What are the strategies of Apple Incorporated - Essay Example

I. Introduction: Apple Incorporated Apple is a very unique company because it dominated a market segment which is not its core business. Apple was launched in 1976 in a garage with Steve Wozniak and was able to revolutionize the computing industry with the introduction of its product line Macintosh (Mac) that “dramatically changed personal computing through its user-friendly graphical user interface (GUI), which allowed users to interact with screen images rather than merely typing text commands” (Marino and Gamble, 2010 pg. 142). II. What are its strategies? Apple’s success is not solely attributed to the creativity and functionality of its product line but also to its pricing strategy which has been a big change from the 1990s when consumers regarded Apple as a producer of overpriced tech baubles that cannot effectively compete against the far cheaper Windows PCs (Wingfield, 2011). This change was a result of a succesful implementation of its value chain activities that has significantly lowered its price. It became very pronounced with the launching of Ipad which price was far lower than what they expected. Its introductory price last year of $499 stunned everyone, which led John Gallaugher, an associate professor of information systems at Boston College to comment “It was a very competitively priced device” (Wingfield, 2011). The same is true in the notebook product line. When Macbook Air was introduced in 2008, it was priced at an exorbitant $1,799. A year later, Apple made its Macbook Air thinner and smaller and just when analysts thought it could be more expensive, the entry level price was slashed to almost a thousand dollars when it was tagged at $999 while its 11-inch and 13-inch counterparts were only priced at $1,299. This became possible by the briliant management of Apple’s supply chain due to capitalizing its organizational capability of having huge cash reserves. It made its supply chain a strategic weapon to lower price in order to capture the market. It tapped into its huge war chest of $82 billion in cash and marketable securities to lock up supplies of parts for years to enable it push down cost by the scale of its purchase (Wingfield, 2011). It also bought manufacturing capacity ahead of its time and made its components scarce that, in turn, made its competitors scrambling for any parts that are left and drove the cost of its products up while Apple had lowered its own (Wingfield, 2011). To date, Apple has been recorded as the biggest buyer of flash memory chips in the world according to the research firm iSuppli (Wingfield, 2011). The effect of using value chain management as a strategic weapon proved to be a nemesis among its competitors. When this effective value chain management was reflected in retail prices, competitors had to slash their prices where Motorola’s Xoom tablet was pushed to lower its price at $379 at Best Buy (for a limited time) and virtually won the competition with Hewlett-Packard’s TouchPad line of tablets which were pushed to be sold at $99 to clean the inventories. III. What is the core of Apple from a product point of view? The core product of Apple was its desktop computer Macintosh. Its main revenue source however comes from its other product line such as Ipad, Iphone and Ipod. IV. Are all products and services equal to Apple? If not what are the key pieces? Use your entire toolkit, especially the financials, to support your decision.  Apple Incorporated made itself distinct by making its hardware and software work in synergy that enabled its products and services unequalled by its competitors. The best example that we can show for this is the synergy that its operating system iOS5 that provide synergy among the different product lines of Apple. It powers the iPad, iPod and iPod touch which allows the three products to interact and complement each other. Its new computer operating system Lion also has an Air-drop feature that has made sharing of information between Mac computers very convenient. Air-drops peer to peer wi-fi based network made file sharing incredibly easy while it was such a pain before that it could induce consumers to upgrade to Mac to make file sharing easy with other Mac users. In addition, the combination of its iTune and iPod partnership proved to be a revenue generator unequalled by its competitors. “In 2010, more than 50 million customers visited the Itunes Store to purchase and download music, video, movies, and television shows that could be played on iPods, iPhones or Apple TV devices”. In the same year, it recorded its 10 billionth download since its launch in 2003 (Marino and Gamble, 2010 pg. 150). The synergy between Apple’s product line is not only about the complementary nature of its devices but also its guarantee that Apple devices “just work”. Unlike its competitors such as Google’s Android which is open to be used by many devices, Apple implemented a strict hardware and software control that guarantees synergy between the device and the software. As a result, Apple’s product lines does not have the vulnerability of Android where it suffers from hardware foibles because the hardware and software do not synergize. V. Recommendations: What should Apple do to make the iPad a success both in the marketplace and on the income statement?  Ipad is the latest phenomenal success of Apple which again proved its visionary approach in the market. Ipad is as good as Apple’s iPod and has become even better when Steve Jobs begun to really assume leadership at Apple in 2001. Initially, it received negative reviews from analysts but later proved them wrong when its sales and consumer reaction proved that the product was in fact revolutionary. Just few months after it was launched, it already sold 3.3 million units whereas iPod took 20 months to reach its 1 million units sale. To sustain Ipad’s success in the marketplace, Apple should guard itself against obsolescence which caused the failure and demise of its predecessors such as Palm which virtually became extinct due to obsolescense. Since iPad leverages on portability, it should also offer more capability to keep itself dominant and relevant in the tablet computer segment and keep itself ahead of competition. References: Marino, Lou and Gamble, John E. (2010). Apple Inc. Wingfield, Nick (2011). Apple’s Lower Prices Are All Part of the Plan. New York Times online. Retrieved from http://www.nytimes.com/2011/10/24/technology/apples-lower-prices-are-all-part-of-the-plan.html?pagewanted=1&_r=2 [Retrieved on January 5 2012] Read More