Strategic Evaluation of Apple Inc - Essay Example

Strategic Evaluation of Apple Inc. The Company and its Strategy Apple Inc. is one of the leading American multinational companies in California. It designs and develops computer software, online services and consumer electronics. The hardware products developed by the company include iPhone, smartphone, iPad tablet, Mac computers, smartwatch and media players that are portable. The consumer software of the organization includes iOS operating systems, web browsers, iTunes media player, etc. The company was established in 1976. It is the largest IT Company in the world with respect to its revenue and total assets. It is also the third largest manufacturer of mobile phone in the world. The annual revenue of Apple for the fiscal year of 2015 is $233 till September (Apple, 2015). Apple Inc. is found to provide high level brand products. It offers the most valuable brands to its customers. The organization offers the best personal experience of computing to the students, inventive proficient, educationist and clients across the world through its inventive hardware (De Wit and Meyer, 2010). It is a perpendicularly incorporated organisation that supplies and industrializes a wide range of software, hardware as well as many operating systems that are innovative. Apple followed this strategy to sustain the company’s profit level with a pledge that they would not lose their margins and growth of profits by investing in somewhere else. The main reason behind the adoption of this strategy is to ensure that they look up to all the significant segments of the company by investing mainly on research and development (R&D). However, there are other strategies as well that Apple Inc can adopt for its future growth (Ocasio and Joseph, 2008). This may include marketing and advertising. The paper thus focuses on the strategies of Apple Inc. and evaluates them. It also suggests a potential alternative strategy that the organization can adopt for its marketing purpose. Company and its competitors’ Budget spending on advertising during 2012-2015 The figure below shows the advertising budget of Apple Inc. It can be seen from the table that the budget of Apple Inc is 1.8 billion$ in the year 2015, almost a double from that of the year 2011. Though the company’s advertising budget is not largest among its competitors, but the organisation uses it most effectively. Figure 1: Apple Inc and its competitors’ budget spending on advertising (Source: Apple, 2015) Strategic Evaluation of the Company over the last five years The market of Apple Inc Recently, Apple integrated with the market of mobile phone for a new model of iPhone. According to Mintel (2015), Apple Inc. is a ‘multimedia download market’. This is because, the Company is able to transfer anything in the form of copy from the internet to portable devices, personal computers etc. However, it has not yet entered into the market of mobile download completely as per Mintel. For instance, a product that is downloadable to mobile phones which includes downloads that are single one-off or subscription purchases that are ongoing (Priem and Butler, 2001). It is well now evident that the multimedia or mobile download market is extremely uneven with a huge number of competitors. This is reflected in Apple iTunes’ market share which accounts for 80% of the share. Key Factors relating to Strategic Position of Apple Inc The increasing level of interest for new technologies by the music lovers can be seen clearly through the ‘market of music download’. However, their concentration is now drawn with the introduction of new products like iPod. Also, technology possesses a trend of merging their functionalities to devices that are linked with one product or item only. For example, the new launch show of ‘Google G-phone’ and ‘Apple iPhone’ (Apple, 2015). From the environment external market of Apple Inc., it is being observed that the consumers are heartened from the existing legislation inefficiencies with respect to copyright matters. They were misguided for the download services that are officially being permitted. It has also been noticed that consumers have a tendency of downloading the contents free from the online resources that are registered online. Mintel foresees usage of internet mobile to be the biggest market in the era. This paper thus tries to evaluate the strategy applied by Apple Inc. for running its business. The measurement for the effectiveness of the company’s strategy needs a SWOT analysis to identify the strengths, weakness, opportunities and threats of the company. The paper also evaluates the strategies against three success criteria. They include Suitability, Feasibility and Acceptability (myndset, 2015). Strategic Evaluation of the Company over the last five years Suitability of the Strategy Suitability deals with the ultimate rationale of the proposed strategy. It considers and determines whether the company’ strategy addresses the key constraints and opportunities that it faces. One of the best of assessing the suitability of an organization’s strategy is to use a SWOT analysis. A well planned strategy suits the mission of the organization and reflects the opportunities and threats that it can have from the external market. Apple Inc. is the market leader in music download industry in terms of profits and cash. The company has the ability to integrate application software, development hardware and other forces to come up with appealing and innovative products. The organization