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Unformatted text preview: Caitlin Vodopia Individual Case Write Up I I Matching Dell 1. The personal computer industry has come to have such low profitability for a variety of reasons. The first reason is the most valuable components of a PC, the microprocessor and operating system, were ceded to other companies by the computer manufacturing companies. Since Intel processors and Windows operating system have become the technical standards for almost all PCs, Intel and Microsoft are able to charge higher licensing fees for their products because if a manufacturer does not use them then their products are virtually useless. Microsoft and Intel hold the power in their relationship with PC makers. The next reason for low profitability in the PC market has to do with inventory. Many companies, such as IBM and Compaq, relied on forecasts to determine customer demand. By doing this, they had to hold inventory to cover the forecasted amount of demand to support distribution channels, incurring a large cost for that. Because resellers held so much inventory, upwards of sixty days worth, manufacturers offered them price protection, so that if the value of the computer dropped while in that distribution channel, the manufacturer would reimburse the reseller or distributor accordingly. As computers took four to five weeks to pass from the PC maker to distributor to customer, and resellers help upwards of sixty days worth of inventory, this was common and accounted for an extra cost burden on manufacturers. for an extra cost burden on manufacturers....
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- Spring '10