Business Strategy of Apple Incorporated - Case Study Example

APPLE INC. Apple Inc., formerly known as Apple Computers, manufactures world’s most innovative consumer electronics, computer hardware and software and commercial servers. Apple is recognized in the electronics industry for its innovative appealing designs and unique marketing campaigns. It has a strong and loyal customer base which trusts Apple’s products beyond measure. Fortune magazine ranked Apple as the world’s most admired company in 2008, 2009 and 2010. It was established in April 1976 by Steve Jobs, Ronald Wayne and Steve Wozniak. The company was previously known as Apple Computers for 30 years and in 2007, it was renamed as Apple Inc. to reflect the intended expansion of Apple in the field of entertainment technology. Apple's Innovation In a periodical it was stated about Apple, ‘…this is truly one of the most innovative companies on earth, one that has defied the odds and overcome amazing adversity.’ (DeMarzo) Apple has always provided its customers with unique products which are ahead of time because its engineers are product-oriented. They create even before the consumer realizes that he needs it. In this period of global recession when companies are laying off their employees and cutting back on its research, Apple is successfully moving forward through ‘...investing, inventing and innovating. Strategic Marketing Issues In an interview Steve Jobs once pointed out, “Some very good product people invent some very good products, and the company achieves a monopoly. But after that, the product people aren't the ones that drive the company forward anymore. It's the marketing guys or the ones who expand the business…” He explains that engineers of the company initiate an upward move by creating products but it’s the responsibility of the marketing personnel to keep the show running. It’s not just innovation and product development that defines the success of a product but it is important to understand how it is delivered to the customer. Very often, new inventions are not acceptable to the customers because they are not accustomed to the new product. (Kahney, 2002) Apple doesn’t advertise to reach out to its first customers but use it to help their first customers reach out to the rest. Apple’s marketing is so consumer-oriented that people buy their products even before seeing it. This happens when people market products for the consumers. An example of this is 250000 iPhone sales on the first day prove the success of their marketing strategy. Apple is, without doubt, the most successful consumer electronics company but it focuses primarily on business-to-consumer market. In my opinion, Apple should partner with other companies and also focus on business-to-business market. This will not only boost its profits but will also help them create more innovative products like they did when they partnered with Intel and HP. I believe that Apple has become a market leader of business-to-consumer market and now, it should also work towards becoming the market leader of business-to-business market. Strategy Trough the design and the development of its own operating system, hardware and many software application and technologies, Apple strives to bring to its customers compelling new products and solution with superior ease-of-use, seamless integration and innovative industrial design. Industry Analysis Above 100 million iPods have been sold already since 2006. On the contrary statistics show that game consoles sold in 2006 stood at 26 million, digital cameras at 94 million, mp3 players at 135 million with iPods commanding an 80% market share and PCS sold at 209 million. Mobile phones sold at 957 million. Apple’s iphone’s role would thus be to reach at least a 5% market share before 2012. They must be looking for 50 Million sales for this. It is a very fragmented market with new competitors emerging Pestle Analysis Political-Legal Forces Most of the laws surrounding the political environment of Apple were in its favor barring a few. According to the Copyright Act of 1957, copying music from CD or DVD and then transferring it to another musical device was outlawed. As per Lazarous, downloading and uploading film and media from the PC to another musical device was also illegal. Apple came up with its own iTunes to avoid these copy right issues. The copyright law could have been a major threat to iPod as iPod meant downloadable music could be transferred to a small portable music device.There were some Political uncertainties that were caused by terrorism activities. These activities directly impact the overall business of the company. Socio-Cultural Forces Socio-cultural trends advance pretty rapidly. They are just like technological advancements. With the increase in the use of computer and internet have increased opportunities for apple. For most of Apple's products like iPod, they are heavily dependent on young people. So the socio-cultural life has evolved over the years in terms of lifestyle and the need for better more revolutionalized gadgets. IPod ownership increased to 48% in 2009 from 13% in 2004. This is also due to the fact that teenagers in today’s age and time have relatively high purchasing power and are more empowered. They tend to be more brand conscious as well as conscious about their social status. All these attributes worked in the favor of Apple’s iPod. Economic With the downfall in the economy and the advent of recession there has been a shard decrease in consumer spending. However, Apple has not been as badly effected as other companies and did considerable well through the slow economic season. There could be adverse effects over the purchase of products from foreign suppliers due to the fluctuations in the exchange rates and the international trade regulations. Technology Technology has improved by miles and bounds. The constant technological change and development in the twentieth century have given rise to shorter product life cycles. Products were becoming obsolete very rapidly hence it was suggested that new innovative product be brought in the market. This is where apples products fit the bill. They are innovative products that are always the first of its kind in the market. The widespread availability of the internet has also led to growing opportunities in the industry. (Micheal, 2006) Porter's Five Forces Analysis Threat of New Entrants: This is around medium to high as with the advent of the technology of Apple's products and the success that it has achieved, there is immediate threat of other companies producing similar products. Nevertheless, Apple has a set standard in the industry that sets it apart from others. The brand name itself is a powerful tool that has managed enough equity to overcome new entrants. Threat of substitute products: This could be characterized as being high. The new technologies such as Digital TV/HDTV, touch screen phones, internet phones, mp3 players are all substitutes of the products of Apple and are spreading in the market and gaining popularity in the industry. Bargaining power of suppliers: Being a company that is reliant over the supply of component, it is imperative that the company maintains favorable relations with the content providers. The dependence enables the suppliers to have the power to bargain for higher prices. Apple being depended upon a selected pool of suppliers is more susceptible to supplier bargain power. Bargaining power of buyers: This is low as with the low number of supplier, there is an option to the customer to chose the alternative that