Laptop Industry Analysis





Presented by:
Ler Gullayanon
Santosh Gupta
Gaurav Nema
Eiji Ozawa
Keiichi Sasaki
PDF created with pdfFactory Pro trial version www.pdffactory.comTable of Contents
Table of Contents..........................................................................................................................................1
List of Figures...............................................................................................................................................1
List of Tables ................................................................................................................................................1
Executive Summary......................................................................................................................................2
History ..........................................................................................................................................................3
Macro-Micro Environmental Factor ...........................................................................................................3
A. Threat of New Entrants: MODERATE..............................................................................................3
B. Bargaining Power of Suppliers: HIGH ..............................................................................................3
C. Bargaining Power of Buyers: HIGH...................................................................................................4
D. Threat of Substitute Products: MODERATE ....................................................................................4
E. Rivalry: HIGH ....................................................................................................................................4
Key Players ...................................................................................................................................................4
Dell Inc..........................................................................................................................................................4
Hewlett-Packard/Compaq............................................................................................................................5
Acer/Gateway ...............................................................................................................................................5
Apple.............................................................................................................................................................6
Toshiba .........................................................................................................................................................6
Lenovo/IBM..................................................................................................................................................6
Key Trends ...................................................................................................................................................7
Key Success Factors (KSF)...........................................................................................................................7
A. Product Positioning Matrix.................................................................................................................7
B. Company Positioning Matrix..............................................................................................................7
C. Skills-related Matrix ...........................................................................................................................8
D. Organizational Capability Matrix ......................................................................................................8
E. Competitive Strength Assessment.......................................................................................................8
Conclusion ....................................................................................................................................................8
Recommendation..........................................................................................................................................9
Appendix I: Figures....................................................................................................................................10
Appendix II: Tables....................................................................................................................................13
References...................................................................................................................................................15
List of Figures
Figure 1: Concept of Porters Five Forces Model.............................................................................................10
Figure 2: Worldwide PC Market Share............................................................................................................10
Figure 3: US PC Market Share........................................................................................................................11
Figure 4: Worldwide Laptop Market Share......................................................................................................11
Figure 5: Matrix for Success Factor Evaluation...............................................................................................12
Figure 6: Basic charts of Apple and its competitors.........................................................................................12
List of Tables
Table 1: Worldwide PC Vendor Unit Shipment Estimates for 1Q07 (Thousands of Units, Source: Gartner Inc.)
........................................................................................................................................................................13
Table 2: U.S. PC Vendor Unit Shipment Estimates for 1Q07 (Thousands of Units, Source: Gartner, Inc.)........13
Table 3: Worldwide Notebook Unit Shipments and Growth (Source: www.rtoonline.com)................................13
Table 4: U.S. Notebook Market Share (2000 Dataquest, 2001 by NPD Intelect, 2006 DisplaySearch, 2007 IDC)
........................................................................................................................................................................14
Table 5: Result of Competitive Strength Assessment.........................................................................................14
1
PDF created with pdfFactory Pro trial version www.pdffactory.comExecutive Summary

