Apples Corporate Strategies - Essay Example

?Case Study Analysis: Apple’s Corporate Strategies Introduction Companies operating in technology industry such as Apple are not only involved in building computers but also play a big role in providing the foundations for technology-oriented activities such as chip production, information and communication systems, and computer systems. These companies serve as the developers and manufacturers of products technologically intended to increase efficiency, and are majorly involved in production of other products including televisions, mobile phones, and other information and communication systems. Given the rapid rate of globalization and advances in technology, companies in the technology industry are forced to formulate corporate and business strategies that ensure they maintain their position at the global arena and remain competitive in the market. Penrose (2009) establishes that an organization is a collection of productive resources, which if administratively coordinated, controlled, developed and exploited, ensures that the firm has the capability to compete. Clegg et al (2011) who asserts that companies should constantly try to develop unique resources over time in order to facilitate production of a meaningful and long-term competitive advantage support this view. The formulation of strategies to overcome growth barriers are mainly informed by changes in the environment brought about by globalization, changes in the business landscape and the desire to satisfy the demands of a digitally driven society. Organizations that are able to remain competitive amid all these factors are those that have the capacity to bring new ideas, adopt strong and winning market strategies, understand their consumer base, and have the competence to formulate strategies that are in line with their overall business objectives. Apple has managed to remain successful in the consumer electronics industry due to its commitment to innovation, strategic decision-making capacity, and a good understanding of the market and consumer needs. The ideas and early innovations that Apple came up with since its formation in 1976 laid down the foundation for building one of the most innovative and effective technology companies in the world today. This paper analyses the corporate and business strategies that Apple has formulated in order to sustain its success in the Consumer Electronics Industry. The paper further looks at post-Steve Job future of Apple concerning strategies it might find viable to implement that would provide the company with a robust competitive advantage. Company Background Apple Computer Inc. was formed in 1976 by Steve Wozniak and Steve Jobs, and was initially involved in the manufacture of personal computers with limited software applications. Currently, the US-based company’s business operations are categorized into hardware, software and business support services. The company not only builds the Macintosh PCs but also creates and sales various other products including applications such as the Macintosh Operating System (MAC OS), iTunes, iLife, Final Cut Studio, and provides internet services through its Safari, QuickTime and MobileMe products. Moreover, Apple Computer builds various other peripheral products such as Apple TV and digital video displays among others. Although the company made major milestones in its initial years in the PC industry, the level of competition was growing at a very rapid pace, and Apple soon realized that it had to come up with new ideas in order to remain viable in the market. Despite the stiff competition present in the consumer electronics industry, Apple has continued to stay afloat and sustain their competitive advantage due to their ‘out-of-the-box’ business ideas that help in constant redefinition of the standards for products, marketing, and industry innovation techniques. The company has recently gained prominence in the industry through their commitment to come up with unconventional ideas and challenge the possibilities available in the computer industry. In line with their goal, the company constantly improves the user-friendliness of their products by making advancements in the technologies previously created and coming up with innovations. Apple’s recent success is also largely attributable to their former Chief Executive Officer (CEO), Steve Jobs who encouraged an open-minded approach in the development of new technologies and services (Isaacson, 2012). As their slogan aptly puts forward, the company’s business strategy leverages on their exceptional ability at designing and developing their own operating system, application software, and hardware by “thinking differently” (De Kluyver, 2010). Contributing to their success is the strong and growing following of loyal customers that the company enjoys. Alongside nonconformist innovative ability and an-open minded approach to strategic business decision-making, Apple’s principal focus is production of powerful, technologically advanced, and user-friendly products and services. Collectively, these elements have been vital in driving Apple in becoming a leading company on the cutting-edge of corporate technology (Schilling, 1998; De Kluyver, 2010). Industry Analysis: Apple’s Competitive Advantages The consumer electronics industry has in recent years, experienced a surge in the level of competition brought about by flooding of the market. The recent developments have forced considerable consolidation and led to a shift in the landscape of the consumer electronics industry. The major leading players in the industry are a group of small, elite multinational corporations that have maintained a large global market share for the past few decades. In the personal computer market specifically, only a few companies, Dell, Hewlett-Packard (HP) and recently, Lenovo, have constantly dominated the landscape for a very long time (Dupuis, 2000; Hill and Jones, 2011). Despite the absence of radical technological innovations in the recent past, the consumer electronics industry still searches for new technologies and markets in order to sustain growth. Recently, revenue for most companies in the industry has been originating from the sales of notebooks, which have largely been stirred by the growth of wireless networking. Handheld computers have significantly declined in sales due to the increase in competition from lower-end notebooks and higher-end mobile phones. Given the current competitive nature of the industry which presents quite a number of advantages to scale economies, major-brand PC providers or Original Equipment