Porters Diamond Theory Application: The of Apple Inc - Case Study Example

PORTER’S DIAMOND THEORY APPLICATION: THE CASE OF APPLE INC. by + Introduction The modern technological market is a very diverse and competitive area of business. It tests a company on all fronts including the innovativeness, its structure and resolve to ensure continued success in its dealings. One exemplary operative in today’s cutthroat field of technology is the Apple Inc. The Apple Inc. is a multinational corporation with its headquarters in California. It sole business involves manufacturing and selling consumer electronics. Prior to these selling, Apple employees, first have to develop and design these products in order to ensure their quality and competitiveness in the industry. The purpose of this report is to discuss the contribution of Porters diamond model to the success of Apple Incorporated. Various aspects of this model such as firm strategy, demand and factor conditions, as well as supporting and related industries will be considered in determining their contribution to Apple’s international success. The Structure, Strategy, and Rivalry of Apple Inc However, this company has also ventured into other technology related businesses among them the production of personal computers and computer software. In addition to these investments, it is also involved in the business of providing online services; hence, it has a healthy range of products for its target market. However, Apple is not on itself in the production of computer electronics. It faces a lot of competition from other equally well-established international companies such as Samsung from South Korea and China’s Hawaii. Their main points of competition besides the usual superiority of their respective products also border around other aspects such as product pricing and market appeal. The Strategy of Apple Company In coming up with the Diamond strategy, Michael Porter recognized the fact that the strategies invoked by a firm play a crucial role in determining its market performance (Reinhert 2013, p.15). Hence, for multinational companies such as Apple, strategy is of the essence as it helps direct their approach towards the market. A primary strategy that is the hallmark of this corporation is differentiation. In the world of technology whereby consumer tastes and preferences tend to revolve around similar product attributes, differentiation is of the essence. The unique designs of Apple products and their high quality have greatly served to set them apart from the products of other competitors such as Nokia. Another vital strategy is value creation. This company has outsourced manufacturing functions to third parties as a way of focusing on product design and creation of user interfaces. In this way, Apple has transferred costs to third parties besides taking advantage of economies of scale. The above strategies have enabled this company to succeed in both the domestic and international market despite the relative high prices of its products. The Structure of Apple In his model, Porter emphasized the vital role that is played by how a firm is created and managed in ensuring its success. Hence, for successful multinationals such as Apple, their structure is of the essence as a basis of their achievements. The Apple Corporation utilizes a collaborative structure in its operations (Dormehl 2012, p.20). Such a business structure serves to join parties in the long term. In this way, the chances of achieving a similar goal by the enjoined entities become more realistic. This structure provides Apple employees and its associates a collaborative environment hence guaranteeing adequate support for cooperative and individual work. Collaborative structure enables professionals to cooperate in achieving goals regardless of their location around the world. Hence, in light of this knowledge, Apple can contract companies in China to manufacture its products and coordinate their operations with its designers in America. Such an undertaking has ensured the success of this business in the international markets by taking advantage of low production costs in Asia. The Rivalry of Apple Besides the strategy and structure that have adopted by an individual corporation, the rivalries in its market play a crucial role in ensuring its success both locally and internationally. Despite its attempts to differentiate its products, Apple has still not managed to brush away its competitors such as Samsung, Nokia, and other technological giants. However, it is also vital to note that the intensity of competition in this industry has only served to make Apple a better producer of electronics. For instance, this company has managed to create considerable amounts of customer loyalty, as well as produce quality products. A vital indicator of this commitment is the anticipation that follows in the period leading to a release of a new product by Apple such as the iPhone series. Hence, it is evident that rivalry in the technology industry only serves to spur Apple to design better products therefore ensuring international success. Factor Conditions A vital component for the success of a company, as identified by Michael Porter in his Diamond model is the factor condition. These terms refer to the various resources that are at the disposal of the business such as the human, knowledge and physical resources. In addition to these, infrastructure and capital resources are also of the essence in the determination of whether a particular entity succeeds or fails in its undertakings. In the case of Apple, the former has always been the case due to the sheer quality of such resources that are at its disposal (Scott 2009, p.15). The human resources form a vital