STRATEGIC APPLICATIONS OF THE FIVE FORCES ANALYSIS OF THE PERSONAL COMPUTER INDUSTRY THE PERSONAL COMPUTER INDUSTRY We will

narrow down our discussion to the personal computer industry. In this report we will be focusing more on the strategic applications of the existing business and new entrants using the five forces analysis which were already discussed in our study of the competitive environment. THREAT OF NEW ENTRANTS With this threat, existing PC firms can use the barriers to entry in the industry to slow down new businesses from entering the industries. We can recall these 7 barriers to entry as the CAPITAL REQUIREMENT, ECONOMIES OF SCALE, PRODUCT DIFFERENTIATION, SWITCHING COST, BRAND IDENTITY, ACCESS TO DISTRIBUTION CHANNELS, AND THE PROMISE OF AGGRESSIVE RETALIATION. Shown below is the measure of how high or low are each barriers for the new entrants and what are their approaches in order to overcome these barriers. I assume that we already understand the definitions of each barrier after the discussion of group two but I ll still give brief definitions for refreshment. CAPITAL REQUIREMENT- *MODEST* As defined it is the amount of money to be invested in the new business. There are 2 ways to enter in to a business, either you buy it or you start from scratch. Buying a company will require large amount of capital investment but it will save you from some other future cost to be incurred than when you start a personal computer business from scratch and it will give you non monetary advantage like for example when you are able to afford Hewlett- Packard for you to own, you get to buy the business with the advantage of brand identitiy. On the other hand, starting the personal computer business from scratch entails modest capital requirement since assembling a computer unit doesnt require a very large amount of money. Thus, a new entrant with sufficient funds can easily enter into the industry. But entering does not mean surviving, it is in the struggle to survive in this competitive fierce industry that most new business failed to achieve in the long run. The next 6 barriers are those that will most likely to deter new entrants in their pursuit to penetrate the PC industry. But that is just the beginning of all since every new business must strive hard in order to survive into the competitive world of the PC industry and that will require large amount of capital investments to spend like for example the R&D expense that is one of the most important segments in the personal computer business. ECONOMIES OF SCALE *MODEST* It is the decline of per unit cost of production as volum e grows. Who enjoys this? Its mostly the large companies usually the existing and surviving players in the industry who are already buying supplies in bulk and have already adjusted cost in their manufacturing processes. Knowing these idea new entrants might be discouraged to enter the industry. PRODUCT DIFFERENTIATION It is the physical or perceptual differences or enhancements that make a product special that catches the eyes of the buyer. In the setting of the PC industry, product differentiation is hard to find. Although, PCs invented by different companies show varying specification and features, these differences are not unique enough to catch customer attentions since the differences are only considered slight. The elusive idea of product differentiation in the industry both favors these new entrants since they can just do business by subassembly and subcontracting manufacturing activities. By that, it means they can outsource manufacturing of some computer parts to other manufacturers that specialize on that certain part and assemble the whole product in the final process to put a touch the companys trademark. But in the long run, product differentiation from different companies might emerge more often from time to time now than before since large existing players are allocating more expenses to the R&D department in order to allow fast innovation with their experts brilliant ideas and creativity. One of the greatest product differentiations in the PC industry is Apple Incorporateds Mac Book Air. Knowing Apple Inc. as once the top in the industry, their released of the said product on 2008 turned heads of customers with amazement about its light weight and thin size which makes it very portable for travel. It makes people think how Apple managed to put all high technology computer parts in to the 0.76 inch thick PC. Current product differentiation that became one of the highlight of the CES (Consumer Electronic Show) Conference 2011 in Las Vegas is Sonys 3d Vaio Laptop where you can enjoy 3D displays when playing games and watching movies on the screen. Therefore, new entrants, in the long run must learn product differentiation by producing high-edge PCs in order to compete in the industry. SWITCHING COST *LOW* These are the cost or burden experienced by a buyer when switching from one product to another. In the PC industry, switching costs are low since users of PCs can easily transfer files from one computer to another. Buyers wouldnt be reluct ant to change; most buyers even think that PCs must be changed from time to time since innovation in this industry comes swift. For them

the latest is always the best since new technologies often give them efficiency in doing multiple tasks. So, all new entrants will just have to look for ways in reach and convince customers to switch.

BRAND IDENTITY *HIGH* As defined, is the visible element of a brand such as colors, design, logotype, name and symbol that together identify and distinguish the brand in the consumers mind. Brand identity in the PC industry is highly barred from the point of view of the new entrants since there are already so many recognize brands such as Toshiba, Acer, Asus, Lenovo, Samsung and many more. In addition, there already exist 4 strongest brands in the industry namely, Apple, HP, IBM and Dell. Building a brand takes a long period to achieve and substantial amount of costs to incur. Therefore, new entrants must strategized critically in building a strong brand to compete with other brands in the industry as these businesses continue to strengthen their brands as well. ACCESS TO DISTRUBUTION CHANNEL *HIGH* Distribution channels bridge the gap between the buyer and the seller. In these globally operating world, new businesses struggles to occupy a space into these distribution channels because existing players have dominated and have great influence over distribution channels. Large established companies are trying to put up their own offices in every countries like for example HP main office in the Philippines which is located in Makati in order to control operations and monitor sales in every retail stores carrying their product. Some are accessing distribution channel directly by putting up their own store like Apple Inc.s iStore in Ayala and SM and other iStores around the Philippines. So, each new entrant will have to choose between indirect access to distribution channels like penetrating retail shops to carry the product and direct access like putting up their own store. THE PROMISE OF AGGRESSIVE RETALIATION Every new entrant must be prepared to compete and retaliate attacks in the industry. By attacks, it means the time to time release of bleeding-edge technologies by existing business as product of product differentiation. Example is when Apple Inc. released Macbook Air in 2008, Dell then immediately responded a year after. By 2009 they released Dell Adamo that matched Macbook air in terms of its size. It surpassed Macbook air with its thickness measuring 0.65 inch while air measure 0.76. inch thick. The of both sleek laptops vary but it gave buyers another option in shopping for a thin and portable laptop. Other companies then followed releases of their own versions