Entrants can therefore either explore the market on a

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Entrants can therefore either explore the market on a small size by facing these economies of scale or bear the financial risks if moving in largely. As far as the issue of customer switching costs is concerned, the situation in terms of barriers to entry proves to be a mixed one. As they are mainly associated with software, PC hardware producers can’t sustain their superior position if new competitors also use – for instance – the Wintel standard. If this doesn’t hold and – as Apple’s position demonstrates – it’s prevented that PC hardware manufacturing entrants use the same software items, existing market participants maintain their competitive advantage. Switching costs are kept up and arising “lock-in and network effects” make consumers less probable to purchase another PC offering different software. In addition to this, preservation of business for the existing enterprises occurs when their hardware has special features. In a more political context, government’s regulations and restrictions can hinder or force the existence of barriers to entry. In Apple’s and its industry’s example where the majority of companies operates on a global basis governments’ interference plays an important role but didn’t have much influence in the last years. Rivalry among established companies As there was already stated, the PC industry is a highly competitive one. This means that rivalry is established at an increased level which is expressed by aggressive
Apple Computer Inc. DIT | Strategic Management | Iliev, Lindinger, Poettler 113 pricing policies, profound product design and innovation ambitions (e.g. Apple’s major efforts), intensive marketing, online direct selling (e.g. Dell and Apple), holistic support and after-sale services. All this shows that profitability isn’t an easy goal to reach in the PC market as all its participants are applying ambitious cost as well as price structures. Regarding the industry competitive structure the PC sector is a consolidated industry being dominated by only a small number of large companies. Nevertheless, it can’t be compared to an oligopoly due to the market’s soared competition. Interdependent companies whose strategies and actions have direct effects on market share and profitability of the other industry participants often end up in finding themselves in so called “competitive spirals” 156 . In the PC market, this proves to be valid as an – especially for high-end manufacturers like Apple – dangerous downward spiral came into existence. Although Apple never intended to follow the dominant industry company in terms of price, this often occurs by establishing an oligopoly. Moreover, the rivalry of the personal computer market is determined by the industry demand which is currently positioned at a very high level. Favourably for all the market participants it implies that from this point of view there’s less rivalry due to a large number of spending buyers, visualised by the industry life cycle.

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