Microeconomic Factors Impacting Personal Computer Industry In India

1. Introduction:

The personal computer (PC) market is segmented into two parts by distribution channel and by-product. On the basis of product, PC is further divided into consumer desktop, commercial desktop, commercial notebook. Currently, India’s personal computer is declining at the rate of 8.3%. India personal computer market is driven by the increase in the number of large projects, and increase in shipment post-GST reforms. Rise in consumers coupled with upcoming manifesto projects across few states will further boost the market growth.

The commercial segment is expected to grow over the next few years as the industry will look to deploy new and powerful devices to meet the evolving technology requirements. Also, pro-business policies in emerging industries in the medium and large segment will look to increase their commercial spending. Lenovo leads the world personal computer market in 2018 with 22.4% of share and will maintain its leadership in the Indian PC market with a market. HP and Dell followed Lenovo’s Footprint. Apple, Acer, Toshiba, Sony, Fujitsu and NEC are some other players involved in the India personal computer market.

India being a populous country with a population projected at 1.369 million in 2019. India is also a very young country with huge potential for growth. 45.82% population of the country also lies in the age group of 10 – 35 which makes 6.27 lakh people who are going to join the workforce or are currently working. This shows the huge market that India offers for personal computing space. Trying to understand why and how this plays out in the Indian market for various companies and how consumers react to various changes in the space is an interesting space to research. This is why we chose this topic for our microeconomics project.

2. Objective Of Analysis:

The objective of microeconomics theory is to analyze how individual decision-makers, both consumers and producers behave in a variety of economic conditions. In this project on analysis of the personal computing market in India, we implemented these concepts of microeconomics to this sector and attempted to analyze the factors that affect the marketplace. Analyzing how the demand and supply changes based on the external factors and how the consumers react to these changes. We have also analyzed the government policies that have affected the industry. Personal computing space has seen a decline over the last few years, we have analyzed what were the factors that caused this decline. Taking HP, Lenovo. Dell as a case study we have tried to look into how the company has tackled these challenges and emerged as the market leaders in this particular sector

3. Evolution In The Personal Computers (Pc) Industry Along With Government Policy Intervention:

The development of computer technologies in India was possible with collaborations of two major forces: The Political administration and Government Policy advisers’ bureaucrats and technocrats.

Evaluation of computers in India can be classified in to 4 phases:

· Phase 1:

The history of computer technologies in India started in 1950’s

• 1955: The first administration to build a personal computer was started under R Narsimhan at TIFR (Tata Institute of Fundamental Research)
• 1959: The Automatic computer was started, this computer used a Cathode Ray tube for the display output and could process up to 40-bit word in 15 microsecond cycle time
• 1960: IBM and ICL got the license to commission computer manufacturing plants in India, IBM firstly started making punch card machines and exported them in different countries from India.

· Phase 2:

• 1970: In PSU called ECIL (Electronics Corporation of India Ltd) a separate computer division was established and at national level a department of Electronics was established with a vision to enhance technologies of electronics
• 1969: A new 12-bit minicomputer called TDC-12 was designed by ECIL
• 1975: TDC-12 was upgraded to TDC-312 followed by TDC-316, a 16-bit computer
• 1978: Till this year ECIL made 98 computers that were sold in different universities for research and were given to Govt. laboratories also
• 1978: Microcomputer policy was made after IBM exited India, which allowed technical entrepreneurs like WIPRO and HCL to manufacture computers and are still prominent in the Industry

· Phase 3:

• 1984: A liberalized policy on minicomputers which allows private sector companies to manufacture computers was made
• Due to this liberalization policy the growth of computers went up to 100% and the cost declined to 50%
• 1986: Computerisation of Indian Railway seat reservation system

· Phase 4:

• 1991: India was imposed to the financial crisis, world bank helped India and set the conditions that forces Indian Government to liberalize the Indian Economy
• 1991: Indian software companies earned a lot by exporting software around more than $100 million
• 1998: Earning was exponentially increased to $1.70 billion with exact growth of 45% year

From 1998 onwards the personal computer industry in India has been growing rapidly and is kee

4. Analysis Of Structure, Market Share And Degree Of Competition:

Hewlett Packard (HP) dominates the market share in India when it comes to personal computing. This is mainly because of the trust that consumers place in the company and the distribution network that HP holds with high penetration across tier 2 and tier 3. this is the key why the company has been able to maintain such high market share

Lenovo and Dell follow suite of Hp with a market share of 9.7 and 9.2 % respectively. Dell has seen a slowdown in growth rate which is generally associated with the decline in market decline over the years

Lenovo has recently picked up its market share because of the introduction of ultra-thin laptops which has garnered interest among the consumers

5. Performance Of Key Players In The Industry:

· HP Inc.:

In India HP Inc. maintained its leadership with an overall market share of 28.1 percent in 2019Q1, it saw a year-on-year decline of 9.7 percent mainly due to consumer segment which declined by 21.3 percent over 2018 Q1. However, HP’s Ultra-slim notebooks witnessed steady consumer traction from its exclusive stores and large format retailers. In the commercial segment, however, HP did not see any major dip in shipment despite elections leading to delayed projects. Despite posting strong quarters across consumer as well as commercial segments, HP Inc. slipped to the second spot in 2Q19. It had an overall market share of 22.4% in 2Q19 though it observed a YoY growth of 5.9%. Despite challenges in the consumer segment, the vendor delivered strong performance in the gaming segment. HP has started to focus more on the e-tail channel and expects it to drive its gaming notebook sales. Owing to its increased focus on the SMB segment, HP registered a strong growth of 17% in a commercial segment on a YoY basis.”

