Apples Competitive Strategy - Case Study Example

Apple’s Competitive Strategy Apple is among the world’s most valuable corporations by market capitalization (Gopinath & Siciliano, 2013). The company started in 1976 and has continually gained market advantages with the introduction of its innovative products. Apple specializes in the manufacture of personal and business computers, tablets and smartphones. The company’s strategic position in the market is a result of effective administrative and marketing strategies. The main competitors in the industry include; Sony, LG, Samsung, HTC, and Blackberry in the smartphone and tablet business. Dell, Hewlett-Packard and Lenovo are the main competitors in the computer business. The competitive strategies that a company employs determine the success or failure of an enterprise. The company uses Porters’ generic strategies to wade through the competitive market. Apple uses three generic strategies to compete effectively. The strategies include a broad differentiation strategy, best cost provider and a focus market strategy. Apple differentiates its products from others in terms of design, unique features such as having its unique operating system, and quality of products (Hamilton &Webster, 2012). In addition, the company offers unique online services for its device users. By so doing, the company products are differentiable from others in the market. The uniqueness of the products in both operational experience, durability and support services have a positive impact on the demand of Apple's products worldwide, thus edging out close competitors. Apple is concerned about offering products that offer the greatest value for money. The best-cost provider strategy ensures that Apple customers pay higher prices for high-quality products and after-sales services. Apple specializes in the manufacture of high-quality products that are feature-rich, and coincide with customers’ expectations. The company manufactures gadgets that appeal to a specific market in both features and price. The premium pricing strategy assists the company in concentrating on a narrower market since the returns are higher in the high price narrow market than a large low-price market. Apple’s strategy aims at maximizing profits rather than having a wider market share. As noted above, Apple is more concerned with profits as opposed to a wider market share. The company specializes on a small focus market that is mainly comprised of high-income earners. The company endeavors to provide the market with the best products and services to lock them in to become loyal customers. By focusing on a specific market, Apple can manage the demand and the tastes and preference of the customers. The understanding of the customers enables the company to make products according to the needs of the clients. The overall effect is that customers always anticipate for new versions of Apple products, for example, the iPhone models. The company uses a combination of the strategies to remain the biggest earner in the industry. The firm has maintained the strategies for more than a decade. However, the competitive strategies have evolved due to market complexities and entry of new firms in the industry. In the computer industry, for example, Apple had to reduce the price for Mac models in order to compete with Dell and Hewlett-Packard. Thus, it can be summed that the strategies evolving due to market conditions. However, the implementing elements for each of the product is slightly different from the overall strategy. It is thus important to understand the strategies employed by Apple on its computers, tablets, media players and smartphone business. The company implementing elements in the computer industry includes; excellent features such as design, processing speed, graphics and software. The objective is to compete with stronger computers such as IBM. The Mackintosh computers also use Apple’s Mac operating system that makes them communicate easily with other Apple gadgets. The motive is to make sure that customers get all business, education and entertainment solutions in Apple computer products. The possibility of synchronization of Apple computers with other Apple gadgets locks-in the customers to Apple products. This enhances the strategy of a small focus market. Apple smartphones use advanced technologies and extra third party services to outdo rivals. The design and feature of Apple smartphones are unique and highly differentiated. Support services are readily available such as iCloud storage and an online application store. In addition, company contract service providers such as EBooks and entertainment services to be available for Apple smartphones. The company also invests heavily in promoting its future models to enhance sales in the first months after a launch. The main media device manufactured by Apple is the iPod. The gadgets come with different configuration and memory capacity. The chief element in implementing the competitive strategy is that users can play music online and download their favorite tunes from iTunes. These features make Apple media devices ideal in the market. The above strategies are responsible for the success of the company. Each of the product contributes significantly to the revenues of the company. The intuition is that the strategies employed in each product act to improve the sales revenue of the company. The financial statistics of the company for the past three years can be useful in determining the course of the company. Apple has performed relatively well in the past three years. The financial information shows that the value of the company rises every financial year. The analysis centers on the changes in profits of the company over a three-year period. Profitability ratios show the extent through which the company is converting revenues into profits (Thompson, 2014). The company’s gross profit margin and the net profit margin ratio are necessary in this case. Financial information (Millions) 2011 2010 2009 Sales 108249 65225 42905 Cost of sales 64431 39541 25683 Net income 25922 14013 8235 Total assets 116371 75183 47501 Total liabilities 39756 27392 15861 The data shows that Apple sales increased dramatically from 2009. In 2009, sales revenues stood at $42.905 billion and rose to 108.279 billion in 2011, representing a 152% change in sales revenues. The cost of sales increased as the sales revenues increased. Gross profit margin Net profit margin Current ratio 2011 0.4 0.2 2.9 2010 0.39 0.2 2.7 2009 0.4 0.2 3 The company’s profit margins remained the same over the three-year period. The current ratio also remained relatively stable over the three-year period. The implication is that Apple is increasing its sales and gross profits, but at the same time spending more on operations. However, the financial information shows an impressive trend. From the 2013 financial data, iPhones net sales amounted $47.057 billion, Mac computers $21.783 billion, iPads $20.358 and iPods $7.453 billion. From the statistics, is clear that iPhone products are the highest earners for the companies while the lowest is iPod product. The iPads have a potential to bring more revenues if advanced marketing strategies are employed. Further, the company can lower the prices to level with major competitors. In conclusion, the competitive strategy of a company determines its position in the industry. Apple is a strong brand, and its products are highly regarded. The quality of its products is the driving force of its success. However, competition is high in the computers, smartphones, tablets and media player industries with major companies such as Sony, LG, Samsung and HTC trying to bite into Apple’s market. The situation calls for Apple to adopt new strategies or enhance current strategies to maintain the stronger markets and boost the markets for media players that contribute lesser revenues. As seen in the paper, the competition bases on quality and price. Apple ranks first in quality, but its prices are higher. Revising the pricing strategy will ensure that Apple remains the top company for a longer time. References Gopinath, C., & Siciliano, J. (2013). Strategize!: Experiential exercises in strategic management (4th ed.). Stamford: Cengage Learning Hamilton, L., & Webster, P. (2012). The international business environment. Oxford: Oxford University Press. Thompson, A. (2014). Core concepts and analytical approaches (3rd ed.). Burr Ridge, IL: McGraw-Hill Education. Read More