Business Strategies Adopted by Apple - Essay Example

Business Strategy Contents Contents 1.Introduction 3 2.Identify Strategic Position 4 2 Porter’s Generic Strategies 4 2.2.Bowman’s Strategic Clock 5 2.3 Strategic Group Mapping 7 3.The Effects of the Key External Drivers of Change 8 3.1. PESTLE Analysis for the brand 8 3.2. PESTLE Analysis (The Key Drivers) 11 3.3. Porters Five forces 11 Bargaining power of suppliers 12 4.Added value to Strategic Position 12 4.1. Resources and Competences Audit 12 4.2. The Value Chain 15 5.Conclusion 18 References 18 1. Introduction Apple Inc is a multinational technology company based in America. The company is actively indulged into selling computer software, consumer electronics, personal computers and online services. Apple Inc., has been able to set its market position due to some innovative products such as Mac computer line, iPhone smartphone, tablet, iPod, and smartwatch. It can be stated that business strategies of the firm has facilitated long term growth and development. The firm was founded in 1976 in California, United States. On the basis of revenue, the firm ranks second position in information technology sector. Apple Inc., possesses wide base of total assets and this makes them largest technology company across the globe. There is large number of customers who opts for Apple products and this has enhanced brand loyalty. Brand loyalty of the product is due to unusual items manufactured by the company. It is considered to be most admired company in United States. The strategic position of the company is well supported by its understanding about customer’s taste and preferences. iPhone denoted creativity of Apple Inc., in smartphone industry. In this study, strategic analysis would be exhibited on iPhone 6/6+ of Apple. This shall indicate effective utilization of resources and competencies in order to address customer demand and secure high profit margins. The company well segments consumer market so that manufactured product reaches right consumer. High prices of its product line are substituted by innovation and quality which cannot be easily imitated by other players in the market place. The study shall encompass analysis of Apple iPhone 6/6+ in technology industry, along with usage of models to determine its strategic framework. Models such as Porter’s Generic Strategies, Bowman’s Strategy Clock, Pestle analysis, Five Forces Model, Value Chain, Resources and Competencies Audit and Strategic Group Mapping will be included in this research study. 2. Identify Strategic Position 2.1. Porter’s Generic Strategies The generic strategies as formulated by Michael Porter have been highlighted in Figure1. Figure 1: Porters Generic Strategies There are four kinds of generic strategies such as cost leadership strategy, differentiation strategy, focus cost strategy and focus differentiation strategy. Products launched by Apple Inc., are unique by nature and are targeted towards a particular consumer market segment. Focus differentiation strategy states that narrow market segment are targeted by the company so as to acquire maximum market share. This form of differentiation strategy is adopted by a company when high priced products are being sold in the market place. Apple iPhone 6/6+ are targeted towards high income group segment (Boxall and Purcell, 2003). Hence it can be denoted that the firm follows focus differentiation strategy. Product uniqueness and narrow market segment are two essential characteristics which indicate this form of strategy. On the basis of focus differentiation strategy, Apple Inc., can deliver products completely unique in comparison to competitors. Apple iPhone 6/6+ was designed taking into consideration culture of customers. Customers purchasing Apple products belong to high income group segment. Competitive advantage secured by the company is due to product innovation (Lasserre, 2012). Premium product line is offered by Apple Inc., so as to sustain its market share in technology industry. Focused differentiation strategy enables the company to be inclined towards a particular consumer market segment (BBC News, 2015). Taste and preferences of these customers forms the basis of product characteristics. Apple Inc., develops a culture which adds upon self-esteem of customers. 2.2. Bowman’s Strategic Clock Bowman’s strategic clock is a framework which is utilized to determine position of an organization in relation to its competitors. The major competitors of Apple iPhone 6 are Samsung, Nokia, Sony, Motorola, Blackberry Limited, HTC and Lenovo. These players also design unique products which might be appealing to customers. However Apple is able to retain innovation and quality in all its product line. Bowman’s strategic clock for Apple iPhone 6/6+ has been highlighted in figure 2. Figure 2: Bowmans Strategic Clock Figure2 reflects global competitors of the brand along with position of Apple iPhone 6 on the clock. Apple is currently at the focused differentiation stage where innovative and high quality product is offered to customers and in return customers are willing to pay premium price (Henry, 2011). The company over the years have been able to establish a particular brand image and this gives them a competitive advantage to charge high prices. Apple iPhone 6/6+ falls between price range of US$199 to US$ 849 (BBC News, 2015). These high priced products are only purchased by customers who belong to high income group or possess a fascination towards unique products. Other players such as Samsung or Nokia believe in offering quality products but at competitive price range. This aspect differentiates Apple Inc., from other players in the market place. Blackberry Limited, Palm, Motorola and Samsung has always adopted differentiated strategy. On the other hand, Lenovo, HTC, Sony, Nokia falls between low price and differentiation positions in the strategic clock (Peng, 2013). 