Computer Hardware Industry Analysis

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Industrial Economics presentation on Computer Hardware Industry in India.

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Computer Hardware Industry Analysis

  1. 1. COMPUTER HARDWARE INDUSTRY SEC: DEF, TOPIC NO. 7 PUNYASHLOK DWIBEDY (2012223) RAHUL MISHRA (2012229) R SUSHANT SINGH (2012233) RAKESH DUTTA (2012234) RASHMI RANI (2012236) S. PREET KARAN BHATIA (2012250) SHIVAM KUMAR (2012296) RAKESH DUTTA © 2014
  2. 2. COMPUTER HARDWARE INDUSTRY IN INDIA • 32,500 Cr market – Accounting 32% of IT industry in India • Some of the industry metrics • PC unit sold • $/storage • Avg. PC revenue • Price to free cash flow • Sales/Employee Computer H/W Industry Personal Computers Network Equip, Computer Peripherals Storage Devices 32.50% 13.70% 11.80% 10.40% 2.80% 28.80% Market Share HP Lenovo Dell Acer HCL Others Data source: Gartner, 2013 RAKESH DUTTA © 2014
  3. 3. 5.05 6.34 7.34 6.80 8.03 9.31 10.82 11.31 2006-07, 26% 2007-08, 16% 2008-09, -7% 2009-10, 18% 2010-11, 16% 2011-12, 16% 2012-13, 5% -10% -5% 0% 5% 10% 15% 20% 25% 30% - 2 4 6 8 10 12 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Growthin% InMillionUnits PC Sales in Volume Data source: IMRB & MAIT RAKESH DUTTA © 2014
  4. 4. PRICE TRENDS 0 20 40 60 80 100 120 140 160 180 200 4/1/2004 6/1/2004 8/1/2004 10/1/2004 12/1/2004 2/1/2005 4/1/2005 6/1/2005 8/1/2005 10/1/2005 12/1/2005 2/1/2006 4/1/2006 6/1/2006 8/1/2006 10/1/2006 12/1/2006 2/1/2007 4/1/2007 6/1/2007 8/1/2007 10/1/2007 12/1/2007 2/1/2008 4/1/2008 6/1/2008 8/1/2008 10/1/2008 12/1/2008 2/1/2009 4/1/2009 6/1/2009 8/1/2009 10/1/2009 12/1/2009 2/1/2010 4/1/2010 6/1/2010 8/1/2010 10/1/2010 12/1/2010 2/1/2011 4/1/2011 6/1/2011 8/1/2011 10/1/2011 12/1/2011 2/1/2012 4/1/2012 6/1/2012 8/1/2012 10/1/2012 12/1/2012 2/1/2013 4/1/2013 6/1/2013 8/1/2013 10/1/2013 12/1/2013 WPI vs. Computer & Peripherals Price Index Wholesale Prices Computers Computer Peripherals INFINF Index INWICMPU Index INWICOPE Index Data source: Bloomberg RAKESH DUTTA © 2014
  5. 5. FDI INFLOW 0 500 1000 1500 2000 2500 3000 0 50000 100000 150000 200000 250000 300000 350000 3/1/2004 5/1/2004 7/1/2004 9/1/2004 11/1/2004 1/1/2005 3/1/2005 5/1/2005 7/1/2005 9/1/2005 11/1/2005 1/1/2006 3/1/2006 5/1/2006 7/1/2006 9/1/2006 11/1/2006 1/1/2007 3/1/2007 5/1/2007 7/1/2007 9/1/2007 11/1/2007 1/1/2008 3/1/2008 5/1/2008 7/1/2008 9/1/2008 11/1/2008 1/1/2009 3/1/2009 5/1/2009 7/1/2009 9/1/2009 11/1/2009 1/1/2010 3/1/2010 5/1/2010 7/1/2010 9/1/2010 11/1/2010 1/1/2011 3/1/2011 5/1/2011 7/1/2011 9/1/2011 11/1/2011 1/1/2012 3/1/2012 5/1/2012 7/1/2012 9/1/2012 11/1/2012 1/1/2013 3/1/2013 5/1/2013 7/1/2013 9/1/2013 FDI Inflow FDI Inflow in India FDI inflows in Computer & IT industries INFDCUMU IFDSCOMP Data source: Bloomberg RAKESH DUTTA © 2014
  6. 6. POTENTIAL GROWTH RAKESH DUTTA © 2014
  7. 7. PORTER’S 5 FORCES Moderate because of • High price Sensitivity • Low Player Differentiation Bargaining power of buyers Strong due to • Limited number of suppliers • Suppliers are large, international companies Bargaining power of suppliers Reasonably easy for new entrant to get moderate success because • Online shopping has grown in popularity over the years. • Reduced fixed costs for all shoppers. Threat of new entrant Reasonably low but • Replaceable technology for gaming consoles • Tablet technology Threat of substitutes Moderate • Consumers have numerous options to choose from and switching costs for them are low. • storage costs are high so quick product turnaround is vital Rivalry RAKESH DUTTA © 2014
