In the past several decades, the computer and consumer technology industries have experienced high growth. Early on, supplier power was very strong. There were few competitors in computer technology hardware. However, more recently supplier power has weakened. There are still relatively few competitors, but Moore’s Law is coming to an end, which means that the major suppliers of computer technology hardware, such as processors, will have fewer and fewer competitive advantages moving forward. Apple as a supplier faces few competitors the same brand recognition as Apple. For Apple, then, they face moderate-to-low competitive rivalry in the computer industry. In contrast, Apple faces low competitive rivalry in the smartphone industry, which will be discussed in much more detail shortly. Meanwhile, as a buyer, Apple has more options now than ever when it comes to choosing suppliers. From this perspective, the consumer computer industry has a moderate balance between the power of buyers and sellers. There is increasing competition in the low-end consumer computer market, which Apple does not operate in, but relatively low-to-moderate competition in the high-end computer market.

There is only a moderate level of threats of substitution in the computer industry. Mac computers are similar in certain ways to personal computers that run Windows or other operating systems, but are certainly distinct from such competition. The threat of new entry into the computer industry is low-to-moderate. Barriers of entry are high, especially for medium- and high-end computers. For low-end computers, the threat of new entry is higher. However, Apple does not operate in the low-end computer industry. The results of a Five Forces analysis reveals that Apple operates in favorable markets and is in a strong position both as a seller/supplier of personal computers and as a buyer of computer components.

Apple’s Competitive Advantages
The greatest general competitive advantage of Apple is its brand image. Apple’s brand is extremely recognizable worldwide. In fact, the brand is so strong that many consumers with Apple products are immediately willing to purchase the latest releases from Apple. The Apple brand, itself, generates high levels of demand for Apple products. However, demand for such products is not generated evenly. The iPhone, for example, continues to increase in sales in large part because Apple’s brand constantly generates demand for the iPhone. The sustainability of the competitive positions of Apple’s PCs, MP3 players, and smartphones is quite high throughout because of Apple’s brand image. However, the sustainability of the competitive position of the iPhone is extremely strong in the MP3 player markets. The supply chain of the iPhone (which will be discussed in more detail shortly) leaves its production cost quite low, while its brand image and cult-following status keeps its price high annually. Apple has been able to build such a strong brand through smart marketing campaigns and industry-leading innovation. While Apple’s Mac computers are considered to be high-end consumer technology, the technology giant virtually created the MP3 player market and the smartphone market through its innovative iPod and iPhone designs.

Another general competitive advantage of Apple is its high production integration and synergy. In other words, Apple products generate demand for one another by heavily integrating and interacting with one another. The most recent application of this is the Apple Watch, which integrates well with the iPhone and iPad. In fact, an iPhone is virtually required for the full functionality of the Apple Watch. The iPhone now has an undeletable Apple Watch app which serves as a marketing tool for non-Apple Watch owners. It should also be noted that Apple products tend not to work well with products from the brands of competitors, encouraging consumers to continue purchasing Apple products. The resulting synergy between Apple products creates a cyclical demand pattern that not only reinforces Apple’s brand, but also allows Apple to introduce new products into nascent markets much more easily. This has allowed for the continued success of the iPad, thus far.

The iPhone remains in a very strong and sustainable competitive position in the smartphone industry. Apple has partnered with every major mobile service provider in the United States to offer lower prices for older-model iPhones and iPads, allowing Apple to move its supply of older model smartphones and smart tablets. The demand for the iPhone remains extremely high. The same cannot be said for Mac computers and the Apple iPod. The issue for Apple’s PCs and MP3 players is a combination of market-specific factors and technological factors. Because smartphones now serve as MP3 players and music streaming services, including Apple Music (a renaming of Beats Music acquired by Apple a few years ago) are available on most smartphones, the need for a stand-alone MP3 player has diminished. Music streaming services are growing in popularity, meaning that any smartphone now has the capacity to easily play tens of millions of songs with a wifi or cellular signal. Given this, the need for an iPod in its current state is diminishing quickly. As a result, it is recommended here that instead of abandoning the iPod, Cook should develop and test an iPod with virtually no memory, but instead easily accessible and powerful wifi and cellular antennas to stream Apple Music. Such a product would continue Apple’s synergistic approach to product and services development, as such an offering would certainly promote Apple Music. Otherwise, Apple may be forced to discontinue its production of iPods.

