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PREFACE
We are living in the era of information. The 21st century has come with more
than ever powerful working tools: the computer, the Internet, and Information
technology. The computer has been playing an increasingly important role in the
daily lives of people, families, organizations and businesses. With their huge
computing and processing power, computers have boosted up productivity,
increased accuracy, saved time, and become essential equipments for almost every
business today. Together with the widely application of the Internet and Information
technology, the computer has become even more powerful tool which improves
every aspect of people’ lives.
Owning to its power and functionalities, the demand for computer has
increased continuously over years, pushing the PC (personal computer) industry
become one of the most competitive and dynamic. Within 6 years from 2006 to
2010, the worldwide PC sales almost doubled and stay at more than 300 million
units in 2010. Large computer companies today spend billions of dollars annually
on innovating new technology, developing new products in order to gain the top
position on the market. Besides, due to the fast pace of changing, as a feature of the
industry, computer firms have to adjust their overall strategies continuously to stay
strong. Dell Inc. is one typical example of successful computer enterprise by using
appropriate strategies toward technology innovation and operation. With innovation
based on standardization, direct sales model, and the support of modern and fast
information technology system, Dell keeps in hand key comparative advantages to
win the first position in the market for many years. Until now, Dell still remains as
the toughest competitor for any PC maker.
Being attracted by the eventful computer industry and efficient operation of
Dell Inc., the writer decides to choose the PC industry as the theme and Dell
Computer is in the centre for this working paper. Within the limited volume of this
thesis, the writer will go through three parts:
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The first part introduces briefly about the computer industry, technology
development, strategies of enterprises regarding technology innovation and
development as well as some short stories of leading companies.
The second part talks about Dell Inc., including its history of development, its
strategies of technology innovation and operation, and its global expansion. This
part will analyze how the combination of creative technology development policies
and business model help this firm becomes one of the leading computer makers in
the world.
The third part will be about technology development in Vietnam in
globalization scenario, Vietnamese technology enterprises and some lessons
withdrawn from Dell Computer’s success and failure for them.
Due to the limited time and knowledge of the writer, this paper inevitably
contains some limitations and shortcomings. Therefore, the writer would like to
receive every feedback or comment from teachers and people who interested in this
topic to improve the quality of the thesis.
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Chapter 1: OVERVIEW OF TECHNOLOGY AND DEVELOPMENT
STRATEGY OF COMPUTER ENTERPRISES IN GLOBALIZATION
1.1. Overview of technology development in computer industry in the world:
The personal computer (PC) industry is one of the strangest and most dynamic
in the world. Probably there is no other kind of product that is so technologically
sophisticated, changed so rapidly, sells for so much money, and is sold by so many
companies for not much profit. The fierce competition in this industry is the reason
why so many problems are encountered by those who deal with PC vendors.
Since PC could be assembled from standardized components without much
expertise required and the barriers to entry are not as tough as in the past, new
computer business is established on a frequent basis. As a result, there are thousands
of companies making PCs that perform similar functions pushing the market to be
extremely price-competitive. Since the market is so competitive, vendors often sell
at very low margins. Computers are not the same as many other products, where the
company selling the device is making upwards of 50% of the price of the product as
gross profit. For PCs it is often around 10%.
Additionally, there is probably no other industry that has prices change as
dramatically and frequently as the PC industry. Usually, prices are decreasing. This
is good for the consumer but very bad for vendors, because it means that their
already low margins get squeezed if prices drop between the time that they buy a
product and the time they sell it. Drop in the price of PC comes from both severe
competition and rapid changes in technology. As a consequence, PC makers often
prefer to keep low inventories. Whenever prices fall, the vendors potentially lose
money on every component in inventory at the time.
Due to the rapid frequency of changes in technology, functionalities and
capacity of computers are improved continuously, broadening PC’s definition over
time. In the dawn of PC industry, a computer was a bulky device, furnished with
some simple functions and small volume, but extremely costly. Today, people could
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possess small handheld devices which are integrated with processing power and
functions tens times better than huge mainframes decades ago. The PC industry has
a strong connection with the software industry and the application of the Internet.
