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- Industry
- Barriers of Entry
- Substitutes Products and Services
- Bargaining Power of Buyers
- Bargaining Power of Suppliers
- Rivalry among Existing Firms
- Managerial Strategy
- Report Summary
- Conclusion
- References
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TOWSON UNIVERSITY  Limitless Solutions Consulting Company
Team Members Chau Tran, Marium Jawed, Glen Rock Timothy DiNunzio, Oluwatobi Ibidapo, Brandy Butler
MNGT 481-Team Assignment Personal Computing Industry Analysis & APPLE INC 2010 I.Industry 2 II.Barriers of Entry 3 III.Substitutes Products and Services 4 IV.Bargaining Power of Buyers 5 V.Bargaining Power of Suppliers 6 VI.Rivalry among Existing Firms 8 VII.Managerial Strategy 9 VIII.Report Summary 12 IX.Conclusion 14 References 15
NAICS 334111: Electronic Computer Manufacturing Definition: This U.S. industry comprises establishments primarily engaged in manufacturing and/or assembling electronic computers, such as mainframes, personal computers, workstations, laptops, and computer servers. Computers can be analog, digital, or hybrid. Digital computers, the most common type, are devices that do all of the following: (1) store the processing program or programs and the data immediately necessary for the execution of the program; (2) can be freely programmed in accordance with the requirements of the user; (3) perform arithmetical computations specified by the user; and (4) execute, without human intervention, a processing program that requires the computer to modify its execution by logical decision during the processing run. Analog computers are capable of simulating mathematical models and contain at least analog, control, and programming elements. The manufacture of computers includes the assembly or integration of processors, coprocessors, memory, storage, and input/output devices into a user-programmable final product. Boundaries: For the sake of this analysis we are limiting the industry to what the public is accustomed to as a Personal Computer (PC). This would include any PC that one would normally have at their home for things such as web surfing, emails and file storage. Other types of computers that would be used for things such as computer games would require a different setup than a standard home PC and therefore would be outside of the boundaries of this case study.
The entry barriers for the personal computing (PC) industry make it difficult for any new startup company to take away any large amount of market share for the current companies in the industry. The financial strength of the larger companies such as HP, Dell and Apple to go and buy the most talented workers and give a large amount of their budget to research and development will always give them a competitive edge in developing the next technological breakthrough. The second major barrier is the ability to manufacture the PC then distribute accordingly. There are several different components to a PC that take time to assemble if you do not have a manufacturing line, also where to sell their product because an issue when competing with the brand names of the industry. HP, Dell and Apple are all fortune 100 which means they make the top amount of revenues and profits in the world. This allows all of these companies with enough financial flexibility to spend more than any startup company in the PC industry can. If a new company does arise that threatens to take market share from any of these three companies they have the ability to buyout the new company or use reverse engineering to come out with their own similar and cheaper product. The term reverse engineering refers to a company acquiring technology from a competitor and figuring out how it works to create a newer and slightly different model. The company then will sell it at a cheaper price and take profits away from the original creator of the technology. Buying parts for a PC is fairly simple and easily accessible. It is almost impossible for a new company to try to mass produce PC’s without having an assembly line like the major manufactures already do. A startup company would need enough capital to buy a warehouse to start assembling them. If they manage to receive that amount of capital they would then have to then acquire the parts where the buyer power is much smaller for a new company. If the suppliers raise prices of their products the larger PC makers can compensate for it since they have the capital on hand. Smaller companies are more affected with the slightest increment of price change since margins are always thinner for new and smaller companies.
In this industry a substitute is any product or service that can replace a personal computer, which can possibly create threats in the industry. The functions of a personal computer include, retrieving information, storing data/ information, manipulating data/information, providing users with information, communication and recreational purposes. Since the early 2000s, consumer electronic products, such as cell phones,PDAs ,Tv set-top boxes, game consoles, started to almost function like a PC. For example, advanced game devices like Sony Playstation3 allowed consumers to watch DVDs, surf the web, and play games directly online in addition to playing traditional video games. Also, smartphones increasingly functioned as handheld computers, allowing users to e-mail, visit websites, and manage their online live. However, these devices also have some weaknesses. They are small in size and often rely on battery power. This creates problems for people that need to use the device for a long period of time. Also, in order to stay portable these devices often lack expandability. They also don’t have as many functions as a PC and not as close in performance. The PC still remains as the most versatile device and does not truly have a fully capable substitute. While several other industry insiders worried about the impact of digital devices on the PC industry, Job had a different view. Apple’s control of both hardware and software made it one of the unique PCs remaining in the industry. Its premium price is also a strength. In this industry substitute products poses a low to medium threat.
