Evaluate the attractiveness of the PC industry.
In short, at the time of the Matching Dell case study the PC industry was essentially in a boom, and particularly in the United States. Steady growth and expansion continued from the first waves created in the mid-1970s by firms like Apple, and exploded in the 1980s with IBM’s first PC offering. Companies likely envisioned a huge potential for growth due to the fact that PC had become attainable as a household commodity, and was almost certainly on the path to become a household necessity in relatively short order. In the early to mid 1980’s, I would argue that the industry was at its attractiveness peak to new start-ups and existing firms that already had a foothold. By the time 1998 rolled around, more than 45% of households owned a PC, and with rapidly improving technology and decreasing prices, projections were pegged for this trend to grow. Notwithstanding this trend, as well as the fact that barriers to entry are low, the severe price-competiveness and typically low margins are risks that small businesses and start-ups that do not have an existing customer base or significant capital would need to consider.
Why has Dell been so successful in the PC industry?
A simple fact that has surely helped to catapult Dell Inc. upwards within the PC industry is the “Direct Model” approach that they introduced and pioneered. No other company was offering such a low-cost option, where consumers had the freedom to tailor a PC system to their needs. The resultant lower cost of this model coupled with the growing consumer behavior and need, allowed Dell to create a significant gap between themselves and all other competitors. Cutting out the retailer, reseller and distributor, Dell was able to save 5-7% and maintain a wide gap, not giving up any ground until other companies were forced to restructure operations and inventory strategies, and consider Dell-like approaches to the direct-to-consumer model. Dell also...
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