Strategic Analysis of Apples iPhone 6 - Essay Example

STRATEGIC ANALYSIS OF APPLE’S IPHONE 6/6+ By Strategic Analysis of Apple’s iPhone 6/6+ Introduction Apple Inc. was established in 1976 as the computer company. Formerly known as Apple Computer Inc., the Company is an American based multinational corporation that has its headquarters in Cupertino, California. Some of Apple’s best-known hardware products are the iPhone smartphones, the iPod music player, the Mac line of the computers and the iPad tablet computers. Apple’s iPhone product has experienced tremendous success in the development of the concept of the smartphone. The company introduced its first iPhone on January 9, 2007. With the launch of the iPhone 6/6+, Apple Inc. has conceded to the popular consensus that there is room for the larger iPhone in the world. This case study features iPhone 6/6+ product of the Apple Inc. and takes deeper analysis its business unit about the company’s external environment, its competitive position, and the value-addition proponents. Apple’s Strategic Position Porter’s generic strategies Porter (1985) asserts that there are three major categories of the generic strategies; cost leadership, differentiation, and focus. As for Apple Inc., the focused differentiation and cost leadership strategy are the best for the company in adapting to the competitive environment while implementing the value adding activities. The cost leadership strategy has been strongly pursued by the Apple Inc. in its continued efforts to ensuring successful competitiveness. The cost leadership strategy has enabled the company to be cost efficiency while ensuring sustainable development of the company. By pursuing cost the leadership strategy, the company has been able to determine the prices of its products and services at competitive prices. Nilsson and Rapp (2005) on the other hand states that when a company can sustain the profits above its expected income then the company can be termed as having gained the competitive advantage over its rivals. Apple Inc. Introduced the iPads to act as the more portable version of their range of the personal computers; an intermediate between the Smartphones and laptops. The introduction of the iPhone 6/6+ by Apple Inc. creates the impression of the company’s continued adoption of the differentiation strategy. Capon (2008) asserts that differentiation strategy is the clever way for the business in the establishment of the large market share owing to the fact that buyers perceive the quality of the services or products in regard to the price. Apple Inc. has made sure that its iPhone possess its line of the applications that can be bought directly installed on the phone. The company has ensured that the iPhone 6/6+ are readily available in the App store. This marketing entry strategy has worked excellently well with the company and has boosted the market share of the company. With the focused differentiation strategy, the company introduced iPhone 6 with the 4.7-inch screen and 18mm larger than iPhone 5s’s. Through the value addition of the product, Apple increased the prices of the iPhones. This value-added product features justifies Apple’s premium prices. Because focused differentiation strategy involves reorganisation of the company’s marketing strategies such as market segmentation, Apple Inc. reorganised the market segments with an objective of targeting the consumer aged 25-45 years. This target group consists of the customers that are not only technology-oriented, but also financial able individuals who can afford the improved iPhone 6/6+ regardless of the premium prices. These are the four generic strategies can be understood in terms of a 2 by 2 model, as used by the Apple Inc. in its iPhone 6/6+. Source of Competitive Advantage Differentiation System Economics Area of Focus Product Best Product (iPhone 6) Operational Efficiency Customer Customer Intimacy System Lock-In Bowman’s strategic clock Bowman’s Strategy Clock helps one to understand the competition of the companies in the market. Looking at the Porter’s generic strategies in the different way, in 1996, Cliff Bowman and David Faulkner developed the Bowman’s Strategy Clock. The Bowman’s eight different strategies include; low price/low added value, hybrid, low price, monopoly pricing, differentiation, focused differentiation, risky/high margins, and loss of the market share. Apple Inc. has used the Bowman’s Strategy Clock of focused differentiation to design products that have perceived high prices and value. Apple iPhone 6/6+ is an example of the Apple’s products that have been designed with not only high prices but also value. The perceived value of the Apple iPhone 6/6+ is enough to earn the company large premiums. Apple’s high perceived value can also be attributed to the company’s strong brand recognition. Apple’s iPhone 6/6+ has developed the competitive marketing strategy that places the company against its competitors using the Bowman’s Strategic Clock. The following are some of the vital points regarding the Bowman’s Strategic Clock; provision of the best services to the customers and earning of the customer loyalty. The manufacture of the iPhone 6/6+ has earned the company a lot of the customer loyalty from their multidimensional customer segmentation. Strategic Group Mapping The strategic group mapping is the sharing of the similar business environments by the firms in order to find out their unique selling