  8. 8. SWOT Strengths • Many companies have strong portfolio offerings. • Research and development - Patent • Ex: HP Weakness • Alternatives to PC’s • Computer Manufacturing Industry is a worldwide market and subjected to instability of economies in various countries. Opportunities • Opportunities for growth and advancement as developing countries increase their need for technology. Threats • Likely decline for PCs • intense competition between the large companies within the industry which make it difficult for new, smaller companies to become effective. • Governments all around the world pose threats to this industry because of environmental regulations and currency fluctuations. S W O T RAKESH DUTTA © 2014
  9. 9. COMPUTER H/W WILL GROW AS IT WILL GROW RAKESH DUTTA © 2014
  10. 10. PRICING POLICIES • Use price competition as their products have been commoditized. • Keep product at as many price points as possible • Examples are LG,LENOVO, ACER. • Price discrimination • large corporate, SMEs, personal PCs RAKESH DUTTA © 2014
  11. 11. PRICING OPTIONS • Promotional and bundling pricing strategies. • For example 1. With HP DESKTOP PC worth Rs. 24,990 Get accessories bundle worth Rs. 2873 @ Rs. 999 And three years onsite warranty. 2. With HP ink cartridge worth Rs 317 Free HP Glossy Photo Paper Pack worth Rs 50 3. Printer + Scanner • EMI Option • Segment Visitors According to Their Purchasing Power • Inter-temporal policy RAKESH DUTTA © 2014
  12. 12. DELL VS. HP RAKESH DUTTA © 2014
  13. 13. MARKET BARRIERS (ENTRY & EXIT) • Entry • Everybody can start a home-based mail order business for computer parts • It takes little government permits • Wholesaler are open for every reseller • There is no need to keep large stock • Exit • Investment in specialist equipment • Specialized skills • High fixed costs RAKESH DUTTA © 2014
  14. 14. NON-PRICE COMPETITION • Nibbler Approach • Go-to-Market Strategy • Online sales opportunity • Hardware maintenance services • Warranty • Patent Wars • Apple vs. Samsung • Embedded Software Licensing • Hardware(vertical) differentiation is not enough. • Example APPLE, SONY. RAKESH DUTTA © 2014
  15. 15. COLLUSIVE BEHAVIOR OF EXISTING FIRMS THE SITUATION WHERE A DUOPOLY ACTS AS A MONOPOLIST • Methods - • Bidding Collusion • Price Fixing • Establish or adhere to price discounts. • Hold prices firm. • Adopt a standard formula for computing prices. • Maintain certain price differentials between different types, sizes, or quantities of products. • Adhere to a minimum fee or price schedule. • Fix credit terms. • Not advertise prices. • Technology Collusion: Holding back the release of existing technologies so that people upgrade in small increments • Ex: DDR II RAM, Overclocking of CPUs etc. • Deliberate control of supply to inflate prices RAKESH DUTTA © 2014
  16. 16. UNIQUENESS • Existing Secondary Market. • Ebay, OLX, Quickr • High R&D expenses. • Mostly products are vertically differentiated. • PCs are now like cars - Predefined consumer preferences, price sensitive & self awareness. • Many repeat purchasers. • Vendors contend with high bankruptcy rates • Low inventory. • No inventory (JIT) – Dell (CCC: -14 days) • Rapid technological changes lead to disruptive innovation. • rapid price fluctuations RAKESH DUTTA © 2014
  17. 17. THE END RAKESH DUTTA © 2014

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