Apple Case Study

2. Analyze the personal computer industry. Are the dynamics favorable or problematic for Apple?

ANALYSIS through 5force model

Suppliers force " The Company has entered into certain agreements for the supply of key components including, but not limited to, microprocessors, NAND flash memory, DRAM and LCDs at favourable pricing, but there is no guarantee that the Company will be able to extend or renew these agreements on similar favourable terms, or at all, upon expiration or otherwise be able to obtain favourable pricing in the future."(10-K, 2008, P, 17). Sometimes quality components can become a struggle within the PC industry as competitors try to obtain these components and make sure that others cannot use these technologies. Considering this, a supplier's power could be changed because of this situation. These days, "declining average selling prices"(X-bit, 2009) are problematic for the suppliers, which in turn could lead to a decrease in new technologies as these suppliers will have lower incomes and thus less revenues to spend on R&D.

Buyers force There are a number of different entities to which Personal Computer industry caters: large companies, normal households, governments and so on.

However, Apple's target includes people who have special demands for a computer.

For example, in the publishing industry; Apple's computer was the only effective machine as it allowed companies to edit things digitally. Apple still remains in that industry, because of the fonts, the system, and options it brings.

Many companies continue to use Apple's computers as it is expensive to change the entire system, thus companies are afraid to switch to other systems.

However, average sales continue to decline. "Combined, HP, Dell, Lenovo and Apple's unit sales decreased only 5% year-over-year, however, their collective ASP dropped 13%, causing an 18% decline in PC revenues."(X-bit, 2009).Needless to say, Apple's competitors have control over Apple's former market share.

New entrants force More than 60% of the market share is occupied by Hewlett-Packard, Dell, Acer, Lenovo, Toshiba ("PC Market Still Strong in Q4 With Solid Growth Across Regions, According to IDC", 2008). Brand identity is a large enough barrier to make it difficult for new companies to enter this market. Producers continue to lower their prices to try and attract new customers. This is a large barrier that makes sure that new entrants cannot easily start a business. Hence, Entry Barriers are so high that threat of new entrants entering the market is low.

Substitutes force Other PC's from other companies are treated as substitutes for Apple's computers, the same is true the other way around. Thus in this market there are a number of substitutes which have an influence on the sales of each producer.

Industry competitors force

"Combined, HP, Dell, Lenovo and Apple's unit sales decreased only 5% year-over-year, however, their collective ASP dropped 13%, causing an 18% decline in PC revenues."(X-bit, 2009) Competition has always been fierce within the personal computer industry and this is only increasing. Cutting costs is required to survive in this a situation.

Moreover, Apple is facing three aspects of conflict in the Personal Computer industry.

a) PC hardware

Needless to say, there are many companies which provide PC hardware. In 2007, Apple had only 2.6% share in global personal computer market ("PC Market Still Strong in Q4 With Solid Growth Across Regions, According to IDC", 2008).

b) Operating System

Mac OSX has minor share comparing to Windows OS. Some important applications do not support Mac OSX.

c) Software

Apple provides software for Mac OS, but most of Apple's software and the software developed by third-parties for Apple could only be used on an Apple Computer in the