APPLE INC.

2. Managing for Competitive Advantage (Porter’s Five Forces)

APPLE INC.Introduction

In April 1976, Steve Wozniak and Steve Jobs were established Apple together after they graduated.

In the past ten years, Apple has expanded into a very intricate company.

Consumer Electronics

Consumer Software

The company operates in five sections:

Americas, Europe, Japan, Asia-Pacific and Retail.

APPLE INC. Practices & Operations Porter’s 5 Forces

THREAT OF NEW ENTRANTS - LOW

Cost of product differentiation >> Barrier to entry Apply patents for inventions Target customers with high salary

range >> Different target market Successfully develop its brand name >> High brand recognition Economies of scales >> Keep costs down

BARGAINING POWER OF SUPPLIERS - MODERATE

Announce plan to use Intel processors >> High switching cost Strong vertical integration >> Not much relying on third-parties

supplier Product differentiation strategy >> Pass cost to customers Buying in large volume >> Discount in bulk purchasing

BARGAINING POWER OF BUYERS - LOW

Focus on niche market >> Special demand Product differentiation strategy >> Highly demanding Target customers who emphasize on

quality >> Willing to pay higher price Developed high brand loyalty >> Return and purchase Using highly compatible closed-systems >> High switching cost

THREAT OF SUBSTITUTE PRODUCTS OR SERVICES- MODERATE

-Samsung smart phone &

Table-computer

EX:Samsung Galaxy S3

COMPARISON SIZE OF TOUCH SCREEN -Samsung Galaxy S3 -

4.8 inch -iPhone 4S -3.5 inch

31 May 2012,when Samsung Galaxy S3 first made available in M’sia -RM999

•PRICE OF SMART PHONE

-Samsung Galaxy S3 –RM2199

-iPhone 4S-RM2499-RM3099

Image of iPhone 4S

Built reputation as innovator

Differentiation approach

Concern on quality

Produce "own" substitutes

RIVALRY AMONG COMPETITORS- MODERATE

Computers companies-Dell, HP,ASUS, ACER, Sony& others computer manufacturers.

-Too much choices

Difficult for customers to make choice

APPLE Limited products

choices,Drive more sales

& beat competitors

Spend heavily on R &D department

Emphasis on quality of products

Product differentiation

APPLE INC. Pro & cons in application of Porter’s 5 forces

UNIQUE Increasing the market

demand Enhance

COMPETITIVE ADVANTAGE

Product differentiation

Strategy

•Difficult to maintain long term perceived unique

•HIGH COST

Move to Intel processor Pro Coming out amazing products Lower production cost and increase salesCons fight against with other competitors

Strong Vertical IntegrationProCoordinate activities in supply chainIncrease customer exposureEnhance product quality and enjoy

unparallel pricing powerConsBureaucratic cost increase

BARGAINING POWER OF BUYERS

Focus on niche marketPro Move efficient and effective Generate higher profits as customer

satisfaction achievedCons Not much sales and profit generated Suffer a great loss when market failure

Highly compatible closed-systemPro Maintain its cost Minimize risk of competitors Rising profitsCons Take time come out patch Cost satisfaction Constantly bear research cost

THREAT OF SUBSTITUTES PRODUCT OR SERVICE Focus making superior quality

productPro Reflect high performance Reflect non price competition Insulated from intensive competitorsCons Increase cost of production Possible for losing market share

Produce own substitutesProDrive up sales and maintain

market shareCompete with competition

RIVALRY AMONG COMPETITORS

Spend heavily on R&D departmentPro High brand recognition and reputation Expand market share Sustain status as industry leaders Enhance probability

Limited choice within product categoryPro Maximize customer satisfaction and

loyalty and increase financial returns Cons Increase pressure Ineffective and inefficiency in product

development process Possible lost market share and gain loss

APPLE INC. Recommendations

THREAT OF NEW ENTRANTS

continue using product differentiation strategy

invent new technology products constantly R&D should find ways to cut costs

BARGAINING POWER OF SUPPLIERS

build good rapport with supplier continue using vertical integration in their

operations reduce their own bureaucratic costs

BARGAINING POWER OF BUYERS

focus on their niche market more technicians for the repairing of the

software

THREAT OF SUBSTITUTE PRODUCTS OR SERVICES

market-skimming pricing when set price for their products

products -provide many features and benefits approach of Apple to offer host of products to

act as own substitutes should be maintained preserve their uniqueness of products- retain

customer loyalty

RIVALRY AMONG COMPETITORS

maintain the culture of being innovative consider about the problems of increasing

pressure on workers of Research and Development Department – EAP in ShenZhen, China

APPLE INC.Conclusion

CONCLUSIONCONCLUSION provides numerous type of technology

products: iPhone (smart phone) iPad (tablet pc) iPod (portable music player) iMac (desktop computer)

CONCLUSIONCONCLUSIONPorter’s Five Forces Influence of Forces

Threat of New Entrants Low

Bargaining Power of

Suppliers

Moderate

Bargaining Power of Buyers Low

Threat of Substitute Products

or Services

Moderate

Rivalry of Competitors Moderate

CONCLUSIONCONCLUSION

o Advantages and disadvantages.o Exploiting strengths and opportunity.o Correcting weaknesses.o Minimizing threats.

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