Therefore, it will be difficult for new entrants to establish their customer base. Specifically, global consumer technology industry in general and computers and smartphones in particular is highly saturated. The time of entry is another factor that can be listed as a barrier for new entrants. New market players, on the other hand, are not able to benefit from the economies of scale, at least for the initial critical few years in the business.ģ. In other words, top established market players are able to procure resources at highly competitive prices and run operations at low costs due to the large scope of their operations. New players will find it difficult to compete with established global brands such as Apple, Samsung, Google and HTC that are able to gain cost advantage via economies of scale. Economies of scale are substantial entry barrier into consumer electronics and tech industry. Accordingly, it is safe to argue that access to capital can prove to be a substantial entry barrier for new businesses.Ģ. Moreover, capital is needed to obtain resources in general and to attract human resources and talented employees in particular.
New market entrants will have to produce new products and services that will have to compete with products and services of top players that invest billions of dollars every year in R&D.įigure 2 R&D spending of top 15 companies in 2018 in USD billions As illustrated in Figure 2 below, the top players in the market invest billions of dollars in R&D in order to keep the pipeline of new products and services active.
Manufacturing technological devices and producing operating systems require massive capital investments. The following factors, among others, determine the threat of new entrants into the industry to compete with Apple:ġ. Threat of new entrants into consumer electronics industry is not substantial. Threat of new entrants in Apple Porter’s Five Forces Analysis Apple Porter’s Five Forces are represented in Figure 1 below:
Porter’s Five Forces analytical framework developed by Michael Porter (1979) represents five individual forces that shape the overall extent of competition in the industry.
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