Declining Gross Margins in the PC Industry PPT

This PPT slide, part of the 26-slide Porter's Five Forces PowerPoint presentation, presents a dual analysis of gross margins in the PC industry, illustrating a significant decline as the market matures into a commodity phase. On the left, a bar chart breaks down the average revenue spending of PC makers, totaling $1.00. The chart details various expense categories: cost of goods at $0.76, R&D at $0.04, marketing and distribution at $0.13, SG&A at $0.02, and operating profit at $0.05. This breakdown highlights the pressure on profitability as a large portion of revenue is consumed by costs, leaving minimal margin for profit.

The right side of the slide features a line graph depicting the gross margins of top PC makers from 1989 to 1994. The trend is clear: gross margins have steadily declined over this period. The lines represent different manufacturers, showing a consistent downward trajectory, which suggests increasing competition and price pressure within the industry. The data implies that as PCs become more standardized, differentiation diminishes, leading to lower margins.

The note at the bottom emphasizes the role of Taiwanese manufacturers like Acer, who have thrived by being the lowest-cost suppliers. This insight underscores a strategic shift in the industry where cost leadership becomes crucial for survival. Companies must adapt to this environment by reevaluating their cost structures and exploring efficiencies. The slide serves as a stark reminder of the challenges faced in maintaining profitability in a commoditized market. Understanding these dynamics is essential for any executive looking to navigate the complexities of the PC industry.

This slide is part of the Porter's Five Forces PowerPoint presentation.

This presentation is created by former McKinsey, BCG, Deloitte, EY, and Capgemini consultants. It teaches a practical consulting framework actively used by tier-1 consulting firms.

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