proposition and to be more competitive than the other market participants (Harrison and John, 2010). The consumer markets are divided into the three categories; low-end markets characterised by the the low-income consumers; the high-end markets that have the high-income earners that are characterised by the high purchasing power and the mid-end market features the mid-income level buyers (Aaker and Mcloughlin, 2010). Based on this categorisation, it is evident that Apple Inc. has adopted high-value high price marketing strategy that attracts the high-end segment of the consumer market. External Drivers The external drivers are the factors that can affect the operations (normal) of the business on which the company has little influence on (Hambrick and Fredrickson, 2001). They are; economic forces, politics, technology, socio-culture, environment and legalities (Porter, 2006). Political and Legal Drivers Lei and Slocum (2005) asserts that politics can have a great impact on the business operations within the country. The political influence on the business of the nation can be subject to the country’s national government’s established regulations and policies (Harrison and John, 2013). The government regulations on the issues like taxation can have a great impact on the operation of the business. For instance the imposition of the 20% rise in the VAT by the UK resulted in the tax burden on the United Kingdom’s populace that forms the basis of the country’s consumer markets (BBC News Business, 2011). The increment on the VAT leads to the reduction of the buyer’s purchasing power making them to reduce their spending level. Economic Factors The global financial structures problems leads to the incidences like the crunch in the European credit and the financial meltdown globally. This can lead to the unfavourable effects of the businesses. These financial crises have resulted in the reduction of the purchasing powers of the consumers. As a result, the consumers decided to buy the necessities thereby making the products that were perceived as the “non-essential” to be avoided by the buyers (Berglof, 2011). The price of the Apple’s iPhone is considerably higher as compared to the other Smartphones. Therefore, with the decreased purchasing power, the buyers will go for the substitute products that are sold at low prices. However, with the global economic condition gradually finding its foot, there is an optimistic view that the business activities will finally be back to the normal. Socio-Cultural Factors The socio-cultural environment is the immediate cultural and social influences that the business unit have little influence over it (Thornton, Domingo and Urbano, 2011). The socio-cultural factors include the aspects of the cultural practices, the preferences and attitudes of the people, religious observations and among other dimensions. Schuler and Jackson (2008) asserts that the businesses are forced the firms are forced to assimilate to the socio-cultural environmental demands due to the isomorphism. The isomorphism can be defined as the situation whereby the business gradually dissolve to illustrate the same practices that are usually subject to the immediate environment demands (Schuler and Jackson, 2008). The United Kingdom’s consumers carry out shopping majorly based on their individual decisions with little influence by the external pressure or influence (Bergloff, 2011). Therefore, there is need for the provision of the customised services in the United Kingdom. Furthermore, in the UK, the consumers have preference towards the consumption of the high-end products that are blended by the latest technology and art. This environment perfectly suits Apple Inc. owing to the company’s drive towards technological innovation. Technology United Kingdom is one of the states with the relatively high consumption of the technology. The virtual communities together with the internet have led to the transformation of the entire United Kingdom into the global village (Barclay et al., 2011). The firms have been made to adopt the e-strategy in which the various aspects of the B2B and B2C business activities have been made online (Mina, Connell and Hughes, 2009). Apple’s value chain starting from the procurement raw materials, warehousing, and business logistics is made possible through the use of the technology (“Apple’s Business”, 2011). The company presently engages in the online marketing. Examples of the online marketing tools that are adopted by the Apple Company in the promotion of their iPhone 6/6+ brand include the social networks. The social networks provides the possibility for the B2C and B2B business exchanges, and they are effective tools for obtaining feedback from the customers. Legal Factors The legal factors refer to the aspects of the government policies and legislation that affects the business practices in the country. The issuance of the business certification and the taxation are the most common aspects of the government legislation. Government’s legal measures are made to ensure balances on all the business activities in the region. For instance, the United Kingdom’s government eliminated the legislative barriers that was a hindrance for the companies from forming the mergers between them (Busineelink.com, 2011). Environment The issues of the environmental conservation have nowadays become very pertinent in the minds of people and businesses. The buyers are finding it