1

Using Porter’s Five Forces Model to analyze the competitiveness of the

Personal Computer (PC) Industry for Hewlett Packard (HP)
Incorporated

Name of Business: Hewlett Packard (HP)

Incorporated
• Provide a clear description of company

HP Inc is an American technology company that was formed in November 2015, following the break-up of
its predecessor, Hewlett-Packard Company. HP Inc's pedigree stretches back to 1935, when the parent
company was founded in the garage of William Hewlett and David Packard.

Initially producing a range of electronic test equipment, HP Co rose in the intervening years to become one
of the leading manufacturers of personal computers worldwide and a global manufacturer of servers,
storage devices, and networking equipment, as well as delivering a variety of IT services for both
consumers and enterprises. With HP Co's closure, HP Inc inherited the personal computer and printer
departments while enterprise software, servers, and storage went to the newly formed Hewlett Packard
Enterprise (HPE). Both companies continue to generate multi-billion-dollar revenues, with HP Inc
earning revenues of 58.76 billion U.S. dollars in 2019. The company employs 56 thousand people
worldwide as of 2019. The company also remains largely profitable, posting net earnings of 3.15 billion
U.S. dollars in 2019.

The core of HP Inc's business remains personal systems and the company appears to have ridden the
separation without too much disruption to its market position. HP Inc remains one of the major players in
the global PC market and its historical market share of around 15 to 25 percent continues into 2020. The
company shipped 58 million personal computers in 2019. In addition to its success in the PC segment, the
company also maintains a healthy market share in sales of hardcopy peripherals. Both HP Inc and HPE will
benefit from the continued strength of the Hewlett Packard brand, which ranks as one of the  most valuable
brands worldwide.[ CITATION Tho201 \l 1033 ]

Operating in 170 countries with a network of more than 250,000 channel partners, HP uses the power of
ideas to put technology to work for everyone, everywhere. HP’s slogan is “HP invents, engineers, and
delivers solutions that amaze.” The firm’s motto is 'Keep reinventing,' which refers to both its internal
operating strategy, and its ability to reinvent itself by launching new products such as the thinnest laptop in
the world, or by revolutionizing manufacturing with its 3D printing technology. According to the firm’s
internal figures, HP ships 1 PC & 1 Printer every second, is ranked first or second in every market and
product category where it competes, while powering 430 of the global fortune 500 companies. To sustain
long-term relationships with customers, HP’s strategy is to sell solutions, not just products. To that end, the
company offers "complete solutions" for partners and customers through integration of HP devices,
supplies, and services.
While its brand name will be familiar to anyone who has used a 2D personal or commercial printer in the
past few decades, HP believes that 3D printing has the potential to usher in a new era by disrupting
virtually every aspect of manufacturing, from initial design to shop-floor setup and from manufacturing and
assembly to supply chain, logistics, and distribution.
In 2016, HP unveiled the world’s first production-ready 3D printing system for manufacturing: the HP Jet
Fusion 3D Printing Solution. Calling its HP Jet Fusion 3D 3200 and 3D 4200 printers "engineering
breakthroughs," that came as "the result of decades of HP investments in inkjet printing, precision fluid
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mechanics, and materials sciences", HP believes that is now poised to bring its 30 years of leadership in 2D
printing into a new dimension.[CITATION Hew19 \l 1033 ]

In March 2015, HP announced that it would be splitting into 2 separate companies, effective November
2015: HP Inc., which now houses the printer and PC division, and HP Enterprise, which is composed of the
rest of the business, including the unit formerly known as HP Services. [ CITATION Hew19 \l
1033 ]

HP first started in a garage in nearby Palo Alto by Bill Hewlett and Dave Packard with an initial
capital investment of US$538, the garage was later designated as a historical landmark. Bill and
Dave became friends when they were both engineering students at Stanford. Their first successful
invention was a precision audio oscillator, using a small incandescent light bulb as a temperature
dependent resistor. The model was selling for $54.4 0 where competitors were selling less stable
oscillators for over $200[CITATION Tim20 \l 1033 ] . The company now has 56,000
fulltime employees and Mr. Enrique J. Lores is its CEO and president [ CITATION Tim20 \l
1033 ].

