Case analysis

by Hildegarde Irish, June 2014

1200 words

4 pages


This paper is aimed at analysing the decision of Hewlett-Packard to withdraw from the tablet market. Porter’s Five Competitive Forces FrameworkThis framework is used to analyse factors that drive competition in the industry. The following Figure 1 summarizes the results of Porter Five Forces Framework analysis applied to the tablet PC industry. Figure 1: Porter’s Five Forces Framework for HP tablet PC businessThe following Table 1 presents the analysis of the forces that impact competition in the tablet PC industry.Threat of new entrants: ModerateThe industry is one of the most competitive markets in the world. Initial investments are high; companies operating in the industry enjoy a high degree of the economy of scale. Additionally, infrastructure costs are high. R&D costs are high. To compete with the major industry players (such as Apple, HTC, Sony, Acer) who are considered reliable by the customers, it is necessary to differentiate the product which is a complex enterprise for a new entrant. Power of buyers: Moderate to lowThere are few devices for customers to choose from; therefore, they cannot impact industry prices to a large extent. Buyers are most powerful when they have numerous choices. Companies like Apple or Sony have strong brand identities and this limits the power of the consumer to affect industry prices. Power of suppliers: HighCompanies in the tablet PC industry rely on several key big suppliers (Microsoft, Intel) and multiple smaller suppliers (Chinese companies, for example, who have recently complained that the tablet components’ market is servicing Apple only). Companies in the tablet PC industry are reluctant to place large orders due to risk and reliability issues that are connected with small suppliers. HP is forced to stock in advance to prevent disruptions and maintain alternative supply sources (just like the majority of its competitors). Threat of substitutes: HighSmartphones, netbooks, even e-book devices are converging to similar standards. Therefore, a tablet could easily be substituted by a well-developed smartphone depending on the end-user’s needs. Additionally, there is a threat of substitution from traditional devices such as laptops and PCs. Internal competition: HighInternal competition is the strongest force affecting the industry. Tablet PC market is clearly dominated by Apple. The majority of players are focusing on Android operating system to compete with Apple’s iOS. HP’s WebOS was slowly adopted by end-users. Basically, there are two types of tablet PC sellers in the market. Google has two versions of Android: Honeycomb (license-specific tablet-designed) that is used by vendors of more expensive tablets (price range: $399 to $700) and Gingerbread (price range: $149 to $249). There also are low-cost segment players (the majority of them offer unbranded tablets). Business Model Evolution Framework (Enhancement, Expansion, Explore, Exit)This model is designed to analyse evolution of an electronics business strategy. Extension suggests adoption of a new business model or entering a new business (Applegate, 2001). By entering the tablet PC market, HP attempted to expand its existing business and its strategic business model. Enhancement suggests adding functionality to improve a product that is being offered. …

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