Technological risk is generally the exposure to loss arising a from activities such as design and

engineering, manufacturing, technological processes and test procedures. Grundy (2006) states
that it involves the risk that customers may suffer service disruptions, or that customers or the
group may incur losses arising from system defects such as failures, faults, or incompleteness in
computer operations, or illegal or unauthorized use of computer systems. Technology has thus
proved influential to business companies as a tool to survive in this competitive environment
companies find themselves in. This essay will focus on opportunities and threats caused by
technological risk on Apple, Inc and Ford Motor company as follows.
Through its Macintosh computers and operating system, the iPad, iPhone and other products,
Apple, Inc has achieved massive success as a company despite going through a number of up
and down cycles since its founding in 1976. In 2014, Apple achieved the notable distinction of
being the first U.S. company to ever attain a market capitalization greater than $700 billion.
Grundy (2006) Apple's success is attributed largely to its ability to innovate and bring unique
products to market that have engendered substantial brand loyalty. Its product development and
marketing strategies reveal an awareness of the need to deal with the major marketplace forces
that can impact Apple's market share and profitability. Ford Motor Company maintains its
position as one of the biggest automobile manufacturers in the world by reforming its strategies
to address the issues shown in this Five Forces analysis.
Industry Competition
The level of competition among the major companies that compete directly with Apple in the
technology sector is high. Apple is in direct competition with companies such as Google, Inc.,
the Hewlett-Packard Company, Samsung Electronics Co., Ltd. and Amazon, Inc.
http://appleinsider.com/articles/12/07/30/apple_focuses_quality_products_not_money_says_desi
gner_jonathan_ive all of these companies expend significant capital on research and
development (R&D) and marketing, just like Apple. Thus, the competitive force within the
industry is strong. One thing that makes the industry so highly competitive is the relatively low
switching cost. It does not require a substantial investment for a consumer to ditch Apple's iPad
for an Amazon Kindle or other tablet computer. The threat of marketplace competition is a key
consideration for Apple, one it has dealt with primarily through continually developing new and
unique products to increase and strengthen its market share position. On the other hand Ford
needs to compete against top players (e.g. Toyota) that aggressively innovate and market their
products. Also, the automotive industry has high exit barriers, which means that firms would
rather keep competing with Ford than to close their business, because of the high costs and
investments. Such a condition exerts a strong force of competition against Ford. In addition, Ford
must compete against a moderate number of firms, especially a few large ones like General
Motors. Based on this aspect of the Five Forces analysis, Ford must maximize its competitive
advantage to address the external factors linked to competition.
Bargaining Power of Buyers

The element of low switching cost referred to above strengthens the bargaining power of buyers
as
a
key
force
for
Apple
to
consider.
http://appleinsider.com/articles/12/07/30/apple_focuses_quality_products_not_money_says_desi
gner_jonathan_ive There are essentially two points of further analysis within this force: the
individual bargaining power of buyers and their collective bargaining power. For Apple,
individual bargaining power is a weak force, since the loss of any one customer represents a
negligible amount of revenue for Apple. However, the collective marketplace bargaining power
of customers, the possibility of mass customer defections to a competitor is a strong force. Apple
counters this strong force by continuing to make substantial capital expenditures in R&D,
enabling it to keep developing new and unique products such as Apple Pay and the Apple Watch,
and by building significant brand loyalty. Apple has been very successful in this area of
competition, establishing a large customer base that, basically, would not consider abandoning its
iPhones in favor of another smartphone competitor. Ford Motor Companys customers face
moderate switching costs, which are the consequences of moving from one firm to another. In
this case, customers can easily transfer to other firms, although infrequently because automobiles
are big-ticket items. Also, each purchase of Fords products is moderate in terms of its price and
contribution to the companys revenues. Thus, even a small change in customers demand can
have significant consequences on Ford. In addition, the moderate availability of substitutes gives
customers the option to move away from Ford. Thus, Ford Motor Company must maximize
customer satisfaction to address the external factors in this aspect of the Five Forces analysis.
Threat of New Entrants to the Marketplace
The threat of a new entrant to the marketplace that could seriously threaten Apple's market share
is
relatively
low.http://appleinsider.com/articles/12/07/30/apple_focuses_quality_products_not_money_says_
designer_jonathan_ive highlights that this is primarily due to two factors: the extremely high
cost of establishing a company within the industry and the additional high cost of establishing
brand name recognition. Any new entrant to the marketplace of personal computing or
smartphones needs to have a massive amount of capital just to spend on R&D and manufacturing
to develop and produce its own product portfolio prior to ever bringing its products to market
and beginning to generate revenue. Such an entrant faces the already identified strong
competition within the industry that exists between Apple and its major competitors, all of which
are large, well-established firms. The secondary challenge is establishing brand name recognition
within an industry that already has several companies, such as Apple, Google and Amazon, with
very strong brand recognition. Companies like Ford commit to huge spending to set up and
maintain their businesses and facilities. These costs are a barrier to entry that weakens the threat
of new entrants. In addition, it is costly to develop a strong brand comparable to Fords, thereby
making it difficult for new entrants to effectively compete against industry giants. Based on this
aspect of the Five Forces analysis, external factors present only a weak threat against Ford.
Although it is possible some new company, perhaps a Chinese firm with financial backing from
the government, might eventually challenge Apple's position within the industry, for the

