Apple Strategy

In: Business and Management

Submitted By hakingsley15
Words 827
Pages 4
Executive Summary

From a standpoint of profitability, the personal computer industry is unattractive. The companies are strategically positioned within the industry and highly competitive. Apple, however, has taken a more proactive approach. Because of its innovation and adaptability, Apple has returned to high profitability. Other companies are working to compete with Apple’s new technologies. To respond, Apple must continue to develop new products and improve existing ones.

Analysis

Personal Computer Industry

The personal computer industry is highly competitive. Although the threat of new entrants is lower because of high start up costs, well-established brands, and economies of scale, the four remaining forces of industry stifle profitability. First, the industry has vast rivalry. The four largest personal computer companies make up over 50% of the world market while several other smaller companies make up the remainder. Next, two companies, Microsoft and Intel, have supplier power over the industry with their specific, distinct products. Third, buyers have pricing power over the industry because of the movement towards commoditization of personal computers and the decrease in component prices. Finally, substitutes such as netbooks, smartphones, and personal video game devices have entered the market. Exhibit 1 illustrates the forces affecting Apple.

Although the current personal computer industry is unattractive, it was profitable in the past. Throughout the 1980s, there were fewer companies in the market with Apple and IBM leading the industry. Fewer companies equates to less competition and therefore, more producer pricing power. In addition, there were no substitutes to computers. The personal computer market was highly profitable with few barriers to entry, but by 1990 manufacturers began to flood the market. Industry rivalry,…...

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