EntrepreneurshipApple Inc. is a multinational corporation operating in such industries as consumer electronics, personal computers, computer software, and commercial servers. Its famous product lines include iPhone smart phone, iPad tablet computer, iPod portable media players, and Macintosh computer line. Steve Jobs and Steve Wozniak founded the company on January 3, 1977 with the creation of the Apple computer. Its quarterly revenue and net profit in the fourth quarter of 2015 constituted $51.5 billion and of $11.1 billion, respectively (Apple Press Info 2015).

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Its strengths: strong brand image, good customer service, marketing campaigns, strong financials, design, and focus on innovation. Its weaknesses: death of Steve Jobs, product recalls, high prices, low functional potential relative to competitors. Its opportunities: market growth, new product development, new retail stores. Its threats: intense competition, high number of substitutes.

Over the five years from 2009 to 2013 its net sales have quadrupled from $24,006 million to $108,249 million. If we compare geographic segments the firm’s operations, we can notice that the Asia-Pacific region faced the largest increase in sales over the year from 2010 to 2011 (174%), followed by the American (56%) and European (49%) regions. Interestingly, comparing the net sales by product, one can see that the increase in iPad and related products and services was the largest and constituted the impressive 311%. It was followed by iPhone and related services, but the growth in its net sales were much smaller and constituted “only” 87%.

Despite of loss of Steve Jobs, in the first quarter of 2012 Apple was able to become of the world’s top five venders of smartphones – second by the total volume (35.1 million units) losing only to Samsung (42.2 million units). Nonetheless, the market for smartphones also presented additional risks related to the Google’s entrance with Nexus 7 and its supply of Android operating system for Samsung.

In 2011, Apple Inc. considered entering the digital camera market by re-launching its product QuickTake. This product was initially developed in 1994 and was one of the first US-made digital cameras. It was enhanced to fit the modern market needs with all required technological advancements, friendly interface and attractive design. According to its Annual Report 2011 its operating revenue and income constituted $108.249 billion and $33.790 billion respectively making it the world’s largest technology company. In addition, it employed about 60,000 people worldwide. Its net income was $25.922 billion and total value of assets was $116.371 billion. According to Hughes (2012), its total value of assets was worth more than this of Microsoft and Google combined.

According to BCC market forecasting research (2012), “the global digital photography market was valued at $65.6 billion in 2010 and $68.4 billion in 2011. By 2016, the digital photography market should reach $82.5 billion, a 3.8% compound annual growth rate (CAGR) between 2011 and 2016.” In addition, “cameras and lenses account for the bulk of the photography market, representing 55% of global sales. This market segment was valued at $37.6 billion in 2011, and is expected to grow at a CAGR of 5.8%, reaching $49.8 billion in 2016” (see Figure 1).
Economic Theory
To analyze the decision to enter the digital camera market in 2011, let us apply the Porter’s Five Forces Model (Porter 1979) which analyzes the decision of entry from the perspective of rivalry intensity in the new market. To start with, let us begin with analyzing the intensity of competition among the digital camera producers at the time. Table 1 presents the vendors with the highest market share (Sawa and Yasu 2011). As it is easily seen, the major digital camera producers are essentially the Asian companies.

To measure the intensity of rivalry we will use the concentration ratio and the Herfindahl–Hirschman Index (HHI). If we add the market shares of the largest four producers we would obtain the measure of the so-called Four Firms Concentration Ratio. In our case it is equal to 60.6% meaning that this industry is oligopoly, and if we go even further and compute the Eight Firm Concentration Ratio, we will see that 81.7% of the market is controlled by the eight biggest firms. Therefore, the rivalry is not intense because the industry is highly concentrated. This relatively small number of competitors may also create high entry costs due to price strategies specific to oligopolistic markets.

We can also try to compute the HHI of the first 9 companies. We receive the value of 0.115 meaning that the index is not concentrated and the industry is competitive with no significant market players.

Analyzing other factors which have an effect on the degree of sector competition, we would note that digital photography does not belong to the industry with high storage costs. Neither digital camera is a fast perishable product. In addition, companies which are camera producers usually have their operational assets focused on other product lines. For example, Samsung and Sony are major producers of electronics apart from digital cameras, so that their operations are not highly leveraged (neither financially nor operationally). Moreover, all the major firms are from the Asian region having pretty similar technological and cultural stances. All these trends serve in favor of the decreased rivalry among firms.

However, there are market characteristics which say that the market competition is indeed intense. Thus, the industry is characterized by pretty differentiated products: cameras are different in terms of lenses, megapixels, prices, etc., so that the assortment to choose from is pretty huge. Even though the technological advancement pushes to produce more and more improved and sophisticated products, the market for the products is highly saturated: up to 90% of the Northern Americans possess a digital camera.

In addition, digital cameras are forced to compete with other devices which also have cameras in it. Thus, for example, video cameras, mobile phones and Internet tablets are the products from the outside of the digital photography industry which present the fierce competition to the digital cameras themselves. So, now we can refer to the one of the Porter’s five forces called the threat of substitutes. For this industry it is relevant in particular because the number of devices which can take snapshots has been constantly growing, and now they are very diverse ranging from usual web cameras implemented in the displays of computer monitors to high megapixel touch phones. This is one more reason why Apple Inc. would benefit from entering this market: a lot of its products are direct or very close substitutes to digital cameras (iPads, iPhones, etc.).

The positive factor to Apple Inc. is the highly limited power of buyers and suppliers in this market. On one hand, buyers are much dispersed and, therefore, the situation is very different from pure monopsony. They cannot control price and, since the producers of digital cameras are huge multinational corporations, they view the whole world as their target market. If demand shortens for this or that reason in one country, producers will always have an opportunity to stream its output into different geographical region. On the other hand, the suppliers’ power is limited too because of the effect of scale in this market. Given that the producers assemble all the details of digital cameras by themselves, it is not a rare case when they form conglomerates with their vendors.

    Works Cited
  • Apple Press Info. 2015. Apple Reports Record Fourth Quarter Results. Recovered from http://www.apple.com/pr/library/2015/10/27Apple-Reports-Record-Fourth-Quarter-Results.html
  • Apple, Inc. (September 24, 2011) Form 10-K. Retrieved from http://www.sec.gov/Archives/edgar/data/320193/000119312511282113/d220209d10k.htm
  • BCC Market Forecasting Research (2012). Information Technology. Digital Photography: Global Markets. Retrieved from http://www.bccresearch.com/report/digital-photography-global-markets-ift030c.html
  • Hughes, Neil (2012). Apple now worth more than Google and Microsoft combined. Retrieved from http://www.appleinsider.com/articles/12/02/09/apple_now_worth_more_than_google_and_microsoft_combined.html
  • Porter, M.E. (1979). How Competitive Forces Shape Strategy. Harvard Business Review, March/April 1979.
  • Sawa, Kazuyo, and Mariko Yasu. (2011). Sony, Nikon Narrow Gap to Canon With New Digital Camera Models. Retrieved from http://www.bloomberg.com/news/2011-04-15/sony-nikon-narrow-gap-to-canon-with-new-digital-camera-models.html