Apple Inc Porters Five Analysis

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Apple Inc. Porters Five Analysis

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Apple Inc. Porters Five Analysis

Executive Summary

Apple Inc. which was formally known as Apple Computer Inc. is a multinational corporation that designs, develops and also sells a wide variety of consumer electronics, personal computers, and computer software. It is located in United States of America California and has its headquarters in Cupertino, California. Among its adequately known hardware products in the market industry are; iPhone Smartphone, iPad tablet computer, and iPod music player among many other computer accessories. Moreover, it develops and sells the following computer software; iOS and OS X operating systems, Safari web browser, iTunes media player, and iWork and iLife creativity and productivity collections.

The intent of the Porter’s 5 forces archetypal is to identify and illuminate the existing levels of competition prevailing within the market; by elucidation what the 5 forces encompass (Porter, 2008). The model, therefore, provides a comprehensive and nuanced depiction of the business and to make an in-depth analysis with a knowledge of what influences one can try to influence to develop optimal conditions for one’s commerce and the industry.

Porters Five Analysis

Threat of new entrants
The exceptional levels of competition presently being experienced in the PC and mobile industry make it problematic for prospective competitors to infiltrate the market. Unlike numerous corporations, Apple Inc. has safeguarded loyalty to its brand by laying more emphasis on product invention and, research and development. Moreover, Apple has fortified its brand loyalty by creating an emotional attachment with customers by taking up the social and the internet at large media to showcase what the business believes in contrary to what the corporation does. The mission statement of Apple Inc. mission supports the above theory; as it states that “Apple is committed to bringing the best personal computing experience to students, educators, creative professionals, and consumers around the world through innovative hardware, software and internet offerings”. (Apple Inc. Mission Statement)

Competitive challenge within an industry
Threat of new business, suppliers bargaining power, bargaining power of customers and substitute products and services are all apart of Porter’s five forces and directly contribute to the existing rivalry within the industry. Rivalry in this industry is expressed by aggressive pricing policies, profound product innovation and design, online intensive marketing, direct selling, and after sale services.

Bargaining power of buyers
The bargaining power of the mobile market is very low to nonexistent due to the demand from customers for these products. Consumers are willing to pay retail prices because they want the product, and it would be almost impossible to influence Apple to reduce its pricing due to the diversity of its products over competitors. It is that product diversity that allows Apple to charge high prices compared to its competitors (Nokia, Dell) who have were made slash their prices due to fierce competition within the industry. Besides, another reason of lower bargaining power of buyers is high switching cost for customers due to change of software or hardware. Apple, however, must consider how readily available substitute products from competitors are and whether consumers will eventually turn to them due to their lower prices that will cause apples customers to have a high bargaining power. Apple, however, is losing out to Dell in supplying education institutions as their software (Windows) is safer and easier to use than IOS provided by Apple.

Bargaining power of suppliers
Apple Inc. has a resilient power of bargaining over its suppliers since it can outsource a variety of their manufacturing components, and it has empowered itself to integrate vertically, hence implying that it can produce some of its supplies. The above vertical integration has enhanced Apple Inc. immense advantages over its competitors in the market since the above strategy work to reduce costs whilst up surging resources.

Threat of substitute’s
In the world today, there exist constant technological advances. As a result, there exist no numerous substitutes in this business due to the high-tech features. Nevertheless, the existence of alternatives is eminent due to competitors. Therefore, if some other business such as BlackBerry, Samsung, Google or Microsoft advance innovative technology or similar phone at a cheaper price or with advanced features at similar prices, then this is a looming problem for Apple. Similarly, Apple Inc. proactively dodge’s Gharajedaghi’s counter-force of inertia by devising new innovative products when competitors start to issue substitutes for their preceding product.