important in the engagement in the consumption of the greener products (Chen and Ching-Hsun, 2012). Grant (2008) asserts that the businesses that show the elements of the environmental concerns are most preferred by the United Kingdom’s consumers as compared to those that show little concern for the environment. The Apple Inc. brought the disposal bags for the disposing of their obsolete and used gadgets. Additionally, Apple Inc. recycles some of the wastes although most of the wastes are disposed of (“Apple’s Business”, 2011). Porters Five Forces Model Porter’s five forces analysis is the mode that is used to analyse the different sources of the firm’s or business threats. The threats include; the threat from the competitors, new market entrants, bargaining power of the suppliers and buyers, and the threat from the substitute products (Porter, 2006). Threat of New Entrants The technologically intensive industries like the one that the Apple Inc. is operating in is faced with the challenge of the new entrants. The field that Apple operates on has little bureaucratic and restrictive measure for the entry (Barclay et al., 2011). Therefore, gaining of the entry into this field is not hard. Apple’s iPhone brand is presently enjoying considerably large market share because of its consideration by the customers as the authentic and reliable quality. This can be attributed to the Apple’s prominent market presence that has been brought about due to its existence in the market for long. Threat of Substitutes The cheaper tablets computers from the Mainland China is a threat to the company’ iPhone 6/6+. Other rivals such as Microsoft also poses a considerable threat to the Apple’s iPhone business unit. The consumers regard the Microsofts tablet computers as not only strong brand, but also a reliable one that can match that of the Apple’s iPhones. Suppliers Bargaining Power The stiff competition in the field of PC Plus with the large number of the new entrants, suppliers of the raw materials leads to the high bargaining power over the firms in the field. Apple’s iPhone 6/6+ business unit relies on the suppliers for the raw materials hence putting the company in the compromising situation due to the immense power of the suppliers to dictate the business activities. Buyers Bargaining Power The cheaper tablet computers in the market and substitutes like the Microsoft tablets PC gives the consumers a relatively higher bargaining edge over the manufacturers. The consumer’s ability to switch over to the substitute products quickly affords them a relatively higher bargaining power. Rivalry Apple’s iPhones faces stiff competition emanating from the prominent market players such as the Microsoft, Android tablet computers and among the other manufacturers from China (mainland). The Value Addition Activities Resource Analysis The capital, technology, raw materials, energy manpower among other resources are the important factors for any firm to participate actively in the competitive market. According to Apple (2012), the company has a relatively stable source of the raw materials, wide market coverage, and the functional logistics providers. The company also strives to ensure that it’s well updated with the technology due to its excellent R&D team (Apple, 2012). In reference to its capital, Apple Inc. owns quite a number of the business units that enables the company to be financially stable. Apple’s relative financial stability gives the company enough working capital that has considerably enabled in opening store outlets within and outside the UK. Apple has the considerable ability to attract the large number of the human resource base, and this can be partly attributed to its flat management structure. As of 2011, the company had an estimated 60,000 full-time employees and about 3,000 temporary full-time employees (Apple, 2012). The flat system of management implies that the employees and their superiors relate at a more personal level thereby leading to the improvement of the employee’s work output. In terms of the world capitalisation, Apple is one of the largest publicly traded company in the world. Additionally, the Company takes the frontline in terms of the technology as compared to its competitors such as Microsoft (BBC News Business, 2011). The company’s iPhone business unit has effectively set up the R&D team that ensures that it’s updated with the recent technological advancement. For instance, Apple’s iPhone business section has adopted modern technology to boost the supply chain management of the business. Apple has adopted information technology and the programs such as the Collaborative Planning, Forecasting and Replenishment (CPFR), continuous replenishment programs and among others (Wong et al., 2011). This has helped the company to have an effective information flow between its stakeholders. Through the CPFR, the company has ensured that there is the joint replenishment and visibility of the goods because the inventory is mutually managed across supply chain of the company. Value Chain Analysis Apple’s iPhone business section is divided into the two parts; the primary and the secondary activities. The primary activities involves the company’s procurement activities, infrastructure, technology and the HRM. The secondary activities on the other hand include the inbound logistics (the supply of the raw materials), operations (manufacture of the iPhones) and the sales and marketing of the final