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Apple Case Analysis

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I. Industry Environment

The industry environment is the set of factors that directly influences a firm and its competitive actions and competitive responses: the threat of new entrants, the power of suppliers, the power of buyers, the threat of product substitutes, and the intensity of rivalry among competitors (Hit, Ireland, and Hoskisson, p.40). In this case, Apple is just one of the many competitors in a saturated markets offering both hardware and software for personal computer systems. Intense players such as, HP/Compaq, Dell, Gateway, and Microsoft all take substantial market share in the industries Apple is competing with. Today in the computer hardware industry there is intense competition and the only way to gain market share is to take customers away from the competition; Dell, Gateway, and HP/ Compaq. Dell runs a direct-to-customer business which offers consumers lower prices, increased customization, and outstanding customer support. Gateway offers a service similar to Dell, but complements it with brick and mortar locations where customers can interact with sales representatives. HP/Compaq plans to focus on innovation in order to keep the large customer base they have already attained.

In the software sector, the competitor base is rather different where one company, Microsoft, has substantial market share on PC based machines. However Apple offers its own operating system on its own Apple computers, the software is not compatible with PCs. It can be said the market share in the software industry is directly proportional to how many hardware units it sells, and also how well it can get consumers to upgrade to their new OS X operating system. Apple with 6 percent in the desktop market and 10 portable has been fighting a losing battle for market share in the education market to companies like Dell. Apple is hoping to find new markets to enter with its iTunes, iPod, and iMac products.

II. Porter's Five Forces Model

1. Threat of New Entrants: In the software industry barriers for entry are extremely high; Microsoft and Apple hold access to the distribution channels and the large capital requirements needed to enter. Also as new entrants try to enter the market both companies would retaliate in order to hold on to their market share. In the hardware industry newer firms can revolutionize a industry causing others to catch up. When Dell began offering computer online reduce their cost while also offering value to the customer while companies such as HP/Compaq are unable to offer the same product and service.

2. Bargaining Power of Suppliers: In the computer industry there are plenty of suppliers that offer complementary products. Therefore it does not have to increase its prices in order to recover for cost increases. Apples also offers its' own software that comes standard with every computer.

3. Bargaining Power of Buyers: Recently Apple has received tremendous growth when it introduced the Apple i-Pod, a new product that allowed users to download music to a portable player. Being first to market allowed Apple to enjoy a temporary competitive advantage allowing no bargaining power of consumers until other competitors began offering similar products. Apple also offers unique products in its software and hardware designs that offer different goods than Microsoft or Dell.

4. Threat of Product Substitutes: In today's society being first to market is one of the best ways to obtain market share and it forces competitors to catch up while you continue to innovate. Apple was successful at doing this with the i-Pod, where competitors are just finally catching up although they might be too late. The computer industry was completely saturated with substitute products Apple found a new industry to compete in which allowed it to diversify itself.

5. Intensity of Rivalry among Competitors: There is intense rivalry with its competitors; forcing them to differentiate their products anyway they can to gain a strategic advantage. Apple was losing market share to Microsoft driven PC based machines, so it launched a switch campaign to show users how easy it was to switch over to Apple. It was also losing market share in the education sector to Dell, so it created it e-series of computers. Finally when it offered its' i-Pod competitive firms such as Dell began offering their own substitute products.

III. Internal Capabilities

Capabilities are the firms' capacity to deploy resources that have been purposely integrated to achieve a desired end state (Hit, Ireland, and Hoskisson, p.81).In the case for Apple the firm's unique marketing abilities, engineering skills, creativity, and R&D. Apple's distinctive core competencies lie within their ability to provide quality products through their vertically integrated inbound activities. Not only are Apple's finished goods differentiated by quality, they are innovative and cutting edge. Innovation is driven by consistent investment in R&D. Apple has also shown competencies in building brand reputation and generating buzz for its products. Their marketing campaigns have been successful and remain a value added activity. One of Apple's key capabilities comes from co-founders, Steve Jobs, who has effectively manage to steer Apple into a new market and gain new market share. Apple has effectively integrated its supply chain and distribution channels with the installation of SAP R/3. It now offers built to order machines that can compete with Dell. Apple also has become a key innovator with products such as the i-Mac and i-Pod each has effectively boosted Apples sales. Apple also has brand recognition as being one of the oldest hardware manufacturers. Software and hardware integration allowed Apple products to be more "versatile," reliable, and superior in performance, and it allow Apple to have complete control over the products.



* Ease of use - products are still regarded as the easiest to use in the marketplace.

* Established in the personal computer market, the oldest hardware



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