possesses a brand loyalty. It has a huge number of users who purchase Apple iPod, MacBooks and iPad. These users might be the potential buyers for iPhone (Hitt, Ireland and Hoskisson, 2012). Apple’s departure from a single operator to a distribution of multi-operator in some nations is likely to increase its share of market. Also, the company’s expertise in leveraging the consumers’ segment is expected to top the emerging market of ‘consumer-centric marketplace’. The organisation also has a potential opportunity in the area of refurbished iPhones that are resold (myndset, 2015). Since, Android phones have become most popular among the people; there is a strong growth in this industry leading to an intensified competition for the company. The organization’s expanding direct sales seems to be affecting the distributor’s business negatively. Also, a major threat of Apple Inc. is its patent infringement of the features and product used by the iPhone. This may lead to loss in revenue of the Company. The SWOT analysis of Apple within the time period 2011-2015 is shown in Appendix 1. Thus, it has been analyzed that the telecommunication division of the company has been able to improve and advance its strategies that has influence on companies. Simultaneously, the company also tries to minimise its threats that it faces from the external environment. The R&D conducted by the organization allows it to design new technologies. According to recent report, the new features of the iPhone 3GS will drive further sales of telecommunication division. This in turn would boost the stock market of the company (Hitt, Ireland and Hoskisson, 2012). The strategy of Apple Inc. has therefore high degree of suitability as it is oriented towards consumer satisfaction or care. The strategy aims at reaching a wide range of target markets by expanding its network of distribution, maintenance outlets and retail. Acceptability Acceptability is concerned with the expectations of the Company’s stakeholders. These expectations may include risks, return and reactions of stakeholders to the performance outcomes. The best way to assess the acceptability of the company’s strategy is to analyze the five forces of Porters. This is because an analysis of Porter’s five forces would provide individuals with the attractiveness and competitiveness of Apple Inc. This would help in assessing the stakeholders’ risks and returns from the performance of the company. The analysis of Porter’s Five Forces is shown in Appendix 2. Also, the stakeholder mapping for the company is shown in Appendix 3. Apple Inc. has been able to design its own chip, buy manufacturing equipments, and take over the distribution of product services and retail through its Apple store. This in turn makes the company to lower the power of chip makers, manufacturers and distributors thereby possessing a high power over the suppliers of organization. Also, Apple Inc. is found to have been vertically oriented towards its customers. The company does most of its work in its online stores and retail locations (myndset, 2015). With regard to the threat of substitutable products, Apple Inc. is equipped in a way to compete with Sony or HP (the horizontal players). Its competitors do not provide same products rather they meet the same needs of customers. The substitutes of Apple products may include PDAs, iPads, Netbooks and laptops of other companies. Thus, the company has moderately high threat of substitutes (Stremersch and Tellis, 2002). The company has a moderate threat of new entrants into the download market industry. The new entrants in the industry have a moderate force depending on some external factors. The factors may include high requirements of capital (weak force) and high cost of developing brand (weak force). However, the capacity of potential is found to be strong. Thus, it is clear from the analysis of Porters five forces that there are many new entrants that are entering into this industry. There are many other companies that are giving tough competition to Apple Inc. The company might lose its new customers due to its high threat of substitutes and new entrants. Also, the company is restricted towards its limited media strategies. Therefore, the stakeholders of Apple Inc. have faced high risk which in turn reduces their returns as well. . Feasibility Feasibility of an organization’s strategy considers whether the company possess the resources required for the implementation of its strategy. The resources may include capital, market access, time, people and expertise. Feasibility can be best assessed through PESTEL analysis. This is because the analysis helps in identifying the political, economic, social, technological, environment and legal factors that largely accounts for company’s resources. The PESTLE analysis of Apple Inc. is shown in Appendix 4. The analysis shows that more than half of the sales of Apple Inc. have come from nations other than America. The company manufactures most of its products and parts outside US. The organization has an adverse impact on its business performance due to the bad political relation between the US and the world (myndset, 2015). Apple Inc. has also noticed three major economic factors including currency, inflation and recession. Since, most of the people consider the products of Apple to be a luxury good, they spend less on them. However, the company has marked its presence on the international market by manufacturing gadgets. Also, in many countries, possessing Apple products are