As stated in “Apple, Inc 2010” there are five main categories of buyers which consist of home, small and medium sized businesses, corporate, education and government. These can be separated into two categories, those that buy in large volumes, and those that buy for personal use. Organizations, governments and schools that purchase computers in a large volume have bargaining power in relation to price, feature and service plans. In this case, this group of buyers has medium to low bargaining power. Although there are many PC manufacturers to choose from in the market, and an increasing number of programs and companies to choose from, there is another aspect that decreases the bargaining power for this group. When any organization buys and sets-up a large quantity of computers, they have to consider aspects such as installation, training, and standardization across a particular organization. These aspects greatly increase the switching costs and limit the choices available to these organizations and corporations- all of which decreases the bargaining power for this group of buyers. Many of these businesses and corporations do not only have indispensable data on these computers, they also use standardized programs for much of their business such as inventory, scheduling and communications. These programs not only need to often stay with specified vendors, but also needs to be constantly updated. This further decreases the bargaining power of this group of buyers. On the other hand, the second group to consider- those that buy computers for personal use and make up about half the worldwide Personal Computer shipments, this group have a very different and much higher bargaining power. This is because firstly, personal computer buyers are price sensitive and do not exhibit strong brand loyalty since the switching costs are low. This situation places the buyer power in a strong position that can only be countered by manufacturer with strong product differentiation that would increase the switching costs. “In recent years customers have more and more alternative options to the personal computer ... because of the availability, sleekness, and trendiness of these alternatives, they have become increasingly popular making personal computers more and more obsolete"(SAR Report). As long as buyers see little difference in the quality and features of available computers, price will determine their purchasing choice. Hence, the bargaining power of buyers can be consider as strong in this case. This idea allows Apple to use a differentiation strategy in which they attract their customer base with higher quality, and brand loyalty. Although in an overall perspective, buyers have a medium to high bargaining power, buyers of Apple products tend to exhibit an increased brand loyalty and switch from different versions of the IPhones, IPads and Apple Notebooks (internal), rather than switching to other brands (external), such as Samsung that has similar products and features. However, with the ever growing frustration on Apple’s competitors, there are an increasing variety of products that have been released that almost can replicate the Apple product, leaving the buyer once again with higher power to choose among an array of options.
The bargaining power of suppliers in this scenario falls into multiple categories. First of all, there are two categories of suppliers that provide to the personal computing industry: those that make peripheral products such as memory cards and keyboards, and those that make core products such as microprocessors and operating systems. Suppliers considered to be in the first category in this case have medium to low bargaining power due to several reasons. Suppliers of peripherals such as monitors, disk drives, and even complementary software (graphics programs, internet browsers etc.) have considerable competition in the field. PC vendors such as Dell, Acer, and Lenovo, who are considered buyers in this case, are looking for the highest quality and the cheapest price for these peripheral and complementary products. Since there are numerous manufactures of these products all across the globe there is competition on an international scale- all of which significantly decreases the bargaining power of these suppliers. At the same time however, the fact that many of these are standard products that can be used by any PC vendor means that these suppliers are able to provide a product which is not exclusive to any one PC manufacturer. Not only this, but this category of suppliers is also able to market directly to consumers. Selling unique types of keyboards, memory storage or software programs, these peripheral and complimentary manufacturers are able to target individual sellers on top of the large personal computer manufacturers. This significantly increases their bargaining power as suppliers, putting them at medium power overall. The second category of suppliers, those are who make products such as microprocessors and operating systems, have much higher bargaining power. As stated in “Apple Inc. 2010” the standard known as “Wintel”, which included the Windows operating system with an Intel processor, became a standard during this time. For this reason, this particular category of suppliers has very high bargaining power. With minimal to no competition (aside from apple itself which used its own operating systems and processors), these suppliers are able to have significant control of the market. Almost all personal computer manufacturers such as HP and Dell are buying from these suppliers. Apple inc. themselves has high bargaining power over its suppliers due to the fact they can outsource many of their manufacturing products, and have enabled themselves to vertically integrate, meaning they can produce some of their own supplies. This vertical integration has given Apple Inc. great advantages over competitors in the market as they are reducing costs while increasing resources. The final category of suppliers to consider is the PC manufacturers themselves. Although this category is also listed as buyers above, PC manufacturers market and sell their products straight to retailers and consumers. Manufacturers such as Dell, Acer, and HP have very low bargaining power in this case because of the great amount of competition and the demand for lower priced and higher quality products from consumers. “PC makers are dependent on its suppliers for microprocessors, memory, motherboard, video adapters, terminals, and hard disks, etc. In general, the relationship between PC makers and their component suppliers today is just like bread and butter. One depends on the other for survival. A supplier only possesses the bargaining power when it has a dominant position in the industry. For example, Intel is almost the sole supplier for the heart of the PC, its microprocessor. Computer makers have to rely on Intel for its chips” (Vo, n.d). Therefore, overall the bargaining power of suppliers is low because the suppliers are in direct competition with each other to obtain exclusive contracts with the manufacturers to have them use their products.
Rivalry among existing firms in the electronic computer market is high. There are many competitors and the market is very unpredictable. The key rivals within the electronic computer industry are Microsoft, Hewlett-Packard, Oracle, Acer America, Dell, IBM, Advanced Micro Device, Intel, Fujitsu and Cisco System. If our rivals were pitted against each other we would describe them as not being too differentiated and being followers of each others trends. When one company increases demand through product differentiation or price differentiation, the others seem to follow. But when comparing our rivals to ourselves, we have come to the conclusion that we have been very successful at being innovative enough to make our products unique and unable to be duplicated. Through all forms of non-price competition, such as product differentiation, advertising, brand loyalty, and advertising we have been able to stay on top of this industry. Due to the rise in the tablet market, the once fast-growing personal computer market is slowing down. Apple would have a high emotional exit barrier if deciding to drop out of this market. Brand loyalty is the main cause of this exit barrier. Some people would not only want apple tablets but also the apple Macbook because they have similar features and usability. If Apple ever decided to drop out of this market they would be disappointing their customer base.
Steve Jobs was a person of study during and after his lifetime. He was seen as innovative, driven, passionate, and controversial, to name a few. However, his leadership and style stands out amongst the rest and leads us to ask ourselves, was he an effective strategic leader? A strategic leader is one who has the “ability to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary.” (Hitt, 2012) From the textbook Understanding Business Strategy, a strategic leader is also said to be one who practices strategic leadership and often holds upper level organizational positions. They are said to have main actions, of which include; establishing vision and mission, Developing the management team and succession, managing the resource portfolio, building an entrepreneurial culture, promoting integrity and ethical behavior, and using effective controls. Steve jobs will be hard to replace due to his individuality and uniqueness, in terms of identifying trends, and the ability to develop products that have incredibly high market potential. He brought his own intense passion, vision, and leadership to Apple, of which he constantly innovated and improved. Steve Jobs’ performance as a leader is often not questioned in the early stages of Apple, however, the era of leadership often examined is late 2000’s, specifically 2010. “According to one of the most recent brand studies carried out by global brands agency, Apple has overtaken Google as the world’s most valuable brand.” (China, 2013). Additionally, many employees who worked for Jobs claimed that he was a stern leader, but understood the importance of long-range goals and vision. His style was laissez-faire, or hands off leadership that he believed promoted the creation of successful and creative ideas from employees. A quote from Steve Jobs as “My job is not to be easy on people”. My job is to make them better. My job is to pull things together from different parts of the company and clear the ways to get the resources for the key projects.” (China, 2013). What this shows is his unwavering dedication to get projects the attention they need as well as to promote an entrepreneurial culture within the company. His board room tendencies and behavior exemplifies his use of effective controls with integrity and ethical conscience. For example, despite his unwillingness to do so, he occasionally admitted that he did not always have all the answers. He would call upon CEOs of Oracle, Intuit, past presidents, and many others to consult regarding strategy for the company. It underlines the importance of good networks and influential mentors. Instead of relying on his judgments and risking the company, he was able to step back from ego inflation to ask those in the best interest of his company. Despite his mass praise of being innovative and revolutionary, often individuals argue the contrary to his leadership. Mark Kardon argues that he can be seen as an ineffective leader in many regards. For example, he was said to be abrasive, often publicly berating employees, throwing temper tantrums, and yelling. He wanted things done his way, with zero exceptions tolerated. It made for a threatening workplace, hostile, for the fear of his over dramatic, emotional outbursts. According to the text, an aspect of the definition of an effective strategic leader is one who can empower others and build culture in the workplace. However, as seen with the critiques of Jobs, he does not seem to follow by that definition. Regardless of these violations, in the grand scheme of Apple and Steve Jobs’ leadership, he can still be seen as a strategic leader. In our opinion, his achievements and strengths can outweigh the few negative comments made by employees and those looking in. From recent claims, “Stakeholders