Apple Inc. is one of the most successful and valuable company across the globe. Its five forces analysis provides the insights related to the external factors that influence the success of the company. The Five forces model is the strategic management application to evaluate how does these five forces affect the organization, which are; suppliers, customers, competition, new entrants and substitutes. Apple's five forces sheds the light on the company strategies foe ensuring the leadership in industry regardless of the external factors' negative effects in the competitive landscape of software and hardware, digital content, and computer electronics market that involves firms such as Google, Microsoft, Walmart, Amazon, Lenovo, Dell, Sony, and Samsung (Ferguson, 2019). It is founded in 1976 and has become the dominant competitor of the industry. Because of five forces analysis, company addresses the bargaining power of buyers and competition that plays significant role in business. The five forces analysis also determines the fact that Apple Inc should focus on these external factors in order to be a market leader. Here is the Porter's five force analysis of Apple;
Bargaining Power of Buyers
Five Forces Analysis of Apple Inc. Apple's strategies are partly based on the need to address forces in the external business environment. These forces can limit or reduce the firm's market share, revenues, profitability, and business development potential. Five Forces Analysis. Apple Inc is necessary to use Five Forces to access the current situation, market shares, and profitability in the current market and technology industry. It is helpful to evaluate the competition from new entrants, rivals, substitute, and bargaining power from customer and supplier. Unit 1 agendasmrs. colville's math class 9. Competition from new entrants―Weak.
- These five forces are as follows, with the ratings alongside in the concept of Apple smartphones; Competitive rivalry or competition (strong force), Bargaining power of buyers or customers (strong force), Bargaining power of suppliers (weak force), Threat of substitutes or substitution (weak force), Threat of new entrants or new entry (moderate.
- Thus, the rating shows that there is a low, moderate and high impact of the five forces on the Apple Inc, in particular, low impact from the position of the competitive rivalry, substitute power, and the power of new entrants along with the moderate impact from the position of the buyer power along with the supplier power, which has the high impact from the position of the five forces.
Apple is strongly affected by this component because it determines the purchasing power and decision of buyers and their related perceptions and preferences which affects the business. For Apples, the strong bargaining of buyers is because of low switching-cost, high level of information to buyers, and small customer size. It is relatively very easy for the consumers to switch brands, and this makes it tough for Apple to satisfy customers from every aspect. Every consumer's purchase is little as compared to the revenue of the company, which makes the consumer's position weak as individual level (Ferguson, 2019).
Bargaining Power of Suppliers
In case of Apple, bargaining power of suppliers is weak, as this is the important element of this model, which determines the influences of suppliers in terms of imposing the demands on company and competitors. This weak bargaining power of suppliers is because of the high level of company concentration to the supplier concentration, medium to high level of supply, and high number of suppliers. Apple has the advantage of having suppliers across the globe, which result in more suppliers, and hence suppliers cannot put their demand as the priority (Dudovskiy, 2018).
Threats of New Entrants
Apple faces the moderate level of threat of from new entrants, because of the high level of capital needed, high cost involves in brand development, and capacity of the potential entrants. To establish the business requires fighting against the existing firms in the market like Apple and this needs capitalization. Brand development is extremely expensive specially when giants are presents in the industry like Apple. However, many firms have the capacity to enter in market like Google introduced Nexus, Samsung introduced its smartphones (Zheng, 2017).
Threats from the Substitute Products
The threats of substitute products are weak because of the technology, online services, and consumer electronics Apple provides. For Apple, substitute products exert the weak force due to limited substitutes available in the market, low performance of alternate products, and low level of buyer propensity to the substitute products. There are some products which are available in the market like rather than using iPhones, consumers can use landlines and digital cameras. However, such products have low performance due to limited features. Apple is having the advantage in this case (Dudovskiy, 2018).
Rivalry of Existing Players
Apple Inc is facing the strong competition in the industry. This factor of the Five forces model identifies the intensity of influences on the company by the competitors. In Apple's situation, competitors influence on some external factors like; high aggressiveness of companies, low switching-cost, and low level of product differentiation. Apple is facing tough competition from LG and Samsung, because of aggressiveness in rapid innovation, imitation, and aggressive advertising imposes the strong force in market. In addition to this, product differentiation is low, because available items in markets are same and fulfils the specific purposes. Low switching cost also creates a problem, because many people prefers to switch to Android because of the iOS cost, functions, network externalities and other concerns (Ferguson, 2019).