Apple’s competitive position in the PC market is not nearly as bleak, although it is certainly not as favorable as its position in the smartphone market. Mac computers remain quite distinct from other computers. They are, of course, associated with the strong Apple brand, but have also been established as being virus-free, simple, and highly efficient. When the smartphone market was still young, iPhones were considered a status symbol. This is no longer the case. Yet, Macs continue to be status symbols, indicating at least a middle-class status. However, the technical specifications for Macs do not suggest that Macs are in the high-end computer range, even though they clearly are, if for no other reasons than brand image and aesthetics. There are a number of PCs that have much better technology than even the most expensive Mac computers. Nevertheless, it appears that Apple has been able to maintain its market share in the personal computer industry. But as the growth in the capabilities of computers appears to be slowing with processors slowing in the annual rate of growth for processing speeds, Mac computers appear firmly entrenched as major competitors. The Apple brand will likely continue to fuel moderate growth from Mac computers. Given the apparent slowdown of technological growth in the industry, Cook should expand its focus on the aesthetical qualities of Mac computers. This includes Mac laptops being extremely slim and minimalist designs for all Mac computers. By increasing the company’s focus on aesthetics, Cook can increase the competitive advantage that Mac aesthetics provide in the industry.

Situated between the Mac laptop computer and the iPhone is the iPad, which has had strong and steady sales growth in the past several years. However, as the iPhone Plus appears to now be a mainstay of Apple and the iPhone increases in capabilities, there are questions concerning the future role of the iPad. In fact, the tablet market may be the most unpredictable of all of the technology markets that Apple operates in. The tablet emerged as a hybrid between the smartphone and the laptop. Apple’s iPad currently dominates the tablet market, but there are questions concerning whether this market will continue to grow in the near future. To sustain the tablet market and the iPad’s dominance in this market, Cook should expand Apple’s offerings of iPad-specific apps. Apps drove the early sales of the iPhone. Yet, currently, most iPad apps also operate on the iPhone and some even operate on Mac computers. To differentiate the iPad from the iPhone, Apple should develop its own set of iPad-only apps. In addition, Apple should add certain hardware functionality to the iPad that the iPhone will not have for years. The iPad-specific apps must make use of such added functionality, further distinguishing the iPad from the iPhone.

Apple’s Supply Chain Model
Apple’s supply chain provides it another distinct competitive advantage. The technology giant’s current supply model should be described as a New Product Development Process model, because the company constantly developed new versions of its technology and continues to develop innovative products that carve out new product markets. The base for Apple’s supply chain model is not its exclusive suppliers, but instead its research and development team. Apple is able to constantly produce new products because it constantly develops new technology. Apple relies on very few supply chain partners for its extensive line of products. Such suppliers have been very reliable for Apple, with only a few delays due to manufacturing issues. China serves as Apple’s top supplier of components, allowing Apple to keep costs low while delivering high quality products.

One supply issue that Apple faces is that there is high uncertainly currently about demand for iPhones. Apple has been able to seemingly over-produce iPhones because the technology giant has always been able to sell older generation models through sales promotions provided by mobile service providers. However, the current used smartphone market is getting flooded with used and refurbished phones at very low prices. Apple would be prudent to analyze market trends in the used phone industry to determine a more accurate number of iPhones to produce in the next several years. Overproduction of the latest iPhones would mean that in the next two years the supply of such iPhones may not have the demand to get sold. In addition, such an analysis would also help forecast future new iPhones sales, which would avoid underproduction issues that may arise in the next several years. As it stands currently, the used smartphone market is somewhat unpredictable, in that the historical trends in this market may not accurately reflect future trends. In addition, it is a recommendation of this project that Apple offer a wider variety of iPhones and iPads in the near future. Even though the iPhone 5c did not meet its expected sales, the reintroduction of the c-version of the iPhone may help regulate the used smartphone market. After all, many people would prefer a new iPhone compared to a used iPhone, even if the new iPhone is a low-end version. Such a reintroduction would help stabilize the unpredictable used smartphone market and, thus, help with sales and supply forecasting.

Summary of Recommendations
Conduct a market analysis to determine the feasibility of iPod products with little memory, but connectivity to both wifi and cellular data, allowing such devices to play Apple Music
Expand the aesthetic focus on Mac development
Add hardware to the iPad to distinguish it further from the iPhone
Develop apps exclusive to iPads to distinguish it further from the iPhone
Analyze the used smartphone market to address supply management concerns
Reintroduce the c-version of the iPhone to address supply management concerns