are very satisfied with Apple Inc. and a conclusion could be made that Apple has high organizational effectiveness by meeting or even exceeding the expectations from the key interest groups.” (China, 2013) In terms of current leadership, it was said that it would be difficult to replace Steve Jobs and that his leadership style would linger long after his death. Tim Cook, the current CEO of Apple Inc. aims to continue innovating and improving the company. Sydney Finkelstein, a Forbes reporter, believes that Steve Jobs was an outlier and unusual phenomenon in terms of his leadership. “Let’s make it clear, almost anyone who adopts the Steve Jobs approach to leadership will fail.” (Finkelstein, 2013) Tim Cook has been leading Apple during some of the most successful periods of sales they have experienced. He shifted management during times of importance in order to best fit the needs of the company. Additionally, Tim Cook is efficient and quick-responding. For example, when he fired Apple’s retail chief that he had personally hired only eight months into the job, it showed that he was able to acknowledge his own mistakes and correct them quickly and objectively. In terms of performance numbers, comparison of Microsoft’s new CEO, Steve Ballmer, and Microsoft experienced 4% returns per year over a course of four years. Cook’s performance on the other hand was 11% per year, despite having less time on the Job compared to Ballmer. (Finkelstein, 2013) Cook has not differed from his predecessor in terms of creating innovate products. Under his leadership, the IPad mini was introduced. While some criticized it for cannibalizing sales of the IPad, Cook viewed it in a different light. He was smart to make the decision for the mini because despite the cannibalization of sales, he kept the market share in Apples pockets. If they were to forego to introduction of the Mini, another competitor, such as Samsung could have easily released a mini tablet, taking market share away from Apple. Overall, Cook has an excellent history of successes with companies he has worked with and will continue to appease shareholders of Apple while improving the brand further. He is in tune with the needs of consumers and has proven thus far that he can efficiently and strategically lead a company of magnitude such as Apple.
Based on our researches and analyses on the personal computer industry recently, the domination is still belong to the big four top vendors- HP, Dell, Acer and Lenovo which have their reputations not only for the qualities of their computer but the brand names. The barrier for the new entries is still quite high. There are too many factors to mass produce PC and keep the product at the low cost in order to compete with other brand names. The appearance of Smartphone has changed the way people use PC because it can handle many functions of a PC such as email, web surfing or data saving. Moreover, Smartphone is considered to be the biggest threat to the PC because it is portable, flexible and meets the demands of young generation who always want to make their own characteristics. However, the size of Smartphone is also its weakness. Companies and institutions require the capable of storing huge data. Therefore, the substitutes for PC are ranged as the low to medium threat. From the perspectives of buyers and sellers, there is still a mutual supports to each other. Buyers hope to buy the best PC at an appropriate price, while sellers expect to lower the costs and increase more profits. We emphasize the strong power of buyers in our analyses because the competition among the PC manufacturers is more intensive due to the demands of PC seems to exist in organizations, educational institutions or government. Sellers, on the other hand, have more options in finding the lower labor cost and willingly to invest in R&D to please their customers. In the marketing arena, manufactures nowadays tend to sell their products directly to the users via either online channel or their stores. The relationship between PC makers and their component suppliers is like “bread and butter” which made their power is quite low compared to the buyers’. Although the competition among the PC makers appears calm recently, the reality is more intensive than its surface. The race in developing the new trends and more advanced technology among the members of PC industry is fierce. Microsoft, HP and IPM focus more on developing the security systems that can enhance the trust of customers to their PC. The shadow of Apple’s success is the marker for the race. Apple itself conducted the revolution by differentiating their products. Under the Steve Jobs’ empire, Apple emerged as the pioneer in creating “I-culture” since 2000s’. Jobs’ strategies have brought Apple up to the new level in the industry. Apple then gave birth to the Mac-new line of PC products was the transparent step in PC industry. Users who love I-Life (IPhone, IPad, IPod or ITunes) are getting familiar with the Macintosh. They find the interesting experiences in using Mac than other operating systems. The most genius strategy of Apple is Mac’s compatibility with all Apple’s products.
