The Strategic Position of Apple - Assignment Example

4. Business Strategy Report - Apple iPhone 6/6+ Case study Table of Contents Table of Contents 1 Introduction 2 1. Organization’s Strategic Position 3 1.1 Porter’s Generic Strategies 3 1.2 Bowman Strategy Clock 7 2. External Drivers of Change Affecting Apple 9 2.1 PESTLE Analysis 9 2.2 Key Driver of Change 11 3. Porter’s Five Forces Model 13 Conclusion 15 References 16 Introduction Apple Inc. is an American based multinational company. The company deals with designing, modifying and selling of software, electronic products, smartphones and personal computers among others. Moreover, Apple is also identified to be providing hardware products that include iPad tablet, iPhones and iPod media players. The major objective of the company has been to add a new phase of technology to the era. Apple is ranked as third in terms of producing mobile phones on a global context. The company also sells various sorts of third-party compatible products that include iPad, iPod and iPhone comprising accessories and software via retail outlets or online stores. The company thereafter sells its products to the customers as well as big or small business houses. The company has been identified to generate annual revenue of about US$ 182 billion. Moreover, the company supplies applications through App Store, iBooks Store and iTunes Store among others (Heracleous, 2013). In order to enlarge and expand the business capacity, the company continued to invent as well as deliver new products with innovative specifications. Recently, Apple has launched a new handset i.e. Apple iPhone 6 or 6+ in the market with different innovative features. Apple iPhone 6 is power efficient with HD quality display. The company provides high quality of electronic products with efficiency. The phone undertakes certain features such as fast and unmatched wireless technology and superior quality of Wi-Fi. It gets connected to every network widely. All these factors enabled in fast accessing of iPhone 6 (Heracleous, 2013). In this respect, the report aims at assessing the strategic position of Apple. In addition, an evaluation of external drivers of change has been performed for analysing their effect on the company. A discussion has been made with the aim of determining the values added to the organization based on the examination of strategic position. 1. Organization’s Strategic Position Apple’s strategy to enlarge its business goal is unmatched. The company develops as well as enhances its designs in relation to hardware and operating systems, application of software to add new and exclusive electronic items and accessories among others. Moreover the factors provided the customers to utilize the products with an ease. The applications as well as the advance techniques present in the smartphone of the company are identified to safe in terms of utility. This criterion attracts the customers towards the iPhones that the company has launched. The company invests in the Research and Development (R&D) department without any interval. Along with the advertisement as well as marketing of the products, the company also concentrates on the sale of its various innovated products. Apple provides its customers with an application called Mac App store, which enables the users to install, download and to search the Mac applications (Porter, 2008). 1.1 Porter’s Generic Strategies Michael Porter has undertaken three strategies that include differentiation, cost focus and cost leadership on the basis of product quality and service. Moreover, other essential determinant, which cannot be overlooked in terms of customers’ perception, is related to brand image. In addition, the company assures to make the mind of the customers not fluctuate from the brand (Porter, 2008). The three generic strategies of Porter are discussed below. A. Cost Leadership Cost leadership strategy signifies that a product possesses lower cost price per unit. It signifies that the cost related to a specific product having lower cost price in the competitive market can show a lower profit margin. The firms having cost leadership provide lowest cost in the market among its competitors. This signifies that the firm providing lowest price in the market holds the power of pricing and higher profit margins (Porter, 2008). B. Cost Focus Cost focus strategy concentrates over a significant section of a product, market condition based on geographic dimensions and on a significant group of buyers. This strategy relies on providing appropriate service focusing on a specific target. The cost focus strategy majorly emphasizes cost related segments to achieve the benefits related to low-pricing. It signifies to attain a lower price index. The cost focus strategy is likely to provide a premium service quality related to a specific target or any product (Utrilla, 2012). C. Differentiation Differentiation strategy focuses on improving the quality of a specific product for obtaining higher profit margins. In order to achieve the profit segments more appropriately, an industry or a firm obtains the market objectives efficiently. A higher profit margin enables the entrepreneurs to outline various significant objectives necessary for expanding the business opportunities. It can be mentioned that differentiation strategy is likely to be more profitable for the firm, as it supports all the factors important for promoting the brand image as well as to grab the opportunities required for enhancing the business. Differentiation focus is the fourth strategy developed emphasizing towards providing quality products and/or services at reasonable prices (Strategy Explores, 1995). From the above figure and discussion, it can be observed that Apple follows differentiation strategy. In differentiating strategy, Apple is able to create a wide range of products with unique features. Using differentiating strategy, the company is likely to establish a new market of its own (Strategy Explores, 1995). The company adopts an effective approach to provide the customers quality products. Moreover, exclusive product launched by the company in the recent years is iPhone 6, which is the widest range of smartphone with internet and multi touch facility based on iOS. iPhone 6 is based on different features that include brilliant camera quality, which provides quality photos and videos. iPhone 6 also includes an application known as photo library app and also possess a voice activated service known as Siri. iPhone 6 connects to iTunes store, iBooks store and App store among others for managing, purchasing, playing the music, apps, movies, books and podcasts among others. iPhone 6 delivers the facility