TABLE OF CONTENTS 1. EXECUTIVE SUMMARY 3 2. INTRODUCTION 4 3. OVERVIEW OF THE COMPETITION: DELL 5 HEWLETT-PACKARD 6 4. OBJECTIVES OF THE COMPANY 7 5. SOURCES OF COMPETITION 8 6. COMPETITIVE ADVANTAGE10 DIFFERENTIATION 10 COST LEADERSHIP10 FOCUS STRATEGY11 QUICK RESPONSE11 7. THE POTENTIAL IMPACT OF E-COMMERCE AND E-BUSINESS ON THE COMPANY12 8. CONCLUSION / RECOMMENDATIONS13 9. REFERENCE14 10. BIBLIOGRAPHY14 EXECUTIVE SUMMARY
The following report will outline and explain how the company Apple can improve its market share in the computer sales market amidst the growing competition it faces from its competitors Dell and Hewlett-Packard. This will also include how these companies have use e-commerce to their advantage and how Apple could use these advantages to their opportunities and how could they over come the disadvantages that these two main companies have.
It will outline the benefits as well as the possible risks that may arise as a result of fighting head to head with two large organizations that are holding a large percentage of the PC market in the world at the moment. Like any other business the hope is that the suggestions will help apple to a long and successful future based creative use of the e-commerce and e-business.
And report will also mention about the importance of looking for every available opportunity in its search for competitive advantage The company’s objectives are outlines followed by a breakdown of the competition the company is likely to face and where this competition comes from. Strategies that can be taken to overcome the competition and attain the company’s objectives are discussed.
This is followed by the conclusion and recommendations. INTRODUCTION The company’s core competency; the sale and service of computer products, does not give it an immediate advantage in the market, since it is practically saturated by a number of other players particularly Dell and Hewlett-Packard, who happen to be giants in this arena, where most others may struggle to stay afloat much less make a go at long term success.
The aim is to retain and possibly gain more market share, before its competitors push it out of the market, to do this, it needs to develop and undertake a number of strategies to have a chance at success. Firstly, it would necessary to look at both Dell and Hewlett-Packard’s strategies, to find out the secret to their success, which can be used as a foundation to build on; this analysis may also reveal some weaknesses that the company can use to its benefit, in gaining that much wanted competitive advantage.
OVERVIEW OF THE COMPETITION: DELL Chairman of the company is Michael Dell who was born in 1965. This company was established in 1984, with it main objective being to know the customer and learn what he or she really wants out of the computer they intended to purchase, therefore building the system to suit the requirements of the end user, the almost certainly guaranteed success. He started this business with $1000 and has gone to be one of the larges companies in the world with ontinually reaped financial rewards in fact it earned around $45. 5 billion in the last four quarters. Dell has earned its respect in the market as it is seen as the top of the line provider of computer products to the world largest corporations, including many of the fortune 500. This massive money machine employs around 50,000 persons throughout the world to support its global enterprise. The key to its apparent success is that Dell offers in-person relationships with corporate and institutional customers.
The direct customer relation made it possible to cut out the middle man (the retailer), which therefore led to a reduction in costs and the ability to save valuable time. This method enables them to sell customized products with the latest technology at competitive prices, because of its direct relationship with its clients. And it also has a very much improved distribution channels. In 1994 the company launched its web site to let the world know what it had to offer and later in 1996 began sales of its products over the internet.
This vast reaching availability has helped to add to the company’s success over the years. This shows that they are very much in action and that they not afraid to experiment new ideas and new technology. Using the internet the company has also been able to provide its customers with after sale customer support. Dell purchases much of it components and materials online and they ensure that the supply of these materials are never more than two hours always. This new supply chain allows for the company to minimize its inventory.
Dell’s current supply chain allows its suppliers access to the company’s long run and short run material needs for all its factories worldwide via internet reports, which help suppliers keep abreast of the demands they are therefore able to reduce wastage of material (the company does not get ‘stuck’ with stock that has become obsolete which usually happens, because the technology advances so rapidly), improve efficiency and respond immediately to customers needs.
HEWLETT-PACKARD Hewlett Packard is one of the oldest and one of the strongest in the market It was started in 1939 by Bill Hewlett and Dave Packard, to provide products, services and after sales services of the highest quality, which they hoped would gain them customer loyalty. They hope to gain this by meeting the needs and demands of the customer, at competitive prices. The company provides technology that can be found in almost all businesses and home.
