The Computer Industry is one of the biggest in the world with IBM, Dell and Hewlett-Packard being the main players. Computer Industry consists of all the actual and potential buyers of personal computers, notebooks, servers, printers, scanners and other computer peripherals.
We focus on Hewlett-Packard and Dell for the purpose of this assignment.
Environmental scan for the Computer Industry
The marketing environment within which a company operates is dynamic. It consists of a microenvironment, the forces close to the company that affect its ability to serve its customers”, and a macro environment, “the larger societal forces that affect the whole microenvironment”
A company’s marketing strategy must take into account changes and trends in the environments that can present opportunities or pose threats. A successful firm is one that regularly modifies it marketing mix and strategies to adapt to these changes. The macro environment consists of forces discussed in detail below.
Demographics is the “study of human populations in terms of size, density, location, age, sex, race, occupations and other statistics”. The importance of the demographic environment lies in the fact that all demand for a product derives ultimately from people.
Kotler noted that demographic developments have “transformed the computer Industry from a mass market into more fragmented micro-markets differentiated by age, sex, geography, lifestyle, ethic background, education and other factors. The implications of such changes are that organisations must now design products and marketing programs for the specific micro-markets they wish to target.
New age communities now make up a significant part of the population, who have clear product and brand preferences. Thus, there is now demand for a wider variety of computers to suit new age tastes, which requires the development of new products and marketing strategies.
The economic environment consists of the “factors that affect consumer buying power and spending patterns”. Factor includes income and employment levels, inflation levels, savings and credit conditions, the value of the currency and so on.
This aspect of the macro environment is important to the computer Industry, because consumers must have the purchasing power to back up their desire for the products. However, since non-price factors, such as branding, are a significant basis for competition for computer products, changes in retail prices will not have a huge effect on the market share of any one manufacturer.
Another Factor that affects the computer industry is the value of the home currency, all branded products are imported, and their prices vary with changes in the relative exchange rates. Also with an increase in income, consumers are likely to purchase higher quality products rather than to simply purchase more. Thus there is a growing market for higher quality and priced computers.
The natural environment concerns the “natural resources that are needed as inputs by marketers or that are affected by marketing activities”. Today, there is a growing awareness of the need to preserve our planet, and to protect our natural environment from the potentially harmful affects of industrial activities. Since computer manufacturers make use of the natural environment, there is a potential for this aspect of the macroenvironment to be quite significant to the computer industry. Such issues that involve computer manufacturing are the use of pollution from manufacturing plants, energy consumptions which can lead to climatic impacts.
The technological environment is the “forces that affect new technologies, creating new product and market opportunities”. In todays world computer manufacturers have not only reduced the size and but has also raised efficiency and improved product quality. The advent Internet shopping is allowing consumers to make purchases on-line, and from foreign suppliers, posing a threat to the size and profitability of the computer Industry.
The political environment consists of the “laws, government agencies and pressure groups that influence and limit various organisations and individuals in the society”. Like in all markets, computer industry is also subject to laws that regulate virtually all aspects of their business, including such areas as health safety, pollution, and advertising and labelling requirements. However, the political environment does not have large impact on the Asian computer market.
The cultural environment consists of the “institutions and forces that affect society’s basic values, perceptions and behaviours”. Changes in culture and emergence of varied sub-cultures can have a large impact on the Industry.
Competition being so intense that there is a threat of customers switching to unknown/local branded products available in the market for much cheaper price. The availability of pirated computer software and peripherals has also been an increased worry in Asian countries as customer prefers purchasing a product for a much cheaper price available in the local market than going for a branded one.
Introduction to the Companies
Dell Computer Corporation is the worlds largest direct computer systems company, and leading computer manufacturers that has transformed and diversified into variety of business segments over the years Michael Dell founded the Dell Computers in 1984 with a simple concept: selling computer systems directly to customers. Spanning over 20 years, the company has always been associated with designing, manufacturing and customizing products and services to satisfy a diversified range of customers including individual customers to corporate and retailing businesses. The company’s philosophy to deal with customers one-on-one has become a management model for other companies.
This strategy would allow Dell to understand and satisfy the computing needs of customers. Dell is in the Computer Hardware Industry of the Technology Sector and is also No. 1 in the worldwide market-share and is also the leader in liquidity, profitability and growth among all.
Hewlett Packard is a company that offers new technologies and research to businesses and homes around the world by providing the best in service, products and sales. Hewlett Packard offers some of the best in customer service and puts forth full effort in helping their consumers. They are focused on providing their customers not only with the best products but the best quality in helping their customers. Customer service is a top priority in Hewlett-Packards mission, and they put forth the fullest effort in fulfilling that service.
Hewlett Packard was founded in the year of 1939, and now has over 88,500 employees worldwide that fill more than 540 sales and support offices, and distributors in more than 120 countries. In the year of 1934 college graduates from Stanford University Dave Packard and Bill Hewlett believed in the power of technology and the contribution it could make to peoples lives, communities and businesses. Almost 70 years has passed and the company continues to evolve and innovate, engineering minded people who apply new thinking to improve the lives of customers.