HP continued to develop new products and earn global respect for a variety of products.
In 1957 HP held its IPO with share selling for $16 and became a public company. The
main objectives for going public were to help with estate planning for its founders and to
enable employees to share in the company [ CITATION Tim20 \l 1033 ].

In the 1960s, HP partnered with Sony and the Yokogawa Electric companies in Japan to develop
several high-quality products. While In the 1970s, HP introduced the world‟s first: handheld
scientific electronic calculator, handheld programmable, symbolic, and graphing
calculator[ CITATION Sar14 \l 1033 ]

In 1968, HP was identified by wired magazine as the producer of the world's first personal
computer, the Hewlett-Packard 9100A and in1984,it introduced both inkjet and laser printers for
the desktop, Along with its

scanner product line. It expanded their computer product line and continued to grow through
several acquisitions and mergers; buying Apollo Computer in 1989, Convex Computer in 1995,
Compaq in 2001 and 3Com in 2009 [ CITATION Chr10 \l 1033 ]

Since 2002, HP has started to work with Sustainability to develop engagement strategies, obtain
and analyzing stakeholder inputs and develop competitive assessments and environmental
strategies. In 2009, they developed Stakeholder Advisory Council (SAC), which met quarterly, to
provide professional advice to HP on current and emerging corporate citizenship issues
(sustainability, 2016).

In November 2015, HP split into two Hewlett-Packard Enterprises and Hewlett-Packard

Incorporated. The first will serve the technology infrastructure, software and services businesses
and the second will focus on personal system and printing business [ CITATION Ale16 \l
1033 ]
• What are the Business units within the company?
The company operates through three segments: Personal Systems, Printing,
and Corporate Investments. The Personal Systems segment offers commercial
and consumer desktop and notebook personal computers, workstations, thin
clients, commercial mobility devices, retail point-of-sale systems, displays and
other related accessories, software, support, and services. The Printing segment
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provides consumer and commercial printer hardware, supplies, solutions, and

services, as well as scanning devices. The Corporate Investments segment
includes HP Labs and business incubation projects[CITATION Hew20 \l
1033 ]

• What are the main products/services?

HP Inc., together with its subsidiaries, provides personal computing and other
access devices, imaging and printing products, and related technologies,
solutions, and services in the United States and internationally. [ CITATION
Hew20 \l 1033 ]
commercial and consumer desktop and notebook personal computers, consumer
and commercial printer hardware, supplies, solutions, and services, as well as
scanning devices, and software, support, and services. [CITATION Hew20 \l
1033 ].

• Are you doing the analysis for a particular business unit or the
entire company- dependent on the company you may select a
specific business unit for this analysis.
For the purpose of this research, concertration is on the personal system
business unit which focuses on commercial and consumer desktop and personal
computers [ CITATION Hew20 \l 1033 ]
• {Companies compete in many industries. Due to the duration of
this class, it may be advantageous to select a business unit to
conduct your analysis e.g. If Apple is your selected company, you
may analyze Apple smart phones or Apple PCs.)
• What industry is this business unit competing within?
The personal computer industry

