The Strategic Position of Apple Inc - Assignment Example

Business Strategy Report - Apple iPhone 6/6+ Case study Contents Contents 2 Introduction 3 Strategic Position 4 Porter’s Generic 4 Bowman’s Strategy Clock 5 Main Competitors 6 Strategic Group Mapping 7 Key External Drivers 8 PESTEL Analysis 8 Porter’s Five Forces 10 Value addition to strategic position 12 Resource Audit 12 Value Chain Analysis 14 Conclusion 16 References 18 Introduction Apple inc. which has now become a multination technological company operating in 6 segments across the globe was founded in the year 1976 by three college students. Apple was founded by Jobs, Wayne and Wozniac in the year 1976 in the garage of the home of Paul and Clara jobs. The company is second largest information technology company by measure of revenue after Samsung. The company has its headquarters in California in the United States. The company manufactures hardware and software of Information technology products. The strategic advantage and the strategic position of the company contribute to the competitive advantage of the company and its products. The company is specially known for the innovation in design and its aesthetically designed products. In the following pages of the report the focus will be on to understand the strategic position of the company and its products through the application of several models. In this particular report several strategic models would be applied to the company in order to understand about the business of the company. There are several products that the company manufactures and for this particular report the focus will be on iPhone 6/6+. During the course of the report the strategic group mapping will be applied to understand about the strategic position of the company. Bowman’s Strategic clock will also be applied for the study. The external environment of the company shall be studied using PESTEL and Porter’s 5 forces. The analyses will next focus on the value chain of the company and a resource audit will be also being done on the company. The analyses will try to find out the answer to the question of how is apple able to create value for the customers through this particular product. The final section of the report focussed on the analysis of sustainability of the strategic position of the company. Strategic Position Porter’s Generic Porter’s generic strategy gives different business strategies that can be used by the businesses in the real world. The four segments of the porter’s generic strategy are low cost strategy, differentiation, Cost focus strategy and focus group differentiation strategy (Magretta, 2013). Apple has always launched that have found a loyal fan following with a particular segment of customers (Porter, 2008). This particular segment of customers can be said to be brand loyal customers of Apple (Keller, 2008). The brand loyal customers of Apple can go to any extent to purchase product of the company. Figure 1Porters generic Strategy The company only target a specific group of customers who can be said as the focus group for the company. In using the focus strategy there are two things that the company could use. One is the Cost focus strategy. However, it can be surely said that Apple does not use Cost focus strategy as different products of the company are priced differently. The company of the other hand has a wide range of products for its customers and thus can be said to be using focus differentiation strategy. The company offers premium products for the customers of the company or in other words to the dedicated customer base of the company. Bowman’s Strategy Clock All business organization has competitors in the business in which it operates. The business need to have an understanding of the competitors of the organization and the strength of the organization (Lasserre, 2012). In recent years Apple has to face tough competition from other players that offers products that are designed in a similar way and the price range is also similar. The major competitors of the firm are HTC, Blackberry, Nokia, Lenovo, Samsung, Sony and Motorola. The fact or the factors which makes the company stand out in comparison to the competitors of the company are the factors of quality and innovation. The following figure shows the application of the Bowman strategic clock in respect of the particular product that is Apple iPhone 6 / 6+. Figure 2 Bowmans Strategy Clock As seen in the figure Apple iPhone 6/6+ occupies a particular position as compared to the competitors in the industry in which the company operates. Most of the products that are launched by the company are aimed at focussed differentiation (Henry, 2011). The customers of the company pay a premium price for products that are manufactured and sold by the company in lieu of the fact that they will be getting a product which is superior in quality and design. Main Competitors Samsung can be said to be the main competitor of the company. Samsung is the largest information technology company in the world on the basis of revenue. Some other competitors of Apple are companies like HTC, Blackberry, Motorola, Sony, Nokia etc. All of the companies have designed products in order to stay competitive. In fact the market in which these companies including Apple operate is driven by innovation (Walby, 2009.). In this market where new products and technologies are being developed each and every day, if a company stops innovating then its future is doomed. Thus one of the basis on which the companies fights amongst each other is on the basis of innovation and investments of the company in research and development field. All the competitors of Apple compete with each other on the basis of the price and the product quality and the features that are provided by the company (Ballance and Forstner, 2004). The customers normally prefer those brands or those products which are high in terms of the product quality, fits in the budget of the customers and have good features. The iPhone 6/ 6+ that is