Apple Inc. is one of the most successful technological companies during the past 40 years. The firm has been able to execute a branding strategy that has helped the company consistently charge higher prices for its products. The superior quality of its products is a critical ingredient to its success. The Macintosh computer brand released in the 1980’s was a revolutionary product in home computer industry. The organization has been able to maintain a leadership position within the industry by offering a variety of innovative technological products. These products were positioned at the upper end of each market segment. To analyze the strategy the company uses a Porter’s five forces analysis will be performed.
Porter’s five forces is a marketing technique that is used to measure the competitiveness of an industry and can be used to formulate strategies. The five forces that compose this marketing framework are competitive rivalry, supplier power, buyer power, threat of substitutes, and threats of new entrants. The Apple case study discussed how Apple evolved through time and explained numerous examples of success and failure in its product offering. There are various applications of Porter’s five forces within the case study that will be discussed throughout the paper.
The competitive rivalry in the computer industry is intense. Apple faces competition in every sector from companies such as Hewlett-Packard, Microsoft, Google, and IBM. The product differentiation strategy the firm has used has helped Apple create brand value and maintain high profits and a significant market share within its industry. The buyer power of the customers of Apple is low. Apple’s offers unique and innovative products that customer’s desire. Three examples of products that exceeded the competition in quality are the Macintosh brand, iPad, and iPhone. Apple enjoys the benefit of suppliers having low power. There are thousands of supplier options for the company. In the past, the company produced its components in-house, but now Apple outsourcers some of the work to selected companies that can only sell the parts produced to Apple. One of the reasons that the threat of substitute product is lower for Apple than other technological companies is because its products have superior features and functionality. The threat of entry as a major competitor to Apple is low because it requires a high capital investments and years of marketing expenditure to achieve a similar level of brand equity as Apple.
The competitive rivalry within the industry requires a constant investment in marketing efforts. A strategy that the company could pursue more is investing money in mobile advertising. The size of the mobile advertising market was $80 billion in 2016, but it is expected to grow to $215 billion by 2021 (Chen, 2017). A good move for the company to take advantage of its beneficial supplier power is to increase its exclusive agreements with companies such as Foxconn. Creating more manufacturing agreements can help Apple increase its production if the demand for its products rises. New entrants will penetrate the industry a lot of them using a low-cost strategy, thus Apple must continue to strengthen its brand by introducing new innovative products especially in the mobile phone sector.
Apple is highly dependent on maintaining the status of its brand to continue to enjoy a competitive advantage. Using Porter’s five force model can facilitate the strategic process for the executive management. The release of the iPhone 8 approximately in September 2017 is a critical event for the company. Mass advertising of the product must be performed and using alliances with suppliers can help the company meet the demand for the product in case the forecasted sales exceed expectations.
- Chen, Y. (2017). The state of mobile advertising. Retrieved from https://digiday.com/marketing/state-mobile-advertising/