Strategic Analysis of Apples Development and Release of the IPad Range of Products - Case Study Example

Strategic Analysis of Apple’s Development and Release of the Ipad Range of Products Name: Course: Instructor: Institution: Date of Submission: Strategic Analysis of Apple’s Development and Release of the iPad Range of Products Introduction The trend of Apple’s products like iPads, iPods and smart phones has all along been positive. Five years from 2007, the company has seen a steady increment in its products usage. iPad range of products comprise a line of tablet computers that Apple Inc, designs and markets. The first iPad was produced in 2010, while the most recent models of iPad Air and iPad Mini were released in November 2013 and December 2013 respectively. The tablet computer has its user interface built around its multi-touch screen, including its virtual keyboard. It normally has in-built Wi-Fi. Since its first release, Apple Inc has sold over 170 million iPads. Although the device has continuously been used by consumers, businesses persons, educationists and other users have also found its importance. On its first release, the iPad device made the company penetrate among Fortune top 100 companies by 50%. Analysts note that the Apple’s product has had unprecedented growth in sales to exceed the sale of Personal Computers. However according some recent reports (in March 2014), it has been noted that Android tablet had beaten Apple’s tablet in the 2013 sales (Asay, 2013). Therefore this discussion will look at the company’s strategic environments and development in general, with regard to introduction of the iPad device. Internal Analysis The VRIO Analysis The VRIO framework assesses the rarity, immitability, value, of products and the organization as a whole. On value, like other products, the iPad tablet has several advantages in that it is being touted as the highest technology in the industry. Moreover, it is easy to carry and use. On rarity, the technology that has been used to manufacture the devices is quite difference for instance, its iOS. Moreover, the iPad’s rare case makes it stand out of the rest as more superior. On immitability, it should be noted that although the company has the superior tablet on the market, there are others that can replace it, like the android one. On organization, the company has really been apt in maintaining its brand through advertisement. Flawless make ups of the iPad have really been appreciated by customers. To maintain its stable market, the management has always been in the forefront to innovate, coming up with newer iPads (Gibbs, 2013; Ritche, 2013). The Strength, Weaknesses, Opportunity and Threat Analysis Strengths and Weaknesses For strengths, first, the company has ensured strong customer loyalty which has been combined with its expanding ecosystem. Among its rivals, the company has emerged as the leading innovator in the device industry. Moreover, it has been positing very positive financial performances, in cash with no debt. Its brands have been having good reputation. Its retail stores and strong advertising and marketing teams have made the company increase its sales (Jurevicius, 2013). On weaknesses, customers have been shying away from its high priced products. Its devices have not been compatible with different OS. Moreover, its market has been decreasing and therefore long term gross margin is expected to decline. Some of the company’s products have been facing defects and therefore it may deter its image. Further changes in management after the death of Steve Jobs may have a negating effect on Apple’s performance (Jurevicius, 2013). Opportunities and Threats High demand for iPad mini and iPhone 5 is poised to increase the company’s market share. With the launch of iTV, it will also increase its sales and therefore the company’s ecosystem of products. Moreover, the growth of Smartphone demand will make its market share expand. Since other companies have had a trend of infringing the company’s products, it will continue gaining from the law suits. The company, nevertheless, has a very strong advertising strategy of its devices that have included iPad, iPhone and iPod touch. Since cloud based technology is expanding, the iCloud service will make the sale of its tablets rise (Jurevicius, 2013). For threats, the whole industry faces a rapid technological change. The increasing US taxes may also cost it a lot. Low prices on the Sumsang’s galaxy tablets are going to swing its product demand. Moreover, analysts have also noted that the company may be affected by the rising strong dollar, which will make its products more costly. If the Android OS is going to dominate the market, it will mean that its iOS will start to decline (Jurevicius, 2013). The Porter Five Forces Model and Apple Company Threat of Other Entries Given that the company has been known to have a history of dominating the consumer electronic industry, the threat of other entries is relatively low. This is reinforced by the fact that the company continuously invests in research and development that makes it come up with very unique products that the new entrant will find it difficult to produce. On the same note, the differentiation strategy always keeps its products unique and newer, iPad line of products included. Analysts note that the company has positioned its brand name, image and a huge loyalty of customers as a barrier that the new entrants will have to cross to be at par. The other factor that scares competitors is the huge sunk costs involved before starting and running a business of the same kind and size. Currently, iPad’s two launches of iPad mini 2 and iPad Air has continued the success of its predecessors. However, since its products are perceived to be highly priced, other companies might find an opening to introduce products in a low price range (Mohta, 2013). Threat of Rivalries According to (Hamblen, 2013) Apples’ immediate and historical rivals are other