provided by the company works on the operating platform IOS7. The price range of the phone falls in the price bracket of US$650-US$850. The product offers a battery backup of 10 hours. As compared to this Samsung operates on the Android platform, with a battery life of up to 25 hours in some cases and a price range which is much lower as compared to Apple. Phones by HTC and LG also operate on the android operating system and offers battery life of 19 and 18 hours respectively. Strategic Group Mapping Another strategic framework that is quite effective is the strategic group mapping. The USP of different firms can be easily known and analyzed through the process of strategic group mapping (Wintzer, 2007). In the following figure strategic group mapping of iPhone 6/ 6+ is shown as compared to other competing firms. As can be seen in the above figure different firms in the industry occupy different positions in the strategic group map. The strategic group map as shown in the above figure has two axes. One axis is the price of the product and another axis tells of the market share of the product. While placing apple in the strategic group map; Apple is found to be a high priced product. The market share of the company is also high (Perreault and MaCarthy, 2003). The reason behind the company dominating a fair share of the market is the fact that the company has always made products that are high on quality and are attractive to the customers of the company (Batey, 2012). As compared to Apple Samsung occupies a good share of the market at a low price. The least market share is occupied by HTC. The price range of the competitors is lesser as compared to Apple except some high priced models of HTC, Blackberry and Samsung. Key External Drivers PESTEL Analysis PESTEL analysis will help to explain the external factors which influence the business activities of Apple Inc in UK market. The marketing strategies of this company will be developed after analysing these external factors. Political Force The political system of UK is very much stable. UK is a democratic country and its government influences the law and order of the country. UK government encourages the growth and development of the business. This will help the growth and development of Apple’s business. The political stability of UK will facilitate the company in manufacturing and distributing its high end products successfully (Solomon, 2006). Economic Force UK is one of highly developed countries of the world. The income level of most of the people residing in this country is high. Therefore their disposable income is also high. This will facilitate the company in increasing the sale of its high end Apple products like iPhone 6. But present the unemployment rate is increasing in UK which can affect the sale of Apple products negatively. Social Force The people living in UK society have a tendency to buy various high end luxury products. The people having good purchasing power purchase different high ends goods and services for showing up their status. This can facilitate Apple in selling its products easily. The main features of its products are design and quality. People of UK will purchase Apple’s products for experiencing unique features and high quality smart phones, laptops etc. Technological Force UK is famous for its advancement in technology. Continuously new technologies are developed in this country which helps the growth and development of many businesses. The technological development in UK will facilitate Apple in innovating new types of products or enhancing the quality of its products. Environmental Force UK is very much concerned about various environmental issues. It takes active part in protecting environment from damages. Many institute and commission are present in the country which looks after the environmental issues. UK government has strong policies regarding environmental issues. Apple will have to consider these factors enhancing its business in UK (Picton and Broderick, 2009). Legal Force The legal system of UK is very much organized. It is very much transparent and organised. Therefore it helps many companies in grow and improve their business. The government of UK looks after effective implementation of law. Legal rules and regulations will help Apple in establishing its business lawfully. Porter’s Five Forces The five force model of Porter analyses the industry in which a company is operating its business operations. With the help of this model the communication equipment industry of UK is analysed in detailed. Competitive Rivalry Competitive rivalry in UK market regarding high end communication equipment product is high. This industry segment is highly fragmented. Different types of communication equipment are available in UK market in various price ranges. The main competitors of Apple present in UK are Sony, KTC, Samsung, Blackberry etc (Percy, 2008). Bargaining power of buyers In UK market the bargaining power of the buyer is moderate. The products of Apple are highly priced. The company mainly deals with high end luxury products. The buyers of these products do not bargain much. They believe in product quality and features rather than their price (Onkvisit and Shaw, 2009). Bargaining power of suppliers There is large no. of companies that operate in the market and thus the companies which produce high quality products are in demand in the market. Thus the bargaining power of the suppliers is high. However Apple as a company lay down rules of raw materials for the suppliers so that they have to follow the quality guidelines while supplying materials to the company. Thus the company maintains an upper hand on the suppliers of the company. Threat of new entrants The threat of new entrants is comparatively low in the industry as it is difficult for the new company to establish a customer following very quickly in this competitive market and thus survive the economies of scale (Kotler and Keller, 2012). The low threat of new competitors in the market