Apples Overall Competitive Strategy - Case Study Example

? Apple Case Study (Add (Add (Add The case clearly specify that Apple’s overall competitive strategy involves “a winning business model, competitive products, an innovative marketing strategy, and an efficient operational model” (Marino & Gamble, 2010). All these elements together provide the company with a set of competitive advantages over its rivals. Software engineering industry, hardware manufacturing industry, and retail industry form the basis for Apple business model. The winning business model has given the company a unique position in the market. The Apple’s product lines mainly include iPod and iTunes, desktop and laptop computers, the revolutionary iPad and iPhone, and the OS X operating system. The company frequently comes up with innovations in its product designs. The Apple follows its traditional Macintosh marketing strategy and always gives specific focus on innovative promotional efforts. Although these four elements were crucial to Apple’s success, frequent product innovations have greatly assisted the company to outsmart its competitors in no time. The organization’s potential competitive strategy significantly aided the management to survive many contingencies, including 2008 global financial crisis. 2. Well developed product differentiation approach and industry leading innovation are the core elements of Apple’s strategy on computers, personal media players, and smartphones. Although Apple’s major portion of revenues is generated from non computer products, the company still considers computers as its core business segment. The differentiation strategy has greatly assisted Apple to attain a competitive position in the personal computer industry. For instance, referring to Marino and Gamble (2010), innovative features like a proprietary operating system and strong graphics-handling techniques benefited Apple to differentiate its Macs from PCs. In addition, Apple offered a variety of computer models in various configurations. Apple practices skimming pricing policy in personal media player industry with intent to capture consumer surplus. According to Marino and Gamble (2010), Apple priced $399 for the iPod when the company launched the product for the first time and the Apple management eventually reduced the price over time. This pricing strategy was greatly beneficial for the company to establish its iPod products in the market. The iPhone 3G was a great product innovation of Apple. The company frequently diversifies its smartphone features also. While analyzing the smart phone sector, it is obvious that Apple’s product innovation and differentiation strategies have significantly contributed to its market competitiveness. 3. Potential Resource Strengths and Competitive Capabilities While analyzing the Apple computers, the global presence is identified as one of the competitive strengths of the company. Since the organization has strong brand image, Apple computers are well recognized in the market. Synergies of combined operation assist the company to reduce operating costs and to improve value chain operations. Evidently, strong media relation and innovativeness are other potential strengths of Apple. Potential resource weakness and competitive deficiencies Undoubtedly, low returns represent a potential resource weakness of Apple computers. Market surveys indicate that many people hesitate to purchase Apple computer because of the company’s premium pricing. Furthermore, the firm increasingly depends on others for the key components. Potential market opportunities Increasing demand for wireless products seems to be a potential opportunity for Apple computers since the company already has a range of products in this area. Similarly, Apple’s new digital platform (integrating iTunes video content into television screens and portable devices) would enhance its growth in computer industry. Potential external threats to Apple’s future profitability Strong competition raises a series of potential challenges to Apple computer because leading market players like HP, Acer, and Dell are continuously introducing innovative product designs. In addition, a slow Eurozone economy and lawsuits are likely to threaten the future market growth of Apple computers. From the overall analysis, Apple’s competitive positions in personal media players and smartphones appear to be stronger than its position in computers. 4. Obviously, it does not make a good strategic sense for Apple to be a competitor in the computer, personal media player, smartphone, and tablet computer industries. Apple needs to compete with a number of well-rooted industrial giants including Nokia and Amazon.com due to its multi-industry focus, and this situation dreadfully affects the firm’s operational efficiency and competitiveness. In addition, today Apple’s technological innovations are not so effective because the firm is forced to concentrate on many products at a time. Recent reports show that the organization is losing its dominance on smartphone industry, which has been one of the key business segments of Apple. Similarly, the value chain activities that Apple performs in various industries are very similar and compatible. Seemingly, smartphones segment is most important to Apple’s future growth and profitability. The growth of PC’s and personal medial players has almost reached its saturation point and therefore these sectors do not offer potential opportunities for the company in future. In contrast, market analysts predict that the smartphones industry has higher growth potential for the future. The following chart illustrates the global smartphone sales for the period 2009-2016. 5. This part briefly discusses Apple computer’s financial performance over the past three years (2002, 2003, and 2004) using financial ratios. The company’s gross profit margin (as cited in Schoenig, Sundberg, Pazoki, Torres & Marshall, 2005), was 27.92%, 27.52%, and 27.29% respectively for 2002, 2003, and 2004 whereas the company achieved an operating margin of 27.62%, 27.53%, and 23.35% for the respective fiscal years. The declining operating profit margin indicates the fact Apple’s profitability of market operations (without income tax and interest charges) is falling (Schoenig et al, 2005). In contrast to this trend, the net profit margin increased from 1.11% in 2003 to 3.33% in 2004. While analyzing return on total assets (1.03%, 1.01%, and 3.43%), an upward trend is shown despite a slight fall in 2003. However, it is not a satisfactory rate of return for a huge organization like Apple. Similarly, it is interesting to see that Apple could improve its return on equity from only 1.59% in 2002 to 1.63% in 2003 and 5.44% in 2004 (Schoenig et al, 2005). The company’s upward trend in return on equity is good news for stockholders. In total, Apple’s profitability ratio analysis reflects a weaker profitability status even though the company shows signs of improvement. Similarly, the firm’s current ratio for 2002, 2003, and 2004 was respectively 3.25, 2.50 and 2.63 while the working capital turnover showed a slight increase during this period (1.54, 1.76, and 1.89). Hence, it can be stated that Apple computers has a good leverage status. Finally, the debt to equity ratio of Apple in 2002, 2003, 2004 was 0.54, 0.61, and 0.59. Since the ratios have not exceeded the level 1, the firm’s debt level is satisfactory and it has higher creditworthiness (Schoenig et al, 2005). 6. As discussed earlier, tablet computers and smartphones are two potential business segments for Apple’s growth in future. Hence, it is recommendable for the company to leave PCs and personal media players industry so as to effectively place those core business segments in its most important markets. From the case scenario, it is clear that Apple is well known for its innovativeness and this strength is the major factor influencing the company’s market share growth. Hence, the company cannot effectively meet consumer demands unless it demonstrates its innovative capabilities in new product designs. Therefore, it is advisable for Apple to invest more in research and development and thereby challenge competitors with technological innovations. Current trends show that Google is growing to be a threat to Apple’s iPad market. Similarly new Android OS supportive tablet computers are also being developed. Therefore, the company has to capitalize on its present tablet market leadership by heavily promoting its iPad across different global markets. Moreover, the organization must continuously improve its iPad features in order to effectively vie with new market entrants. Apple may also adopt a competitive pricing strategy in order to raise potential challenges to its rivals. References Marino, L & Gamble, J. E. (2010). Cases in crafting and executing strategy. Apple Inc. in 2010, C:141-C:154. Schoenig, C., Sundberg, M., Pazoki, C., Torres, D & Marshall, H. (2005). Comprehensive business analysis. Apple Computers, Inc. (AAPL), 1-77. Retrieved from http://mmoore.ba.ttu.edu/ValuationReports/Apple.pdf Telecom Trends International Inc. retrieved from http://www.telecomtrends.net/ Read More

 

Read More