ANALYSING MICHAEL PORTERS 5 FORCES MODEL WITH RESPECT TO(Apple Inc.)

• SUBMITTED TO : SHITAL PADHIYAR BY1. ANMOL 2. TANVI3. MUNNAVAR . SHAIKH CLASS : TYBBA.

MICHAEL PORTER

Apple Inc

INTRODUCTION OF Apple INC.

• Apple INC. is an American multinational technology company founded by Steve Jobs, Steve wozniak and Ronald Wayne on APRIL 1, 1976 to develop and sell personal computers.After that it was renamed as Apple Inc. on january 9, 2007, to reflect its shifted focus towards consumer electronics.Its Headquarter is located at CUPERTINO, CALIFORNIA.

Apple Inc. Industry Computer hardware,computer software Digital distribution, Consumer electronics. Products Mac, iPod, iPhone, iPad, Apple Watch Apple TV,OSX, iOS,iLife,iWork. Services Apple pay, Apple store, online app store, i Tunes Store ,iOS App Store,Mac App Store, I Books Store, I Cloud , Apple Music. Its OPERATING INCOME is US$71.230 Billion with NET INCOME US$53.394 Billion and REVENUE US$233.715 BILLION (2015)

THE PORTERS 5 FORCES MODEL

• MICHAEL PORTER developed the Five Forces method of analysis in 1979.The FIVE FORCES MODEL aims to examine Five key forces of competition within a given industry. The main force examined by PORTERS model is the level of competition within an industry and business strategy development.

PORTERS 5 FORCES MODEL

THREAT OF NEW ENTRANT OR NEW ENTRY.(MODERATE FORCE)

• Apple experience the moderate force of the threat of new entrant. This components of porters 5 forces model indicates the effect and possibility of new competitors entering the market. In Apple case ,new entrant exert a moderate force based on the following external factors.

1. HIGH CAPITAL REQUIREMENT2. HIGH COST OF BRAND DEVELOPMENT3. CAPACITY OF POTENTIAL NEW ENTRANTS

THREAT OF NEW ENTRANT OR NEW ENTRY.(MODERATE FORCE)

• Establishing a business to compete against firms like apple requires high capitalisation.Also it is condiderably costly to develop a strong brand to compete against large firms like Apple.These factors make new entrant weak.

• However there are large firms with the financial capacity to enter the market and impact Apple.

• .Google has already done so through products like NEXUS SMARTPHONES. • Samsung also used to be a new entrant.• These examples shows that there are companies that have potential to

directly compete against Apple.• Thus, the threat of new entry is moderate and this part of 5 forces

analysis shows that Apple must maintain its competitive advantages through innovation and marketing to remain strong against new entrants.

COMPETITIVE RIVALRY OR COMPETITION WITH Apple (Moderate force) FORCE)

• Apple Faces the strong force of competitive rivalry or competition . This component of Porters 5 forces analysis model determines the intensity of influence competitor have on each other .In Apple case this influence is based on the following external factors.

1. High aggressive of firms2. Low switching cost

Companies like blackberry ,samsung, LG and others aggressively compete with Apple. Such aggressiveness is observable in rapid innovation,aggressive ,advertising and innovation.On the other hand switching cost is low, which means that it is easy for customers to switch from Apple to other brands , thereby making competition even tougher . Thus this part of the five forces analysis shows that competitive rivalry is among the most significant consideration in Apple strategic formulation.

COMPETITIVE RIVALRY• Apple has avoided price based competition thus far by staying

away from low end market where price is the main differentiator.

• BY generating a superior product to the Android pones , rival tablets and e readers it compete based primarily on quality,service and unique ecosystem.

• It is possible that its competitor have similar ways of doing the same thing the reality is that once a person buys Apple products there is unique appeal to stay within that ecosystem .With this in mind Apple has an incentive to try to get users hooked on Apple products early on and that starts with staying relevant.