Laptop also known as notebook is a small portable computer compared to a desktop. Although the
concept of a laptop was introduced as early as 1971, the first commercial portable computer, Osborne 1, was
available only in 1981. Before Windows 95 came out, laptop was used by research institutions and untouchable
to general public. As technology innovation has been repeatedly occurred, laptop became portable, inexpensive,
and user-friendly. Laptop PC industry is dynamic and has high demand from personal users in home and
business users in their office. Its portability provides advantage for the users in terms of business
communication tools anywhere, anytime. Marketing strategy including price war and brand-value creation is
more common in laptop PC industry among major players in 21st century.
In order to understand the macro-micro environmental factors of the laptop industry, the Porter's five-
force analysis has been performed. From the analysis, it is found that the industry posses moderate threat to the
new entrant. The suppliers of the major and most costly components (the operating system and processor) of the
laptops essentially have the monopoly and hence, their bargaining power is high. The customer also has the high
bargaining power, as there is practically no switching cost involved. PC's and Laptops are well-established
products and hence, the threat of substitution by new products is relatively moderate. The rivalry in the industry
is high due to increasing price war and razor thin profit margins.
The present report concentrates on six major players of the industry in United States: Dell, HP,
Acer/Gateway, Apple, Toshiba and Lenovo/IBM. The report summarizes the financial status, background,
merger and acquisitions and marketing strategy of these players. In addition, particular attention has been paid to
the recent trends in the industry in terms of market share and industry growth. It is found that the laptops are
increasingly replacing desktops computers. The PC market of United States is at the saturation stage. However,
the worldwide PC is growing rapidly due to emergence of new markets such as China.
Eight key success factors are identified to evaluate the relative success of various key players of the
industry. These are product performance, IT services, price, marketing/operations, product innovation/R&D,
brand, and financial stability. Each of the key players has been rated based on these success factors. Based on
the assessment, it is expected that HP and Apple are going to be more successful than others in the future.
Finally, conclusions and recommendations have been made with particular attention to the investors. It
is concluded that United States PC market is at saturation stage with well-identified major players. However, the
world market is in rapid growth stage. Apple is suggested to have a bright future in the industry and it is justified
from the recent stock price data of various key players. In general, PC industry is still going to be one of the
most promising industries for investment. "Technological Differentiation" and "Diverseness of Application" are
suggested as the big key success factors. A well-established blend of technology and marketing strategy is
recommended to be successful in the industry.
2
PDF created with pdfFactory Pro trial version www.pdffactory.comHistory
A laptop computer, also called laptop or notebook, is a small mobile computer compared to a desktop
computer. It was proposed as Dynabook by Alan Kay at Xerox PARC in the early 1970s. In 1981, the first
commercial portable computer, Osborne 1, was available for purchase, but it was large and heavy compared to
today's laptops with a tiny CRT monitor. For the specialized applications, in 1982, Bill Moggridge released
GRiD Compass 1101, a laptop whose flat display can be folded shut against the keyboard. In 1983, when the
IBM Personal Computer became the standard platform, Compaq introduced the Compaq Portable, more portable
than the Osborne machines but required to be plugged into power supply. The computer can be run from
batteries, but not compatible to IBM computer, and cost US$ 8-10,000. It was used by the US military, and
NASA on the Space Shuttle during the 1980s [4].
The release of Windows 95 operating system by Microsoft in 1995 was the biggest event in the history
of laptop computers. PC sales including laptop computers sales were very limited among the general public in
the past until then. It standardized and stabilized most aspects of laptop design. In those years, almost all laptops
are expected to have CD-ROM drives, Intel Pentium processors, and floppy disk drive. Laptop market leaders
like Dell, Gateway and Toshiba quickly released models that compiled with the expected features of a standard
laptop computer [19].
After the Windows 95, the laptop computers became more and more popular, and viability; functions,
and specification design were significantly improved. Up until third quarter in 2007, a dynamic battle has been
taking place among top laptop share makers like Dell, Hewlett-Packard, Apple, and Toshiba. According to IDC,
rd
Dell is currently running top share on US laptop shipments followed by HP. Apple significantly rose up to 3
position presumably due to their revolutionary switch to Intel CPU [6].
Macro-Micro Environmental Factor
Porters five forces model (See Figure 1) [22] is an excellent model to use to analyze a particular
environment of an industry. The factors as outlined in Porter's model are key factors that influence industry's
performance; so it is imperative to have an insight into these factors to understand the state of industry. Here we
will do a brief analysis of laptop manufacturing industry using this.
A. Threat of New Entrants: MODERATE
· Low capital investment for independent stores
· Low product differentiation
· Brand name may be a barrier to entry
· Low economies of scale
· No legal or governmental barriers
· Decreasing profitability shows that there is a threat of new entrants
The laptop industry poses a moderate threat of new entrants and is a competitive industry. Given the low capital
investments and low economies it should have been an industry with very high threat of new entrants; however,
propriety product differences (like Apple's notebook and MAC OS) and brand value makes it a bit less
skeptical. Brand value turns out to be one of the major barriers.
B. Bargaining Power of Suppliers: HIGH
· Large number of suppliers for components like hardware, keyboards, etc.
· But two major inputs are monopolized:
o Microsoft standard for all PC's
o Intel standard for most PC's
· High switching costs
Laptop industry is an excellent example of one with a very high and powerful supplier. Though there are lot of
items/commodities the key input, which is the processing unit, is limited to very few key suppliers (Intel) who