component of factor conditions. Apple has built a reputation for fostering excellence and individuality in its workforce. As such, it has over time managed to attract the most talented workers especially during the late Steve Jobs’ second stint at the helm of this company. The Apple Fellow program has also played a significant role in motivating and attracting a quality workforce to this entity hence ensuring its success in the international market. Another crucial element of factor conditions is the capital resource that is available to a company. Due to its innovativeness and continued profitability, Apple stocks have always commanded a very high value in the markets. Hence, it has been considerably easier for this company to secure capital financing in order to undertake its various projects. Such an advantage has enabled it to fund its research undertakings, which have in effect put it at the helm of technology around the world. The physical resources available to Apple are also a primary reason for its worldwide success. Through the shrewd use of unique manufacturing logistics, repeatedly Apple has managed to conduct massive product launching around the world. This achievement has been possible regardless of the fact that this company keeps its inventories to the minimal. The location of physical plants in cost effective areas such as China has further enabled Apple to exploit this competitive advantage to its success, much to the detriment of its competitors. As such, the extent of physical resources at the disposal of this corporation explains part of the reason that Apple has achieved to conquer the international markets. In addition to the factor conditions discussed above, the extensive base of knowledge resources available to this company ought to be credited for its international success. Since its inception, the Apple Corporation has always sought after the best brains in order to enhance its research and innovativeness. As such, this multinational has amassed a considerable knowledge resource, which puts it a step ahead of the competition. Couple this resource with its use of diligent and well skilled foreign workers in its overseas factories and the result from this combination is a very competitive enterprise. Overall, the specialized resources that have been developed by this corporation have also played a crucial role in ensuring its competitiveness. Just as Michael Porter envisaged in his Diamond Model, the factor conditions surrounding an enterprise influence its success or failure. In our case, the success of Apple Incorporated in the international markets can partly be attributed to the above factor conditions. Demand conditions In the analysis of the competitiveness of a corporation, the demand conditions in its markets play a very crucial role in ensuring its success. Michael Porter included this factor in his Diamond model due to the significance of its contribution to the success or decline of a business entity (Dunning 2002, p.12). The demand conditions surrounding the products of Apple Inc. are to be credited for much of its success. A case in point is the domestic market of this company. Even before it went global, Apple was still commanding a market with an extensive for technologically innovative products. Since the Second World War, the United States has been the home of advancement and technology. As such, the home market of America has grown to regard technological products with a lot of value. Such contest drives their demand as consumers strive to own the latest gadgets as a way of fitting in with the expectations of the society. From this explanation, it is evident that since its inception in 1976, this corporation was born in a local market with an insatiable thirst for its products. As such, the combined interplay of the factors named above served to give Apple Inc the competitive advantage it so desired. If we factor in the sophistication of the American market in comparison to other countries, it becomes clear that this company was under more pressure to innovate and improve on its previous products. Because of this pressure from the home market, Apple started creating technologically advanced products from the word go. Hence, it was able to compete favorably with entities that had been in prior existence such as the Japanese electronics giant, Sony Corporation. Eventually, Apple won this war and others to follow. As Apple ventured into the international markets for consumer electronics, the growing similarity of these markets to its domestic one ensured further success (O’Grady 2009, p.45). For instance, venturing into the European market exposed this corporation to another group of sophisticated consumers. In addition to this new legion of Apple enthusiasts, the purchasing power of these customers ensured that the pricing of Apple products was within their range. The success of western media in raising awareness of this new symbol of status further helped to shore the demand for Apple products in the European market. Consumer tastes and preferences towards technological products tend to be similar across the human divide especially if the said products target a particular segment of the population. Based on this knowledge, the demand for Apple products spread through Asia and eventually the African market, which is still catching up. The cumulative demand conditions in the world markets served to spur greater innovativeness from the Apple Corporation. Hence, this company turned to foreign markets such as China whereby it set up factories in order to exploit the cheap labor and economies of scale. In so doing, Apple manages to concentrate on product development and design in its home market while offshore factories ensure