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Short note on the history of the computer
Short note on the history of the computer
Brief history of the personal computer
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How and why did the personal computer industry come to have such a low profitability? Historically the personal computer (PC) industry has sold its products at reasonably high prices yet garnered only small profit margins. One reason for this is the high competition in the PC industry which led to competitive pricing among producers. Analyzing the competitive environment of the PC industry, it is evident that there is very little barrier to entry in this market. PC's have very low physical uniqueness and are made of standard components that require very little expertise to assemble. Capital requirements to set up an assembly line to produce PC's are also relatively low, estimated at roughly a million dollars (Rivkin & Porter,1999 pg. 5) which means that virtually any firm can enter the market easily. Despite sky rocketing demands for PC's, PC producers are unable to capitalize due to increasing number of competitors. The PC industry is also affected by environmental turbulence due to price fluctuations of its components. Constant innovation in PC technology causes older components to be rendered obsolete and prices of older versions to plummet. PC producers who are stuck with inventory of obsolete products incur high costs of dumping these components. PC manufacturers who limit their inventory to reduce the impact of price fluctuations are at a cost disadvantage by failing to reduce costs through economies of scale in purchasing components. Therefore PC manufacturers face high risk when stocking components and essentially loose out on profitability due to changes in technology. The existence of many large manufacturers in addition to the continuous entry by smaller manufacturers results in limited differentiation and decreased competitive advantage among PC manufacturers. All manufacturers have access to similar suppliers and therefore have the same buying power especially for processors which are sold at the same price to all manufacturers. It is clear that the competitive advantage in the PC industry is not sustainable as easy replication by competitors promotes price wars which lower profit margins for the industry as a whole. Ultimately, high competition and price fluctuations have led the PC industry to low profitability. Why has Dell been so successful despite the low average profitability in the PC industry? Dell has been successful due to its differentiated strategy compared to its competitors.
PC industry is affected by two opposite forces: technological advance that pushes the industry forward and the industry sensitivity to economical stagnation (if the economical situation is bad customers won't upgrade their computers).
The law of demand tells us that "Quantity demanded rises as price falls, other things constant, or alternatively, quantity demanded falls as price rises, other things constant (McGraw 2004). The XBOX 360 phenomenon that took place in 2005 is a good example of this economic principle at work. Microsoft's XBOX 360 gaming console was released into the U.S. market on November 22nd 2005. The release came after a great deal of advertising and media hype that ensured that the demand for the product would outweigh the supply. Quite simply, there were more consumers wanting to purchase the product than there was product available. The retail price for the gaming system with a hard drive was $399. Many consumers, however, paid a great deal more than the $399 sticker price to acquire the system. On the morning of the U.S. release, retailers across the nation sold out of the product within just a few hours of opening their doors to consumers. In the weeks that followed however, many consumers purchased the unit from sellers on on-line auction sites and even from individuals in parking lots for as much as $1500. The reason for this was that the supply was significantly less than the demand for the product. In some cases, parents who wanted to ensure that their children received and XBOX 360 for Christmas in 2005 were willing to pay well over retail for the hard-to-acquire system. In other cases, video gaming enthusiasts wanted to be among the first individuals to own and play the system. News reports across the nation showed footage of people lining up days ahead of November 22nd in order to secure a place in line at retailers that would have the product available on the release date.
Hewlett-Packard (HP) is a technology leader in United States and the world. It was founded in 1939 in Paolo Alto, CA by two Stanford graduates Bill Hewlett and Dave Packard. Forty five years later another student Michael Dell in Austin, TX found another company that will essentially become HP’s biggest competitor. These two companies are pushing each other in developing new products and services to its extremes in attempt to capture bigger market share and increase profit. Strong competition is the biggest reason for tiny profit margins in this industry. Both companies use strategy that they think is the right for the given moment. We will analyze strategic moves that both companies made recently or are still making.
“Supply manager Joe Smith was considering the purchase of 1,000 desktop Personal Computers (PC’s) for his organization.
In markets that constantly change in technologies Silicon Arts Inc. needs to consider this in making its decision. Though the Global Digital Imaging semiconductor market forecasts for a growth of 20% in the 1st year and demand to grow 7% between years 2-4, one has to consider that new technology will replace the old technology by the end of year 5. The overall growth is great for the industry but another factor that will affect Silicon Arts sales volume is the rumor that one of their major competitors is introducing a cheaper similar product in early year 1. I feel this will make a major impact. As mentioned before, technology is always changing and products are being introduced everyday and getting cheaper every time, for example portable CD players was very popular when it was first introduced, as time passed a new product the mp3 player ultimately replaced the portable CD player. Silicon Arts can use the sensitivity analysis to examine how sensitive the Net Present Value is to changes in basic assumptions (Ross, Westerfield, & Jaffe, 2005,Chapter 8). In the simulation I was able to see how sensitive these changes were to revenues by changing the volume of sales, increasing or decreasing the percentage of price per unit and the increasing or decreasing of the percentage of marketing costs. In the second cycle of the simulation I needed to analyze the Capital Expenditures for the two proposals.
Dell Inc. weakness was cell manufacturing because their assembled computers were being shipped five to six days after the order was placed. It is an inconvenience for the customers to always send their computer away to have it repaired. First, they are left without internet access. Second, the time it reaches Austin, Texas, have it repaired, and shipped back can take days. The company opportunities were the Dell U.K. that open business in 1987 and in that country it was a lot of companies selling cheap computers. Dell Inc. strides on loyalty among customers and employees, and that could only be derived from having the highest level of service and performing products. Segmentation within the company enables them to measure the efficiency of the business in terms of assets use. Dell Inc. evaluates their return on invested capital in each segment, compare it with other segments, and target what the performance of each should be.
