The computer hardware industry in India has a market of Rs. 32,500 crore, accounting for 32% of the IT industry. Personal computers make up the largest segment at 32.5% of the market, followed by network equipment, computer peripherals, and storage devices. The top players in the market are HP, Lenovo, Dell, Acer, and HCL. The industry has seen annual growth rates ranging from -7% to 18% over the past decade. Key factors like pricing trends, FDI inflows, Porter's 5 forces analysis, and SWOT analysis are discussed in relation to the future potential of the computer hardware industry in India.

1. COMPUTER HARDWARE INDUSTRY
SEC: DEF, TOPIC NO. 7
PUNYASHLOK DWIBEDY (2012223)
RAHUL MISHRA (2012229)
R SUSHANT SINGH (2012233)
RAKESH DUTTA (2012234)
RASHMI RANI (2012236)
S. PREET KARAN BHATIA (2012250)
SHIVAM KUMAR (2012296)
RAKESH DUTTA © 2014

2. COMPUTER HARDWARE INDUSTRY IN INDIA
• 32,500 Cr market – Accounting 32% of IT industry in
India
• Some of the industry metrics
• PC unit sold
• $/storage
• Avg. PC revenue
• Price to free cash flow
• Sales/Employee
Computer
H/W
Industry
Personal
Computers
Network
Equip,
Computer
Peripherals
Storage
Devices
32.50%
13.70%
11.80%
10.40%
2.80%
28.80%
Market Share
HP Lenovo Dell Acer HCL Others
Data source: Gartner, 2013
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3. 5.05
6.34
7.34
6.80
8.03
9.31
10.82
11.31
2006-07, 26%
2007-08, 16%
2008-09, -7%
2009-10, 18%
2010-11, 16%
2011-12, 16%
2012-13, 5%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
-
2
4
6
8
10
12
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Growthin%
InMillionUnits
PC Sales in Volume
Data source: IMRB & MAIT
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4. PRICE TRENDS
0
20
40
60
80
100
120
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160
180
200
4/1/2004
6/1/2004
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2/1/2012
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2/1/2013
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6/1/2013
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10/1/2013
12/1/2013
WPI vs. Computer & Peripherals Price Index
Wholesale Prices Computers Computer Peripherals
INFINF Index
INWICMPU Index
INWICOPE Index
Data source: Bloomberg
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5. FDI INFLOW
0
500
1000
1500
2000
2500
3000
0
50000
100000
150000
200000
250000
300000
350000
3/1/2004
5/1/2004
7/1/2004
9/1/2004
11/1/2004
1/1/2005
3/1/2005
5/1/2005
7/1/2005
9/1/2005
11/1/2005
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9/1/2007
11/1/2007
1/1/2008
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11/1/2008
1/1/2009
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5/1/2009
7/1/2009
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11/1/2009
1/1/2010
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7/1/2010
9/1/2010
11/1/2010
1/1/2011
3/1/2011
5/1/2011
7/1/2011
9/1/2011
11/1/2011
1/1/2012
3/1/2012
5/1/2012
7/1/2012
9/1/2012
11/1/2012
1/1/2013
3/1/2013
5/1/2013
7/1/2013
9/1/2013
FDI Inflow
FDI Inflow in India FDI inflows in Computer & IT industries
INFDCUMU
IFDSCOMP
Data source: Bloomberg
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6. POTENTIAL GROWTH
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7. PORTER’S 5 FORCES
Moderate because of
• High price Sensitivity
• Low Player Differentiation
Bargaining power
of buyers
Strong due to
• Limited number of suppliers
• Suppliers are large, international companies
Bargaining power
of suppliers
Reasonably easy for new entrant to get moderate success because
• Online shopping has grown in popularity over the years.
• Reduced fixed costs for all shoppers.
Threat of new
entrant
Reasonably low but
• Replaceable technology for gaming consoles
• Tablet technology
Threat of
substitutes
Moderate
• Consumers have numerous options to choose from and switching costs for them are low.
• storage costs are high so quick product turnaround is vital
Rivalry
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8. SWOT
Strengths
• Many companies have strong portfolio offerings.
• Research and development - Patent
• Ex: HP
Weakness
• Alternatives to PC’s
• Computer Manufacturing Industry is a worldwide market
and subjected to instability of economies in various
countries.
Opportunities
• Opportunities for growth and advancement as
developing countries increase their need for technology.
Threats
• Likely decline for PCs
• intense competition between the large companies within
the industry which make it difficult for new, smaller
companies to become effective.
• Governments all around the world pose threats to this
industry because of environmental regulations and
currency fluctuations.
S W
O T
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9. COMPUTER H/W WILL GROW AS IT WILL GROW
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10. PRICING POLICIES
• Use price competition as their products have been commoditized.
• Keep product at as many price points as possible
• Examples are LG,LENOVO, ACER.
• Price discrimination
• large corporate, SMEs, personal PCs
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11. PRICING OPTIONS
• Promotional and bundling pricing strategies.
• For example
1. With HP DESKTOP PC worth Rs. 24,990
Get accessories bundle worth Rs. 2873 @ Rs. 999
And three years onsite warranty.
2. With HP ink cartridge worth Rs 317
Free HP Glossy Photo Paper Pack worth Rs 50
3. Printer + Scanner
• EMI Option
• Segment Visitors According to Their Purchasing Power
• Inter-temporal policy
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12. DELL VS. HP
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13. MARKET BARRIERS (ENTRY & EXIT)
• Entry
• Everybody can start a home-based
mail order business for computer parts
• It takes little government permits
• Wholesaler are open for every
reseller
• There is no need to keep large stock
• Exit
• Investment in specialist equipment
• Specialized skills
• High fixed costs
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14. NON-PRICE COMPETITION
• Nibbler Approach
• Go-to-Market Strategy
• Online sales opportunity
• Hardware maintenance services
• Warranty
• Patent Wars
• Apple vs. Samsung
• Embedded Software Licensing
• Hardware(vertical) differentiation is not enough.
• Example APPLE, SONY.
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15. COLLUSIVE BEHAVIOR OF EXISTING FIRMS
THE SITUATION WHERE A DUOPOLY ACTS AS A MONOPOLIST
• Methods -
• Bidding Collusion
• Price Fixing
• Establish or adhere to price discounts.
• Hold prices firm.
• Adopt a standard formula for computing prices.
• Maintain certain price differentials between different types, sizes, or quantities of products.
• Adhere to a minimum fee or price schedule.
• Fix credit terms.
• Not advertise prices.
• Technology Collusion: Holding back the release of existing technologies so that people upgrade in small
increments
• Ex: DDR II RAM, Overclocking of CPUs etc.
• Deliberate control of supply to inflate prices
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16. UNIQUENESS
• Existing Secondary Market.
• Ebay, OLX, Quickr
• High R&D expenses.
• Mostly products are vertically differentiated.
• PCs are now like cars - Predefined consumer preferences, price sensitive & self awareness.
• Many repeat purchasers.
• Vendors contend with high bankruptcy rates
• Low inventory.
• No inventory (JIT) – Dell (CCC: -14 days)
• Rapid technological changes lead to disruptive innovation.
• rapid price fluctuations
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17. THE END
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