immediate future, the likelihood of such a challenger arising is remote. Nonetheless, it is

important for Apple to continue strengthening its competitive position through new product
development and building brand loyalty to place any potential new entrants to the industry at a
larger competitive disadvantage.
Bargaining Power of Suppliers
The bargaining power of suppliers is a relatively weak force within the marketplace for Apple's
products. The bargaining position of suppliers is weakened by the high number of potential
suppliers for Apple and the ample amount of supply. Apple is free to choose from among a large
number of potential suppliers for component parts for its products. The industries of its parts
suppliers, such as the manufacturers of computer processors, are themselves highly competitive.
Maybury and Belardo(1992) stated that the switching cost for Apple to exchange one supplier for
another is relatively low and not a significant obstacle. Plus, Apple is a major customer for most
of its parts suppliers, and, therefore, one its suppliers are very reluctant to risk losing. This
strengthens Apple's position in negotiating with suppliers, while conversely weakening their
positions. The bargaining power of component parts suppliers is not a major consideration for
either Apple or its major competitors. The moderate overall supply and moderate population of
suppliers give suppliers significant but limited bargaining power on firms like Ford. Also, most
of these suppliers have low forward vertical integration, which means that they do not own or
control the distribution and sale of their products to Ford. The suppliers bargaining power is
further weakened because of Fords backward vertical integration through the Ford River Rouge
Complex. Through the Complex, Ford produces some of the materials it uses to manufacture cars
and related finished products. Thus, this aspect of the Five Forces analysis shows that Ford must
consider the significant but limited external factors linked to suppliers effect on the business.
Threat of Buyers Opting for Substitute Products
Substitute products, within the framework of Porter's Five Forces Model, are not products that
directly compete with a company's products but possible substitutes for them. In the case of
Apple, an example of a substitute product is a landline telephone that might be a substitute for
owning an iPhone. This market force is relatively low for Apple due to the fact that most
potential substitute products have limited capabilities compared to Apple's products, as in the
example of a landline telephone compared to an iPhone that has the capability to do much more
than just make telephone calls. There are considerable substitutes to Fords products, including
public transportation and bicycles. However, these substitutes are not always available or
appropriate in certain areas or situations. In addition, the switching costs are moderate because,
even through Fords customers can shift to using these substitutes, they cannot easily do so when
they are still paying for their car loans. Also, in many instances, these substitutes have lower
performance than Fords products in terms of convenience and safety. Based on this aspect of the
Five Forces analysis, Ford needs to address suppliers as a second-priority external threat.

REFERENCES
Grundy, T. (2006). Rethinking and reinventing Michael Porters five forces model. Strategic
Change, 15(5), 213-229.
Maybury, M. T., & Belardo, S. (1992, January). Five forces. In System Sciences, 1992.
Proceedings of the Twenty-Fifth Hawaii International Conference on (Vol. 4, pp. 579-588).
IEEE.
http://appleinsider.com/articles/12/07/30/apple_focuses_quality_products_not_money_says_desi
gner_jonathan_ive

Surname
Name
:
Reg No.
Module
Course Code
Lecturer
Programme :
Con/Para/Block:

:
BAKURI
TALENT
:
M154236
: enterprise risk management
:
BM202
:
Mr Bhasera
BUSINESS MANAGEMENT 2:2
Conventional

Question
: Using two firms of your choice discuss how technological
risk has enhanced opportunities and threats for their competitiveness.
Mark: