Why Dell and HP Should Not Attack Apple
I have received requests to elaborate on when you should use the "attack strength" strategy. The following question from a reader illustrates the issue:
"In one article you explain lucidly why it is that Microsoft needs Zune (essentially the same reason Google needs online office 'stuff'), but then you describe Dell's DJ and HP's HPod as 'silly distractions.' These seem like attempts at similar 'attack their strength' strategies. Please explain."
The reason Microsoft should attack Apple's strength and Dell and HP should not is that Apple is a strategic competitive threat to Microsoft but it is not a strategic competitive threat to Dell or HP.
The strategic competitive threat Apple represents to Microsoft is covered in depth in Why Microsoft Needs Zune. To summarize, OS X is a potential threat to Windows. Microsoft must do everything it can to keep Apple from freeing OS X to run on generic Intel compatible PCs.
Perhaps it seems counter-intuitive to state that Apple is not a competitive strategic threat to Dell or HP. After all, Apple, Dell and HP all manufacture and sell personal computers. So let us first consider Apple’s personal computer strategy.
Apple sells simplicity, ease of use and hip style. The Mac is the appliance of personal computers. It is targeted primarily at hip, artistic urbanites, graphic artists, the education market and a small but devoted group of Mac true believer techies. Apple's strategy of controlling the core hardware and software enables it to maintain high margins. Mac has a worldwide market share of about 2%.
Dell and HP sell Windows compatibility, low price, reliability and customer service. Their Windows platforms are the generic PCs for every PC use, targeted at everyone. They compete with the world on hardware, have no control over the software, and thus employ a low cost provider, high volume, thin margin strategy. Dell is number one with about 18% worldwide market share, HP is number two with about 15%.
Mac provides fat margins, to which Apple is addicted. This means Apple is not likely to compete with any Windows PC vendor on low price. Nor are most Mac buyers choosing between Mac and Windows platforms when they make a purchase decision. Mac is thus unlikely to appreciably increase its small personal computer market share over the next five years and is not a strategic competitive threat to Dell or HP. (Dell and HP now even have insurance against the small but non-zero chance that Apple will change its strategy: they can cheer along Microsoft Zune, a kind of passive-aggressive attack-by-proxy.)
Dell and HP are, of course, direct strategic threats to each other. Thus HP attacked Dell's strength buy acquiring Compaq and Dell attacked HP's strength by entering the printer business.
I will address the "when to attack strength" question more generically in a future post.
Copyright © 2006 Philip Bookman
Technorati: Dell HP Microsoft
"In one article you explain lucidly why it is that Microsoft needs Zune (essentially the same reason Google needs online office 'stuff'), but then you describe Dell's DJ and HP's HPod as 'silly distractions.' These seem like attempts at similar 'attack their strength' strategies. Please explain."
The reason Microsoft should attack Apple's strength and Dell and HP should not is that Apple is a strategic competitive threat to Microsoft but it is not a strategic competitive threat to Dell or HP.
The strategic competitive threat Apple represents to Microsoft is covered in depth in Why Microsoft Needs Zune. To summarize, OS X is a potential threat to Windows. Microsoft must do everything it can to keep Apple from freeing OS X to run on generic Intel compatible PCs.
Perhaps it seems counter-intuitive to state that Apple is not a competitive strategic threat to Dell or HP. After all, Apple, Dell and HP all manufacture and sell personal computers. So let us first consider Apple’s personal computer strategy.
Apple sells simplicity, ease of use and hip style. The Mac is the appliance of personal computers. It is targeted primarily at hip, artistic urbanites, graphic artists, the education market and a small but devoted group of Mac true believer techies. Apple's strategy of controlling the core hardware and software enables it to maintain high margins. Mac has a worldwide market share of about 2%.
Dell and HP sell Windows compatibility, low price, reliability and customer service. Their Windows platforms are the generic PCs for every PC use, targeted at everyone. They compete with the world on hardware, have no control over the software, and thus employ a low cost provider, high volume, thin margin strategy. Dell is number one with about 18% worldwide market share, HP is number two with about 15%.
Mac provides fat margins, to which Apple is addicted. This means Apple is not likely to compete with any Windows PC vendor on low price. Nor are most Mac buyers choosing between Mac and Windows platforms when they make a purchase decision. Mac is thus unlikely to appreciably increase its small personal computer market share over the next five years and is not a strategic competitive threat to Dell or HP. (Dell and HP now even have insurance against the small but non-zero chance that Apple will change its strategy: they can cheer along Microsoft Zune, a kind of passive-aggressive attack-by-proxy.)
Dell and HP are, of course, direct strategic threats to each other. Thus HP attacked Dell's strength buy acquiring Compaq and Dell attacked HP's strength by entering the printer business.
I will address the "when to attack strength" question more generically in a future post.
Copyright © 2006 Philip Bookman
Technorati: Dell HP Microsoft
Labels: software strategy
posted by Phil Bookman at 9:34 AM
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