Business Strategies Adopted by Apple Inc - Essay Example

?Apple Company Unit Table of Contents Executive Summary 3 Introduction 4 Background 4 Objectives 4 Business Strategy 4 Main Findings 5 Conclusion 10 Recommendations 11 References 12 Executive Summary This report is based on the findings from the business strategies adopted by Apple Inc. it endeavors to: 1. Identify the strategies that have kept Apple Inc ahead of competition. 2. To analyze the strategies developed by Apple Inc 3. Develop a critical view and evaluation of the competitive strategies by Apple Inc. 4. Establish recommendations that will see the company keep up with change. Through a review of literature from diverse sources, the reports bring forth the findings on the business interventions the company has adopted in order to remain ahead of competition. Two main aspects characterize the strategies developed by Apple Inc, these are innovativeness and product diversification. These two strategies have been put in perspective in this report. In addition, conclusions are drawn from the findings and recommendations made. The company has adopted a differentiation strategy that has the following advantages; Increased competitiveness Uniqueness Flexibility Limitations of the strategy; Increased chances of imitation Uncertainty of the future Recommendations Rebranding Being cautious of customer needs Evaluation of long term and short term goals Introduction Background Apple Inc is the second largest multinational company in the information technology sector all over the world in terms of revenue. It is known for its electronics, software, and personal computers. Their products have been admired the world over, the Fortune magazine has ranked it the most admired company in the world from 2008 to 2012 (Fisher 2008); (Colvin 2009); (Fortune 2010, 2011 and 2012). The company utilizes diverse means to reach out to their customers, including having retail stores, online stores, and selling to wholesalers among other ways. Objectives This report endeavors to: 1. Identify the strategies that have kept Apple Inc ahead of competition. 2. To analyze the business strategy developed by Apple Inc in an attempt to elucidate what makes them unique. 3. Develop a critical view and evaluation of the competitive strategies by Apple Inc 4. Analyze the limitations and the strengths of the strategies adopted by Apple. 5. Establish creative recommendations that will see the company stand the torrents of competition and change. Business Strategy A company ought to stand the dynamics of the business world through gaining a competitive edge over the rest. It is of essence that a company should establish a business strategy. According to Johnson et al (2011), a business strategy involves a long-term focus to achieve a competitive advantage through utilization of available resources and competencies to the attainment of the stakeholders’ expectations. Being ahead of competition brings forth differences in the customer’s perception of a particular product hence the willingness to purchase (Martin and Thompson 2010). A company that remains on top in terms of competitiveness must embrace change and must provide better services or products to the customers compared to the competitors. Such a company will remain profitable. Competitive advantage A competitive advantage is achieved through a business strategy that may affect part or the entire workforce (Romaniuk, Sharp and Ehrenberg 2007). The board of directors together with the entire management team has the responsibility of foreseeing the development and implementation of business strategies that will help the organization to remain profitable. Apple’s Competitive Advantage Apple is a company has grown to a multinational with a great reputation across the world. In its path innovation strategies, product diversification and acquisitions have contributed greatly to its success. Despite some lapses in the management at some point, Steve jobs took over the company to steer it to become a leader in the industry (Nair & Leng 2012). Findings Apple Inc stands on the philosophy of “think different” which means the company is focused on innovation (Jinjin 2013). Apple has been consistent in the development of its products; they have embraced changes in several occasions hence developing products that have hit the market by storm. Another strategy the company has adopted is diversification, when the company was started, its sole mandate was to develop and sell personal computers. However, over time the company has diversified shifting from this role to that of developing and selling consumer electronics such as mobile gadgets, televisions, and iPods among others. The strategy utilized by Apple Inc is the differentiation strategy. Differentiation Strategy In the process of achieving a competitive edge in the market, a differentiation strategy is a key consideration. According to Porter (1998), the strategy is geared towards providing a better or unique product that is different from all the other market products. The price can be relatively higher in comparison to other related products but the quality of the product or service is distinct. There is a particular market segment that is targeted by this unique product hence the ability to reach the market effectively. Drummond et al (2008) argues that a company must develop a unique product for it to be seen to exhibit differentiation in the market. At the end of the day, brand loyalty gives new entrants a chase for their technologies (West et al 2006). Apple’s Differentiation Strategy Apple has developed various mechanisms to have a superior brand that differentiates itself from the competitors. The company’s innovativeness, leadership, and ability to embrace diversification of products characterize these strategies. Some of the aspects that have made the company reputable and distinct include: Innovation and product diversification at Apple Inc Apple I was the first product developed by the company in 1976 before its incorporation in 1977.The product received a good market reception with increment in sale revenue being registered. Later on, they advanced to Apple II that was more advanced in design in addition to color graphics. It is at the time of introduction of Apple II that the company moved a notch higher to introduce the floppy disc from the convectional cassette tapes. Through the innovation Apple was able to remain ahead of its competitors, however, its products were relatively expensive hence limited the consumption to those who could afford. From Apple II came Apple III that was an innovative product geared towards developing the company’s competitive edge with the bigwigs in the computing industry especially with Microsoft and IBM. The team of innovative engineers under the leadership of Steve Jobs further began the development of graphical user interface that was later entrenched in the Apple Lisa. The product faced poor market reception as result of the high introductory price (Hormby 2006). However, it had a good reputation and captured the attention of the rich since it was the first personal computer ever developed with a Graphical User Interface (Mallin, & Finkle 2011). In the same line of development, the company engineered the Macintosh desktop and later on, the Macintosh Portable. This was a better brand compared to the former in terms of market and user experience. PowerBook was developed coupled with the System 7, an