Five Forces Model of Competition--Apple Essay Example
Five Forces Model of Competition--Apple
The Analysis of Apples position against its competitors using Porter's five forces, supplier power, barriers to entry, threat of substitutes, buyer power, and the degree of rivalry is listed below.
Threat of New Entrants:
The threat of new entrants is low. The start costs are extremely high. It is in the range of $5-10M. Companies will not want to invest this money especially if the ROI is going to take long and the market competition from clones is strong. The existing companies have capitalized on the distribution channels and have created strong branding awareness. The probability of success is so low that competitors pursue niche markets rather than trying to compete with the bigger companies. Companies like Apple together with Dell, HP, and Gateway have created a name for themselves with consumers which is hard to supersede.
Bargaining Power of Suppliers:
The market is flooded with computer component suppliers especially in China and Taiwan. They need to be competitive to ensure they can retain the business with the large computer companies. The only area that has a limited manufacturing base is the computer processing chips. These are manufactured by Intel, AMD and a few other companies. Given the above, larger companies can readily switch to another supplier without any major repercussions. Suppliers can adjust pricing and quality to make their products more attractive so competition is high leaving them in a low supplier power position.
Bargaining Power of Buyers:
All of Apple's customers have a variety of computer companies from which to chose 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
The Analysis of Apples position against its competitors using Porter's five forces, supplier power, barriers to entry, threat of substitutes, buyer power, and the degree of rivalry is listed below.
Threat of New Entrants:
The threat of new entrants is low. The start costs are extremely high. It is in the range of $5-10M. Companies will not want to invest this money especially if the ROI is going to take long and the market competition from clones is strong. The existing companies have capitalized on the distribution channels and have created strong branding awareness. The probability of success is so low that competitors pursue niche markets rather than trying to compete with the bigger companies. Companies like Apple together with Dell, HP, and Gateway have created a name for themselves with consumers which is hard to supersede.
Bargaining Power of Suppliers:
The market is flooded with computer component suppliers especially in China and Taiwan. They need to be competitive to ensure they can retain the business with the large computer companies. The only area that has a limited manufacturing base is the computer processing chips. These are manufactured by Intel, AMD and a few other companies. Given the above, larger companies can readily switch to another supplier without any major repercussions. Suppliers can adjust pricing and quality to make their products more attractive so competition is high leaving them in a low supplier power position.
Bargaining Power of Buyers:
All of Apple's customers have a variety of computer companies from which to chose 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