manufacturers (OEMs) such as Apple have made efforts to widen the scope of their business operations into other sectors. This has been achieved by Apple, which successfully expanded into the fragmented digital music (DM) industry and quickly blossomed to become the industry leader. While companies were still occupied with the scramble for digital media rights, Apple promptly launched iPod and iTunes in 2003, and currently commands more than 80% of the market share. The digital media industry, being a nascent, technology-driven industry, favours first-movers as evident with Apple that gained significant market power (Hitt, Ireland & Hoskisson, 2012). However, this industry does not entail manufacture of a lot of parts and accessories, and distribution of digital music hardware and software is easy, making it easier to enter than the PC industry. Because of this ease of entry, Apple has recently experienced increased competition in the DM industry from companies such as Sony, which entered the market with iPod clones. Due to the fact that DM is a new and upstart industry, the first-mover advantage that Apple enjoys might not continue for a long period of time given that other rival companies have observed and attempted to copy the marketing and distribution strategies that Apple has implemented (Ernst and O’Connor, 1992; Shankar et al., 2012). One area where the company wields considerable advantage over its rivals is its strategic decision to sign contacts numerous record and television companies, and movie studios that give iTunes exclusive rights to quite a significant number of multi-media products (Ireland, Hoskisson, & Hitt, 2008). The strong ties that Apple has with many small businesses, especially the ones creating audio and visual graphics, also cement the company’s competitive advantage over its rivals. As Apple continues to meet their demand for high-end and more sophisticated software, these small businesses continue to boost the company’s revenue through their brand loyalty and sustained purchase of high-priced hardware and software. In contrast to many of its rivals, Apple continues to provide to its customers the needed hardware, software and accessories that all complement efficiently. This enables cross selling of all its different products to a specific business or consumer thereby opening up entirely new revenues streams and allowing Apple to enter into unexploited demand sectors. Moreover, the ability to cross-sell insulates the company from certain competition because it sells to consumers directly through retail stores in a cost-effective way while managing to meet all the consumers’ demands. Even though currently Apple does not control a large percentage of the computing market, the near future looks bright for the company’s PC sales due to three key advantages it has over its rivals. First, the company’s major source of revenue has been small businesses with specialized needs, and it is the common belief among many business and economic analysts that the industry will experience a continued increase in demand from small and medium-sized businesses. Second, Apple’s Boot Camp software is an indication of the company’s architectural flexibility (White, 2010), and proficiency at entering into new markets, putting its competitors on the defensive. Lastly, given the record of accomplishment, Apple has been known to be exceptional at innovation, it is expected that Apple will increase its presence in the industry through new ideas and innovations. Apple’s Strategies I. Commitment to Innovation In the consumer electronics industry, innovations that meet social needs and enhance the society’s capacity to act are a requisite for any company that wants to maintain its lively experience in the industry (Osburg and Schmidpeter, 2013). Innovation can be further subdivided into product, business process and business model subsets (Goldenberg and Mazursky, 2002). Product innovation is divided into three areas, which include the product, the business process and the business model innovation. As the name suggest product innovation involves improvement of features of current products and services that meet social needs while at the same time. The iPod for instance has had a devastating effect on its competitors, the Walkman by Sony for example and crumbling of the online music download site, which was the brainchild of the Virgin Atlantic founder to the IPod and ITunes, download sites The establishment of new markets to solve untapped customer problems, and this involves the creation of new market propositions is characteristic of the Business process. The creation of the Apple IPod and the gadget nourishing iTunes media store is a significant example (this was the very first stable music download music of its kind). Companies that are innovative enough to come up with newer solutions to solve customer problems remain afloat over a long period. Those that do not heed to the demand of innovation are quite disadvantaged in the market place. Two method of innovation exist and these include sustaining; which deals mainly with the improvement of performance of current products, services and features of existing products. The other arm of the innovation, which is disruptive in nature, involves implementation of new policies that change not only the production process but also existing product design and service delivery. II. Apple’s Branding Strategy The use of the Apple brand to compete in several very competitive markets, including the Apple computer brand and sale of relevant software, is important for the better performance of the product. The flooding of the gizmo world with products, which include the iPod, the smart phone market in the name of Apple iPhone, music distribution through the iTunes music store, the selling of magazines, games and various other applications through AppsStore for computing devices that include the smart phone and the tablet computer. Branding has the effect of helping a customer recall a brand form his memory when given a variety of options to choose from, apart from that, it helps in the concise passing of the intended information, reasserts the company’s credibility, connects emotionally with the target customers, it motivates most buyers and enhances the user loyalty to the products thus offered. The personality of the brand apple most importantly is simplicity, which of course includes the ability to make the lives of people easier as they have design that are tailor made to suit their needs. The operations of the company Apple is characterised by a vertical integration model that encompasses