Behavioral Sciences | Apple Inc. | Group 1 Project |

TABLE OF CONTENTS

Introduction 3
External Environment 3 Customers 3 Suppliers 4 Competitors 7 Regulatory Environment 8 New Entrants 8 Substitutes 10
Conclusion 10

INTRODUCTION

Apple Inc. is an American multinational corporation that designs and markets consumer electronics, computer software, and personal computers. The company's best-known hardware products include the Macintosh line of computers, the iPod, the iPhone and the iPad. Apple software includes the Mac OS X operating system; the iTunes media browser; the iLife suite of multimedia and creativity software; the iWork suite of productivity software; Aperture, a professional photography package; Final Cut Studio, a …show more content…

This yields significantly higher margins and market share for Apple, among other benefits.

It turns out that Apple has secured about 60% of global touch panel capacity, with a focus on 10-inch displays. Some have speculated that this has forced some competitors to initially focus on devices with 7-inch screens, such as Samsung with its Galaxy Tab.

Because Apple is buying these components in such large quantities it can exercise significant leverage over suppliers. This leverage enables Apple to negotiate favorable terms and pricing. For instance, South Korean Fair Trade officials alleged that Apple struck a special deal with Samsung to obtain flash chips at below market rates. This favorable pricing means that Apple has a lower cost structure for its products relative to competing products. And all else equal, this lower cost structure results in higher margins for Apple versus competitors.

Second, when Apple commands such a large portion of the global market for a key component it creates enormous barriers to entry for potential competitors. Competitors can obtain the component in limited quantities but at a higher price, therefore placing them at a cost disadvantage. Next, competitors can launch different products — e.g., a hard drive based portable media device or a 7-inch touch screen tablet – that may not match the preferences of consumers.