Strategic Use of Information Systems by Apple to Gain Competitive Advantage - Case Study Example

STRATEGIC USE OF INFORMATION SYSTEMS BY APPLE Inc TO GAIN COMPETITIVE ADVANTAGE Student’s Name Course Instructor’s Name Date Table of Contents Table of Contents 2 Executive Summary 3 Introduction 3 Background of Apple Inc 5 Theoretical Framework Analysis 6 Porter’s five forces model approach 6 New Entry Threats 7 Supplier Bargain Power 8 Buyer Bargaining Power 8 Threat of substitution 9 Resource based view of Apple Inc 11 Model Strategies of Apple Inc. 12 Limitation of IT used 14 Conclusion 14 References 15 Executive Summary This research report evaluates the use of information systems as the basis upon which sustainable business strategies are instituted and implemented. Strategic Information Systems have been defined as that which is capable of supporting and/or shaping the competitive strategy of a business organization. Strategic implementation of information systems has been found to enable Apple Inc. in gaining competitive advantage in a highly competitive personal computing industry. In the case of Apple Inc., Porter’s five forces model has been used to identify rivalry amongst existing firms, threats of substitute services or products, threat of new entrants, bargaining powers of buyers as well as the company’s relation with its suppliers. Consequently, a resource based review has been used to identify the capabilities and resources of the company. These have enabled the company to identify new market opportunities especially in personal computing industry through introduction of unique products such as smartphones –iPod. Besides, the company’s capacity to differentiate products, innovation and increase in research and development as well as increased networking has enabled it establishes a robust market niche. However, due to the rapidly changing ICT environment, the company is disadvantaged in that it has to keep on investing in research and development so as to remain competitive in the industry. Introduction The way in which information is collected, assessed and disseminated is a valuable strategic business resource that any company can adopt and implement in order to enhance its competitive advantage. Hence, it is necessary to incorporate information systems during formulation of corporate strategy and corporate governance (Gaines et al., n.d.). According to Loudon and Laudon (2009), Information Systems plays a key role in business operations, non-financial and financial aspects for instance decision making in corporate management. Hemmatfar et al (2010) refers to strategic information systems as that which are capable of supporting and/or shaping the competitive strategy of a business organization. The strategic use of information systems is characterized by the capacity to considerably change the way in which business is conducted so as to aid in attaining strategic advantage (Hemmatfar et al., 2010). Key features of a strategic information systems as identified by Hemmatfar et al (2010) include; decision support systems which facilitates in developing strategic approaches capable of aligning information technology and/or information system with business strategies of an organization, solutions of ERP that integrates business processes meet set objectives and optimize resource use, database systems with capacity to enhance utilization of corporate information in respect to innovation, production, promotion and marketing functions and real-time information systems that aim at maintaining a rapid response as well as quality indicators. Therefore, Porter (2008) argues that competitive advantage is the basis upon which a firm may can fail or succeed. Such a competitive advantage seeks to lead in controlling the market and making larger-than-average profits. General ways in which competitive advantage can be thought of include but not limited to; providing services of delivering products at lower costs, providing a service or delivering a product that is differentiated, targeting particular market segments so as to identify and create unfilled-up market niches and innovation by developing new services or products or services via new computer technology like in the case of Apple Inc.’s i-series of products e.g. iPhone, iPod and iMac among others. According to Turbal et al (2006), strategic Information System facilitates companies to attain competitive advantage via its contribution to the company’s strategic goals and/or its capacity to considerably increase productivity and performance of the company. This research report focuses on the use of strategic information systems by Apple Inc that has enabled it to cut a market niche in personal computer industry including software and mobile phones. As a consequence, Apple Inc has recorded increase sales through retail, wholesale and direct sales in both offline and online markets leading to significant gains in market leadership and competitive advantage. Background of Apple Inc Apple Inc is an American company that was founded on 1st April 1976 by Steve Jobs and Steve Wozniak. The vision of the company revolves around the notion that man is capable of initiating changes in the world through technologies developed for both corporations and consumers. Over the years, the company strives to make its clientele base the masters of the product produced by the company (Wonglimpiyarat, 2012). Besides, Apple Inc continues to institute systems for ensuring consistent customer interaction through creation of marketing, operational, financial and non-financial structures. In respect to the company’s mission, it is committed to towards provision of best computing experiences to educators, students and creative consumers and professionals all over the world through innovation of software, hardware and internet offerings. Major