The Strategy of Apple Company - Essay Example

MANAGEMENT STRATEGY and CASE STUDIES al Affiliation) Key words: Apple, Walmart Introduction Strategy is a tool in the armory of groups fighting over a set of resources. In our present world this cannot be truer given the intensity of competition among firms on a truly global scale (Barney, J. B., Barney, J. B. 1986) There are a lot of firms in the world who are competing for the same resources (customer base) and competition is nowadays based on more than just trading blocs and products, it requires strategic thinking that focusses on understanding the key drivers of the economy with a specific intent of creating new opportunities that add value. Following the global financial crisis that was offset by the bursting of the housing bubble in 2008 in the USA and later followed by the global financial crisis in 2010, a lot of firms have adopted measures to deal with the reduced revenue and sales yield amidst growing competition from other firms and many of the firms have adopted competitive business strategies. Competitive business strategies facilitate a firm to sell or produce products and services with more efficiency and with the sole aim of having a competitive advantage over their competitors (Mandarini 2014). There are a variety of business strategies that are used by managers as they have choices between using set standard strategies or creating their own set of strategies and therefore it should be noted that, flexibility and innovation play a very important role in competitive business strategies. Apple Company Competitive advantage is a management strategy that was first developed by Michael Porter who classified the competitive advantage of an organization as being either achieved through differentiation, or by adopting lower costs of production (Dicken 2011). Competitive advantage enables a company to gain a competitive advantage over its rivals in the market through adopting new information technology, gaining access to natural resources or highly skilled personnel. One of the companies in the last decade that has outshone its competitors due to the adoption of a strategic management strategy that places emphasis on acquiring a competitive advantage via adoption of new technology and differentiation different form other firms in the market has been Apple. In the period between 2001 and 2007 following the unveiling of the Apple iPod and Apple iPhone respectively, the company, courtesy of its CEO, Steve Jobs had shifted from its previous strategy of premium priced innovative computers, which was a relatively safe strategy and adopted the highly risky but profitable strategy of venturing into the extremely competitive consumer markets of electronics (Gamble, 2008). The company was founded in 1976 and was based on its reputation of developing innovative personal computers that were user friendly to its customers but were however higher priced than its competitors and therefore exclude some of the customer base. The founders of the company, Steve Jobs and Steven Wozniack created the Apple Macintosh or simply Mac and they failed to share or sell their cutting edge software to their competitors and their non-co-operation strategy led to the company’s steady decline over the next couple of years coupled with the introduction of Windows 1.0 from Microsoft who adopted the strategy of availing its software to other rival companies for a fee (license fee). In the 1990s, Microsoft was developing and distributing a Windows version that was distributed to almost all computer manufactures that could be used by every compatible personal computer from IBM. This was mainly due to Microsoft’s strategy of being readily willing to distribute its product to computer manufacturers unlike Apple which continued focusing on supplying its hardware and software products. However at the beginning of 2000, Apple adopted a new management strategy with an aim of exploiting the global market of electronics-MP3 music players, CD players and cameras among others. Apple integrated these ideas with its own by launching Apple versions of the electronic products with an aim of adding value but this time, the company, rather than keep the product to itself, sought co-operation from other players in the industry. IPod was launched in 2001 and the iTunes music store was established in 2003 in the USA and in 2004, it developed a music store in Europe. The development of the Apple Music Store was a significant milestone in the strategy of the company because iTunes was an agreement fostered between Apple and the five top most record companies in the world that allowed users to download music via the internet for a charge of 99 cents. Apple’s new strategy began to pay off and was evidenced by the fact that iPod was the single highest contributor of the overall sales of Apple’s portfolio. In 2007, Apple adopted the same strategy it used in the launch of iPod in launching iPhone at a period when many households in the USA began feeling the pinch of the ripples of the credit crunch downfall in the housing market. The iPhone was a user friendly mobile phone and was made readily available on a global scale. For the purpose of distribution and enhancing control of its product, Apple entered into exclusive contracts in each major country with only one telephone service provider and the commodity was premium priced. Apple still made use of previous strategies like the development of premium priced innovative computer products but adopted co-operation in order to circulate its product on a wider global scale. The price of the iPhone 1 was reduced to facilitate the company to enter into a vast and expanding mobile phone market that was now a global phenomenon and that was also highly competitive and volatile on a global front with competitors such as Nokia from Finland, HTC from Taiwan and Samsung from South Korea. In 2007, Apple’s iPod, though slightly higher priced than the other music players in the market, was more stylish and had greater features than