Identify the Industry

(if your business unit is Apple smart phones then your industry is the smart
phone industry)
• Overview of the Industry/competitive environment
The computer hardware industry provides a broad range of products. These include everyday items used in
homes, businesses, and schools, such as desktop computers, monitors and keyboards: laptop computers;
and peripherals like printers and scanners; as well as specialized or industrial items such as webcams, ATM
machines, or data storage devices used by corporations, large and small. A rapidly growing segment of the
computer hardware industry is in multipurpose handheld communication devices, such as smartphones and
tablet computers, which allow consumers to have phone conversations, send electronic text messages and e-
mail, surf the Internet, or access media. The personal computer industry celebrated its 41st anniversary in
2016.
In its first year, 1975 as marked by the Computer Industry Almanac, the personal computer industry as it is
known today sold fewer than 50,000 personal computers with a value of $60 million. By 2010, worldwide
sales had grown to more than 320 million personal computers with a retail value of $320 billion. The global
computer hardware manufacturing industry is now a $346 billion business, according to market research
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group IBISWorld. Sales of personal computers (PC) have dropped since 2012, however, as tablet and
mobile phone use has grown. International Data Corporation reported that shipments of personal computers
had fallen by more than 10 percent in 2015 compared to shipments in 2014. It was estimated that 276.7
million personal computers shipped in 2015, a significant drop from the 308.2 million computers that
shipped the previous year.
The computer hardware industry encompasses the companies that research, develop, design, assemble, test,
manufacture, and sell these various devices. Technological advances continue to produce complex
microchips in smaller sizes, enabling the computer hardware industry to provide smaller, more compact
devices to consumers. Flat-screen computer monitors and thinner, lighter laptops or tablet computers are
but a few of the innovative new products now available or in the planning stages. Also expected to lead the
growth in the industry are electronics with computing platforms such as those used in the medical and
health-care industries, the telecommunications industry, and the automotive industry, as well as the
growing consumer demand for and use of mobile devices like smartphones that perform various functions
of computers
Although computer hardware companies can be found worldwide, including in India, Japan, and China,
many companies are located in the United States. Silicon Valley in California, Route 128 in Massachusetts,
Research Triangle in North Carolina, and Austin, Texas, are among areas in the United States with high
concentrations of computer hardware companies.
The industry employs workers of all education and skill levels. Computer scientists and engineers;
development, design, and production engineers; system analysts and set-up specialists; service technicians;
quality assurance specialists; and computer sales representatives are but a few of the career choices open to
those seeking work in the computer hardware field.[ CITATION Hew19 \l 1033 ]

• provide a clear description/positions and names of key players in that

industry
Personal computers (PCs) are small, multi-purpose devices, intended for use by individuals. Prior to the
development of the PC, computers were significantly larger and intended for use by large organizations.
The term PC was first applied as early as 1972 to the Xerox PARC's Alto, but this later developed to
specifically mean a desktop microcomputer compatible with IBM's PC products. Such was the influence of
IBM that only Apple Macintosh (Mac) products were able to compete for a share of the microcomputer
market after the 1980s, without compatibility to the IBM PC[ CITATION Tho20 \l 1033 ].

The market leaders in the U.S. PC hardware market are Hewlett Packard (HP) and Dell Technologies,
occupying over a combined 55 percent of the market, whilst Lenovo and Apple sit third and fourth
respectively. PC vendors in the U.S. are faced with the challenge to adapt to the changing market and stay
relevant with new products and services. HP have had a focus on using premium materials, introduced
privacy technologies built into each PC unit, and found success in laptops that convert to tablet computers.
Others, such as Dell Technologies, shifted their attention to cloud service and storage solutions, moving
away from mainly manufacturing computer hardware to providing software and service solutions.
[ CITATION Tho20 \l 1033 ]
• including scope, size, growth forecast, market share,
stage(mature, emerging, declining)
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• Global market share held by PC vendors 2019

The overall market leader in the global personal computer market in 2019 was Lenovo with a
market share of 24.1 percent with Hewlett Packard a close second with a 22.2 percent share. In
terms of unit sales, Lenovo had almost 63 million shipments, while HP had around 58 million
shipments. With the overall technology sector moving into a direction centered more on software
and services, the PC hardware market has declined over the past years [ CITATION Tho202 \l
1033 ]

