Porter's Five Forces analysis of the computer industry shows: 1) Threat of substitute products is medium as PCs come in many configurations but Mac faces no direct competition. 2) Bargaining power of suppliers is medium as Apple chooses suppliers based on quality but they compete for contracts. 3) Bargaining power of buyers is high as customers are loyal to Macs but PCs dominate the market. 4) Threat of new entrants is low due to the need for large capital and dominance of Dell, HP, and IBM.

1. Porter’s Five Force Model THREAT OF SUBSTITUTE PRODUCTS & SERVICES BARGAINING POWER OF SUPPLIERS BARGAINING POWER OF BUYERS THREAT OF NEW ENTRANTS Medium PCs are available in multiple configurations, performances and price ranges PCs represent about 90% of the market Huge network externalities for PCs No Mac clone available No competing product in the Mac market Low Suppliers compete among themselves to obtain exclusive contracts with Apple and therefore have no bargaining power. Medium End-users are mostly loyal. Cost of switching to PC is high. PCs have dominance in the marketplace, and huge network externalities. Threat of switching to Wintel platform always present. Low High capital investmentCommoditized market makes it difficult to differentiate Substantial dominance of low-cost large-scale players (Dell, HP, IBM)

2. Value Chain FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT PROCUREMENT OUTBOUND LOGISTICS OPERATIONS INBOUND LOGISTICS SERVICE PRIMARY ACTIVITIES SUPPORT ACTIVITIES MARKETING & SALES TECHNOLOGY DEVELOPMENT COMPETITIVE ADVANTAGE FIRM INFRASTRUCTURE Apple infrastructure consists of a single campus in California, USA. Apple has 194 Retail Stores around the World. Manufacturing is completely outsourced. HUMAN RESOURCE MANAGEMENT Apple employs approximately 20,000 employees around the world. TECHNOLOGY DEVELOPMENT Apple spent 712 million in research and development in 2006. Apple has one of the most admired design and engineering departments in the world. PROCUREMENT Apple chooses its suppliers based on its stringent standards of technology and quality. SUPPORT ACTIVITIES PRIMARY ACTIVITIES INBOUND LOGISTICS Procurement of raw materials is supervised by apple but carried out by Chinese manufacturers. OPERATIONS Production is Completely outsourced to various chinese manufacturers. Apple supervises production to ensure it adheres to their strict quality control policy OUTBOUND LOGISTICS Finished goods are delivered directly to apple retail stores around the world. MARKETING & SALES Apple advertises online, on TV and through print ads. Apple stores have various programmes to promote their products. Apple is also endorsed by their fiercely loyal customers. Products are sold by Apple resellers, through the Apple website and at 194 retail stores around the world. SERVICE Applecare provides extensive customer support around the world Updates of software are regularly released.

3. Strategic Grid POTENTIAL STRATEGIC SUPPORT OPERATION Degree of dependence of business on IS/IT applications in obtaining business performance Potential Contribution of IS/IT applications to achieving business goals HIGH HIGH

4. Critical Success Factors Innovation Brand Loyalty Steve Jobs