20 situational analysis 21 external analysis 211

2.0 Situational Analysis
2.1 External Analysis
2.1.1 Industry Analysis
2.1.1.1 Porter’s Five Forces
The industry analysis was done using Porter’s 5 forces as shown in figure 1 below.

Figure 1. Apple’s Porter’s Five Forces analysis (Khan, Alam, & Alam, 2015; Lehuan, et al.,
2011; TAN, 2013)
Rivalry in the industry
Apple faces fierce competition from key tech
companies such as Samsung, Microsoft,
Nokia and Google which is as a result of cost
leadership strategy.
Nonetheless, Apple maintains its position in
the market from its high quality products and
high income earner customer focus.
Bargaining power of suppliers
Apples suppliers have a low to moderate
effect on its operations due to their unique
competence in manufacturing Apple’s
products.
It has a diversified number of suppliers and
hence doesn’t rely on one supplier which
lowers their influence on it.
The company also buys in large quantities
lowering the suppliers’ bargaining power.
Threat of Substitutes
Apple’s product face high to moderate threat of
substitutes for its iPad by Samsung tab, the
iPhone by Nokia, Samsung galaxy and Sony
Erickson.
However, Apple’s OS, iTunes, app store and
iClouds are its key strength areas as it has no
close substitutes.
Threat of new entrants
Apple’s global dominance makes it difficult
for new entrants to gain a market share to earn
them a competitive advantage.
Its contract manufacturing strategy, its
copyrights, high switching costs and patents
bars new entrants.
The hence makes threat of new competitors is
low.
Bargaining power of buyers
Apple has a strong image as an innovator,
great investor in research and development
and in quality continuation, and is hence able
to retain its customers.
Apple is also very effective in switching
consumers towards itself. Hence, buyers have
no significant influence on Apple’s operations.

2.1.2 Market Analysis
2.1.2.1 Market Structure
Apples products have a promising market this is because an increasing trend in sales has
been reported over the years as shown in figure 2 below.
Figure 2. Market growth trend (Statista, 2016)
2.1.3 Customer Analysis
Customers are key to the success of Apple. By considering who the main customers are,
Apple is able to understand what they seek, where they want to buy them, when to buy and how
they buy them. The company is also able to understand aspects that show why the customers buy
their products and hence continuously improve on such aspects. Table 1. Below shows an
analysis of Apple’s customers.

Table 1. Customer Analysis- Apple Inc. (Apple Inc, 2016)
Who Main Apple customers are the Mac and Windows users. They include students, graphic
designers, banks, hospitals, developers, schools, business owners, IT professionals, law
firms and scientists.
What -Customers seek originality, quality, fashion, convenience and luxury.