* Essential to product
Although AT&T has a large market share in phone networks, Apple can choose to work with more than a single network operator like Verizon Wireless. As for the interoperability with Office products, Microsoft keeps developing the Office suite for Macintosh as it can be benefited by the Mac users.
* Switching cost
The services provided by AT&T are not reliable and substitutable, so its bargaining power is weak to Apple. Moreover, Apple created its own Web browser Safari to replace Internet Explorer. This allows Apple to switch its production from its competitor with a low cost.
* Apple is an important buyer
Apple has become one of the largest purchasers of flash memory in the world since 2005. For example, Apple agreed to pay $500 million up-front to Intel and Micron to secure “a substantial portion” of their memory output. Similar deals were made with Hynix, Samsung, and Toshiba. As a result, the bargaining power of Apple is high to the hardware suppliers due to the huge purchasing power.
Threat of Rivals is high
* Number of competitors
There is a gradual increase in the entry of the smart phones market. The rivals in the phone production are included BlackBerry, Nokia, HTC, Motorola, LG and Samsung. In addition they run Microsoft Window or Google Andriod OS. These rivals are highly substitutable with the iphone in respect of the functions.
* Switching cost
Regarding to the average selling price (ASP), the switching cost of the buyers is low as a analysts estimated that Apple generated an ASP of $562 from its iPhones, while competitors’ ASP on similar handsets ranged between $300 and $400.
* Product differentiation
A survey of developers in the spring of 2010 suggested that 87% were very interested in developing iPhone apps; 81% for Android apps, with Blackberry and Microsoft a distant third and fourth, at 43% and 34% respectively. This indicates that iphone apps...