Introduction
Apple Inc., the American technological giant, has enjoyed massive success with one of its main products, the iPhone. The iPhone is a smartphone launched in 2007, the first in its class to use multi-touch technology. The smartphone has been the most-selling smartphone since its launch and accounts for about 21% of the smartphone’s market share globally (Orr, 2023). In 2022, 52% of Apple’s sales were generated from iPhone sales, highlighting the product’s success (Curry, 2023). Below is Porter’s model analysis of the product. Porter’s model helps to assess the competitiveness and attractiveness of a product, firm, or industry.
Rivalry Among Firms
Competition within the smartphone industry is intense, and the iPhone faces competition from other products such as Samsung, Huawei, and Google. These products compete with the iPhone on various factors such as product features, ecosystem, price, design, and many others. Firms that produce these alternative smartphones are similarly aggressive to Apple concerning innovation, new product development, and marketing, providing Apple with a strong industry competition force. Apple differentiates its iPhone product using its unique proprietary iOS operating system, which has seamless integration with other Apple products and focuses on high-end user experience. Low switching costs also promote competition between smartphone products. Customers can easily switch from an iPhone to a Samsung smartphone, considering the products will carry out the same purposes. Such intense competition makes Apple continue seeking ways to enhance the iPhone, e.g., through innovation, and make it unique to maintain or improve its market position.
Bargaining Power of Suppliers
Apple sources components for the iPhone from a diverse number of suppliers globally, which weakens the individual supplier’s bargaining power in imposing demand on Apple. Furthermore, Apple can easily switch amongst component suppliers for making the iPhone easily. Component suppliers of the iPhone would also not wish to lose such a big customer like Apple to other companies, a situation that strengthens Apple’s bargaining power with suppliers. In this regard, it is evident that iPhone’s component suppliers have lower bargaining power which means it is a weak force for Apple.
Bargaining Power of Buyers
The smartphone industry is characterized by low switching costs between products which means that the bargaining power of buyers is an important consideration for Apple. From an individual’s perspective, the bargaining power of a buyer is weak since the loss of an iPhone customer would have little or no impact on Apple’s revenue. However, from a collective point of view, the bargaining power of buyers is strong since the loss of many consumers to competitors would seriously harm iPhone’s revenue. Nowadays, the availability of information to buyers means they can easily compare smartphone products, e.g., product features and customer reviews, to guide their purchasing. However, Apple’s strong brand loyalty and differentiated user experience could give it a certain level of insulation from buyer power (Keller, 2009). In this regard, the bargaining power of buyers is moderate to high and is an important force that requires Apple’s attention. For this reason, Apple spends large amounts of money for continuous investment in research and development for the iPhone to make it unique and better every year. This way, the product is expected to become attractive to existing and new customers.
The Threat of Substitute Products
The threat of substitute products for the iPhone may be considered low for several reasons. Firstly, most potential substitutes for the iPhone, e.g., The DSLR camera, generally have limited or lower capabilities than the smartphone. While the increasing capabilities of other devices, such as tablets and wearable technology, could substitute smartphones for certain tasks, the iPhone is well ahead regarding the current and potential capabilities that this new class of products offers. Apple’s robust research and development means that the iPhone is well ahead with regard to its capabilities, and it is unlikely that there exist potential substitutes that would seriously erode its dominance in the market. Furthermore, the iPhone’s interoperability with other Apple products and services, such as iPad, also reduces the threat of substitute products.
The threat of New Entrants
Entry into the smartphone industry is very difficult for new companies or products that are not very well established. Noting iPhone’s market dominance and capabilities, a new entrant into the smartphone industry would require massive capital for R&D, product development, and marketing to compete. The entrant would also face significant competition from other well-established and big brands, such as Samsung and Google, that compete with Apple’s iPhone. Notably, establishing brand name recognition would also be very difficult for a new entrant. While it is possible for a new company with innovative technologies or disruptive business models and significant financial backing, e.g., from a government, to pose a threat to iPhone dominance, the threat is likely to be very low. Apple is continuously strengthening its competitive position through R&D and enhancing brand loyalty to the iPhone, which makes the threat of new entrants very low.
Conclusion
In conclusion, Porter’s model shows that rivalry among firms selling similar products as the iPhone is high due to similar product offerings and low switching costs. The bargaining power of suppliers for the iPhone is low, considering the diverse global component suppliers involved, while the bargaining power of buyers is moderate to high. The threat of substitute products is low mainly due to the iPhone’s advanced capabilities and limited capabilities of substitutes. Similarly, the threat of new entrants is also low, considering the iPhone’s market dominance and capabilities. From this analysis, the iPhone is expected to continue its market dominance at least in the near future, although Apple needs to enhance its R&D and product offering, e.g., by identifying future opportunities to maintain its position considering the competitiveness of similar products (Van De Vliert, 2021).
References
Curry, D. (2023). Apple Statistics (2023). Business of Apps. https://www.businessofapps.com/data/apple-statistics/
Keller, K. L. (2009). Building strong brands in a modern marketing communications environment. Journal of marketing communications, 15(2-3), 139-155.
Orr, A. (2023). Despite global smartphone market contraction, Apple is thriving with 21% market share. Appleinsider. https://appleinsider.com/articles/23/04/27/despite-global-smartphone-market-contraction-apple-is-thriving-with-21-market-share
Van De Vliert, D. (2021). Apple iPhone: a market case study. MacEwan University Student eJournal, 5(1).
write