Question 1.1 Barriers to entry in the PC industry. Support your response with relevant theory and extracts from the case.
The personal computer industry has undergone major changes in its market structure. The industry has grown substantially from its beginnings in January 1975, when the first microcomputer, the Altair 8800, was introduced. During its early development, the industry was dominated by a few small-scale companies, mainly hobbyist-run. Entry into the market was determined by technological innovation and the availability of system-compatible software. Companies tended to design their own software, with little compatibility among systems. IBM introduced its personal computers in 1981 and dominated the market for several years. Gradually producers of software and hardware began separating, with less vertical integration and more compatibility among products. The 1980s brought a large number of smaller firms into the market, making the industry more competitive. By the end of the 1980s, substantial product differentiation had occurred, with most firms offering several models, often with several versions each. Throughout the period, new product development was the engine of the industry's rapid growth. http://findarticles.com/
Porter (1979) defines barriers to entry as unique industry characteristics that define the industry. Barriers reduce the rate of entry of new firms, thus maintaining the level of profits for those already in the industry. From a strategic perspective, barriers can be created or exploited to enhance a firm’s competitive advantage. Barriers to entry arise from several sources such as government regulations, economic factors, and marketing conditions. The Five Forces Model of Competition by Porter outlines that the state of competi ...