Notes: Data includes desk-based PCs, notebook PCs and ultramobile premiums (such as Microsoft
Surface), but not Chromebooks or iPads. All data is estimated based on a preliminary study. Final estimates
will be subject to change. The statistics are based on shipments selling into channels. Numbers may not add
up to totals shown due to rounding.
Source: Gartner (January 2020)
Lenovo maintained its No. 1 position in the worldwide PC market and widened its share over HP Inc. With
the exception of the Asia/Pacific, Lenovo recorded year-over-year growth in all regions. In the U.S. alone,
Lenovo’s desktop PC shipments rose more than 30% compared with a year ago.
HP Inc. experienced its third quarter in a row of year-over-year shipment growth, and kept its top position
in the U.S., EMEA and Latin America. However, it is facing aggressive competition from Lenovo and Dell.
Dell finished the fourth quarter of 2019 with a record number of shipments, exceeding 12 million units for
the first time since Gartner started tracking PC shipments. Dell’s shipments grew year-over-year in all
regions at a much higher rate compared with the regional average, due in large part to its particularly strong
desktop PC growth.
The U.S. PC market grew 4.6% in the fourth quarter of 2019 with double-digit growth of desktop PCs for
the first time since 2014 (see Table 2). Only two of the top vendors experienced a decline in U.S. PC
shipments, compared with four in the fourth quarter of 2018.
“The fourth quarter is typically a strong buying season for small and midsize businesses (SMBs) that want
to maximize their spending before the tax year ends,” said Ms. Kitagawa. “The relatively stable economic
conditions in the U.S. compared with previous quarters, coupled with the end of Windows 7 support, also
loosened up spending on PCs.” [ CITATION Kat20 \l 1033 ]

Reacting to market shifts

PC vendors are faced with the challenge to adapt to the changing market and stay relevant with new
products and services, and each vendor in the hardware market has to navigate its own path to remain
relevant in this shifting market. For example, HP focused on using premium materials, introduced privacy
technologies built into each PC unit, and found success in laptops that convert to tablet computers. Others,
such as Dell Technologies, shifted their attention to cloud service and storage solutions moving away from
mainly manufacturing computer hardware to providing software and service solutions[ CITATION
Tho202 \l 1033 ]
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Lenovo shipped 16.2 million personal computers during Q2 2020, surpassing HP's 16.17 million shipments
in that same quarter and retaining its position as market leader. Dell occupies the third place on the list,
shipping 10.65 million PCs. There is a growing trend of consolidation, with HP, Lenovo, and Dell taking
up an increasing PC market share.

Vendors shifting away from traditional PCs

The nature of the PC market is changing, as many vendors are gravitating towards the expanding software
industry. A predominate adaptation strategy is to incorporate new technologies into the PC experience. For
example, Dell Technologies, which has a market share of around 17 percent, is prioritizing enterprise
software and cloud solutions, and a new direction for its PC design by including virtual and artificial
intelligence technologies into Dell Workstations. HP is responding to the changing market environment by
focusing on developing its product line of premium devices for gaming ecosystems. Lenovo’s response has
been developing devices specifically for corporate use, as well as integrating virtual reality headsets into
their line of computers.

Changing nature of personal computing

The type of computing hardware preferred by consumers has shifted significantly, as portable devices
become more durable, more capable, and more affordable. Desktop-PCs – once a must for any user that
intended to purposefully use their device for work or play – are the biggest victim of this shift. In
2010, desktop PC shipments reached 157 million units, a figure that is expected to fall to 79.5 million by
2023. Tablets have filled the hole left by declining PC sales, rising from 19 million units shipped in 2010,
to an expected 122.1 million in 2023.[ CITATION Tho203 \l 1033 ]

• Identify direct and indirect competitors

• Basis for competition

Now for the industry analysis utilizing porters

Step 1. Gather the information on each of the five forces

Use one of the many templates on porter’s/ competitive analysis to assist with
this assignment. Some modifications will be necessary to customize for this
class: Information Systems.

Check the researched information against some of the factors listed e.g. under
the threat of new entrants “How much capital is required to enter this market?
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Step 2. After gathering all the information, analyze the results, what
impact does this force have?

Sample: Porter’s five forces worksheet

Name of force: e.g. Threat of New Entrants
Threat of New Entrants is Low if
List your reasons to support your conclusion: It will require a
considerable capital investment to start a PC business or simple put large first-
hand capital investment in technological resources and infrastructure. Besides,
skilled workers and marketing require a huge investment. [ CITATION Abh19 \l
1033 ]

Are there any opportunities? How? New entrants in Diversified Computer Systems
brings innovation, new ways of doing things and put pressure on HP Inc. through
lower pricing strategy, reducing  costs, and providing new value propositions to the
customers.

