Five Forces Model of Competition free essay sample

Five Forces Model of CompetitionApple The Analysis of Apples position against its competitors using Porters five forces, supplier power, barriers to entry, threat of substitutes, buyer power, and the degree of rivalry is listed below. Threat of New Entrants: The threat of new entrants is low. The start costs are extremely high. It is in the range of $5-10M. Companies will not want to invest this money especially if the ROI is going to take long and the market competition from clones is strong. The existing companies have capitalized on the distribution channels and have created strong branding awareness. The probability of success is so low that competitors pursue niche markets rather than trying to compete with the bigger companies. Companies like Apple together with Dell, HP, and Gateway have created a name for themselves with consumers which is hard to supersede. Bargaining Power of Suppliers: The market is flooded with computer component suppliers especially in China and Taiwan. We will write a custom essay sample on Five Forces Model of Competition or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page They need to be competitive to ensure they can retain the business with the large computer companies. The only area that has a limited manufacturing base is the computer processing chips. These are manufactured by Intel, AMD and a few other companies. Given the above, larger companies can readily switch to another supplier without any major repercussions. Suppliers can adjust pricing and quality to make their products more attractive so competition is high leaving them in a low supplier power position. Bargaining Power of Buyers: All of Apples customers have a variety of computer companies from which to chose when it comes to purchasing hardware, software, or peripherals. Switching costs are low. The buyer has the ability to switch when quality, service or price offered elsewhere is better or cheaper. This situation places the buyer power in a strong position that can only be countered by companies with strong product differentiation that would increase the switching costs. Threat of Substitute Products: Substitute products are readily available so this threat is very high. Competitors work to convince their customers that their product is superior to its competitors. The more differentiation of product the less likely the switch to a substitute will occur. If prices are higher, then the company with the higher price has to provide justification for the increase. Apples operating system differentiation can command higher pricing when it is presented to the creative designer community, but not to the individual computer buyer unless they are specifically looking for such enhanced graphic capabilities. Rivalry among competing Firms: Apple has many competitors that have the advantage of possessing the larger portion of market share. Apple competes against companies like IBM, Hewlett-Packard, and Dell. Even a smaller company like Gateway poses a threat. Competition is fierce in the computer hardware industry and switching costs are low.