take the major share of the industry's profit. Further, lack of substitutes for the processing unit vests more power
to the supplier. Intel's ability to impact laptop manufacturers' final product and the volume of supply gives them
immense power in the industry.
3
PDF created with pdfFactory Pro trial version www.pdffactory.comVertical integration is something that this industry needs to wary of in the coming future; Apple some what
stands out in this regard. Probably, supplier power is one major defining aspect of the laptop industry.
C. Bargaining Power of Buyers: HIGH
A. Highly price sensitive
B. Reliability and customer service become important factors.
C. Insignificant switching cost (exception: Macs)
With large corporations, Government sectors, educational and business institutions being the concentrated
buyers and with the individual consumers treating laptops much as a commodity; the industry provides a high
bargaining power to its buyers. This effect is attributable to very low prospects of backward integration and
ample information available to buyers.
Laptop industry is highly price sensitive and there is practically no switching cost involved. Apple,
however stands out in this regard as switching from a Mac Book to a PC can involve significant costs. Dell's
product, for instance are very reliable and has satisfactory customer service. These two factors help Dell to
create certain brand royalty, but that is, given the fact that the Company set the prices very low. If the price
goes up high enough, customers will not hesitate to switch.
D. Threat of Substitute Products: MODERATE
· Strong presence of PC's throughout society
o One computer within every three person in the U.S.
Although laptop industry has a Moderate threat of substitute products, some analysts believe that Apple's
iPhone, is most likely, being positioned against laptops as a convergence device that eliminates the need to have
to carry around multiple devices. The key decision that Apple has made, is to put the Mac OS on the iPhone,
opening up a vast range of possibilities. The competition also needs to think OS! Only Linux can meaningfully
compete in the OS arena. Who is building the Linux-based convergence device?
E. Rivalry: HIGH
· High concentration
· Price War: Low Margin
· Decreasing profitability
· Low differentiation
Laptop industry is unique in its sense of rivalry among the key players. Though competitors are fighting to
capture their projected share of the market, the key players are quite diverse and rely on their own strategy.
Corporations like Dell are holding on to their market share owing to its unique and innovative supply chain.
IBM/Lenovo on the other hand has been relying on its customer satisfaction services and response. Apple once
again stands unique owing to its own OS and entirely different configuration.
Key Players
Dell Inc.
Dell is one of the world's largest manufacturers of personal computers engaged, vending to consumers
through a direct-selling model. It designs, develops, manufactures, markets, and services a range of computer
systems. Dell makes notebooks and lower-end servers, and more recently, it began to offer Internet hosting and
related services, which carry higher profit margins than some of its hardware lines. Legendary for its efficient
inventory and production systems, Dell climbed its way from being the world's seventh largest PC maker in
1992 to become the world's leading producer, with more than 14 percent of the market by 2001 [18]. The
company primarily operates in the Americas; Europe, Middle East and Africa; and Asia Pacific-Japan. It is
headquartered in Round Rock, Texas and employs about 83,000 people. The company recorded revenues of
$55.9 billion during the fiscal year ended January 2006, an increase of 13.6% over 2005 [19].
Dell offers customers customized better quality PC's at a lower price by eliminating the middle man and
selling to the end user directly. The company's "direct model" increases service efficiency by spending time
with customers to figure out exactly what they want before the product's made. Listening to the customer ahead
of time takes the guesswork and wasted resources out of the equation altogether. By cutting operating costs,
4
PDF created with pdfFactory Pro trial version www.pdffactory.comeliminating the middleman, scrapping inventory and spending a minimal amount on research and development,
Dell is the first to admit that its sole goal is to offer computers at the lowest possible price and leave the cost and
risks of innovating to others. Dell's build-to-order manufacturing and sales model changed the way companies
buy computers. Dell has excellent supply chain for notebook products and strong marketing execution
capabilities. Dell remains the leader in service and support for the largest global enterprises. Dell's marketing
strategy is simple: satisfying customers and making a profit. By focusing on product customization, customer
needs and customer service, Dell is still one of the most customer-centric companies in operation today [23].
In response to the competitors' dramatic increase in sales, especially HP and Toshiba, Dell has decided
to compete on more than price and service. Dell now has to reconsider its computers' designs. The original
black box just doesn't work in business today. Customers are asking for hotter looking computers. But is Dell
only doing the copy cat work? If Dell wants to become the leader in this industry again, it needs to deliver
products that are unique and leapfrog the technology.
Hewlett-Packard/Compaq
HP provides personal computers, imaging and printing products, access devices, consulting, and IT
infrastructure services to both individual and enterprises customers. The company, founded in 1938 and based in
Palo Alto, California, has a presence in 170 countries across the globe. The company recorded revenues of $91.7
billion in 2006 and employs 156,000 people worldwide [19].
HP maintains excellent account management for its largest global enterprise. HP is setting the standard
in the notebook industry with the best combination of advanced features and extremely competitive prices.
While coordination challenges may still exist for small enterprise customers, the patchy account management
seen through 2004 has disappeared, showing that the underlying organizational issues are resolved [23]. HP has
a broad product offering with a variety of form factors and is regarded as best in class for its ongoing efforts to
understand user needs and customer satisfaction. HP is a good supplier to global enterprise customers regardless
of size of the business.
HP and Compaq agreed to merge in Sep. 4, 2001. At that time, their market shares were the world's
third and fourth largest in computer companies respectively, but both companies was losing net revenues and the
shares in PCs, as well as servers. The merger was believed as a reasonable restructuring plan for them to cut
