Mr. Negroponte wanted to create educational opportunities for the world’s poorest children by providing each child with a low cost laptop. This laptop will have educational software to provide children with otherwise unavailable technological learning opportunities. OLPC provides an interesting vantage point from which to examine the dynamics between non-profit and for-profit competitors because of the rapid development of the low-cost laptop market. OLPC was undoubtedly the innovator in this category of low-cost laptops with their “$100 laptop” concept. However, now that for-profit companies have entered the market and released a slew of similar products, OLPC must find ways to maintain its competitive advantage.
OLPC was facing some marketing challenges and some the non-marketing challenges. The $100 price for the laptops is to be achieved by operating with no profit, cutting all unnecessary frills including marketing campaigns and assembling large quantities of computers. Negroponte estimated the program will launch with a distribution of at least 5 million computers, and said he hopes to increase that number to 100 million by the second year. He predicted that as the laptop design improves, the per-unit price will go down.
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• Marketing a low-cost, lightweight laptop seemed contradictory to recent products that are lightweight and ultra-thin that were typically more expensive and harder to manufacture.
• Most children using $100 laptop would not have ready access to electricity.
• Consumers criticizing OLPC for discounting the value of teacher training and curriculum development using the device.
• Governments opting out to put its resources toward traditional method of education.
• Prices for the OLPC don’t seem to stay at $100 causing different price floats.
• Competition like Intel(for profit companies) launching its own cheaper laptop targeting developing nations as well. Offering enhanced capabilities and the ability to run version of Linux or Window XP 3.
Differentiation: Price and Technology
OLPC should differentiate its product, the XO, from direct competitors such as Intel’s Classmate PC and indirect competitors in the netbook category such as Dell Mini product lines. Differentiation must be visible on three distinct levels; price, technology, and brand.
Price: OLPC is currently the cost-leader in this category. The Intel Classmate PC, which is OLPC’s most direct competitor, is currently priced at $285. The OLPC’s XO is priced at $175. Since both OLPC and its competitors are serving government education programs, cost will be extremely important as a number of nations are creating bidding wars for purchasing contracts. Even though OLPC is the lowest cost offering at this point, maintaining this price advantage will become increasingly difficult as competition in the market for low-cost laptops heats up. OLPC overcame some of the challenges by keeping laptop at low-cost by outsourcing the major design work and key part of the operating systems to different countries.
Technology and Innovation: OLPC had a first-mover advantage in this market as its XO offering was perhaps the first entrant into the affordable netbook category. OLPC is specialized for its market of children ages 6-12. The design and child-friendly operating system is very unique. The unique connectivity is important for rural areas with sparse communications infrastructure. The XO is built for ultimate adaptability. Even its power sources can be diversified. OLPC has done an admirable job differentiating its product from its competitors through its innovative technologies and education-specific software and hardware.
Competitive Strategy: Though OLPC is a leader on price and feature set, sustaining this advantage will be extremely difficult when facing competition from the largest computer companies in the world. Thus to keep its top position, it must leverage its advantages as a non-profit organization. OLPC must create value from its non-profit status to build reputation and trust. As a non-profit, OLPC can build goodwill in ways that for-profit companies are not able. Also being a non-profit enables OLPC to finance and maintain pricing schemes that are different than the competition.
In terms of cost savings, OLPC has the advantage that many companies are eager to produce components for the OLPC. For example, Microsoft has gone out of its way to create a version of Windows to run on the OLPC. This is a cost savings that competitive firms are unable to match. To exploit this advantage further, OLPC could even attract advertisement agency to advertise on their PCs to further lower the cost of each machine.
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