... billions over budget, and years behind. Due to Microsoft being a monopoly, it created such a change in the market with the introduction of its new software that an upgrade of hardware was needed to for computers to function correctly, causing increases in cost of producing PC’s. As such, this may cause decreased profits for firms selling these new computers, demonstrating how one change in an environment can cause drastic changes in all related markets.
Dell Inc. has realized that the most efficient path to the customer is through a direct relationship, with no intermediaries to add confusion and cost. With the power of their direct model and their team of talented people, they are able to provide to their customers high-quality, relevant technology, customized systems, superior service and support, and products and services that are easy to buy and use. HISTORICAL REPORT Dell Inc, was founded as “PC’s Limited” in 1984 by Michael Dell, while still a student at the University of Texas at Austin, with just $1000. From Michael Dell's off-campus dorm room at Dobie Center, the startup aims to sell IBM-compatible computers built from stock components. Michael Dell started trading in the belief that by selling personal computer systems directly to customers, PC's Limited could better understand customers' needs and provide the most effective computing solutions to meet those needs.
Dell’s initial competitive strategy, when it was founded in 1984 by Michael Dell, was to focus mainly on differentiation. Its strategy was to sell customised personal computer systems directly to customers, which was a rapidly emerging market at that time (1). This was done by targeting second-time customers, those that already understand computers and know what they wanted. Meanwhile other companies at the time was selling “’plain brown wrapper’ computers” (2). By offering customisations, Dell gained a better understanding of customers’ needs and wants. This helped the organisation position itself differently against the more popular brands, such as Compaq and IBM.
According to the casing study, Intel’s “Rebates” and Other Ways It “Helped” Customers Intel paid customer huge pay. As the dominating company, they purposely paid other companies not to use ADM products. They paid Dell 6 billion dollars over a 5 year period (Velasquez, 2014). In addition, they knew ADM would not be able to compete with them: they took advantage of their size and used their rebate program to try and ADM from advancing in the x86 processor industry. In addition, Intel’s monolply-like behavior is displayed in the terms of quality. They did not care about customers wanting the reliable x86 processors, they wanted to monopolize the market with their product, and would pay a huge amount of money to achieve their
The second way is to achieve low direct and indirect operating costs is gained by offering high volumes of standard products and offering basic no-frills products. Production costs are kept low by using less parts and using standard components. Limiting the number of models produced to ensure larger producti...
Historically, personal computer companies produced most of the components for a computer which they assembled into their final products and distributed to resellers. The manufacturing of these components was vertically integrated into the organisation. Dell, as a small start-up, could not build this infrastructure. Instead, they developed a model where they developed relationships with organisations that could provide these components, allowing Dell to focus on selling and delivering computers. By selling directly to customers, initially through mail orders and later by using the internet, Dell avoided reseller mark-up. Dell also enabled customers to order customised computers, which Dell then assembled after receiving the order (Magretta, 1998, p.73-74). “Customers got exactly the computer they wanted and Dell saved money making the computers only when they were ordered” (Hill & Seggewiss, 2008)....
The Osborne Computer Corporation was founded in 1980 by Adam Osborne. This company was founded upon the idea of developing one product, the portable computer system. The first Osborne 1 was shown at the National Computer Conference in May of 1981 and was an instant hit. It brought brand new concepts to the table, such as a built-in screen and an optional battery back. (2) This computer, though a success, had lots of room for technological advances. A small 5" screen and a weight of 24.5 lbs left users wanting more. Surprisingly, it wasn't the mobility of the computer that was the selling point, but it was the $1500 worth of software that was included in the $1795 price tag. To the business consumer, this was an incredible deal. Within the first 8 months of sales, 11,000 units were shipped and 50,000 were on backorder. The success of the world's first portable computer was apparent, but the business smarts of the Osborne Computer Corporation were not. After massive success with the Osborne 1, the company began to develop a new portable computer system to sell. Despite the rampant success of the Osborne 1, several other computer companies offered a large amount of competition. Not only did the competition make improvements upon the Osborne 1, but they also introduced a new a new IBM operating system that was faster and had more software titles available. Although the competition was heavy, the Osborne 1 continued to sell until early in 1983 when Adam Osborne announced the future arrival of a new product from the Osborne Computer Corporation. This announcement killed the demand for the Osborne 1 in anticipation for its replacement. As inventory increased, sales decreased until Sept. 13th, 1983 when Osborne Computer Corporation filed for bankruptcy. (3)
Prior to the revolution in technology that was microprocessors, making a computer was a large task for any manufacturer. Computers used to be built solely on discrete, or individual, transistors soldered together. Microprocessors act as the brain of a computer, doing all mathematics. Depending on how powerful the machine was intended to be, this could take weeks or even months to produce with individual components. This laborious task put the cost of a computer beyond the reach of any regular person. Computers before lithographic technology were massive and were mostly used in lab scenarios (Brain 1).
We often dream of owning the best computers in the world. However, various options from the wide range of manufacturers tend to make it difficult to do a selection. Therefore, picking a reliable model that is stupendous is inevitable; a computer that even after four years, it will still be outstanding. Knowing the chances of its success is fundamental. This means that a good machine should break less often. Additionally, a company that has a great technical support, which helps a computer owner to receive timely and reliable customer support services. What is ignored are the outliers. There are companies that have had awful record of accomplishment of crappy and extremely expensive computers. One must ensure they purchase from established and genuine dealers.