Workshop 3 writing assignment 1. Risk of entry by potential competitors. Potential competitors are companies that are not currently competing in an industry but have the capability to do so if they choose. Apple’s 3 main product lines right now are the iPad, iPhone, and the iPod. All three are mobile technology devices. This is a very competitive market right now. There are numerous companies that sell one or more device that is comparable to Apple’s products, and therefore are direct competitors. However there are new brands and companies appearing in the stores all the time.
Most of the time they are little companies and don’t pose much of a threat to a company the size of Apple. But even on a small scale they still take sales away from them. I think that the barriers to entry in this industry are large for incoming competitors. Economies of scale, product differentiation, and capital requirements would pose the biggest problems for small companies. They simply cannot compete on the level of companies like Apple. 2. Bargaining power of buyers.
Bargaining power of buyers refers to the ability of buyers to bargain in the industry by demanding better product quality and service. The customers who purchase Apple’s products for use are the buyers. Apple doesn’t deal in the corporate area so that would make the individual population the customers. Apple’s customers have a powerful position in this industry. There are so many options for people when it comes to mobile electronics. Each one has different features, capabilities, and price points. All of which are important to the purchaser. Apple has to stay competitive and show an advantage for the people to buy their product. 3. Threat of substitutes.
The products of different businesses or industries that can satisfy similar customer needs. When iPod’s first arrived on the market they were priced at $399, now they are less than $75. This is because the industry has found other products that can substitute for the iPod. All smart phones come with music players on them, and you can download other options off the internet. Most phones come with more storage space than iPods and it is a phone also. That way you only need one device instead of carrying around multiple devices. Smartphones create a strong competitive threat for iPods.
Even Apple’s own product the iPhone is a competitor of the iPod. And smartphones and iPhones satisfy the customers need better because there are more options and upgrades available. Because the iPhone is a direct competitor of the iPod, and satisfies all of the needs that the iPod satisfies, Apple is able to charge a premium price for their iPhones. Essentially the customer is getting multiple devices all rolled into one for one price. The threat of substitutes for Apple is high overall. Customers have so many choices when it comes to buying mobile devices these days. Android is one of the biggest substitutes for Apple products.
Android is an operating system that is run on multiple phones, made by multiple companies. It is easy to use, uncomplicated, and programmable. A person can make an Android device do just about anything they want if they know how. More internet and cellular companies sell Android devices so they are easier to find and get. They are generally less expensive and they are compatible with other programs. Apple products are at a disadvantage because they are a proprietary company meaning that all of their attachments and programs work only with Apple products. Though this has changed a bit in recent days it can still cause issues. 4. Bargaining power of suppliers.
Bargaining power of suppliers refers to the ability of suppliers to raise input prices or to raise the costs of the industry in other ways – for example, by providing poor-quality inputs or poor service. I don’t think that this is a problem for Apple. There are so many substitutes for the components used in their products that they could just switch buyers. On top of that Apple has a history of finding a good component and then either buying the company that produces the component or signing a contract that allows them exclusivity to the component. 5. Intensity of rivalry among established firms.
I think that this is Apple’s biggest problem. There are many companies such as Motorola, Sony, Samsung, and Nokia that have very comparable products that cost less and do more. These are established companies that have been around for a while and know what they are doing. They are very capable of competing with Apple. Most people prefer a product that is easy to use and compatible with the other devices in their home.
If a person owns all Apple products then the Apple iPod, iPhone, and iPad are the best choice for them. However, if a person does not own other Apple products then compatibility becomes an issue. This makes Apple an inferior choice.
The text is well written and makes the topic easy to understand. It touches on all of the important topics in Michael Porter’s article. But, the article is much more detailed and conclusive. It was written to inform people of a topic and therefore easier to read, at least for me. The book was written to educate and teach, and while it is effective, in this situation the original article was very informative and helpful. I didn’t see any drawbacks other than the amount of reading required for this assignment.