APPLE CASE STUDY Porters 5 Forces Analysis on Apple Co.

Apple Inc., formerly Apple Computer, Inc., is a multinational corporation that creates consumer electronics, computer software, and commercial servers. Apple's core product lines are the iPad, iPhone, iPod music player, and Macintosh computer line-up. Founders Steve Jobs and Steve Wozniak effectively created Apple Computer on April 1, 1976, with the release of the Apple I, and incorporated the company on January 3, 1977, in Cupertino, California. For more than two decades, Apple Computer was predominantly a manufacturer of personal computers, including the Apple II, Macintosh, and Power Mac lines, but it faced rocky sales and low market share during the 1990s. Jobs, who had been ousted from the company in 1985, returned to become Apple's CEO in 1996 after his company NeXT was bought by Apple Inc., and he brought with him a new corporate philosophy of recognizable products and simple design. With the introduction of the successful iPod music player in 2001, Apple established itself as a leader in the consumer electronics industry, dropping "Computer" from its name. The latest era of phenomenal success for the company has been in the iOS range of products that began with the iPhone, iPod Touch and now iPad. As of 2011, Apple is the largest technology firm in the world, with annual revenues of more than $60 billion.

Suppliers Barriers to Entry Time and Cost of Entry Knowledge Economies of Scale Cost of Advantages Technology Barriers Number of suppliers Size of Suppliers Switching Cost Unique service/product Ability to Substitute Substitutes Substitute performance Cost of switching Buyer Willingness

Competitive Rivalry Buyers Number of Customers Buying Volumes Differentiation Price Elasticity Incentives Brand Identity Switching Cost Number of Competitors Exit Barriers Niche/Quality Differentiation Switching Cost Industry concentration Diversity of Competitors

Force 1: Existing Rivalry

Microsoft Co. gives a stiff competition to Apple inc. related in similar categories of software. Microsoft softwares are easily available, they are user friendly and less complicated to their rival Mac OS. Microsoft products cost relatively less as compared to Apple Inc. The roots of Apple inc. are not so strong globally compared to its other alternative sources of computer hardware likewise DELL, LENOVO, HP. Apple launches I -pod like I -pod Shuffle, I -pod Nano, I -pod Classic and I -Pod touch which receives a healthy and stiff competition from other mp3 manufacturers like Creative, Samsung, Sony, etc., Apple launches its software website named iTunes. iTunes website is restricted only to Apple users, whereas Napster which is also one of the online music store which allows N number of users to download music and videos without any restrictions.

Force 2: Threat of New Entrants

Apple inc. faces Threats from Emerging Entities and leading websites which provide online services. For e.g.: Verizon, It is a online streaming site through which audios & videos are downloadable. Verizon is well-known as V-Cast. On demand online services are also been provided by leading websites which are similar to I Tunes.

Force 3: Bargaining Power of Suppliers

In lay mans language, There are many suppliers of processors for various computer manufacturing companies like Motorola, Intel, IBM, etc., whereas on the other hand Apple has very less suppliers of processors like Samsung manufacturer. Hence, giving the bargaining power to the supplier. Apple inc. having strategic alliance with Macintosh computers in the field of IT, whereas in entertainment industry they have an alliance with Disney, ABC, FOX, Sony; whereas they have collaborations with BMG, Sony, Warner, Universal in the field of music.

Force 4: Bargaining Power of Customers

There is an advantage to a customer when they do not opt for an Apple product is that by switching to peer to-peer networks like (Ares & Limewire) they can share music files and videos without paying for them. Retailers may pressure for lower prices or better terms. For e.g. In India where the market share of Apple is very low, the retailers can pressure the manufacturers for lower prices or better terms to enhance their own profit margin. As we all notice the inflation rates are going high people choose to go for low price durable products rather than opting for better brand image like Apple.

Force 5: Threat from Substitutes

Apple is trying to cope up with its Substitutes like (X-Box, PS2) Instead of paying for downloads of music on premium site music CDs and DVDs are an alternative which are of comparatively low value. Instead of paying for downloads of videos on premium site Cable, Broadcast, theatres are an alternative sources of comparatively low value.

Conclusion Any company must seek to understand the nature of its competitive environment if it is to be successful in achieving its objectives and in establishing appropriate strategies. If a company fully understands the nature of the Porters five forces, and particularly appreciates which one is the most important, it will be in a stronger position to defend itself against any threats and to influence the forces with its strategy. The situation is fluid, and the nature and relative power of the forces will change. Consequently, the need to monitor and stay aware is continuous. Some issues during the implementation of these Five Forces are crucially important for organizations to build long-term business strategy and sustaining competitive advantages rather than simply list the forces. Successful use of the Porter Model Analysis includes identifying the sources of competition, the strength and likelihood of that competition existing, and strategic recommendations for the action a company should take in order to develop barriers to competition.