How does Information Systems affect this force? Check table 3.5 in textbook
for ideas: Product Differentiation by investment in IT which could lead to
innovating new product and services. New products brings customers and
given additionally reasons to old customers to stay with HP.

Also, IT investment can lead to economies of scales so that it can lower the
fixed cost per unit.
Finally, investment in R&D essentially IT investment.  New entrants are less likely
to enter a dynamic industry where the established players such as HP Inc. keep
defining the standards regularly. It significantly reduces the window of extraordinary
profits for the new firms thus discourage new players in the industry.
Considering your business current situation, how likely is this factor to affect us
and to what degree

Continue for each of the five forces

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Name of force: e.g. Threat of Competitive rivalry

Threat of Competitive rivalry is High if
List your reasons to support your conclusion: The level of competitive rivalry
between the existing brands in the PC industry is very high. The top players
compete in the global market. The situation has become more complex due to
Lenovo’s excellent performance. In the Asian markets especially, Lenovo’s rise
has proved a threat for brands like HP, Dell and even Apple. The competitive
pressure becomes evident in the form of price competition between the top
brands. It is because of its premium pricing strategy that Apple lost a large
market share in the Asian markets. HP is among the top personal computer
manufacturers in the world. HP competitors in the industry are Lenovo, Dell, an
Apple. Lenovo is the market leader with 24.1% market share, HP with 22.2%
and Dell with 16.8% and Apple with 7% market share.

If the rivalry among the existing players in an industry is intense then it will drive down
prices and decrease the overall profitability of the industry. HP Inc. operates in a very
competitive Diversified Computer Systems industry. This competition does take toll on
the overall long term profitability of the organization.

Are there any opportunities? How?

 How does Information Systems affect this force? By building a sustainable

product differentiation at low cost with the use and investment in IT

Considering your business current situation, how likely is this factor to affect us
and to what degree

Name of force: e.g. Threats of Substitute is Moderate

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Threat of Competitive rivalry is moderate

List your reasons to support your conclusion:
Since the advent of the smartphone revolution that started in 2007, the PC
industry had been on the Downward spiral. Rise of mobile technology and
changing consumer preferences both have affected demand. Now, there are
different products devoted to different purposes. You do not always need a
laptop or PC to play games. Even a smartphone or tablet can be sufficient. To
use the internet-based services, you do not always need to carry a laptop even
a tablet can let you access most of the services online. This has somewhere
reduced the demand for laptops which used to be the most favorite machine
for gaming and work. Now, the smartphones come equipped with work related
features as they can perform similar tasks as personal computers like emails,
video conferencing, web surfing . Smartphones and tablets have been here for
decades and yet In the short term, there is no complete substitute or
alternative to laptops

Are there any opportunities? How?

 How does Information Systems affect this force? By building a sustainable

product differentiation at low cost with the use and investment in IT
 Apart from product innovation, marketing also requires higher focus and
investment both of which IT investment is at the Center.


Considering your business current situation, how likely is this factor to affect us
and to what degree

Name of force: e.g. Bargaining Power of Suppliers

Bargaining Power of Supplier is moderate
List your reasons to support your conclusion:
There are three sources of supplier: Component suppliers, software suppliers
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and human resource expertise. Intel and AMD (Advanced Micro Devices) are
major suppliers of Chipset. In the last quarter of 2019, 68.4% of recorder tests
was from Intel while 31.5% was from AMD (Statista,2020). So AMD and Intel
have comparatively bargaining power. The other major computer components
are 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 with 87.90% of
market share with Apple’s operating system, MAC has 9.52% of market share
(Net Market Share, 2020).

Are there any opportunities? How?