References
Dudovskiy, J. 2018. Apple Porter's Five Forces Analysis. [Online], Available at: https://research-methodology.net/apple-porters-five-forces-analysis-3/, [Accessed on: 30th March, 2019].
Ferguson, E. 2019. Apple Inc. Five Forces Analysis (Porter's Model). [Online], Available at: http://panmore.com/apple-inc-five-forces-analysis-porters-model-case-study, [Accessed on: 30th March, 2019].
Zheng, 2017. Porter's five forces analysis apples fall and rise. [Online], Available at: https://medium.com/@Jayden_Zheng/porters-five-forces-analysis-apple-s-fall-and-rise-fc27a439fcf, [Accessed on: 30th March, 2019].
Related
Strategic Management Essays, Term Papers & Presentations
Porter Five Forces Analysis is a strategic management tool to analyze industry and understand underlying levers of profitability in a given industry. Apple Inc. managers can use Porter Five Forces to understand how the five competitive forces influence profitability and develop a strategy for enhancing Apple Inc. competitive advantage and long term profitability in Electronic Equipment industry.
Brief overview of Apple Inc.
Apple Inc. is one of the leading firms in the Electronic Equipment. Over the years Apple Inc. has redefined the ways of doing business in Consumer Goods. Apple Inc. is listed at New York Stock Exchange (NYSE) and have a market cap 752.31B USD.
What are Porter Five (5) Forces
In his revolutionary article - 'Five Forces that Shape Strategy', Michael Porter observed five forces that have significant impact on a firm's profitability in its industry. These five forces analysis today in business world is also known as -Porter Five Forces Analysis. The Porter Five (5) Forces are -
- Threat of New Entrants
- Bargaining Power of Suppliers
- Bargaining Power of Buyers
- Threat from Substitute Products
- Rivalry among the existing players.
Porter Five Forces is a holistic strategy framework that took strategic decision away from just analyzing the present competition. Porter Five Forces focuses on - how Apple Inc. can build a sustainable competitive advantage in Electronic Equipment industry. Managers at Apple Inc. can not only use Porter Five Forces to develop a strategic position with in Electronic Equipment industry but also can explore profitable opportunities in whole Consumer Goods sector. Burn dmg to usb mac.
Apple Inc. Porter Five (5) Forces Analysis for Consumer Goods Industry
Threats of New Entrants
New entrants in Electronic Equipment brings innovation, new ways of doing things and put pressure on Apple Inc. through lower pricing strategy, reducing costs, and providing new value propositions to the customers. Apple Inc. has to manage all these challenges and build effective barriers to safeguard its competitive edge.
How Apple Inc. can tackle the Threats of New Entrants
- By innovating new products and services. New products not only brings new customers to the fold but also give old customer a reason to buy Apple Inc. ‘s products.
- By building economies of scale so that it can lower the fixed cost per unit.
- Building capacities and spending money on research and development. New entrants are less likely to enter a dynamic industry where the established players such as Apple Inc. keep defining the standards regularly. It significantly reduces the window of extraordinary profits for the new firms thus discourage new players in the industry.
Bargaining Power of Suppliers
All most all the companies in the Electronic Equipment industry buy their raw material from numerous suppliers. Suppliers in dominant position can decrease the margins Apple Inc. can earn in the market. Powerful suppliers in Consumer Goods sector use their negotiating power to extract higher prices from the firms in Electronic Equipment field. The overall impact of higher supplier bargaining power is that it lowers the overall profitability of Electronic Equipment.
How Apple Inc. can tackle Bargaining Power of the Suppliers
- By building efficient supply chain with multiple suppliers.
- By experimenting with product designs using different materials so that if the prices go up of one raw material then company can shift to another.
- Developing dedicated suppliers whose business depends upon the firm. One of the lessons Apple Inc. can learn from Wal-Mart and Nike is how these companies developed third party manufacturers whose business solely depends on them thus creating a scenario where these third party manufacturers have significantly less bargaining power compare to Wal-Mart and Nike.
Bargaining Power of Buyers
Buyers are often a demanding lot. They want to buy the best offerings available by paying the minimum price as possible. This put pressure on Apple Inc. profitability in the long run. The smaller and more powerful the customer base is of Apple Inc. the higher the bargaining power of the customers and higher their ability to seek increasing discounts and offers.
