Managerial Economics

Running head: MANAGERIAL ECONOMICS
Managerial Economics
Name of the Student:
Name of the University:
Author note:

1MANAGERIAL ECONOMICS
Table of Contents
1. Introduction............................................................................................................................2
2. Discussion..............................................................................................................................2
2.1. Company Overview........................................................................................................2
2.3. A Review of the Five Forces Analysis............................................................................3
2.4. Advantages and disadvantage of Five Force Analysis....................................................4
2.5. How the tool can be improved........................................................................................6
2.6. Five Forces Analysis for Apple Inc................................................................................6
3. Strategic Conclusions...........................................................................................................11
References:...............................................................................................................................13

2MANAGERIAL ECONOMICS
1. Introduction
For keeping the business ahead of the real competition, managers need to continually adjust
their strategies for reflecting the environment in which their company operates (Doppelt
2017). Companies need to anticipate the changes taking places in their surrounding
environment in order to stay competitive and sustain in the business market. Porter's five
forces were introduced in the year 1979 by Michael Porter as a strategy tool that aims
towards analyzing the immediate competitive environment a particular industry (Arshed and
Pancholi 2016). This tool considers some of the specific forces that helps in determining the
competition. It is their impacts that facilitate the economic potential and the competitiveness
of a particular industry. This paper is going to elaborate on performing a five forces analysis
as the basis for forming strategic conclusions for Apple Inc., a multinational American
technology company.
2. Discussion
2.1. Company Overview
Apple Computer Inc. is an American multinational technology company that was
founded in the year 1976 by Steve Jobs, Ronald Wayne, and Steve Wozniak in order to
develop and sell the personal computers in the market (Coccia 2018). Later in the year 2007,
the company was renamed as Apple Inc. for reflecting that its focus has shifted towards
consumer electronics. The company is headquartered at Cupertino, California and earns total
revenue of 233.715 billion dollars as per the year 2015. The company belongs to several
industries including computer software, computer hardware, consumer hardware, digital
distribution, financial technology, and cloud computing.
It is to note that the organisation has managed creating a substantial value for itself in
the modern competitive personal computer industry through innovating and forging a path

3MANAGERIAL ECONOMICS
different from the other key players in the industry. The competition is focused on design
elegance, quality, and high quality customer service in the process of outsourcing the actual
manufacturing to the trusted original equipment manufacturers. However, the company is
facing a significant challenge in terms of the stiff competition present within the industry as
well as the other factors in its external environment that presents some formidable challenges
for the company (Vugec, Spremic and Bach 2018). It is to note that the personal computer
market is gradually becoming highly commoditized, and this is leading to some intense
rivalry among the competitors present within the industry. At the same time, it is also driving
the prices down and has led to the creation of potentially destructive price wars among the
players. Under a brilliant stewardship of Steve Jobs, Apple has become successful at
innovating its way towards a more comfortable market position. However, unfortunately, it
cannot rest on its laurels. The strategic objective of Apple is to expand further to ensure broad
market reach.
2.3. A Review of the Five Forces Analysis
Michael Porter developed the five forces model in the year 1979. It is aimed towards
examining the critical factors of competition present within a particular industry (Oneren et
al. 2017). It is to note that the dominant force that is reviewed by this model is the level of
competition present within a sector and its influence on the development of the business
strategy. It is an essential tool for analyzing and understanding the forces that shape the
competitive environment within a particular industry. The tool helps in evaluating the five
effects that are affecting the company, and they include- customers, substitutes, suppliers,
competition, and new entrants. All these forces have the potential of limiting and reducing the
market share of the company along with influencing the revenue, business development, and
profitability. The five effects include the following: