This research paper will use the PESTEL analysis to study the factors that impact the PC industry. The paper will also include weakness and strengths that affect the industry and some opportunities for its growth in the next five years. PESTEL analysis has been used by many international industries to analyze the risks and opportunities during the expansion to other parts of the world (Frinch, 2012). The computer industry deals with companies that manufacture and assemble personal computers, hardware, and computer peripherals. The industry is very competitive, therefore it requires companies to be innovative at all times. Examples of companies in this industry include Apple, Dell, HP, IBM, Toshiba, and Oracle (Barfield, 2003).
All industries in the United States are affected by political factors, either directly or indirectly. More to this, the General Accepted Accounting Principles must be followed by all companies in the United States that manufacture computers. Big companies in the industry have been involved in many legal battles in the past few years. For example, HP won a legal case against Oracle due to a breach of a contract (Bort, 2012). Oracle then decided not to use the HP’s Itanium servers and opted to install its own database software. The volume sales for HP dropped; therefore, the company had to sue Oracle again, claiming to be compensated for the losses incurred.
In recent years, the industry has been faced with many economic factors that limit its marketing strategies. Most firms in the industry do not manufacture and assemble key computer products; therefore, they are forced to outsource from other companies. More people are currently able to afford these products due to the fall of the prices, enabling the companies to make huge profits from the high demand for computer hardware. The industry has been faced with high exchange rates because most of the companies depend on foreign countries to make their profits. For example, Toshiba, Dell, and Acer have to be aware of the current currency fluctuation because it affects the domestic dollar value (Roger, 2011).
The level of income and education affects the demand patterns on how the companies market their products. Apple computers are mainly found in households that have a high income enabling the company to maintain its marketing strategy of premium pricing. The main markets for the industry are in the United States, Europe, and Asia, which accounts for more than 80 percent by value (Gartner, 2013). Recently, the companies have ventured into new markets in China and Africa, which enabled them to expand their market. The high population is the main sociological factor that made the companies target these new markets. More to this, the one laptop per Child Program in Africa has led to the development of new devices that meet the needs of underprivileged users.
The computer industry depends on research and development to enable it to market its products. Microsoft and IBM spend more than 7.8 billion dollars in the year 2012 for research and development (Cathers, 2012). According to new research done by Microsoft, servers are the main reason for the growth of the market (Betteridge, 2012). Companies such as Oracle, HP, and IBM are the main beneficiaries of research and development of technological development.
The companies depend on large scale outsourcing in countries such as China and India because of the cheap labor. Through outsourcing, the firms are able to understand the global market; therefore, develop products that will sell in these regions. Through this, the companies will make more profit through inventing products that meet the needs of a global market.
Strengths, weakness, and opportunities in the industry
Research and development are the main strength in this industry because they ensure the companies remain competitive. In addition, the companies are willing to spend millions of dollars in research and development of the best technology. Most companies in the United States have a portfolio with a wide range of products for its consumer. For example, the Hewlett Packard Company offers a diverse range of services, such as financial, printing, and software services (Zang, 2010).
Through this, the company will be able to avoid any future downfall. The companies must take advantage of the new markets in China, India, and Africa by developing products that meet their needs. The development of new alternatives to PCs is the main weakness in this industry. For example, new gadgets such as tablets, smartphones are in higher demand than PCs (Cathers, 2012). Finally, companies have to be aware of issues affecting most countries, especially in the economy, because the industry is a global market.
The industry has many opportunities for growth for the next five years, especially in developing countries due to the demand for new technology. China and India have the highest populations than all other countries in the world; therefore they offer the greatest potential for expansion of the industry (Barfield, 2003). To gain trust with consumers, the companies must employ face to face interactions for them to be successful in these countries.
The PESTEL analysis will continue to be applied by multinational companies in the world. The industry will also expand in the next few years due to demand for its products. New emerging markets in India and China will play a key role in the expansion of the industry. The companies will be involved in fierce competition to win the largest share in these new markets. However, the company that will conduct detailed research will definitely come up with the best marketing strategy to expand into these new markets.
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Gartner (2013). Gartner Says Worldwide PC Shipments in the First Quarter of 2013 Drop to Lowest Levels Since Second Quarter of 2009. Web.
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