Dell 5 forces analysis

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

Rivalry: HIGH
-High concentration
-Price War: Low Margin
-Decreasing profitability
-Low differentiation
-However, in the midst of sever competition, Dell can still gain market share from
-----ther competitors. That proves Dell’s business strategies have been successful.

Threat of Substitutes: LOW

-Strong presence of PC’s throughout society
-One computer for every three people in the U.S.
-Only substitute for PC: Apple Computer.
However, high price, and lack of software support prevent people from switching to
Apple system.

Bargaining Power of Buyer: High

-Highly price sensitive
-Reliability and customer service become important factors.
-Dell’s products are very reliable and customer service is outstanding. These two
factors help Dell to create certain brand royalty. But that’s given the fact that the
Company set the prices very low. If the prices are raised too high, customers will not
hesitate to switch.

Bargaining Power of Suppliers: HIGH

-Large number of suppliers for components like hardware, keyboards, etc.
But two major inputs are monopolized
-Microsoft standard for all PC’s
-Intel standard for most PC’s
-High switching costs