1. Rivalry among competing Firms:Apple has many competitors that have the advantage of possessing the larger portion of market share. Apple is faced to compete against companies like IBM, Hewlett-Packard, and Dell. Even a smaller company like Gateway poses a threat. It was Apple who pioneered personal computers but IBM was the company which was able to bring PC to main stream using windows software and intel processors.
The market was open to everyone and since the it was an open platform the race to outperform their competitors grew and companies like dell, Lenovo followed the lead set up by IBM and Apple and since the switching costs was low competition became fierce in the computer hardware industry. Apple is also reliant on promoting its own operating system.
The digital hub being pursued by Apple has already been copied by Gateway. The companies were busy in making or improving on existing platforms but what made apple to sustain was its unique hardware design and style which boomed the sales of Apple with its product Macintosh. After jobs was re-appointed he brought apple os to run on intel processor which made it compatible with windows and also improved the storage and computing speed and hence made it different in terms appearance as well as performance. 2. Threat of Substitute Products and compliments:
Substitute products are readily available so this threat is very high. Competitors work to convince their customers that their product is superior to its competitors. The more differentiation of product the less likely the switch to a substitute will occur. If prices are higher than the company with the higher price has to provide justification for the increase. The computers fell into 5 categories;
Home, small & medium sized business, Corporate, Education, and Government. Apple’s operating system differentiation can command higher pricing when it is presented to the creative designer community but not to the individual computer buyer unless they are specifically looking for such enhanced graphic capabilities. The market is favourable for the companies that have locked a business or educational facility since substitution will require a change of each computer within the facility and in some cases more than one location. Internet connectivity has increased the ability of switching individual units while the others remain the same.
The customers started to buy PC from Wal-Mart, Costco etc. and then came the white channel distribution which assembled the PC according to consumer’s preference which was done on a low cost by the local entrepreneurs. This was affordable because there was no premium price charged by the local entrepreneurs. Thus people preferred to buy from pc assemblers rather than buying from company’s official retail outlet.
The complimentary software’s also played an important role for the consumers to make their buying decisions, the value of a computer corresponded directly to the complementary software, content, and hardware that were available on that platform. Key application software included word processing, presentation graphics, desktop publishing, and Internet browsing. Since the early 1990s, the number of applications available on PCs exploded, while ASPs for PC software collapsed.
Microsoft was the largest vendor of software for Wintel PCs and, aside from Apple itself, for Macs as well.37 Firms such as Google even offered productivity software (Google Apps) for free. PCs also benefited from a wide selection of content, and a vast array of complementary hardware, ranging from printers to multimedia devices. Thus it made it more competitive for apple to survive because it believed in making innovation with the resources it had and not to copy or use other companies’ designs or technology. 3. Bargaining Power of Buyers:
All of Apple’s customers have a variety of computer companies from which to choose when it comes to purchasing hardware, software, or peripherals. Switching costs are low. The buyer has the ability to switch when quality, service or price offered elsewhere is better or cheaper. This situation places the buyer power in a strong position that can only be countered by companies with strong product differentiation that would increase the switching costs.
The computer operating systems differentiation makes it difficult for companies to switch but individuals will find it rather easy to change from one computer system to another. The same difficulties and cost apply to the education facilities that have committed to a single operating system. 4. Bargaining Power of Suppliers:
The suppliers are plentiful and must compete with others to ensure that they will be able to retain the business of the computer companies. The position is low especially since the larger companies can readily switch to another supplier without any major repercussions. Suppliers adjust pricing and quality to make their products more attractive so competition is high leaving them in a low supplier power position. The suppliers fell in two categories: – Who made keyboards, chips, memory and another who made processors and operating systems.
The later was dominated by Microsoft and Intel with more than 70% market share in CPU market. The memory and chips were available at competitive prices but OS and processors where supplied only by Intel and Microsoft which made it difficult for Apple since it was having issues having with performance and storage others had an competitive edge over the Apple and during 1996 it almost went to bankruptcy and insiders believed that the company would have gone bankrupt within 90 days if something was not done.
