Apple Case #20 Apple Inc.

(Apple) is a company founded in 1976, and incorporated in 1977 by Steve Jobs and Steve Wojniak (Barringer, Johnson, Lugo, Ponds & Stoudemire, 2008). The company operates within the consumer electronics industry and designs and produces many products such as computers, phones and tablets as well as computer software such as Itunes (Barringer et al. 2008). While Apple is a multinational company, it is based in America and has its headquarters in California with more than 60,000 employees worldwide (Barringer et al. 2008). Within the electronics industry in which Apple competes, there is a high level of technological innovation and in order to stay competitive, the company needs to make constant innovations to functional devices that meet current consumer needs (Barringer et al. 2008e).

Early on in its development, Apple showed an extreme emphasis on new and innovative designs of its products, and many believe this was due to the personal interest Steve Jobs had in the development of new products (Barringer et al. 2008). In recent years however, the brand image of Apples products has stalled in growth as competition becomes more intense in the personal computing industry and communications industry (Yoffie, 2010).

Problem
Competition in the consumer electronics industry is increasing and a constant battle is taking place between large companies in order to produce the most technologically advanced and innovative products (Dess, 2012). If Apple does not assess the threats in the industry and adjust its corporate strategies to maintain its position as a high quality provider of innovative devices and products, it will become a low margin commodity and lose its excellent brand reputation keeping it at the top end of the market (Rane, 2011).

Analyses
Despite Apples success throughout the years, the industries in which it operates are becoming more competitive and the company must assess this competition in order to retain competitive advantage and provide products which are perceived to be high quality and worth the premium price (Venter, 2012). In order to assess this competition, it is possible to use Porters five-forces model to address the industry, which investigates rivalry, barrier to entry, bargaining powers of buyers, bargaining powers of suppliers and the threat of substitutes (Venter, 2012).

Intensity of rivalry among established firms Rivalry and competition in this fragmented industry is quite high, and major competitors include Dell, HP, IBM, Samsung and Microsoft (Barringer et al. 2008). These competitors are mostly large companies with high growth rates and diversified strategies (Yoffie, 2010). For example, Samsung also produce laptops, mobile phones and tablets which are marketed to the same consumer groups (Yoffie, 2010). Many of these competitors focus marketing and advertising to make sure their products are recognized by consumers in the market (Barringer et al. 2008). Due to the competitors diversified strategies, it is unlikely that the exit costs for this particular industry are very high, as similar consumer electronics industries can take over (Barringer et al. 2008).

Risk of entry by potential competitors The barriers of entry to the consumer electronics industry are moderate. Consumers are coming to the realization that different brands in these types of products can all provide the same fashion and functionality (Yoffie, 2010). However, the investments needed to set up in this industry are considerable and involve the design and production of a product before it is able to be released to the market (Barringer et al. 2008). In addition, the technology and innovation necessary for these products is constantly changing and improving, making for a fast-paced environment (Barringer et al. 2008). While the costs to consumers for switching is generally low, Apple has increased this cost by making some of their software products, such as those available from the app store, non transferrable to other devices (Barringer et al. 2008). Finally, the distribution channels in the industry are difficult to use effectively unless economies of scale are taken advantage of, therefore making this harder for new entrants (Barringer et al. 2008).

Apple has been able to create high brand recognition for its products while positioning them for marketing to wealthier clientele, and has also claimed patents for many of its devices form and functions (Barringer et al. 2008). Some of the companies that have been able to enter this market despite risks and costs include HTC, Huawei and Lenovo, which are all now competitors of Apple (Yoffie, 2010).

Bargaining power of buyers The bargaining power of consumers can be seen as moderate. Consumers range from individuals purchasing personal computers and devices, to large companies purchasing products for their staff (Barringer et al. 2008). In this instance the consumer does not have much bargaining power. However, the consumer does have many different choices of company to purchase from, and it is generally not a difficult switch for consumers to transfer to another brand (Barringer et al. 2008). One way in which Apple has reduced the ability of its customers to change brands is by implementing non-transferrable software such as app store purchases for use on their devices (Yoffie, 2010). The synchronization between Apple products also is attractive for clientele who are willing to pay premium prices for quality goods (Yoffie, 2010).

