CRS178 The European Personal Computer Market Nov88

This internal document from November 1988, prepared by Jennifer S. Swanson for Digital, provides an overview of the European Personal Computer (PC) market to determine the viability of selling Tandy products there. The report highlights the impending unification of the European Community (EC) market by 1992, which will remove trade barriers and create a single, deregulated market of 320 million people, making established European distribution networks crucial for competitiveness.

Key findings include:

• Market Growth & Segmentation: The European PC market is growing rapidly (e.g., 70% in units 1986-1987), though growth is projected to slow. It's expected to reach almost 10 million units annually by 1993. The business/professional segment accounts for the largest value (70%), while the home/hobby segment makes up a significant portion of unit shipments (42%) but low value due to low-end machines.
• Market Leaders: IBM, Amstrad, and Olivetti are consistently identified as the top three players across various market research firms (IDC, IEE, Inteco), although their specific market shares vary based on how "PC" is defined (e.g., inclusion of low-cost home computers).
• Processors: IBM PC compatibles are the market standard. In 1987, 8-bit machines (like the 8086/8088) still held a large share, but the market was trending towards 16-bit (80286) and 32-bit (80386) processors, with demand for speed increasing. IBM's PS/2 with Micro Channel Architecture was quickly gaining traction in Europe.
• Country Overviews: The report provides detailed unit shipment forecasts and vendor market shares for individual European countries (Belgium, Denmark, France, Italy, Netherlands, Norway, Sweden, Switzerland, UK, West Germany). Growth rates vary by country; Belgium shows the highest projected growth (18% CAGR 1988-1993), while the Netherlands is much slower (0.6%). Tandy has a small presence in some markets (e.g., 0.58% in France, 0.8% in UK, 0.47% in West Germany).

• Distribution Strategies: Three main channels are used: direct sales, distributors/dealers, and mass merchandising. Dealers (especially value-added resellers or VARs) and mass merchandising are growing in importance, while direct sales from manufacturers are predicted to decline.

  • Tandy's specific strategy: Tandy ships its products to Europe via its subsidiary InterTan, primarily through company-owned retail stores (90%) and franchises (9%). InterTan operates stores/franchises in the UK, France, Belgium, Holland, and Germany (franchised), and ships to distributors/dealers in countries without stores (Finland, Sweden, Italy, Spain, Switzerland, Austria).

• Pricing: PC prices in Italy are notably lower than in Germany, France, and the UK. Dealer discounts typically range from 22-30%.

In essence, the report advises Digital on the opportunities and challenges in the rapidly evolving and integrating European PC market, emphasizing the importance of strong distribution networks, the shift towards more powerful processors, and provides specific data points for evaluating Tandy's market entry.