Porter's Five Forces Analysis Apple

1. What we know about profit pools is that: ‘Profits don’t necessarily follow revenues’ and that ‘Today’s deep revenue pool may become tomorrow’s dry hole’. In this article we are focusing on Apple and the way how it managed to recognize the variability of profit, and along with it, could find out the best way of realizing it. Apple has three main businesses as top priority: Macintosh, iPod-iTunes and iPhone. These are the pioneers of superior improvement in PC, music and smartphone industries.

In the beginning of 2000s PCs and laptops became very popular. Therefore people demanded much simplified and convenient new versions. One of the things that Apple did was – i)switching to Intel microprocessors - which was a market leader in microprocessors

To access the industry in which Apple operates, we use the 5 Forces Matrix. This will help us to achieve a broader understanding of the industry itself, and how Apple in particular survived and become one of the most successful companies.

Porter’s 5 Forces Analysis:

1. Rivalry among existing competitors – High. The industry is characterized by very intense and fierce competition against players like HP, Dell, Acer and etc. because of low switching cost. In PC segment, the key for Apple’s success is its unique positioning and differentiation from others comprising attractive design, ease of use, security, and high-quality bundled software. They also made their customers purchase complementary products that do not transfer to other platforms, thus creating a high switching cost that enhances the retention rate and loyalty.

2. Threat of new entrants – Moderate or relatively low. Requires high investment and capital. In addition, Apple’s ability to continuously differentiate its products from other companies makes it hard to copy their success. Apple also produces at relatively low cost due to economies of scale of wide-spread

Bargaining power of suppliers – Moderate. Depending on where along the supply chain a supplier is, his bargaining power varies from low to moderate. There are many suppliers for consumer electronics industry, therefore companies tend to be more elastic. However, if the supplier is unique and provides highly differentiated materials, like Intel supplies its processors, there might be moderate power. In the case of Apple, they contracted with competitors like Samsung and Toshiba that supplied them with components, thus cutting the costs and concentrating on what they do best. They also are in strategic alliance with companies like Microsoft for their Mac computers, Disney for Apple TV, and BMG, Sony for I-tunes and media