Bargaining Power of Suppliers: To build a PC, a firm requires software and a set of physical components. In the early 70s and 80s, PC makers produced many of the products by using widely available supplies; and thus, bargaining power of suppliers was low. Later, Apple realized that their PCs needed a couple specific components to be successful--Microsoft’s operating system and Intel microprocessors. This brought their supplier’s bargaining power to a moderately high level, and placed Apple at the mercy of its suppliers.
Threat of Substitute Products or Services: Few significant substitutes existed for PCs until the “digital convergence” of PC and CE products (ie: smartphones, music machines). To combat this threat, Apple took advantage of the shift and produced and profited off their own “substitutes”. Therefore, it was ultimately a favorable dynamic for Apple, who saw a drastic increase in their market value during the iPhone and iPod phenomenon of 2007 onward (Exhibit1a and Exhibit2).
Bargaining Power of Buyers: In the early 1980s, PC buyers had low price sensitivity--only the educated rich had reason to buy a PC, but In the 90s, more people developed a need. These buyers were price sensitive, so they had more bargaining power. This forced Apple to make profitable... [continues]
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