1. Introduction
The porter’s five forces can be used to establish the competitive intensity thereby the attractiveness of a market. Attractiveness refers to the industry profitability. An industry where there are combinations of forces that drive down the industry profitability is known as ‘unattractive’ industry. A very unattractive industry refers to the industry approaching pure competition.
The porter’s five forces include;
Threat of entry of newcomers
Threat of substitute products
Intensity of competitive rivalry
Bargaining power of suppliers
Bargaining power of customers
Michael porter’s model is a powerful tool that can be used to scrutinize the industry economy and the attractiveness of the industry. The model is applied in analyzing Apple Computer, Inc. in case 9.
2. PORTER’S 5 FORCES
Threat of New Entrants is Low
HIGH
LOW
Product differentiation
Apple is a market leader in innovation with different products in the market like; iphone, pc, iPod, Apple TV. These products have unique features when first introduced in the market.
Capital requirements are:
The award of innovation for three subsequent years (2005, 2006, and 2007) is an evidence of the company massive investment in research and development to remain the leader of innovations.
Ease of Access to distribution channels is:
Apple Computer, Inc. controls a large market in the world. The company controlled 70 % of the digital music market in 2007
Government policies creating barriers are:
There is no information in the case document about the government regulations.
Bargaining Power of Buyers is MODERATE
Concentration of buyers relative to suppliers is:
NA
NA
Switching costs are: low
There are many suppliers of products same as the ones apple is supplying in the market thus the switching cost for the clients is low. Examples of these include; dell, HP, IBM, Napster, kazaa, RealNetworks, Inc, CinemaNow, Sony, Virginia Media, and Yahoo! Music Unlimited.
Extent of buyer’s profits is:
NA
NA
Product differentiation of suppliers is: high
Apple Computer, Inc. products like phones and PCs make not make a large difference to the buyer as compared to products from other companies because these products perform the same functions with same capacity.
Threat of backward integration by buyers is:
The product needs a lot of technological facilities to process thus the buyers are unlikely to make same products as the ones manufactured/processed by Apple Computer, Inc.
Importance of supplier’s input to quality of buyer’s final product is:
Buyers are more selective when it comes to product features, durability, and the product outlook. Apple, Computer Inc. was the first to come up with a computer having a sleek plastic casing in 1977, the Apple II. The standardized products offered by Apple Computer, Inc. also require the suppliers to provide standardized supplies as per the provisions of the company.
Threat of Substitute Products is Low
HIGH
LOW
Rate of improvement in price-performance relationship of substitute product is:
There are many substitutes provided by companies such as IBM, HP, Dell, Sony, and Microsoft. For example in 1990, Microsoft was the first to introduce Windows 3.0. This software could run nearly on any PC.
Competitive rivalry is high
HIGH
LOW
The number of competitors in the industry is high. Examples of competing product manufacturers in this industry include IBM, Microsoft, HP, and Sony. Also competitors in the music downloads include; Napster, Kazaa, RealNetworks, and CinemaNow.
Exit barriers are:
High exit barriers because products and services offered by companies in the industry are standardized
Strategic stakes are:
Apple adopts diverse product strategies for example the company produces PCs, iPhones, iTunes, and iPods.
Product differentiation is:
Products are branded thus creating the difference
Bargaining power of suppliers is high
HIGH
LOW
Switching costs of the buyer are:
Switching costs of the buyer is high since there are not many suppliers of these products.
Threat of forward integration by the supplier is:
Threat of forward integration is low because to complete such integration heavy capital and R&D will be needed.
Importance of customer to the suppliers is:
This industry is growing fast thus there so many upcoming demands for the suppliers.
Product differentiation is:
the products are standardized since it is not the final product
3. COMPETITORS ANALYSIS
Introduction
The competitors of Apple Computer, Inc are in the online videos and music download services (in both legal and illegal industry). They also compete in PCs, hand phones, and portable music player industry.
Apple’s products include; iTunes (online music store), iPhone (hand phone), iPod (portable music player), Apple TV (Television), Personal Computer (Apple-I,II and III, iMac, Macintosh, iBook , Powerbook
Competitors Analysis
iTunes
Dimensions
Apple iTune
Yahoo
Wal-
Music download service
Downloads made to PC, to iPod, or to Mac.
Can be downloaded as songs and video from web to iPod, PC ,CD, or DVD
Subscribers can listen to cast radio stations or download songs to PC
Offer music in MP3 format
Blockbuster movies and computer games
There is a high resource similarity
Product
Types
online music store
online music store
online music store
online music store
online music store
There is a high resource similarity
Distribution Center / Stores
The source are record labels (studios)
Customers subscribe to enjoy the benefits of real player music store
Yahoo site
Online music store
Customers can download through Virgin’s V2 music label.
