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Rivalry among competitors

Attractiveness

No of Competitors Low 2

Industry Growth High 4

Fixed Cost High 2

Differentiation High 4

Switching Cost Low 1

Openness : Terms of Sales Medium 3

Excess Capacity High 2


Strategic Stakes V High 5
Overall Attractiveness 2.875
Justification
Number of competitors in Smart phone manfacture include heavy weights
like Samsung,Xiomi,LG,Huwei etc. On the OS or software front Apple has
to compete with Google,Windows.

Indian Telecom industry is worlds second largest country in terms of


wireless communication, internet connectivity. It recorderded a CAGR of 21
% in year 2017. Source
: https://www.ibef.org/industry/indian-telecommunications-industry-
analysis-presentation

Apple produts are always priced at premium. Apple spends considerable


amount in R&D. Rival competitors offer services at much lower costs and
less profit margins as compared to Apple products and services.

Differentiation of products is hall mark of Apple Inc. Apple focusses on


differention of its products in pricing, brand loyality and product design.
Apple products are characteristically distince to those of other
products.Source https://bizfluent.com/way-5815745-apple-differentiation-
strategy.html
Apple looses edge in terms of cost of its products. Its rivals operate on low
cost margins and it is easier for a consumer of India to easily switch to rival
products due to low affordability.

Apple is a Global company with a strong supply chain. In terms of sale and
product service it has clear guideline which can be easily accessed by any
consumer. Its advantage on this aspect with respect to its rivals is
moderate as Samsung,Google and windows have global presence as well.
It does have a distinct advantage over chinese products.

Supply of products and services in telecommunication matches with


demand for them. In India every product and service range is covered.
There are low end players like Micromax,Lava, Karbon and medium level
players like LG,Sony, Samsung,Vivo,Xiomi,Huwei etc and High end
players like Apple, Samsung, One plus. In services Music Apps, Pay
services etc are provided by a plethora of players. Reliance Jio is a new
entrant in this regard. Only in th Map services Google is a dominant player
and Apple is investing heavily to bring parity.
India is a young nation with 44% of its population under 25 as per 2017
estimates. (source:
https://www.indexmundi.com/india/demographics_profile.html). India is
second largest English speaking country with nearly 10% of its population
seaking english. (Source quora.com). Indian Telecommunication market is
having a very high growth rate. (Source Ibef.com mentioned earlier). with
North America and europe markets stagnating and Greater china markets
declining, India is a potential game changer for Apple Inc. Apple needs
India more than India needs Apple.
Exit barriers (or barriers to exit) are obstacles that st
Barriers to Exit specific market.
Attractiveness

Asset Specialisation High 4

Cost of Exit High 2

Government Restriction Low 4


National Barriers Low 4

Strategic Interrelationships High 4


Overall 3.60
arriers to exit) are obstacles that stop or prevent the exit of a firm from a

Justification

Apple products are known for being first in its class. Innovation
is the driving force in all apple products. Its competitors are
more like clones of apple products.
Source : 2017 -10 K annual report of Apple .
Business section

Apple Inc is seeing India as a potential market for sustaining its


revenues and as a replacement for Greater china market. It has
invested in Bangalore and Hyderabad which are known as
Digital centres in India. It is planning to bring in Retail stores
with Government allowing 100%FDI in single brand retail stores
in India. It is bargaining hard for tax sops in importing of raw
materials for manufacture of Apple products in India. It is giving
employment to 4000 odd people to improve its Maps service in
India. It is thnking of relaunching Apple pay post
demonetisation. The cost of exit therefore is very high for Apple
Inc. Attractivenes in staying put in India given its huge cash
reserves and huge potential in India market is very high.
Source : Financial
health - 10 K Annual Report. Apple Inc plans
in India : http://www.thehindu.com/business/Industry/exclusive-
interview-with-apple-ceo-tim-cook/article8621739.ece.
https://www.thehindubusinessline.com/info-tech/im-very-
bullish-on-india-because-of-its-people-culture-and-the-
leadership-apples-tim-cook/article9807665.ece.

http://www.livemint.com/Companies/XuR9UJREa6snat6BQKe0
eJ/Apple-close-to-setting-up-manufacturing-plant-in-
Bengaluru.html

