Apple was founded by Steve Job and Steve Wozniak on April 1, 1976. Since this company launched to the market, it had been the leader of the world of technology for almost two decades. It not only was the pioneer of the desktop computer but also has a large successful number of products introduced over the years. By 1990, Apple had 1 billion in cash and more than $5.5 billion in sales and the ROE was 32% by that time it was considered as a year profitable.
However, this situation was not permanent Apple suffered the decay due to the technological market was extremely fast changing as it was moving through the people ‘lives. Additional, there were other factors that affect Apple such as competition in the market, products available that can substitute Apple’s products and the price. Therefore, the question is how Apple should do or what strategies should apply Apple forward 1992.
Five force Porte’s Analysis
Potential competitor: By 1991 the income of hardware was $50 billion in the market and $30 billion for software and about 100 million for installing. The topmost 17 of computing’s industry that located in the market have increased their market share by installed united from 39% in 1981 to 61% in 1991. Of these 17 companies, the most relevant that could compete with Apple was IBM, NEC, Compac and Olivtti.
Additionally, the companies that prevalent in the production of the microprocessor (brain center of the computer) was Intel and Microsoft. With these two companies (Intel and Microsoft) worked together to seize the market share almost 90% assuming $40 billion in software was installed in the Intel and Microsoft, then only $4.5 billion to $5 billion on Apple which means only covered 10% of the market share.
New Entrants: For the personal computer industry, it could classify in components such as memory storage, microprocessor, operation system, platform, application software and distribution for each one had a different level of barriers of entry. For example, Microsoft and Intel which produce microprocessor and operation system. This kind of products was required high specialization and a high cost of investment, therefore, it had higher barriers of entry. However, for the platforms, application software and distribution have low barriers of entry it was due to these products was easy to imitate and it required lower investment to produce it.
Bargaining power of buyer: it could categorize into three sectors: the first one was business/government which is the large one. This sector could produce 60% of the units and 70% of the total income. The second was individual/home market produce 31% of units and 23% of income the last one and also the small sector one it was educational that only could generate 9% of units and 7% of income.
With this information we can assume that the large business, government, and school, the could buy computers in a huge volume as a result, they were strong enough to dictate term and bargain on price, quality, and service. However, personal computer was more sensitive to the price because they were more likely to notice a price rise and switch to another product.
Bargaining power of supplier: the components for manufacturing personal computer was the microprocessor, motherboard, memory storage, and peripherals such as monitor, keyboard or mouse, along with bundled software. The memory storage and peripheral were components that was extremely regularized and very accessible from any supplier which mean it would be easy to switch from one supplier to another.
Consequently, the supplier of those similar components had lower force in the PC industry. However, Microsoft and Intel which produce microprocessor and operation system, these components embraced important power in the market especially for the personal computer makers that they wanted to trade their computer as a package which means include preinstalled software. Moreover, Apple worked exclusively with Motorola. Motorola was the only supplier to Apple. Therefore, it was not only would not be easy to change the supplier but also was sensitive price.
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