Dell: Porter’s 5 Forces Essay

Question 1 dicker Power of SuppliersAlthough there were many suppliers for calculator comp unmatchednts, microprocessors were supplied by only a handful of companies. Pg.3. Microsoft and Intel monopolized the suppliers mart as, between 85% and 90% of data processors sold conformed to Microsoft/ Intel Standards.pg.3. With much(prenominal)(prenominal) a steep percentage of computing machines being sold using Microsoft and Intel it would pass water it rattling difficult for any new suppliers to take the lead in this merchandise, do the supplier power mellow.Threat of SubstitutesComputers were a hot feature in the U.S, being that 45.5% of households owner a reckoner in 1998, and the figure was expected to rise to 49.5% by 2000.pg3. A computer was something new into the grocery, and no new(prenominal) product nearly comp bed to its capabilities and complexity. Given that the computer was one of its own kind in this time the threat of other substitutes was very low.Bargaining Power of BuyersDell created a strong and certain relationship with its customers. Over a thousand outside sales reps worn-out(a) their time in the field, understanding customer needs, courting customer personnel, portion customers configure their information systems, and promoting Dells products and services. Pg6. Although Dell had put a great effort into their customer service, the impairments of the product were a key constituent in the success of Dell. Customers at retail dont see what theyre looking for, other than price. Pg.7. As price appears to be the major deciding factor in product choice, the buyer will be most likely to purchase their product based on price rather than quality of the actual product.Threat of New EntrantsWithin the market of computers, there is not a great get of product differentiation, with the riddance of Dell directly serving its customers. Without much differentiation new entrants could very easily present a new and different problem dodgi ng which could surpass leading market shareholders. The threat of new entrants would be high due to the lacking differentiation, but is also considered medium because of the great amount of existing entrants in the market. With IBM, Compaq, Hewlett-Packard, Gateway, Dell, and Apple all entering the computer market within a short period of time, we can conclude that it was comparatively easy to enter the market. Although it was easy to enter, it was nearly impossible to differentiate, and produce a business plan to succeed in gaining a competitive prefer to already existing competitors.Competitive RivalryCompetition was very high within the computer market, as all the competitors were finding ways to persist competitive by reducing costs and improving sales efforts. HP hoped that the program would allow it to reduce price protection to two weeks, thin down defects, and shave 5%-15% off of its prices.pg.12 In conclusion, the personal computer industry was a very attractive industry to do business in, as the threat of substitutes was very low, and new entrants is medium/high. This means that it would be easy to enter the market, and there were not any other products that compared to the computer. This makes for a very attractive market to do business in.Question 2Dell was the first and only competitor in the computer market to deal directly with its customers, giving them strong differentiation therefore making them unique. You cant ignore what Dell has done I could burst you a list of names of really large customers who have utter to HP, Either do business with us directly or you are not going to do business with us.pg.12 Dell used particular proposition tactics through its use of the Dells Direct determine in order to ensure the PC industry was an attractive one that it could compete in. Dell realized in order to be booming in this market they needed to set themselves apart from related companies by possessing a variety of differences from like companies appealing to consumers.Dell took advantage of the cattle ranch evident in the computer industry by eliminating the use of middlemen such as retailers and distributors. By eliminating the middleman Dell developed an inventory barren system, resulting in saving costs and allowing them to be more competitive in the market. The current production system requires that the whole organization be integrated. Youve eliminated buffers. When you have no buffers and you have no inventory, the whole organization has to work together. There is no way to let things pile up, because you have no piles.