Government Involvement in Apple’s App Store in 2024: Porter’s Five Forces Applied

Article Summary?

For this week’s current event analysis, I wanted to reflect on a news story about?the US DOJ’s lawsuit against Apple announced today. When we were studying Porter’s Five Forces, none of the forces explicitly mentions government intervention. Apple is being sued by the US Government, claiming Apple is too big and holds a monopoly on the smartphone market. (Kopack et al., 2024) The monopoly according to the DOJ involves the Apple App Store and the steep fees it charges developers on its platform. The fixed cost is $99/year for the developer to be listed on the App Store, but the variable cost is up to 30% of any subscriptions or purchases made through apps on Apple’s app store.?

Apple has sold smartphones since 2007’s iPhone launch and their app store is the premiere location for finding new apps for their iPhone products. In the US, the app store is the only place developers can roll out applications to the iPhone. However, in the EU, recent new legislation has made it so that 3rd part app stores can be installed on iPhones. (Apple 2024) So which of Porter’s Five Forces are at play here??

Course Topic Integration?

In its purest form, the government should represent the will of the people. In that light, it could be seen as a coalition representing the bargaining power of buyers, one of Porter’s Five Forces. (Kennedy, 2020) Consumer protection by government bodies is an important part of keeping large companies, like Apple, in check, but it can have major implications for business leaders trying to grow profit and market share. From Apple’s perspective, the DOJ lawsuit could represent pressure from the force of the bargaining power of buyers by making it easier for buyers to use third party app stores, thereby making Apple’s business less profitable. This pressure, according to Porter’s model, would give buyers of iPhone apps another option other than Apple’s app store for finding and purchasing applications. (Kennedy, 2020)?

Views and Opinions?

So why does this matter and how does it challenge our understanding of business strategy? If a company the size of Apple is dealing with a potential revenue hit of this size, no business is beyond paying attention to major regulations affecting their livelihood. If alternate app stores are legislated, or even agreed upon as a concession to appease the DOJ, this would be a huge hit on Apple’s revenue. For reference, Apple reported over $1.1 trillion dollars' worth of applications through their app store and cleared $109 billion from in app advertising and $104 billion for digital goods and services in FY2023. (Apple 2023) Their commissions represent more revenue than most companies see in a lifetime, and this is just one segment of Apple’s business. That amount of revenue highlights the DOJ’s case that Apple has grown too large and too powerful to be the exclusive supplier for iPhone apps to iPhone users.?

With this much revenue at stake, I don’t see how Apple couldn’t put up a fight to keep sole retention for app delivery to its phone. They’ll make the case that they maintain security and quality controls, although that is questionable and there have been malware and viruses that have found their way into Apple’s app store, despite their best efforts. (Hesse, 2022) This may be Apple’s biggest battle yet, but it should provide a precautionary tale for other businesses looking to apply Porter’s Five Forces to understand the external forces at work in their industry. Industry Buyers in the form of government intervention can make drastic changes to how your company does business, especially when it comes to digital delivery through app stores online.?

No company is too big to ignore Porter’s Five Forces and Apple’s DOJ lawsuit in March 2024 shows that Porter’s ideas are still relevant and necessary for study and application.?

Works Cited:?

Apple announces changes to iOS, Safari, and the App?Store in the European Union. (2024). Apple Newsroom . https://www.apple.com/newsroom/2024/01/apple-announces-changes-to-ios-safari-and-the-app-store-in-the-european-union/?

App Store developers generated $1.1 trillion in total billings and sales in the App?Store ecosystem in 2022. (2022). Apple Newsroom . https://www.apple.com/newsroom/2023/05/developers-generated-one-point-one-trillion-in-the-app-store-ecosystem-in-2022/?

Hesse, B. (2022, August 8). Great, Now the Apple App Store Has Malware Too. Lifehacker; Lifehacker. https://lifehacker.com/great-now-the-apple-app-store-has-malware-too-1849386738?

Kennedy, Reed. (2020) Strategic Management. Blacksburg, VA: Virginia Tech Publishing.?https://doi.org/10.21061/strategicmanagement?CC BY NC-SA 3.0?

Kopack, S., Wile, R., & Dilanian, K. (2024, March 21).?Apple sued by Biden administration over alleged iPhone “monopoly power.”?NBC News; NBC News. https://www.nbcnews.com/business/business-news/apple-sued-doj-antitrust-monopoly-biden-rcna144424?

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