products that the company manufactures are for instance Macintosh computers, iPhones, iPods and Mac Operating Systems among others (Abel, 2008). Initially the Apple Inc started as a private venture but later in the early 1980s it went public thereby increasing it financial resource-base for increased production and expansion. In terms of employee workforce, Apple Inc has about 37,000 employees both temporary and permanent. Apple pioneered in the personal computing industry in at a time when demand for such products was steadily growing with lot competitors. For instance, by 1984, the Apple II’s market share hit a low 8% whereas PC was about 26% in terms of market share. Consequently, by 1990s the market share of Macintosh computers started to peak with increased demand to slightly more than 10%. During the time, the company faced stiff competition in the market for their Mac OS due to stiff completion from Microsoft Windows. Apple Inc also has dominated the music industry through its infamous launch of iTunes and iPod (West & Mace, 2010). As at 2005, the company sales of digital music ranged at between 65% and 75% of totals downloads whereas sales of its portable music players amounted to 80% of the whole market. Theoretical Framework Analysis Porter’s five forces model approach The case of Apple Inc can be analysed using Porters five forces model. This is more of an outside business unit strategy and it’s applied in analysing the value (attractiveness) of the structure of an industry. According to Wonglimpiyarrant (2012), the use of competitive strategy was emphasised by Porter in achieving competitive advantage. This is based on the precept of resource-based approach that supports strategies for coping with rapidly changing environment is based on firm’s capabilities. Such capabilities are integration of various resources ranging from relationships, experiences, organizational capabilities, and technology. In that case, Porter’s five forces model approach in analysing the strategic portion of the firm or else competitive position include; rivalry amongst existing forms, threats of substitute services or products, threat of new entrants, bargaining powers of buyers and relation with suppliers (Wonglimpiyarrant, 2012). This is illustrated in the figure below. New Entry Threats The industry threat for space that is currently occupied by Apple is a big threat. Apple need to get on pursuing differentiation of product and scope of economies to preserve their constant competative benefit in the industry. To do this, they need to evaluate other new companies that are geeting into the market to understand their working strategies so as to be in aposition of remaining competitive. According to Shim and Lee (2012), analysis software that have an open source for instance open office applications and linux operating systems threaten both Microsoft and Apple products. The reduced software cost may permit them to overtake Microsoft and Apple, particularly in growing markets for instance in China. The chief online retails of music products for instance Amazon are planning entry in the online market of music. With extensive household name and internet presence, Amazon could act as a frightening confront to Apple. If the chief record brands negotiate for improved terms with novel iTunes competitors, Apple may be hindered from providing a number of music content, which they offer currently. Additionaly, the chief music brands hate apple pricing of a dollar for each song. This implies that most of their customer would shift for any other better alternative while provided. Although the brands renewed their agreements with apple recently, possibly there are provisions that permits future alterations in the costing model. Supplier Bargain Power The latest change to intel processor would present an important danger to Apple. Since there are only two corporations creating processors that are compatible with intel products, there is a high likelihood for oligopoly power and tacit collusion between the two suppliers. Therefore, apple purchasing need to compete directly with Dell, Lenovo and HP. If exclusive agreement or shortages materialize, Apple would face difficulties in getting raw materials. Therefore, they should consider extra sources for instance Advanced Micro Devices (AMD) (Porter 2008). Buyer Bargaining Power Like every other big software products, Apple software contains security loopholes that hackers can take advantage of. Therefore, an important future exploitation could destroy several households and businesses by employing Apple computers. This could influence customer decisions to purchase apple products in future. On the other hand, apple benefits from a competitive advantage, since its OS X is stable and mature because it is based on Unix BSD. Apple has retained considerable reserves for cash during worldwide PCs dominance and explosive growth. To achieve this, Apple developed an implicit love relation with their consumer base through delivering products that are technically superior for instance PCs versus Macs, MP3 players versus iPods, and pursuing software and hardware updates aggressively. Apple incorporated their basic activities perfectly to make it clear to the customers where a single activity starts and the second activity terminates. A good example to illustrate this is the willingness of apple to create a software to execute windows XP on its novel iMac which was Intel-based and then send it online to all iMac users for free. In this kind of environment, consumer service merely turns to be the recognition of acquiring a little extra than expected (Wonglimpiyarrant, 2012). Threat of substitution Sony is an instance of competitors containing a unique stand against Apple. Apple is supplied by Sony music with several iTunes songs. In addition, Sony