The firm I have chosen to analyze is Apple. Apple, officially called as Apple Inc. was founded on April 1, 1976 by Steve Jobs and Steven Wojniak. It was incorporated on January 3, 1977. (Mohta, 2010) Apple designs and manufactures consumer products such as computers, laptops, tablets, phones and music players and computer software products such as Mac OS Operation System and iTunes. Over the past few years, Apple has gained a large customer base and been able to dominate the market share. Strategic frameworks such as Porters five forces and Strategic focus will help us in analyzing how Apple has managed to sustain its profits over a long period of time.
Porter’s five forces framework
Threat of Competition
When it comes to computers, tablets and music players, Apple dominates the market share by a huge margin. The gross profit for Apple in the year 2012 is $65.64 billion whereas the gross profit for HP and Dell is $27.64 billion and $13.06 billion respectively. (Sparks, 2012) HP was unable to compete with Apple in the tablet market that it has started to consider focusing only on the computer industry. In the smartphone market, Samsung has by far been the biggest competitor for Apple. Samsung has 29.1% of the market share in the smartphone market whereas Apple only has 24.2 % of the market share. (Reisinger, 2012)
Threat of new entrants
Considering the large customer base Apple has, threat of new entrants is quite low. The new entrants have neither been able to match up to the quality of the Apple products nor to the sales volume held by Apple. Hence, if Apple continues to design and manufacture innovative products, it will be extremely difficult for new entrants to be able to compete with Apple.
Threat of Substitutes
When it comes to Apple’s hardware products, there are no substitutes as such that could replace it. However, when it comes to Apple’s software products such as the iTunes, which is the music store designed and developed by Apple for the purpose of purchasing and downloading music, there is a high possibility that the customers could look out for alternative sources for music such as limewire, youtube.com. (Mohta, 2010)
Power of buyers
Apple has always focused on hardware and software integration of its products. Hence, Apple customers end up owning more than one Apple product. As a result of this, switching costs are extremely high. Also, due to the fact that large sales volumes are promised by Apple to the carrier networks such as AT&T and Verizon, iPhones are sold to the customers at a subsidised rate. This is an indication that the carriers have very less buying power. (Sparks, 2012)
Power of suppliers
Apple has an advantage over its suppliers as it outsources most of its manufacturing and has also started producing its own supplies. Consequently, it also gives Apple a huge competitive advantage. (Term paper warehouse)
Strategic focus framework
The three value disciplines that are taken up for analyzing a company are:
Apple as a company is highly efficient when it comes to operational excellence. All the departments in the organization starting from the sales forecasting department to the Distributions department are synchronised with each other leading to a highly efficient supply chain. Also, Apple has a limited product line. (Lariviere, 2011) Hence, it is able to provide its complete focus on designing and manufacturing those products rather than drifting away from the organizations objective to sustain profits with a large number of product lines.
“Apple targets people. It focuses on users. And it lets them decide how and where they will use its products.” (Asay, 2010) Apple has always been a customer focused company where its main aim is to deliver high quality products to its customers.
Apple has managed to be a leader in its industry because of the fact it has been able to design innovative products. It has initiated changes to which its competitors had to respond. For example, Apple revolutionised the Smartphone market by introducing the iPhone. Except for Samsung, no other competitor of Apple has been able to come up with a strategy to deviate market focus from Apple. In addition, Apple has always on the lookout for new products to design and new markets to enter. This strategy has led to Apple being a leader in its industry.
Asay. M. (2010). Apple Doesn’t target Markets. It Targets People. GIGAOM. Retrieved from: http://gigaom.com/2010/08/26/apple-doesnt-target-markets-it-targets-people/
Bargaining Power of Suppliers. Term Paper Warehouse. Retrieved from: http://www.termpaperwarehouse.com/essay-on/Bargaining-Power-Of-Suppliers/84367
Lariviere. M. (2011). Operations: Apple’s Secret Sauce? The Kellogg Insight. Retrieved from: http://operationsroom.wordpress.com/2011/11/04/operations-apples-secret-sauce/
Mohta, J. (2010). Poter’s 5 forces model case Apple Inc. Slideshare. Retrieved from: http://www.slideshare.net/jontymohta444/porters-5-forces-model-case-apple-inc
Reisinger, D. (2012). Samsung Pulling away from Apple in smartphone market. CNET. Retrieved from: http://news.cnet.com/8301-1035_3-57424779-94/samsung-pulling-away-from-apple-in-smartphone-market/
Sparks, D. (2012). Competing with Apple is No Fun. The Motley Fool. Retrieved from: http://beta.fool.com/danielsparks/2012/09/03/apple-2012-50-growth/10776/
Spartanski. (2009). Case Study Apple Inc. Slideshare. Retrieved from: http://www.slideshare.net/Spartanski/case-study-apple-inc-2008
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