I. Porter's Five-Forces Model
II. External Factors Environmental Scan
I. PORTER'S FIVE FORCES MODEL
INTENSITY OF RIVALRY AMONG INDUSTRY COMPETITORS
- High concentration of similar competitors all located in Taiwan.
- All supply the same large, mainly American clients.
- Same relocations of factories in particular regions of China.
- Low switching costs for buyers.
- Channel conflict of selling to main buyers, who also sell to public market competitors want to sell more into.
- Economies of scale established by approx. a dozen players.
- Not much product differentiation – poor or nonexistent branding (white labeling).
- Capital intensive requirements.
- Very high level engineering and machine requirements.
- High availability of similar, very high-quality substitutes.
- Buyer’s switching costs low.
- High price competitiveness – buyer’s market.
- Limited number of main buyers such as IBM, HP, Apple, Gateway, Compaq, Dell.
- Many substitute providers.
- Low evidence of buyer loyalty.
- Many substitute providers.
- Similar high-quality competitors.
- Industry important to country.
MARKET FACTORS
- Downward trend in market demand.
- Downward drop in PC pricing.
- Low upgrade rates – what customers have now is sufficient for performing most desktop functions.
- Too many competitors in the space selling to the same brand names like IBM, Dell, Gateway, HP, etc.
- End customers perceive little differentiation between Dell and Gateway, for ex.
- Existing competitors have excess capacity.
- Profit margins have plummeted.
- Some developing economy opportunities.
- Current government unknowledgeable and ineffective in technology policy development.
- Investing in agriculture to meet special interest group demands.
- Poor management of stock market.
- Administration continuing efforts to develop relationships with other developing nations, and sell bulk quantities of Taiwanese companies’ own brands.
- Few new technological/engineering innovations.
- General market feeling of "What to do now?"
The personal computer manufacturing industry in Taiwan, Republic of China, is in deep trouble. Product leadership positions are occupied by Acer, Gigabyte, and Microtek, with innumerable me-too players, in the manufacture of chips, motherboards/mainboards, monitors, personal computers of all types, and all peripherals, including printers and scanners. Many OEMs built tremendously beautiful, high-tech production facilities complete with the most innovative production lines, best R&D departments staffed by scientists and engineers. This debt is not being paid back by the projected sales claimed by buyers such as household PC names like Dell, Gateway, IBM, HP.
The industry itself is crowded with very competent players, many of whom have moved their production lines to mainland China in order to survive. There has been a shakeout, and some consolidation, where main motherboard manufacturers acquire the OEMs of other PC-related parts.
I believe these players may have an opportunity to expand into other markets - such as Brazil, Chile, and certain countries in the Caribbean (Dominican Republic). The US market is saturated, and the branding problems are too large. China is also a strong possibility for promotional inroads as many OEMs have already invested there. The government needs to invest more aggressively in branding initiatives highlighting the technical capabilities of its PC market. Certain market leaders should be cultivated – Acer, Gigabyte, and Microtek in particular should receive some government support to gain more international market share. A high level international PR/branding/advertising firm should also be considered to leverage the strengths of this industry along with announcing the strong support of the government. There needs to be product and company differentiation – branding is key. Debt considerations/allowances could be made by the banks with the support of the government.