their costs. On the other hand, a lot of analysts had a skeptical view of two companies' success after the merger.
According to Gartner Group's Andrew Butler, "the deal would mean many overlaps in products, technologies,
distributors, services, facilities and jobs. The combined HP/Compaq would face the challenge of creating
coherent strategies for four server architectures, seven operating systems, four storage architectures and several
service businesses." [21]
Acer/Gateway
Acer Inc. is a Taiwanese multinational electronics manufacturer. Its products include desktop and
laptops, as well as PDAs, servers and storage, displays, peripherals, and e-business solutions for business,
government, education, and home users. Acer America Corporation, headquartered in San Jose, California, is a
member of the Acer Group. Acer recorded revenue of $11.1 billion in 2006 and employs 6,554 people [19].
Although Acer is not a major player within the US notebook PC market, it is the world's third largest PC seller.
Acer has global product offering, with a highly efficient supply chain and a strong market presence across many
regions. However, its core business targets transactional customers (small business and retail), and its business
model is not focused on the higher-volume requirements of large-enterprise customers. Global service and
support capabilities, as well as account management, are far below those offered by the market leaders.
Gateway, Inc. is an American computer hardware company based in Irvine, California. The company
develops, manufactures, supports and markets a wide range of personal computers, computer monitors, servers,
and computer accessories. It recorded revenue of $3.98 billon during 2006[23].
Since acquiring eMachine, Gateway has expanded its operation to Western Europe, Latin America, and
Japan; however, it remains primarily focused on retail and has shown no signs of building the capabilities
needed to be a global enterprise notebook supplier. Gateway's enterprise product portfolio is good, and its direct
sales capabilities within the US are adequate, although limited. The lack of a strong track record with large-
enterprise customers is a barrier to Gateway strengthening its position with this customer group. Gateway is a
5
PDF created with pdfFactory Pro trial version www.pdffactory.commoderate supplier for small to midsize quantities in the US market. Outside North America, customers should
expect limited supply capability.
On Oct. 17, 2007, Acer merged with Gateway, the fourth largest PC Company in the US and a leading
retail PC provider. From a strategic point of view, Acer as a Taiwan-originated worldwide leading branded PC
vendor acquires huge compensation in the US market immediately. This will be an excellent addition to Acer's
already strong positions in Europe and Asia. Upon acquiring Gateway, Acer will further solidify its position as
number three PC vendor globally [15].
Apple
Apple Computer is well known for being the most visible dissenter to the Windows/Intel standards that
dominate the PC business. The company designs, manufactures and markets personal computers and related
software, services, peripherals, and networking solutions. Apple also designs, develops, and markets portable
digital music players along with related accessories and services, including the online distribution of third-party
music, audio books, music videos, short films, and television shows. It is headquartered in Cupertino, California.
The company primarily operates in the Americas, Europe and Japan. Apple recorded revenue of $24.01 billion
in 2006 and employs 17,787 full-time and 2,399 temporary people [19].
Apple's marketing strategy has always be giving away (or nearly so) software to get people to buy
hardware. Apple has been widely acknowledged as the leader in computer design and innovations [24]. Apple's
contrary view of marketing may be the wave of future, even as it looks to the past, where the value is placed on
the hardware. Apple is, after all, a hardware company, and much of the software Apple creates enhances the
appeal of the hardware it creates. Apple believes that typical notebooks have become commoditized. They sell
for discounted prices and bring in tiny profits. But when laptop is unique, there can be a justifiable premium,
and customers are willing to pay that. Recently, Apple announces Intel-based notebooks in effort to steal market
share from notebook PC competitors.
Toshiba
Toshiba Corporation is a Japanese multinational conglomerate manufacturing company, headquartered
in Tokyo, Japan. The company's businesses are in high technology, electrical engineering and electronics fields.
The company product line includes digital products, digital telephony, electronic devices & components, home
appliances and others. It recorded revenue of $52.265 billion during the fiscal year ended in March 31, 2006 and
employs 165,000 worldwide [19].
Toshiba created the portable PC market with the 1985 launch of the T1100, the world's first laptop PC.
The company has retained its vanguard position ever since, and driven market expansion, by constantly adopting
state-of-the-art technologies, and by promoting and supporting moves for industry standardization. Today,
Toshiba pursues a tightly focused, two-fold strategy. Through its "Differentiation Strategy", Toshiba seeks to
offer new value through innovative products that create and develop new market. In its "Commodity Strategy",
the company seeks to advance the overall business through economies of scale that support worldwide delivery
of competitive products [23].
The notebook PC market is now the high growth segment of the PC market, driven by growing demand
from mobile computing and replacement of desktop PCs. In developing its new mobile PCs, Toshiba thoroughly
researched the wants and needs of mobile users, with a view to providing a product embodying its "True
Mobility" concept: thin, light, with long battery life. To this potent combination Toshiba has added body
strength, superb quality, advanced security, network connectivity, and usability. With the resulting PCs, Toshiba
will seek to bring new levels of value to the notebook PC market and to increase market share.
Lenovo/IBM
IBM's brand ThinkPad has achieved a place a lot of other manufacturers would like to be, but IBM's
challenge going forward is in marketing and sales. They haven't done a very good job communicating that with
customers. They are somewhat encumbered by the rest of IBM because things get kind of muddled in such a
large organization. IBM is the only major notebook manufacturer that has largely ignored the consumer market.
IBM's notebooks' future success also depends on price. Their products are reasonable priced, but they always
get the image of being high-priced. That's the image they haven't been able to overcome [23].
6