results in the fact that the company should be able to enjoy unhindered growth. Threat of substitutes Threat of substitutes is relatively high in the market as new technology is producing several new gadgets that are used to compete with the phones that the company manufactures. Continuous technological improvements are placing new products in the market, the products which can become the competitor to the iPhone 6/ 6+. Value addition to strategic position Resource Audit Industry Wide Sources of Competitive Advantage Necessary Resources Capital Infrastructure Finance Technology Equipment Unique Resources Apple is a cash rich company with cash reserves growing up to $178 billion in the year 2015. The cash reserves that are held by the company are one of the largest among all the public corporations in the world (Bowers, 2015). Companies like Samsung may have a bigger share of the market but what makes Apple unique is the amount of profit that the company makes just by selling iPhone. In the year 2015 Apple report net profit of $18 billion which is the largest of any public limited company ever. iPhone the flagship product of the company have been able to transform the mobile phone industry. The company has more than 7000 patents to its name. The sales of the company in Greater China have increased by 70% (BBC News, 2015). Threshold Competencies Human Resource Product Innovation Customer Base R&D Core Competencies In the year 2014 more than $6000 million have been spent by the company on innovation which is an increase of 35% from the year before (Apple, 2014). The company has a diverse workplace and supports diversity at workplace. In terms of no. of patents that it receives each year it ranks amongst the top 15 companies of the world. Most of the products that are sold by the company are hugely popular with the customers of the company. Products like iPhone, iPad, iMac have been able to create a brand name for themselves. The company has successfully ventured into the China market and it is found that for the first time in history Apple’s sales in China has surpassed the sales data of the company for United States of America (BBC News, 2015a). This is a good sign for the company as the company has been able to get a good foot holds in a market that is growing at one of the fastest rate in the world (Higgins, 2015). Apple is one of the companies which spend the largest amount on Research and Development. The company has more than 7000 patents in its favour and this is a testimony to this fact. Although the no. of patents that is hold by the company is less as compared to its rivals like IBM which has about 82000 patents in its favour. Its count of patents is also less than the rival Samsung which has about 60000 patents in its favour. However despite this fact the company has been able to use its intellectual property right especially that relates to the field of design quiet effectively as it won a major legal battle in this issue over its rival Samsung (Cole, 2003). It is found that iPhone 6/6+ counts amongst the top selling product of the company and contributes to the increase in net profit cash pile of the company. The customers of thee company are located all across the globe and the company serves them through its list of retailers, wholesalers, owned store of the company etc. It is possible to segment the customers of the company on the basis of operating segments. The company segments the total market of the company into 6 market segments for ease of operation. There are 50% white and about 15% Asians who work for the company (Apple, 2015). This improves diversity of the company increases the chances of innovation and development. The company designs products that are aesthetically designed and caters to quality that the customers seek. Value Chain Analysis Support Activities Infrastructure The global market of the company is divided into 6 operating segments. These are: Greater China Americas Rest of Asia Pacific Europe Japan Retail (Apple, 2014) The company follows an innovation based organization culture that supports decision being made at local level and cutting red tape. H.R. Management The no. of full time employees associated with the company is 92600. People from different backgrounds work together at the company and the company supports the inclusion of diversity. Technology Development 3% of the net sales of 2014 were dedicated to research and development. The amount of money dedicated to research and development stood at $6041 million and this was an increase of 35% from year before. Procurement The company obtained the components for the manufacturing from a no. of different sources. Primary Activities Inbound Logistics. Components were procured from different countries across the globe. Operations Sometimes the products are not produced by the company. The company uses the economies of scale of Original equipment manufacturers. Outbound Logistics Over the years the company has increased the no. of retail stores owned by the company. Marketing & Sales The main focus that the company lays on is the design of the product. The company designs the products as significantly different from those offered by the competitors. Service The information and support that is related to the product is available at the website of the company. Apple as company sales its products to people across the globe. The total market of the company is divided into 6 market segments that to provide ease in managing the sales of the company. There are total 92600 employees who were associated with the company as of 2014. However, the actual number of employees who work for Apple is far greater as most of the people who work in the manufacturing facilities where the products of Apple are manufactured are not in the payroll of Apple. The company spends about 3% of its net sales figure on research and development. The net increase of the company’s spending in the field of research and development has been by 35% from the previous year. The company