Application of the Ansoff Matrix in Apple Inc - Essay Example

Lecturer Question One Assess the major macro-environmental trends facing Apple Inc as they operate in the technology and software sector and highlight the implications on the organizations strategic decisions of the trends identified. Introduction Macro environment are external factors which affects operations of an organization; the organization has no direct power to control these factors. One approach of understanding the macro environment involves PESTEL analysis. PESTEL is an abbreviation for; political issues affecting business; economic factors influencing business; socio-cultural issues affecting business; technological changes; environmental factors in business; and finally legal issues influencing organization’s operations. For us to get a an understanding of the macro environment affecting Apple Inc, then a deep study of the overall technology industry must be done (Kotler Phillip and Gary Armstrong, 2006). Macro-economic Factors The first factor influencing operation of Apple Inc is the technological force; the company continuously experiences changes in technology, each year the computer electronic components became faster, cheaper and convenient hence computer design frequently changes. Apple is affected by changes in the technology industry; hardware producers like Intel and competing software producers like Microsoft are always innovative in their designs, and therefore Apple must be creative and innovative to ensure superior products and differentiation (RodgerRafter, 2002) Microsoft is a major software producer for Intel computers, and the major competitor of Apple; continuous innovation by Microsoft in software product (especially new versions of windows) has created pressure on Apple to continuously upgrade software like MacOS. Economic factors which affect computer sector include market competition. There is a lot of competition in the technology industry because of low entry barriers; which allows easy entrance by competitors hence increased industry competition. Also, the bargaining power of suppliers is limited due to the limited number of hardware and related software suppliers like Intel and Cyrix. On the contrary; the bargaining power of customers is strong because of the low costs of switching and searching (Jobs, S., 2005). Marketing strategy during entry should take into consideration the purchasing powers of potential consumers; the purchasing capability of developed states is high, while that of developing countries especially in Africa is low. Social change includes the dynamic lifestyle of customers that make apple to be continuously innovative. Consumer lifestyle can be divided into several categories; entertainment customers require products with superior graphics and sound capabilities; travelling customers require products which are light, small and have long battery life; and interconnectivity customers require products which ensures fast and reliable communication capabilities (Jeffs, 2008). Political forces create opportunities and threats for Apple; for example when China Joined the World Trade Organization opportunities were created, for example low market barriers and also low investment barriers in China. Environmental factors also ensure that Apple conforms to environmental protection guidelines. Apple has ensured friendliness to nature through effectively recycling old products and ensuring that new products have no traces of toxic chemicals like lead. Conclusion The macro economic factors are studied to ensure strategic decisions of Apple are made and implemented properly. Study of economic factors enables Apple to decide the most appropriate method of entering a new market in developing countries; analysis of environmental factors ensure that the company properly adhere to set customer corporate social responsibility, through removing harmful chemicals in their products; Political factors allow Apple to enter markets created by global trading bodies like the European Union; and social issues creates an opportunity for Apple to create a unique product for targeted market segments, for example designing a unique product which support office activities (Kotler, Armstrong, Philip, Gary., 2009). Bibliography Jeffs, C. (2008) Strategic Management, SAGE Publications Ltd., p. 29 et seq. Jobs, S. (1995, April 20) STEVE JOBS Oral History, (D. S. (DSM), Interviewer) Kotler, Armstrong, Philip, Gary. (2009) Principles of Marketing, Pearson education: New Jersey. Kotler Phillip and Gary Armstrong (2006), Principles of Marketing, Pearson Education Inc: New Jersey Rodger Rafter, (2002, Feb 12) Apple’s Business Model and Strategy Retrieved August 20, 2007, from The Motley Fool: http://www.fool.com Question Two At the corporate level there are alternative strategic options for growth that an existing organization can take in terms of choices about products or markets. The Ansoff Matrix can be used to identify various strategies that could be adopted an organization to pursue growth. Using the Ansoff Matrix, evaluate the various strategies that Apple could consider in order to pursue growth and develop their competitive position. Introduction Ansoff Matrix is a popular marketing method or tool which was initially published as a review in Harvard Business School in the year 1957by a mathematician called Igor Ansoff. The Ansoff Matrix has two main aspects; the first aspect has existing products and new products, while the second aspect has existing markets and new markets (Shaw, E. 2012). The matrix has four dimensions; market penetration which involves a business entering existing markets using existing products; product development which entails business introducing new products to existing customers; market development where the business attracts new customers using existing products; and diversification where the business attracts new customers using new products. Application of the Ansoff Matrix in Apple Inc In the market penetration strategy; Apple should try to sell existing products to existing markets, for example selling Mac computers in an existing market. This approach aims at increasing the market share of a known product through