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Autor: bjurcz2 • September 26, 2011 • Case Study • 1,455 Words (6 Pages) • 542 Views
Apple Inc. is a company which operates in two primary industries which include different products like PC, iPhone, iPad and iPod. These products made the company one of the mostly known companies for its innovation, brand and customer loyalty which give Apple a competitive advantage over other companies. Apple also experiences threats of substitute products and services like peer-to-peer networks which allow sharing and exchanging of music rather than buying from iTunes. This threat needs to be eliminated in order for Apple to get greater sales from iTunes and to stay competitive among others like Amazon.com, Napster, and Walmart.com. This can be done by investing more into innovation and making iTunes more personalized toward each customer.
Apple Inc. has had its ups and downs, during the late 1980s and we can definitively state that the company had a strong brand, rapid growth and high profits but in 1996 it almost went bankrupt. As Steve Jobs returned to the company in 1997, because of the new innovations and high investment in Research and Development, Apple Inc. managed to turn around and starting in 2004 earnings before interest, taxes, depreciation and amortization were at $533 million constantly increasing up to $19.57 billion by the end of 2010 (See Exhibit 1). Comparing Apple with its competitors using EBITDA, Microsoft and Sony are still ahead of the game by the end of 2010; especially Microsoft with $14.08 billion. One of the top PC vendors Dell is at $3.04 billion and the leader in smart phones Nokia is at $2.1 billion (See Exhibit 2). Apple is financially healthy as a company and it has have never given up to invest and create new products and ideas.
Any firm or company that wants to remain successful now and in the future needs to become aware of its competitive environment. Apple leads the market with different products like Pc, iPhone, iPad and iPod which creates brand identity and makes its customers loyal and ready to pay even the premium price for a product which is different from others. It is operating in two primary industries which are the computing, hardware and software as well as the delivery of entertainment and media. Apple is also devoting a large percentage of sales to research and development; in 2009 it devoted 3% to compete in the market (See Exhibit 3). They also have an access to distributors like AT&T and Verizon in U.S. which gains the 60% of the market therefore Apple's threat of new entrants is relatively low.
When it comes to suppliers for Apple there are different views. One is for the supplier of products like memory chips, disks, and drivers where the bargaining power is low because these products are standardized and don't really have any substitutes but there are many suppliers for these products same for iPhones. The second one is products like microprocessors and the operating systems by Intel and Microsoft which have a high bargaining power because the industry is growing and it is profitable for the suppliers and also the fact that there are only few of them on the market. Bargaining power of Buyers is low and moderate for Apple products. The number of buyers is continually increasing and they keep demanding new and updated products for PC, MP3 player/online music services as well as mobile devices.
The threat that customers will switch their business to competitors within the industry is definitively high since there are other competitors that are using different strategies but all are diverse like Apple in Smartphone's and PC and in Laptops all at the same time. This all relies on customers' brand loyalty because there are too many competitors even for iTunes there are other online music stores like Amazon.com, Napster, and Walmart.com. If Apple does not keep the products innovative, the other company's products which are lower in price than iPod can be a significant threat in anytime. Last threat is for substitute products and services which might seem very similar to the intensity of rivalry but it is different. Apple is very unique and has its own product line that makes it different from competitors that is why so many Apple's customers stay loyal to its brand and products which makes the threat of substitute products and services moderate depending on the customer. The substitutes for MP3 player can