Analysis of Apple’s Strategic Position 1997-2010

PCs

When Steve Jobs took over the reins of Apple in 1997, it was operating in the personal computer industry. Examining the PC industry at this time using Porter’s five forces model reveals multiple threats facing Apple. Within the industry, there is a strong threat of new entrants into the market place. Parts used to construct PCs were being sold in a commodity manner making it affordable for many different competitors to enter. The case mentions that due to standardization, PC companies have been able to scale way back on R&D funding. Also, the standardization has meant that differentiation between actual PCs was difficult. Apple was able to differentiate slightly through quality of hardware and significantly through their proprietary operating system. They also began to differentiate through packaging of PC components with the release of the initial iMac.

Apple faces a strong threat of rivalry in the PC industry as well. There are a large number of competitors from Lenovo to Dell to Hewlett-Packard. Relative to those firms, Apple is a small firm and only has a small market share of the industry. Nationally, the industry is slowing in growth as more than 60% of American homes already own a PC, but internationally, there is some opportunity to subdue some of the threat because growth is rapid.

Thanks to the large number of suppliers and the standardization of parts, there is a low threat of suppliers to Apple. Where Apple does run some risk is from their processor producer, Intel. Intel is a large firm and competes with only a few other firms in that particular industry leaving Apple vulnerable to price changes from the most expensive component of the PC. There is a threat of forward integration from supplier...

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...ber of buyers for all three products. In fact, Apple recently passed the 10 billion mark in music downloads from the iTunes store illustrating the massive number of buyers and purchases that these buyers are making from the iTunes store.

Overall, Apple has a strong strategic advantage in these industries currently. While these advantages are important, they are not sustainable due to the efforts of R&D of other companies and the thought that consumer electronics are becoming more of a commodity for consumers as opposed to luxury goods. If Apple does not work to maintain high barriers to entry through their powerful knowledge base and keeping the market growing rapidly by introducing more niche products, they can expect their rivals to catch up with them technologically and potentially pass them because of their larger financial ability to market their products.