Paper 3



Paper 3

Porter's 5 Forces

Threat of New Entrants:

There are high entry barriers in the computer hardware/software industry. The two main reasons for the high barrier are based on the high costs to enter the market, the time it will take before companies earn revenue on their investment, and product differentiation. This is due to a complex and expensive development stage, which is needed for severe product testing.

Rivalry Among Firms

Apple is confronted by aggressive competition in all areas of business. The market for the design, manufacture, and sale of personal computers and related software is highly competitive. Apple operates in two branches: hardware and software. The most important rivals for Apple in the hardware industry are Hewlett Packard, Dell and IBM. In the software market there is far less competition. The main competitors in this market are Microsoft and Linux.

Bargaining Power of Suppliers

Apple's "powerchip" is supplied from either Motorola or IBM. IBM originally produced the chip but Motorola holds a license to ensure that Apple does not depend solely on one supplier. As Apple continues to advance with technology changes and increased customer requirements, it continues with an ongoing need for suppliers. Apple looks for quality, customer focus, cost savings, innovative business solutions, and technology in all of their suppliers.

Bargaining Power of Buyers

Apple divides its customers into three groups. The first group consists of consumers who are purchasing an Apple computer particularly for the brand name and its unique operating system. The second group is composed of entertainment and media consumers who often work with graphic programs. The third group purchases Apple products solely for their "trendy" design. Apple pays much attention to the design layout of their hardware and software. In addition, Apple now relates to consumers searching for high quality music and media downloading systems as well as advanced audio players.

Threat of Substitute Products

With numerous competitors in the industry, Apple is threatened with substitutes from companies such as Microsoft, Dell, and even Sony to name a few. For Microsoft, Windows is used as a substitute; Dell Computers are a substitute and Sony products such as the MP3 player may be substituted for the newly rising iPod. In addition, the growth of mobile phones has also been considered a threat to the company's success.

Internal Environment

The internal environment of Apple Computer, Inc. consists of variables that are within the organization itself. Strengths and weaknesses are the variables that form ...