Porter 5 Forces Analysis of Computer Industry

1033 Words Apr 17th, 2012 5 Pages
Porter’s five forces analysis of the Personal Computer (PC) industry
In his article “The five competitive forces that shape strategy“, Michael Porter (2008) updates and extends his “five forces” framework he first introduced in 1979 and which has influenced the academic and business research for decades. He reaffirms that “THREAT OF ENTRY”, “THE POWER OF SUPPLIERS”, “THE POWER OF BUYERS”, THE THREAT OF SUBSTITUTES”, and “RIVALRY AMONG EXISTING COMPETITORS” are the forces that shape every single industry, and a thorough understanding of such forces help analyze everything from the intensity of competition to the profitability and attractiveness of any industry. The framework has two dimensions; the vertical dimension that connects
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All these factors make the PC industry interesting, and invite scholars and business analysts for in-depth analysis of the industry to understand the main forces that are shaping its competitiveness.

1.1 Threat of entry
Porter (2008) argues that the threat of entry “puts a cap on the profit potential of an industry … [and] incumbents must hold down their prices or boost investment to deter new competitors” (p. 81).
The large capital requirements to enter the computer industry combined with established brand identities of the current incumbents make barriers to entry high, not to mention the economies of scale and distribution channels that incumbents enjoy which make entry barriers even higher. The current PC incumbents enjoy demand-side benefit of scale in the business sector where PC buyers prefer to buy products from large trusted companies, raising the level of entry barriers.
On the other hand, the following factors lower entry barriers: the customer switching costs are small as PCs are open systems with standard specifications that can be met by any manufacturer, governments don’t, usually, restrict entry to the PC…