Independent Strategies - Apple Inc - Essay Example

? Independent Strategic Review: Apple Inc. Introduction The present day giant in the high definition electronics industry, Apple Inc. was establishedin 1976 with the name of Apple Computer in Steve Jobs’ garage, the founding member. Steve Jobs partnered with Steve Wozniak and A. C. Marakkula eventually joined them. The company was incorporated in early 1977. The initial mission was ‘one person – one computer’ (Freedman & Vohr, 1998). Today Apple, Inc. is recognized as the world’s leading technology company and has a ubiquitous international presence. When one examines the financial figures from the time Jobs returned, the results are truly staggering. Essentially, he brought an organization from the brink of bankruptcy to one annually generating $25 billion dollars in net income and a stock valuation exceeding $500 per share ("Apple," 2011). While Tim Cooke assumed the CEO position after Jobs death the organization has retained its prominence. Currently Apple competes in a variety of market sectors: mp3 players, smart phones, personal computers, tablets, and they are rumored to be entering into the television market (Elmer, 2011). I. Internal Strategic Audit PESTEL Analysis Apple, Inc. competitive position involves a complex array of elements. Within this context of investigation a PESTL analysis has been established as a means of examining Apple’s market position. Political Analysis: To a large degree the organization has avoided significant political restrictions. While the United States Department of Justice (DOJ) readily intervenes in large business mergers, the extensive amount of competition at Apple’s level of operations is such that government intervention is not necessary. Political considerations only indirectly affect Apple through DOJ intervention in large-scale telecommunications suppliers competing for spectrum (Velazco, 2011). For instance, the government recently blocked a merger between AT&T and T-Mobile; the impact on Apple is in terms of maintaining overarching low cost services when usage patterns are considered (Velazco, 2011). One also considers the potential of foreign political risks. Currently over 50% of Apple’s sales are international and one considers the potential of such profits being affected by future political shifts related to patent or licensing concerns ("Apple's international sales," 2011). Economic Analysis: There are a number of economic considerations. One notes the macroeconomic recession shifts in both the United States and Europe hold the potential for a negative impact on Apple’s continued success. In these regards, one considers that Apple’s success has largely come from sales of quality electronics that necessitate a corresponding high price tag. Recessionary headwinds could potentially create a public shift towards lower cost product design. Social Analysis: In terms of social elements one considers that one of Apple’s greatest assets has been its innovative brand and marketing approach. While quality and innovation has greatly driven net profits a close contributing factor has been Apple’s branding as a chic alternative to dominant culture. While such an approach was viable when Microsoft and IBM remained dominant in the market, Apple has since become the mainstream to which they once positioned themselves. With the death of Steve Jobs one questions if they will be able to continue to maintain this cutting-edge brand. Technological Analysis: Apple’s current position in smart phones as a leading provider is most attributable to cutting edge technological design. The iPhone 4 was accompanied by the iPhone 4S in October 2011 continuing Apple’s commitment to innovation (Brown, 2011). In addition, Apple has recently implemented Siri, a voice activated recognition service. Latest reports have indicated that service providers have experienced tremendous challenges meeting data demands (Browning, 2011). Environmental Analysis: To a large extent Apple has been successful in becoming embroiled in environmental controversy. Still, recent reports have emerged regarding the organization’s implementation of Chinese labor wherein workers have been required to sign pledges not to commit suicide (Chamberlin, 2011). While these are undoubtedly abhorrent conditions, the reality is that they are characteristic of manufacturing product life cycles in the 21st century. Legal Analysis: Some of the most prevalent considerations in terms of Apple’s position in smart phones are related to legal elements. As a cutting-edge innovator, Apple has experienced tremendous success through functioning as the first to market on product design. Still, such innovation has resulted in a glut of competitor’s attempting to replicate Apple’s patents resulting in a series of legal battles. For instance, Apple recently won a lawsuit with HTC over copyright infringement (Arora, 2011). Competitive Advantage There are a number of considerations regarding Apple’s competitive position. From the earliest incarnations of Apple Computer the company sought to carve out a competitive advantage through horizontal and vertical integration that restricted external product licensing ("Apple computer, inc.," 2011). While this approach had been implemented early in the era of the Apple II and Macintosh the organization had gotten away from it until Steve Jobs returned in 1997. Another prominent advantage was Apple’s attention to design elements. Building products from the ground up allowed Apple to implement innovative design elements that created a loyal customer base. One considers the iMac released in 1998 with its eggshell design as prominently implementing this technique ("Apple computer, inc.," 2011). This design advantage also extended into Apple’s image. Apple, Inc. would increasingly cultivate an image that presented itself as the alternative choice to mainstream computer producers. This allowed Apple to become a cultural force resulting in significant market advantage. There also exist a number of potential weaknesses regarding Apple’s competitive position. While the Apple App store is a highly important element in Apple’s success the Android Marketplace has begun developing a number of competitive applications as a means of threatening Apple’s smart phone sustainability (Wauters, 2011). Still, the greatest weakness is that while Apple has leveraged market share through product innovation the open source models have been able to reengineer many of Apple’s