Apple Inc. founded in 1976 in the United States, is a prominent global company in the electronics industry. The company creates and produces various electronic devices, including smartphones, laptops, tablets, wearables, and accessories. In addition, Apple Inc. provides different services such as payment solutions, cloud services, and advertising (Apple, 2022). Apple Inc. is globally recognized for its strong brand reputation and high customer loyalty. Since its incorporation, the company has consistently seen revenue growth quadruple, reaching $394.33 billion in 2022, when it was also ranked as the worlds most valuable brand (David, 2023). According to David (2023), Brand Finance Global 500 reported that Apple Inc. set a new record of the highest brand value ever recorded in 2022 in its history. In the same report, Amazon and Google ranked second and third, respectively. However, in 2023, Amazon surpassed Apple to claim the top spot. The technology industry is highly competitive, marked by intense price rivalry. It is dominated by the five major brands known collectively as GAFA (Google, Amazon, Facebook, Apple, and Microsoft). In Europe, the competition between Apple and Samsung is especially fierce. From May to June 2022, the market values of these two leading brands were nearly identical (Statcounter, 2022; Saha et al., 2020). 

Federica, (2023) reported that globally Samsung was the leading company in the global smartphone market in the third quarter of 2022 with a 20% market share, while Apple held 16%. In the fourth quarter of 2022, Apple overtook Samsung, achieving a 23% share compared to Samsungs 19%. As a result, Apple Inc.s outstanding performance was a key factor in selecting it for this study.

Research Objectives

This study aims to identify different industry forces that impact the performance of Apple Inc. in the lenses Porters five forces framework.

Research Questions

What are the major industry forces that impacted the performance of Apple Inc.?

Porters Five Forces Framework

This framework of Porters five forces is a business model that explains how competitive advantage can be achieved by a company through understanding industry structures and dynamics (Porter, 2008).

Bargaining power of buyers

The power of buyers refers to the power buyers exercise on a company. Suppliers are more powerful in a market where a small number of buyers purchase large volumes, goods are undifferentiated, low switching costs, backward integration, not quality sensitive, and where the buyers have full information about the cost structure and margins of the sellers. The best mechanisms to defend against the power of buyers include raising the switching costs for the buyer, increasing brand loyalty, and product differentiation (Kostetska, 2022).

Bargaining power of suppliers

The Bargaining power of suppliers refers to the power suppliers exercise on a company. This power is exercised through charging high prices, limiting the quality of products/services, or shifting costs to industry players. Suppliers are more powerful in markets where there is a small number of suppliers, and differentiation of the suppliers products/services is available. Some of the strategies to defend against the power of suppliers include acquiring or merging with the suppliers (Kumar & Nanda, 2022).

Threat of new entrants 

This threat relates to the situation where new competitors try to win share and power in a market. This threat is very high in a market where barriers to entry are relaxed. New entrants force the existing companies to cut prices. Cutting prices for the existing companies due to the entry of new competitors can negatively affect their profitability or in a worse situation, companies may ultimately fail and lose the market completely. The best mechanisms to defend against the entry of new competitors include aggressive marketing leading to an economy of scale and putting in place hard mechanisms for the companies entering the market to achieve supply chain efficiently (Kohnová & Salajová, 2023). 

Threat of substitutes

Threat of substitutes refers to the situation where the buyers have a choice between products of the same functionalities. Hardly, the company is aware of all potential substitutes available for its products/services which makes it hard for the companies to deal with this threat. Substitutes are always available in the market, but they are easily underestimated simply because they are different from existing products/ services. The main mechanism to defend against substitutes is to differentiate the product/services to the extent where the customers remain with no other option (Wellner & Lakotta, 2020).

Rivalry existing competitors

The rivalry of existing competitors refers to the intensity of the competition in the market. The rivalry is more powerful in the market where companies are equally balanced. Rathore et al. (2023) argue that slow industry growth and little product differentiation are the contributing factors in making competition intense among the existing competitors. Porter, (2008) argues that due to constant competition, the profitability of the market grows at a very low rate or not growing at all.

Disadvantages and criticisms of Porters Five Forces Framework

Being outdated: Obu, (2022) criticizes the model as being developed in a business context named social era which is completely different from the digitalized business context of today which changes very quickly. Thus, the model needs to be revised to match the current business context.

