The first force in Porter's Five Forces Model is Entry Barriers. These factors are those that make it harder or easier for another computer company to enter into the industry. High barriers to entry will keep potential competitors out of the industry and low barriers to entry will give an opening for competitors to enter into the industry if the industry returns are high enough. The fewer competitors in an industry, the more existing companies can take advantage of higher prices and better returns. One barrier to entry Compaq contains is brand loyalty. Many Compaq customers continue with Compaq products for the rest of their life. Although Compaq is not on the list of " Banking on A Ranking: Top 60 Global Brands by Value, Hewlett Packard is mentioned as number 14. If the Compaq- Hewlett Packard merger goes through, Compaq will gain more brand loyalty by playing off Hewlett Packard's.
Another barrier to entry is switching costs. It is relatively expensive to switch from a Compaq system to an Apple system. When IBM and Apple were the only computer systems to choose from people had to make a choice. When you went to buy one system then you had to buy all the software that went along with that system. Ultimately, IBM became the more popular system and there was more software produced for IBM computers rather than Apple. So now, when consumers are searching for a computer that will help them out in the new work environment they are more likely to stay with the brand that they picked originally or another brand that is compatible to that system.
A third barrier to entry is one of imitation and absolute cost advantages. This is were Compaq has lost it's advantage. Compaq is a computer that is very open for imitation. There are many different computers that are compatible to the IBM format. Many new companies, Compaq being one of them, have entered the market and realized that IBM had the more popular system and then tried to copy it.