These two peripheral industries have accelerated the speed of technology innovation
even faster. In years recent, a computer device has evolved into a centre for all the
digital peripheral such as music players, digital cameras, video recorders, internet
TV, etc. With the technology evolution, computers have become the ever powerful
tools that are essential for any success business and modern families; and the PC
industry become one of the most strategic industries in the world in the 21st century.
1.1.1. Velocity of development and innovation:
The personal computer industry has grown from a hobbyist industry in the
1970s to a highly profitable industry worth hundreds of billions of dollars
worldwide. Driven by consumer demand to access the Internet and the
advancements of microprocessor technologies, the demand for PCs for personal and
business use has climbed continuously in the early 21st century
The PC industry is one among the fastest growing industries in the world.
According to a research carried out by Etforcasts, the annual worldwide PC sales
has a trend to double every six years. By 2000, the PC sales was 132 million; and
almost doubled in 2006. The velocity of increase in this industry is at a staggering
rate of around 9% annually compounded. (Table 1)
Table 1: Worldwide PC Sales
Unit: 1 million PCs
Year
Worldwide PC Sales
1990
1995
2000
2005
2010
24
58
132
207
325
(Source: etforecasts)
Another noticeable index is the number of PC in use. In 2000, there were more than
500 million units in-use and the figure in 2010 is over 1400 million units almost
three times higher. (Table 2)
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Table 2: Worldwide PC in use
Unit: 1 million PCs
Year
Worldwide PC in use
1990
100
1995
225
2000
529
2005
2010
910
1,425
(Source: Etforecasts)
The figure above shows that the computer industry has a huge growth
potential. These growth potentials are fostered by the upgrading of obsolete
machines, newly established business around the world, new generation or
innovation of computer devices integrated with digital functions.
Yearly PC sales for the U.S. and the main regions of the world are
summarized in the next figure. North America will remain the largest region
through 2007. All figures are in millions of units.
Figure 1: Annual PC Sales of the main regions of the world
(Source Etforecasts)
In 2003, the number of PCs sold in the US was roughly about 30% of the total
worldwide sales. This data indicates that the remaining 70% of the PC sales
happened outside the US. This shows that there are many opportunities yet to be
discovered by firms around the world. According to etForcast , Asia will be the
region with the fastest growth in computing devices. This trend is confirmed by the
rapid urbanization and modernization of China in recent years, and expected to
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continue to grow in the next decade. Therefore, it is logical to move the PC
manufacturers in the US into the global arena.
PC revenue was growing slower than unit growth due to considerable price
declines and saw a pause the last two years due to lower unit sales growth than price
declines. The worldwide PC revenues were $251B in 2000, which increased to over
$333B in 2007. Worldwide PC revenue declined to $320B in 2010. According to
experts of Etforecasts, worldwide PC revenue has a trend to grow again in the next
five years to around $400B in 2015, which is due to the unit growth boost from the
iPad and competing products.
To get a clearer picture of the potential of IT industry, have a look at the
following figure about computer and peripherals industry in the period from 1999 to
2004. This computer and peripherals industry include products which are computerbased and inter-connected to computers. These products are indicators of how well
the entire industry is doing in terms of new innovations and future development.
Figure 2: Computer and Peripherals Industry 1999 – 2004
Unit: billion Dollars
This figure is a good indicator of the huge potentials in the IT industry.
Although the industry had a minor setback in 2001, the net profit and sales remains
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high for 2004. As mentioned above, IT industry has become a center for computer
and peripheral devices. There will be a greater demand in networking because
computers are more connected to each other. Wireless technology will continue to
grow in range and speed for more and more information need to transmit between
computers and across networks.
