The Apple Company has had great success with the iPod but now needs to figure out a way they can create a sustainable comparative advantage in the Mp3 player market or they will lose demand and market share, and decrease profits and revenue . Analysis I am now going to analyze the PC and Music Player industry using Porter’s five forces. ~Competitors The competitors in the PC industry are fierce and intense. There is a very high rivalry in the industry causing the price to decline. For Apple there are two types of competitors, Hardware, for example Dell, and Software like IBM and Microsoft. In either case, the competition is still high.
Also now Apple has to compete in the Music Player industry with the invention of the iPod. They control 70 percent of the market in music players just themselves. The competition is increases as Microsoft and Creative get into the market but iPod has still been able to control most of the market. ~Buyers The cost of switching from one brand to another brand is very low. Companies with more product differentiation. It is hard to get buyers at first in the market. When computers first came out buyers were easy to please. Now they are a lot harder to please since they know what to expect and they only want the best.
The industry has matured over the time and buyers have become a lot more powerful. Also in the music player industry, since iPod is very compatible to Apple computer’s they are starting to have a lot more brand loyalty. ~Suppliers There are very few suppliers in processors and With Apple’s operating systems OS. On the other hand with the plastic, keyboards, memory drives and chips, and disk drives, rewritable CD’s, there are many suppliers. Suppliers are going to want to make there parts cheaper and better so there is a lot of competition with suppliers causing them to have a lower power position.
~New Entrants Since the market is mature now and there are already big power house names like Dell, Microsoft and IBM not a lot of people are going to want to invest there many into a new company for fear they will not be able to go up against these giants. Therefore the threat of new entrants is low in the PC market. New entrants are springing up in the Music player market do to the rising success of Apple. Microsoft and Creative are two big names who have stepped into the race to see if they combat this ever growing iPod trend. The threat of new entrants in high in the music player market.
~Substitutes Substitutes in the PC industry are higher if the company doesn’t have a lot of differentiation. Apple has a lot of differentiation making it harder for substitutes to replace them. This causes them to charge a higher price to graphic designers but it is a bit harder to do this with the regular consumer because they can go to Dell or Lenovo. Substitutes in the music player industry are a little easy but as far as the whole package like Apple has, it is a lot harder for a smaller company to have its own software to download and be compatible with both PC and Mac.
This also helps Apple to sell more computers because people become fans of the design and Ease of use design. Plan of Action (POA) The best way for Apple to develop a sustainable comparative advantage is to develop a sustainable comparative advantage is to: A) Concentrate on their core competencies like innovation and differentiation. Have a new product come out every year or six months, possibly get into the video game market. B) Get back into the education market. Since they used to be the leader and every since the iPod came out, they sort have shifted all focus toward it.
C) Make computers for the average consumer. By creating a new product or division that can make a cheaper more affordable computer. Evaluation Apple have been the premium company and high dollar computer producer for years. Their computer design has that ease of use and specializes in graphic design. They have just recently created the iPod and have lose touch with some of their core competencies. They need to return to the education market where they have been at the top for years but ever since the iPod has come out they have dropped to the bottom. I know as a college student and being
involved with education Macs are by far more secure and easier to work with then a Dell or Compact. They have everything you need for school/education and they rarely have technical issues. If the Apple company would target more education systems they will increase their market share and help them to develop a sustainable comparative advantage. They also need to get back to being different from the rest of the companies which they have done very well in the past and stick to the core competencies but also I believe more importantly, they need to concentrate on their innovation.
The iPod will only be able to stay at the top of the charts for so long before the demand for them will decrease and something newer and better will replace them. With technology increases rapidly in this market they need to be on their toes thinking about what new product can we develop next. Also with this product they need to still have the same looping effect as they did with the iPod to keep customers brand loyal and attract more customers. For example the iPhone came out just recently and has been selling like hot cakes. I know of 10 of my friends that already have the iPhone and they love them.
The final thing is that Apple seems to specialize in graphic design. The average consumer doesn’t like to pay a lot of money when there are Dell and Compact selling computers with the same software they need at a cheaper price. To combat this, I believe a new product or division should be created to target the average consumer with the objectives of lower prices. I know some premium companies have smaller companies/divisions that produce somewhat cheaper products to expand their customer base. I believe this will help Apple to get atop the PC industry and have this sustainable comparative advantage.
Some of the drawbacks of this plan are that Apple may lose some of their premium computer sales to that of their cheaper products that target average consumers. Also Apple will focusing on their innovation they may need to hire more developers so they can be two steps ahead of their competitors. Another drawback may be since they may explore possible new markets their products may be busts or they might not sell real well right away. Every plan has its risks and benefits but I believe that in my plan, the benefits greatly outweigh the risks.