OLIGOPOLY MARKET

COMPUTERS LIKE DELL, HP, LENOVO

(a) Determine the market structure of the industry (b) how does the market structure impact the degree of competition

(c) is product innovation important

(d) how firms respond to the competitive pressures in the industry

Your part

c. is product innovation important

The first personal computer, the MITS Altair 8080, was released in 1975 and changed the world forever. A handful of geeks (Bill Gates included) saw this humble $395 kit as the beginning of something big... but nobody knew how big! The Altair sold a few thousand units in 1975. Today, more than 130 million personal computers are sold each year.

LET US HAVE A BRIEF OUTLOOK AT THE MARKET SHARE OF THE LEADING PC VENDORS TO HAVE A BETTER INSIGHT FOR THE IMPORTANCE OF PRODUCT INNOVATION IN PC MARKET.

Market share of leading PC vendorsFrom Wikipedia(View original Wikipedia Article)Last modified on 18 April 2011, at 20:15

Because the personal computer (PC) is an iconic high tech product the market share of leading PC vendors is watched closely. Market discussion of these devices may include netbooks but do not include media tablets which was dominated by Apple products.[1]

Key developments in recent years have been the battle for the top spot between Dell and HP, the rise of Acer, and the dwindling share of PCs sold by companies outside of the top five. Global PC Market Share by Units, Percent. 2006-2010. Rank 1 2 3 4 5 Others 2006 IBM HP Lenovo Acer Toshiba[2]

2007

[3]

2008

[4]

2009

[5]

2010

[6]

15.9 HP 15.9 Dell 7.0 Acer 5.8 Lenovo 3.8 Toshiba 51.6

18.2 HP 14.3 Dell 8.9 Acer 7.4 Lenovo 4.0 Toshiba 47.1

18.4 HP 14.3 Acer 11.1 Dell 7.2 Lenovo 4.5 Toshiba 44.5

19.3 HP 13.0 Dell 12.2 Acer 8.1 Lenovo 5.1 Toshiba 42.3

17.9 12.9 12.0 9.7 5.4 42.1

Dell pushed ahead of Compaq in 2001, but returned to second place when HP and Compaq merged in 2002. IBM sold off their PC business to Lenovo, placing a mainland Chinese company in the top five. Acer ascends to the top five in 2004. Global PC Market Share by Units, Percent. 2001-2005 Rank 1 2 3 4 5 Others 2001 Dell[7]

2002

[8]

2003

[9]

2004

[10]

2005

[11]

13.3 HP-Compaq 16.2 Dell 15.2 HP 6.0 IBM 3.4 Fujitsu* 3.2 Toshiba 56.0

15.0 Dell 14.3 HP 5.1 IBM 3.8 Fujitsu* 2.9 Acer 58.9

16.4 Dell 14.6 HP 5.5 Lenovo 3.8 Acer 3.4 Fujitsu* 56.4

16.8 14.5 6.9 4.6 3.8 53.3

Compaq 11.1 Dell HP IBM NEC 7.2 IBM 6.4 NEC 3.8 Toshiba 58.1

Compaq and IBM dominated the market in the mid-1990s. Dell and HP emerge as important players late in the 1990s while IBMs market share wanes. Global PC Market Share by Units, Percent. 1996-2000. Rank 1 2 3 4 5 Others

1996 Compaq IBM PackardBell NEC Apple HP

[12]

1997 10.0 Compaq 8.6 IBM 6.0 Dell 5.9 HP Packard Bell NEC

[13]

1998 13.1 Compaq 8.6 IBM 5.5 Dell 5.3 HP 5.1 62.2 Packard Bell NEC

[14]

1999 13.8 Compaq 8.2 Dell 7.9 IBM 5.8 HP 4.3 60.1 Packard Bell NEC

[15]

2000 13.2 Compaq 12.8 9.8 Dell 7.9 HP 6.4 IBM 5.2 NEC 57.5 10.8 7.6 6.8 4.3 57.7

Fujitsu figures include Fujitsu Siemens. Figures include desktop PCs, mobile PCs, and servers using the Intel x86 processor architecture. 1996-1999 figures exclude x86 PCs. Figures subject to revision in later data releases. Unit Sales to Global PC Market 199 199 199 199 200 200 2003 2004 2005 2006 2007 2008 2009 2000 6 7 8 9 1 2[16] [17] [18] [19] [20] [21] [22]

Units 70. 80. 92. 113 134. 128 132 168. (M) 9 6 9 .5 7* .1 .4 9 Grow 17. 13. 15. th 8 7 3 (pct.)

189. 0 11.8

218. 5 15.3

239. 4 9.5

271. 2 13.4

302. 2 10.9

305. 9 1.2

21. 7

14.5 -4.6 2.7 *

10.9

Figures include desktop PCs, mobile PCs, and servers using the Intel x86 processor architecture. 1996-1999 figures exclude x86 PCs.

