Porter Five Forces Analysis Of The Competitiveness Mobile Phone Industry
With the technology that is available today, new companies that offer goods or services can be developed and indulge into a market very quickly which causes more competition amongst those already in the industry. Consumers love to have the newest and most recent good that is made available which can benefit new companies who can slightly modify an already popular good. The five forces model, which was established by Michael Porter, is used to determine the probability of competition within or wanting to join a market. The model also allows you to market your company and it’s goods or services determined by the results of the model. Taking a look into the cell or mobile phone industry, it will be interesting to run the five forces model to examine the competitiveness of the industry since Apple has dominated the industry for quite some time now. While other mobile cellphone companies like Samsung have tried to compete, they have just been simply overshadowed.
An article titled ‘Porter’s fiver Forces’ by business to you explains to us that the five forces are a “threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products or services, and existing industry rivalry. ” Applying all of these to the cell phone industry can help us run the model to determine the competition level of the market as well as the competitive advantage Apple may have over any of their competitors. A threat of new competitors or new entrants into a market is always a possibility, no matter how competitive the market already is. Technology allows us to create mind-blowing goods and there are always people out there working to make the next big good or slightly modify the item that is good and make it great.
It is clear to see that Apple is the dominant figure in the cell phone industry, which makes the odds of new entrants coming in to compete with them very slim. Apple is too big and too well established for a new start up to try and contend with them. The brand loyalty to Apple from all their clients is superb, as many people cannot wait to get their hands on the next Apple iPhone and connect it with their other Apple devices. It would be nearly impossible for a new entrant to come in and pull these loyal customers to their side. While the bargaining power of suppliers would leave the suppliers with the opportunity to charge Apple expensive rates for their goods and services, they do not. This is solely because of Apple’s utter dominance in all of their markets. For example, an Shobhit Seth’s Investopedia article on the ’10 Major Companies Tied to the Apple Supply Chain’ explains that “being associated with a brand like Apple can be a remarkable boon for a supplier firm” because “Apple has a reputation for innovation. ” (Seth) In fact, instead of there being a bargaining power of the suppliers, Apple has the bargaining power over the suppliers. Shobhit Seth explains in the same article that “failing to please Apple can spell doomsday for a small or medium-sized supplier that relies significantly on the tech giant. ”
Being a part of Apple’s supply chain and contributing to their success will give you plenty of business for a long time coming. As we see in figure 1 shown below from Jeff Dunn’s article on iPhone sales, Apple’s sales have continuously been on an upward trend, which would require more work from suppliers each year. The bargaining power of buyers is very similar to that of suppliers in the fact that if you are unhappy with the product of Apple and you decide to switch to a Samsung, it will not bother Apple one bit due to their outrageous number of clients. If you don’t like the price of Apple, you move on as you have no bargaining power against the giant. The ability to connect all of your Apple devices and the iMessaging between Apple users are brilliant ideas implemented by the Apple team that makes consumers feel as they can not operate or will be left out if they do not have an Apple iPhone. The threat of substitute products may have the highest percentage of possibility to limit Apple, but because of their dominance in the field, it is nothing to worry about.
Samsung is the next closest competitor to Apple and sure their phones are priced relatively cheaper, and Apple may lose customers because of this reason, but they have priced and marketed their products accordingly and know that they will still get the asking price because people demand these products that badly. Lastly, the rivalry and competition that is in the market already is between Apple and Samsung. Samsung knows that they are over shadowed by the dominance of Apple but they are the only real two competitors in the market. Almost everyone has a mobile phone now a days so the population of consumers is very large. Being able to split that population ultimately between 2 companies is great for both. Samsung knows they have to maintain prices slightly cheaper than Apple or else everyone would have an iPhone.
Prior to running the Porter’s five forces model, I wondered why we don’t see any newer companies try to jump into a market with little competitors, but it is because the two biggest players are very well established and respected companies who have a long history of success. We see that there are so many car companies because each car owner has a different need or want, but with a phone, there are a limited amount of ways to make a phone different from the next besides the style and the look. With the information gathered on Apple and the cell phone industry, I would not risk diving into the market to compete with Samsung and Apple.
