Personal Computing Industry PESTEL Analysis

A PESTEL analysis of the global PC industry : Major players Dell, Apple, Lenovo, HP and ASUS

The PC industry has been in the situation of consistent decline for the past several years. There are several factors that have been affecting its performance and the decline looks perpetual. Despite trying their best even the known names have continued to lose their market share. Some of the most recognized names in the PC industry are Dell, Apple, Lenovo, HP and ASUS. Apple, ASUS and Lenovo faced a decline with growth falling. Apple’s Mac PCs and laptops lost a 9.8% market share to their competitors. Dell and HP could not achieve remarkable growth rates either.

The problem is in the fast changing environment. 2016 was the fifth year of continuous decline for the PC makers. The changing technological and economic factors both are there behind the continuous decline. However, there are other factors too that are hindering the growth of this sector. While most analysts have predicted that the downslide is going to continue, some of the PC makers like HP are trying to bring the PC and laptops back in a new avatar. Some of the PC makers are feeling existential pressure. SONY even sold off its VAIO PC division fearing continuous decline and loss from PC sales.  This article analyses the various forces affecting the PC industry through a PESTEL analysis.

Global PC Industry Analysis
PC Industry PESTEL/PESTLE Analysis

Political:

Political stability or instability can have a deep impact on the profitability of an industry. Globally the political environment is linked with economic stability. Political instability can lead to chaos and disruption of supply chain. Several of these PC makers have a large number of their suppliers in China. Dell has a very large number of its suppliers from various parts of China. In the recent years the political environment in China has remained normal which means no disruptions.

Even then in several other areas in Europe, political turmoil could affect PC business. Leaving aside Brexit political turmoil in other nations like Spain could also impact PC business.  These political changes have both short and long term impact on the market conditions. Changing political tides in the European countries can leave the PC makers badly frustrated. Political stability ensures several things apart from continued supply and good sales. It also ensures that companies can do business without any fear of losing profits and sales.

Economic factors:

Economic factors mostly have a direct impact on market conditions. However, sometimes even small economic changes can shift the tide, making the situation less than favorable for the companies. Economic growth drives industrial growth and economic recession whose impact is still being felt in several corners of the world is also a reason that the PC industry has been on a downward trajectory. There are other factors too like production costs, labor costs etc. that affect the profitability of the PC makers. It is the primary reason that most PC makers have shifted production to China where labor and raw material costs are considerably lower. Moreover, with economic revival the situation in Asian markets has grown a lot better.

Compared to the other markets, the performance of the Indian and Chinese markets has remained better. The importance of China as a market for PCs has grown in these years. HP and Lenovo particularly saw some good performance in these markets during the recent years.  In all the markets and economies, better economic conditions mean higher consumption. So, economic factors are a major force that can influence PC sales all over the world. While some brands are experiencing satisfactory growth in the Asian markets, others are trying to be back with attractive products and prices.  Prices are an influential factor when it comes to sales and profitability of these PC brands. It is why the Laptop and PC makers try to attract new customers using various deals and discounts.

Social:

The social and cultural trends too impact the PC popularity and sales deeply. During the recent years and with the rise of social media, people’s taste has shifted towards products that provide better mobility.  People have started using mobile devices with large screens that can provide both connectivity and options to surf the internet. Smartphones and tablets are more in use as people can post Facebook updates on the go from anywhere. Several things have changed in just last ten years. However, in the Asian societies where PC was initially seen as a tool for professionals has become increasingly common. It is being used for home computing, entertainment and gaming purposes too.

So, in some of the societies and mainly the Asian societies if the popularity of PCs and laptops is intact then it is because of its new avatar as a gaming and entertainment tool. It is also why PC makers like HP and Lenovo have released new models that do not just cater to people’s needs but also to their taste. New, cute looking models that fit with the consumers’ fun lifestyle are more popular. Increase in leisure trends have also proved good for the PC brands. It has allowed them to experiment with the existing models and bring new ones that are more exciting and fun. In India too PC and laptops have found higher acceptance with the local culture. Based on these facts, one can expect the PC market to return. From watching online videos to reading news, people are using PC in the Asian nations to do several types of things including shopping. Based on its potential for productivity too PC can be expected to play a more important role in the coming days.

Technological:

Technological factors are very important when it comes to PC sales. PC and laptops are technological products that are affected deeply by technological changes. The biggest technological change that has impacted the PC market is the increase in the increased popularity of the mobile technology. The increased sale of smartphones and tablets has impacted the PC industry deeply. It is because people who used to buy PC for small needs or for entertainment purposes are now more inclined to buy smartphones and tablets. The rise in the popularity of mobile technology has given birth to new trends that have not proved favorable for the PC brands. It is being predicted that increased use of mobile technology may be killing the PC industry slowly. The new laptop models are now focused on providing more portability.

It is why the trend of detachable notebook like laptops had caught on during past 2 years. However, it seems that PC makers will need to use better twists to be back with a bang. Still, when it comes to professional and organizational use, while the rise of cloud technology may have hurt PC sales a bit, it has not been able to completely end its relevance. PC is still relevant in the professional circles as it was for its potential of productivity. In the Asian nations if PC sales have sustained then it was for the high professional consumption in these nations. PC is smart technology but needs to be equipped with better features and more portability to shine again. It seems the release of premium ultramobile, ultrathin laptops might help resurrect the dying laptop market. The PC industry has been through ups and downs previously too and so it can be expected to return again.

Ecological:

The main environmental concern for the PC industry is the disposal. PCs are produced using relatively cleaner processes. Still, there are minor effects during the production and assembly of the laptops. The biggest issues are related to the disposal of these products that are non-degradable.   However, the PC brands are investing in sustainability top offset the disadvantages. They are focused on establishing cleaner and more sustainable supply chains that are securer for their workers too.

Legal:

Legal compliance is also an important concern for the PC industry. The PC makers sell in several markets and compliance with the local laws is essential to remain cautious about. In Asian markets particularly, legal issues can be more challenging. In China entry is generally not possible without local partnerships. Similarly, Red Tape can become a major hindrance to business in India. Apart from it, there are laws that are industry specific and some of the common laws like tax and labor laws that create pressures on the PC brands.

The manufacturers and supply chain partners are also required to comply with relevant labor and safety laws. OSHA requires that the manufacturers based in US provide their employees with safe and hygienic working conditions. The PC brands are required to adhere to the local laws of the markets they operate in. All these concerns are important since legal challenges can lead to unnecessary cost for the PC makers.

Sources : [1], [2], [3], [4]

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.