PDF created with pdfFactory Pro trial version www.pdffactory.comLenovo Group Limited is the largest personal computer manufacturer in the Asia-Pacific region as of
2006. The company produces desktop, laptop, servers, handheld computers, imaging equipment, and mobile
phone handsets. It also provides information technology integration and support services, and its QDI unit offers
contract manufacturing. The company has executive headquarters in Beijing, China and in Morrisville, North
Carolina, USA. It is incorporated in Hong Kong. The company recorded revenue of $13 billion during 2005 and
employs 19,000 people [19].
On May 1, 2005 Lenovo Group Limited, the leading PC brand in China and across Asia bought IBM's
PC division. The contract was agreed with that Lenovo purchased IBM's PC division with its debt while IBM
took an 18.9% stake in Lenovo. IBM believed that Lenovo's leading brand recognition in China will help IBM's
powerful global brand grow faster in the largest market in the world. Lenovo's consumer strength and market
leadership in China can let Lenovo and IBM successful in the world fastest growing IT market. IBM will be the
preferred services and customer financing provider to Lenovo.
The promise Lenovo brings to the channel is of a well-capitalized company with low production costs
that can go toe-to-toe with Dell. Since Lenovo is now a global brand name, the company cannot count simply on
high-end models for the business sector, and as a result, the company has to develop Lenono-branded notebooks
targeting the consumer segment, a segment which has been a weak area for the ThinkPad line.
Key Trends
The PC market is currently one of the most volatile markets in the world. Figure 2, Figure 3, and Figure
4 along with Table 1, Table 2, Table 3, and Table 4 show the recent trends in the PC (including laptops and
desktops) and laptop market worldwide as well as in United States.
It can be observed from these data that PC market in United States is growing at a relatively lower rate.
The growth rate for US is 2.9% in 2006 compared to the worldwide growth rate of 8.9%. This difference in
growth rate of PC industry is due to significant demands in emerging markets such as China. Due to their
mobility and high performance laptops are becoming more popular than Desktops. This can also be seen from
the data presented above. The worldwide growth rate for laptops in 2006 is estimated as 14% compared to the
growth rate of 8.9% of overall PC industry.
Dell is the market share leader worldwide as well as in US in 2006. However, its market share declined
in 2007, HP took the first spot from Dell worldwide. In US too, the market share of HP and Dell are almost
equivalent. Analysts believe that the HP's growth was driven by strong retail business and a steady increase of
small and midsize business. However, Dell's results were mainly attributed to its weakness in the home market.
HP is market leader worldwide in laptop business. However, Dell is the market leader in US. Apple's laptop
shares in US are growing at a faster rate than any other company. According the results of third quarter 2007,
Apple's market share ranking is only behind Dell and HP. Other major PC and laptop vendors in US are Acer
(with the recent Gateway acquisition), Lenovo and Toshiba.
Key Success Factors (KSF)
In Figure 5, eight key success factors are identified in the laptop industry. They are then categorized
into four types of matrices. The details for each matrix are described below. These matrices enable us not only
to understand the current situation of this industry, but also to forecast the market's future trend.
A. Product Positioning Matrix
X-axis: Price
Y-axis: Product Performance
It is getting more difficult for "Win-Tel" companies to show their originality and uniqueness in terms of
product performance. Therefore, severe price competition has been going on in the laptop industry. Considering
the Apple's recent jump in the laptop market, "Technological Differentiation" and "Diverseness of Application"
seem to be one of the key success factors in this industry.
B. Company Positioning Matrix
X-axis: Strategic Point (Technology -Oriented, or Marketing or Operation - Oriented)
Y-axis: Business Type (IT Service (Networking, Software, etc.), Hardware Only)
7
PDF created with pdfFactory Pro trial version www.pdffactory.com· The companies which can create their own laptop demands by expanding the business field and
the business model will be able to survive through the current severe competition. This means
the companies in the first quadrant have the possibility to show higher growth rate in the laptop
industry. As surrounded by a green dashed line, HP, Lenovo(IBM), Apple, and Toshiba seem to
have advantages for future competition.
· HP and Lenovo(IBM) have economy-of-scale advantages. In addition, they can sell laptops as a
part of their IT solution services. That is their big strength. Similarly, Toshiba has in-company
demand which comes from their wide range of business fields. Apple is very much technology-
oriented that they can explore their new laptop market by using collaboration between iBook,
iPod, or iPhone technologies. For these companies, software technology is much more
important than hardware technology to grow the market.
· Acer and Dell are strong in the hardware business and have established their own speedy
distribution and low cost manufacturing system. However, Acer also plays as a supplier of
OEM parts including computer peripherals. Therefore Acer will be able to keep a certain level
market share and its price competitiveness. Unless Dell changes its positioning as just a supply
chain company and develop new business models or values, Dell will be put in a difficult
position sooner or later.
C. Skills-related Matrix
X-axis: Technical Capabilities (Laptop PC Product Development Capability)
Y-axis: Brand (Status), Customer Satisfaction
In this matrix, companies in the first quadrant have superior workforce talent, quality control, and
design expertise, expertise in a particular technology, ability to develop innovative products, and ability to get
new products to market quickly. Therefore, the pink arrow shown in this matrix should be called "KSF vector".
In order to improve these skills, each company has to consider how to manage the technology differentiation
strategy. In the laptop industry, the key success factors for "Technology Differentiation" strategy are considered
to be: design, software, speed, mobility (weight, size, battery, and wireless device), usability (diverseness of
application), multimedia (HD, DVD, and wide LCD), and reliability/durability/security. An example from this
matrix is Acer needs to improve their brand image adding to its good technology.
D. Organizational Capability Matrix
X-axis: Company Scale
Y-axis: Financial Power
This matrix indicates that companies in the first quadrant have superior information systems, ability to