The marketing mix:
There are many organisations that operate within the computer Industry. Each company positions themselves with a unique marketing mix that is aimed at specific segments of the market. Kotler defines the marketing mix as “the set of controllable marketing variables that the company blends to produce the response it wants in the target market.” The variables of the marketing mix are the ‘four Ps’:
Product: “the ‘goods-and-service’ combination the company offers to the target market”
Price: “Amount of money customers pay to obtain the product”
Place (Distribution): “involves company logistics and marketing activities concerned with making and distributing the final product”
Promotion: the “activities that communicate merits of a product and persuade the target customers to buy”. This includes advertising, publicity, sales promotions, personal selling, direct marketing and sponsorship.
Marketing mix outline – DELL
Product: Though there is no segregation of the different products and services but nevertheless in separating the components enabled it to target the customers based on the regions in which the products are manufactured. By assigning each regionalized production centre particular component for production not only have diversified the risk of concentration of labour and production costs but also depending on particular infrastructure.
Price: For the above reason Dell’s product pricing reflect the affordability of the local consumers. For example basing plants in Xiamen, China Dell has been able to provide products and services at the local prices without incurring additional costs to price. Price reasonability and the availability of support, after sales services and parts have alleviated Dell’s position from others.
Place: For this reason, Dell has been able to affect the location strategy aspect of its marketing campaign. As Dell’s products are always available at the nearest dealers customers develop trust for the “local Dell” thereby achieving the objective of gaining their trust in Dell products and services, and forming a large and diversified consumer base. Dell has also linked itself in alliance with major players in the IT Industry such as Intel to compete better with its potential rivals.
Promotion: Dell in the past have not concentrated on extensive marketing campaigns but these revolutionaries in 1999 when Dell changed its tactics by engaging in extensive marketing campaigns. The “Be Direct” attitude has changed the way consumer view Dell as the local producers. Dell has been successful in its promotions and it is time again to revise this campaign to attract customers.
Marketing mix outline Hewlett Packard
Product: The merger of Hewlett Packard and Compaq has opened the market to a broadly diversified mix of businesses, ranging from Server, Printers, Scanners, Fax, Personal Computers, Notebooks, Handhelds and Multi Function Devices and has segmented its products to a group of like-minded customers who need a particular selection of service features. Hewlett Packard is characterized for its great service marketing; and sometimes has many varieties of services to tempt discriminating buyers. They also offer some truly different packages, ignoring snoozing competitors who have missed the emergence of a new market segment.
Price: Hewlett Packards product pricing lies in the essence of its brand, standing behind such a strong brand as a leader in innovation and corporate reputation, customer are willing to pay more for its products, services and solutions. HP believes that if a product, service or support is clear, consistent, different and better at every touch point it creates a greater experience for its customer and builds lasting loyalty for its brand, keeping this in mind the HP brand is acknowledged for its contribution to creating differentiation and builds a closer bond with its customers through customer loyalty programs.
Place: Like Dell, HP has a direct sales force for its large corporate clients, however HP favours a model where its products are provided “indirectly” to customers through resellers or stores located across the globe and provides training materials and support programs for retailers and resellers to assist their customers better. HP will provide its channel partners with the opportunity to resell and possibly deliver services as appropriate. HP also acknowledges the benefits of an in-store experience hence benefiting customers with the touch and the feel of the product. Like Dell, HP has also aligned itself with some of the major players in the IT Industry such as AMD, Yahoo etc to keep up with the every growing competition within its industry.
Promotion: Unlike Dell, Hewlett Packard has participated in a lot of marketing campaigns and advertisements targeting a range of segments, e.g. The Disney-themed promotion offering customers the opportunity to win great prizes while they do their holiday shopping, giving them the opportunity to be entertained while they promote and market their products. The most recent ad campaign The computer is personal again shows an in-depth consumer research to know different consumers, their different needs, and a varied range of computers to fit to their needs.
Dell Vs Hewlett Packard
The marketing mix of Dell and Hewlett Packard are quite different, although they belong to the same industry, and target the same set of customers. These differences reflect the different positioning of the two companies, and the segments of the market they were aiming to capture.
HP is a problem for Dell on many aspects. HP not only competes with Dell in PCs, but also in printers a newer business for Dell as well as servers. Dells allegiance to Intel chips has enabled HP to gain ground in servers, since some HP servers use AMD chips, which are believed to be technically superior to those made by Intel.
With HP restructuring and streamlining its supply chain management, it has taken an added advantage over DELL due to its direct sale/build-to-order to avoid retail inventory burden. In order not to loose this critical advantage DELL cannot afford to deviate from its proven “no inventory” business model.
The Dell strategy is in sharp contrast to the solutions approach being aggressively driven by HP and its partners. The simple fact is HP and its partners are driving more customer value than the low-priced approach that Dell continues to cling to.
Generally, Dell and Hewlett Packard are competing neck to neck within the same industry, Hewlett Packard has clearly the highest quality in product and service, and consumers must pay for this. What Dell is offering is a more affordable alternative.
The Computer Industry is subject to the demographic, economic, political, cultural, natural and technological forces of the wider macroenvironment that it operates within. Each of these forces has the potential to change the marketing environment, and create opportunities and pose threats to the market and those who operate within it. What companies must do is monitor these environments to adapt its marketing mix accordingly.
In the Computer Industry, different companies have quite different marketing mixes, as can be seen when comparing Dell and Hewlett Packard. These differences do not mean that one is more effective than the other, but rather they reflect the different marketing strategies adopted by each company to capture the market segments they feel the company can best serve.
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