They provide information technology solution to users, personal computers, and accessing devices, global services and imaging and printing equipment to its customers. They spend approximately $4 billion yearly on research and development to come up with new technology that change the market to their advantage which by extension creates opportunities for them to stay ahead in the market. They have a work force of about 142,000 personnel in approximately 170 countries, and in the fiscal year ending October 23 2003 they earned $73. billion dollars. HP has identified four core competencies to focus on they are; the customer solution group, which markets and sells computer hardware and software, the imaging and printing group which provides printing and imaging devices to it customers, personal systems group which supplies competitively priced computers, and the technology solution group which deals with storage systems, software and services. Both Dell and HP have use their own strategy to the maximum use and that has given them competitive advantage over the other rivals.
Both companies are easily adaptable to any business to which they would be relevant. OBJECTIVES OF THE COMPANY The main objective of the company at the moment is to retain what market share it currently has; this can be viewed as an overall or long term objective of the company. The company like many other also has other objective to work towards these. The creation and retention of profits; to be able to generate profit would mean that the company can be able to put money back into the organization to facilitate growth, research and development.
Profits in the business could help it achieve its main objective, by enabling possible product development. Market leadership for the organization will be possible, by providing what the customers want, the products, the services, the after sale support systems. The company constantly needs to keep abreast of the changes in technology, the offers of the competition and the demands of the consumer, you may if finances allow, need to be pioneers in some new technologic development.
For any of this to be possible the mind set of everyone in the organization from management to shop floor needs to be adjusted to a common belief and goal; the need to be at the top of the market, that happens through hard work, dedication and good strategies. The business can grow if it is will to come up with innovative ideas and develop products based on them. The management needs to be able to make decisions where there may not be any particular level of certain about the outcome, in order to encourage growth; part of being in business is about taking risks based on the market conditions.
Because computer technology is such a large part of our daily life, the demand for the products is almost unlimited, so the potential for growth is great. It is up to the come to act smart and try to be one step ahead of everyone. THE SOURCES OF COMPETITION The threat of competition is always eminent in public sector industries, and there are always some elements in the environment to influence the competitive nature of the businesses. The diagram below represents the Five Forces identified by Michael Porter, which affect companies in a given industry, in this case businesses in the computer industry.
PORTER’S FIVE FORCES (1) The threat of potential entrants is present, however because the larger companies are more established and have the loyalty and trust of a lot of the market, they do not usually survive that long they usually go under because of inability to cover costs incurred to get a foot hold in the market. Substitution in the computer market is a reality, because of the number of companies and the similarities in the products they all produce. A buyer may choose a substitute based on price, or based on their perception of product superiority, or customer loyalty.
The power of buyers in this market is particularly high because of the availability of substitutes, companies allowing buyers to customize products they want, the ability to shop around, and the consumer’s knowledge of the products. Suppliers in some markets have the advantage in that they are able to dictate the availability of their products and the price, which affects the price the customer has to pay for the end products. Finally competition rivals, companies who aim at the same customer groups as you company, these companies are usually around the same size and can match you product for product.
They are working to ‘steal’ market share from other businesses. These threats identified by Porter can be overcome by the company by undertaking appropriate strategies to gain competitive advantage. COMPETITIVE ADVANTAGE Every business wants to achieve competitive advantage, this means that they have the upper hand in the market they are the leaders, and this is what any good strategist aims for. Competitive advantage means survival and shows the company’s strengths where others have failed. Competitive advantage grows fundamentally out of value a firm is able to create for its buyers that exceeds the firm’s cost for creating it.
Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price. (2) The following are strategies under which competitive advantage can take place: •Differentiation •Cost leadership •Focus strategy •Quick response DIFFERENTIATION Differentiation relates to the company attempting to be unique in the products it has to offer, or its methods of sales and / or delivery or the way and means of marketing it product, when compared to its competitor.
It is the creation of that aspect that would make customers take notice and go after your product instead of the competitors’, while sustaining a profit and possibly getting premium price for the goods. COST LEADERSHIP In this strategy the firm objective is to be the lowest cost producer in the market, to do this they may attempt to benefit from economies of scale, becoming a pioneer in some new technological development, attempt to minimize its supply chain, to get quicker more effective access to product components, finding relatively inexpensive ways of marketing or selling it products.
Product differentiation help the firm become a cost leader, however the company must make their products more desirable than competitors, otherwise they may be forced to reduce prices to attract buyer and they would then lose any possible advantage that could have been gained. FOCUS STRATGEY This strategy suggests that the business focus its efforts on one particular area of the operation rather than all of it.
