Porter’s 5 Forces: iPhone game apps

Nani Barkman, Dan Baux, Ian Griffith, Dy Han, Janelle Jones

Management 301

Power of Suppliers

Apple

o Apple controls the App Store, which is the primary means to acquire

apps, consequently giving them a great deal of power.

Tech. companies

o Tech. companies develop and produce apps. Individually they don’t

have much power since there are so many, but together they control

almost all of the apps created.

Individuals

o Individuals have the ability to introduce their game apps to the App

Store, but they have very little power as compared to the tech.

companies and Apple.

Rivalry

Primarily quality based

o Game developers generally sell their apps for no more than

approximately $2. Since there’s little competition over price, they

compete to create the highest quality product.

High end apps based on price

o There are apps with high functionality that people are willing to pay a

good deal more for. In this case companies compete over the price of

apps.

Apps promoted while using other apps

o Advertising for new apps is done through other apps. The companies

that own apps oftentimes advertise their other apps.

Power of Customers

Very limited due to high numbers

o There’s an extremely large number of consumers using game apps.

Since the numbers are so high, no single consumer has much power.

One company controls the majority of apps

o The App Store is the hub for nearly all app sales. Customers have little

power when opposing such a large force.

No threat of backwards integration

o Consumers in the game app market are very unlikely to try to acquire

the suppliers or set up their own facilities to create their own apps.

The number of consumers who even try is marginal compared to the

rest of the market.

Threat of New Entrants

Low investment costs

o For individuals wanting to enter the market, it doesn’t take much

money to develop an app and introduce it to the App Store.

Few legal restrictions

o There are few legal barriers to entering the game app market, making

it easy for new entrants.

Easy access to suppliers and distribution channels

o It’s not difficult to get into contact with the suppliers and distributers

of game apps, increasing the threat of new entrants.

Threat of New Substitutes

Many different versions of the same apps

o There aren’t many substitutes to the apps themselves, but many

different versions of the same apps. Game developers often find a

popular game and create another app extremely similar to the first at

a lower price.

Customers willing to switch to cheaper apps

o If consumers are offered two very similar apps, they are going to

choose the one that’s cheaper.

Brand loyalty

o Certain consumers like the quality of product produced by companies

and are more likely to purchase game apps from that same company.