is most cost effective. Rivalry among competition: There is heavy rivalry and competition among the giant companies in the industry. As there is fierce competition to get the largest share of the market, there are rigorous price cuts and alterations in products. SWOT analysis – with respect to Apple iPod Strengths: Apple is a huge company and a very successful. Increase in the sales of iPod led to a stronger brand perception thereby increasing the sales of it’s Macintosh computers as well. iPod has the power to pave way for the customers to access other parts of Apple’s brands. Because of iPad, sales of notebook also increased. Apple is a very well established brand and has its own clique of brand loyalists. Thus Apple not only attracts its customers, but also retains them. These customers can then be extended to new products. Weakness: There are reports in the press that the iPod Nano has a faulty screen. The company has tried to rectify the problem by replacing all faulty items. There have also been claims that the batteries are faulty. There is a growing pressure from the music industry to increase the price of its music downloads from itunes. Most of these companies earn more from iTunes than their original DVD sales. Apple fears that if it gives into these demands, it will be considered as a commercial weakness. Opportunities: Apple has the opportunity to further develop its iTunes and music player into a more mobile phone friendly format. Something on the lines of Rokr mobile phone device by Motorola should greatly benefit the company. Apple can also capitalize on revenues that can be generated from podcasts and radio shows. They can be downloaded from the internet and then played back on iPod. Threats: Apple is an IT company and competition in this industry is very intense. Apple has to work very hard on its marketing and R & D to stay on the top of the rung. The sales of iPods are vulnerable to economic fluctuations. TOWS Matrix Internal Strengths: Apple’s brand name is huge. Has a huge array of brand loyalists to its credit. Competent marketing team. They have the best of the industry. A strong research and development team and focus on it. External opportunities: Apple can capitalize on it’s brand name and current brand loyalists by rolling out advanced versions of the iPod; they should also develop user friendly devices Develop a stronger brand perception. Capitalize on current customers to get new ones. Internal Strength Apple’s brand name is huge. Has a huge array of brand loyalists to its credit. Competent marketing team. They have the best of the industry. A strong research and development team and focus on it. External Threat There is a huge threat of substitutues but Apple’s branding thanks to its awesome marketing can over power any such threat. The competition in the industry is fierce. However the research and development team at Apple undergoes constant innovation to cope up with the challenges of the industry. Increase channel power and develop brand positioning. Internal Weaknesses Declining funds available for research and development. There is a huge dependency on Steve Jobs for marketing endeavors. External Opportunities Apple can utilize its current customer base and built-in market for more products and attracting revenues and customer for them. Increase channel power Internal Weaknesses Declining funds available for research and development. There is a huge dependency on Steve Jobs for marketing endeavors. External Threats Threats of substitutes Threat to increase the prices of its iTunes music. Company Performance The brand name of Apple is Huge. It is recognized all around the world and has immense brand presence. There is a huge array of brand loyalists to its credits which means that there are a number of loyal followers who would prefer Apple over any other brand. Apple has a competent marketing team that encompasses the best of the industry and they also have a strong research and development team and they focus on it. These factors can enable Apple to capitalize on its vast brand name and current brand loyalists by rolling out advanced versions of their products such as the IPod and the IPhone. If Apple continues to do so, build a stronger brand perception, capitalize on current customers and develop more user friendly products, it should not have any problems in flourishing and evolving with the market and retaining its position in the industry. However, there is a huge threat of substitutes as there are other competitors who are coming up with similar products. The competition in the industry is fierce. But this can be overcome by Apple’s branding and with its excellent marketing it can overpower any such threat. The research and development team at Apple undergoes constant innovation to cope up with the challenges of the industry. Some of the threats that Apple is faced with revolve around the declining funds available for research and development and there is a huge dependency on Steve Jobs for marketing endeavors. This strengthens the position of the competitors and the threat of the substitutes and risk of increasing prices. However, Apple can utilize its current customer base and built-in market for more products and attracting revenues and customer for them. It can increase channel power and develop brand positioning. These factors show the constant performance of the company and its future. Apple seem to be recession-proof and has been in a position to take advantage of the tough economic times. The robust sales of Apple laptops and IPods enabled it to overcome the worst sales season in years. The sales were more than expected and there was an increase in the markets share. It is said that Apple has been taking advantage of the falling component pricing and with its advanced marketing and innovation is constantly attracting the consumers. Despite having the share of the 70% market for Mp3 players, the sale of IPods is constantly growing. This is because of the constant innovation and agility that the products have. There are new advancements every season, color, touch screen, video and so on. Similar is the case with IPhone, the IPhone enables apple to be miles ahead of the competitors and has made a superior place for itself in the market although there have been new phones coming out that are close imitations of the IPhones. (Krazit) Conclusion Apple has become a phenomenon in stylish and luxuries electronic products. It has marked its position and perception in the minds of the consumers as being the market leader. The constant innovation in new products and advancements in recent version has enabled the company to retain the attention of the consumers and keep them coming back. With the recent medical leave of Steve Jobs, the biggest concern is regarding the fate of the company without Steve Jobs. Steve Jobs is very important for Apple because of his charisma, innovation, leadership and vision. Having said that, Apple is has now developed itself as a strong brand that has a good market and research team. The ideas and patents of Apple can lead to its success in the future with a competent management team and constant innovation, Apple can keep intriguing its consumers. Bibliography Aaker. (1900). Dimensions of Brand Personality. Journal of Marketing Research . Apple's Branding Strategy. (n.d.). Retrieved April, 2011, from Marketing Minds: http://www.marketingminds.com.au/branding/apple_branding_strategy.html BALMER, J. M. (2003). Corporate Brands: What Are They? What are they made of . 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