Generalization: Customers need to be classified between intermediate from end customers where the manufacturer sells personally and distributors. Isabelle et al. (2020) criticize the framework for failing in prioritization of customers. This may lead to competition between wholesalers and manufacturers.

This study utilized a desktop research methodology to identify different industry forces that impact the performance of Apple Inc. in the lenses of Porters five forces framework. Desktop research involves gathering secondary data, or information that can be obtained without fieldwork, making it more it a more cost-effective method compared to field research. As such, this study relied on existing resources.

Limitations

Time constraint was the main limitation of this study. This relates to the huge information required to be reviewed.

Ethical Issues

Unauthentic work: This study was produced without cheating or colluding with other researchers and it is not the product of buying the service of other individuals to produce it on my behalf and claim to be mine.

Power of buyers: Moderate

Apple customers are attracted by brand loyalty, user experience and innovative devices. However, there are alternative devices in the electronic market which are available at lower cost which gives the customers power to negotiate. To defend against the power of buyers, Apple committed to consistently creating innovative products/services with outstanding user experiences adding value to customers (Apple, 2022).

Power of suppliers: Moderate

The supply of components of Apple are available from multiple sources, single sources or limited sources. The wide industry demand for these components makes them scarce though they are available from multiple suppliers. The suppliers are facing a big challenge of meeting the required wide market demand and Apple may face the challenge of getting the required demand to satisfy the production until the suppliers grow in number or at the required capacity. To defend against the power of suppliers, Apple has entered into agreements with suppliers of different components needed in production at commercially acceptable terms though these terms cannot be guaranteed to continue in the long-term (Apple, 2022).

Threat of new entrants: Low

It is hard for new entrants to win a market share and market power in the electronic industry due to barriers such as high capital investments, high costs of research and development, economy of scale and strong brand loyalty. Apples annual report, (2022) reveals that research and development expenses were more than 51% of total operating expenses in the year 2022. These expenses are 50% and 48% of net operating expenses in the year 2021 and 2020 consecutively. With these barriers together with strong brands in the market, it is hard for new entrants to enter into electronic market.

Threat of substitutes: High

In the electronic industry, competitors produce products/services of similar functionality at different prices. Khalid and Vida, (2023) argue that the sales of laptops are influenced by tablets and smartphones. To defend against this threat of substitutes, Apple invests in differentiating its products/services through innovation. However, with the fierce competition in this electronic market, this differentiation needs to be at the level where the users feel that there are no other products of similar functionalities to make them remain loyal to the brand.

Rivalry of existing competitors: High

Competition in the electronic industry is fierce and is characterized by aggressive price strategies. Giant brands in the market such as Samsung and Huawei are continuously introducing electronic devices at lower prices compared to Apple. Statcounter, (2022) reports that the two giant brands of Apple and Samsung shared almost the same market value during the period between May and June of 2022. Federica, (2023) reports that in the third quarter of 2023, Samsung outperformed Apple. To defend against this high rivalry of existing competitors, Apple invested in differentiating its products and services and maintaining its strong brand loyalty.

Overall, the results show that Apple is operating in a highly competitive market characterized by aggressive pricing strategies. There are different products of similar functionalities in the electronic market which places Apple at a high threat, but the buyers and customers of Apple have moderate bargaining power. There is a low threat of new companies entering the market because of different factors such as high capital investments, high costs of research and development, strong brand loyalty and economy of scale. The strong brand loyalty, differentiated products/services, and loyal base customers give Apple a strong position in this aggressive competitive market. To maintain its position, Apple invests in innovating to make its products/services differentiated and maintain its strong brand loyalty.

In conclusion, it is hard for new companies to enter the electronic industry due to factors such as high capital investments, high research and development expenses, and economies of scale. However, the products and services of similar functionalities place a high threat to Apple Inc. and Apple opted to constantly invest in innovating and differentiating its products/services and maintain its strong brand loyalty to mitigate this threat. Apple Inc. needs to consider the consumers of low incomes as the products of Apple are considered to be expensive for this group and where the competitors are willing to offer substitute products at low costs.

J.C.U.; and S.N.: Confirm the collective responsibility in the preparation of this study.

We acknowledge the contribution of our mentor Masood Ahmed Qurash for his contribution. We are also very grateful to our families and colleagues for the support provided in the preparation of this study.

We declared that no conflicts of interest related to this study.