How Apple Can Gain Competitive Advantage through Leveraging Its Internal Resources and Competencies - Coursework Example

How Apple can gain competitive advantage through leveraging its internal resources and competencies How Apple can gain competitive advantage through leveraging its internal resources and competencies Introduction Apple is a multinational company that deals with the design, production and sell of consumer electronics, computer software, portable digital music players, personal computers, and smart phones. The company has a considerable market share in the industry, but can leverage its internal resources and core competencies to attain a competitive advantage in the crowded technology and electronics industry (Lynch 2006). The mission of Apple aims at bringing the best personal experience to creative professionals, educators, students and consumers across the globe through its innovative software and hardware products (Snickars and Vonderau 2013). Apple is the second-largest global information technology company by revenues and can leverage its internal resources and core competencies to attain market leadership position in the industry. The essay will analyse how Apple can gain competitive advantage through leveraging its internal resources and competencies. Business environment The PEST (political, economic, social-cultural, and technological) analysis is useful in understanding the macroenvironment facing Apple. The political environment is stable, but Apple is required to adhere to legislation on product quality and consumer health. The economic environment is favorable due to positive economic growth, stable interest rates, and high disposable consumer incomes. The social-cultural environment is characterised by favorable attitudes towards sophisticated consumer electronics, high education levels and high demand for information. The technological environment is favorable for the business activities of Apple due to the recent advancements in mobile computing, research and development and growth in internet communications (Chasten 2012). Apple resources Apple has various internal resources that it can be utilised to attain competitive edge in the market. Accordingly, Apple has various core competencies that present unique strengths that can be utilised to differentiate its business activities and drive competitive advantage. Apple has both tangible and intangible resources that it can leverage to attain high market share and competitive advantage in the market (Chasten 2012). Some of the tangible resources of Apple include the plant and equipment, buildings, capital, and human talent. Apple has highly qualified human resources that have the required education, skills and attitudes to drive innovation in the company. Apple has invested heavily in training and development of its research and innovation teams. The company has effective job design and job specifications that allows for job coordination and high performance of its employees Chasten, I. (2012. In this case, Apple experiences low employee turnover due to the high job satisfaction and good remuneration policies that aim at attracting and retaining human talent in the company. The company has fostered individual excellence and recognises the best performing employees who portray exemplary leadership and technical contribution through the Apple Fellows Program. Apple has established an organizational culture that fosters positive attitudes towards work and that aims at ensuring employees exert their creativity in their roles. Apple has physical assets such as buildings and equipment, and research facilities that are essential in new product development (Chasten 2012). The company headquarters is located in the Middle of Silicon Valley in California where the company has six building that provide cool working environment. The company has invested heavily in buildings such as retail stores and Apple store that are essential for the distribution of company products such as iTunes. Apple has various distribution centers and employee campus that can host more than 13,000 employees. The company buildings have additional facilities such as clinics and fitness facilities that improve the welfare of employees. The company has various production facilities that can be utilised for mass manufacturing to meet expanding demand of the innovative devices. The company production facilities are compatible with AGP, Wi-Fi, USB and HyperTransport standards (Snickars and Vonderau 2013). The manufacturing and research facilities are strategically located across various markets in order to attain flexibility in production, and ease the distribution of the finished products to the markets. The company has excellent computer and communication infrastructure that allows for collaboration of the global product development teams. The company has access to quality raw materials at affordable costs due to the existing supplier contracts thus enabling maximum utilisation of the production facilities and equipments (Saxena 2009). Apple has sufficient financial resources since it is the second-largest information technology company by revenues across the globe. The global revenues reached $ 170 billion in 2013 and it became the largest public trade corporation in the world according to market capitalisation (Arthur 2014). The company has positive cash flow and is capable of generating financial resources internally or accessing funding from the capital markets easily since it has various assets that it can pledge as collateral. The company has a lot of global assets such as the distribution centers and utilises international accounting practices that enable comparability of its financial resources across various accounting regimes. Accordingly, the company taxation systems are aligned with the best global practices in order to facilitate global access to capital and improve the borrowing capacity (Grant, 2010). The intangible resources are invisible and lack physical attributes and include the culture, knowledge, brand equity, reputation, and intellectual property rights such as the copyrights, patents, trade secrets and trademarks. Apple has various technology copyrights and patents that are essential for sustaining competitive advantage (Arthur 2014). Apple is considered a global brand and is popular with sophisticated and urban customers who prefer performance, quality, sophistication, and status. Apple products allow for multi-media applications that enabling customers to perform various functions such as streaming videos, accessing news, communicating and perform financial transactions (Arthur 2014). Another intangible asset is the cordial relationships with customers, distributors and suppliers that have led to brand equity and good reputation for the company. Apple has a positive brand image since the company positioning takes in to consideration the needs of the supply chain partners and customers (Arthur 2014). Apple has the ability to conduct market intelligence and maintain relationships with customers through the use of online infrastructure that allows customers to provide suggestions, request product information and report defects in their devices. Accordingly, the company has reliable suppliers of high quality materials and has maintained these relationships through adhering to the contract terms and honouring all obligations to the suppliers (Czinkota and Ronkainen 2005). Apple enjoys high customer loyalty since the company has build a reputation of innovation. Apple marketing communication efforts are geared at highlighting the differential benefits and premium aspects of the brand thus enabling the company to build brand intimacy. Apple core competencies The core competencies are activities and processes through which the resources are deployed in order to attain competitive advantages in ways that are unique and competitors cannot imitate. One of the core competencies of Apple is the ability to leverage industrial design and integrate the software and hardware in order to design high-tech mobile devices that can take the consumers’ experiences to higher levels (Arthur 2014). Apple is capable of using its sophisticated information technology infrastructure in order to differentiate its products through offering additional features and designs that improve the user experience. Apple’s iOS is more preferred by business-oriented customers since it offers more efficient iCloud Drive and is compatible with various hardware platforms (Arthur 2014). The company has a high level of customer service that is essential in building and sustaining cordial customer relationships. In this case, Apple is able to understand the changing customer needs and respond effectively by developing products that meet higher customer expectations. Critical success factors (CSF) in the industry There are critical success factors (CSF) that determine competitiveness in the information communication industry. A critical success factor is an element of a company that is central to future success and develops over time (Johnson, Scholes and Whittington 2005). The CSF includes the manufacturing flexibility, employee attitudes, superior technology, and excellent distribution network. One of the critical success factors of Apple in the industry is the extensive research and development activities that are essential for new product development and innovation. The company dedicates about 40 percent of its annual budget towards research and has increased its research and development workforce by more than 10,000 employees (Arthur 2014). Superior innovation and IT capabilities is a core critical success factor in the industry since it enables a company to differentiate its products and offer new products to the customers (Graham 2008). Apple is committed to continuous learning and innovation and has launched more than five market changing innovations in the last decade. For instance, the company was first to offer the iPOd, iPhone , iTune and Apple Exchange products that revolutionalised the industry due to their sophistication. Apple has developed more than 100,000 apps that facilitate product integration and expand the customer benefits. The breadth of product line is another critical success factor for Apple in the industry since the company has a diversified product portfolio that includes personal computers, software, hardware, digital music devices and mobile communication devices. The company offers accessories and networking solutions that support the related services of the core products (Graham 2008). Another CSF is the high brand recognition and reputation of the company (Graham 2008). Apple is one of the worlds’ trusted brands due to its superior quality products and high brand awareness. The brand recognition of Apple is comparable to global companies like Google, Starbucks and IKEA. A low cost structure is another critical success factor since it enables the company to engage in mass production and charge lower prices for the premium quality products. Apple has high production facility capacity and high economies of scale that enables the company to offer high quality products at discounted prices (Graham 2008). Accordingly, the cost savings from the production activities are passed to third-party distributors in form of lower factory prices (Porth 2003). A variety of distribution channels and ease in accessing markets is another key success factor in the industry. Apple has own retail distribution centers across various cities and markets across the world. The company uses third-party resellers and value-added resellers thus enhancing the market reach and improving customer convenience (Graham 2008). Another CSF is strong marketing communication strategy and high online presence. Apple is well-known for its effective marketing and advertisement campaigns that successfully persuade customers to try new products and maintain their loyalty to the brand. Advertisement campaigns such as ‘think different’ and ‘super bowl commercial’ and ‘iPod People’ proved very effective in new product market penetration (Arthur 2014). How resources deliver sustainable competitive