2.3 Strategic Group Mapping Strategic group mapping is applied on firms which are sharing a common business environment. This analytical tool helps to determine strategic position of firms along with their unique selling proposition. The strategic group map for the firm has been outlined in figure below. This map would be formulated on the basis of two parameters like price and value. High Price Low Low Value High Consumer markets can be categorized into three segments such as low end market represented by low income buyers, mid-end market represented by middle income group individuals and high end market segment characterized by individuals belonging to high income group. High price and high value marketing strategy is implemented by Apple Inc., in order to attract high income group customers (Mintzberg, 2006). The competitors mapped in this strategic framework are Nokia, Samsung, Sony, Blackberry, Motorola, Palm and HTC. These are considered to be close competitors of the company. As per the strategic group map, high value and high price denotes Apple iPhone 6/6+. On the other hand, products offered by Samsung, HTC, Nokia, Sony, Blackberry, Palm and Motorola belongs within the range of low to medium price, and low to medium product value (Pringle, 2008). In the current scenario, companies like Samsung and Nokia are inclined towards imitating product line of Apple Inc. so as to acquire brand loyalty for longer time period. Strategic position of Apple indicates its unique selling proposition in technological industry. The unique selling proposition of other players is represented through competitive prices and desirable product quality. 3. The Effects of the Key External Drivers of Change 3.1. PESTLE Analysis for the brand PESTEL analysis is implemented so as to determine key drivers that affect business operations. The external forces are political, economic, socio-cultural, technological, legal and environmental conditions. Political Impact Politics have considerable impact on business operations. Government regulations imposed on taxation structure is responsible for decreasing profit margins. UK government in recent scenario has incorporated 20% increase in VAT. The population is largely influenced due to such increase in VAT percentage. An increase in VAT tends to decrease purchasing power of customers. Apple Inc., offers high end products and such decreased purchasing power is not suitable for premium brands. Economic factors European credit crunch and financial turmoil occurring across the globe has disrupted many business organizations. Financial meltdown decreases consumer base for Apple Inc. It can be stated that products such as iPhone 6/6+ is purchased by customers only when they have high disposable income. In comparison to other smartphones, iPhones are relatively of high price. During financial crunch, customers would prefer to purchase essential products more rather than investing into premium product line (Apple Inc, 2015). However the current situation portrays economic stability around the world which shall be beneficial for business operations of Apple Inc. Socio-Cultural Consumer market of UK is more quality conscious in comparison to Asian markets. Customers based in Europe or United States, does shopping based on their personal taste or preferences, but there exists external pressures for customers located in Asian market place. Technology and art motivates consumers based in US and UK to purchase high end products (Cole, 2003). Technology driven companies like Apple Inc., are greatly benefitted by such consumer market trend. It denotes greater prosperity for products like iPhone 6/6+ in future years. Technology Technological advancements have been rapid not only in domestic markets but also in foreign markets of Apple Inc. The technology factor not only plays a major role in marketing strategy but also in overall production process. Technology inspired people are the main target segment for Apple iPhone 6/6+. The value chain of the firm is totally based on technology ranging from raw material procurement, warehousing, and logistics to delivery of finished goods to end customers. Technology enables the firm to design creative products which forms its unique selling proposition. Online sales and marketing activities have been adopted by the company in order to reach out to larger base of customers. Social networks are adopted by the firm so as to promote iPhone brand of Apple Inc. Legal Factors Policies and government legislation has an impact on firms operating in specific countries. Issue of business certification and taxation are the major key drivers within legal framework of a country. European government has eradicated legislative barriers and this provided advantage to companies in terms of initiating mergers. The taxation rate in United States is relatively high and this hinders firms such as Apple Inc. Profit margins are adversely affected due to such high tax rates. Environment Environmental standards are high in UK and US markets, with more inclination towards green products. These standards have to be followed by companies in order to sustain their business operations. Apple Inc., has incorporated best practices in its supply chain. The company focuses on appropriate waste management strategies so as to reduce any form of adverse impact on environment. 3.2. PESTLE Analysis (The Key Drivers) The key drivers of PESTLE analysis indicate the major forces which have significant impact on operations of Apple Inc. Political, social, legal and technological forces can be stated as key drivers for extended operations of Apple Inc. Apple iPhone 6/6+ would be able to gain desirable market share only when there is political stability in target geographical market along with regulated legal framework. On the other hand, social conditions also denote sales margin of iPhone 6/6+ since customer market trend needs to be well aligned with product strategy. Technological forces serve as a key driver because it governs overall operations of the company. 3.3. Porters Five forces Threat of new entrants High accessibility of technology and operating in an intensely competitive business environment initiates greater threat of new entrants. PESTEL analysis has outlined the importance of technology in business environment. The major issue for new entrants is establishing market share in technology industry. Large market share is maintained by iPhone brand of Apple Inc. Threat of Substitutes Threat of substitutes is more in this industry segment. There are other players offering products at competitive prices. Substitutes of iPhones in terms of smartphones are launched by Nokia, Samsung, Sony, etc., at much lower price range compared to Apple Inc. Bargaining power of suppliers Bargaining power of suppliers is relatively high since there is large number of players present in the market place (Magretta, 2013). The supplier base of Apple has the capability to dictate business activities. Bargaining power of buyers As per PESTLE analysis, consumers have high brand loyalty towards products of Apple Inc., because of their quality and creativity. Higher bargaining power is possessed by buyers since they can easily switch to other product brands. Competitive rivalry Apple’s iPhones witnesses tough competition from other players in the industry. Nokia and Samsung are the strongest competitors of the company. Intense competition is a key driver for Apple Inc., as per PESTEL analysis. 