of downloading iPhotos, iMovies and iWork apps for free, as iOS is accessible in every new iPhones. Apple’s iCloud facility synchronizes the contacts, mail, music, photos, documents and calendars among others. It is based on superior quality of techniques and features (Apple Inc., 2012; Utrilla, 2012). This creates superiority as compared to the other smartphones. In this respect, based on Porter’s Generic strategies, the company is identified to be based on differentiation strategy, for providing products on numerous variations that include newer technology, brand image and various designs for providing the products in a smarter look (Apple Inc., 2012). Differentiating strategy focuses on various factors that include product specification to increase the turnover of a firm as well as to enlarge the average rate of return. It also reduces price elasticity of demand. The strategy confronts the company with the market rivalries by maintaining loyalty towards the brand. The company has been developing products on the basis of uniqueness, which minimizes the option for substitutes. As a result, this shows a high profitability graph reducing the wants of cheaper products’ advantage. Higher profitability margin enables the company to confront with vibrant suppliers in the market. Differentiation strategy eliminates the power of the buyers. The company with the assistance of the differentiation strategy is able to achieve optimum results. It maximizes the customers’ relation with the brand. The strategy creates as well as enhances the managing skills for developing a better strategic position of the company in the market. The strategy also involves discovering newer ideas and creating new innovations for products modification. This strategy also signifies the importance of R&D department in order to build up the product techniques more efficiently without any obstacles. Moreover, this strategy concentrates less on the incentive payment criterion. Hence, it can be mentioned that the company on the basis of differentiation strategy is able to perform operations in a sustainable as well as profitable manner (Apple Inc., 2012; Porter, 2008). 1.2 Bowman Strategy Clock Bowman’s strategy clock is used to analyse the marketing strategies of an industry. The Bowman’s strategy facilitates in measuring the competitive situation of an industry or a firm for having an effective understanding about competitions and recognizing the market strategies with the implementation of which an organization can perform operations competitively. Unlike, Porter’s generic strategy, Bowman’s strategy clock considers the advantages related to cost and differentiation. Whereas, Porter’s generic strategy is not suitable for the companies facing a fluctuating profitability condition or in case, companies having more than one strategy. Bowman’s strategy clock shows a result of comparison among the different rivals of a company (Tanwar, 2013). The results undertake the compared scenarios of the market against the perception of customers’ preferences and the current rate of a product. Basically in a competitive market, the consumers make the choice of selecting a product according to their requirement. Moreover, the strategy identifies customers’ perception in relation to value-for-money. The factor ‘cost’ remains in every section of the strategy in Bowman’s strategy clock. The strategy assists the management to recognize the changing requirements regarding the market. Based on the results, the management of organizations to choose the option based on which maximum profit can be accomplished from the market as well as build competitiveness. Hence, it can be mentioned that Apple with the provisions of quality as well as differentiated products falls under the differentiation strategy in Bowman’s strategy clock to attain superior profitability index. In the Bowman’s strategy clock, the objective of differentiation signifies to provide the customers with high value preferred products in order to expand the rate of profit margins or to decrease the cost of the products for enhancing market share. Moreover it can be perceived that Apple implements differentiation strategy for fulfilling its organizational requirements (Tanwar, 2013; Apple Inc., 2012). 2. External Drivers of Change Affecting Apple 2.1 PESTLE Analysis A. Political Factor Apple has been operating in different countries and it has been identified that the company operates in stable political environment. The political factor affects Apple’s business environment in terms of different governmental policies raising complexities. Tax issues influences the business environment or the business operations. Currently, the government of the UK has increased 20% of VAT in the products. As a result, a burden of tax cropped up on the UK public. A single percentage of increase in the VAT results to a huge decrease in the quantity demanded by the consumers. This factor decreases the intention of the consumers to expend towards making purchase on iPhone 6, which affects the performance of the company to a certain extent (Zemsky & Audner, n.d.). B. Economic Factor Economic factor implies a large impact on the business environment. Apple largely is based on superior economic condition. The turnover of the company is based on the economic condition of the UK. The consumers are identified to make purchase decisions in terms of value for money. In this regard, Apple perceives the demand of the consumers and supplies iPhone 6 based on the needs of the customers (Zemsky & Audner, n.d.). C. Social Factor Social factor that determines the strategic position of Apple is discussed hereby. Social culture has influences over the business unit. The social factor involves cultural practices and customers’ preferences based on which Apple has been operating businesses. Basically, the customers of the UK purchases products on their own preferences. This signifies that Apple with the provision of quality and differentiated products is able to perform operations competitively and sustainably. Differentiation business strategy is suitable for the development of products driven by technology as adopted by Apple (Kunc, 2010). D. Technology Technology on a very high rate is utilized in the UK. Innovation has been an important consideration for the development of businesses and overall UK economy. Apple has been a technology driven company owing to which the company has been able to produce differentiated products such as iPhone 6, which is a technologically advanced smartphone of the company for added features and specifications (Apple Inc., 2015). E. Environment The environment factor supports the marketing strategy of Apple. The