respond quickly to shifting market conditions, superior ability to employ internet to conduct business, and more
experience and managerial know-how. The financial power seems proportional to the company scale because it
depends on the company's sales and revenue and retained earnings [20]. Judging from this matrix, Acer
(Gateway) and Lenovo always face the risk to be acquired by large well-financed company such as HP, Dell,
and Toshiba. Lenovo may be able to get some financial support from IBM in case they face a crisis of M&A.
On the other hand, Acer seems to need hedge against M&A to be a more stable player.
E. Competitive Strength Assessment
As shown in Table 5, we rated key players on each key success factor using rating scale of 1 - 10 (1 =
weak; 10 = strong) an un-weighted rating system. Individual rating has been summed to get overall measure of
competitive strength for each rival. As a result, HP was ranked No.1 taking advantages of its IT Service,
Marketing/Operation system, and Financial Stability/Scale. Apple follows HP due to its Brand, unique products,
and high technology. Toshiba became No.3 based on its comprehensive ability. On the other hand, despite its
good present market share, Dell is not so competitive in KSF evaluation. Since this assessment could imply each
player's potential in the near future, the players that have low scores are required to recover their weakness.
Conclusion
Based on our analysis of the Laptop (PC) industry we conclude that the industry is steadily moving to
the Maturation stage in US market. However, it is still at the Growth stage in the developing nations. In the US,
8
PDF created with pdfFactory Pro trial version www.pdffactory.comthe industry had been volatile with new players entering with technology innovation and also marketing
strategy. With its closing on to the stage of maturation the industry has clearly distinguished its major players
with market distribution. Given the brand value of the existing players and the constantly decreasing profit
margin involved, the chances of new entrants capturing a significant market share is very feeble. Although, at
some level of remote thought if we try to find resemblance between Laptop and Automobile industry; the
possibility of the Laptop industry following the fate of Automobile industry in US Market cannot be denied. As
mentioned the market is highly price sensitive and so a Chinese/Japanese local laptop manufacturer with quality
and strategy can overtake the world as well as US market. But given the technology innovation and capabilities
vested with companies like Apple, IBM, HP such a scenario is certainly not a near future viability. Enormous
market for laptop lies untapped in developing countries in South Asia and Middle East; it shouldn't be a surprise
to see the major players competing among themselves to capture/ capitalize this market.
At this stage Apple Inc., seems to have a bright future in the industry. Almost all the key players have
clearly identified their strength in the market and are sticking to it. Dell mostly relying on this supply chain to
come up with low prices, HP capitalizing on its global presence and technical capability; whereas IBM on the
other hand providing its customers with an unparalleled package involving the best customer support system in
industry. With an appealing style and its own operating system Apple, however, has an edge in the industry
which promises it an unprecedented future in the industry. Mac is rapidly gaining its popularity as an open ware
since the launch of iPhone wherein more and more hackers are getting into writing applications for the device.
This can give Apple an upper hand where its competitors give a Lion's share of their profit to Microsoft for
Windows as an Operating System in their Laptops/PC. A quick glance at the trend of stock prices of these
players (Figure 6) at this moment will help convince investors in laptop/PC industry think along our lines.
The consumers are also maturing along the lines of industry. With ample information available at
customer's disposal more and more people are looking into what goes inside their machine. With updated
information and plenty of options available for configuration consumers are taking the driving seat of industry
and the players need to comply with the consumer's trend. The winner will be the one who can successfully
predict the consumer's choice and trend.
With real estate and housing touching unprecedented low in the US capital market investors are looking
into technology. Laptop/ PC leaders form a core group of companies in the technology sector. Constant
innovation and service enhancement can see the industry through this time. With tech-savvy consumers who like
to proudly own and play with new gizmos, companies need to come up with devices to satisfy this hunger.
Miniaturization, portability and mobility will be the key challenges to companies and key issues to the
customers. Clearly, existing companies need to add on to their product list and provide more and more services
to the customers. As of now Apple seems to gather a loyal collection of fans ready to throw extra bucks to be the
first proud owner of its cool new gadgets. With Microsoft and even Google looking to come up with their own
st
personal machines the industry may see a revolution and enter into an entirely unpredicted battle of 21 century
innovations.
Recommendation
From our analysis, the big key success factors in laptop industry in current US economic condition are
"Technological Differentiation" and "Diverseness of application." Therefore, each company should strengthen
its laptop technology such as stylish design, software, mobility (weight & size, battery, wireless device),
usability (diverseness of application) and so on.
A well-balanced strategy between technology and marketing operation is required for this industry.
Although Dell keeps its high rank in the laptops market, its low price and low cost strategy seems to be stuck in
a dead end because Dell's strategy is no longer innovative and Dell's products are not very attractive. Unless
Dell changes its positioning as just a supply chain company, Dell will be put into a difficult position sooner or
later (However, in case that the US economy goes down rapidly, Dell's business model may remain to be
effective). We consider it is one of the best options for Dell to acquire Acer (Gateway) in order to improve its
technology capability and develop a new business model.
As Apple has been trying it these days, sharing technological architecture should be a good way to
expand their market and to increase the business partners. While polishing its proprietary strategy, Apple is
taking a new approach. This kind of disclosure policy may affect to the reorganization in laptop PC industry.
9
PDF created with pdfFactory Pro trial version www.pdffactory.comAppendix I: Figures