creates a portable version of Walkman music player which is an iPod direct competitor. Moreover, Sony is trying to integrate the music buyers vertically forward. To achieve this, they have started integrating their music scheme into their Walkman. Additionally, it is distributing particular music on Mora exclusively, which is currently targeting on Japanese customers. If Sony could acquire extra momentum, their services can present an alarming challenge in additional markets to iTunes (Wonglimpiyarrant, 2012). Product design and technology are aspects that stand for the apple’s actual core capability. From being the initial platform to execute an electronic spreadsheet to the initial, in order to establish a hub for digital lifestyle, the history of Apple is rich with progressive technology development. Apple is not only fighting to be the first but also the best. The Operating System of Apple is regarded universally as more reliable and stable than windows, while the software bundles of desktop publishing are more comprehensively accessible to end users. Since apple had refused to give operating system license to outside entities, the Apple development software and hardware bundled package became Apple production procedure cornerstone. Apple attained unparalleled performance through architecture of 64-bit, distinctive styling that was integrated with multi-colored translucent cases of iMac, and redefined instinctive iPod operation. While all products initiation has not been successful, Apple handles production of components as a design process natural extension (West & Mace, 2010). In order to retain considerable reserves for cash during the worldwide PCs dominance and fiery growth, Apple developed an implicit love relation with their consumer by distributing products that were technically superior and pursuing software as well as hardware updates aggressively. Apple incorporated their basic activities perfectly, an aspect that made it clear to the customer on where the initial activity starts and where the other terminates. A good instance of this is the willingness of Apple to come up with software that would execute windows XP on its novel iMac which was Intel-based, and then send it online to users of iMac for free. In this case, customer service simply turns to be the realization of acquiring a little over the expected (Ibid, 2010). In an innovative and constant changing market climate, it is unavoidable that coerce to expand services and product offerings will put Apple to claims of copyright and patent infringement. The dispute concerning the logo of Apple on its music store of iTunes for instance went on despite an earlier agreement settlement with Apple Corps Ltd of Beatles in 1991. While this litigation infringement of Microsoft’s windows on patent of Mac OS has widely publicized, application of legal control to drive achievement versus strategies of internal development for products such as iMusic and Garage Band have proven to be highly valuable ((Wonglimpiyarrant, 2012). Resource based view of Apple Inc Apple has over the time managed to mobilize its capabilities and resources thereby aiding it in establishing new market opportunities especially in personal computing. For instance the introduction of iPhone brought together there distinct products; an iPod with a wide screen that had touch controls, a device for internet communication and a new mobile phone. This depicts how Apple took made use of its existing products –safari Internet communicator and iPod – to bring integrate earlier separate functionalities into one. This was a new move that had not been done by another industrial player. Besides, the design of Apple’s mobile phones is not based on keyboards and main buttons like in the case of other competitors such as Black Berry but also big screen that increases user’s comfort. Also, the design of iPhone introduced a use of a handy pointer, a finger, was a strategic move when Apple differentiated the design of iPhone to come up with a unique Smartphone. This significantly increased the value of end-users and customers whilst brought several opportunities in the cell industry in respect to smart phones. Thus, Apple attained market leadership with the introduction of iPhone by winning a large customer base in both businesses and private use. The paradigm shift of focus from businesses in the 1990s to user friendly Personal Computers in the 2000s were what have enabled Apple to dominate personal computing industry. On the other hand, Apple Inc has managed to imitate its development strategy in both software and hardware especially in respect to iPhone. Till then, there had been no manufacturer who produced both excellent hardware product and software in the perspective of the consumer. Majority of smart phones for instance Samsung make use of Google android OS. With such complexity, the capabilities and resources of Apple products are costly or hard to copy thereby giving it a competitive advantage. Besides, almost every apple product is similar to each other as in the case of iPhone, iPod, Mac book and iPhone 4 in terms of appearance and they make use of identical software. This distinguishes Apple products from others within the market in terms of software and hardware design. In that case, the fact that apple develops its own hardware and software, renders it impossible for any competitor to control the company’s capabilities or resources thereby forming the basis of gaining competitive advantage. Model Strategies of Apple Inc. Apple belief is that firms that firms compete within an industry depending on the purpose for which the computer was created and those that are on the lower end of price range base their competition on price-value. As such, the ability to command high product prices in the personal industry would lead to consumers