the others but was responsible for 60p of the sales in music players globally. It was also the single highest contributor to the firm’s annual sales which was aided by Apple’s strategy of re-configuring it in order to allow the product to be compatible with computers that were run by Windows. These new strategies coupled with its domination in the music download market accounted to around $1 billion in turn over per annum. When Apple launched iPhone 1 in 2007, its objective was to sell ten million units of the mobile phone in the first year coupled with keen focus on the then leading mobile phone market leader on a global front, Nokia, which sold 350 units per year. Apple was however soon to be a leader in the market due to the invention of the touch screen which has been regarded by many technology analysts as the single most technical breakthrough of mobile phoned in the last seven years or so. The iPhone 1 was almost immediately above the other products in the market and the sales estimates previously perceived by the company were shattered and in 2010, the company launched iPhone 4 which did as well. It should be noted that Nokia had been approached earlier about the prospect of developing their Nokia mobile handsets by integrating the touch screen feature but its management declined which has been regarded as the start of the fall of the Nokia Company as the leading global mobile handset provider in the market. Apple has continued to develop new generations of iPhone and Apple Tablet computers which other companies have adopted with touch screen mobile phones a necessary bench mark for all mobile phone companies wishing to sell their products. In recent years other companies have recognized the usefulness of flexibility and innovation as a market strategy when responding to competition from other rivals in the already existing limited market or in new markets (Nolan 2002). Walmart The other competitive advantage strategy adopted is the cost leadership strategy which involves offering the customer base products and services at a lower price than what the other firms in the industry are offering and by doing so, the firm attracts a larger customer base and creates a competitive advantage (Grant 1991). One of the companies that has successfully adopted this strategy has been Walmart. The company was established in early 1960 and its founder, Sam Walton, wanted to sell his products at the lowest price possible even if the company’s profit margins did not meet the margins of the other players in the industry. The reduced profit margins per unit of the products sold were to be compensated by the increased volume of products sold which would increase the overall revenue yield. In the 1970s, the company grew more and it went public and by the early 1990s, it surpassed its key competitors Kmart and Sears in size. Walmart adopted a number of key strategies to be able to lower the cost of its products such as advocating for the establishment of the global bar code in the retail industry which compelled manufacturers to use common labeling (Penrose 2007). The new technology was responsible for facilitating retailers to generate a variety of information regarding their inventory which led to a shift in the power dynamics form suppliers to retailers. Walmart became increasingly good at extracting information from the universal bar code system for the purpose of accounting for its inventory and reducing costs involved the supply chain and externalities due to lack of information. The founder also instituted a frugal culture at Walmart that places emphasis on employees to reduce expenditure and making sure that the expenses are kept at the lowest price possible coupled with the very meagre health care plans and basic salaries offered to its auxiliary staff with critics pointing out that the company even fails to pay overtime wages to hourly employees who are at times demanded by the management to work in overtime. Further frugal measures include reducing any expense however minimal on heating and cooling the stores, store managers are required to work a minimum of 70 hours on a weekly basis, executives of the company are provided coach facilities for travelling, they are also housed together with their colleagues in hotels and the company’s headquarters is based in an inexpensive city in Arkansas. The company through the adoption of the radio frequency identification technology in recent years has pushed suppliers relentlessly in a bid to cut prices. It should be noted that even in the recession when firms like J.C Penney were trying to improve sales, Walmart continued to record high turnover values. As of today, Walmart employs over 1.5 million people, and has over 6200 retail outlets globally. However these measures enable Walmart to pursue the low cost strategy which is solely for the purpose of maintaining the retail prices low and as a result the strategy has made Walmart the biggest retail store chain in the world. Analysts have estimated that for every cart of groceries a shopper buys at Walmart, they save about 15% which is very beneficial to customers References Barney, J. B., Barney, J. B., ‘Types of Competition and the Theory of Strategy: Toward an Integrative Framework’, Academy of Management Review, 11.4 (1986), 791-800. Dicken, P, ""The State is Dead" - oh no it isn"t!", in The Global Shift (London: Sage, 2nd ed., 2011), pp. 169-220. Gamble, A., ‘Crises of Capitalism’, in The Spectre at the Feast (Basingstoke: Palgrave Macmillan, 2008), pp. 36-64. Grant, R., ‘The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formulation’, California Management Review, 33.3 (1991), 114-135. Mandarini, M., ‘The Dynamics of the Business Environment’, Lecture Week 4, 16.10.2014. Nolan, P., D. Sutherland and J. Zhang, ‘The Challenge of the Global Business Revolution’, Contributions to Political Economy, 22.1 (2002), 91-110. Penrose, Edith, Firm Effects: Resources, Capabilities and Core Competences, in Strategy for Business: A Reader (London: Sage, 2007), pp. 145-7. Read More