Apple Inc. is one of the most successful and valuable company across the globe. Its five forces analysis provides the insights related to the external factors that influence the success of the company. The Five forces model is the strategic management application to evaluate how does these five forces affect the organization, which are; suppliers, customers, competition, new entrants and substitutes. Apple’s five forces sheds the light on the company strategies foe ensuring the leadership in industry regardless of the external factors’ negative effects in the competitive landscape of software and hardware, digital content, and computer electronics market that involves firms such as Google, Microsoft, Walmart, Amazon, Lenovo, Dell, Sony, and Samsung (Ferguson, 2019). It is founded in 1976 and has become the dominant competitor of the industry. Because of five forces analysis, company addresses the bargaining power of buyers and competition that plays significant role in business. The five forces analysis also determines the fact that Apple Inc should focus on these external factors in order to be a market leader. Here is the Porter’s five force analysis of Apple;
Bargaining Power of Buyers
Apple is strongly affected by this component because it determines the purchasing power and decision of buyers and their related perceptions and preferences which affects the business. For Apples, the strong bargaining of buyers is because of low switching-cost, high level of information to buyers, and small customer size. It is relatively very easy for the consumers to switch brands, and this makes it tough for Apple to satisfy customers from every aspect. Every consumer’s purchase is little as compared to the revenue of the company, which makes the consumer’s position weak as individual level (Ferguson, 2019).
Bargaining Power of Suppliers
In case of Apple, bargaining power of suppliers is weak, as this is the important element of this model, which determines the influences of suppliers in terms of imposing the demands on company and competitors. This weak bargaining power of suppliers is because of the high level of company concentration to the supplier concentration, medium to high level of supply, and high number of suppliers. Apple has the advantage of having suppliers across the globe, which result in more suppliers, and hence suppliers cannot put their demand as the priority (Dudovskiy, 2018).
Threats of New Entrants
Apple faces the moderate level of threat of from new entrants, because of the high level of capital needed, high cost involves in brand development, and capacity of the potential entrants. To establish the business requires fighting against the existing firms in the market like Apple and this needs capitalization. Brand development is extremely expensive specially when giants are presents in the industry like Apple. However, many firms have the capacity to enter in market like Google introduced Nexus, Samsung introduced its smartphones (Zheng, 2017).
Threats from the Substitute Products
The threats of substitute products are weak because of the technology, online services, and consumer electronics Apple provides. For Apple, substitute products exert the weak force due to limited substitutes available in the market, low performance of alternate products, and low level of buyer propensity to the substitute products. There are some products which are available in the market like rather than using iPhones, consumers can use landlines and digital cameras. However, such products have low performance due to limited features. Apple is having the advantage in this case (Dudovskiy, 2018).
Rivalry of Existing Players
Apple Inc is facing the strong competition in the industry. This factor of the Five forces model identifies the intensity of influences on the company by the competitors. In Apple’s situation, competitors influence on some external factors like; high aggressiveness of companies, low switching-cost, and low level of product differentiation. Apple is facing tough competition from LG and Samsung, because of aggressiveness in rapid innovation, imitation, and aggressive advertising imposes the strong force in market. In addition to this, product differentiation is low, because available items in markets are same and fulfils the specific purposes. Low switching cost also creates a problem, because many people prefers to switch to Android because of the iOS cost, functions, network externalities and other concerns (Ferguson, 2019).
References
Dudovskiy, J. 2018. Apple Porter’s Five Forces Analysis. [Online], Available at: https://research-methodology.net/apple-porters-five-forces-analysis-3/, [Accessed on: 30th March, 2019].
Ferguson, E. 2019. Apple Inc. Five Forces Analysis (Porter’s Model). [Online], Available at: http://panmore.com/apple-inc-five-forces-analysis-porters-model-case-study, [Accessed on: 30th March, 2019].
Zheng, 2017. Porter’s five forces analysis apples fall and rise. [Online], Available at: https://medium.com/@Jayden_Zheng/porters-five-forces-analysis-apple-s-fall-and-rise-fc27a439fcf, [Accessed on: 30th March, 2019].