The latest Apple smartphone, iPhone Xs, faces high competitive rivalry due to numerous factors. The aggressive advertising and rapid innovation of the competitors force Apple to invest a large amount of money into research and development (Securities and Exchange Commission 5). As the differentiation of products and the switching costs in the smartphone market are low, competition is one of the most significant considerations in the company’s strategic management.
The buyer power’s effect is also high due to low switching costs and high buyer information. As buyers can easily change their iPhone for another smartphone, Apple is forced to ensure customer satisfaction. Additionally, since extensive comparative information about the products of different brands is abundant, purchasers are empowered to change one provider for another. Therefore, customers’ bargaining power is to be considered an important strategic variable.
Threat of Substitution
Even though there are many available substitutes for iPhone Xs, the competitive threat of substitution is low. The primary reason for the matter is that customers demonstrate a low propensity to purchase alternatives, such as digital cameras, cellphones, and portable media players. Additionally, many customers are loyal to the brand due to progressive performance and convenience (Securities and Exchange Commission 2). Therefore, the company does not need to prioritize the threat of substitution in strategic planning and development.
The impact of suppliers on the company is low because of their abundance. Apple Inc. has a developed supply chain and can easily substitute one partner for another (Securities and Exchange Commission 5). Additionally, manufacturers value partnership with the company posing only a limited threat to Apple. In short, iPhone Xs has minor issues with the supply power making the matter insignificant for the effectiveness, innovation, and leadership.
The threat of New Entrants
The fact that there are many companies that can potentially enter the smartphone market makes the threat of new entrants a moderate issue. Considering the history of the market, Samsung was once a new entrant. However, over time, the company has developed its brand and has earned the loyalty of many customers. Today such companies as Honor and Xiaomi enter the smartphone market, posing a high threat to iPhone Xs. However, the high capital investment and expensive brand development limit the number of new potential competitors. Therefore, even though iPhone’s success may be threatened by new entrants, there are conditions that moderate the danger.
Porter’s Five Forces Diagram
Technology-Based Strategy to Outperform iPhone Xs
The latest iPhone Xs Max outperforms all the competitors in the majority of characteristics. However, the smartphone has a significant flaw that may be exploited to gain a significant technological advantage over the product. According to Kelly, Apple overstates the battery life of its smartphones by a substantial margin. The majority of other smartphones have also rather limited battery capacity since the same technology is used. Therefore, the approach towards outperforming iPhone Xs Max lies in utilizing innovative technologies in batteries. California Institute of Technology develops a new battery concept that can increase the battery life in mobile devices and vehicles by several times. The new batteries use fluoride anions instead of lithium cations that significantly improves the performance. The scientists claim that such batteries will need to be recharged once in several weeks (California Institute of Technology). A company can invest in the research of such batteries and outperform Apple products utilizing the weak spot of its flagman in smartphones.
California Institute of Technology. “New Battery Concept Based on Fluoride Ions May Increase Battery Lifespans.” TechXplore. 2018. Web.
Kelly, Gordon. “Apple Warned iPhone Batteries Significantly Underperform.” Forbes, 2019. Web.
United States Securities and Exchange Commission. “Form 10-K: Apple Inc.” Securities and Exchange Commission, Web.