Porter’s Value Chain
‘Every business entails a collection of undertakings that are undertaken to design, produce, and market, supply, and support its invention. All these undertakings can be represented using a supply chain or a value chain. A business supply chain and the way it performs definite activities are a replication of its history, its approach to implementing its strategy and the fundamental economics of the undertakings themselves (Porter, 1985). The different elements of the value chain come under two headings. Primary activities: inbound logistics, operations, outbound logistics, marketing and sales, and service. These activities directly relate to sales, maintenance, support and physical creation of a product/ service. Support activities: Procurement (purchasing), human resource management, Technological development, and infrastructure. These activities act to support the primary activities of the value chain. This value chain helps Apple Inc. to identify its utilization of resources by developing a systematic framework to work from

Technology and product design
The entrepreneurial within Apple can be best described by saying. It is very easy to be different, but very difficult to be better. This element of the value chain signifies the real center Of Apple Inc.’s ability. Apple was the first company to run successfully an electric spreadsheet and to establish a digital lifestyle hub. Apple has a reputation for cutting-edge technology development especially as there operating systems are universally known to be more trustworthy than competitors. Alongside this is Apple’s desktop publishing software (e.g. iTunes) which is the most inclusive and accessible to customers.

Production
Apple treats the component production as a natural expansion of the design procedure. Apple has accomplished supreme performance owed to their 64-bit architecture, integrated distinguished product designs and redefined intuitive operations. Apple’s production process, however, is very reliant on their decision to refuse any licensing of its operational systems to external entities. The above allowed Apple to create and develop software and hardware that is now the cornerstone of Apple’s successful production process.

Sales and marketing
Apple Inc. owes a lot of credit to the late, former CEO Steve Jobs. His new product introductions, marketing campaigns, and product development guidelines reasons for apples success and market dominance, as well as the market, being easily accessible to the product range they did. Apple also entered a patent, cross licensing and technology agreement with Microsoft which will create more opportunities for ideas and more resources.

Customer service
Apple has managed to keep cash reserves despite a rapidly expanding market. Apple retains reserves by distributing technically superior products and enforcing hardware and software updates upon consumers to establish brand loyalty and equity. Vy integrating their primary activities, Apple manages to keep any plans transparent to any consumers. This realization of receiving a bit more than you though as it effective when gaining brand reputation and winning the customer over competitors as they will see your services as ‘providing more for you’.

Legal services
Intellectual property is Apple Inc.’s most valued resource. In a market with so much entrepreneurial innovation, change is inevitable and therefore it is not uncommon for a company such as Apple to have endured legal disputes. Apple has faced legal battles over their logo and the highly publicized Windows infringement on Mac OS. The legal guidance inherited from these cases has proven highly valuable and has allowed Apple to encourage acquisition versus internal development strategies for products.

The Table below shows the current market cap Of Apple Inc. with its key competitor being Google Inc. Apple Inc. secures its market leadership by providing products and services with unique attributes using differentiation strategy. They also implement focus strategies such as instead of targeting business users, targeting consumer users.

http://image.slidesharecdn.com/porters5forcesmodel-caseappleinc-100620072008-phpapp01/95/porters-5-forces-model-case-apple-inc-2-728.jpg?cb=1277018496

Conclusion

Porter’s five tools undertake a critical role in the world of business. It enables the business to identify its key competences, threats, opportunities and weaknesses. Reasonably, it focuses on how to improve the organization by sustaining competition. (Ahlstrom & Bruton, 2010). As a result, it enables the management to understand the business and come up with strategies to sustain the business. For instance, the above analysis of Apple Inc. gives more insight and intellect regarding the internal and external environment to guard against and that which to take advantage off. Owing to the above elucidations, I recommend that corporation should embrace the Porters Five tool or analyzing business. However, I recommend that managers should employ other tools like the PESTEL and SWOT analysis to gain a comprehensive understanding of the organization.

References

Ahlstrom, D., & Bruton, G. D. (2010). International management: Strategy and culture in the emerging world. Australia: South-Western Cengage Learning.

http://image.slidesharecdn.com/porters5forcesmodel-caseappleinc-100620072008 phpapp01/95/porters-5-forces-model-case-apple-inc-2-728.jpg?cb=1277018496

Porter, M. E. (2008). On competition.




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