1.1.2. Overall impact to the development of economies in the world
The 21st century comes with more than ever powerful tools which based on the
widely use of computers and the Internet. The popularity of PCs is phenomenal
because it has revolutionized the way people communicate, how information is
stored, and people’s ability to access knowledge at their fingertips. Besides, PCs
have become necessities in the corporate world simply because business processes
involve heavy use of computers and Internet. In fact, the percentage of population
with computer connected to the worldwide network has become one of the key
indicators for the level of modernization and human power of economies in the
world. Following is the figure for some typical countries:
Table 3: Internet users per 100 people
Country
US
Japan
Germany
Australia
China
Singapore
Vietnam
2007
2008
2009
2010
75.2
74.1
78.2
79.3
73.6
74.7
77.4
79.4
75.4
78.3
79.7
82.5
69.6
71.7
74.1
75.8
16.0
22.7
29.0
34.4
67.9
68.0
68.4
70.1
20.9
24.2
26.8
27.8
(Source: World Bank estimates - World Development Indicators)
There are two things that can be easily seen from the above table. First, the
advanced economies often have high percentage of population with computer
connected to the Internet. Developed countries such as US or Germany have a very
high rate, almost four-fifth of the population; meanwhile, developing countries like
China or Vietnam stay at much more humble levels. This means that internet
connection is one of the indicators for the power and modernization of the
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economies. Second, the percentage in general has the trend to increase continuously
over time which denotes the increased demand for computers and Internet using.
People’s job will more and more related to the application of computer and
Internet’s functions.
Information technology has shifted the paradigm of economies. In a
macroeconomic sense, information technology affects the patterns of production,
investment and employment.
Production structure: as the information technology evolves, the world is
now in paradigm shift from the industrial age to the information age. As a result,
there is a growing demand in the service fields that require expert knowledge and
information. Thanks to information technology, existing service industries such as
banking and distribution are enhancing efficiency and expanding their business
areas. New industries on the basis of information technology such as software
industry and information processing service are rapidly growing.
The following table is about information and communication technology
goods exports include telecommunications, audio and video, computer and related
equipment; electronic components; and other information and communication
technology goods of some countries. The number is taken as percentage over the
total goods exports.
Table 4: ICT goods exports (% of total goods exports)
Country\Year
US
2007
14.2
2008
12.8
2009
13.0
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Japan
Germany
Australia
China
Singapore
Malaysia
15.7
14.3
14.7
7.9
6.9
6.8
1.8
1.5
1.4
29.1
27.5
29.5
36.2
35.9
35.4
41.6
26.2
38.1
(Source: United Nations Statistics Division's Commodity Trade)
The table shows clearly that ICT products is an important part in the
production structure of countries, especially Asian developing countries since the
percentage is very high (times higher than developed economies). This can be
explained as the trend of outsourcing in big technology firms of developed countries
to take advantage of cheap labor force and market potential in Asia-Pacific area.
Investment structure: as information technology changes the aspects of
competition, investment is made more in the area of information and
communications that promotes productivity and efficiency of knowledge-based
products. As the demand for high technology goods has increased continuously, the
IT industry becomes a highly profitable but competitive industry. Severe
competition in home countries forces computer firms to expand globally, finding
new market for their growth. In addition, the pressure of price-competition requires
them to find ways to cut cost. As a result, large multi-national technology tend to
invest in potential markets such as countries in the Asia-Pacific area or India,
changing dramatically the investment structure of both home countries and
investment receiving countries. According to OECD Factbook 2010 regarding to
investment structure of the world, ICT shares in total non-residential investment
doubled, and in some cases, even quadrupled between 1980 and 2000. In 2008, ICT
shares were particularly high (at 24% or more of the total) in countries like the
United States, Sweden and Denmark, etc.
Software has been the fastest growing component of ICT investment. In many
countries, its share in non-residential investment multiplied several times between
1980 and 2008. In 2008, software's share in total investment was highest in Sweden,
the United States, Denmark, Finland and the United Kingdom. In the recent years,
software accounted for 50% or more of total ICT investment in France, Finland,
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Sweden, Japan, Korea, Denmark, the United Kingdom, the United States, Canada,
Switzerland and Netherlands. Communication equipment was the major component
of ICT investment in Portugal and Greece. IT equipment was the major component
in Belgium and Ireland.