 By building efficient supply chain with multiple suppliers.
 By experimenting with product designs using different materials so that if the
prices go up of one raw material then company can shift to another.
 Developing dedicated suppliers whose business depends upon the firm. One
of the lessons HP Inc. can learn from Wal-Mart and Nike is how these
companies developed third party manufacturers whose business solely
depends on them thus creating a scenario where these third party
manufacturers have significantly less bargaining power compare to Wal-Mart
and Nike.

 How does Information Systems affect this force?



Considering your business current situation, how likely is this factor to affect us
and to what degree

Name of force: e.g. Bargaining Power of Buyer

Bargaining Power of Buyer is moderate
List your reasons to support your conclusion:
Buyers are often a demanding lot. They want to buy the best offerings available by
paying the minimum price as possible. This put pressure on HP Inc. profitability in the
long run. The smaller and more powerful the customer base is of HP Inc. the higher
the bargaining power of the customers and higher their ability to seek increasing
discounts and offers.
While competition in the PC industry may be intense, the number of real
players with established brand image and consumer loyalty is low. These
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factors limit the bargaining power of the buyers. Moreover, HP has an excellent
brand image and its products are considered reliable plus technologically
excellent. Its high performance PCs are backed with superb technology and
excellent customer service. These things help build brand loyalty. If the
customer service and after sales support from a brand are good, customer
loyalty for the brand remains strong. HP is a master in all these areas. However,
the only factor that has increased the bargaining power of the buyers is the
rising use of mobile gadgets and smartphones. PC market has weakened and
so the focus is again on the consumers. Overall, their bargaining power can be
considered low to moderate. HP has responded by making products that are
great in terms of performance, quality and design.
Buyers of personal computers can be grouped as business users and personal
users. Individually, buyers have low bargaining power. Nowadays, information
is available and buyers options. A potential buyer can search for the best-suited
item. As a result company offers a range of products to attract a large number
of buyers.

Are there any opportunities? How?

 How does Information Systems affect this force?

 By building a large base of customers. This will be helpful in two ways. It will
reduce the bargaining power of the buyers plus it will provide an opportunity to
the firm to streamline its sales and production process.
 By rapidly innovating new products. Customers often seek discounts and
offerings on established products so if HP Inc. keep on coming up with new
products then it can limit the bargaining power of buyers.
 New products will also reduce the defection of existing customers of HP Inc. to
its competitors.

Considering your business current situation, how likely is this factor to affect us
and to what degree

Once complete
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Step 3.Summarize your findings, make recommendations. Formulate

strategies based on your findings.

Create a table summarizing the forces?

Summary of Forces Threats Role of IS

Threat of Substitutes
Competitive rivalry

Which opportunities should the company embark upon?

Create a table summarizing the opportunities

Forces Opportunities Role of IS
Threat of Substitutes
Competitive rivalry

Which forces pose the greatest threats?

Where are the company’s greatest opportunities?
What are the main drivers of competition in this industry?

Based on your analysis, can you suggest a competitive strategy(ies)?

In addition to google searches, here are some possible sources of information.
Please ensure you use a mixture of primary and secondary sources.

Annual report & accounts

Newspaper articles
Analysts’ reports
CEO interviews
Regulatory /Government reports
Presentations / speeches
Pricing / price lists
Press releases
Promotions
Advertising campaigns
Recruiting ads
Competitors’ documents
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ONCE YOUR WORKSHEET IS COMPLETE; UPLOAD TO

DISCUSSION BOARD FOR PEER REVIEW.

IT TAKES TIME TO GATHER THE

INFORMATION, YOU NEED TO THINK, ANALYZE
and SYNTHESIZE YOURFINDINGS
YOU CAN DO IT, I BELIEVE IN YOU

There is no denial that covid 19 has have negatively impacted the supply chain
and distribution of many MNCS.

Porter Five Forces is a holistic strategy framework that took strategic decision away from
just analyzing the present competition. Porter Five Forces focuses on - how HP Inc. can
 14

build a sustainable competitive advantage in Diversified Computer Systems industry.

Managers at HP Inc. can not only use Porter Five Forces to develop a strategic position
with in Diversified Computer Systems industry but also can explore profitable
opportunities in whole Technology sector.

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