· Dell Inc.:

In India Dell has retained the second position with a 25.9 percent market share in the overall India traditional PC market in 2019Q1; with a year-on-year growth of 2.2 percent and a quarter-on-quarter growth of 26.7 percent. Dell Inc.’s commercial business witnessed a 25.9 percent year-on-year growth owing to prioritization of India market by Dell to provide the necessary supply of Intel chips resulting in the execution of some projects which were delayed in 2018Q4 due to same issues and also helping them improve their performance in Government, BFSI and IT sector. Dell Inc. had a relatively weak quarter as its T2/T3 channel partners faced credit issues. The vendor slipped to the third spot as its share fell to 14.2% in 2Q19. The vendor had a YoY decline of 10.1%. It had a weak consumer quarter where it witnessed a YoY dip of 40.4%. However, it managed to clock 13% growth in the commercial segment which helped the vendor regain some ground lost in the consumer market. It fared well on BFSI and IT segments which led to relatively better commercial performance.”

· Lenovo:

In India Lenovo remained at third position, with a market share of 25.2 percent in 2019Q1 in overall India traditional PC market, observing a 6.2 percent year-on-year growth and a growth of 29.2 percent sequentially. The vendor also witnessed a dip in consumer segment like all other vendors, while on the commercial segment, it witnessed a massive quarterly growth of 70.8 percent driven by partial execution of ELCOT deal, since Lenovo is the sole executor of this project. Lenovo led the Indian traditional PC market in 2Q19 with overall market share of 46.2%. It saw a YoY overall growth of 283% mainly backed by ELCOT shipment in the commercial segment. Outside ELCOT, it fared well in education and BFSI segments. The vendor, however, saw a YoY decline of 14% in the consumer segment. Owing to slow response to “back to school” campaigns, Lenovo, just like other vendors struggled to fare well in the consumer segment.

6. Conclusion:

· Prospects:

Personal Computer demand expected to revive on the back of replacement sales and new technology:”

Laptop sales in India have started to pick up following a decline in sales owing to demonetization. Sales of laptops were affected by the demonetization of the INR500 and INR1,000 banknotes of the Mahatma Gandhi Series late in 2016 and weak consumer sentiment on the back of low employment opportunities, income and price levels made its effect felt on laptop sales through 2017 and 2018. The increasing popularity of mobile phones has provided tough competition for laptops. With the increasing penetration of smartphones in the country, people are using mobiles for various activities, including watching videos and listening to music. It has been observed that consumers are delaying purchases of laptops, with the average replacement cycle for laptops being three years. Over the forecast period, replacement sales and the introduction of a lighter, thinner laptop with more portable designs that also fulfill the need for higher processing speeds are expected to drive sales. There is also expected to be increased demand for specialised products such as gaming laptops.””

· Challenges

GST implementation hinders Digital India drive: “

Computers and peripherals sales to consumers were significantly impacted by the roll out of the Goods and Services Tax (GST). Laptops and tablets were placed under the 18% tax bracket, whereas monitors and printers were under the 28% tax bracket. Prior to GST, the tax rates were around 14-15%. As a result, the prices of the products increased, further weakening consumer sentiment and affecting the government’s Digital India drive aimed at increasing the penetration of information technology (IT) in the country. The introduction of GST has also impacted the “Make in India” initiative for computers and peripherals, making it more affordable to import rather than manufacture in the country. Over the forecast period, companies are expected to provide more value for money by adding features to counter the impact of the price rise.”

· Issues

Focus on expanding retail network and after-sales service to increase market share:

With the computers and peripherals segment in India witnessing a slowdown in growth, companies are focusing on strengthening their retail distribution and after-sales services to appeal to consumers. Companies have started to identify that, along with having an impressive product line-up, it is also important to have robust after-sales services to engage consumers. Lenovo India Pvt Ltd is exploring the possibility of leveraging the concept of the Internet of Things (IoT) for better after-sales services. After-sales services are fast emerging as the key differentiator, especially for premium products.”

Growing role for internet retailing:

Internet retailing was the only distribution channel to register growth in 2018. With the increasing popularity of online retailing, companies are tying up with online players to sell their products through e-commerce websites. Providing discounts and easy financing options during grand sales and festive seasons are prominent strategies being adopted by companies.”

International brands dominate sales:”

· International brands dominated the sales of computers and peripherals in 2018. Domestic brands have a very limited presence in laptops and peripherals. Hewlett-Packard India Sales Pvt Ltd (HP) is the largest player in both computers and peripherals. Within computers, the company narrowly overtook Lenovo India Pvt Ltd in 2018, and stood less than three percentage points ahead of third-placed, Dell India Pvt Ltd. In peripherals, in which its position is supported by strong printer sales, HP is some way clearer of its closest rival, LG Electronics India Pvt Ltd. The leading companies in computers and peripherals maintain their position through their strong retail distribution network coupled with a wide range of models with the latest specifications and technology.

7. References

1. WARC
2. Euromonitor: Passport IDC Capitalline
3. Profits HP Lenovo Dell Acer 589.83000000000004 95 589.83000000000004 7.75
4. REVENUE HP Lenovo Dell Acer 25025.68 6718.3 24895 2580