that worldwide demand is met. In this way, the demand conditions in the domestic and world markets have pressured Apple into greater innovation hence setting the ground for its international success. Related and supporting Industries In the diamond model, Michael Porter was wary of the contribution of supporting and related industries in ensuring the success of a firm. Of note is the fact that industries mentioned above are part of the operating environment of an entity. Considering the ability of this environment to influence the productivity and innovativeness of its members, it is understood that a firm’s success is dependent on this environment. When the above explanation is considered alongside our case, then the influence of supporting and related industries to the success of an enterprise cannot be more evident. For instance, third-party manufacturers have been instrumental in ensuring that Apple Inc. meets the market demand (Scott 2008, p.12). This company has utilized the production capacities of these entities especially those in located offshore such as in China. By using this option, Apple has exposed itself to a market whereby labor costs are relatively lower in comparison with the developed world. Hence, it has managed to control production costs without compromising on product quality, a factor that has put it ahead of its competitors. As such, the success of these supporting industries has served to enhance the competitive advantages of Apple Inc. hence cementing its international success. The development of the related industries has also made a notable contribution to the success of Apple Corporation. The emergence of smaller manufacturers of consumer electronics has served to expose low-income consumers to these gadgets before fuelling their appetite for superior products such as those made by Apple. As consumers graduate from cheap, low-quality electronics to the high-quality ones, extensive product differentiation by Apple ensures that they turn to its product range. The growing craze of consumers towards smartphones has opened the market for Apple hence enabling it to foray into new territories without the risk of abandoning its home markets. In addition to the above, the development of software industries has also served to bring success to Apple. The development of its IOS device backup facilitates a direct integration with software applications belonging to third parties. Such integration widens the range of choices available to consumers of Apple products thereby increasing their popularity and acceptance by the customers. The growing popularity of internet use around the world has also served to improve the competitiveness of Apple’s products (Sutherland 2011, p. 12). If the increased use of internet is coupled with the growth of the music industry, then the success of Apple product can be further explained. For instance, the iTunes store operated by Apple has grown to be the largest online music retailer in the world. Thus, the development of the internet use has enabled this Apple product to gain access to a wider market, and this access has in turn increased its worldwide popularity. Such has been the contribution of related and supporting industries to the ensuing success of the Apple Inc. In fact, in the absence of these industries, this corporation would be devoid of several competitive advantages, which would in turn affect its overall success. Conclusion From the above discussions, it is evident that the factors outlined in the Michael Potters diamond model can be seen in the success of the Apple Inc. For instance, the contribution of the structure, rivalry and strategy of this entity has been immense towards its entry and success in the international markets. In his model, Porter observed that the creation of companies, their goals and mode of management have considerable influence on their eventual performance. There is other better place to measure the interplay of these factors other than at the Apple Inc. Since its incorporation, proper management, clear goals and an intensive rivalry in the market has helped spur this company to global success. In addition to the above, the contribution of factor conditions to the excellence of this corporation is also of note. Potter envisaged a situation whereby conditions unique to a particular company help advance its competitive advantages. In the case of Apple Inc., unique factors such as the human and capital resources have been instrumental in facilitating its success in the global business environment. A crucial aspect in any market is the existence of demand. In his model, Porter stated that increased demand especially by the home market could inspire companies into greater innovation. This assertion is mirrored by the rise of the Apple Company, which has been on the back of the American markets demand for technologically advanced consumer products. Consequently, the resulting innovation has guaranteed its success in the international markets. Lastly, the supporting and related industries also deserve considerable credit for the success of Apple. In conclusion, it is evident that the factors outlined in Porter’s diamond model have been instrumental in the success of Apple. References List Dormehl, L 2012, Different thinking: Steve Jobs, the counterculture and how Apple Inc. took over the world, Virgin, London Dunning, JH 2002, Theories and paradigms of international business activity. Cheltenham, Edward Elgar, UK. OGrady, JD 2009 Apple Inc Greenwood Press, Westport, Conn. Reinert, ES 2013, Competitiveness and Development Myth and Realities, Cambridge University Press, Cambridge Scott, M 2008, Apple Inc. Greenwood, Westport . Sutherland, A 2011, Apple, Wayland, London. Read More