consumers are recognized to be environment conscious and accordingly, utilize green products. Keeping the recycle process in mind, Apple has brought up several disposal bags. Apple recycles the obsolete or disposed gadgets. The company recycles the waste products and accessories in order to mitigate wastage and to eliminate environmental issue (Apple Inc., 2013). F. Legal The legal factor implies to have a significant effect over Apple. The legal matters related to law and tax balances the overall market position of Apple. The government legal procedures and policies facilitate Apple to perform operations on the basis of legal requirements and marketing strategies is able to ascertain sustainability. Employees or managers tend to handle the legal matters of the company. Based on the government’s legalization, the policies are set up to enhance the profit structure. The legal policies enable Apple to display a reputed example in the market. This in future will influence the investors and customers to have a positive attitude towards Apple (Caldwell, 2012). 2.2 Key Driver of Change Innovation Innovation is a major factor, which influences sales as well as marketing strategies. Apple has repeatedly made smart and efficient innovations with the aim of offering quality and features added products to the customers. Innovation has facilitated Apple to perform operations in a positive manner. Products, gadgets and accessories have influenced the customers to have a favourable attitude towards Apple. Many other renounced smartphone brands like HTC, Blackberry and Sony among others have made new line of innovation, but Apple provides certain specific features, which distinguishes it from the other brands (Kunc, 2010). Products Specification The specific features of Apple have made the customer choose or prefer Apple as their preferred product. Quality specifications of Apple have enlarged the demand of the products such iPhone 6. Starting from display to the longevity to the apps of Apple, the company has provided many such specifications relating to operating system, design and application software among others have made the customers to prefer Apple. The specific features of Apple place it on a top position from the other brands that include HTC, Blackberry and Sony (Apple Inc., 2013; Heracleous, 2012). Sales Sales of Apple drives for a change in the sales figure of Apple. From the above discussed matters, it can be noted that innovation and product specification affects the sales of Apple. The overall features present in Apple differs it from the known brands like HTC, Blackberry and Sony. In this respect, the customers are able to have similar features as provided by Apple, but the enhanced version of specifications influences the public to make purchase of iPhone 6. This specification gives an advantage to maximize the sales of Apple. Hence, it can be mentioned that all the factors including innovation, product specification and sales are the key driver change for the increased popularity of the brand on a global context (Apple Inc., 2013; Heracleous, 2012). 3. Porter’s Five Forces Model The five forces model of Porter explains about the five factors, which can affect the market position of Apple. Threat of New Entrants Apple has formulated as well as implemented strategies with the aim mitigating threats from new entrants. The basic hurdle is to eliminate the risk factors engaged with new companies. Apple is one of the renowned companies in the world, so the risk factors are lower for Apple. The new emerged competitors have to put up a strong effort in setting up their existence in the market, as the leading company Apple has an advantage of being in the market from years with the provision of quality as well as specified products. Moreover, it possesses a hold over the market more prominently for innovative as well as unique products (Apple Inc., 2012). Threat of Substitutes The emergence of substitutes that is creation of new companies, which can provide similar featured products like Apple can be a risk factor for Apple. Substitution threat is high for Apple, as the smartphone industry is developing in a rapid manner with different product ranges. In this regard, the availability of identical products at lower prices from by competitors on a global context proves to be a threat for the company, as it affects the marketing strategy and reduces the sales (Apple Inc., 2015). Bargaining Power of Suppliers Competition among the business firms have reached to a higher level. Apple relies on the supply of the raw materials. Based on the supply of raw materials, the company produces smartphones, accessories and gadgets among others. Apple depends upon the availability of raw materials with them in order to maximize productivity. The segment of iPhone of Apple depends upon the suppliers. This dependent nature makes Apple to compromise in the business owing to which the suppliers are identified to have high bargaining power (Heracleous, 2013). Bargaining Power of Buyers Nowadays, easy availability of low cost products in the market allows the customers to bargain. Moreover, it is often noticed that the customer switches over to a substitute product, which is a bad sign for the leading company i.e. Apple. The preference of lower cost products in the market puts Apple in the risk zone, as the customers prefer products similar to iPhone 6 at a low cost. Moreover, the availability of cheaper products may divert the perception of customer regarding Apple, which may affect the sale of iPhone 6 to a large extent (Apple Inc., 2012). Competitive Rivalry Rivalry is a common term to every leading brand in the world. Similarly, Apple also faces intense competition due to the rise in the number of companies manufacturing smartphones. Android and Microsoft tablets are also effectively active in the market, which raises the competition for Apple. In order to improve competitiveness, the company has been identified to adopt differentiation strategy with the intention of providing products with unique design as well as features (Heracleous, 2013). Conclusion From the above discussion, it can be comprehended that Apple is one of the leading brands in the international market. Though the company is ruling over the market from years, it faces competitions, which acts as a hurdle in the progress of the company. Apple serves to be the best in the field of technology, innovation, services and quality products. Regarding the preference of organization’s strategic position, Apple applies differentiation strategy to maintain the market strategic condition with a strong hold on a global context. 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