advantage According to VRIN framework of resource analysis, Apple resources and core competencies will deliver sustainable competitive advantage if there are valuable, rare, inimitable, non-substitutable (Graham 2008). The resources must be valuable and transactions costs associated with the resources must be lower than the discounted future profits of the resources in the value strategy. In this case, Apple resources such as financial capital, human talent and equipment are essential in ensuring efficiency and effectiveness in order to outperform competitors (Graham 2008). Another factor is the rareness of the resources and imperfectly imitable since it should be controlled by one firm. The copyrights, patents and superior computing technologies of Apple are not easy to imitate. The resources should be non-substitutable and Apple research and innovative capabilities, patents and copyrights are non-substitutable. Resource-based view theory According to the resource-based view of corporate strategy, critical resources and core competencies will lead to lower costs of production and generate superior quality products that differentiate an organisation from its competitors in the market. According to the theory, developing sustainable competitive advantages involves creating customer loyalty through branding, positioning and loyalty programs and thus Apple has established customer loyalty since it has databases that monitor consumer purchasing behaviour (Graham 2008). Secondly, the location is essential since it must create customer convenience and encourage repeat sales. Apple retail outlets are strategically located in urban centers and there is an online store that improves the market presence (Porth 2003). The third element is the distribution and information systems that should ensure retailers reduce their prices. Apple has an integrated distribution channel that is relatively cheap and efficient in reaching the market. The fourth element is unique merchandise that includes private labels and Apple brand products have unique styles, designs and features that enable the customers to recognise the product in the shelves. The fifth element is the vendor relations and Apple has established exclusive agreements with distributors and value-added third-party resellers (Graham 2008). The sixth concept is the customer service and Apple has attained positive reputation due to excellent customer service and after-sales services. The last concept is the multiple source advantage and Apple has certain advantages over its competitors since consumers identify the brand with superior quality, better performance and stylishness. Value chain and value system of Apple Customer value results the degree of customer satisfaction relative to the costs incurred in consuming the product. Apple has a high customer value since it products are of high quality and has efficient distribution network that creates customer convenience (Wilson and Gilligan 2012). Manufacturing companies such as Apple create value through changing the raw materials to finished products and supporting customers with after-sales services (Chasten 2012). According to Michael Porter’s value chain, Apple must invest in support and primary activities that aim at enhancing the customer value (Porter 2008). The company primary activities such as inbound logistics, operations, outbound logistics, marketing and services must be efficient and cost-effective. The company should create value through investing in integrated marketing communication and sales approach and ensuring faster and reliable after-sales service for the defective products. The company should differentiate its offerings with the superior customer service and efficient outbound logistics that create customer convenience (Wilson and Gilligan 2012). The support activities of Apple such as procurement, human resource management, infrastructure and technological development should be utilised to create value. The company must invest in training innovation team and motivate its employees. The company should invest in the state-of-the art technology and establish cordial relationships with suppliers in order to negotiate for best raw material prices (Wilson and Gilligan 2012). Conclusion Apple is a global company that has attained high brand recognition and customer loyalty through superior and innovative products, intensive marketing campaigns and efficient distribution network. The company must utilise its internal resources and core competencies that are valuable, rare, imperfectly imitable and non-substitutable to create sustainable competitive advantages. Sustainable competitive advantage will involve ensuring customer loyalty, offering differentiated products, improving the efficiency of distribution and information systems, enhancing customer loyalty and establishing beneficial vendor relationships. The value system should involve low cost sourcing of the raw materials, the low cost structure in the production system and product pricing that is aligned with the differentiated customer benefits. Apple will be capable of providing high quality products and charging a premium price due to established customer brand loyalty and still maintain its sales volumes. Reference List: Arthur, C. 2014. Digital wars: Apple, Google, Microsoft and the battle for the internet. New York: Kogan Page Publishers. Chasten, I. (2012). Strategy for Sustainable Competitive Advantage: Surviving Declining Demand. New York: Routledge. Czinkota, M and Ronkainen, I. (2005). International Marekting. New York: Cengage Learning. Graham, H. (2008). Marketing Strategy and Competitive Positioning. London: Pearson Education. Grant, R. (2010). Contemporary Strategy Analysis: Concepts, Techniques and Applications. 7th Ed. Massachusetts: Blackwell. Johnson, G., Scholes, K and Whittington, R. (2005). Exploring Corporate Strategy. 7th Ed. Harlow: Financial Times Prentice Hall. Lynch, R. (2006). Corporate Strategy. 4th Ed. Harlow: Financial Times Prentice Hall. Porter, M.E. (2008). 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