Bargaining power of suppliers In this industry, the bargaining power of suppliers is high (Barringer et al. 2008). This is due to the very few suppliers of digital signaling chips and operating systems (Barringer et al. 2008). The existence of only a few suppliers implies that they can manipulate the market due to their bargaining power (Venter, 2012). In the past, Apple has even purchased some of its parts from competitors in the industry, including Samsung, in order to create their products (Yoffie, 2010).

Threat of substitutes The substitutes for the products Apple produces are popping up all over the place from a variety of competitors, with android phones, tablets and operating systems becoming very common and available in a range of qualities and prices (Yoffie, 2010). However, the threat of substitutes has proven to be low to moderate as Apple has differentiated their products from anyone else in the market through high brand recognition, restricting data and synchronization abilities between their products and others, and by providing a high level of physical design properties which promotes a high quality brand (Barringer et al. 2008).

It can be seen from this analysis that Apples main strengths in the industry are a low-moderate threat of substitutes, high barriers of entry to new firms trying to enter the market and a moderate bargaining power of buyers (Venter, 2012). Conversely, the main threats the company needs to address are the high rivalry between established firms such as HP, Dell and Samsung and a high bargaining power of suppliers (Venter, 2012).

Alternative Solutions
In order to maintain its position and reputation as a high quality provider of innovative products, there are some alternative solutions that Apple can implement. These include improving differentiation strategies to include more products and opportunities, add more physical locations to focus on customer service and marketing, and investigate more suppliers of parts for its products.

As differentiation in the market as a high quality producer is what currently stands Apple apart from many of its competitors, it is very important to keep this reputation in order for continued growth of the company (Rane, 2011). In addition, the company needs to continue to strive to differentiate its products in ways that competitors are not (Barringer et al. 2008). One solution for its current position is for Apple to establish a relationship with a cell phone carrier and enter into the communications industry (Rane, 2011). This would enable the company to bundle many of its devices with a plan and take over some of the distribution of its products.

The second alternative, to add more physical locations to focus on customer service, would aim to address some of the rivalry in the market by increasing brand recognition, improving customer relations and advertising its product in more locations (Rane, 2011). Currently Apple has very few physical locations compared to many of its competitors, yet its stores have proven to be very popular and innovative (Yoffie, 2010). By increasing consumers exposure to the produce, Apple would be able to increase sales (Rane, 2011).

Finally, by investigating different options for suppliers of hard to find parts Apple could significantly improve its current situation in regards to the bargaining power of suppliers (Barringer et al. 2008). Ingrained in this investigation should be an investigation in the possibility of making these parts themselves, or acquiring a company who does (Barringer et al. 2008). By lessening the leverage that suppliers may have over operations, Apple may also be able to reduce costs and make their products more affordable (Rane, 2011).

Recommendations
On the basis of these alterative solutions, the recommendation is that Apple focuses their efforts on investigating supply chains in order to reduce supplier bargaining power, while also assessing their strategy for differentiation opportunities. By addressing these issues, the company will be able to greatly improve their position in the market and reduce the threats to its business strategies. Adding more physical locations may also benefit the company by increasing exposure; however it is not a priority in order to maintain Apple at the top end of the market as a high quality producer.

Conclusion
Over the lifetime of the company, Apple has been very successful in gaining an position in the market as a high quality, innovative producer of consumer electronics and software. With the increasing demand for these types of products in homes and organizations the competition in the industry has increased and Apple needs to make some changes to its overall strategy in order to maintain its favorable position. In order to do this, the company should investigate further innovation and differentiation opportunities such as establishing itself in the communications industry, and assess its supply chain in order to lessen bargaining power of suppliers.