BARGAINING POWER OF APPLES BUYERS.(WEAK FORCE)

This force looks at the power of the consumer to affect pricing and quality. Consumer have power when there are number of sellers as well as when it is easy to switch from one business products or service to another. Buying power is low when consumers purchase products in small amounts and the sellers product is very different from any of its competitors.

BARGAINING POWER OF APPLES BUYERS.(WEAK FORCE)

• SWITCHING COST The cost for buyers to switch between Apple and another provider can be

significant ,but the issue is not strictly about price. The real consideration an customer have to make is about the high updated software application that Apple INC provides.Remember that apple software and media only works with Apple devices. If an Apple user switches to a device made by a different company the media purchased for the Apple devices does not work , nor do any smartphone application or software designed for Apple. In this sense bargaining power is low. It would cost so much for users to change operating system of iOS.

EXAMPLE : A VIDEO EDITOR iMOVIE is only compatible with Apple device. Moreover iMOVIE is number 1 application which is not compatible with any other smartphone of other android devices.

FRAGMENTED CUSTOMER• The Bargaining power of Apples customer is also low because the market

is fragmented . The companys products and services appeal to a wide variety of individual and the products and services have a broad range of uses and users.

• For Apple , individual bargaining power is a weak force since the loss of any one customer represents a negligible amount of revenue for Apple . How ever the collective market place bargaining power of customer , the possibility of mass customer defections to a competitor is a strong force .

• Apple counters this strong force by continuing to make substantial capital expenditure in R&D enabling it to keep developing new and unique products such as Apple Ipad pro and Apple watch and by building significant Brand loyalty .

BARGAINING POWER OF Apple SUPPLIERS (Weak force)

• Apple experience the weak force of the bargaing power of suppliers.This component of porters Five forces analysis model indicates the influence of suppliers in imposhing their demands . In apple case suppliers have a weak bargaining power based on the following external factors.

1. High number of suppliers.2. High overall supply.

Even though Apple has less than 200 suppliers of components for its products , the company has more options because there are many suppliers around the world.This condition makes individual suppliers weak in imposing their demands on firms like apple . In relation there is a high level of supply for most components of Apple products. Thus, this part of the five Forces analysis shows that Apple does not need to prioritize the bargaining power of suppliers in developing strategies for innovation and industry leadership.

EXAMPLE : GLU MOBILE INC. MAKES 64 % REVENUE FROM APPLE IMPLYING ITS MAJOR DEPENDENCY ON APPLE. SO SUPPLIER BARGAINING POWER IS LOW.

BARGAINING POWER OF Apple SUPPLIERS (Weak force)

• APPLE REDUCE The power of module chip makers by designing its own module chips.

• Apple reduce the power of manufacturer like foxconn by buying manufacturing equipment and only allowing the equipment to be used for Apple products.

THREAT OF SUBSTITUTES OR SUBSTITUTION(WEAK FORCE)

• The threat of substitution is weak in affecting Apples business. This component of porters five forces analysis model determines the strength of substitutes product in attracting customers.In Apple case substitutes exert a weak force based on the following external factors.

1. High availability of substitutes 2. Low performance of substitutes

Substitutes to Apple products are readily available in the market . For example , People can easily use digital cameras instead of the iphone to take pictures. They can also use landline telephone to make calls. However these substitutes have low performance because they have limited features.Many customers would rather use apple products because of their advanced features. Thus substitution has a weak force in impacting Apples business . This part of the five forces analysis shows that apple does not need to prioritize the threat of substitution in business process like marketing and product design and development.

CONCLUSION

• Threat of new Entrant Moderate force• Bargaining power of supplier Weak Force• Bargaining power of buyer Weak force• Competitive rivalry Moderate force• Threat of SUBSTITUTES WEAK force

CONCLUSION

Considering these five forces Apple must focus is attention on competitive rivalry and the bargaining power of buyers. The analysis supports Apple current position of continious innovation. The firm effectively address the five forces in its external environment, although much of its effort is to strength its position against competitors and to keep attracting customer to Apple products.