Today’s environment for conducting business is quite competitive (Peskett, 2011). Currently, it’s a lot easier and less expensive to start-up a business, particularly with technology enabling business to be conducted online and internationally to win customers in foreign markets (Peskett, 2011).
According to Amedeo, competitive advantage is what makes an entity’s goods or services superior to all of a customer’s other choices (2018). Michael E. Porter who is an American academic has come up with the five forces which is a model that identifies and analyzes five competitive forces that shape every industry, and helps determine an industry’s weaknesses and strengths (Investopedia, 2018). The five forces are so vital if an entity is going to have a competitive advantage against similar ones. We are briefly going to look into each of the forces below using Apple and how the marketer can effectively take advantage of the environment for competitive advantage.
Apple experiences a high level of competition from its competitors in the technology sector. Some of its competitors include Google, Samsung and Amazon. The companies spend a lot in carrying out research and also developing their products. This makes the competitive force to be very strong hence Apple is forced to develop unique and new products continually so that they may ensure they maintain a stable market position (Investopedia, 2018). There are so many forms in which Apple manages to stay relevant despite the competition. Below are some of the forms:
Uniqueness through product differentiation.
In order to remain unique, Apple ensures that there products work differently compared to the other devices offered by their competitors. One of the unique factors is that they have a totally different operating system and format. The company has also come up with systems that work together, pretty seamlessly, in a sort of ecosystem (Investopedia, 2018). For a matter of fact, its competitors also have similar ways of doing the same thing but the fact is that once someone buys Apple products, there is a unique appeal to stay within that ecosystem (Investopedia, 2018). With this in mind, Apple has an incentive to try to get users hooked on Apple products early on, and that starts with staying relevant (Investopedia, 2018).
Another form in which Apple manages to beat competition is through exclusivity. According to Investopedia, Apple products despite being differential are also on trend (2018). You can tell an Apple product by first look; it is that distinctive in appearance, which is part of its brand and its appeal (Investopedia, 2018). Moreover, many of Apple’s devices and media services are priced at premiums to its competitors and incorporate premium materials, such as aluminum instead of plastic casing for phones, tablets and laptops which serves to differentiate Apple products as being premium and reinforces the exclusive concept (Investopedia, 2018). At the same time, many popular applications and software programs are designed solely for Apple so you need an Apple device to access them (Investopedia, 2018).
A marketer can therefore take advantage of the environment by ensuring that the products and services offered are exclusive and unique. By doing this, the marketer is able to compete with rivals head on and ensure they have an edge in terms of having a competitive advantage in the market.
Bargaining power of suppliers
Dudovskiy states that the bargaining power of suppliers is not that significant in general and although most components essential to Apple are generally available from multiple sources, a number of components are currently obtained from single or limited sources (2018). Some of the forces that make Apple stand despite being everywhere and facing so much competition are:
Apple is able to keep its capital assets with suppliers’ facilities and also engages in inventory prepayments at negotiated prices( Investopedia, 2018). By doing this, Apple establishes a strong connection with its suppliers and comes handy whenever they need favors from them. Some of its suppliers are Motorolla, IBM, Sony,Disney, Intel and Fox.
Many of Apple’s suppliers are overseas, and the company relies on them to ensure the components and products they produce adhere to the standards of quality that Apple and its customers expect (Investopedia, 2018). It also extends warranties to its customers, and in some cases, may have to make good on any quality issues before it can be reimbursed by those suppliers (Investopedia, 2018).
Apple relies on a variety of third-party digital content, including movies, music and books (Investopedia, 2018). It therefore uses these products to fuel its ecosystem and tie its product portfolio together since It has to offer the digital content its customers want, and this means negotiating commercially reasonable terms with its suppliers (Investopedia, 2018). Suppliers however, have an extremely high degree of power in this regard. Also, Apple needs good relationships with third-party software developers since there is no guarantee these developers will create software that can run on Apple systems, and if there is not enough available software that works with Apple devices, customers may stop buying its products (Investopedia,2018).