How Apple Inc. can tackle the Bargaining Power of Buyers
- By building a large base of customers. This will be helpful in two ways. It will reduce the bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its sales and production process.
- By rapidly innovating new products. Customers often seek discounts and offerings on established products so if Apple Inc. keep on coming up with new products then it can limit the bargaining power of buyers.
- New products will also reduce the defection of existing customers of Apple Inc. to its competitors.
Five Forces Analysis Apple Inc. Download
Threats of Substitute Products or Services
When a new product or service meets a similar customer needs in different ways, industry profitability suffers. For example services like Dropbox and Google Drive are substitute to storage hardware drives. The threat of a substitute product or service is high if it offers a value proposition that is uniquely different from present offerings of the industry.
Threats of New Entrants
Apple faces the moderate level of threat of from new entrants, because of the high level of capital needed, high cost involves in brand development, and capacity of the potential entrants. To establish the business requires fighting against the existing firms in the market like Apple and this needs capitalization. Brand development is extremely expensive specially when giants are presents in the industry like Apple. However, many firms have the capacity to enter in market like Google introduced Nexus, Samsung introduced its smartphones (Zheng, 2017).
Threats from the Substitute Products
The threats of substitute products are weak because of the technology, online services, and consumer electronics Apple provides. For Apple, substitute products exert the weak force due to limited substitutes available in the market, low performance of alternate products, and low level of buyer propensity to the substitute products. There are some products which are available in the market like rather than using iPhones, consumers can use landlines and digital cameras. However, such products have low performance due to limited features. Apple is having the advantage in this case (Dudovskiy, 2018).
Rivalry of Existing Players
Apple Inc is facing the strong competition in the industry. This factor of the Five forces model identifies the intensity of influences on the company by the competitors. In Apple's situation, competitors influence on some external factors like; high aggressiveness of companies, low switching-cost, and low level of product differentiation. Apple is facing tough competition from LG and Samsung, because of aggressiveness in rapid innovation, imitation, and aggressive advertising imposes the strong force in market. In addition to this, product differentiation is low, because available items in markets are same and fulfils the specific purposes. Low switching cost also creates a problem, because many people prefers to switch to Android because of the iOS cost, functions, network externalities and other concerns (Ferguson, 2019).
References
Dudovskiy, J. 2018. Apple Porter's Five Forces Analysis. [Online], Available at: https://research-methodology.net/apple-porters-five-forces-analysis-3/, [Accessed on: 30th March, 2019].
Ferguson, E. 2019. Apple Inc. Five Forces Analysis (Porter's Model). [Online], Available at: http://panmore.com/apple-inc-five-forces-analysis-porters-model-case-study, [Accessed on: 30th March, 2019].
Zheng, 2017. Porter's five forces analysis apples fall and rise. [Online], Available at: https://medium.com/@Jayden_Zheng/porters-five-forces-analysis-apple-s-fall-and-rise-fc27a439fcf, [Accessed on: 30th March, 2019].
Related
Strategic Management Essays, Term Papers & Presentations
Porter Five Forces Analysis is a strategic management tool to analyze industry and understand underlying levers of profitability in a given industry. Apple Inc. managers can use Porter Five Forces to understand how the five competitive forces influence profitability and develop a strategy for enhancing Apple Inc. competitive advantage and long term profitability in Electronic Equipment industry.
Brief overview of Apple Inc.
Apple Inc. is one of the leading firms in the Electronic Equipment. Over the years Apple Inc. has redefined the ways of doing business in Consumer Goods. Apple Inc. is listed at New York Stock Exchange (NYSE) and have a market cap 752.31B USD.
What are Porter Five (5) Forces
In his revolutionary article - 'Five Forces that Shape Strategy', Michael Porter observed five forces that have significant impact on a firm's profitability in its industry. These five forces analysis today in business world is also known as -Porter Five Forces Analysis. The Porter Five (5) Forces are -
- Threat of New Entrants
- Bargaining Power of Suppliers
- Bargaining Power of Buyers
- Threat from Substitute Products
- Rivalry among the existing players.