innovations. While Apple has engaged in a series of patent lawsuits, notably a recent victory over HTC, the extent that this remains a viable strategy remains greatly questionable. Furthermore, Google’s position as a cornerstone of the Internet, coupled with the increasing coupling of telecommunication and search, could potentially allow Android to leverage compatibility with Google as a means of competitive advantage. Ultimately, the industry remains highly competitive; if Apple is unable to maintain constant innovation, its competitive advantage will quickly fade. Competitive Strategy Apple’s competitive strategy in recent years has been the cutting-edge design of products. While this seems an over simplification, in this instance the truth is easy to grasp. Still, within this context of understanding there are a number of strategic maneuvers that demand further consideration. Apple has strategically implemented its iPhone operating system through a closed source approach. Not only has Apple refused to license out its operating system, but the organization has also retained exclusive vending control. In these regards, the only way to purchase Apple products is directly through the Apple website or through exclusively licensed Apple stores. This strategic approach has allowed Apple to retain a strong emphasis on quality management, as well as to retain its unique branding image. Apple’s approach to exclusivity has extended into its strategic enforcement of patent violations. In this spectrum of understanding, Apple has engaged in large-scale war with outside manufacturers that infringe on copyrights. In terms of specific outputs, Apple has strategically leveraged iTunes and its App store (Wauters, 2011). With recent innovations in Cloud computing, iPhone users can purchase mp3s on their phone and later find them on their tablet or Macintosh. In these regards, Apple’s quality personal computing design has been used to directly contribute to the iPhone’s competitive advantage. While the organization has recently suffered the setback of the death of company founder and CEO Steve Jobs, there remain a strong number of organizational elements in place to ensure the corporation continues its growth and success. Currently sales of the Apple iPad and iPod devices have constituted powerful company strengths and present a strong means of innovation. Indeed, Apple’s innovative processes coupled with its brand function as the company’s driving force. In advancing through future markets it’s clear that these aspects will constitute the backbone of Apple’s directional strategy. Within this context of understanding, it’s further necessary for the company to implement leverage as a means of retaining their competitive advantage. Sales of the Apple Macintosh as well as iPhone and iTunes technology are such that the company is given access to many new segments of the population (Schramm, 2011). In these regards, it’s necessary for the company to implement their consumer access as permitted in this software as a means of promoting innovative software design and industry leading brand. The following years will be a telling period for Apple in terms of whether they are able to continue this innovate product development after the death of company CEO Jobs, but with the corporation’s significant leverage and brand identity there exists plentiful opportunity for the continuation of the success the company has enjoyed in the previous decade. Key Issues Facing the Company In November 2011 Apple, Inc. finds itself in a challenging position. While past product design and the potential impact of the upcoming Apple will drive growth in the immediate future, the death of Steve Job’s could indicate the end of such cutting edge innovation (Elmer, 2011). While Research in Motion’s (RIM) Blackberry has currently been delayed, the Microsoft and Nokia collaborative Lumia 900 will debut in 2012 (Colon 2012). Indeed, this product has received rave reviews at this week’s CES conference in Las Vegas. In addition, the force that is Google’s Android increasingly has taken on a pervasive sort of inevitability. This is reflect in equity valuations where the Google stock has factored into it a higher expectation of future growth with a + 20 P/E ratio compared to Apple’s 15.3 ("Apple," 2011). Furthermore Apple has increasingly faced challenges in regards to meeting customer demands, as the customer base has become increasingly diverse in the 21st century. While future product innovation will be necessary, one considers that one of the main mistakes Apple made after Steve Job’s original company termination was extending into too many markets. Developing a balance between innovation and quality and strategic management will be a pressing challenge for the upcoming five years. II. Stakeholder & Brand Assessment Brand Challenges While the previous investigation has considered Apple’s internal strategic elements, the most overarching concern in this segment of the assessment relates specifically to Apple’s brand management. One considers that Apple has gained recent negative publicity for the factory conditions of many of its Chinese manufacturing entities. Although the organization has downplayed these factory conditions, one recognizes the full extent of their conditions may be unknown and could present significant supply chain difficulties in upcoming years. Recent reports have emerged regarding the organization’s implementation of Chinese labor in the Foxconn factory wherein workers have been required to sign pledges not to commit suicide (Chamberlin, 2011). One considers that the theory-oriented branding paradigm has presented emotional branding as a major market consideration. Further considerations by McAlexander, Schouten, & Koening (2002) “treats vital characteristics of brand communities, such as geotemporal concentrations and the richness of social context, as dynamic rather than static phenomena” and “demonstrates that marketers can strengthen brand communities by facilitating shared customer experiences in ways that alter those dynamic characteristics” (McAlexander, Schouten, & Koening, 2002, p. 1). What these notions demonstrate for Apple, Inc. is that while they may legally be in accord with accepted laws in China, the community established emotional connection consumers establish with Apple products could interpret these actions as detrimental to Apple’s image. Apple’s Stakeholders In further understanding brand and marketing concerns it is necessary