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THE WHITEBOARD
After Hewlett-Packard announced plans to spin offor sell its personal computer business on Aug. 18, H-P shares fell 20 percent the next day. Worried investors sold shares and began debating H-P's strategy. A key to understanding investors' concerns is Michael Porter's Five Forces model.
Porter, a Harvard professor, introduced the Five Forces in a 1979 Harvard Business Review article, "How Competitive Forces Shape Strategy." He expanded on his ideas in 1980 in his seminal book, "Competitive Strategy."
The Five Forces model provides a framework for analyzing the key structural forces acting on an industry and their effect on a business, given its current or future strategy. We can learn much about the investors' concerns, and the model, by using it to analyze H-P's strategy.
The Five Forces are: rivalry among existing firms, threat of new entrants, threat of substitutes, bargaining power of buyers, and bargaining power of suppliers.
1. Rivalry among existing firms. H-P has clawed its way to the top of the personal computer market. The rivalry continues, but H-P knows how to win. There is nothing new on the horizon from key competitors Dell or Lenovo that will change the dynamics of the rivalry. This force does not appear to drive...