry: Threats of entry in this case is moderate. There is low brand loyalty of existing firms. Consumers usually compare the prices with different brands when they decide to purchase PCs. They think that every PC has the same price and has the same function no matter what brand it is, which means low product differentiation. There is medium capital requirements, no government regulations and low economies of scale in manufacturing. There is low investment for independent stores. Decreasing profitability indicates that there is a threat of new entrants
Threat of Substitutes: Threat of substitute products is low. HP believes in standards-based technology, which represents the opportunity to decide in the item of much preferance. HP tries to eliminate barriers by continuous updating processes and presenting new products to remain in the top of the industry.
The Power of Buyers: Bargaining power of buyers is high. Consumers are very price sensitive because they like to buy cheap and high quality products. If they see a hardware or software or PC with similar functions but different brands and price, they will tend to buy a cheaper one. The buyer power for HP can be low since product demand is high, this means that the company has power to control the amount of production and also its products price. On the other hand, customers have lots of substitutes. Moreover there is not a huge difference between products which are produced in the market.
The Power of Suppliers: HP bargaining power of suppliers is high. There are large number of suppliers for every component parts of the PC, for example, one can make a PC by using component parts from different suppliers, including hard disk, DVD drive, monitor, etc. Microsoft and Intel have tremendous bargaining power against the PC manufacturers. There are high switching costs.
Competitive Rivalry: Rivalry is high. For instance, price, when one company acts to protect