to considers Apple’s stakeholders. Apple, Inc. is a publicly traded company and as such its primary stakeholders are its stockholders. One can reasonably assume Apple’s stockholders, despite the recent China incident, are satisfied with the organization. Apple’s stock has experienced tremendous growth in recent years the staggering degree of increase surely has surely delighted individuals both internally and externally. One considers that in February alone the organization’s equity valuation rose from $400 to $500, now resting at an all time high. Internally executive and employee compensation, while not specifically released to the public, is oftentimes linked to increasing stock prices and company net profits; as such recent expectations have been adequately met. A third potential stakeholder, however, is the social environment in which the organization operates. The recent strife surrounding factory conditions could be considered an area where Apple has failed to live up to expectations. While this most prominently involves the United States, it’s also recognized that over 50% of Apple’s sales are international and there is potential of profits being affected by future shifts related to negative branding concerns ("Apple's international sales," 2011). There are varying perspectives regarding Apple’s actions with their stakeholders. Financial accounting theory examines many of these considerations. Stakeholder theory is one of the most prominent perspectives on organizational management. Stakeholder theory contends that an organization’s primary responsibilities are to its stakeholders (Clement 2005). Within the case of Apple, Inc., as their major stakeholders are the stockholders, they’re primary concern would be to ensure that their equity valuation continues to rise. In this spectrum of understanding it’s recognized that the issue of workers in China would not be a central organizational worry. Still, one considers that Apple’s stakeholders also include its employees. It becomes a moral question then whether which stakeholder is more central to Apple’s operations. In determining the extent that Apple, Inc. should be concerned with their actions in China financial accounting theory offers the perspective of corporate social responsibility. Corporate social responsibility contends that organizations are not merely responsible to their stakeholders, but to the broader societies in which they operate (Hunt, Owen, Swift, 2002). Within this spectrum of understanding it would become Apple’s responsibility, not merely because of profit, but because they operate in these environments. There exists counter perspective to this notion of corporate responsibility. Prominent economist Milton Friedman argued that the business of business is to make money (Friedman 2002). Additionally, Mathews (1997) has argued that oftentimes the notion of corporate social responsibility is removed from reality in that it criticizes organizations for actions that in certain contexts are appropriate. While the actions in China are difficult to justify when the recognition that workers are potentially committing suicide, it is possible that the low wages and long hours these employees work, within the specific context of that Chinese province is actually highly benefit to their subsistence and that economic structure. Brand Management There are a number of considerations in terms of Apple’s brand management. As noted the most overarching consideration is Apple’s Chinese factories. Currently the organization is recognized as making substantial changes to these factories (Boudreau 2012). While there are undoubtedly still abhorrent conditions by Western standards, the reality is that they are characteristic of manufacturing product life cycles in the 21st century. Still, in terms of social elements one considers that one of Apple’s greatest assets has been its innovative brand and marketing approach. While quality and innovation has greatly driven net profits a close contributing factor has been Apple’s branding as a chic alternative to dominant culture. While such an approach was viable when Microsoft and IBM remained dominant in the market, occurrences such as the factory conditions have demonstrated that Apple has since become the mainstream to which they once positioned themselves. In these regards, it’s necessary for Apple to compete aggressively as a means of maintaining their brand identity. Klewes (2010) recommends a number of specific ways that organizations can work to protect their brand identity. In Apple’s instance aggressive search engine image protection measures can be implemented. Additionally, as the company has already established, changes must be made to the extreme factory conditions to ensure suicide or sensational occurrences are not taking place. Conclusion In conclusion, this research has provided an internal audit of Apple, Inc.. Additionally, the research has considered branding concerns related to the fallout of the Foxconn factories in China. While it is recognized that Apple, Inc. has a number of weaknesses and threats that could dislodge its future market position, it remains a strong organization and an attractive investment option. Apple’s tablets remain the best selling tablet on the market and the iPhone remains one of the preeminent options for smart phone customers. In addition, the upcoming release of Apple TV is all but assured to carry with it significant growth potential for the organization. In terms of branding concerns it is recommended that Apple need ensure the sensational occurrences abroad are curtailed as a means of protecting their brand. Ultimately, however, the research has recognized that the nature of contemporary supply chains is such that low cost Chinese labor is a necessity to compete. References Apple. 2011, January. Retrieved from http://www.wikinvest.com/wiki/Apple Apple computer, inc. -- company history. 2011. Retrieved from http://www.fundinguniverse.com/company-histories/Apple-Computer-Inc- Company-History.html Apple's international sales are 'on fire’. 2011. Retrieved from http://www.macnews.com/2011/06/28/apples-international-sales-are-fire Arora, N., 2011, January. An open letter to apple CEO Tim Cook to adopt a new strategy to win patent wars. Retrieved from http://www.forbes.com/sites/greatspeculations/2011/12/29/an-open-letter-to- apple-ceo-tim-cook-to-adopt-a-new-strategy-to-win-patent-wars/ Boudreau, J. (2012). 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