Hewlett-Packard Company was founded in the second quarter of the 20th century in Palo Alto, California, by Bill Hewlett and David Packard. The company has evolved over time, and since its inception, it has gone through major structural changes; Company has split twice once in 1999 and then in 2015. HP Inc. (HP) is the company that retains the core business of personal, enterprise computers, and printers. It has 55,000 employees and is ranked 55th in the Fortune Global 500 companies (Fortune, 2020). The company is one of the major manufacturers of computers for domestic and enterprise customers globally. HP is the company that has always been at the forefront of the computer industry. Porter’s five forces analysis is conducted to assess the risks that the company face with the potential opportunities it can take advantage of in the macro-environment.
Competitive Rivalry in the Market
The personal computer industry is highly competitive in nature. The laptop market has taken off in the late last decade, and then it changed the way world works (Charles Arthur, 2009). There are many companies with specific departments manufacturing computers. Across the Globe, laptop sales have been steady since the smartphone revolution. HP is among the top personal computer manufactures. HP’s competitors in the industry are Lenovo, Dell, and Apple. Lenovo is the market leader with 24.1% market share, HP, Dell, and Apple has 22.2%, 16.8%, and 7% market share, respectively; whereas Lenovo and HP shipped 63 million, 58 million units (Statista, 2020). HP is the leading manufacturer of printers in the world, with the highest market share in 2020. Consider the state of competitiveness and market share divided among the top four manufacturers’ personal computer market is highly competitive.
Threat of Substitutes
Since its inception, personal computers were at the forefront of the digital revolution. Smartphone revolution that started in 2007, it was dubbed the end of personal computers. But even a decade and a quarter later we are still using personal computers with steady demand. There need for personal computers has become more work-oriented rather than entertainment-oriented. The laptops and notebooks are used for software development and design purposes, and they are portable and powerful. They come in between desktops and tablets. As smartphones can perform a lot of tasks for which personal computer was required in the past like emails, video conferencing, and web surfing. The smartphones and tablets are there for over a decade now; in the short-term, there is no complete alternative for laptops. The threat of substitutes is moderate in the short-term and in the medium-term threat is high of alternatives.
The Threat of New Entrants
The Personal computer market is highly competitive, and there are five major manufacturers of personal computers Lenovo, HP, Dell, Apple, and Acer. Lenovo and HP have almost half the market share of the total personal computer market. It requires a huge capital investment to start a personal computer business. Another major component that is required technical expertise; it is really difficult to raise a team to technical hardware experts. Due to established market players, penetration is difficult because cost-cutting and producing an innovative product to compete with existing manufacturers is hard. Considering the factors, the nature of business and required capital threat of new entrants is low.
Bargaining Power of Buyers
Buyers of personal computers can be broadly categorized into two categories business users and personal users. Business users encompass users, such as developers and designers. They need high-end work machines with ultimate performance, and personal users use this for entertainment purposes. As the market is highly competitive, and buyers can buy machines of their choice from all the available, individually, buyers have low bargaining power. Nowadays, information is available, and the buyer has options, a potential buyer can search for the best-suited item. As a result, companies offer a range of products to attract a large number of buyers. Buyers have moderate bargaining power.
Bargaining Power of Supplier
There are three sources of supply component suppliers, software suppliers, and human resource expertise. For chipset, major suppliers are Intel and AMD. It is evident by the fact that in the last quarter of 2019, 68.4% of recorder tests was from Intel, while 31.5% were from AMD (Statista, 2020). So, AMD and Intel have comparatively higher bargaining power. The other major computer component is hard disk and RAM. There are many component computer suppliers across the globe and thus, they reduce their bargaining power. In the operating system landscape, it is dominated by Microsoft Windows, and it has an 87.90% market share, and Apple’s operating system MAC has 9.52% market share (Net Marketshare, 2020). Companies are trying to reduce their reliance on these hardware and operating system providers by manufacturing personal computers by using products from other vendors. Overall, suppliers have moderate bargaining power.
References
Arthur, C. (2009). How laptops took over the world. Available at: https://www.theguardian.com/technology/2009/oct/28/laptops-sales-desktop-computers
Fortune. (2020). HP. Available at: https://fortune.com/fortune500/2019/hp/
Statista. (2020). Distribution of AMD and Intel x86 computer processors worldwide, from 2012 to 2019, by quarter. Available at: https://www.statista.com/statistics/735904/worldwide-x86-intel-amd-market-share/
Statista. (2020). Market share held by the leading personal computer vendors worldwide in 2019. Available at: https://www.statista.com/statistics/267018/global-market-share-held-by-pc-vendors/