aspects of both hardware and software production. The Apple Operating system runs only on Macs and other Apple related products and this has the effect of making it in sole control of the development, distribution and price of all its products. This is important as it offers assurance to the customers of not only powerful and easy to use products but built by Apples users for Apple users (Lashinsky, 2012). . III. Channeling and Distribution Strategies Strategic theory outlines three stages of a product that have the potential to affect Apple’s iPod or iTunes (Kim and Mauborgne, 2005). These stages are the Product Power, Position Power and Process Power and two features, value-addition and obstacles define each stage. In the first stage, the company achieved considerable product power with the launch of the iPod invention and the associated iTunes software. Because of higher-end quality of the product, increased user-friendliness, and catchy marketing, Apple gained a first-mover advantage in the market and capitalized (Gitman and McDaniel, 2008). Because of the rapid growth of the two products, Apple was able to gain significant position power in the market. The Apple Company, aware that channelling and distribution strategy is one of the most important aspects in the consumer electronics industry, Apple made one of its smartest moves by deciding to further vertically integrate and open its own retail stores (Rosenbloom, 2011). By eliminating the primary-agent challenges arising from sole distributors and disconnected retailers, Apple realized that the most important element to their products that ensured their success and retained their customer-base was possession of a knowledgeable and helpful sales team with the ability to enable their customers experience the Apple products (Lashinsky, 2012). IV. Future Plans Away from the normal business practices of increasing revenue through the reduction of the company expenses, Apple continues to transform every aspect of the business process in which it operates. The company has a high affinity for recycling their own e-waste, which is implemented in close to 95% of all countries that take part in the sale and distribution of their products. In the year 2008, the company made head way by recycling approximately 33 million pounds of electronic waste, this accounted for 41.9% of all products sold worldwide (Apple computer, 2010). The biggest challenge facing the Apple’s new CEO, Tom Cook, is how to maintain the momentum that had been set and sustained by the iconic and innovative former CEO Steve Jobs. His biggest task, therefore, is to sustain the world’s largest and renowned consumer electronics company’s success in the industry. This challenge comes on the heels of a decade-long turn around and innovations that had very few equals in corporate history. Currently, Apple has a strong and winning product in the iPad tablet, however it faces stiff competition particularly originating from Google and Samsung who have developed similar products and are fighting for the huge market share. Although the iPad tablet is still the most popular product among consumers, other products from competitors are slowly coming to the forefront, leading to overcrowding of the market. For example, the failure of Apple to launch a new product in the first quarter of 2013 led to a decrease in sales in the second quarter. However, the decline could as well be attributed to increasing competition. Conclusion The urge by Apple Inc to put client needs above all other needs has added a personal touch in the personal computer industry. The company continues to be a trailblazer in the industry and this is credited to the award winning products and services that it continues to produce. Some of these innovations have occurred in the digital media and portable iPods and video players that are nourished by the presence of the iTunes online media store evidence this. The entry of the company in the smart phone world through the use of creative business strategies (value innovation) which makes irrelevant competition between the various companies by opening up new and untapped markets. The demand for more powerful and user-friendly gadgets, which are cost effective, is a primary concern at the company. The restraint in announcing product development plans years in advance has the effect of creating suspense in the customers. The goal of this strategy is to keep the customers on toes for the latest products that the company realizes in the near future, which occurs very regularly. The need to connecting with other human beings and regularity of connecting with other human being is characteristic of our social nature. This is made possible by the presence of mobile communication equipment and the synchronization of both products and services with the concoctions of mixed media content, this has the effect of improving on each product released by apple. The future of Apple depends largely on its ability to continue developing high quality gadget components for communication devices cheaply, such devices includes flash memory (nonvolatile- NAND), liquid crystal displays (LCDs) and dynamic random access memory etc. The need to continually create demand products through implementing of new designs, the ease of operation of the products and the development of user-friendly features continues to be the primary concerns engaging the company’s faculties. Plans to reduce the product prices also are of concern to the company despite having the negative effect of affecting the company’s gross margins negatively. The company’s presence in different locations coupled with the fluctuations in exchange rates and punitive tax regimes is likely to affect the financial results and Apples strategy of operation. The dependence of third party developers in the creation of new software applications that is both powerful and relevant to the Apple products. Various companies are likely to suffer a huge blow if any disruption of whatever sorts occurs in the third party Apple software development department. References Apple Computer. 2010. Apple and the Environment: The Story Behind Apple’s Environmental Footprint. [Online] Available at: http://www.apple.com/environment/complete-lifecycle Clegg, S., Carter, C., ? Kornberger M. & ? Schweitzer, J. 2011. Strategy: theory & practice. Los Angeles, Sage. De Kluyver, C. A. 2010. Fundamentals of global strategy: a business model approach. New York, Business Expert. Dupuis, J. A. 2000. First stop for jobs and industries. Detroit, Gale. Ernst, D., & O'Oonnor, D. 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