computer companies that include HP, Dell, ASUS, and ACER, Sony. On the line of iPads, the company faces more than 11 tablet substitutes: Amazon kindle fire, nokia lumia, Microsoft surface 2, google nexus, Samsung Galaxy Note, Sony Xperia Tablet z, Argos My Tablet and Tesco Hudll. However, the company does not worry very much on its rivalries. This is because as it can be realized, Apple leads other firms in innovations.When the other firms needed a product that would be unique but already known in the market, the company recorded the most important initial success by introducing iphone and I pad; this came before any other firm could realize, gaining a bigger market share over its rivals like Samsung. (Mohta, 2013). The Threat of Substitutes As Wilson (2009) notes, simple MP3 players will substitute the IPods while the Samsung tablet can be used instead of I pad. For instance Samsung galaxy Note 10.1 has had been very powerful predecessors which are likely to boost its image and therefore sales. Moreover, the Samsung device has been having full access to Google Pay application store and therefore becoming one of the strongest contenders against the Apple’s tablets. As substitutes for its phones, simple smart phones are the first substitutes to the iPhones. Nevertheless, a Motorola Droid can successfully substitute the Apple’s I phone 3GS; in fact, both of them cost the same price. The Flip Ultra HD will do the same to the iPod Nano. Far but important are the Music DVD and CDs and alternative sources of video such as theatres, cable and broadcast that are alternatives to iPods and iTunes. However, as business commentators’ note, since the company has already achieved economies of scale it can still gain over other firms, due to production at low costs. The other advantage is that it markets better than its competition, whereby among the substitutes, its brand recognition is very high as compared to those of other products, making it sell well. Although other companies market their products, Apple has done a tremendous job that almost every customer equate its products with superior value and benefits. The Threat of Suppliers Generally, this force is not very much threatening to the company. The suppliers in this company consist of Motorola, Intel and IBM, which supply computer memory and processors. Strategic Alliance is the supplier of the Mac while ABC, Disney, Fox and Sony supply movies and TV series. Nevertheless, the Universal movie, BMG, Sony, and Warner supply music and movies. Considering that, there are many organizations producing electronic products, those that belong in this industry will tend to be a bit elastic. This implies that if a supplier organization tends to increase price, Apple would definitively seek an alternative one. The fact that the suppliers sell products that are very much differentiated and special, will automatically give them a greater purchasing power (Lloyd, 2013). However, as Fern (2010) establishes, Apple being a bigger company than the rest, it will buy the components in large quantities exercising larger advantage over their suppliers. This will enable the management to negotiate to attain favorable terms and prices. At this level too, when the company keeps on commanding large portions of supplies, it will be putting barriers of entries to it’s would be competitors. The Threat of Customers As noted earlier, customers can peer-to-peer share music and other services without paying. However, in general, this is not really a threat to Apple. The company has created millions of loyal customers across the globe, some of them who are big firms for its iPad and other devices. By uniquely differentiating its products of high quality, it implies that customers have little power to bargain. The company should therefore ensure that price increase is not much drastic, or else the customers will start looking for inferior products as alternatives, for instance cheap tablets like androids (Kelleher, 2013). PESTEL Analysis For political factors, the company which has 52% of its business from outside US is likely to suffer due to straining international relationship between the country and other nations. The recent economic crisis has hugely impacted on the company. As inflation went up, the country’s citizens did not have command on the company’s products and in fact they viewed them as just luxurious. As the country’s dollar keeps fluctuating, the company may have to be affected, especially if its value is seen as high. However, it has countered this problem by buying itself foreign currencies and therefore it has tried to minimize any harmful impact that may arise because of the US currency fluctuations. On social cultural factors, as the demand for luxurious goods keeps on rising across the globe, Apple has made its ways in these markets by introducing products like Ipods, iPhone and iPad, which are considered of high status. The other social influence the management of the company is benefiting from is the rapid demand for music. With its virtual music space like the iTunes, and therefore the need for iPad the company has benefitted from customers with potable music trends. Technologically, the company’s management has done a lot in investing in research and development which has made it to stay on top as a technology leader. On legal ground, the company has been fighting various legal battles against Nokia, where the latter claims that the company has been infringing its patent rights regarding iPad, iPhone and iPod touch. Moreover, the company’s segment in China is fighting for its rights to have iPad as its trade mark. On the environmental investments, the company is considered to be among the least in caring about the environment (2nd Management Group, 2014). Analysis of the Main Strategic Factors The company has been keen in matching higher prices with its product superior design and quality. These strategies have seen it increasing an average profit of 20% accompanied