1. Analyze the structure of the personal computer industry over the last ten years. How have the dynamics of the PC industry changed?
2. Has Steve Jobs solved the "problem"? What should Steve Jobs do today?
The majority of the general population may think that the PC industry arrived along with Bill Gate's "Windows" package and "Apple's" "I think, therefore iMac" statement, but in reality the modern computer age began in 1971, when Intel built the first microprocessor chip in an attempt to provide more technologically adept "Calculators".
No-one could have foreseen the way the PC would influence and become an integral part of our lives. Technology has advanced at unforeseen rate and this couple with the fact that competition has never been higher means that the structure is constantly changing. However I will attempt to outline the Structural changes that have occurred over the past decade making full use of Porter's Five-Forces Framework for Industry analysis.
Five-Force Framework for Industry analysis.
Michael Porter developed an industry framework model that showed what he supposed the five forces that influenced the "normal" competitor in the Industry. It was originally designed to show the "attractiveness" of an Industry for individual firms in terms of profits, but I feel that it would be ideal to illustrate how the dynamics of the Personal Computer Industry have changed over the last ten years. The general model is shown overleaf.
Diagram of Porter's 5 Forces
Importance of volume to supplier
Differentiation of inputs
Impact of inputs on cost or differentiation
Switching costs of firms in the industry
Presence of substitute inputs
Threat of forward integration
Cost relative to total purchases in industry
Absolute cost advantages
Proprietary learning curve
Access to inputs
Economies of scale
Access to distribution
-Buyer inclination to
trade-off of substitutes
Threat of backward integration
Buyer concentration vs. industry
Buyers' incentives DEGREE OF RIVALRY
-Fixed costs/Value added
-Diversity of rivals
Five-Force Framework for PC Industry.
It must be noted that the majority of profits are to be made through the production and development of software while the actual assembly of the computer is less profitable.
Switching Costs; Intel and Microsoft have combined their power forming a business agreement where most PCs are now Wintel. Their establishment in these dominating positions is based on their technological advancement. To rival this the normal manufacturer would have to spend many billions of dollars over a number of years. The cost for most PC manufacturers of switching away from the Wintel combination would be absolutely huge and so Wintel have massive power. In their infancy these firms obviously had less power and this is reflected in their market value. Intel has almost doubled in value since 1996 while Microsoft has trebled. This has changed the dynamics of the computer industry immeasurably.
Differentiation of Inputs; All these companies have limited power as the Operating Systems and the Microprocessor are almost solely controlled by Microsoft and Intel respectively. Other more basic parts which make up the motherboard have many sources and consequently those suppliers have...
Harvard Business School. "Apple Computer 2002." Yoffie and Wang. March 2001.
Please join StudyMode to read the full document