Changes in employment structure: In advanced economies, the number of
workers in manufacturing sector is drastically reduced by shrinking share of its
production. But employment in information and knowledge-intensive service sector
is increasing with automation and investment in information technology. In the
occupational categories, there are more demands for experts with creativity and
information technology. Meanwhile, for developing countries, a large number of
people move from the agriculture sector into manufacturing due to the trend of
outsourcing of big technology firms in the world. Investment in infrastructure of
high technology firm in developing countries to take advantage of the cheap
manufacturing factors has created jobs for millions of employment in the local
areas.
In a microeconomic sense, information technology changes business
activities. It is important today that how much information a company have and
how much of them could be converted into useful knowledge. The global modern
economy has proved that knowledge itself, not a physical good, is a valuable
product. In other words, owning to advanced information technology, knowledgebased workers, who create and utilize information, play a key role in economic
activities and knowledge creating organizations like research institutes and
universities will find their increased roles as a place for economic activities.
Changes take place in every part of the business from the communication
system to development of goods and technology, procurement, production, sales,
distribution, and after sales services. Enterprises depend heavily on rapid
development of diverse goods and technology in order to satisfy customers. Time to
market is also getting an important position in today economic environment.
Modern communication methods such as email or fax have been widely used in
companies since they accelerate the whole business process and save a lot of time.
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Meanwhile, enterprises have a trend to change production system from mass
production under economy of scale into production on demand thanks to the
application of E-commerce and advanced communication tools. Keeping a smooth
flow of information both internally and externally has become one of the key
comparative advantages of companies in technology field. It helps companies save
time and keep them updated constantly with information about the real demand of
the market. That is the basis for their customization to truly meet the need of theirs
customers.
In short, the informatics era come with the technology evolution has
restructured and speed up people’s lives, business operation, and the whole
economic scenario of every countries in the world. The technology power of
countries in the 21st century comes with the economic and politic power.
Information, communication and computer-related industry have become the
strategic focus of development in almost a large number of countries and regions
around the world.
National policies to promote technology development and innovation:
When talking about the countries growing fast and increasing their power with
technological means today, people often mention the role of information
technology, the widespread use of computers and the Internet. Information
technology sector has proven itself to be the most strategic power in the
development of national economies due to its productivity, speed, and versatility.
As a consequence, countries in the world have set up and changed their own
policies and strategies to develop their technology power on a continuous basis.
On of the main indicator regarding to the policies for technology development
and innovation of countries is how much they spend on research and development
activities (R&D). The following table shows a brief comparison of this expense in
some typical countries in the world. For even a clearer look, the second column
takes this expense as percentage over the GDP of those countries.
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Table 5: Domestic expenditures on R&D by country 2009-2010 (most
recent year available)
Country
US 2009
Japan 2009
Germany 2010
France 2010
South Korea 2010
United Kingdom 2010
Canada 2010
Italy 2010
China 2009
Singapore 2009
South Africa 2008
R&D expense (million
R&D expense/GDP
current ppp)
(%)
401 576.00
2.90
137 314.21
3.36
86 209.64
2.82
49 990.76
2.26
53 184.86
3.74
39 137.82
1.77
23 970.09
1.80
24 269.15
1.26
154 147.36
1.70
5 733.23
2.27
4 708.22
0.93
(Source: OECD, Main Science and Technology Indicators)
In general view from the above table, developed countries often have a higher
rate of R&D expense over their GDP, more or less of 3%. This is relevant with the
result of strong technology power and potential in these countries. Meanwhile,
developing countries such as China has also spent a substantial amount to develop
its technology power to catch up with developed economies in the world. In deed,
the location of R&D investment has a trend to move toward new emerging
economies such as India or China. This is considered as the direct consequence of
outsourcing activities of many large technology firms in the world in the process of
global expanding and cost cutting.