SUPPLIER POWER
Very High
Powerful
Capture lion's share of industry profits

THREAT OF
BARRIERS
SUBSTITUTES
TO ENTRY
Moderate
Low Barriers
Creates price pressure
Fast growth
PDAs
Threat of New Entrants
Smart Phones

BUYER POWER DEGREE OF RIVALRY
Large purchasing organizations Competitive
Sophisticated Moderate CR

Difficult Short Self Life
Powerful Price: significant factor

Figure 1: Concept of Porters Five Forces Model





PC Market Share Q1'06 (Worldwide) PC Market Share Q1'07 (Worldwide)
Others Dell HP Lenovo Acer Toshiba Others Dell HP Lenovo Acer Toshiba
17.60%
16.40% 14.90% 13.90%
5.90% 6.30%
6.80%
5.10%
3.80% 4.10%
53.90% 51.30%

Figure 2: Worldwide PC Market Share

10
PDF created with pdfFactory Pro trial version www.pdffactory.comPC Market Share Q1'06 (United States) PC Market Share Q1'07 (United States)
Others Dell HP Gateway Apple Toshiba Others Dell HP Gateway Apple Toshiba
21.00% 25.70%
7.70%
8.50%
4.00% 5.00%
33.90% 5.40%
4.40% 27.90%
28.20% 28.30%

Figure 3: US PC Market Share









PC Market Share Q1'06 (United States)
Others Dell HP
Acer Apple Toshiba
Asus Lenovo Sony
Fujitsu Siemens
4.40%
4.10%
9.80%
8.40%
13.30%
5.00%
5.30%
20.00%
14.50%
15.00%

Figure 4: Worldwide Laptop Market Share
11
PDF created with pdfFactory Pro trial version www.pdffactory.comFigure 5: Matrix for Success Factor Evaluation




Figure 6: Basic charts of Apple and its competitors
12
PDF created with pdfFactory Pro trial version www.pdffactory.comAppendix II: Tables

Table 1: Worldwide PC Vendor Unit Shipment Estimates for 1Q07 (Thousands of Units, Source: Gartner Inc.)
Company First Quarter 07 First Quarter 06 Growth (%)
Shipments Shipments
HP 11,030 8,569 28.7
Dell 8,692 9,430 -7.8
Acer 4,275 2,927 46.1
Lenovo 3,969 3,417 16.1
Toshiba 2,552 2,213 15.3
Others 32,201 31,014 3.8
Total 62,719 52,571 8.9




Table 2: U.S. PC Vendor Unit Shipment Estimates for 1Q07 (Thousands of Units, Source: Gartner, Inc.)
Company First Quarter 07 First Quarter 06 Growth (%)
Shipments Shipments
Dell 4,126 4,881 -15.5
HP 3,807 3,027 25.8
Gateway 1,147 1,225 -6.3
Toshiba 805 635 26.8
Apple 741 570 30
Others 4,185 4,057 3.1
Total 14,811 14,395 2.9





Table 3: Worldwide Notebook Unit Shipments and Growth (Source: www.rtoonline.com)
Company Third Quarter 06 Fourth Quarter 06 Growth (%)
Shipments Shipments
HP 3.6M 4.7M 29%
Dell 3.6M 3.5M -2%
Acer 2.4M 3.1M 29%
Toshiba 2.2M 2.3M 5%
Lenovo 1.7M 2.0M 18%
Fujitsu-Siemens 1.3M 1.2M -7%
Sony 0.8M 1.2M 40%
Asus 0.7M 1.0M 49%
Apple 1.0M 1.0M -7%
All Others 3.1M 3.4M 11%
Total 20.5M 23.4M 14%




