Threat of New Entrants
The smartphone market is relatively new with quite a short history. Among the top competitors in this market, there is Apple Inc., a multinational corporation based in the United States that specializes in manufacturing and marketing of a wide range of products most of which are various kinds of software and electronics. Competing at the top of the smartphone industry, Apple Inc. has to face a multitude of pressures one of which is linked to the possibility of new market entries in the near future.
For a long while, the oligopolistic smartphone market has been considered to have a low threat of new entries. This was the dominant opinion because of such factors as expensive research and development required from a strong competitor, complicated manufacturing systems, secured intellectual property, and a high level of loyalty of the existing consumers (Tan, 2013). At the same time, the current threat level related to the threat of new entrants is evaluated as medium. This effect mostly occurs due to the presence of a wide variety of substitute products and the growing fragmentation of the market (Tan, 2013). To be more precise, today, there exist several smartphone brands that can perform the same or similar functions to those of Apple’s iPhones but can be purchased at a much lower price. Also, the same dynamic can be observed when it comes to the other products of Apple such as laptops and iPods. Practically, the main factors increasing the threat of new entrants for Apple are the high bargaining power of their consumers, the presence of strong competitors with products of high quality similar to that of Apple’s devices, and the existence of a variety of substitute products.
The Intensity of Rivalry Among Competitors in the Mobile Industry
Over the last several years, the mobile industry has been expanding rapidly and in many aspects. In particular, due to the increased demand for smartphones in the countries with emerging economies such as India and China, the number of customers grew significantly. As a result, many new manufacturers started to desire to take over a share of this market. Consequently, the number of competitors in the mobile industry started to grow as well adding to the variety of hardware and software approaches and options. While Apple produces some of the most expensive smartphones in the market, there exist a number of weaker competitors who produce affordable phones; the intensity in this niche of the market is increasing by the year (Prasad &Sahoo, 2011). Apple’s major competitor – Samsung still continues to be a strong hardware manufacturer with weaknesses in the aspects of software, but its ability to cover both higher and lower tiers of competition definitely provides the corporation with a significant advantage (Xu &Quddus, 2013). In this highly intense rivalry, Apple is able to maintain its top position due to the loyalty of consumers whose bargaining power allows buying premium quality smartphones that run solely on software created and developed by Apple. In that way, the competitive advantage and strategy of Apple can be attributed to such strategic features as the establishment and maintenance of a business ecosystem in which Apple managed to take over as many as possible sources of income by means of manufacturing hardware, developing software, and providing support service for their products. Additionally, the unique design and high-quality of smartphones produced by Apple have become the drivers of consumers’ readiness to purchase that are more powerful than the price of the products.
Prasad, V. V., & Sahoo, P. K. (2011).Competitive advantage in mobile phone industry. International Journal of Computer Scienceand Communication, 2(2), 615-619.
Tan, J. (2013). A strategic analysis of Apple Computer Inc. & recommendations for the future direction. Management Scienceand Engineering, 7(2), 94-103.
Xu, J.,& Quddus, M. (2013). Managing information systems: Ten essential topics. New York, NY: Springer.