Matching Dell

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How and why did the personal computer industry come to have such low average profitability? The PC industry has started to develop fast in the 80 's when IBM launched its first PC series and later on when numerous small companies entered the market. PC is a new product and companies had to create the demand to it from the scratch. We shall apply the Porter 's 5 Forces model to examine the PC market and see how forces of competition influence the profitability of the market players. (See Appendix 1 for detailed description of how does certain parameter influence the market.) Entrance barriers are: The initial investment is relatively low (1.1) Brand loyalty is average to low (1.2) Switching costs of the market player are average.…show more content…
See table 2 – Dell 's net income gross (1992 - 1998) - 1750.98%. More than 4 times over HP (436,4%) – the second best performing player and twice over Compaq (770%). Revenues of Dell increased on 1285% against 660% of Compaq (1992-1998). From this data it can be seen that at Dell net income gross exceeds the revenue gross, while Compaq didn 't succeed to use the revenues incline to make income. Inventory (table 2) Inventory turnover – increase of 634.9% at Dell against 202% at Compaq shows the competitive advantage if Dell in managing and maintaining its stocks Customer service (table 3) In serving its customers Dell has succeeded more than its rivals. It can be seen from the table 3 that ranks PC manufactures based on Consumer Report where Dell won the 1st rank place. Competitive advantage of Dell in serving customers in comparison with other manufacturers can be also seen on table 3. Concerning corporate customer service by Dell and Compaq should be mentioned deep understanding of customer needs at Dell Corporation and 24/7 support against based on forecast production system with 64 days of delivery period. (see Appendix 4, 4.1 for detailed explanation) 4. How effective have competitors been in responding to the challenge posed by Dell 's advantage? How big is Dell 's advantage? The steps of competitors threaten the competitive

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