Comm 401-G
Individual Case Analysis
Apple Inc. 2012

October 28th, 2013

By:
Giuseppe BALDINO
1710230

Word Count 1780
Introduction:

Apple, a gazelle in the technological industry can associate a major part of its success to its innovative CEO Steve Jobs. The unexpected announcement of the sudden and tragic death of the company’s CEO, leaves many business analysts and devoted Apple aficionados sceptical of the company’s future in such a cut throat industry. The empire is passed on to Tim Cook, the previous Chief Operating Officer, leaving many to believe that Apple may fall behind, as Cook does not possess the same aggressive characteristics as Jobs in protecting intellectual property. As once stated by Jobs “we thrived when we created intellectual property…. If protection of intellectual property begins to disappear, creative companies will disappear.”1 This being said, will Apple continue to release innovative products as it once did with Jobs?

External Analysis:

The technology sector can be seen as highly competitive and is advancing at an exponential rate. Apple must adapt rapidly to changes in the personal computer industry. Companies in this sector have to deal with average selling price falling at an exponential rate but also with components constantly being upgraded and offered at a cheaper cost. With such technologies constantly changing manufacturers must invest large amounts of capital towards research and development in order to satisfy consumer’s demands. An operating system that is threatening Apple’s I-Phone IOS is Google’s Android platform. With competition being so fierce within this industry one can imagine how valuable intellectual property is to a firm.

Legal battles are of no surprise within the industry, as large amounts of capital are allocated every year towards research and development for firms to discover the next trend in technology. Legal actions have been taken against firms such as HTC, Samsung and Google for violation intellectual property. The Department of Justice has also been investigating six cases of price fixing after Apple developed a strategy to allow publishers to set their own prices for E-books. This caused Amazon to lose 60% of its market share, forcing them to increase prices above their advertised $9.99. Needless to say, companies in this sector must compete with ever changing technologies without instigating legal litigations, potentially wiping out their minimal profits.

In order to establish what Porter refers to as “the threat of new entrants,” for the Personal Computer, one must evaluate who has a significant market share. The personal computer industry is dominated by powerhouses such as Hewlett Packard, Dell, Lenovo and Acer which in 2011 accounted for 53.6% of worldwide shipments. Local entrepreneurs who assemble custom personal computers “white boxes” representing 30% of the market share. Regardless of their combined market share, these mom and pop companies do not have the resources to compete with the sales of the industry’s power houses, the production of scale, nor do they have the funds to allocate towards research and development which would grant them a competitive edge. The key market holders have set the entry barriers very high making it extremely difficult for small firms to compete with their market share.

With the rising use of smart phones and gaming systems able to complete the tasks of a personal computer, firms in the industry face an increasing risk of substitution. Smart phones such as the I-Phone and the Samsung Galaxy, allow consumers to surf the internet, receive emails, receive media and enjoy all conventional phone amenities. Gaming systems such as the “Sony PlayStation 3 allow users to watch DVDs, surf the web, and play games directly online in addition to playing tradition video games.” Not only do clients demand the most technologically advanced products, they also demand them at a competitive