Competitive Strategy
Apple is a multinational technology corporation that produces highly innovative products, including phones, computers, and watches. The firm uses a generic product differentiation strategy as a competitive advantage in the industry (Strategy levels, n.d.). Through differentiation in product design and functionality, Apple attains the goal of leading in the technologically innovative market. The corporation’s unique phone designs and capabilities persuade customers to try other Apple products (Maverick, 2022). The product differentiation strategy ensures high-quality products that, although sold above the market prices, the customers are willing to pay extra for.
Porter’s Five Forces Model
Industry Competition
One of the five forces is the number of competitors in the industry and their ability to undercut the company. Apple faces a higher level of competition from companies that offer similar innovative products. These firms include Amazon, Google, Samsung, and Hewlett-Packard (Maverick, 2022). According to Maverick (2022), these corporations expend high capital in research and development, just like Apple, thus posing a competitive force. Low switching costs make the competition stiff because customers can switch from Apple to Amazon products without substantial investment.
The Threat of New Entrants to the Market
The potential of a new entrant that could intimidate Apple’s market share is relatively low. One reason is the high cost of establishing a company in the industry (Maverick, 2022). Another reason is the additional high costs related to establishing brand recognition to fight the big brand (Maverick, 2022). A new company entering the market would require a massive amount of capital to spend on research and development to match Apple’s innovation level.
Bargaining Power of Buyers
The bargaining power of the buyers refers to the component of switching costs, enabling customers to move from one brand to another. Apple customers experience low switching costs, thus having a higher bargaining power (Maverick, 2022). Customers can easily switch from Apple products to other competitors’ products. However, following a massive consumer base and high prices, Apple experiences negligible revenue loss when a few customers leave (Maverick, 2022). Furthermore, the high-quality products offered by Apple ensure that if a customer is switching brands, they are not going for the same quality but a lower one.
Bargaining Power of Suppliers
Apple suppliers have a weak bargaining power compared to many potential suppliers. The corporation does not have sales representatives in many countries and thus depends on available suppliers (Maverick, 2022). Apple suppliers are readily available because of the high demand and attractive prices of the products for business. Therefore, the switching cost for Apple to change suppliers is low and barely an obstacle. Apple is also the sole supplier of its spare products; hence, the suppliers would not risk losing business by abandoning the company.
The Threat of Substitute Products
In the Five Forces framework, a substitute is a product a buyer would use instead of another product. Apple’s phone substitutes would be landline telephones, which the owners would use instead of iPhones (Maverick, 2022). Consequently, the threat of substitute products is relatively low because the potential substitutes have limited capabilities. While landlines can only be used to make calls, iPhones can do more than make phone calls. Most of Apple’s products have no or few substitutes that can match the products’ capabilities.
Recommended Competitive Strategy
Apple should consider increasing its level of market penetration and development. Although the corporation is a big brand internationally, it has limited market penetration, especially in developing countries (Maverick, 2022). The brand also has lower priority in developing markets for its products. Market penetration and development effectively match Apple’s product differentiation strategy. Therefore, the firm could use this as a new strategy, especially in developing nations, to gain a unique competitive advantage against its competitors.
References
Maverick, J. B. (2022). Analyzing porter’s 5 forces on Apple (AAPL). Investopedia. Web.
Strategy levels. (n.d.). Reference For Business. Web.