As we can clearly see, establishing good relationships with suppliers is the key to having a competitive advantage amongst your competitors. A marketer should ensure he/she is well connected to a diverse and broad list of suppliers in order to be able to satisfy fully customers’ wants. There is definitely beauty in being diverse with your suppliers. Different suppliers offer different features which gives a company an added advantage. When a company maintains such good relationships like Apple, they are able to obtain huge favors in various forms such as having flexible contracts with suppliers which helps them remain relevant.
Bargaining power of customers
Customers can change brands quickly meaning they are powerful in that a company like Apple has to work really hard at ensuring that every single customer is satisfied with whatever they offer (Ferguson, 2017). Apple is able to achieve this since:
Market is fragmented
Due to market fragmentation, the bargaining power of Apple’s customers is low and its products and services appeal to a wide variety of individuals since the products and services have a broad range of uses (Investopedia, 2108). Apple products can be found anywhere for example in corporate environments and high schools, government offices and home offices and no one demographic or subgroup has more influence than another (Investopedia, 2018).
As stated by Investopedia, Consumers may also impact Apple’s business strategy with their preferences (2018). For instance, before an iPad of any size can really work well in business or for people who may have to work on documents on the fly, such as students, a USB port is practically a necessity and Apple does not offer a tablet with a USB port and instead has an adapter that works with digital cameras but not documents (Investopedia, 2018). Going forward, customer preferences for USB ports could force Apple to develop a new iPad with that feature (Investopedia, 2018).
It is evident that at the core of any firms’ success, customers play a vital role. If a firm does not embrace the desires customers long for then they are not going to achieve what they intended to achieve. A marketer’s main target should therefore be to go with the flow of customers. Marketers should work at ensuring they remain relevant and that they have a competitive advantage by ensuring they put customers at the forefront of their plans. Just like Apple, a marketer can also look into ways in which the market is going to be fragmented so that the bargaining power of customers becomes low and its products and services more appealing.
Threat of new entrants
The power of a company can be affected by the force of new entrants in the market. The less time and money it costs for a competitor to enter a company’s market and be an effective competitor, the more a company’s position may be significantly weakened (Investopedia, 2018). An industry with strong barriers to entry is an attractive feature for companies that would prefer to operate in a space with fewer competitors (Investopedia, 2018). Apple is able to curb the threat of new entrants since:
Cost of entry
There are considerable barriers to a company wanting to compete with Apple since any new entrant into the technology sector has to absorb substantial costs in research and product development as well as marketing and distribution (Investopedia, 2018). The threat of new entrants thus becomes very low.
Patents and proprietary knowledge
Ferguson states that the real issue is the ideas and knowledge necessary to create competing technology (2017). He goes on to state that these concepts and ways of doing things can be patented, creating a barrier to entry in the process. The founding company of the innovation could charge the new entrant with patent infringement (Ferguson, 2017). Even if the competing technologies are not exactly the same, they could be close enough to warrant a patent infringement charge, or at least delay the debut of a new product (Investopedia, 2018).
A marketer can opt to look into venturing into projects that have few firms and that which have strong barriers of entry in order to have a competitive advantage over the other firms and stay relevant. A marketer can also look into opportunities that require a short time to venture in and that which require less capital.
Threat of substitute products
The threat of a substitute product effectively replacing Apple in the market is quite low (Ferguson, 2017). An example of a product that can replace it is a landline telephone to make phone calls. Another example is a digital camera for taking photos. The land line telephone and digital camera compared to Apple products such as the iPhone have limited features and people would therefore opt to just use the Apple products since they have advanced features and can perform numerous tasks. This clearly shows how substitution has a weak force in replacing Apple.
A marketer can look into ensuring that the products they offer in the market are diverse and have dozens of advanced features in that finding a substitute is almost impossible. By doing this, a marketer is able to aid a company in ensuring that they stay at the top.