Current Market Competition: Analysis
Electronics over the past fifteen years have become an everyday essential in today’s market. The use of personal computers skyrocketed from being in higher income households to common place in almost every home. Equalus Inc. is excited to jump into the world of desktop computers and notebooks by providing service to the masses of a “build-your-own” personal system with tech help and customer service all originating within the United States. Based on a series of questions Equalus will be able to build a desktop or notebook to the user’s needs.
Consumers will no longer wonder if their purchase will be able to handle what they need it to do and last for as long as they need it to. With the type of business Equalus will be bringing to the consumer the closest competition would the Hewlett-Packard (HP). This analysis of HP is in attempts to foresee any possible issues that may occur for Equalus and provide an accurate description of the market competition. Hewlett- Packard (HP): Analysis Equalus strives to be the number one manufacturer of “made to order” personal computers. HP currently stands to be the major competitor for Equalus in relation to pricing and products offered.
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Going over HP’s history, product demand, and seeing how fixed and variable costs affect the product will give Equalus the best advantage to compete with HP. Hewlett- Packard History Meeting in 1934, Bill Hewlett and Dave Packard needed to make some kind of money after graduating from Stanford University. They rented a small garage in Palo Alto, California and began working part time on equipment. Shortly after creating their first product, Walt Disney became their first customers in 1938 buying the HP 200A; an audio oscillator to test sound equipment.
HP did not create a “personal computer” until 1968 and went into the business of computing in 1972. Between the years of 1975 and 1985 HP creates a wrist calculator, the first desktop personal computer, a touch screen, and invents the ThinkJet printer. All of these technological advances by HP receive the attention of Japan and China where HP expanded in hopes of continuing to invent newer and better technologies in the future. Since the 90’s HP has gone on to invent many other firsts like the first all-in-one device and is the first company to recycle ink cartridges.
They have also acquired many smaller companies like Snapfish and Compaq to grow the company to being one of the industry leaders in personal computing. (Hewlett-Packard, 2013). Market Factors Computer technology is constantly advancing over software and hardware that is available at any one given time. These constant changes affect how long computer products can sell for a premium price but also can make it cheaper for those consumers that are not interested in the newest and latest components.
Personal computers (PC), also known as desktop computers, are common place in jobs, schools and homes. The demand for personal computers is constant and revolving since components of computers gets better and more powerful with time. The target market then becomes anyone that uses a personal computer for home or work. HP uses the fact that computers are a common item in any office or home to their advantage and offers not only PC’s but other accessories pertaining to computers as well.
While HP currently excels at providing a product for a decent price they are missing out on consumers that Equalus will focus on by offering a product custom made to fit the user, provide customer support for that product, and provide that assistance from the originating country with beginning stages in the United States. Issues Industry Faces Equalus will face many different issues while trying to break into the personal computer industry. The first will be overcoming big brand names.
While there are many companies out there that offer the ability to build a custom computer many turn to the well known names like Dell and HP simply because of product name. Then there is the always changing technology. While Equalus plans on charging depending on the build of the computer there is no guarantee that price will be able to compete with the low prices that brand names can offer the consumer. Equalus will have to rely on big advertising to bring in a large flow of customers to ensure enough profit will be made to overcome the cost of various technological innovations that comes with PC’s.
Reinforcement on Equalus’ motto “computers custom built on personality” can lead the consumers looking for a more personal touch to their PC’s to the company, strictly relying on the census finding stating, “ In 2011, 75. 6 percent of households reported having a computer” (File, 2013). During the beginning stages, Equalus will rely on a small inventory and minimal employees to keep overhead costs and labor costs to a minimum to ensure that productivity stays high while the company is growing.
Equalus also has operating procedures drawn up to keep the number of personnel working on one order to two people; one hardware specialist and one software specialist to ensure that the product is built in a timely manner without too many personnel slowing down the process. This will also help determine if there is an issue with employees manufacturing defective product and keep loss to a minimum. Overall Cost Structure Figuring cost structure breaks down into two areas: fixed and variable.
According to Colander (2010), fixed costs are, “…costs that are spent and cannot be changed in the period of time under consideration” (pg. 283). In these terms a fixed cost for Equalus would be a rental agreement for a year of office space. The amount of rent will not change or be altered for that year long lease hence it is considered a fixed cost. What will affect fixed costs is if the business does not make it in the industry at which point any money invested in equipment or in the office space lease is now considered lost.
Colander (2010) goes on to explain variable costs as, “…costs that change as output changes” (pg. 284). For this definition the hardware that is purchased to fulfill orders would be a variable cost since it is unknown in a year how many components of a certain type will be ordered. Also, any wages paid to employees would be considered variable since it is unknown if an employee is going to work a 30-hour work week or have to put in overtime hours to complete orders. Another variable is the time of year. If the beginning of the school year is approaching there is a higher demand for PCs and laptops for students.
For Equalus, watching that variable costs do not get out of control will help in the beginning stages of company growth. Conclusion Equalus Inc. has to compete with strong competitors like HP. With the right business plan, a watchful eye, and strategic advertising Equalus Inc. has a good chance of breaking into the personal computer industry. Breaking into the computer industry may be tough with brand loyalty to other brands; however brands such as Apple and HP they show that it is possible and profitable.
Colander, D.C. (2010). Economics (8th ed.). Retrieved from The University of Phoenix eBook Collection database File, T. (2013). Computer and Internet Use in the United States. Retrieved from http://www.census.gov/prod/2013pubs/p20-569.pdf Hewlett-Packard. (2013). HP Timline. Retrieved from http://www8.hp.com/us/en/hp-information/about-hp/history/hp-timeline/hp-timeline.html .