opting for elegant of intricate designs. This is base on the notion that other competitors within the industry concentrate more on providing basic functional designs that costs low prices. This is true considering creation of both support and quality metrics in a single product such as iPhone. Apple Inc provides portable computers that are well designed in order to achieve high functionality as opposed to its competitors who offers low-end and mid-range computers and thus paying less attention to user preferences. In this sense, Apple Inc has continued to consider paradigms such as Price versus Design as well as creating Quality based on Design. Upon achieving this, providing Support is the ultimate extrinsic measure through which the company has been able to compete in the market. Within the market, there are two extremes of support policies which include low-price and high-price. In the case of Apple Inc, the company provides both one-on-one and in-store support to all its customers (Hemmatfar et al., 2010). On the other hand, the capacity to differentiate products, innovation and increase in research and development as well as increased networking has enabled Apple Inc to effectively compete in the market. In the case of product differentiation, the company has been able to create differentiated lifestyle brands thereby ensuring continued resistance to pressure for other competitors such as HP and Dell. Innovation strategy of the company is that which has enabled it to sustain its, market leadership especially in the cellular industry. However, continued innovation on improved user interfaces is the one that will enable Apple to distinguish its Mac computers from other Personal Computers within the industry. It is the integration of both the software and hardware systems of Apple Inc that has enabled it to successfully develop and market if key strategic resources. Upon this basis the company has continued to create value of all its products. As such, of the company’s key capacities is the ability to create a hardware and software ecosystem through the use of its designers, engineers and programmers as resources. It has been knowledge of the company that the human resources are representative of the company’s competitive advantage. Therefore, the integration of their key capabilities has necessitated in establishment of sustainable and continued competitive advantage within the industry. On the other hand, the increased network relationships and relationships of Apple with other players within the industry such as OEM has enable the company to withstand stiff competition from other players by being able to outsource some of its manufacturing processes. This ensures that the company is continuously producing high quality products that meet the expectations of the customers. In addition, sustenance of Apple Inc’s industrial design capacity is a key strategic resource which comes in handy as a functionality of innovation capability (Abel, 2008). Limitation of IT used Nevertheless, although Apple Inc has managed to provide stiff competition in the market, its strategies in terms of both operations, financial and non-financial aspects faces a lot of challenges. For instance, most Apple products are designed and highly differentiated to be used in educational settings especially in the US. Besides, there are other key market players within the sector who are consistently posing a stiff challenge to Apple. As such, a saturation point may be reached whereby Apple Inc may be force d to spend more resources on research and development so as tom keep pace with its innovation strategy. This may lead to the company losing its market share. Conclusion As illustrated in above discourse the capacity to efficiently and successfully adapt to the rapidly changing market environment is key in achieving competitive advantage in the global market. In the case of Apple Inc. quality of products and differentiated design has been the main focus throughout its production process. The use of information systems by Apple Inc has enabled in creation of innovative applications, altering business processes, liking with business partners, reducing costs and supporting strategic objectives. This is the basis upon which Apple Inc has managed to cut a market niche as discussed above using porter five forces model. References Abel, I., 2008. "From technology imitation to market dominance: The case of iPod", Competitiveness Review, 18(3), pp. 257-274. Hemmatfar, M., Mahdi, S. & Marziyeh, B., 2010. Competitive Advantages and Strategic Information Systems. International Journal of Business and Management, 5(7), 158-169. Loudon, C. K. & Laudon, P. J., 2009. Managing Information systems. New York: Pearson. Gaines, C., David, H., William, F., Tish, M. & Rodger M., n.d. Information systems as a strategic partner in organizational performance. Journal of Management and Marketing Research, 1-18. [Online]. Available at: Porter, M. E., 2008. The Five Competitive Forces that Shape Strategy. Harvard Business Review, 86, pp. 78- 93. Shim, S., & Lee, B. (2012). Sustainable competitive advantage of a system goods innovator in a market with network effects and entry threats. Decision Support Systems, 52, 308–317. Turban, E., McLean, E & Wetherbe, J., 2006. Information Technology for management Transforming Organizations in the Ditigal Economy, 5th Ed. New York: John Wiley. West, J. & Mace, M., 2010. Browsing as the killer app: Explaining the rapid success of Apple’s iPhone Telecommunications Policy, 34, pp. 270–286. Wonglimpiyarat, J., 2012. Technology strategies and standard competition — Comparative innovation cases of Apple and Microsoft. doi:10.1016/j.hitech.2012.06.005 Carr, N. G., 2004. The corrosion of IT advantage: strategy makes a comeback. The Journal of Business Strategy, 25(5), pp. 10-15. Read More