The focus strategy can either be cost based where the organization concentrate on getting a cost advantage from a part of the production that has been singled out for instance it could be the marketing aspect or the sales aspect selling on the internet rather than having a physical shop. The other focus strategy is differentiation focus, where they choose an area they want to give attention to. Example focusing on the needs of customers interested in a particular product, and attempt to make that product as iverse as possible by adding new features, utilizing new technologies, letting customers specify the features they want the product to have, any little change to the item, that makes it different to the competitors and draws the customers’ attention to you. You may not be able gain total competitive advantage with this strategy, but you may however be able to corner at least a segment, which could lead to total product line recognition and therefore a step closer to being on par with the players at the top.
QUICK RESPONSE This refers to the company’s ability to react to, for instance changes in the market, change in the technological requirement of the customers; that is any aspect that can and will dictate the customers’ demands. It is basically a case of ‘the early bird catches the worm’; whoever is able to meet the new demands is able to corner that segment and gain the competitive advantage over its rivals. It must be mentioned that not every one achieves success from implementing any of these measures.
Some businesses have been driven into a position where they cannot gain competitive advantage in the market, much less draw profits. This could occur if the company cannot decide on what area they want to concentrate on to get ahead. THE POTENTIAL IMPACT OF E – BUSINESS AND E – COMMERCE ON THE COMPANY ‘Electronic commerce [is] the process of buying and selling goods and services electronically, involving transactions using the Internet, networks and other digital technologies…..
Electronic business [is]the use of the internet and other digital technologies for organizational communication and coordination and management of the firm. ’(3) To fully gauge what its use could bring to the company, a SWOT analysis becomes necessary. Strengths to be gained from undertaking such a venture -Cost advantage to be gained, cheaper to market and sell products -Closer relationship with customers and suppliers -Gaining a simpler supply chain -Increased flexibility Weaknesses -Some potential customers may have a problem with trusting a faceless sales representative.
Opportunities -Ability to expand globally in a cost effective manner Threats -Lack of security which could be a disadvantage to both customers and company. Theses are some of the strength and weaknesses that can be identified from the use of electronic commerce. CONCLUSION / RECOMMENDATION In any business situation, but especially in a highly competitive market, it is usually survival of the fittest. The companies with the stay power are those who come up with the innovative ideas that can pull the customers away from competitors and hold their interest and hopefully gain their loyalty.
The company can afford to learn a thing or two from the successes experienced by Dell and Hewlett-Packard, from the business strategies they used in their business ventures. Direct selling to customers is a very effective way of cutting costs of the company, while at the same time being able to meet the demands of the buyers, since the products can be made to customer specification. The advent of e-business has made such a venture highly profitable, the company is able to cut out the need for retail outlets and the need for large storage space. The cut in costs will lead to the buyer paying a lower price.
Direct selling has enables companies to implement Just In Time Production as the company are producing item based on the particular demands of each customer the company only require the components needs to produce the ‘custom made’ products, this help cut down expenditure in stocking components that especially in this industry become obsolete, therefore there is less wastage of finances. If the company can afford to, attempt to focus attention of research and development on a particular product of the company and attempt to improve it, add new features that make it unique to the market. REFERENCE 1. Johnson G. Scholes K. (2002) Exploring Corporate Strategy 6th Edition. Pearson Education Limited, England. Page 113 2. Porter M. E. (1998) Competitive Advantage Creating and Sustaining Superior Performance. Free Press. 3. Laudon K. C. & Laudon J. P (2002) Management Information System: Managing A Digital Firm 7th Edition. Prentice Hall. New Jersey. Page 24 & 25. BIBLIOGRAPHY 1. Cassidy A. (1998) A Practical Guide To Information Systems Strategic Planning. St. Lucie Press, London. 2. Narayanan V. K. (2002) Managing Technology And Innovation For Competitive Advantage. Prentice Hall, New Jersey. 3. Laudon K. C. , Laudon J.
P. (2002) Management Information System Managing The Digital Firm. 7th Edition. Prentice Hall, New Jersey. Pages 24 and 25 4. Edited By: Marchand D. A. , Davenport T. H. , Dickson T. (2000) Mastering Information Management Your Single Guide To Becoming A Master Of Information Management. Pearson Education Limited, London. 5. Edited By: Marchand D. A. (2000) Competing With Information A Manager’s Guide To Creating Business Value With Information Content. John Wiley & Sons Ltd, Chichester. 6. Turban E. , Lee J. , King D. , Chung H. M. (2000) Electronic Commerce A Managerial Perspective. Prentice Hall, New Jersey.