Industry Classification

Computer Hardware and Related Software• iMac• MacBooks• Mac Pro Desktops• iPad• Mac Displays• Time Capsule• Xserve/ Mac Pro Servers• Mac Mini Server• Mac OS X• Final Cut Studio• Logic Studio• iLife• Aperture• iWorks• Apple Remote Desktop

Media and Communication Devices• iPhone• iPod• Apple TV• iOS Operating System

Digital Media Content• Music• Movies• E-books• App Store

Computer Hardware Industry Overview

A highly competitive industryA mature industryMarket is characterized by frequent product introductionsA few well-established companies, such as:

HP (Global leader with 17.4% market share)DellAcerApple (Seventh in global market share (4.3%)ToshibaLenovo

Three main operating systems for personal computers:Microsoft Windows(used in 85-90% of PCs worldwide)Mac OS XDifferent flavors of Linux

Intel Corp.’s processors are used in approximately 80%of PCs

79.2 % of US

Market Share

Porter Five Force Analysis of Computer Hardware Industry in Relation to Apple

Level of Threat in

the Industry:Moderate to High

The Threat of New

Entrants:Low

The Threat of Buyers:

Low

The Threat of

Suppliers:Moderate

The Threat of

Substitutes:

Moderate

The Threat of Rivalry:

High

The Threat of RivalryHigh

Intense price competition Dominated by Windows, Apple is a

minor player Continuous Product Introductions

focusing on product feature enhancements

Apple’s iPad competes with low-end PC market

The Threat of New EntrantsLow

Economies of Scale Product Differentiation Proprietary Technology Know How Favorable Access to Raw Material Learning-Curve Cost Advantages Customer-Switching costs Access to distribution

The Threat of SubstituteModerate

Smartphones are the biggest substitutes

More than 10 billion units being used world wide

New smartphone functionalities are on the rise

The Threat of SuppliersModerate

Intel is the sole supplier of Microprocessors for Apple’s desktops or laptops

Use of multitude of custom components that can be usually sourced from one supplier only

No risk of forward integration from the suppliers

The Threat of Buyers

Low

A large number of individual buyers Buyers unlikely to engage in

backward integration.

Opportunities for Apple in Computer Hardware

IndustryApple can continue to gradually increase its market share in this mature industry by:

Engaging in product feature enhancements

Capitalizing on its excellent service and support

Improving the processes to reduce the operating costs

Capitalizing on the “Halo Effect” associated with Apple products

Mobile and Communication Device

Industry OverviewA relatively new and emerging market

Smartphone sales increased in 2010 by 72.1 percent from the prior year, whereas sales for all mobile phones only increased by 31.8 percent.

A moderately concentrated though competitive industry

Product differentiation on the basis of product features, linkage with other firms(Wireless Carriers), consumer marketing, and product reputation.

Porter Five Force Analysis of Mobile and Communication Device Industry in Relation to

Apple

Level of Threat in

the Industry:

Moderate

The Threat of New

Entrants:Low

The Threat of Buyers:

Low

The Threat of

Suppliers:Moderate

The Threat of

Substitutes:

Moderate

The Threat of Rivalry:

High

The Threat of RivalryHigh

A few major players Intense competition between major

players Android phones constitute 33% and iPhone constitute 16% of global market

share for smartphones Costumers have choices

Frequent product launches and rapid technological advances

Competitive pricing

The Threat of New EntrantsLow

Economies of Scale Learning Curve Cost Advantages Favorable access to raw materials Difficult to match the Product

Differentiation Proprietary Technology and Know How High Customer-Switching costs

The Threat of SubstituteModerate

Personal Computers, Tablets, Game Consoles, Portable gaming systems(PSP, Nintendo DS etc.), and CD Players

Unable to match processing power and functionalities of PCs

Third party digital contents are complimentary

All the substitutes do not provide mobile or portable user experience

The Threat of SuppliersModerate

Uses a variety of custom components that can be usually sourced from limited suppliers only

No risk of forward integration from the suppliers

The Threat of BuyersLow

A large number of individual buyers who are fragmented

Buyers unlikely to engage in backward integration

Products are differentiated

Opportunities for Apple in Mobile and Communication Device Industry

Apple can continue to be a dominant player in this emerging industries by:

Implementing technological leadership

Investing in strategically valuable assets

Adopt business strategies which will create customer-switching costs

Digital Media Content Industry Overview

An emerging as well as network industry

A highly competitive industry; major players are Apple, Amazon, Netflix and Google

Most of the contents are developed by third parties

Most of the contents are platform specific

Apple is the market leader for Apps and Music

Apple started the digital music revolution with the launch of iTunes and iPod.

Amazon is the market leader for E-books

Netflix is the market leader for streaming videos

Porter Five Force Analysis of Digital Media Content Industry in Relation to Apple

Level of Threat in

the Industry:Moderate

The Threat of New

Entrants:Low

The Threat of Buyers:

Low

The Threat of

Suppliers:Moderate

The Threat of

Substitutes:

Moderate

The Threat of Rivalry:

High

The Threat of RivalryHigh

Competition is intense between the major competitors

Competitive pricing Competitors engaged in gaining First- movers

advantage Amazon challenging Apple in the Apps market

The Threat of New Entrants

Low

Apple has market power High Customer-switching costs Proprietary Technology Governmental Regulations

The Threat of SubstituteModerate

Books, DVD’s, Video Games on game consoles and portable gaming Systems, Cinemas, and any outdoor activities are suitable substitutes for digital media contents

Substitutes still popular with majority of population

The Threat of SuppliersModerate

Application Developers are fragmented E-books, Music and Movies developers

are not fragmented Content providers may have the option

to switch. Big content providers such as record

companies, movie studios or TV networks may start the distribution of the content directly

The Threat of BuyersLow

A large number of individual buyers who are fragmented

High switching costs for customers. Products are undifferentiated,

especially in the case of non-exclusive digital content