Compaq is producing very similar computers to all of its competitors; this in turn causes Compaq to loose their advantage.
Supplier Power Analysis.
The second of Porters competitive forces is the bargaining power of suppliers. Suppliers can become severe threats to any company when business depends on them for their products, but the supplier does not depend on the company for business. Suppliers are a threat when they are able to force up the price that a company must pay for its inputs or reduce the quality of the inputs they supply, therefore depressing the companies" profitability. If suppliers are weak, this gives the company the opportunity to force down prices and demand higher input quality. Compaq relies on a comprehensive Supplier Selection Process to evaluate a vendor's operations. At the minimum, Compaq suppliers must demonstrate ongoing environmental programs. At the close of 1996, all Compaq product and option suppliers were 100% CFC free. Once a potential supplier is identified, a formal survey is initiated which evaluates a company's environmental performance, regulatory compliance, waste minimization, self-assessment programs and environmental policies. As in the Ben and Jerry case, Compaq's power of suppliers is low, however their insistence on using economically responsible suppliers limits the number available. .
To compete with Dell, Compaq needed to improve its inventory management. Build-to-order should eliminate these problems by reducing inventory levels. Build-to-order, however, requires a much higher level of supply chain integration and management. Physical inventory must be replaced with information. Suppliers must know their delivery requirements almost as soon as Compaq does. If the flow of products were to be delayed, Compaq would not have the parts and subassemblies necessary to assemble complete PCs, and the build-to-order process would break down.