Zaineb Baig
Assignment 3
Apple Case

  1) Use Porter’s Five Forces to analyze the personal computer market in the mid-1980s based on information in the case.   

Entry Barriers

Forces lowering entry barriers

  * IBM’s open architecture lowered entry barriers
  * Standardized components are widely available
  * R&D is done by component suppliers
  * Assembly is easy and does not require strong production skills. Evidence for this is the long tail of small firms in the industry that collectively still accounted for half the global market in 2005, no one of which had more than 2% of sales.
  * Distribution is not hard

Forces tending to raise entry barriers

  * Importance of brand as an assurance of quality
  * Economies of scale on the input side
  * Economies of scale required to support dedicated customer care functions
  * Economies of scale required to support diverse product offering (Dell’s mix and match)
  * Economies of scale required to support information systems and tightly

Buyer Power

Buyers have without question have become more powerful
  * They see PCs as commodities and products of leading firms as direct substitutes for each other
  * Buyers have become more sophisticated about computing, and more price sensitive.
  * Translates into low switching costs and downward pressure on prices

Suppler Power

  * Powerful suppliers of key inputs (operating system and microprocessor) have been able to extract economic value from the industry
  * 2005 Intel and Microsoft earned $20 billion while the entire PC industry only earned $6 billion.
  * Suppliers of other components have little or no power (inputs such as memory chips and hard drives are commoditized).


  * Historically few if any, but that is now starting to change.
  * Computing is starting to become ubiquitous.
  * Video game consoles, wireless phones, digital TVs, etc are all computers
  * If the center of gravity...