According to an estimation of European Commission, between 13 years from
1995 to 2008 the world’s gross domestic expenditure on R&D (GERD) almost
doubled in real terms. Over this period real GERD increased by about 50 % in the
EU, 60 % in the United States, 75 % in developed Asian economies, 855 % in
China, 145 % in BRIS countries (Brazil, Russia, India, South-Africa) and almost
100 % in the rest of the world. As a result, less than 24 % of R&D expenditure in
the world was located in the EU in 2008, compared to almost 29 % in 1995. The
share of the United States and Japan also decreased substantially from almost 38 %
to 33 % in the United States and from 16 % to 13 % in Japan. Moreover, this global
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trend has been accelerating since 2004, which marked the beginning of a steeper
increase in R&D expenditure in China and developed Asian economies.
Figure 3: Changes of World GERD in real terms
(Source: DG Research and Innovation
Data: Eurostat, OECD, UNESCO
Notes: BRIS: Brazil+Russian+India+Singapore)
This evolution is expected since rapid economic growth in China and a
number of other countries in the world allows for rapid increases in R&D
expenditures in these countries. Also, high growth rates are more easily reached
when the initial level is relatively low. In that context, the share of the EU and other
advanced economies is bound to shrink and the figure below quantifies this
shrinkage. This re-balancing in knowledge production has important consequences
for the EU in terms of international scientific and technological cooperation and
knowledge flows in the world.
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In the 2002 Lisbon Strategy, the EU set the objective of devoting 3 % of its
GDP to R&D activities by 2010. In 2005, with the re-launch of the Lisbon Strategy,
Member States set their own national R&D intensity targets to be met in 2010. In
the Europe 2020 Strategy adopted in 2010, the EU maintained the 3 % objective for
2020 and in the following months, Member States adopted their 2020 national R&D
intensity targets. Despite a 25 % real-terms increase in research expenditure over
the period 2000–2008, R&D intensity in the EU has stagnated at around 1.85 % of
GDP between 2000 and 2007 with a slight increase in 2008 and 2009 to 2.01 % of
GDP (Figure I.1.2). This late increase in R&D intensity is, however, due to a more
rapid decrease in GDP than in R&D expenditure.
In the United States, after a continuous decline during the first half of the
decade, R&D intensity started to increase from 2005 to 2.77 % of GDP in 2008,
slightly above its 2000 value (2.69 % of GDP). This quasi-stagnation of R&D
intensity in the EU and the United States contrasts with the strong increases
observed in Japan, South Korea and China during this period, up to 3.44 %, 3.37 %
and 1.54 % of GDP respectively. Part of the very high R&D intensity growth
observed in China is due to its low initial position. It is to be noted that this increase
slowed down in 2007–2008 in Japan. Of the largest contributors to R&D
expenditure in the EU, France and the United Kingdom have followed a similar
path to the EU average, while Germany is closer to the US level.
1.2. Development strategy of technology enterprises:
Although the market for computer is huge and profitable, the competition is
truly fierce between leading providers including Dell, Hewlett-Packard, IBM, Sony,
Toshiba, Acer and Apple. As the demands for computer and computer-related
products are getting higher day by day, there is also a pressure for PC vendors to
drive the price down to compete with others. It is often down to the level where
profits are questionable; as mention in the previous sector, around 10% of price
margin. Meanwhile, PC vendors also have to cope with rapid product cycle because
high technology is changing so quickly. As the result, IT enterprises have to keep
their costs down and try to maximize their market share. The use of information
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systems to gain competitive advantage becomes very attractive to the companies in
this industry. Each firm follows their own strategy of technology innovation and
doing business.
Dell: The innovative Direct-Sales Business Model eliminates the need for a retail
chain. The ability to customize PC on an individual customer basis is one of the
main comparative advantages of this vendor. Dell’s PCs are built and upgraded
based on standardized components of collaborative partners.
Hewlett-Packard: It merged with Compaq Computer to compete against Dell. This
computer giant still relies on the more traditional retailer channel business model.
HP also offers variety of computer products such as printers, scanners, and digital
cameras.
IBM: Traditionally IBM is in the mainframe and large scale computing market. It
holds the most patents in the world as an attempt to stay ahead in the competition.
The PCs from IBM are gear towards corporate and business use.
