Apple Key Features of Apple\'s

Apple

Key Features of Apple's Success

Apple, Inc. is widely recognize as one of the most innovative technology firms in the world. It owes much of this reputation to the identity of its leadership, and particularly to the sweeping changes wrought by the re-emergence of company co-founder Steve Jobs. According to the model offered by Porter's 5 Forces, Jobs helped poise Apple to become the singular powerhouse that it is today.

Supplier Power:

Apple has achieved much of its success through its strategy of propriety ownership of its software and of other compatible products. As the case study by Heracleous & Papachroni (2009) indicates, key features of Apples success "have been the focus on design, the consumer experience, and the seamless integration of hardware and software (such as in the case of iPod and iTunes). The tight integration of its own operating system, hardware and applications, has been a strategy followed diligently by Apple." (p. 10) This approach has allowed it to remain in a position of total control over the supply of the fundamental programming innovations that help to define the company's product intuition and functionality. In this way, Apple defines the cost of its innovations according to the retention of in-house talent. In addition to reducing the power of suppliers with in its industry by removing their stake in its product, Apple also achieves a high level of internal loyalty and morale.

Threat of New Entrants:

One way in which Apple postured itself as something of an irreplaceable force in the industry was by trimming its product offerings to reflect only the highest standards of production and innovation. Upon Jobs' return to Apple in 1997, the case study by Heracleous & Papachroni (2009) reports, he forced the company to establish itself with unattainable dominance in those areas where it stood most to succeed while dispatching with participation in those areas where such was not possible. According to Heracleous & Papachroni, Jobs "axed 70% of new products in development, kept 30% that he believer were 'gems', and added some new products that could offer breakthrough potential. He also revamped the marketing message to take advantage of the maverick, creative Apple brand, and re-priced stock options to retain talent." (p. 7)

The outcome of these decisions was the creation of a brand and a product line commanding a tremendous amount of customer loyalty. The perception among users that products are designed with the intuition to meet their highly individualized needs prevents new entrants from depriving Apple of its core users. In addition, the innovation pursued here would create a product model in which high levels of product integration compound this loyalty with a need for a wide array of products and peripherals.

Threat of Substitutes:

Where the threat of substitutes to Apple's current industry dominance is concerned, the company's agenda of aggressive innovation and savvy target marketing has largely insulated it against such dangers. As our research explains the concept of market substitution, "the competition engendered by a Threat of Substitute comes from products outside the industry. The price of aluminum beverage cans is constrained by the price of glass bottles, steel cans, and plastic containers. These containers are substitutes, yet they are not rivals in the aluminum can industry." (Quick MBA, p. 1)

Quite in fact, few companies have ever demonstrated the effectiveness of this principle better than Apple, a technology firm which ultimately succeeded in dominating a flagging music market by substituting its technologically driven delivery innovations for the role played by record companies, distributors and music retail stores alike. In a sense, iTunes and the iPod have superceded all of these forces in determining the thrust of the current music industry. Today, there are many different streaming and subscription digital music services. Likewise, there are a wide array of mobile devices, media playing devices and listening platforms which might be perceived as potential substitutes for different aspects of Apple's music product lines and services. However, to present day, Apple owes a great deal of its success to the fact that its product differentiation is nothing less than iconic. Such is to say that its sleek design, singular functionality and general cultural cachet have helped Apple products permeate commercial, social and artistic contexts in a way that is virtually unparalleled in home computing.

Buyer Power:

In many ways, Apple has succeeded in rendering buyer power almost moot. By offering a product that is perceived by many buyers as unparalleled in quality and capability, Apple has remained fairly recession-proof even while maintaining some of the highest product prices in the industry. Without question, this ability stems from its innovations, which often come to define product design throughout the industry. The iPod is perhaps the greatest example of this. According to the case study, "in 2001, Apple introduced its first iPod, launching a new era for the company as it entered the consumer electronics industry. Capitalizing on the emerging trend of MP3 music, Apple introduced a breakthrough product that soon became synonymous with the MP3 music player category." (Heracleous & Papachroni, p. 9) Thus, even as its probative prices were sustained through many generations of advancement, each iPod, iPhone or iPad produce derived from this original model continues to command market dominance.