considered to be a symbol of status which in turn increases the product sales of the company (Wu, et al., 2009). With regard to the cash flow analysis, it has been found that the company produced $46.6 billion from its operations at the end of June. The cash flow analysis has been shown in Appendix 5. The table clearly shows that Apple has been able to generate a lot of money, though the growth rates of the company has decelerated in the recent year. The company was growing at a faster rate in 2011 and 2012 (Apple, 2015). However, after an analysis of the suitability, acceptability and feasibility of Apple’s marketing strategy, the company can also use some alternative approach for its growth in future in terms of market profitability and share. The next section thus recommends the company a potential alternative strategy for the company. Potential Alternative Strategy for Apple Inc There are some strategies that Apple can use based on TOWS-Collision matrix. A chart for TOWS-Collision matrix is shown in Appendix 6. TOWS matrix helps in determining the threats, opportunities, weaknesses and strengths of the company. It assists organizations in determining the strategic alternatives through identification of external threats and opportunities. Then, it is compared to the company’s strengths and weaknesses. Firstly, the company should maximise its strengths in order to maximise its opportunities. For this, Apple can enlarge its customer base. It is highly recommended to the company to produce and enhance the products for the wealthier and older customers so that theses developmental activities can help the company to fit their needs. According to some recent survey, the company is recommended not to target the older group at present. Apple Inc. should improve its technology so that their customers will be enhanced to buy more products from them with extra functions. This in turn will increase the sales and profit of the organization. The company is also recommended to move towards more Ad-driven content. This context of ad-driven can be utilized by the organization to maintain available technology because of its strength and strong competitiveness of the brand name. Secondly, Apple Inc. should maximize strengths to minimise its threats. This can be achieved by defending the market share. The company can use strong and influential marketing campaigns to maintain their customers’ loyalty towards the brand. This would help Apple to prevent its customers from switching to other brands of its competitors as well as in expanding their market share. Thirdly, the organisation should minimize weaknesses to maximize its opportunities. Apple should expand its products and also introduce internet mobiles that are aimed at low-end-markets. The company should formulate a strategy to offer customized products to gain more consumer satisfaction and loyalty from its customers. Conclusion Based on the strategic evaluation of Apple Inc’s key positioning strategy, it is observed that the strategies adopted by the company are suitable, acceptable as well as feasible. However, the organization is recommended to use some alternative strategies to expand its future growth and market expansion. The success of any company is largely dependent on implementation and development of business strategies that considers and controls the organisation’s core competencies, threats and opportunities. Reference List Apple, 2015. Financial Infomation. [Online] Available at < http://investor.apple.com/financials.cfm> [Accessed 1 December 2015]. De Wit, B. and Meyer, R. 2010. Strategy: process, content, context: an international perspective. United States: United States: Cengage Learning. Hitt, M., Ireland, R. D. and Hoskisson, R. 2012. Strategic management cases: competitiveness and globalization. United States: Cengage Learning. myndset, 2015. Apple brand marketing strategy – What should we really learn from Apple? [Online] Available at < http://myndset.com/2014/09/23/apple-brand-marketing-strategy/> [Accessed 1 December 2015]. Ocasio, W. and Joseph, J. 2008. Rise and fall-or transformation?: The evolution of strategic planning at the General Electric Company, 1940–2006.Long range planning, 41(3), pp. 248-272. Porter, M. E. and Heppelmann, J. E. 2014. How smart, connected products are transforming competition. Harvard Business Review, 92(11), pp. 11-64. Priem, R. L. and Butler, J. E. 2001. Is the resource-based “view” a useful perspective for strategic management research? Academy of management review, 26(1), pp. 22-40. Ravasi, D. and Lojacono, G. 2005. Managing design and designers for strategic renewal. Long range planning, 38(1), pp. 51-77. Stremersch, S. and Tellis, G. J. 2002. Strategic bundling of products and prices: A new synthesis for marketing. Journal of Marketing, 66(1), pp. 55-72. Wu, R. N., Han, F. L., Shang, J., Hu, H. and Han, L. 2009. Analysis of patulin in apple products by liquid–liquid extraction, solid phase extraction and matrix solid-phase dispersion methods: a comparative study. European Food Research and Technology, 228(6), pp. 1009-1014. Appendices Appendix 1: SWOT Analysis of Apple Inc. (2011-2015) (Source: myndset, 2015) Appendix 2: Porter’s Five Forces for Apple (Source: Porter, M. E. and Heppelmann, J. E. 2014) Appendix 3: Stakeholder Mapping of Apple Inc. (Source: Apple, 2015) Appendix 4: PESTLE Analysis of Apple Inc. (Source: myndset, 2015) Appendix 5: Cash Flow Analysis of the company (Source: Apple, 2015) Appendix 6: TOW Collision Matrix (Source: myndset, 2015) Read More