Lenovo: Lenovo is the world's second largest PC maker after its 2005 acquisition of
IBM's personal computer business. . Lenovo markets its products directly to
consumers, small to medium size businesses, and large enterprises, as well as
through online sales, company-owned stores, chain retailers, and major technology
distributors and vendors.
Sony: a Japanese consumer electronic giant becomes a computer maker. Their
computers gear toward the consumer market and offer tools for video editing. It is
aiming towards the overall design and appearance of the computer. The main
Laptop line of Sony is Vaio which tend to concentrate on the high end market.
Toshiba: a Japanese diversified manufacturer and marketer of electrical products,
information & communications equipment and systems, Internet-based solutions
and services. In PC venture, Toshiba focuses on portable computers. Their
computers offer a balanced between price and performance.
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Acer: Taiwan PC maker which has been staying in top 5 PC vendors regarding the
market share in recent years after its acquisition of US-based competitor Gateway.
In the early 2000s, Acer changed it business strategy a manufacturer to a designer,
marketer and distributor of products, while performing production processes via
contract manufacturers. Acer’s products are competitive both in the quality and the
price.
Apple: Last major PC maker that is not using Microsoft’s Windows operating
system. Apple has moved from competing directly with the Wintel market to a
more leisure computer market. Their computers focus on design and userfriendliness. The customers for Apple are personal users, educational institutions,
and graphics design firms.
The following table is about global market share of leading vendors in recent years:
Table 6: Global PC Market Share 2008 - 2011
Rank
1
2
3
4
5
Others
2008
HP
Dell
Acer
Lenovo
Toshiba
2009
18.4 HP
14.3 Acer
11.1 Dell
7.2 Lenovo
4.5 Toshiba
44.5
2010
2011
19.3 HP
17.9 HP
17.2
13.0 Dell
12.9 Lenovo 13.0
12.2 Acer
12.0 Dell
12.1
8.1 Lenovo 9.7 Acer
11.2
5.1 Toshiba 5.4 ASUS
5.9
42.3
42.1
40.6
(Source: Gartner and IDC estimation)
The position of leading competitors in the PC market has changed a lot in
recent years due to the acquisition and merger of companies. Dell stayed for years at
the first place in the early years of 2000s; however, after the acquisition of Compaq,
HP has gained the biggest market share, much bigger than Dell and stayed at No. 1
position. The acquisitions of IBM by Lenovo and Gateway by Acer have also
changed the position of these two companies. In 2009 and 2011, Acer and Lenovo
respectively overcome Dell to gain the second position on the global market.
1.2.1. Technology innovation
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Leading PC makers mainly follow 2 ways of technology innovation: to
become a leading innovator or to follow standards-based innovation.
Leading innovator: By this way, PC makers follow independent innovation
to create a brand new technology. They focus on R&D activities in order to achieve
technical breakthroughs which enable enterprises to form a strong technical barrier
by applying for a patent and exclusive right of the new technology or product.
Product innovation in this way occurs through two broad processes: R&D and
new product development. R&D is an ongoing activity that generates new
knowledge that can be applied to new products. New product development is a
multi-stage process of design, development and production that creates physical
products for target markets. These two processes are both very costly because this is
when the computer makers try to develop something totally new to the market. This
is the case when an entirely new product is being created such as the wireless
notebook that requires integration of communication technologies, or in the case of
a new product category such as the Apple iPod.
If the new technology is widely accepted by the market, the leading
innovation companies will receive a huge benefit from the exclusive right of using
the new technology. If the consumers want to use the new product, they have no
other way but buy them from the exclusive providers since they are the only
sources. However, following this way means that independent innovation
enterprises should input adequate human and material resources in the research and
development and market development. They bear the huge cost of R&D and also
the risk that the product may not be well recognized on the market. Moreover,
because technology in the computer industry changes very fast, the new technology,
after a short period of time, will be standardized. At this point, the leading company
of the technology will face with the tough competition from other parties who can
produce the same technology with much cheaper price. The leading company will
continue the cycle of R&D and product development for a new product.
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Standards-based innovation: This way mean the computer maker will based
on standardized technology and market demand to build their own product by
improving product design, capacity, productivity, etc.