products and lastly the services that are offered by the Apple’s iPhone business unit. Primary Activities Company infrastructure The company’s infrastructure refers to the company’s corporate culture, organisational structures, and the company’s overall control systems. Apple Inc. has about 194 retail outlets that are distributed across the world. Additionally, the company has an approximated number of 20,000 employees that are distributed across Apples app stores. HRM The company has a unique and non-conventional business structure that is known as “apple core structure”. The company’s core structure is composed mainly of management of the human resource across organizational levels. This enables the company to have a streamlined business management. Technology The company’s iPhone business unit has the R&D team that keeps the company updated with the technological trends (Apple, 2012). This explains why the company never compromises on its quality of their technology. Supply of the Raw Materials (Procurement) The Chinese manufacturers undertake Apples procurement of the raw materials. The company supervises the procurement process and then makes the allocation of the funds. The procurement process must, however, undergo the accreditation process of the company. Secondary Activities Manufacturing of the iPhones The manufacturing of the Apple’s iPhone 6/6+ and the other products of the Apple are totally outsourced to the Chinese companies (Meyer, 2012). The company’s main input is to ensure that the products are manufactured meet the required standards. Marketing and Sales of the iPhone 6/6+ The company has subsidiaries that carry out the marketing and selling of the iPhone 6/6+. The subsidiaries’ advertisement is majorly done through the official website of the company, the TV ads, and the print media (Meyer, 2012). Additionally, the company carries out the advertisement campaigns that involves the collection of the media sources. Other secondary activities include; the services that are offered by the company and the supply of the finished iPhones. Sustainability of the Apple iPhone Business Unit’s Strategic Position Apple Inc. has adopted the product differentiation strategy as the market entry strategy. This is particularly vital when the company is entering into the fresh markets. The differentiation strategy has afforded the company the differential advantage over its competitors. Sheth and Kellstadt (2002) defined the competitive advantage as the manner in which the business maintain the customer loyalty while ensuring sustenance in the prevailing market. With the introduction of the Apple 6/6+, the company adopted the focused differentiation strategy. The adoption of the focused differentiation strategy has enabled the company to increase its market share. Apple’s iPhone 6/6+ has its various stores that are spread across the UK. The company has acquired the significant advantage and customer base as compared to its rivals such as the Google (Android) and Microsoft). Based on the Porter’s five forces analysed above, the bargaining power of the consumers is considerably strong in the UK. When it comes to competition with the other manufacturers, Apple heavily relies on its brand name, up-to-date technology, and the quality production in order to gain the competitive advantage in the entire market. In addition to the company’s production and sound marketing strategies, Apple also enjoys a very strong market presence owing to its strong brand name. The consumers perceive Apple Inc. in terms of its reliable and quality services. In particular, the Apple’s iPhone business unit holds a lot of the business power in due to the company’s human resource management, the value chain management, and the technological practices. Conclusion It is evident Apple is gaining more competitive advantage in the technology market because of its consistent and superior strategy of differentiation, which has enabled the company to create superior and customer tailored products that give consumers a value for their money. With the launch of the iPhone 6/6+, Apple Inc. has, for instance, that there is room for the larger iPhone in the world in the computer and smartphone market, which needs to be filled through the development of high-end consumer products. Apple Inc. has created a very strong marketing strategy for the iPhone 6 plus, and it has managed every aspect of the product’s launch effectively. Like almost all the other products, the iPhone 6 plus has some drawbacks and flaws, but the company has been able to develop a unique product of for the tech-savvy customers that are interested in the combination of the Smartphone music player and make the customers aware of the product through effective marketing efforts and the strong publicity. The iPhone 6 plus exemplifies Apple’s Inc. knack for creating the excitement about its products among its loyal customers that keep attention focused on Apple and then justify the hype through the delivery of the high quality and desirable product. However, the material being used in the iPhone 6 as the phone housing was a great mistake. I recommend the Product Development since the company has already released the phone to the market worldwide. Bibliography Aaker, D. A, and Mcloughlin, D., 2010. Strategic market management global perspectives. Chichester: Wiley. Apple official website, 2012. Revolutionary. 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