Porter Five Forces Model
1. The risk of entry by potential competitors
The threat of new entrants in the computer hardware manufacturing industry is very weak. Currently the market is dominated by several major companies such as Hewlett-Packard Company and Dell Inc. which have gained most of the market share. Each firm has strong brand loyalty and sufficient resources. The dominant companies have created a huge barrier to the new entrants since these small companies have to require large and significant investments in Research and Development to develop new innovative products. Because of the economies of scale, major companies are able to manufacture products at lower prices.
2. Bargaining power of customer
The bargaining power of customers is high. Because the switching cost is low, customers are able to switch to use another product at low cost. We can know that there are some other contributing computer hardware manufacturing companies such as Apple Inc. and IBM. It means that customers can make decisions from a large range of brands. Also the population of customers in this industry is pretty huge, Customers can have the ability to bargain down prices charged by companies in the industry.
3. Bargaining power of suppliers
The bargaining power of suppliers is low. Since the dominant companies usually have contract manufacturers around the whole world to help them build products. They also have their own manufacturing capacity.
4. The Closeness of Substitutes to an Industry’s Products
The threat of substitute products is high. The industry has been affected by the smartphone industry and tablet industry. Smartphones and tablets are more portable than computers. Also, these products can provide similar functions and benefits to customers that a computer has.
5. The Intensity of Rivalry among Established Companies within an Industry
The rivalry among the computer hardware industry is quite high. Since the product cycles for computers are very...