Key features of a strategic information systems as identified by Hemmatfar et al (2010) include; decision support systems which facilitates in developing strategic approaches capable of aligning information technology and/or information system with business strategies of an organization, solutions of ERP that integrates business processes meet set objectives and optimize resource use, database systems with capacity to enhance utilization of corporate information in respect to innovation, production, promotion and marketing functions and real-time information systems that aim at maintaining a rapid response as well as quality indicators.

Therefore, Porter (2008) argues that competitive advantage is the basis upon which a firm may can fail or succeed. Such a competitive advantage seeks to lead in controlling the market and making larger-than-average profits. General ways in which competitive advantage can be thought of include but not limited to; providing services of delivering products at lower costs, providing a service or delivering a product that is differentiated, targeting particular market segments so as to identify and create unfilled-up market niches and innovation by developing new services or products or services via new computer technology like in the case of Apple Inc.

’s i-series of products e.g. iPhone, iPod and iMac among others. According to Turbal et al (2006), strategic Information System facilitates companies to attain competitive advantage via its contribution to the company’s strategic goals and/or its capacity to considerably increase productivity and performance of the company. This research report focuses on the use of strategic information systems by Apple Inc that has enabled it to cut a market niche in personal computer industry including software and mobile phones.

As a consequence, Apple Inc has recorded increase sales through retail, wholesale and direct sales in both offline and online markets leading to significant gains in market leadership and competitive advantage. Background of Apple Inc Apple Inc is an American company that was founded on 1st April 1976 by Steve Jobs and Steve Wozniak. The vision of the company revolves around the notion that man is capable of initiating changes in the world through technologies developed for both corporations and consumers.

Over the years, the company strives to make its clientele base the masters of the product produced by the company (Wonglimpiyarat, 2012). Besides, Apple Inc continues to institute systems for ensuring consistent customer interaction through creation of marketing, operational, financial and non-financial structures. In respect to the company’s mission, it is committed to towards provision of best computing experiences to educators, students and creative consumers and professionals all over the world through innovation of software, hardware and internet offerings.

Major products that the company manufactures are for instance Macintosh computers, iPhones, iPods and Mac Operating Systems among others (Abel, 2008). Initially the Apple Inc started as a private venture but later in the early 1980s it went public thereby increasing it financial resource-base for increased production and expansion. In terms of employee workforce, Apple Inc has about 37,000 employees both temporary and permanent. Apple pioneered in the personal computing industry in at a time when demand for such products was steadily growing with lot competitors.

For instance, by 1984, the Apple II’s market share hit a low 8% whereas PC was about 26% in terms of market share. Consequently, by 1990s the market share of Macintosh computers started to peak with increased demand to slightly more than 10%. During the time, the company faced stiff competition in the market for their Mac OS due to stiff completion from Microsoft Windows. Apple Inc also has dominated the music industry through its infamous launch of iTunes and iPod (West & Mace, 2010). As at 2005, the company sales of digital music ranged at between 65% and 75% of totals downloads whereas sales of its portable music players amounted to 80% of the whole market.

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