Porter’s five forces Porter’s five forces model is an outline for any industry analysis that is used in analyzing an industry. The five competitive forces are; Threats of new entrants, bargaining power of customers, threat of substitute products, bargaining power of suppliers and competitive rivalry within an industry. By applying Michael Porter’s five forces framework, it will help establish Apple’s position in the market.
Threats of new entrants In situations where it is easier for anyinvestor to invest in a sector, then the threat of new entrants can be considered to be very high. The nature of barriers in place in a particular industry will establish the degree that threats of new entrants pose to the industry, it can be argued that the threat of new entrants in the Pc, tablets and smart phone industry is very high since as noted by Kim (2012), huge amounts of capital for R&D and marketing have to be spent in order to bringa smart phone or tablet to the market.
In addition, Kim (2012) notes that economies of scale have to be taken advantage of in order to gain a platform and access the distribution channels effectively. Some of the new entrants to the industry that have contributed to the decrease in the profitability in the industry include HTC, BenQ, Huawei, ZTE and Lenovo. Bargaining power of suppliers Suppliers in anysector include suppliers of the various raw materials used in manufacturing of specific products.
The power of suppliersin any given industry will normally 17 be determined by the amount of suppliers in the given industry. This means that few suppliers in any industry will imply that the suppliers have more bargaining power. The threat of suppliers in the Pc, tablet and smart phone industry an be said to be very high since there exists very few suppliers of digital signaling chips and operating systems. Texaslnstruments as noted by Forbes(2010) is the major supplier of signaling chips to various computers and handset manufacturers.
Existence of few suppliers implies that they can manipulate the market at any time since they have a lot of bargaining power. Bargaining power of buyers The large array of Pcs, smart phones and tablets has created a lot ofpower at the hands of the consumers. However, once the initial purchase has been made, brand oyalty may begin to formulate. The Apple store offered on many platforms is not transferable to another brand, which may be deemed as a high exit costs.
Although at first analysis it may seem that the consumer has a large array, their choices are restricted temporarily as often the products are bought whilst being contractually bound to a network provider/carrier. Arguably this leads to the perfect situation for t he consumer to become acquainted with their product and ascertain brand loyalty. The consumer has a lot of bargaining power, however -it may be xpensive both financially to terminate contracts and personally as they may lose their apps and software which they have built their device around.
Threats of suostltute products A substitute product can be described as a product that is unique while compared to another product in the market but can meet the needs usually met by the product that it is different with. Some of the substitutes to the Pc, tablet and smart phone industry include emails 18 and fax. However, substitute threats cannot be said to be very high since they cannot be used in urgent cases unlike in voice calls. Rivalry among existing competitors In the industry,Rivalry between competing firms in a given industry can be of different types.
Competing firms compete in forms of price wars, products differentiation and product development among others. Law entry barriers in the industries means that there exists many competitors in the various sectors that Apples operates in which results to intensified competition as the companies aim to increase their market share. Comparison of Apple with Dell Dell Inc.. Founded in 1984 Mission Statement: “To be the most successful computer company in the world at elivering the best customer experience in markets we serve. Next day delivery No middlemen or intermediate retailers Current Situation: Revenue over $56 billion Net income of $3. 4 billion Apple: Founded in 1976 Mission statement of Apple is as follows: “Apple will be a leader in providing simple, powerful, high-quality information products and services for people who learn, communicate, and create. ” Stylish product innovation Entrepreneurial $14 billion in revenue Net income of almost $1. 3 billion The Top And Bottom Lines The numbers are big enough that even single-digit revenue growth means more than 10 billion.
But for Apple, gross margins have declined, which not only halted profit growth, it quite literally reversed it. That doesn’t mean the company is any sort of trouble, of course, not with around $150 billion in the bank and more being added each quarter. But to say tne company nas nearly stopped growing Is no exaggeration. Ana to acknowledge that companies resemble organisms is equally true: If they aren’t growing they are slowly but surely dying. For Apple, the challenge is to find enough of the magic elixir to turn those graphs upward again. Or to draw some new ones.