PC I ndustry and Advertising

1. PC Industry and Advertising YanyanGai Celine You Sheng Chen EdipoCravo

2. Agenda • Introduction • Industry Analysis • Advertising Strategy • Recommendation

3. Industry Definition • “This industry manufactures, designs, or assembles personal computers (PCs), laptops, handheld computers and servers. Operators typically purchase computer components from dedicated manufacturers in other industries.” ---IBIS World

4. Why This Topic • Why we choose this industry? Who doesn’t have a computer? Other than sleep, how many of you think you spend more time doing something other than looking on your computer? Computer are very relevant to our generation and important to our daily life.

5. Background • Major Products Desktops Portables Servers

6. Background • Major Markets • Government Agencies • Large Enterprises • Exports • Consumers • SMB

7. Competition • Large Number of firms • Top 5: 2011 market share of units shipped HHI: 771.5 CR4: 53.5

8. Competition • Entry / Exit • Rivalry • Popular Brands • Differentiation

9. Competition Number of Television Ads Dollars Spent on Television Ads Toshiba: 10.7 MM HP: 53.4 MM

10. HP (Red) Vs Toshiba (Orange)

11. Government Role • Supporting policies for industry growth and competitiveness • Japan (strong support) • China (State R&D access, Quasi-state owned enterprises) • USA, Korea, Taiwan, Singapore…

12. Interesting Facts from 2011 TV commercial data • HP was the only company to advertise Desktop Computers on TV in all of 2011 • Apple Computers, had the largest advertising budget out of any competitors, but spent 0 dollars advertising their desktops and laptops.

13. Organization • Several Large famous companies+ Many small companies • Many large companies just assemble products manufactured by other companies.

14. Advertising Strategy

15. Primary Advertising Methods • Informative • Persuasive • Comedy • Celebrities

16. HP • PC is a personal reflection of consumers' desires and needs. • From informative advertising to persuasive advertising( brand building) • Celebrity, opinion leader • Big event marketing ( Super Bowl, GRAMMY® Awards)

17. Advertising Expenditure VS Total Revenue HP Resource: Internet Resource: IBIS World

18. HP-Advertising-to-Sales Ratio Resource: Mergentonline A low ratio may indicate that the advertising campaign generated sales.

19. HP 2010 2007 2003 2011 • From informative advertising to persuasive advertising( brand building) • A theme every 1-2years • From product advertising to integrated marketing campaign

20. HP 2007 "Personal Again" • Launching during Super Bowl XLI----Orange County Choppers • Highlighting celebrities: Jay-Z, Gold Medals, Mark Cubanhttp://www.youtube.com/watch?v=fsE0g-8CDQo • www.hp.com/personal

21. HP 2010 “Let’s Do Amazing" • The amazing things Do-ers do with HPCelebrity+humor: Dr. Dre and comedian Rhys Darby; • TV ads and Online Ads

22. HP 2011 “Everybody On" • Music stars (Alicia Keys ) and passionate individuals • $33.3 million for Google advertising • Television: 53rd Annual GRAMMY® Awards+ 13-time Grammy Award winnerhttp://www.youtube.com/watch?v=KAQatcfVrSs

23. Dell Target customers Relationship buyers: Large business/government Educational institutions Transaction buyers: Small and midsize business Individual consumers 2007

24. Dell • Informative advertising of direct selling model and low retail prices • advertisements have appeared in all types of media • New On-line media advertising • Combative advertising is increasing

25. Dell 2000"Dude, you're gettin' a Dell!” 2006 Campaign for the XPS line of gaming 2007 Campaign for he Inspiron and XPS lines. "Work it Out” and slogan "Yours is here” 2009 Dell Ramps Up Twitter Advertising Efforts 2010 Take your own path 2011 "More You" advertisements: “Dude, you’re getting a lifestyle brand”

26. Dell

27. Apple • Apple uses its own operating system Mac OS X • Niche Market art professions; premium-price differentiation

28. Apple • Brand image centered “Jobs wanted Apple to be a cultural force” • High advertising expenditure In 1984, they spent 2.5 million on a 39 page print ad • Combined TV commercial and Print advertising TV, Mainstream/Fashion/Popular Magazines • Combative + Catchy Slogans “The ultimate all-in-one design” “It just works”

29. Apple • Apple used the contemporary art and feature icons as specific themes to differentiate it with other brands. • Key words and information: ease of use, industrial design, technical elegance

30. Advertising Expenditure • Advertising expenditure

31. Advertising Expenditure

32. Timeline 18 page Apple brochure, Bill Gates as a feature 39 page Macintosh promotion in Newsweek 2.5 million “what’s on your powerbook?” celebrities tells their experience with mac “Think Different”, in Newsweek and Time etc. Apple’s evolution “Imagine That” Apple’s response to Windows 95 1983 1984 1985 1988 1990 1995 1998 2006 2010 “Think Different”, featuring Einstein, Ghandi, Amelia Earhart, etc. “Get a Mac” “1984” super bowl commercial, 1min 900,000 “Pencil Test” TV sitcom “Crowd Control” Apple’s response to Windows 95 “Lemmings”super bowl commercial

33. Recommendation

34. Personal Investment: Buy AAPL

35. Personal Investment: Buy AAPL Apple Computers: US$220.49 MillionBarnes & Nobles: US$46.57 Million RIM: US$ 47.88 Million Samsung Group: US$ 54.4 Million Desktops: US$ 14.98 MillionLaptops: US$ 62.51 Million Tablets: US$466.78 Million

36. Personal Investment: Buy AAPL • Apple expected to dominate tablet market maintaining above 50% market share through 2015 • Tablet market sales expected to grow to 60% of PC sales by 2015, eventually expected to surpass PC sales.

37. VC and PE investments • High competition, high cost of failure • Enter Market by acquiring underperforming brand, and invest heavily into an image and advertising • Software over hardware • Disruptive innovation