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Five Forces

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Submitted By richardlau426
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Barrier to Entry -- Low • Low Capital Environment – Low capital required to setup a PC manufacturing business, and very low R&D cost required, where white-box is a very good example. • Easy accesses to critical supplier – The critical inputs of a PC, processor and operating system, etc, are fairly easy to source.

Threat of Substitute -- Low • PDA, mobile, game console and TV set box, etc, can act as some kind of substitute. • However, the functions of such CE are different from PC, especially at business level.

Bargaining Power of Supplier – High • Supplier concentration – The vital parts of a PC, chips and OS, are source from only 1 or 2 suppliers. • Critical Input – These parts are the fundamental value of a PC which consist most of the cost. • High switching cost – Change supplier for such parts can be very risky and costly.
Compliment
• Intel/MS – The suppliers of such critical input are also contributing to the sale of a PC, where customers can make the purchase because of the inclusion of the supplier’s inputs.

Bargaining Power of Customer -- High • Price sensitive – The home PC users are very sensitive to the price. • Buyer volume – Corporate purchases normally generate great power which can drive down the price • Low switching cost/Low differentiation – Customer can switch from one brand to another easily at no cost due to the very low differentiation provided by companies.

Rivalry – High • Price/Profit margin – Price can be very sensitive to customer’s decisions. Companies often lower their price to win the deal which further drive down the profit margin • Low differentiation – The products provided by different companies are generally the same. • Accesses to distribution – Companies have to fight for the shelf positions in the large retail outlets. • Geographic competition – Companies will fight for different regions and markets.

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