Question

Research an innovative organization, and analyze how the organization uses Porter's Five Forces Model.

Answer 1

Apple Inc., is an innovative company. Apple Inc., was established in 1976 and the company was struggling to survive in its initial stages. However, under the leadership of Steve Jobs, the company became the industry leader today. The company is known to produce innovative products and thus is considered as one of the most valuable companies in the world. iPhone6s, iPad, MacBook Air, Aluminium power book G4 are some of the innovative products produced by Apple Inc.

Apple is able to combat the competition in the industry and the Porter’s five forces model helps the firm to continue addressing the competition in the industry.

Porter’s five force analysis helps the firm to understand the strengths and the intensities of external factors affecting the industry. The five forces are:

1. Competitive rivalry (strong force)- Apple faces strong competition in the industry. The factors that make the competition more intensive are:
   1. High level of aggressiveness of the firms (strong force)- Aggressiveness of the companies is mainly through rapid innovation concepts and products, advertising, and of course imitation.
   2. Low switching cost of products (strong force)- The industry has low switching cost which means that customers can easily reach out to substitute products which makes competition more intensive.

Apple’s strategy should be formulated keeping in mind the competitive rivalry.

2. Bargaining power of customers (strong force)- This is a strong factor for Apple. The force depicts how the buyers impact the business. The buyer’s strong power is based on the following factors-

1. Low switching cost (strong force)- Since it is easy for customers to change the brand, there is a continuous need for Apple to keep the customers satisfied to avoid moving them to different brands.
2. Size of individual buyers are small (weak force)- the ratio of the individual purchase to the Apple’s total revenue is small. This makes the customers weak at the individual level. Apple should consider this factor into strategy formulation.

3. Bargaining power of suppliers (weak force)-This force indicates the influence of suppliers in imposing their demands. Apple’s suppliers have weak bargaining power because of the following factors-

1. Number of suppliers is more (weak force)- Apple has large number of suppliers across the globe which provides them to have options if required. This factor need not be a main consideration in drafting strategies.

4. Threat of substitutes (weak force)- This force denotes the availability of substitute products in the industry. The factors that influence this factor are:

1. High level of substitute products availability (strong force)- The number of substitute products is more in the industry. Apple can be replaced by Samsung and other brands.
2. Low performance of products (weak force)- Though substitute products are available, nothing can replace Apple due to its high performance.

Since these factors are just a weak force in the industry, these need not be considered in Apple’s strategy formulation.

5. Threat of new entrants (moderate force)- This factor denotes the possibility of new entrants entering the market. This force is influenced by the following factors-

1. High capital investment (weak force)- Since a huge capital investment is required for the industry, there is a minimal entry of competitors in the industry.
2. High cost involved in developing the brand and the brand image (weak force)
3. Potential new entrants might enter the market (strong force)

Apple should continue innovating new products and solutions to gain the competitive advantage.