Indian government is on an overdrive to attract FDI to this


country. It had made several policies which directly or indirectly
favour Apple. It has allowed 100% FDI in single brand retail
which helps Apple in setting up its shop in India. Digital India
and its push helps Apple to propogate its products and
services. Demonetisation has helped in pay services like
Paytm,google Tez there by creating a marketing which Apple
can exloit with its Apple pay.
Apple is a global gaint. It is not bound by national barriers. It
has a supply chain which spreads across continents. It has
enough cash reserves which are bigger than national GDP of
most countries. Source : Apple annual 10 K report financial
section for cash reserves of Apple

India needs Apple Inc to set its shop here for creating jobs in
manufacturing and Information Technology. Apple Inc needs
India to improve its revenues and maintain ints number uno
position in market value. India and apple Inc are tailor made for
Business.
Barriers to enty
Attractiveness

Economies of Scale High 4

Product Differentiation High 4

Brand Identity High 4

Switching Cost Low 1

Access to channels of Distribution Moderate 3

Capital Requirement Low 4

Access to Technology Moderate 3

Access to Raw Material Moderate 3


Government Protection Low 4
Overall score 3.3333333333
Justification

Apple Inc products are not just restricted to India. Its products have
universal appeal. The cost advantages can be exploited by increasing
the scale of production beacuase of its brand value
Apple products have unique appeal and most of its products are first
in its class.

Apple is considered as a quality barometer. Other products are


considered as clones. Google stands out as an exception as a service
provider for maps.

Apple offers its products at a permium. Switching costs are low.


Gaining market share therefore is a herculean task. Apple has an
CAGR of 17 % in 2016-17 as compared to 53% previous year.
Source: As mentioned earlier

Apple sells its products through reseller stores and through its own
website. Its distribution channel includes multiple channels with
Redington being a major player. However, distribution channels of
Samsung, Xiomi and other smartphone makers is better. Opening of
Retail stores of Apple shall enhance its distriution network. Apple
products are still to gain traction in Indian market. Apple is likely to
increase its channels of distribution based on demand. Source :
http://www.channeltimes.com/story/partners-wish-apple-
streamline-the-distribution-process/.
http://www.business-standard.com/article/companies/new-
distributor-for-apple-s-enterprise-solutions-won-t-impact-us-
redington-117080500882_1.html
Apple has huge cash reserve piles and has high Return on capital
Invested based on Annual 10K report for year 2017. It does need to
borrow money to start its shop in India.

Apple does not require any technology in manufacturing its products


as it has its own design centres. It however, needs more technical
assistance in refurbhishing its Maps and Pay services.

Apple is seeking hard for reduction/waiving of import charges on its


components to reduce costs. It is also seeking relaxations on 30%
locally manufactured parts for single brand retail. Source :
http://www.business-standard.com/article/companies/new-
distributor-for-apple-s-enterprise-solutions-won-t-impact-us-
redington-117080500882_1.html
Government is keen to have Apple onboard. It opening up of single
brand retail and feverant push by ministers to see Apple Inc
manufacture its products and resume its services in India is an
indication. Other rules like 30% local sourcing and taxation on
imports are applicable to other rivals as well.
Threat from Substitutes
Attractiveness

Availability of close substitutes Low 5


Switching costs Low 4
Substitutes Price Value NA -
Profitability of Producers of substitutes Low 4
Overall Score 4.3333333333
Justification

In this digitalised world smart phones and smart services have taken over analogus world. Digital
India is the buzz word. India is primed to be a digital country. Landlines/fixed lines have lost their
relevance. Digitalisation is taking place in Banking sectors. Maps are digital. Sustitutes are
restricted for limited purposes.
Bargaining Power of Buyers
Attractiveness

Number of Buyers Moderate 3

Availability of substitutes/alternatives Moderate 3

Switching Cost Moderate 3

Buyers threat of backward migration Low 4

Industry's threat of forward integration Moderate 3


Contribution to quality Moderate 3

Contribution to cost High 2

Buyer's profitability V Low 1


Overall Score 2.75
Justification

The growing e comerce and increasing penetration of smart phone and digital usage
by consumers is an indication of huge market. The current 180 million digital buyers
is likely to increase to 339 million by 20202.of 22 to 25 % is likely to rise to 39%.
Added to this is the fact that India is second largest telecommunication market. It is
showing a high groth potential with a CAGR of 19%. However, the density of buyers
is skewed to lower end products and Apple product share is a mere 2.5% in the year
2017. Xiomi and Samsung coner more than 20% market share. Apple can increase
its market share by targetting youth which it is promoting by providing its products
at a lesser price for students and by shifting its production to India. It also needs to
provide better services in Maps and payment.
Source : https://www.ibef.org/industry/indian-
telecommunications-industry-analysis-presentation
https://www.statista.com/statistics/251631/number-of-
digital-buyers-in-india/

Digital usage is unlikely to be substituted by analogus usage in the near future.


