Porter's Five Forces Framework
THE FIVE FORCES FRAMEWORK Figure - Porter's Five Force Model for PC Industry
Threat of new entrants
• Established mobile phone manufacturers can also be considered as a threat to the PC industry because they can easily shift to PC manufacturing given their technical expertise
• The advent of modern software capabilities like online office, online operating system, and online resources might push PC manufacturers
• The relative technology and know-how needed to make PCs is low.
• Due to increased standardization in operating system (by Microsoft) and Microprocessors (by Intel), it is easy for any new entrant to copy and manufacture PCs with no established brand name.
• Players like Dell today have shifted to negative working capital because of their strategy of build-to-order. This is an attractive option for new entrants.
As the PC industry in most nations is close to the maturity stage, the number of entrants has slowed down and industry concentration increased. Hence the threat from new entrants to the PC industry is weak to moderate.
The Threat of Substitute Products and Services Anything that may replace personal computer is a substitute, which creates a threat to the PC industry.
• A cell phone with an Internet web browser and emailing function is a substitute for the PC for people who use a computer only to use those functions.
• Word-processor/typewriters and calculators are also substitutes.
• Xbox by Microsoft, has a DVD player, high-performance games, and a standard Ethernet network card for high-speed Internet connections without PC hardware, which is a substitute of PC especially for home users. However substitutes for computers do not have as many functions as a PC and are not close in performance. Hence threat from substitutes is weak to moderate in the PC industry.
Bargaining Power of Suppliers
• Most of the components for manufacturing personal computers are highly
Threat of new entrants
• Established mobile phone manufacturers can also be considered as a threat to the PC industry because they can easily shift to PC manufacturing given their technical expertise
• The advent of modern software capabilities like online office, online operating system, and online resources might push PC manufacturers
• The relative technology and know-how needed to make PCs is low.
• Due to increased standardization in operating system (by Microsoft) and Microprocessors (by Intel), it is easy for any new entrant to copy and manufacture PCs with no established brand name.
• Players like Dell today have shifted to negative working capital because of their strategy of build-to-order. This is an attractive option for new entrants.
As the PC industry in most nations is close to the maturity stage, the number of entrants has slowed down and industry concentration increased. Hence the threat from new entrants to the PC industry is weak to moderate.
The Threat of Substitute Products and Services Anything that may replace personal computer is a substitute, which creates a threat to the PC industry.
• A cell phone with an Internet web browser and emailing function is a substitute for the PC for people who use a computer only to use those functions.
• Word-processor/typewriters and calculators are also substitutes.
• Xbox by Microsoft, has a DVD player, high-performance games, and a standard Ethernet network card for high-speed Internet connections without PC hardware, which is a substitute of PC especially for home users. However substitutes for computers do not have as many functions as a PC and are not close in performance. Hence threat from substitutes is weak to moderate in the PC industry.
Bargaining Power of Suppliers
• Most of the components for manufacturing personal computers are highly