marketing method like sales promotion and advertising, so as to encourage new customers to purchase its products (Porter, 2007). For sale and profits to increase; Apple should encourage existing customers to purchase additional products, for example the business can encourage an existing customer to purchase a Mac Computer in addition to the iPod. Apple can also adopt effective product promotion which will drive away competitors, and ensure the whole market access only its products (Johnson and Scholes 2009). Concerning product development strategy, the company should create new products for the existing or current customers. Product innovation ensures competitive advantage of the company and customer satisfaction. Apple implements this strategy through, for example, innovating products like the iPhone; in the year 2008 the iPhone 3G was introduced in the market, this was replaced in the year 2010 by the iPhone 4G. Market development strategies ensure that Apple enters new markets through effective marketing techniques. This can be through expansions targeting foreign markets, for example; Apple has expanded its operation globally (from the traditional United States market) hence in the year 2010 it got more profit from foreign markets than the United States market (Ansoff, 2007). Diversification strategy is challenging because Apple must introduce new products in new markets. Apple applied this strategy in the year 2010 when it introduced a new product, the iPad, targeting a new market of frequent internet users (Johnson G. and Scholes K. 2009). Conclusion The Ansoff Matrix is important in decision making and strategic planning because it gives a framework which helps Apple managers to put in place strategies for future business development and growth. The growth factor discussed in the Ansoff Matrix helps the business to avoid risky issues like, selecting inappropriate strategies (Ansoff, I. 2007). Bibliography Ansoff, I. (2007) Strategies for Diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957, pp. 113-124 Johnson G. and Scholes K. 2009, Exploring Corporate Strategy, 5th Edition London Prentice Hall International 1999 Porter, Michael (2007). From Competitive Advantage to Corporate Strategy, Harvard Business Review. May–June (3): 43–59. Shaw, E. (2012). Marketing strategy: From the origin of the concept to the development of a conceptual framework. Journal of Historical Research in Marketing, 4(1), 30–55. Question Three Evaluate the usefulness of the value chain in analyzing Apple’s activities and demonstrate how it can contribute to adding value in each of the areas. Introduction Value chain is the internal activities of an organization, which leads to the changing of inputs into product outputs. Value chain analysis involves an organization identifying its primary activities that increase value of the final product and thereafter study these activities in order to increase efficiency and differentiation (Pierre LeBlanc and Stephen Matthews, 2013). The term “value chain” was initially described by Michael Porter, in 1985, in his book Competitive Advantage: Creating and Sustaining Superior Performance. The value chain of Apple can thus be summarized as; design, procurement, manufacturing, distribution, logistics and sales. Value Chain Analysis of Apple Inc There are two approaches of value chain analysis; cost advantage approach, where organizations compete based on cost advantages; and differentiation advantage approach where firms compete in providing superior products. In the value chain process, Apple strives to secure competitive advantage using both approaches (Porter, 2005). Certain production activities are too important hence only Apple staffs performs them. Apple usually takes full responsibility of the design of its products; this is because the product design is a very unique determinant of competitive advantage. Apple always aims at producing y products that ensures customer experience is great (Grant, 2010). Distribution and the sales of products are also entirely controlled by Apple; this is very significant because customer sales experience is an important part of product mix. Sales experience also enables the staffs of Apple to understand customer expectations and follow the market trends. Apple also outsources some activities in its production process. Apple does not procure production materials, for example; semi conductors used in production are bought from Samsung, memory is bought from Japan, display panels from Korea, chipsets are purchased from Europe and rare metals are purchased from Asia and Africa (Angel, 2012). Apple does not entirely manage the procurement process because the inputs required are not specific hence requires huge investment, and uncertainty involved in procurement is nowadays low due to the developed technology. However, regardless of internal components of products, the value customers derive is due to unique and reliable design and usability or effectiveness of the product. Conclusion The idea of value chain as a decision support method was added to the competitive strategies developed by Porter in 1979. Porter explains in his paradigm that; logistics, operations, sales, marketing and customer service, are grouped as primary functions. Secondary functions involve human resources, procurement, infrastructure and technology (Microlinks 2009). Bibliography Angel Gurría (5 November 2012). The Emergence of Global Value Chains: What Do They Mean for Business, G20 Trade and Investment Promotion Summit, Mexico City: OECD Grant, R.M. (2010) Contemporary Strategy Analysis. 7th ed. John Wiley & Sons, p. 239-241 Gereffi, G., (1994). The Organization of Buyer-Driven Global Commodity Chains: How US Retailers Shape Overseas Production Networks, in G. Gereffi, and M. Korzeniewicz (Eds), Commodity Chains and Global Capitalism. Westport, CT: Praeger. Microlinks (2009), Value Chain Development, Washington, D.C.: USAID. Pierre LeBlanc and Stephen Matthews, (4 September 2013). The Tax Policy Landscape Five Years after the Crisis; OECD Taxation Working Papers, France: OECD. Porter, Michael E. (2005). Competitive Advantage: Creating and Sustaining Superior Performance. New York: Simon and Schuster Read More