Apple Five Forces Analysis

Apple is the world’s largest technology company operating in a highly competitive business environment. It operates in a business environment characterized by high level of rivalry and aggressive competition for market share. However, Apple has maintained a strong competitive edge and due to its differentiated technologies, the company is ahead of its rivals. It is a premium brand famous worldwide for products like the iPhone and Mac. Apple does not depend on external providers for its technology but its PCs and smartphones run on the company’s own operating system the Mac OS and the iOS.

Apple has its own distinct position in the technology sector. It is known for a strong focus on innovation, product quality and customer dedication. The company is financially in a very strong position and over the past few years, it as experienced solid improvement in its sales of iPhones, leading to superior financial performance.

In this five forces analysis, we will analyze the competitive environment of Apple and how well the company is positioned against its rivals. We will also analyse how successful the company is in terms of utilizing its resources and capabilities to generate superior results and maintain a strong market position.

The five forces analysis is a framework for analyzing the competitive environment of a company and has been named after the Harvard Professor who developed it – Michael E Porter. These five crucial forces are a part of every industry and affect every company. The analysis can be used to guide business strategy and to increase a firm’s ability to compete.

Bargaining Power of Suppliers:

The bargaining power of suppliers in the technology industry is low to moderate. Apple suppliers generally hold low to moderate bargaining power. It can be attributed mainly to the dominant market position and financial strength of Apple. As a market leading company, Apple is in a financially very strong position. Compared to Apple, its suppliers are much smaller firms. The smaller size of supplier firms is a key reason that they hold little or moderate bargaining power.

Moreover, the company has multiple options and it is easy for a large firm like Apple to switch from one to another supplier which also helps control the bargaining power of suppliers. The threat of forward integration from the suppliers is low to null, which is because Apple relies on exclusively its own technologies that are not possible to imitate for suppliers or rivals. This minimizes the potential threat from suppliers and also helps control their bargaining strength.

Bargaining Power of Buyers:

The bargaining power of Apple’s buyers is low to moderate which is because of several factors. Apple has been known to be a strongly customer dedicated company since its foundation. It has always dedicated itself to innovation and product quality. Despite the premium prices of Apple products, their popularity is relatively much higher when compared to rival products and it is particularly true about the core product of Apple – the iPhone.

The bargaining power of buyers would have been higher if the company did not rely on its own exclusive technologies and operating systems for its iPhone and other devices. The level of quality and customer dedication that Apple has always demonstrated makes it a market leading brand that enjoys a very strong level of demand. So, innovation, marketing, brand image, customer focus and similar other factors have helped the company drive the demand for its products and services high, while also helping the firm control the bargaining strength of its buyers.

Threat of Substitutes:

The threat of substitute products has kept increasing over the past several years for Apple. Its core product is the iPhone, which is a market leading product enjoying very high level of demand but also experiencing strong competition from rival products in the global market. The threat of substitutes for Apple mainly comes from rival brands. There are several rivals in the market including leading names like Microsoft, HP, Samsung and several more PC and smartphone brands. With its entry into online streaming, it is also competing with online streaming providers like Netflix, Amazon Prime and Disney plus.

In the smartphone industry, the list of rivals making premium smartphones is long and includes Samsung, Huawei, LG, Motorola and several more. HP, Lenovo, Dell and others make computing products that are substitutes for Mac laptops and PCs. So, overall the threat of substitutes for Apple is very high. However, Apple has kept the threat of substitutes under control with its competitive edge. Its products are unique and rely on its own cutting edge technology for operation. This differentiates the products from their substitutes and is the main reason behind their popularity worldwide.

The level of threat from substitutes gets mitigated to some extent through marketing, brand image, innovation and customer focus but still remains high because customers can easily switch to rival brands and products priced economically compared to Apple products.

Threat of new entrants:

The threat of new entrants for a company like Apple is very low. It is not only because of the enormous size of the company but also because of its technology and the level of innovation at the company. While Apple is financially in a very strong position, it owns technologies that are not easy to imitate for new comers. Its technological innovation, product quality and superior brand image make it a highly competitive brand.

The company is also very aggressive about innovation and has strong research and development capabilities that are not easy to create for a new entrant. In the technology industry, the incumbent brands are quite aggressive about their market share which makes it difficult for new entrants to gain an edge over others.

Apple is also known to be a highly creative brand in terms of marketing. Any new entrant will need to be financially very strong and must have the technological knowhow to ,gain an edge faster. However, this is generally not the case and so new brands trying to enter the smartphone or PC sector generally fail to generate a competitive advantage. So, the threat from new entrants remains very low for Apple.

Intensity of competitive rivalry:

Apple is operating in an intensely competitive business environment where its rivals are mostly leading names in their respective industry sectors. There is a long list of brands competing with Apple for market share in both the PC and smartphone industries. Apple makes only premium products that are dedicated to the high end market. However, there are several more brands also making similar products for the high end market and which are seriously focussed at innovation.

Some of the main rivals of Apple include Microsoft, Samsung, Huawei, HP, Lenovo, Dell, LG and others. Companies like Microsoft and Samsung are among the leading R&D spenders in the industry. HP, Dell and Lenovo have also introduced several products targeted at the high end of the market and are continuously innovating to maintain their market share.

The balance is tilted somewhat in the favor of Apple because of its serious focus on innovation, product quality and customer service. Apple also invests a large sum each year in research and development. The company is well known as a market leading brand with cutting edge technology. Its brand image serves as another critical pillar of success in the global market. While these factors help mitigate the competitive threat, the intensity of rivalry from competing firms still remains high.

Conclusion:

Apple is undoubtedly a mighty brand and a highly competitive business. It operates in an intensely competitive environment but has a strong competitive edge that allows it to perform against other leading rivals. Apple’s growth has been driven by mainly three factors that include quality, innovation and customer focus. Its market position has continued to strengthen with the release of new and more innovative models of its existing products.

The company still relies mainly on a core set of products and technologies that have been in existence for a long time. However, its continuous and serious focus on innovation has brought the company to a turning point where it has successfully established itself as the market leader. Its competitive edge in various areas including production, supply chain and marketing cannot be questioned. The company has improved its technologies a lot over the past several years and so when it comes to performance, Apple products are considered much superior to the competing products. Overall, Apple is in a very strong position in the global market, where very few brands hold the capability to compete against it.