1. How attractive is the PC industry? Conduct an industry analysis on the PC industry (A) in its early stages, and (B) in its later stages. Comment on how the industry has evolved.
In personal computer industry, we considered two different time periods. The early stage includes development from 1980s to the early 2000s, and the later stages starts from early 2000s to now.
Threat of Entry
Early Period
PC industry has low entry barrier which is brought by IBM’s entry to the market. In 1980s, IBM adopts open architecture strategy which outsources its operating system (OS) and microprocessors to Microsoft and Intel respectively. This strategy also has several implications: (1) product design and feature information is also available to other potential competitors, (2) IBM does not possess any patents related to product design, which allows competitors to copy the product designs. For small companies, open architecture significantly reduces the risk of market entry as it significantly reduces capital investment for firms to develop their own OS and microprocessors. Another industry environment that sustains lowers entry barrier to 1990s is network effect, which is defined as increase in products’ value due to increase in its popularity among consumers. As IBM converts PC as the mainstream and adopts open architecture strategy, Microsoft and Intel collaboratively develops a new standard known as “Wintel”. Manufacturers, ranging from Dell to generic companies, are able to use Wintel as components of PC. This stimulates growth and encourages small companies to enter the industry.
Late Period
Standardization in OS and microprocessors also helps maintaining low entry barrier to late period. The standardization of components reduces firm’s investment in R&D. Besides, as Asian firms took more responsibilities for innovation. These dynamics reduces the cost of