Following is the porter five forces analysis for Hindustan Computers Limited so that the company could identify as well as analyze its strength, weaknesses, and threats.
A quick overview of porter’s five forces analysis of HCL
1. Threat of new entrants – LOW TO MEDIUM
2. Competitive rivalry – HIGH
3. Threat of substitute products – LOW TO MEDIUM
4. Bargaining power of buyers – HIGH
5. Bargaining power of suppliers – MEDIUM
The Threat of New Entrants
This force of porter analysis determines that how easy or difficult is it for a newcomer to enter to a specific industry. When we talk about the threat of new entrants for HCL, there are a number of barriers for the new entrants to enter into this marketplace. So, it is not an easy task for a newcomer to get established and gain customer’s trust as compared to HCL. There are a few reasons for which the threat for a new entrant is considered moderate. The first and foremost thing is that the customers are really loyal to the company for its quality products as well as prices so they can’t even think to switch to the new entrants, even if they proffer the attractive offers. The second most important thing is the brand name. A newcomer can’t achieve such a good reputation as HCL. The third important thing to mention here is that the prices of the HCL are really fair and reasonable.
Competitive Rivalry
At this step, we analyze an industry to get to know about its competitors. When we talk about Hindustan Computers Limited, the competitive rivalry is really high. What are the potential external factors that lead to the high competitive rivalry? A few of those significant factors are a price war, low differentiation as well as decreasing profitability leads. The IT industry is full of players which are playing very well, making the tough situation to compete for each other. All the competitors of HCL like Acer, Compaq, Lenovo, Sony, Dell etc own high repute and excellent relationships with the customers creating a high competition for Hindustan Computers Limited. In this scenario, the HCL needs to make the reliable relations with the customers by proffering them the high-quality products, latest technologies at the fair prices. This is the only way with which it can achieve high reputation and can stand out amongst all in this high competitive scenario.
The Threat of Substitutes
At this stage, we analyze all the substitute products which can serve the customers well as a replacement. When we talk about HCL, the threat of substitute products is medium. As a matter of fact, not merely in India but all around the world, the utilization of PCs is very common. Almost every third to the fifth person in society possess a personal computer. With this statement, we can judge the vitality of the PC in one’s life. Except for the strong PC presence as well as need in the society, the Hindustan Computers Limited proffers its customers the high customer services in terms of quality as well as prices. So, the threat of substitute products remains low for HCL.
On the other hand, if we talk about the present age, a number of needs can be fulfilled with the smartphones instead of PCs. For instance, if you merely need a PC for personal use i.e. for surfing internet etc, you can easily have a smartphone instead of it as it will a better option for you as it is portable as well as have low costs. Other than home utilization, the need and importance of PCs for employees in offices etc can’t be denied.
Bargaining Power of Buyers
When we talk about bargaining power of buyers for Hindustan Computers Limited, it’s really high. What are the potential reasons behind the high bargaining power of buyer for HCL? As a matter of fact, the customers or the buyers are highly priced sensitive i.e. if they need a PC for merely a personal use, they can’t afford to buy the expensive ones. Also, the competitors of the Hindustan Computers Limited like Dell make the situation tough for the company.
For instance, if the company is going to raise the prices of its products, in this case, the customer’s won’t hesitate to switch for the reason that they need a reliable as well as the reasonable option for them. Also, the high availability of competitors in PC industry will proffer lots of options to the customers. But as a matter of fact, the Hindustan Computers Limited has very reasonable prices, as mentioned above, and has established a very loyal and good relationship with the customers. For instance, a number of notebooks by Hindustan Computers Limited can be bought at very cheap prices in the market.
Bargaining Power of Suppliers
The last but not the least force of porter five forces analysis is the bargaining power of suppliers. In this, we examine the power of the suppliers. For instance, the suppliers have the power if and only if they have the influence on the quality of products or the product’s prices. Most importantly, if the suppliers are few in number, they will hold the power to squeeze the industry’s profitability. On the other hand, if the suppliers are large in number, they won’t retain power. The HCL has a very good relationship with its supplier but as a matter of fact, a large pool of suppliers is available so if they try to lower the quality or try to higher the prices, HCL can easily switch to the other suppliers but it has a very good and reliable relationship with its existing suppliers. Also, the suppliers can’t negotiate for the reason that they know the company has several options available in this regard and can easily switch to the better options. So, keeping in mind all these things, we conclude that the bargaining power of suppliers remains medium for Hindustan Computers Limited.