Porter’s five forces analysis: Apple’s fall and rise

Apple Inc. is a giant in the world of PC industry. However, they were not the PCs mainstream, perhaps due to the premium price. Although its aesthetically pleasing design and high functionality were revolutionary, the market itself was easily accessible for new entrants, especially, like IBM. IBM spotted an opportunity in the PC market and entered it with a different market positioning, which consisted in the low-price differentiation strategy, exploiting economies of scale and cost advantage. Retrospectively, IBM products provided more versatility and utility than Apple products. Given the cheaper price and functionality, the customer had low switching cost and therefore, high buyer bargaining power. Addidtionally, IBM was more efficient at building their cost structure because they licensed their products to third parties and had little R&D expenses. The CEO John Sculley, decided to compete with IBM and imitate their strategy. Instead of carrying on with a proper differentiation strategy, he chose to trading apple products in the ordinary mass-market with reduced price. Furthermore, Apple allowed third party licensing to produce MAC clones which lead to increase of the supply bargaining power. This strategy was clearly against the basic principles that underpinned Apple’s core business values. By implementing this strategy apple reduced its ability to offer a different product and, as a result, it lost about 50% of its worldwide PC Market Share.

Apple Inc. is a giant in the world of PC industry. However, they were not the PCs mainstream, perhaps due to the premium price. Although its aesthetically pleasing design and high functionality were revolutionary, the market itself was easily accessible for new entrants, especially, like IBM. IBM spotted an opportunity in the PC market and entered it with a different market positioning, which consisted in the low-price differentiation strategy, exploiting economies of scale and cost advantage. Retrospectively, IBM products provided more versatility and utility than Apple products. Given the cheaper price and functionality, the customer had low switching cost and therefore, high buyer bargaining power. Addidtionally, IBM was more efficient at building their cost structure because they licensed their products to third parties and had little R&D expenses. The CEO John Sculley, decided to compete with IBM and imitate their strategy. Instead of carrying on with a proper differentiation strategy, he chose to trading apple products in the ordinary mass-market with reduced price. Furthermore, Apple allowed third party licensing to produce MAC clones which lead to increase of the supply bargaining power. This strategy was clearly against the basic principles that underpinned Apple’s core business values. By implementing this strategy apple reduced its ability to offer a different product and, as a result, it lost about 50% of its worldwide PC Market Share.