References1. Nearly 18 Million Media Tablets Shipped in 2010 with Apple Capturing 83% Share; eReader Shipments Quadrupled to More Than 12 Million, According to IDC

Gartner Says Hewlett-Packard Takes Clear Lead in Fourth Quarter Worldwide PC Shipments and Creates a Virtual Tie with Dell for 2006 Year-End Results. Gartner Press Release. January 17, 2007. 3. Gartner Says Worldwide PC Market Grew 13 Percent in 2007. Gartner Press Release. January 16, 2008. 4. Gartner Says In the Fourth Quarter of 2008 the PC Industry Suffered Its Worst Shipment Growth Rate Since 2002. Gartner Press Release. January 15, 2009. 5. Gartner Says Worldwide PC Shipments in Fourth Quarter of 2009 Posted Strongest Growth Rate in Seven Years. Gartner Press Release. January 13, 2010. 6. Gartner Says Worldwide PC Shipments in Fourth Quarter of 2010 Grew 3.1 Percent; Year-End Shipments Increased 13.8 Percent 7. Gartner Dataquest Says 2001 is a Year Battered PC Vendors Would Rather Forget. Gartner Press Release. January 17, 2002 8. Gartner Dataquest Says PC Market Experienced Slight Upturn in 2002, but Industry Still Shows No Signs of Strong Rebound. Gartner Press Release. January 17, 2003. 9. Gartner Says PC Vendors Experienced a Happy Holiday Season with Fourth Quarter Worldwide Shipments Increasing 12 Percent. Gartner Press Release. January 14, 2004. 10. Gartner Says Strong Mobile Sales Lift Worldwide PC Shipments to 12 Percent Growth in 2004. Gartner Press Release. January 18, 2005. 11. Gartner Says EMEA Region Became Largest PC Market in the World Based on Unit Shipments in 2005. Gartner Press Release. January 18, 2006. 12. Compaq and IBM Winners in 1996 Market Share. PCWorld. January 27, 1997 13. GartnerGroup's Dataquest Says U.S. and Europe Boost 1998 Worldwide PC Growth. Gartner Press Release. January 29, 1999. 14. GartnerGroup's Dataquest Says U.S. and Europe Boost 1998 Worldwide PC Growth. Gartner Press Release. January 29, 1999. 15. GartnerGroup's Dataquest Says Worldwide PC Market Topped 21 Percent Growth in 1999. Gartner Press Release. January 24, 2000. 16. Gartner Says PC Vendors Experienced a Happy Holiday Season with Fourth Quarter Worldwide Shipments Increasing 12 Percent. Gartner Press Release. January 14, 2004. 17. Gartner Says Strong Mobile Sales Lift Worldwide PC Shipments to 12 Percent Growth in 2004. Gartner Press Release. January 18, 2005.

2.

18. Gartner Says EMEA Region Became Largest PC Market in the World Based on Unit Shipments in 2005. Gartner Press Release. January 18, 2006. 19. Gartner Says Hewlett-Packard Takes Clear Lead in Fourth Quarter Worldwide PC Shipments and Creates a Virtual Tie with Dell for 2006 Year-End Results. Gartner Press Release. January 17, 2007. 20. Gartner Says Worldwide PC Market Grew 13 Percent in 2007. Gartner Press Release. January 16, 2008. 21. Gartner Says In the Fourth Quarter of 2008 the PC Industry Suffered Its Worst Shipment Growth Rate Since 2002. Gartner Press Release. January 15, 2009. 22. Gartner Says Worldwide PC Shipments in Fourth Quarter of 2009 Posted Strongest Growth Rate in Seven Years. Gartner Press Release. January 13, 2010.

In terms of market share, HP is the leader holding 19.8 percent. Dell and Acer virtually tie in at second place with 13.1 and 13 percent respectively. Lenovo Holds. 6.5 percent of market share and Toshiba holds 5.5 percent.

The problem is constantly growing. Major PC companies are rapidly expanding. So a new entrant would not only have to catch up but anticipate the growth of the PC industry so it can stay caught up. One instance of growth within the PC industry is Dell's decision to sell its product at retail stores such as Wal-Mart and Best Buy, when it previously operated through catalogues and its website. Obviously, this greatly expanded Dell's consumer base. It is likely that it would take decades of manufacturing to attain the level the large players are in terms of cost efficiency as well.

New products are important to sustain growth, increase revenues and profits, and replace obsolete items. There is tremendous pressure on industry to innovate more, and do it more quickly, notes the director of IBM S 200-engineer Zurich Research Laborator.

When people think of innovation, they usually have a narrow view that encompasses only product innovation. Product innovation is very important to remain competitive, but just as important is process innovation. Process innovation is anything new or novel about the way a company operates. Process innovations are important because they often reduce costs, and it may take competitors a significant amount of time to discover and imitate them. Some process innovations can completely revolutionize the way a product is produced. When the assembly line was first gaining popularity in the early twentieth century, it was an innovation that significantly reduced costs. The first companies to use this innovation had a competitive advantage over the companies that were slow or reluctant to change. As one of the first Internet service providers, America Online offered a unique innovation for accessing the nascent Internetits unique and user-friendly interface. The company grew at a massive rate, leading the rapidly developing Internet sector as a force in American business. While most innovations are not going to revolutionize the way that all firms operate, the small innovations can reduce costs by thousands or even millions of dollars, and large innovations may save billions over time.