Porter Five Forces is a holistic strategy framework that took strategic decision away from just analyzing the present competition. Porter Five Forces focuses on - how Apple Inc. can build a sustainable competitive advantage in Electronic Equipment industry. Managers at Apple Inc. can not only use Porter Five Forces to develop a strategic position with in Electronic Equipment industry but also can explore profitable opportunities in whole Consumer Goods sector. Burn dmg to usb mac.
Apple Inc. Porter Five (5) Forces Analysis for Consumer Goods Industry
Threats of New Entrants
New entrants in Electronic Equipment brings innovation, new ways of doing things and put pressure on Apple Inc. through lower pricing strategy, reducing costs, and providing new value propositions to the customers. Apple Inc. has to manage all these challenges and build effective barriers to safeguard its competitive edge.
How Apple Inc. can tackle the Threats of New Entrants
- By innovating new products and services. New products not only brings new customers to the fold but also give old customer a reason to buy Apple Inc. ‘s products.
- By building economies of scale so that it can lower the fixed cost per unit.
- Building capacities and spending money on research and development. New entrants are less likely to enter a dynamic industry where the established players such as Apple Inc. keep defining the standards regularly. It significantly reduces the window of extraordinary profits for the new firms thus discourage new players in the industry.
Bargaining Power of Suppliers
All most all the companies in the Electronic Equipment industry buy their raw material from numerous suppliers. Suppliers in dominant position can decrease the margins Apple Inc. can earn in the market. Powerful suppliers in Consumer Goods sector use their negotiating power to extract higher prices from the firms in Electronic Equipment field. The overall impact of higher supplier bargaining power is that it lowers the overall profitability of Electronic Equipment.
How Apple Inc. can tackle Bargaining Power of the Suppliers
- By building efficient supply chain with multiple suppliers.
- By experimenting with product designs using different materials so that if the prices go up of one raw material then company can shift to another.
- Developing dedicated suppliers whose business depends upon the firm. One of the lessons Apple Inc. can learn from Wal-Mart and Nike is how these companies developed third party manufacturers whose business solely depends on them thus creating a scenario where these third party manufacturers have significantly less bargaining power compare to Wal-Mart and Nike.
Bargaining Power of Buyers
Buyers are often a demanding lot. They want to buy the best offerings available by paying the minimum price as possible. This put pressure on Apple Inc. profitability in the long run. The smaller and more powerful the customer base is of Apple Inc. the higher the bargaining power of the customers and higher their ability to seek increasing discounts and offers.
How Apple Inc. can tackle the Bargaining Power of Buyers
- By building a large base of customers. This will be helpful in two ways. It will reduce the bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its sales and production process.
- By rapidly innovating new products. Customers often seek discounts and offerings on established products so if Apple Inc. keep on coming up with new products then it can limit the bargaining power of buyers.
- New products will also reduce the defection of existing customers of Apple Inc. to its competitors.
Five Forces Analysis Apple Inc. Download
Threats of Substitute Products or Services
When a new product or service meets a similar customer needs in different ways, industry profitability suffers. For example services like Dropbox and Google Drive are substitute to storage hardware drives. The threat of a substitute product or service is high if it offers a value proposition that is uniquely different from present offerings of the industry.
Five Forces Analysis Apple Inc. Free
How Apple Inc. can tackle the Treat of Substitute Products / Services
- By being service oriented rather than just product oriented.
- By understanding the core need of the customer rather than what the customer is buying.
- By increasing the switching cost for the customers.
Rivalry among the Existing Competitors
If the rivalry among the existing players in an industry is intense then it will drive down prices and decrease the overall profitability of the industry. Apple Inc. operates in a very competitive Electronic Equipment industry. This competition does take toll on the overall long term profitability of the organization.
Five Forces Analysis Apple Inc. Price
How Apple Inc. can tackle Intense Rivalry among the Existing Competitors in Electronic Equipment industry
- By building a sustainable differentiation
- By building scale so that it can compete better
- Collaborating with competitors to increase the market size rather than just competing for small market.
Implications of Porter Five Forces on Apple Inc.
By analyzing all the five competitive forces Apple Inc. strategists can gain a complete picture of what impacts the profitability of the organization in Electronic Equipment industry. They can identify game changing trends early on and can swiftly respond to exploit the emerging opportunity. By understanding the Porter Five Forces in great detail Apple Inc. 's managers can shape those forces in their favor.
You can order Apple Inc. Porter Five Forces & Industry Analysis with us at Fern Fort University.
