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Apple Inc Attractiveness of PC Industry - Group 3 Context:: 2 Categories

The PC industry has experienced significant consolidation in recent years, with the top 3 vendors now accounting for over 65% of worldwide shipments. Competition in the industry is high as products have become increasingly similar. Customers have moderate bargaining power due to the large number of brands and options available. The threat of substitution from smartphones and tablets is high and has contributed to a decline in PC sales since 2011, though Apple has been able to differentiate itself and maintain customer loyalty, facing a lower threat of substitution than other PC manufacturers.

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Amit Tyagi
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101 views

Apple Inc Attractiveness of PC Industry - Group 3 Context:: 2 Categories

The PC industry has experienced significant consolidation in recent years, with the top 3 vendors now accounting for over 65% of worldwide shipments. Competition in the industry is high as products have become increasingly similar. Customers have moderate bargaining power due to the large number of brands and options available. The threat of substitution from smartphones and tablets is high and has contributed to a decline in PC sales since 2011, though Apple has been able to differentiate itself and maintain customer loyalty, facing a lower threat of substitution than other PC manufacturers.

Uploaded by

Amit Tyagi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Apple Inc

Attractiveness of PC Industry -Group 3

Context:

While Apple pioneered the first usable PC devices, PC’s were brought into mainstream by IBM in 1980’s.
Industry constituted thousands of manufacturers that built PCs using Microsoft Windows operating system and
Intel processor. Industry boomed through 2000’s and sales peaked in 2011 to 352 Mn shipments worldwide.
Low prices and expanding capabilities were key growth drivers during this phase. The sales declined to 260 mn
shipments in 2019 and was expected to hit 241 mn by 2022 along with stabilization of prices in last decade
despite new machines having more memory and storage.

We analyse the attractiveness of PC industry using Porter’s Five forces framework.

1. Competitive Rivalry – High


PC industry is increasingly becoming concentrated with top 3 PC vendors (Lenovo, HP, Dell)
constituting 65.4% of worldwide shipments, up from 51% in 2014. The industry leadership position has
changed various times in last 3 decades indicating that as the PC industry developed, the rivalry also
increased.
Since available products in market are increasingly similar, Apple wanted to produce products that
were unique and well designed and have a loyal customer base who ‘love’ their machines. This allowed
the company to be able to differentiate itself from its competitors and dominate the premium PC
market.

2. Bargaining Power of Customers (Buyer Power) - Moderate


The PC market is very competitive and saturated with products. Consumers can choose from various
brands at various price bands and differentiated specifications. Because of the large number of
companies that are now operating in the PC industry the bargaining power of buyers has increased over
the years. Of the 5 categories of PC buyers (Home, SMB, Corporate, Government, Education), Home
buyers represent the biggest segment (approx. 50% shipments worldwide). This segment values design,
mobility and wireless connectivity in addition to price which is a factor for all segments.

3. Bargaining Power of Suppliers (Supplier Power) – Low to Moderate

2 categories –
Products with many sources : Memory chips, keyboards, disk drives etc – Low bargaining power
Products with limited sources : Microprocessors, Operating Systems – High bargaining power

4. Threat of New Entrants - Low


PC market is currently dominated by a handful of major players and is getting increasingly
concentrated. There is a huge barrier to new entrants because a company has to make a huge
investment in terms of R&D and product development to develop quality and innovative products. New
entrants also will be discouraged with huge startup costs for manufacturing, brand building, distribution
and customer service.

5. Threat of Substitutes - High


Smartphone and tablet industries affect sales of personal computers. They have various major players
and their products offer similar benefits that are offered by the PCs. With the growth of smartphones
and tablets, PC sales have declined from 352 Mn shipments in 2011 to 260 Mn in 2019

PC’s currently offer significantly higher computing power and the applications are more compatible as
compared to tablets and smartphones. However, with the fast pace of technological advancements,
smartphones/ tablets may attain parity with PC’s

However, apple has a loyal set of customers who ‘love’ their products. They would rather use Apple
products for simplicity, design, technology and convenience. Hence, threat of substitution is lower for
apple.

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