operating system that has been market’s favorite for nearly ten years running before the introduction of Mac OS. These innovations made the company to get back to a profitability path (Hormby 2006). The first attempt to diversify its products, Apple was confronted with a number of challenges. Several experimental devices such as audio players, speakers and TV appliances under development failed resulting into losses to the company. However, around 2007, the company began engaging in the development of mobile devices that brought the company to a great success. Products such as iPhones, iPads, Apple TV, iPod Touch were developing hence revolutionizing the technology behind the mobile devices (Battistella, Biotto and De Toni, 2012; Mickalowski, Mickelson & Keltgen 2008). This transformation led to the transformation of the company’s name from the traditional Apple Computer Inc to the current Apple Inc. The response to Apple’s mobile products has been very encouraging and enormous. Apple’s Expansion, Change, and Acquisitions Apple’s first acquisition was the funding and expertise from Mike Markkula who facilitated the company resulting to its initial development including incorporation in 1977. Partnership with IBM and Motorola saw the development of Reduced Instruction Set Computing (RISC) microprocessors. The management was changed in 1993, with the replacement of John Sculley by Michael Spindler (Apple Inc 2009). Later on, Gil Amelio replaced Spindler as the CEO, he introduced a number of changes including the acquisition of NeXT, a company that had been formed by Steve Jobs after his resignation from Apple (Nair & Leng 2012). In the near past has acquired the Augmented Reality system used in the identifying objects when streaming a video live. In addition, the iOS 7 and OS X Mavericks were developed as well as the iTunes Radio service (Welch 2013). Benefits of Apple’s Differentiation Strategy Apple’s products have distanced themselves from those of the competitors in the sense that they have unique features that are not available in the rest. The operating systems in Apple products are customized for their devices and it is unlikely that their competitors can use them. The uniqueness in their quality makes the price also unique hence the company is able to make profits. Its products are affordable to the middle class, the rich too are able to afford them. Another benefit is that there is a lot of flexibility in the production, the company can easily diversify as well as develop products that targets a specific group of individuals (Jinjin 2013). It is also possible that their products can be customized to individual requirements since the sale price can give an allowance for that. Differentiation can be a good strategy to build the market share (Lynch 2008). The differentiation strategy gives Apple a major competitive edge in the market, making not only the products unique but also the company. In the electronic industry, Apple has created a respectable brand and people confidence with it. It has attracted technology enthusiasts and those in need of certain aspects in electronics. Creating an impressive brand like the one for Apple facilitates the customer’s loyalty and presents psychological benefits to them (Herman 2008). By remaining innovative and establishing new products that are unique to those of the competitors helps to foster customer retention and hence brand loyalty. The shift from providing personal computers to other products has immensely benefited the company. The success of iPod, iPad, Apple TV and other electronics and software developed is a revelation of the impact of diversification. For quite some time, the company had struggled to pick up but in the recent years, the new products have proved a major success to the company (Jinjin 2013). Challenges Confronting the Differentiation Strategy Apple has competitors to its products; at some point, the company has developed collaborations with its competitors in an effort to develop products. Such an aspect limits the differentiation strategy the in the long run results into increased competitiveness and profit sharing. At some point Apple was in partnership with companies such as Microsoft, Motorola and IBM, such could compromise the status of the company hence reducing its competitiveness. Technology can easily be copied hence affecting the developer in a great way. Apple has been in constant development to remain top of competition; at times, the competitors have developed products with better market reception. However, the company has not relented in developing innovative and enhanced products. At some point Sculley, the chief executive officer was asked by the board of directors to contain Steve Jobs ambitions of developing new products since it was proving expensive for the company. Such are implications of adoption of a differentiation strategy. In addition, Microsoft was involved in a legal tussle with Apple over the Graphical User Interface that had been developed by Microsoft resembling the one in Apple’s Apple Lisa (Hormby 2006). It is likely for Apple to lose sight of the specific needs by the customers in an effort to protect the brand. Differentiation strategy may create a scenario where the company offers too high standard of products that it forgets they need to sell as well as to make it affordable to a number of customers. Due to the developments that are advanced from time to time , the company is likely to incur huge amounts in development of products hence resulting to its failure to meet the stakeholders requirements. In the mid 1990’s, the company had declined in its profitability due to the product development that took center stage. This incidence to firing of Steve Jobs from the management of the company. Conclusion The differentiation strategy has been effectively utilized by apple in remaining ahead of competition. Its products have outstood in the market while its brand has received a tremendous embrace and loyalty. This success can be attributed to the strategy adopted in many aspects. The quality of products that the company has continued to provide distinguishes it from the rest. Apple has developed personal computers that have kept the competitors on their toes since the development of its first ever product, Apple I. The differentiation strategy by Apple over the years has been characterized by innovation and diversification. Constant development has been a key driver of the company’s strategic position in the market. In addition, the shift to mobile devices made Apple not only to change its name but also its products. This diversification has brought a great success to the company since 2007. Apple has obtained several advantages from the differentiation strategy. Firstly, it has helped the company to remain ahead of competition despite the stiff competition from other players in the sector. Secondly, Apple’s brand loyalty has made the strategy to work for the good of the company. However, it is likely to lose sight of the needs of the customers. In addition, imitation can limit the competitiveness and the position of the company. Recommendations In view of the findings brought forth in this report, Apple Inc should be very cautious of the customer needs. Regular product evaluations should be done to prevent the company from engaging in too ambitious developments that may cost the company a great fortune. 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