Below is a detailed explanation of the critical competitive forces (and their un

Question

Below is a detailed explanation of the critical competitive forces (and their underlying dynamics) in the smartphone industry that may threaten Apple based on a relevant five-forces analysis and other concepts.

            Porter's five forces analysis is a very useful methodology to analyze the external environment effect on any organization or industry. By applying the external five forces, we can easily determine the after effects of those forces on the specific organization. Five forces of porter's analysis on mobile phone industry are as follows.

Competition rivalry- As number of competitors are consistently increasing, quality of the competitors for Apple is also consistently increasing in the specific market segment. As couple is dominating in its field and having availability of better brand identity, competition rivalry is getting intense as Google as also launched its devices in the market.

Supplier Bargaining- Availability of many suppliers has a directly decreased the bargaining power of the suppliers as apple is able to take the supply from different suppliers which reduces their overall pardoning power. Any of the organizations are directly importing goods from China and manufacturing them into their own facility and availability of vast options has reduced the overall power of supplier bargaining.

Customer bargaining- As apple has relatively high-class products and does not negotiate with its prices, customer bargaining power is also very less as compared to other Smartphone manufacturers.

Below is a detailed explanation of the potential for new entry and/or effective substitute competition, based on a relevant blue ocean strategy analysis and other concepts.

Threat of new entrants- This is the most prominent part for Apple. As increment in the number of new entrants in the specific market segment has definitely reduce the overall impact of the Apple or dominating the specific market. As apple has increase number of new entrants in the market, ability of different factors as well as other mobile phones have greatly reduced the overall impact of apple over customers.

Substitute threats- Substitute including a Google pixel and other ranges such as Samsung Galaxy range has been threatening the Apple sales by a huge margin. These Android mobile phones are indirect competition with apple in terms of providing service as well as having an understanding of the market and providing large range of products.

QUESTION:

An explanation of the strategic implications of the competitive forces identified above: what are the opportunities and threats to Apple's position in the ecosystem of the smartphone industry that it must factor into its strategy for the future, based on the above analysis, and why?

Explanation / Answer

Going by the analysis that has been done so far, we can identify there are two factors where Apple still dominates the industry clearly. They are the bargaining power against suppliers and the customers. This is due to their brand equity and efficient procurement system.

On the other hand Apple is experiencing weakness in the competitive rivalry, new entry of competitors and threat of substitutes. While these can be clearly identified as the threat, the fact is that the brand equity of Apple is still higher than all of its competitors. However, the competitors are constantly improving their product quality and features as well as their brand positioning. This is the biggest threat that Apple faces. The difference in the brand positions is why Apple can currently charge a premium. If they lose this advantage then they will likely begin seeing declining market share more rapidly.

This also brings us an opportunity. Since the brand position of Apple is still the strongest, they should use this to constrict the supplier market for the competitors. This could be done through exclusivity contracts with the best of the suppliers. This would mean that the good quality parts suppliers will not be able to work with the likes of Samsung, LG, Sony, etc. and the competitors will be unable to produce quality of products that match that of Apple. This again would allow the company to keep producing high quality products, maintain the distance of brand position against competitors and keep the bargaining power on the customers.

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