Apple Inc. is a company that more than any other shows the benefits of innovation and continuous growth in business, as well as the potential damage of stagnation in products and services. By going through numerous ups and downs, the company has expanded immensely and committed a complete transformation, which allowed it to not only survive in a highly competitive market of personal computers but also to enter an entirely new industry of portable mobile devices and successfully carve its niche in it.
When the company was first founded as “Apple Computer,” it initially received wide recognition and appraisal for its strong brand of Macintosh personal computers. The company was universally well regarded for the strength of its product, despite high prices. However, things changed with the introduction of the IBM personal computer into the market, which not only was cheaper but also was much more compatible with software and hardware by other companies.
While Apple and its PCs retained the perception of a premium brand, it was not able to compete with IMB, which became the volume sales leader of the market. By the 90s, the Apple Computer came to be in such a dire state, that a revamp and a rebranding of a company was needed, which succeeded, in many ways due to the efforts of Steve Jobs, who took the reins of the company and transformed it into “Apple Inc.”
Under his guidance, the company has re-imagined itself, more as a mobile device business. While it made its first big comeback with its computer iMac, the company was changing into something different, more “hip” and “innovative” and Jobs saw the company’s future where the main trends were. And as the 2000s showed, they were shifting towards mobile devices, and Apple followed suit, identifying itself as a mobile device company by 2010, with their computers being pushed into secondary position at less than five percent of the global PC market (Yoffie & Kim, 2010).
Nowadays, Apple is a massively successful multinational technology corporation, widely recognized for its prestigious smartphones and tablet computers, as well as a variety of software for their products. However, just how well does it hold up against the PC industry titans such as Microsoft, Dell, Hewlett-Packard, and Acer? This paper aims to conduct an industry analysis of Apple’s computer industry and determine its competitive advantage.
To be able to maintain its niche in the market, a company needs to be able to develop a powerful competitive advantage and to respond strategically and efficiently to changes in the industry. A competitive advantage is a particular feature of a company or of its products and services, which allows the business to maintain a superior position in the market about its competition. In practice, a competitive advantage signifies that a business has a broader gap between the customers’ desire to pay for the product or service, and the production costs, than its competitors.
The personal computer industry is extremely competitive, due to the relatively low cost of switching to a different service and product provider. As a result, to maintain competitive advantage companies have to invest continuously in Research and Development and seek opportunities for innovation. They also need to strive for constant improvement in their managing practices, to improve teamwork, communication, morale, and other features of a firm which increase its efficiency (Chemawat & Rivkin, 2006).
Despite being the pioneer of the personal computer business and creating the initial competitive advantage, by introducing the customers to computers, Apple found itself unable to sustain this advantage, as IBM and other companies quickly overtook the market with much cheaper and incompatible hardware and software. Apple had always perceived control over their hardware and software to be an important part of its business policy, and as a result, lost out to the much more variable and flexible competitive systems.
To generate a new competitive advantage for its computers, Apple needed to produce a design and marketing strategy that would bring forth the strong, appealing features of their product, and compensate the weaker features.
The main five competitive forces, which a company has to address to maintain and improve their business share, and through which the structure of the industry can be comfortably analyzed, were defined by Michael Porter in 1980, and reprinted in 2008 in his article “The Five Competitive Forces That Shape Strategy.” These forces are the threat of entry, the bargaining powers of suppliers, and the bargaining powers of buyers, the threat of substitute products and services, and the rivalry with the existing competitors. The degree to which these forces can affect the companies and their competitive advantages varies greatly from industry to industry (Porter, 2008).
Despite the rigid competition between Apple, Microsoft, Dell, HP, Acer, and Lenovo, the industry is constantly looking for new innovative ideas. As a result, the threat of entry has a moderate impact on the company’s competitive advantage, as on the one hand, a newcomer can find it very hard to enter the industry with already established leaders, and, on the other, an innovative idea can shift the market balance. The power of suppliers plays a major role in the market and has a high impact on a company’s competitive advantage, as Microsoft holds a near-monopoly on operating systems, which makes Apple’s iOS an appealing alternative.
The presence of other numerous established brands, which don’t differ very much in prices, but are constantly developing their product, marketing, and business model, also has a high impact on the industry, forcing continuous development and attention to the buyer’s needs, which define the industry (Porter, 2008).
Apple initially tackled its market situation and the five forces which determine it, by focusing on its Mac computer as a “digital hub” used to control all other devices, all geared to the goal of integrating its products into the digital lifestyles of the consumers. They achieved this by concentrating on the product’s image, as well as making them both functional and yet accessible. The main competitive advantages of Apple’s Macs are the company’s adaptability and innovation, loyal users, high quality of both software and hardware, and an efficient, yet isolating “closed” nature of the system (Hill & Jones, 2012). The latter means that a dedicated Mac user would be unable to purchase software or additional hardware from competitors
Additionally, in the modern era of constant shift and instability, Apple’s adaptability and flexibility have allowed it to develop an image of a safe and reliable PC, which grows and changes together with its customer base (Reeves & Deimler, 2011). By closely following the digital trends, Apple was able to keep the functionality of its PCs in-sync with them, and their marketing heavily relies on advertising Mac’s modernity, simplicity, and streamlined nature.
However, Apple does not perceive this competitive advantage as one that it will be able to maintain continuously. While the “closed” system is appreciated by its core fans, the majority of PC users prefer personal computers of other companies, due to their greater flexibility in terms of personalization, greater accessibility, and simply by them being the industry standard at this point.
For this very reason, the company has shifted its focus towards the industry of mobile devices and related technologies, with them making up more than sixty percent of Apple’s current total revenue. Nowadays the iPhone, and not the Mac, is the company’s “killer app”, and since 2010 focus on the iPhone as the new “digital hub” of the Apple technology and software is progressively increasing. While it is hard to say what future lies ahead of Apple’s personal computers, the analysis of the industry shows that the company is benefiting immensely from its shift to iPhones and iPods, which has allowed them to fulfill their objective of making their product an integral part of the digital lifestyle of the general populace.
In conclusion, Apple Inc. is still enjoying the revenue from the ideas of its late chief visionary Steve Jobs. As part of his vision, the company has been moving away from personal computers as their principal product, focusing instead on portable devices and software. While the corporation still provides high-quality support to their PC customers, Apple Inc. has found its niche in the modern market by taking over the mobile industry, in a risky move which redefined it from the ground up.
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Hill, C. W., & Jones, G. R. (2012). Essentials of Strategic Management (3rd ed.). Boston: Cengage Learning.
Porter, M. E. (2008). The Five Competitive Forces That Shape Strategy. Harvard Business Review, 2-18.
Reeves, M., & Deimler, M. (2015). Adaptability: The New Competitive Advantage. Own the Future 50 Ways to Win from the Boston Consulting Group, 19-26.
Yoffie, D. B., & Kim, R. (2010). Apple Inc. in 2010. Harvard Business School, 1-25.