procures the raw material from number of different sources across the globe. In procuring goods from different sources across the globe it is found that the company stipulates quality requirement. By using the supply of the component of the phone from different suppliers across the globe the company is able to ensure that the cost of production is less. There are some portions of the value chain which the company handles for itself. Rest of the portions are outsourced to other companies across the globe. The main value addition for the company is the design of the products of the company which are aesthetically designed to the taste and preferences of the customers of the company. This step of the value chain is done by the company in house. Another step of the value chain that is done by the company in house is the step of the sales and marketing. IN order to increase the engagement of the customers with the products that are sold by the company, the company is increasing the no. of stores owned by the company. There are two channels of sales that are used by the company in order to sell the goods that are produced by the company. In 2014, 28% of the total sales take place through direct channel and 72% occurred through indirect channel. Conclusion The report in the above pages is an analysis of Apple as a company. In analyzing Apple as a company there are several strategic models that are used which analyzes the company from different angles. There is different strategic framework that has been applied to the company as part of the study. It is found that if one analyzes the external forces and the effect of the external forces on the company it is found that the external forces play a major role in shaping the direction of the company. The product line and the price point of Apple are very different from the ones that are offered by the competitors of the company. This is due to the fact that Apple focuses on providing such products that are desired by the customers or dreamt by the customers and the customers are themselves not aware about the demand of theirs. It is found that the direction of the company is guided by the strategy of focussed differentiation. The strategic group mapping shows that Apple is placed at a position that encompasses both the sectors of high price and high share of market. The analysis of PESTEL shows that the political system in UK is a stable one, and the disposable income of people is high. The social force is also positive as the people in UK have a tendency to purchase high quality goods. The country is also very much concerned about the environment of the country. the legal system is also very much organized. The company operates in a market that is guided by fierce competition and rivalry among the companies. The suppliers’ power is much pronounced and so is the power of buyer. The way to maintain position in the market is to provide the customers of the company some unique products that attracts the customers and creates a loyal fan following for the company. For Apple that unique proposition lies in the fact that products of Apple are designed aesthetically to carter to the demand of the customers. The firm helps to analyze the fact that the particular characteristics’ of culture and consumer market is different for different firms. Sustainability in the operations of business refers to the fulfilling of the goals of the business without having an effect on environment. References Apple., 2014. 10K. [Online] Available at: http://files.shareholder.com/downloads/AAPL/215012788x0x789040/ED3853DA-2E3F-448D-ADB4-34816C375F5D/2014_Form_10_K_As_Filed.PDF [Accessed 24th May 2015]. Apple., 2015. Race and ethnicity data. [Online] Available at: https://www.apple.com/diversity/ [Accessed 24th May 2015]. Ballance, R. and Forstner, H., 2004. Competing in a global Economy. London: Psychology Press. Batey, M., 2012. Brand meaning. USA: Psychology Press. BBC News. 2015. Apple posts the biggest quarterly profit in history. [Online] Available at: http://www.bbc.com/news/business-31012410 [Accessed 24th May 2015]. BBC News. 2015a. Apple reports booming China sales. [Online] Available at: http://www.bbc.com/news/business-31014650 [Accessed 24th May 2015]. Bowers, S., 2015. Apple’s cash mountain grows to $178bn. [Online] Available at: http://www.theguardian.com/business/2015/feb/02/apple-cash-mountain-grows [Accessed 24th May 2015]. Cole, G.A., 2003. Strategic management. Singapore: Cengage Learning EMEA. Henry, A., 2011. Understanding strategic management. New York: Oxford University Press. Higgins, T., 2015. What to expect from apples earnings later today. [Online] Available at: http://www.bloomberg.com/news/articles/2015-04-26/apple-iphone-sales-in-china-seen-surpassing-u-s-for-first-time [Accessed 24th May 2015]. Keller, P., 2008. Strategic brand management. New Delhi: Pearson Education India. Kotler, P. and Keller, K., 2012. Marketing management, global 14 Ed. Harlow, Essex: Pearson Education Lasserre, P., 2012. Global strategic management. Singapore: Palgrave Macmillan. Magretta, J., 2013. Understanding Michael porter: the essential guide to competition and strategy. Boston: Harvard Business Press. Onkvisit, S. and Shaw, J., 2009. International marketing: strategy and theory. New York: Routledge. Percy, L., 2008. Strategic integrated marketing communication. Oxford: Elsevier. Perreault, W.D. and MaCarthy, E. J., 2003. Essential of marketing: A global-management approach. Boston, Mass.: McGraw-Hill/Irwin.  Picton, D. and Broderick, A., 2009. Integrated marketing communications, 3rd edition. Harlow: FT- Prentice Hall. Porter, M. E., 2008. Competitive advantage: creating and sustaining superior performance. New York: Simon and Schuster. Solomon, M., 2006. Consumer Behaviour: A European Perspective. New York: Financial Times. Walby, S. 2009. Globalization and inequalities: complexity and contested modernity. London: SAGE. Wintzer, E., 2007. Global competition and strategic management. Germany: GRIN Verlag. Read More