with an average growth of 30%. In this regard one can note that company aims to compete with its rivals on differentials but not on costs. Although this strategy will help it maintain stable market, and superior brand name, it will take longer than its rivals who are much keen on penetration strategies by going with low prices that will gradually raise later (Gibbs, 2013). Recommendations that the Business should Implement First, the company needs to consider its strategic pricing policies that have made the android tablet overtake it in the 2013 sales. It can adopt price lowering strategy at the beginning as it maintains the same quality of products, during the iPad launch. Moreover, with the same pricing strategy, the iPad designs should remain unique as it enters new markets. The company should enter into new joint ventures with others so that they can help each other in advertising and other product promotional means and distribution. This will help the company reach many markets that it had not reached due to inadequate advertising. Since it is the innovation leader in the in industry, the company should introduce the concept of knowledge management. Moreover, since customers are only able to get the iPads and other products from the few stores it has, it is important the company increases more retail stores (Hamblen;etal, 2013).Although not really a problem at the moment, but with the nature of the industry, the company should continue investing very much in research and development to continue being innovation leader in the industry. This is reinforced by the fact that when the company continuously invests in research and development, it will come up with very unique products that the new entrant will find it difficult to produce. On the same note, the differentiation strategy always keeps its products unique and newer, iPad line of products included. This will enable the company survive against threats of rivalry and therefore substitutes to iPads and other products. Moreover, by uniquely differentiating its products of high quality, it implies that customers have little powers to bargain. On suppliers, the company should continue purchasing inputs in larger quantities to decrease supplier bargaining power, and therefore getting them at low prices; this will be putting barriers to entries of the would be competitors. Moreover, to stabilize its prices due to fluctuating US currency, the company should continue buying foreign currencies. It should also establish, through its research and development team, new market niches that are in favor of luxurious goods, like iPad and iMusic. Nonetheless, through its CEO, it is supposed to instill confidence in shareholders and customers by showing that its management is stable despite the loss of the brilliant C.E.O. Steve Jobs. It should also check on the compatibility of its products like its operating system with other devices. The company should, nonetheless, restrain from legal suits against it and do more in environmental protection. Conclusion The company should continue launching products that are innovative and luxurious for the existing customers and those from newer markets. Quality products at favorable prices will enhance the image of its iPad brands. Both internal and external company analyses and the Porter five force model has helped in looking into the environments that it operates and therefore to draw favorable strategies for improvements. Although the company’s iPhone has brought a positive revolution in its development, iPad range of products have also been revolutionizing, which have made the company become one of the biggest corporations in the Fortunes top 100. For this successful trend to continue, the strategic recommendations reached above should be put into implementation. References Asay, M. (2013). More Than a Matter of Market Share. Retrieved on 3 March 2014 from http://readwrite.com/2013/08/08/why-market-share-trends-favor-apple-not-android#awesm=~okg8bb40D40GPu Fern, M. (2010). Apple and Industry Forces. Fern Strategy. Retrieved on 3 March 2014 from http://fernstrategy.com/2011/02/17/apple-and-industry-forces/ Gibbs, S. (2013).Apple iPad Air and 11 other tablets compared: which is best?. The Guardian. Retrieved on 3 March 2014 from http://www.theguardian.com/technology/2013/oct/23/apple-ipad-air-ipad-mini-tablets-nexus-7-google-android Hamblen, Matt. (2013). Apple-Samsung rivalry intensifies With September Device Launches. Computer World .Retrieved on 3 March 2014 from. http://www.computerworld.com/s/article/9241578/Apple_Samsung_rivalry_intensifies_with_September_device_launches Jurevicius, O. (2013). SWOT Analysis of Apple. Strategic Management Insight. Retrieved on 3 March 2014 from http://www.strategicmanagementinsight.com/swot-analyses/apple-swot-analysis.html Kelleher, K. (2013).Xiaomi: China’s Threat to Apple and Samsung. Business Time Retrieved on 3 March 2014 from http://business.time.com/2013/10/14/xiaomi-chinas-threat-to-apple-and-samsung/ Lloyd, A. (2013). Apple and Five Forces. Global Strategic MGMT Company News. Retrieved on 3 March 2014 from http://lloyd7160.blogspot.com/2013/02/apple-and-five-forces- model.html Mohta, J. (2010). Porter’s 5 Forces Model case Apple Inc. Slideshare.net. Retrieved on 3 March 2014 from http://www.slideshare.net/jontymohta444/porters-5-forces-model-case-apple-inc Nations, D. (2014).iPad vs. Android: Which Tablet Should You Buy?. About.com iPad. Retrieved on 3 March 2014 from http://ipad.about.com/od/ipad_competition/tp/iPad-vs-Android-Which-Tablet-Should-You-Buy.htm Ritche, R. (2013).iPad vs. Galaxy vs. Nexus vs. Kindle vs. Surface: Which tablet should you get?. iMore. Retrieved on 3 March 2014 from http://www.imore.com/ipad-vs-galaxy-vs-nexus-vs-kindle-vs-surface-which-tablet-should-you-get Wilson, M. (2009). The Best Alternatives to Every Apple Products. Gizmodo. Retrieved on 3 March 2014 from http://gizmodo.com/5431521/the-best-alternatives-to-every-apple-product/ Read More