Apple Porter’s Five Forces Analysis

Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape the overall extent of competition in the industry. These forces are represented in Figure 1 below:

Apple Porter's Five Forces

Figure 1 Apple Porter’s Five Forces

Rivalry among existing firms in all markets where Apple operates is fierce. In desktop computing market Apple competes with PCs running Microsoft operating system such as Dell, Asus, Hewlett-Packard and Acer, whereas Apple’s major competitors in mobile computing industry are Google, Samsung and Nokia. Moreover, Apple iOS competes with Google Android which runs on most competitor phones and tablets, and Apple’s latest service, Apple Pay directly competes with PayPal and Google. Cost leadership has been adopted by the majority of Apple competitors as one of the basis of competitive advantage.

Moreover, an impressive rate of the growth of the industry attracts new market players especially from emerging economies with access to cost-effective resources and this tendency is expected to persist in long-term perspective.  Despite the fierce competition in consumer electronics and e-commerce industry, Apple is one of the acknowledged leaders in the global marketplace. As it is illustrated in Figure 2 below, iPhone market share of new smartphone sales in the global market place is almost consistently above 15 per cent since the launch of the product.

Apple Porter's Five Forces Analysis

Figure 2 Apple iPhone’s market share of new smartphone sales worldwide from 2007 to 2016, by quarter[1]

Bargaining power of buyers in consumer electronics industry is huge. As of September 24, 2016 and September 26, 2015, Apple had one customer that represented 10 per cent or more of total trade receivables, which accounted for 10 per cent and 12 per cent, respectively. Apple’s cellular network carriers accounted for 63 per cent and 71 per cent of trade receivables as of September 24, 2016 and September 26, 2015, respectively.[2]

Buyer bargaining power is fuelled by the abundance of choice and the absence of consumer switching costs to competition. Price elasticity for Apple products and services can be specified as another important factor that increases buyer bargaining power. However, Apple enjoys significant brand loyalty among its consumers and purchase volume of Apple products and services per consumer is not substantial.

Threat of substitute products or services is not substantial. Although landline telephones represent the most obvious substitution for mobile phones, they pose limited risk to mobile phones due to the portability convenience of the latter. Nevertheless, there is an indirect substitution for Apple products and services and these include but not limited to satellite radio for music (XM, Sirius), music, media and entertainment media (TV, XBOX, PS2), alternative sources of music (CDs and DVDs) and alternative sources of video (cabel, broadcast)…

Apple Inc. Report contains a full analysis of Apple Porter’s Five Forces Analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Value Chain analysis and McKinsey 7S Model on Apple. Moreover, the report contains analyses of Apple leadership, business strategy, organizational structure and organizational culture. The report also comprises discussions of Apple marketing strategy and addresses issues of corporate social responsibility.

Apple-Inc.-Report

[1] Porter, M. (1979) “How Competitive Forces Shape Strategy” Harvard Business Review

[2] Statista (2017) Available at: https://www.statista.com/statistics/216459/global-market-share-of-apple-iphone/

[3] Annual Report (2016) Apple Inc.