Dell: Porter’s 5 Forces Essay

Question 1 Bargaining Power of SuppliersAlthough there were many suppliers for computing device components, microprocessors were supplied by only a handful of companies. Pg.3. Microsoft and Intel monopolized the suppliers market as, between 85% and 90% of computers sold conformed to Microsoft/ Intel Standards.pg.3. With such a high percentage of computers existence sold using Microsoft and Intel it would make it very difficult for any radical suppliers to take the lead in this market, making the supplier power high. curse of SubstitutesComputers were a hot item in the U.S, being that 45.5% of households owner a computer in 1998, and the figure was expected to demonstrate to 49.5% by 2000.pg3. A computer was something forward-looking into the market, and no other fruit almost compared to its capabilities and complexity. Given that the computer was one of its own kind in this time the affright of other substitutes was very low.Bargaining Power of Buyersdell created a quick and reliable relationship with its guests. Over a pace outside sales reps spent their time in the field, understanding customer needs, courting customer personnel, helping customers configure their information systems, and promoting dingles merchandises and services. Pg6. Although dingle had put a cracking effort into their customer service, the tolls of the overlap were a key factor in the success of dell. Customers at retail dont know what theyre looking for, other than price. Pg.7. As price appears to be the major deciding factor in proceeds choice, the buyer will be most likely to purchase their product based on price rather than quality of the actual product. little terror of New EntrantsWithin the market of computers, there is non a great amount of product differentiation, with the exception of Dell directly serving its customers. Without more differentiation pertly entrants could very easily present a new and different traffic strategy which could surpass leading ma rket shareholders. The threat of new entrants would be high due to the lacking differentiation, but is to a fault considered medium because of the great amount of existing entrants in the market. With IBM, Compaq, Hewlett-Packard, Gateway, Dell, and Apple altogether entering the computer market within a short arrest of time, we can conclude that it was relatively 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 advantage to already existing foes.Competitive aspirationCompetition was very high within the computer market, as entirely the competitors were finding ways to stay competitive by reducing be and improving sales efforts. HP hoped that the program would allow it to reduce price protection to two weeks, cut down defects, and s give way 5%-15% clear up of its prices.pg.12 In conclusion, the personal computer exertion was a very winning industry to do busine ss 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 give you a list of names of actually large customers who have said to HP, Either do business with us directly or you are not going to do business with us.pg.12 Dell used specific tactics through its use of the Dells Direct Model in order to ensure the PC industry was an attractive one that it could compete in. Dell realized in order to be successful in this market they needed to pit themselves apart from related companies by possessing a variety of differences from like companies appealing to consumers.Dell took advantage of the gap evident in the computer industry by eliminating the use of middlemen such as retailers and distributors. By eliminating the middleman Dell developed an inventory free system, resulting in saving costs and allowing them to be more competitive in the market. The current production system requires that the whole face be integrated. Youve eliminated buffers. When you have no buffers and you have no inventory, the whole agreement has to work together. There is no way to let things pile up, because you have no piles.