Competitor in a good position to initiate competitive strategic attacks
Market Shares
no available data
no available data
no available data
Has larger market share in the nation followed by Apple company
no available data
no available data
Financial Resources
no available data
no available data
no available data
no available data
no available data
no available data
Future Objectives
no available data
Gain the market share from Apply
no available data
no available data
no available data
no available data
Current Strategies
An agreement with five major record labels and other over 200 independent labels
Reduced per album and per song prices to $4.99 and $0.49 respectively compared to Apple prices of $9.99 and $0.99.
no available data
no available data
no available data
Competitor in a good position to initiate competitive strategic attacks
Assumptions
no available data
no available data
no available data
no available data
no available data
no available data
Capabilities
After downloading music can be stored as digital library, more than six million songs available to clients
no available data
Subscribers can access more than 2 million songs
Offer music in MP3 format
In addition to videos and computer games, Virginia media has more than 15000 record labels for its clients.
no available data
Resource
Similarities
Just like Virgin media, customers can listen to samples for 30 seconds before purchasing
Just like the Apple iTunes, videos and music can be downloaded to iPod or PC
Songs can be loaded to the PC.
no available data
Just like Apple’s iTunes, customers can listen to samples for 30 seconds before purchasing
High resource similarity
Market Commonalities
no available data
no available data
no available data
no available data
no available data
no available data
COMMENT
Apple’s iTunes is the second largest after Wal-Mart
no available data
no available data
Wal-Mart is the largest music retailer
Has some resource similarity to Apple’s iTune
There is evidence of direct competition in this market
Apple TV
Dimensions
Apple TV
Amazon Unbox
download service
Download movies and music
Users download TV shows or films
Movie and computer games downloads
Movie download services
Deliver any content provided in SPHE including TV shows and movies
no available data
The download services makes use of the internet
Computer, Xbox 360
Xbox 360
Xbox 300, Computer, or TV connected to computer
no available data
High resource similarity
Distribution Center / Stores
no available data
Amazon Unbox
no available data
no available data
no available data
no available data
no available data
Market Shares
no available data
no available data
no available data
no available data
no available data
no available data
no available data
Financial Resources
no available data
no available data
no available data
no available data
no available data
no available data
no available data
Future Objectives
no available data
no available data
no available data
no available data
no available data
no available data
no available data
Current Strategies
Negotiation with major studios to allow Apple rent their movies
Partnering with TiVo and an agreement with most studios
Has been differentiating itself in the market by creating joint ventures.
no available data
no available data
no available data
no available data
Assumptions
no available data
no available data
no available data
no available data
no available data
no available data
no available data
Capabilities
no available data
no available data
Has Library with of more than 10000 movies, can provide TV programs and music concerts
no available data
Able to produce DVD of any TV show, movie, or any content available in SPHE
Able to offer 3300 movie titles
no available data
Resource
Similarities
Just like Amazon Unbox Movie must be viewed in 30 days once it is downloaded and in 24 hours once it has been started
Movie must be viewed in 30 days once it is downloaded and in 24 hours once it has been started
no available data
no available data
no available data
no available data
no available data
Market Commonalities
no available data
no available data
no available data
no available data
no available data
no available data
no available data
COMMENT
Apple is in a good position to initiate competitive strategic attacks
Amazon Unbox in a good position to initiate competitive strategic attacks
no available data
no available data
no available data
no available data
Competitor in this market are in a good position to initiate competitive strategic attacks
Research in Motion (Blackberry)
Comment
Product Type
Hand phone
Hand phone
Smartphone
Hand phone
High resource similarity of the product
Service/Features
Voice mail, access to internet, voice calls, Bluetooth
Phone can be used as modem, has Bluetooth, SD card format compatible
Phone can be used as modem, has Bluetooth, SD card format compatible
Competitor are in a good position to initiate competitive strategic attacks
Distribution Center/Stores
no available data
no available data
no available data
no available data
no available data
Market Shares
no available data
Was the market leader but has been losing to RIM and iPhones
no available data
no available data
no available data
Financial Resource
no available data
no available data
no available data
no available data
no available data
Future Objectives
no available data
no available data
no available data
Introduce a touch-sensitive screen
no available data
Current Strategy
Selecting Cingular as the wireless carrier because it is the most popular in United states
no available data
no available data
Additions of fun features.
