In this paper I will discuss the industry structure and the behavior of firms in the Personal Computer Industry. The personal computer industry has five leaders: Compaq Computer Corporation (CCC), Dell Computer Corporation, International Business Machines (IBM), Hewlett-Packard, and Gateway, (Industry Survey, Apr. 2000). The PC industry, as discussed in the paper, is comprised only of home/business use machines, not mainframes, databases, or any kind of servers or super-computers. The PC industry is a fast-growing, consumer-based oligopoly. I will prove the latter through the use of industry characteristics and firm behaviors by giving an overview of each leading firm and their behaviors', then by combining them into an industry analysis. The companies will be addressed from top leader to bottom.
Compaq Computer Corporation,(CCC) is the current industry leader. CCC boasts a 1999 market share of 12.8%. However, this figure has declined slightly from its 1998 share of 13.4%. The dip is due to Dell Computer Corp.'s heavy presence in the small PC market, (Industry Survey, Apr. 2000). Compaq has a wide range of PC products from smaller, less expensive machines to more costly, high-tech systems. CCC has been most successful with their smaller machines, targeted to the home/family segment, because they are able to sell large quantities. However, Compaq has been unsuccessful in retaining customers because most of them were pleased with their smaller machines and did not upgrade to CCC's more expensive, high-tech systems,(Hamblen 1-2). Customer retention has been a problem for the forty billion-dollar company, (Hamblen 1-2). It is my assessment that Compaq does still remain the leader because their products are very easy to buy for the uneducated consumer. You may simply walk into the WIZ or BEST BUY and there are five or so Compaq machines all competitively priced with a good range of attributes, usually not the best that a veteran user would require. For instance CCC's newest product, the iPac, is a very simple-to-use, inexpensive machine. It is supposed to satisfy business workers' needs for a useful computer at low cost,(Wildstrom 1-2).
Another problem in CCC's not-to-distant future is their distribution costs. With the use of the Internet, competitors have been able to reduce and even eliminate distribution costs. To follow suit Compaq plans to increase direct sales in the future, according to Micheal Capellas, CEO (Hamblen 4). The future for CCC is quite hazy. Despite the sales numbers and the heavy bottom line, CCC's stock price has sat down in the low $30's,(Hamblen 1). Competition is increasing daily and Compaq needs to distinguish itself in the marketplace. They've already experienced a decline in markets share, only they can change their fate.
Dell Computer Corporation, the second leading computer manufacturer, began by...