4. Added value to Strategic Position 4.1. Resources and Competences Audit Dynamic capability is possessed by Apple Inc., and it is reflected through new product development. Necessary resources (same as competitors) Unique resources Resources Company owned retail stores have capital investment Raw material procurement and transforming them into finished products High value product and services enhances brand loyalty Business operations spread across the globe Revenue margin of about US$ 182.795 billion (Young and Simon, 2005) 437 stores of Apple, operating across 15 countries Wide product range Employee appraisal programs Increased CSR activities New programs such as education and employee health insurance Threshold Competencies Core Competencies Competencies The firm possess business licence and fair trade business certification Strong distribution channel developed by the firm on the basis of technology leveraging Integrity, quality and long term customer relationship (Wintzer, 2007) Strong brand equity Firm is a well-known brand for manufacturing innovative products Employees and other supply chain partners are treated well Trademarks owned for brand logos, product packaging copyrights, and patents acquired for product design Resources and competences audit clearly indicate that there is certain characteristics unique to Apple Inc., which cannot be imitated by other players. Competencies have been divided into two segments where one segment denotes core competencies of Apple Inc., and other set of competency is associated with normal business environment. Resources and competencies of Apple Inc., can be strongly associated with value chain framework of the firm. The coloured symbols beside all these resources and competencies will outline its relation with value chain elements. Technological advancements are sustained within the company due to extended support from R&D department. Flat management structure enables the company to retain and attract employee base (Guardian News and Media Limited, 2015). Inventory level is managed by the company through effective supply chain process. Replenishment programs facilitate the firm to control its operational costs. 4.2. The Value Chain Firm Infrastructure Flexible organizational culture Committed to high quality and innovative product line Operations are spread across 15 countries, with headquarters located in California (Apple Inc, 2015) Procurement Strong relationship with suppliers Strict accreditation process is maintained throughout procurement process Necessary funding and supervisory control on procurement process is exhibited by company itself HRM The core structure of the company reflects non-conventional and unique framework. Flat management structure exists within the organization and this helps in efficient management of people. Stream line interactions are structured by the firm between employees and top management Inbound logistics Operations Outbound logistics Marketing and sales Services Apple Inc., has established contract with suppliers in order to manufacture iPhones Manufacturing hub located in United States Operating segments located across 15 countries 437 stores of the company sell iPhones Finished products are directly sold to retail outlets Stores are engaged into marketing activities Promotional activities and local advertisements are continuously implemented by the firm (Hoskisson,Hitt, Duane and Harrison, 2007). Multiple subsidiaries perform marketing activities TV advertisements, website and print media are key marketing channels Brand loyal customers also advertise its products through positive word of mouth Software application update can be regarded as a value added service offered to customers Free maintenance and repair are offered by the firm within guarantee period The value chain process clearly portrays maximum utilization of resources and competencies in order to deliver final products to end customers. Human resource management strategy is well implemented by the organization in order to retain best talent within the system. Marketing activities denote advertising unique features of iPhone 6/6+ which might be appealing to target consumer market segment. It can be stated that value chain strategy of the company involves forming long term relationship with all supply chain partners. 5. Conclusion As per the study, unique business strategies have been adopted by Apple Inc., in order to promote its innovative product line. This study was centred towards product strategy of Apple iPhone 6/6+. The company over the years have been engaged into delivering superior quality products or services to end customers. Quality has contributed towards increased brand loyalty of consumer market segment. To be more precise, the firm has established its market position on the basis of product innovation and quality. Various strategic models have been incorporated in this particular study so as to analyze current strategic position of the company. Apple Inc., has achieved sustainable market position but there is still scope for further growth of the firm in future years. As per Bowman’s strategic clock and strategic group mapping, the firm is inclined towards offering high value and premium priced products to target market segment. In overall context, intense competition in the market place influences Apple to adopt best technology based practices. The company sets its product category of iPhone 6/6+ in premium class segment and targets customers belonging to high income group. It can be regarded as a business strategy of the firm whereby only selected group of individuals are targeted. The factor which differentiates Apple Inc. from other players in the market place is adoption of focused differentiation strategy. This strategy has enabled the firm to serve wide base of customers across the globe and acquire higher percentage of profit margins. References Apple Inc. 2015. Investor relations. [Online] Available at: http://investor.apple.com/financials.cfm [Accessed 12th May 2015]. BBC News. 2015. Apple posts the biggest quarterly profit in history. [Online] Available at: http://www.bbc.com/news/business-31012410 [Accessed 12th May 2015]. BBC News. 2015. Apple reports booming China sales. 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