Thus in this case apple had to come out with an design which is far better than Microsoft and other competitors and had a product differentiation at the same time that’s when Jobs came up with an idea to run iMac on Intel processors which would enhance the performance as well as retain the differentiation strategy of Apple. 5. Threat of New Entrants:
Start-up costs are extremely high so the probability of new entrants is low. The existing companies have capitalized on the distribution channels and have created strong branding awareness that makes it difficult for new comers to compete. The probability of success is so low that competitors pursue niche markets rather than trying to compete with the bigger companies. Apple positioned itself years before so it has created its space in the computer industry just as IBM, Hewlett-Packard, Gateway and Dell.
Answer:- Looking back on how the PC industry developed, Apple was the original innovator, but they became overshadowed by IBM and Microsoft who would sell their rights to manufactures who could make a cheaper and almost comparable device to Apple.
As we have seen in the past few years, Apple has been able to cash in on developing new technologies before anyone else has. Jobs’ idea of creating a digital hub allows him to monopolize the consumers experience because all devices such as the iPod and iPad, which are highly sought after, can only be used if you purchase add on through Apples store. Apple also has made their PC’s more compatible with other PC’s by working with Microsoft and providing the capability to use applications such as Microsoft Office, which is the most widely used creation software.
They also cooperated with Intel which allowed them to make their computers faster and more energy efficient. I believe that Apple’s competitive position is sustainable as long as they continue to come up with products that are cutting edge and customers are forced to buy them first from Apple if they want to get their hands on the latest and greatest technologies.
If we take a closer look at Apple’s trend before and after Steve job’s it was struggling to make profits and almost went to bankruptcy but once Steve job came to the picture the there was a complete turnaround in the way Apple functioned; everything changed and he believed that “if you don’t cannibalize your own product someone else will” and this can be seen when ipad was launched , it had similar functions of an iMac and the sales of iMac reduced and the company which was pioneer of personal computers now changed its core competency and now iMac contribute only 5% profit for the whole company.
Even though it contributes 5% it is still preferred over any other personal computer thus it is able to sustain itself in this growing competition only with two mantra’s innovation and consumer experience. Q4. How sustainable is Apples competitive position in MP3 players
Ans. When apple came out with the iPod in 2001 they secured a position in the MP3 market that no other competitor could match. The quality and capability of the iPod surpassed that of its competitors and Apple soon came out with new generations MP3 Players that out performed its previous model. By 2010 Apple held more than 70% of the MP3 market. Apple also introduced iTunes which allows users to purchase and save their music in any computer they choose and download to any Apple product.
This is the largest music catalogue available and is the catalyst to get customers to buy Apple products. They make hardly any money on the music, but people will purchase the Apple products to have the whole experience. Considering these facts and the reality that Apple has developed other products such as the iPhone and iPad which allow you to use the same music interface and store, theywill continue to be the leader in MP3 players.
Q5. How do you assess Apples competitive position in Smart phones?
Ans. With the problems that were created for Apple with the availability of free listening on sites like Pandora and Spotify, Apple had to figure out how to get customers to still use iTunes. With the invention of the iPhone in 2007, there were able to not only partly address that issue, but also introduce a product into the industry that was completely different and could offer capabilities that no other phone could. Even with all this to offer there were some draw backs. The first iPhone model was limited to a single network that did not always have the best service, bad battery life, and did not support flash technology.
They were able to capture over 14% of the smart phone market and introduced the Apple App Store which would bring in even more revenue and benefits to customers which would convince them to buy the iPhone. Overall people still continue to purchase the iPhone and there seems to be a sort of “following” for Apple created products, so I do not think that Apple will have a problem with maintaining a position in the smart phone market.
Q6.What is the prospects for the iPad?Ans. The iPad was designed to be a middle ground between the smart phone and laptop. Some thought that the iPad would be a replacement for the Kindle eReader but that was never Jobs intention. Eventually Jobs thought that the iPad would kill the laptop market but my personal opinion is that it never will. The capabilities and design of the iPad does not always provide the same experience that a laptop does, so only time will tell where the iPad goes.