COMPAQ
Environment Analysis
The computer industry by 1999 has become a mature commoditized industry. This is reflected by drop in profit margins, slowing growth rates and increased concentration ratio. This industry can be broadly segmented into large and small customers with $1million purchase as the separation between the two. Through porters 5 force analysis this industry looks as follows
• Entry barrier ? this industry has a high entry barrier due to the high investment in research and development, short life span of technologies and growing consolidation among producers and suppliers resulting in concentration of resources in the hands of fewer enterprises thus making it tougher for a new entrant to gain a foothold in the market.
• Bargaining power of Suppliers ? the bargaining power is moderate to high because the heart of a computer is its operating system and the mother board. Here the operating system is dominated by Microsoft and the chip market has Intel as the leading players. To mitigate this bargaining power manufacturers have resorted to partnerships with these suppliers which has in turn increased entry barriers for new entrants.
• Bargaining power of buyers ? since this industry has matured the customers are very elastic. The high completion amongst key players has resulted in lower prices thus transferring the bargaining power to the customers.
• Rivalry within the industry ? this is very high because the product is a mature stage and thus profit margins are beginning to decline.
• Substitutes - There is no efficient substitute to computers with respect to data storage, ease of information sharing, productivity improvement.
Organizational Analysis
In trying to understand the competitive advantage of Compaq we n ...