Competitor in a good position to initiate competitive strategic attacks
Assumption
no available data
no available data
no available data
no available data
no available data
Capabilities
no available data
no available data
no available data
no available data
no available data
Resource
Similarity
no available data
no available data
AT&T is the service provider for both Apple iPhones and palm
no available data
no available data
Market Commonality
no available data
no available data
no available data
no available data
no available data
COMMENT
Apple does not have a significant market share. The market is shared among many competitors
Motorola does not have a significant market share. The market is shared among many competitors
Palm does not have a significant market share. The market is shared among many competitors
Blackberry does not have a significant market share. The market is shared among many competitors
There is direct market competition
Microsoft Zune
Dell Digital Juke
Samsung Napster
Gateway Juke
RIO Karma
Comment
Product Type
portable music player
Digital player
Digital player/ voice recorder
Digital player/ voice recorder/ radio
Digital player/ voice recorder/ radio
Digital player
High resource similarity
Service/Features
users can carry songs and videos wherever they go
users can carry songs and videos wherever they go
users can carry songs and videos wherever they go
users can carry songs and videos wherever they go
users can carry songs and videos wherever they go
users can carry songs and videos wherever they go
There is a high resource similarity
Distribution Center/Stores
no available data
no available data
no available data
no available data
no available data
no available data
no available data
Market Shares
The largest market share with the close competitor controlling only 8%
Can only control 3% of the market share Apple can control
no available data
no available data
no available data
no available data
Apple’s iPod has a significant market share and does not feel the competitor effect
Financial Resource
no available data
no available data
no available data
no available data
no available data
no available data
no available data
Future Objectives
no available data
no available data
no available data
no available data
no available data
no available data
no available data
Current Strategy
While others duplicate apple continue to innovate new portable devices with more advanced features
Smaller with better viewing screen
no available data
no available data
no available data
no available data
Competitor are not in a good position to initiate competitive strategic attacks
Assumption
no available data
no available data
no available data
no available data
no available data
no available data
no available data
Capabilities
Has up to 160 GB storage allowing users to carry up to 40000 songs or 200 hours of video
80 GB storage space
Longer lasting battery (16 hours)
Has up to 20gb storage capacity
Has up to 20gb storage capacity
Has up to 20gb storage capacity
Apple’s iPod is the most powerful with bigger storage ability
Resource
Similarity
Allow users to carry songs and movies wherever they go
Allow users to carry songs and movies wherever they go
Allow users to carry songs and movies wherever they go
Allow users to carry songs and movies wherever they go
Allow users to carry songs and movies wherever they go
Allow users to carry songs and movies wherever they go
high resource similarity
Market Commonality
no available data
no available data
no available data
no available data
no available data
no available data
no available data
COMMENT
The Apple’s iPod is the market leader with little competition. The
Can only control 3% of the market share Apple can control
Exhibit high resource similarities to other devices in the market
Exhibit high resource similarities to other devices in the market
Exhibit high resource similarities to other devices in the market
Exhibit high resource similarities to other devices in the market
No direct market competition
Comments and discussion
Market commonality
Each industry comprise of various markets which can further be divided into segments. Example of the subdivision could include; digital online music & portable music players (iTunes and iPODs) , computers ( Mac book, ibook ), mobile phone (iPhone) , digital videos ( Apple TV).
There is a high market commonality for the iPhones and the Apple TV because there are many firms competing in the same market. iPhones experience stiff completion from Motorola, palm, and blackberry. The Apple TV experiences competition from Amazon Unbox, CinemaNow, Disney, HP, and Wal-Mart.
The iPod has many competitors in the market but the Apple is already a market leader in this device. It also do not share most of the markets with the competitors thus experiences low market commonality. The market shares of the other companies are insignificant compared to the Apple Company market share.
When the Apple II was introduced, it experienced a low market commonality because it did not share most of its markets with competitors.
Resource Similarity
There is a high resource similarity between the iPod and its competitors like; Microsoft (Zune), Dell (digital juke), Samsung (Napster) RIO Karma, and Gateway Juke. All the players are portable and enable the user to carry music and videos whenever they are going.
The iPhones, iTunes, and Mac exhibit high resource similarities with the competitors’ products in the same product category.
High
Market Commonality
Apple TV
iPhones, Mac book, iTunes
Low
Market Commonality
Apple II,
iPod
Low Resource Similarity
High Resource Similarity
Conclusion
The first part of this analysis uses porter’s 5 forces to analyze the industry economy and attractiveness based on case 9. The analysis show that; there is low risk of new entrants, the bargaining power of buyers is moderate, the competitive rivalry is high, threat of substitute products is low, and finally the bargaining power of suppliers is high.
The second part seeks to analyze the competitors to Apple Computer, Inc. The analysis is based on the product type, distribution, market share, strategy, financial resources, resources similarities, and market commonality. These analyses show that the iphone, Mac book, and the iTune experience the highest direct competition from other brands. Mac book also experiences direct completion from Microsoft, dell, And IBM. The ipod experience a high market similarity but low market commonality thus the reason the product has a very large market share and sales revenue. Apple TV has high market commonality but low market similarity. Apple is in a good position to initiate competitive strategic attacks this segment (Apple TV).
References
Roy, D. (2009). Strategic foresight and Porter's five forces: towards a synthesis. München: GRIN.
