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Apple company and its strategic management
Apple company and its strategic management
Strategic Leadership and Innovation at Apple, Inc
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Apple Case Analysis In today’s society, there is an ongoing interest in the study of the forces that can provide competitive advantage to organizations. In 2008, Michael Porter wrote an article called “The five competitive forces that shape strategy.” In this article, he wrote about the five different forces that deal with the attractiveness of an industry. All of these forces shaped every single industry’s behavior in the competitive market in today’s society. In order to better understand the PC industry structure, using this Five Force Analysis would be very beneficial. First in the new entrants force, one of the main barriers to enter this industry is the scale economy. In the PC industry, many companies need to start investing in very large capitals in the beginning. All the capital will gain towards the scale economies, such as financial economy, marketing economy, technology economy, and many other economies. In addition, this industry will also involve patents and rights in order to protect their own innovations. Patents and rights are very important due to setup another barrier for other competitors to enter this industry. Hence, barriers to entry are so high in this industry that the threat of new entrants entering the PC industry is very low. The second force is the substitute products force. Basically, anything that can replace a personal computer counts as a substitute. There are also many other PC companies that are treated as substitutes for Apple’s computer and it is also goes the other way around. Although the substitutes are threats to the industry, it can be beneficial because these substitutes might not have as many functions as a PC. Therefore, there are many substitutes which have a big impact on each of the company’s sales. Now the third force is the supplier force and there are different types of suppliers for the PC industry. The suppliers that provide the hardware components, which consist of memory chips, disk drives, and keyboards, have a low bargaining power. This is due to the product being is widely available at highly competitive prices. However, the microprocessors and operating systems suppliers have more power to bargain. There are only two main competitors existing, which is Intel and Microsoft, which is why these suppliers have more power to bargain. Fourth force would be the buyers’ force. There are five different categories that PC buyers would fall into; home, small and medium sized business, corporate, education, and government.
The industry environment has a more significant effect on the firm’s strategic actions. By five forces analysis including threat of entry, the power of suppliers, the power of buyers, product substitutes and the intensity of rivalry among competitors, AT&T is to find its position in the industry. Mentioned before the company acts as the first mover in lots of segments of the industry environment it is competing in. Having an intensive rivalry because of the speedly developing high tech requirements of the environment and the R&D forces of the leader companies, new entrants are discouraged. Late movers have commonly less chance to be able to compete and gain advantage over to companies such as AT&T and its competitors.
Apple Inc. originated out of California in 1976. Steve Jobs and Steve Wozniak dropped out of college together to begin making technology in their garage. Apple’s technology skyrocketed becoming one of the top technology producing companies. They fell short in the nineties though, companies began to catch up and now there was more competition than before. Apple released their ipod in 2001, putting them back in the leadof the technology industry (The History of Apple). Presently, Apple is still exceeding other companies in the technology industry, such as Microsoft, Blackberry, Google and Hewlett Packard. Microsoft is Apple’s largest competitor, which is revealed through the Dupont analysis and other activity ratios, these particular ratios also make known that Apple’s numbers are not all accurate.
Historically the personal computer (PC) industry has sold its products at reasonably high prices yet garnered only small profit margins. One reason for this is the high competition in the PC industry which led to competitive pricing among producers. Analyzing the competitive environment of the PC industry, it is evident that there is very little barrier to entry in this market. PC's have very low physical uniqueness and are made of standard components that require very little expertise to assemble.
The 5-Force Industry Analysis first introduced by Michel Porter, Harvard Business School professor, a quarter-century ago. This theory examines the suppliers, buyers, product substitutes, existing firms’ rivalry and new entrants in a firm’s product market.
PC Industry - Structural Analysis: (Using Michael Porter's Model) Based on the information provided in the case, we can do a structural analysis of the PC industry which will help us in better analysis of the case. Threat of New Entrants: Entry was easy in the industry due to its huge potential. However, the major market share was held only by a few players. Rivalry: Stiff competition among a few major players having equal strength and potential.
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 86(1), 25-40.
We shall apply the Porter's 5 Forces model to examine the PC market and see how forces of competition influence the profitability of the market players.
Five-force analysis provides a means of identifying the forces which determine the nature of the competitive environment, especially in terms of:
Let’s take a trip back in time and review the evolution of a computer company. It’s not IBM or Microsoft. This company is Apple Computers, Incorporated. In the year 1976, before most people even thought about buying a computer for their homes. Back then the computer community was only a few nerds building simple computers from hobby kits. When Steve Wozniak and Steve Jobs sold a van and two programmable calculators for thirteen hundred dollars and started Apple Computers, Inc., in Jobs garage, the reach for success seemed far.
Competitive advantage is the advantage for the competitors and gained by the offerings from the consumers that have the greater value either by the low prices of the products and by providing the benefits and services to the consumers that denotes the high price. It is a set of the innovative and different features of the company and the products and services sale to the consumers so that company can achieve the targets what they have decided and it is the betterment for the enterprise in the competitive market (Porter, 2011). There are three determinants which can be used in the competitive advantage that what the company produce for their consumers, their target market that what they have to achieved and the competition from the other entity
The Porter five forces model (see Appendix 1) as an external analysis tool was established by Michael E. Porter and firstly announced in his book “Competitive Strategy: Techniques for Analyzing Industries and Competitors” in 1980 . The main idea of the Porter five forces concept is that the attractiveness of a market depends on the characteristic of the five competitive forces that have an impact on a company (see Appendix 2).
Apple can adopt the strategy to portray a picture of a not so conducive less profitable market, which could discourage new entrants from picking that path as they will be demotivated by the low return on investment resulting from low profitability levels. In order for apple to create a niche for t numerous products, it needs to adopt and implement such bold strategies of defense to protect their interests and continue to be profitable and successful (Ideavist, 2011). Entry of a new company into the technology sector would spell doom for most companies already struggling for market share as better priced and reliable products could imply consumers would shift their preference to the new entrant leading to a negative volume of sales stir for most already established companies. Another strategy that could be employed as part of Apple’s defense could be the pre-entry strategies that make it even harder for new entrants to compete and enter into the sector and this involve continuous improvement for their products, covering
The external factors can be divided into six broadly categories which are political, environment, social, technology, environment and legal (Johnson, 2005). Such external factors usually are out of the firm's control and sometimes present themselves as threats. In this case, political factor, environmental factor and technology factor will be used to analyse the computer technology industry.
Computers and technology makes it easier for entrepreneurs to enter this market. Not only are major tech companies competing against one another, but they are also competing against little programmers that know how to code. In our time you will never know with certainty when a small group of engineers or computer scientists are going to create, “next big thing”. Apple has been able to have a competitive advantage over its competitor by creating the highest quality products and services. Some of Apple’s current competitors are Microsoft, Google, and Facebook, and a few other tech companies as well. Most people strongly people Apple is one of the stronger company its industry, but then again some other people have biased views. Financially, they are the strongest company in the world. Also people are always willing to pay a premium for their products because of their durability, quality, and prior experiences with Apple products. Apple is always on the look at for new innovative ideas and concept that are being produced by self-motivated entrepreneurs. They are always looking to hire bright minds and let them develop within the company. A lot of entrepreneurs, programmers and engineers do not have a problem working for Apple because of their well-established perks. Apple offers its employees of the best benefits in the world. They also fairly compensate their employees that work in the front-end store as
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 25-40.