Standards based innovation offers advantages and safeguards which
independent innovation cannot match. Standardization means a technology has the
support of its industry. In other words, since the technology is already accepted by
the market, it is ensured about the inter-operating ability and future proofing, and
thereby contributes greatly to customer confidence. Additionally, as it draws on
research from multiple sources, standardization means technologies are continually
improving in their performance, and expanding into new areas and applications. As
a consequence, standard technology allows for larger and homogenous markets.
While many leading innovator try to differentiate their products by spending
huge amount of capital on R&D activities to create brand new technologies which
distinguish them from any thing available on the market, the others with more
humble budget for R&D could follow this strategy of innovation which is based on
the standardization of technology. When a new technology appears on the market, if
it is accepted by consumers, the leading innovator will often possess an exclusive
right with the usage and application of that technology and this would bring them
substantial benefit for a period of time. At this stage, the consumers have to accept
the price even if it not reasonable for that exclusive technology because that is the
only way they could use it. But this is just the beginning of the whole story. With
the higher demand of the market for that technology, it will become more and more
popular to the point that other parties could gain the knowledge of manufacturing
that technology and beginning to produce it. The technology is gradually
standardized and could be sold with much cheaper price than the exclusive one.
This is the point when companies with standards-based innovation strategy start
playing their games. Based on the standardized technology, they spend some money
on R&D to build their own products, upgrade its capacity, and improve the
efficiency to serve their customers in the way they want. This strategy of innovation
benefits them in many ways: first, they could spend a smaller amount on R&D
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activities with the same technology. Second, because the technology is
standardized, it is widely accepted by the customers on the market which means
small risk of their products being rejected. Third, they spend money on developing
their own products and they are often better than the original products of leading
innovators regarding the computing capacity, speed, volume, and often with more
competitive price.
The second strategy of technology innovation has proven itself to be a wiser
way to build a product. Among leading PC providers, Dell is the best example of
using this way of innovation to accelerate its business. Other competitors like HP or
Lenovo also have had the movements toward this way of managing their
technology.
Application of Information Technology to the Industry
By looking at the size of the PC Industry, analysts will conclude that it is
impossible to run business efficiently without the use of Information Technology.
The entire business will be supported by three major aspects of IT use in the
Industry; they are the use of IT in the manufacturing, the use of IT in customer
support and service, and the role of IT in strategies that enable the firm to gain
competitive advantage.
Figure 4: PC industry Value Chain
Suppliers Manufacturing Retail Services Customers
Information Technology Support
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The PC industry Value Chain shows the logical components that support the
day-to-day business operations. Information Technology support is throughout the
value chain.
In the manufacturing stage, a firm has to be able to track the inventory of all
the components that goes into a computer, and they need to do it in with millions of
computers on a daily basis. It is close to impossible for any PC manufacturer to do
this without the use of IT to support the manufacturing process. IT helps to
automate a lot of the mundane daily task and leaves the resources free for other
tasks.
PCs are highly customizable in features and processing power. Therefore, it is
important for the manufacturers to customize any PC to fit the needs of any
customer. To accomplish it efficiently IT will support the ordering processes and
customer service processes. All the information will store into a database, and the
manufacturer can look up the any information on any PC that they have ever built
for its customer.
IT is often used in the forming the strategy for the PC manufacturers. For
example, IT enables a manufacturer to manage their global sales and customer
services. The ability to manage an effective IT system lies among the main
competitive advantages of a PC company. An effective IT system ensures the flow
of information run smoothly both externally and internally within enterprises. And
in this era, information means profit. Large companies like Dell or HP have proved
that their success in managing the IT system helps them understand about the real
market demand, form the basis for their product customization. Furthermore, with
the support of the e-Commerce website, PC manufacturers open up unlimited
business opportunity that can span the entire world.
1.2.2. Business strategy:
As mention in the previous part, the competition in the computer Industry is
fierce and global. These conditions force the manufacturers in the industry to stay
competitive using well thought out business strategies and tactics. And it does not
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