However, consumers can choose alternative products from rivals which are
relatively cheap and competitive. Competitors do not have products which closely
match performance of Apple products and most of them compete against
themselves.

Consumers are unlikely to shift to land lines/ digital cameras with increasing
penetration of smart phones and smart devices. However, consumers can migrate
from Apple ecosystem to Andriod ecosystem as Andriod ecosystem is relatively
cheaper. Apple needs to pursue its innovation so that it retains its customer base.
Currently, apple brand value alone can retain its consumer base.
Apple products are wholly manufactured by them through their contracted
manufacturers. These products are not available in the open markets in bits and
ppieces for carrying out backward integration

Apple Inc is known for forward integration through franchising in the world. Infact,
Windows followed suit and started opening its own retail outlets. In India , however,
apple follows the policy of multiple distributors to leverage its costs. Opening of
Apple owned retail stores is a work in progress and the process of forward
integration is likely to be more robust from then.
Reeves and Bednar (1994) suggest a four-way classification of quality
definitions that incorporates excellence, value, conformance to specifications
and meeting and/or exceeding customer requirements. Apple products and
services meet all the requirements in global markets. In Indian context value
for money plays a major role. Indian consumer is not willing to shell money
when he can obtain a slightly low grade product or service for much cheaper
price. Apple products and services need to buil those bridges and gain
confidence among middle class Indin consumers that heir products and
services provide greater value than expected by a consumer.
Source : Research paper on "Impact of Buyer-
Supplier Relationships on
Quality Practices and Quality Performance".
Apple products and services are priced at a premium. They represent a significant
portion of buyer's purchase.

Profit margins for Apple products are high. The profit margins for I phone six was
touted to be close to 60% and that of I phone 7 is said to be close to 400$ from
open source. Apple accessories are pricey. I phone 8 cover costs 4000/- in India.
Bargaining power of suppliers
Attractiveness

Number of suppliers Moderate 3

Availability of substitutes High 4

Switching costs Low 4

Suppliers threat of forward integration Low 4

Industry threat of backward integration High 4

Contribution to quality High 4

Contribution to costs Moderate 3

Industry importance to supplier High 4


Overall Score 3.75
Justification

Apple has 5 suppliers in India of which Redington tops the list. It also has Taiwanese
OEM for manufacture of Iphones in India. World wide 97% of its components are
manufactured by 200 odd companies as mentioned in its suppliers list where a
majority of suppliers are from China predominantly, and Taiwan and Japan
moderately.
A whole range of substitutes are available to Apple around India. Even in India it
can easily find suitable substitute.
It can easily switch suppliers. It has diversified from one primary supplier in
Redington to add fuor more suppliers as in 2017.
Apple supplier base is still at a nascent stage. It does not have enough capacity to
carry forward integration unlike in china

Apple has huge cash reserves and it can employ it to buy out suppliers. Redington
had to diversify and supply for chinese products to maintain its balance sheets.
As the competition between suppliers is high, it should ideally lead to better quality
logistic support.
Less number of suppliers necessitate Apple to ensure that a balance is struck
between demand and supply

As Apple products gain traction and popularity suppliers stand to gain from it. With
more exposure they shall be able to pose threat of forward integration
Government Actions
Attractiveness

Industry Protection Fair 3


Industry Regulation Fair 3

Customs and
Tariff regulations
abroad. Fair 3
Overall score 3
Justification

Telecom Industry is regulated by TRAI and ministry for


telecommunications. Industry policy is not protecting govt
players like BSNL and MTNL. Policies are same for all
smartphone makers with regard to import of raw materials
and single brand retail.
Regulations are same for all global players.

FDI policies for single brand retail are relaxed. Import clause
for 30% domestic manufacture is present to promote
domestic industry.
Attractiveness(A) Weightage(W)
Rivalry among competitors 2.875 5
Barriers to Exit 3.6 3
Barriers to Entry 3.33 4
Threat of substitutes 4.33 2
Bargainig power of buyers 2.75 4
Bargaining power of supppliers 3.75 3
Government actions 3 2
Total 23

Overall Attractiveness
(AxW)/23
0.6250
0.4696
0.5791
0.3765
0.4783
0.4891
0.2609
3.2785

3.2785

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