Assignment 3A

Jacob Zimmerman
Professor: Ronald Eaglin
Assignment 3A
CET: 3010

A sleek Multimedia Smartphone, with a touchscreen capped with a camera, could describe a number of different phones on a number of different cellular service carriers, none of which truly fits the word sleek except AT&T's iPhone. The original iPhone was released from AT&T June 29th, 2007 and is said to have sold 270,000 in the first thirty hours being released. Recently, the iPhone has undergone change. Close to a year later, Apple reintroduced Time Magazine's “Invention of the Year,” with the iPhone 3G. The differences between the original iPhone and the iPhone 3G are fairly modest. (Everyipod) Minor differences include a slightly larger black frame around the screen and lighter weight than the older 2G model. The iPhone 3G allows the iPhone to access the 3G faster network and has A-GPS, an updated Bluetooth system, a better standby and talk battery-life time, and finally is half the price firmly at $199 for the 8gb and $299 for the 16gb. While the iPhone may have been the invention of the year for 2007, it is clear it would not have made the cut in the communications industry 2008 without its ever-expanding technology. Porters 5 forces analysis possibly could have been the framework that helped Apple see what they needed to add to the already innovative device, and stay on top of the market. Through the threat of substitute products, the threat of the entry of new competitors, the intensity of competitive rivalry, the bargaining power of customers, and the power of suppliers we may be able to see why the Apple introduced the iPhone 3G.
According to Porters 5 Forces Analysis the threat of substitute products or the existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases. With the iPhone 3G lowering its price to $199, the substitutes on the AT&T website are few to none, but one being the Samsung Epix that is also $199. The Samsung Epix has 3G Network capabilities, A-GPS, Wi-fi, and a get more done on the go high-speed processor (AT&T). While the Epix is a clear substitute to the iPhone 3G in respects to the price, the iphone 3G has no clear substitute in performance and specs. No other smartphone matches the hard-drive space at AT&T, and while some may possess a few features of the iPhone 3G, all have lacked an element that makes the iPhone 3G the unique gem in the rough.
The second force known is the threat of the entry of new competitors, that introduces the idea that profitable markets that yield high returns will draw firms. This results in many new entrants, which will effectively decrease profitability. The iPhone 3G is sold exclusively at AT&T and if it opened up to different carriers it would be the biggest threat to all smartphones. Futhermore, Apple has filed more than 200 patents related to the technology behind the iPhone. The threat of a phone that has all the same features including the 8-16 gb hard drive would be unsuccessful because iPhone has built off of iPods music players success and name as well.
Another force to be taken into account with the iPhone 3G is the intensity of competitive rivalry. For most industries, this is the major determinant of the competitiveness of the industry and sometimes rivals compete aggressively. Sometimes rivals even compete in non-price dimensions such as innovation, marketing. In a corporation like Apple, that produces a variety of products from computers to cellphones it can only be compared to the classic rival Microsoft and other similar corporations. Apple's total advertising budget for 2008 was $486 million dollars or 10% percent of the companys 3.8 billion SG&A (selling, general, and administrative) expenses. (BNET) The ad budget $467 million in 2007 and in 2006 it was $338 million and helped Apple grab 8.2 percent of the U.S. desktop/laptop combined market behind Dell which is #1 at 29.4 and HP which is #2 at 25.3. (BNET)
The fourth force is known the bargaining power of customers and is described as the market of outputs. The ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes. The fact that the phone is exclusive to the AT&T network, its the first phone made by Apple, an already household name, and by having the price less than half of the original the iPhone 3G it assures the customer its uniqueness. Since it has no substitute but phones that are similar sets the phone in a different league.
The Last force is also described as market of inputs. Suppliers of raw materials, components, and services to the firm can be a source of power over the firm. Industry experts estimate that the production costs have been trimmed by Apple for their new release. Cost of the producing the new phone are estimated to be around $100. This means huge profits for Apple if the estimated phone sales meet predictions. Fortunately for the corporation of Apple, they produce their inputs and are self sufficient. The iPhone 3Gs parts are made exclusively by Apple and with its patented design customers will continue to have to buy Apple parts. By having this advantage as well as all the others on just the regular iPhone, the upgrade to the iPhone 3G responds to the five sources to be the top product in 2009.


Works Cited
Bishop, Todd. “Microsoft vs. Apple Advertising Spending: The Real Numbers to Watch” Techflash 23 Nov 2008.
http://www.techflash.com/microsoft/Microsoft_vs_Apple_advertising/
Blakely, Lindsay “Apple’s Advertising Budget: Revealed!” Bnet 21 Nov 2008
http://industry.bnet.com/technology/Apples-Advertising-Budget
Brock, Kyle. “iPhone Q&A” EveryiPod 13 July 2008.
http://www.everyipod.com/iphone-faq/differences-between-original
Park, Will. “Apple Iphone manufacturing costs-would you believe $100?” Intomobile 17June 2008.
http://www.itomobile.com/2008/06/17/
Pegoraro, Rob. “AT&T Reveals iPhone 3G Prices” Washington Post 1 July 2008.
http://voices.washingtonpost.com/fasterforward/2008/07/Att_reveals_iphone/
Wilcox, Joe. “Whats Different About The iPhone 3G?” eWeek 11 June 2008.