Bargaining Power of Apple’s Suppliers

As per this case study, the researchers believe that the brand’s position against its suppliers is strong
and their bargaining power is weak. This conclusion is after having known of the facts that Apple
maintains excellent control over its suppliers and that switching costs may be very low for Apple.
Conversely, it is not the same as the suppliers. Obviously, no supplier would like to lose business with
Apple. Also, there is no threat of forward integration by the suppliers either. These findings indicates
that the influence of suppliers in imposing their demands on the company and its competitors is
somehow very weak. Below are some external factors: 1. Moderate to high number of suppliers (weak
force) 2. Moderate to high overall supply (weak force) 3. High ratio of firm concentration to supplier
concentration.

These external factors reflect the presence of a small number of big companies like Apple and Samsung,
in contrast to a larger number of medium-sized and big suppliers. Thus, we can safely say that this
component of the Five Forces analysis shows that the bargaining power of suppliers is a minor issue in
developing Apple Inc.’s strategies for supply chain management, value chain effectiveness, innovation,
and industry leadership.

Threat of Substitutes or Substitution

This component of Porter’s Five Forces analysis framework determines the strength of substitute
products in attracting customers. This threat has kept growing for Apple. It is because several brands in
the same industry have introduced low to mid-priced models. Despite the brand loyalty Apple has
established among customers, some of the models from Samsung and Google are a potential threat
because of their efficiency and design. This threat grows bigger outside the US, where Apple’s brand
loyalty is comparatively lower. Apple can hardly do anything to mitigate this threat except to bring more
products with great features keeping this sort of threat moderate enough to be under their control.
Below are the external factors affecting such threat: 1. Moderate to high availability of substitutes
(moderate force) 2. Low performance of substitutes (weak force) 3. Low buyer propensity to substitute
(weak force) Moreover, these external factors exert moderate forces in the industry environment. But,
these available substitutes have low performance because they have limited features. Still, many
customers would rather use Apple products based on convenience and advanced functions. This is what
makes substitution a weak force in impacting the company’s business. At this point, we can safely say
that Apple does not need to prioritize the threat of substitution, specifically in management decisions in
business processes like marketing, market positioning, and product design and development.