The PC industry is raising its barriers due to the risk from substitutes. However, strong power of buyers is pushing manufactures in general and Apple to either innovate the new products or develop their customer services which means the closer to the customers, the better. So far, Apple still keeps the loyalty from its customers. In the Q4 of 2011, the research firm Gartner reports the U.S. PC Vendor Unit Shipment as “Apple recorded growth of over 20 percent and maintained third place in U.S. computer sales”. (FoxBusiness, 2012). HP and Dell stand for the first and second with 23.1% and 22.4% of the market shares respectively. The Apple stores have also distributed in to its success by providing convenient destinations and support resources for users to the Mac as well as Apple’s new products. Based on our analyses and Apple’s performance compared to its rivals’, our team concludes that Apple definitely has the medium potential and sustainable competitive advantage in the PC industry. The rationale of our conclusion is the distribution and equity of other manufacturers such as Microsoft, HP, Dell, etc. are currently higher than Apple and unpredictable. Not mention the probability in changing managerial structure and the merger and acquisition of those organizations to defeat Apple can happen once the market is saturated with the PC suppliers. ReferencesIreland, Hoskisson, Hitt. (2012). Understanding Business Strategy Concepts Plus. Mason, Ohio. South-Western Cengage Learning. Schuchart, Wendy. (August, 2011). Lessons learned form Steve Jobs’ effective leadership style. ITKnowledgeExchange. Retrieved from Kardon, Mark. (July, 2012). Was Steve Jobs an Effective Leader? Executive Leadership Alliance—On Leadership. Retrieved form AllAboutChina. (February, 2013). Leadership Study of Steve Jobs in Apple Inc. Retrieved from Finkelstein, Sydney. (January , 2013). Steve Jobs and Tim Cook: Does Apple Still Have the Leadership It Needs? Forbes. Retrieved from Product differentiation in imperfectly competitive markets – the MacBook Wheel." Economics In Plain English. Jason Welker, 28 Jan. 2009. Web. 2 Mar. 2014. <http://welkerswikinomics.com/blog/2009/01/28/product-differentiation-in-imperfectly-competitive-markets-the-macbook-wheel/>. Decision Analytics Blog." Lumina Decision Analytics Blog RSS. Hadley J, 10 June 2013. Web. 5 Mar. 2014. "15 Reasons for Apple’s New Product Drought - Tim Cook is Just One." The Mac Observer. John Marteliaro, 7 Aug. 2013. Web. 5 Mar. 2014. "Porter's Five Forces - Dell vs Apple SAR Report." Porter's Five Forces - Dell vs Apple SAR Report. Web. 01 Mar. 2014. Vo, Phong. "The Personal Computer Industry." Welcome to VACETS Web Page! Web. 01 Mar. 2014. FoxBusiness. (2012). “Apple Remains in Third Place, with 11.6 5 of U.S. Computer Market”. Web. 05 Mar. 2014. Directory: uploads uploads -> 587 Return function, r i(X) r i(0) r i(1) r i(2) r i(3) 1 0 2 4 6 Thermal Station, I 2 0 1 5 6 3 0 3 5 6 10 uploads -> Department of science and humanities department of mathematics part-a questions and answers uploads -> The Case Against the nypd’s Quota-Driven ‘Broken Windows’ Policing What Is It? uploads -> For want of a nail uploads -> Ownership Models There are two different types of ownership models uploads -> Police Militarization uploads -> City of rising star regular meting thursday, july 14, 2016 uploads -> Township of winfield uploads -> Stop Militarizing Law Enforcement Act of 2014 uploads -> The Black Panther Party’s Ten-Point Program What We Want Now! Download 45.97 Kb. Share with your friends:
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