13
PDF created with pdfFactory Pro trial version www.pdffactory.comTable 4: U.S. Notebook Market Share (2000 Dataquest, 2001 by NPD Intelect, 2006 DisplaySearch, 2007 IDC) [5]
Share Ranking 2000 2001 2006 2007 (3Q)
Dell Compaq HP Dell
1
(21.5%) (33.9%) (20%)
Compaq Sony Dell HP
2
(16.6%) (25.2%) (15%)
Toshiba Toshiba Acer Apple
3
(13.4%) (21.7%) (13.3%) (17.6%)
IBM HP Toshiba Gateway
4
(12.1%) (15.2%) (9.8%)
HP Apple Lenovo Acer
5
(5.8%) (2.9%) (8.4%)



Table 5: Result of Competitive Strength Assessment

Key Success Factors (KSF) Dell HP Acer + Gateway Apple Lenovo (IBM) Toshiba
Product Performance/Software/Design 3 6 3 10 8 8
Price/Cost 10 6 7 2 4 5
IT Service/In-Campany demand 4 9 3 7 10 8
Marketing/Operation 9 10 3 8 5 6
Product inovation/R&D Technology 3 6 8 10 7 8
Brand 6 6 3 10 9 7
Financial Stability/Company Scale 8 10 3 5 4 9
Overall strength rating 43 53 30 52 47 51
KSF Ranking 5 1 6 2 4 3
US Market Share Ranking at 2006 2 1 3 - 5 4
US Market Share Ranking at 2007 Q3 1 2 4 3 - -

14
PDF created with pdfFactory Pro trial version www.pdffactory.comReferences
[1]"The Top Laptop Makers Are Not HP, Dell, or Toshiba"
http://www.physorg.com/printnews.php?newsid=98005202
[2]"Laptop makers push size, price limit to gain sales"
http://uk.reuters.com/article/technologyNews/idUKTP9601320070609
[3]"Consumer watch: what can PC makers learn from Apple"
http://www.pcworld.com/printable/article/id,119977/printable.html
[4]"The History of the Laptop Computer
"http://www.randomhistory.com/1-50/006laptop.html
[5]"Notebook Computer Market Share" 2005
http://www.businessweek.com/technology/tech_stats/laptopsales050418.htm
[6]Apple notebook share is growing due to their use of Intel CPU.
http://cultofmac.com/?p=1327
[7]US PC share ranking in 2003 & 2004
http://www.idc.com/getdoc.jsp?containerId=pr2004_07_14_153325
[8] US laptop share ranking in 2000 2nd q by Dataquest.
http://www.news.com/2100-1040-247633.html
[9] NPD and ICD
http://www.macworld.com/news/2007/08/21/appleshare/index.php
[10] Notebooks pass desktops in U.S. retail
http://www.news.com/Notebooks-pass-desktops-in-U.S.-retail/2100-1044_3-6033967.html
[11] The Dell Laptop - Market Share and Market Forecast
http://mosaic.cnfolio.com/M528Coursework2007A201
[12] Dell Revamps Market Strategy with Project Hybrid By Chris Preimesberger May 17, 2007
http://www.eweek.com/article2/0,1759,2132680,00.asp
[13] 2005 laptop Market - Led by Lenovo and Steered by Three Tycoons
http://www.ccwresearch.com.cn/en/research_text.asp?articleId=8864&Columnid=998&view=#
[14] Acer and HP Continue to Gain Notebook Market Share(03-20-07)
http://www.rtoonline.com/content/Article/Mar07/NotebookShipmentData031907.asp
[15] Acer to Acquire US-Based Gateway, Inc., Solidifying Acer's Position as the #3 Largest PC Company in the
World
http://global.acer.com/about/news.asp?id=6775#
[16] Toshiba Topples Dell in Global Notebook Battle
http://www.ecommercetimes.com/story/18046.html
[17] Toshiba Launches Light, Thin Mobile Notes PCs with Long Battery Life
http://www.toshiba.co.jp/about/press/2007_06/pr0501.htm
[18] Computer Hardware in United States
September 2006, Datamonitor Inc.
[19] Laptop Computers
http://en.wikipedia.org/wiki/Laptop
[20] Reuters Stocks Information
http://www.investor.reuters.com/StockEntry.aspx?wtmodloc=L2-LeftNav-7-Stocks&target=%2fstocks
[21] Information Age
http://www.information-age.com/article/2001/september/hp-
compaq_merger_the_analysts_and_rsquo_verdict
[22] Porter's five forces
www.quickmba.com
[23] Magic Quadrant for Global Enterprise Notebook PCs, 2006
http://www.computers.us.fujitsu.com/www/content/aboutus/analysts/data/gartner_RA105022008.pdf
[24] NY Times Looks At Apple's Backwards Marketing Strategy
http://www.macobserver.com/article/2004/01/20.4.shtml

15
PDF created with pdfFactory Pro trial version www.pdffactory.com