Strateguc Management of Apple Inc - Assignment Example

Report Contents Part Main internal and external factors affecting the strategic management of Apple Inc. 3 Part 2: Strategy model application in Apple Inc. 6 Resource based view 6 Value chain analysis 9 SWOT analysis 12 Part 3: Strategic options for Apple Incorporation and recommendations for future strategy formulation 12 References 15 Part 1: Main internal and external factors affecting the strategic management of Apple Inc. Strategic management refers to the formulation and application of the major initiatives, objectives and goals as decided by the top management of a company on the behalf of the owners. The formulation and implementation of strategies is done by evaluating the external and internal factors affecting the business. The top management conducts strategic analysis through the consideration of the availability of resources and capabilities within the firm and an in depth assessment of the internal and external environment in which the company is operating. Strategy can be defined to be the determination of the key long term goals that are to be achieved by an enterprise and the action plan that is to be devised along with the allocation of resources and capabilities for achieving these pre determined long term goals. Strategic management is extremely important from the perspective of success, growth , sustainability and competiveness of a company because in this form of business management, strategies are formulated with the aim of deciding the future direction of the business, focusing the efforts in different departments and segments, clarifying and defining the organization and its critical success factors, assessing the core competencies and resources availability in the business and provide guidance and consistency in the performance of the organization in response to the changes, challenges, opportunities and threats in the external macro and micro environment relevant to the company (Baker, 2008). Strategic management is based on the concepts of strategic thinking and strategic planning. For the purpose of evaluation of the strategic management processes and their efficiency within a company, it is necessary to identify and assess the various factors that may affect the functioning and management of the company in the short term as well as in the long term scenarios. There may be a number of internal and external factors that affect the functioning an operations of a company. For this purpose, the key micro and macro environmental forces that have shaped and analysed the strategic management course and the business and corporate decisions of the chosen multinational organization, Apple Inc, are identified and evaluated in this section. The main internal factors that have impacted the functioning of Apple Inc, and the strategic management processes and decisions of the company are discussed as follows. Resources and capabilities of the company: The availability of resources and capabilities including financial resources, physical resources, human resources and other key competencies of the company are major internal deciding factors for the strategic management of Apple Inc. The company is rich in terms of both tangible and intangible resources which act as value adding factors for the technology giant. The cur competencies of Apple Inc. like product designing capabilities, high investments made in fostering radical innovations, breakthrough inventions, highly robust research and development systems act as the key strengths as well as the Critical Success Factors (CSF) of the company. Thus, the business focuses on leveraging on such competencies and resources to create a strategically advanced position for the corporation in the global technology industry. The company has also remained highly efficient in product design and development which forms the backbone for the operability of a technological company. Te high investments made in the research and development arenas of the organization also add to the success of the company and can significantly impact the future success of the business as well. The company culture and the shared values within the organization are other important external factors that can negatively or positively impact the growth, success, sustainability and future direction of Apple Inc. The main external factors or macro environmental factors that have significantly impacted the operations, functions, profitability and sustainability of Apple Inc. and have played major roles in influencing the strategic management course of the company from time to time are analysed as follows. Technology advancement is a key external environmental factor that impacts the company in significant ways. Since, Apple Inc. operates in the consumer technological industry which is a dynamic and fast changing industry segment, therefore, the company has to consistently focus on innovative approaches in designing and developing the business, operational and functional strategies that would ultimately foster sustainable growth and competitive advantage generation through highlighting and building up on the core capabilities of Apple Inc. like technological innovation and radical inventions in the company. In order to remain competitive, the company has to focus on investing highly in the research and development and product designing and development departments of the company (Aaker, 2008). Also, the political, economic and regulatory situations prevailing in the home country and in the global markets continue to affect the decisions of the business. The social factors including changing lifestyles focus on technology and environmental consciousness are some other macro environmental factors which impact the success and sustainability of Apple Inc. The levels of competition including the competition among the dominant players as well as the entry of small technological companies are critical deciders of the future strategic direction setting for the business (Shaw, 2012) Figure 1: Critical success factor evaluation and weightage for Apple Inc. (Source: Besanko, Dranove, Schaefer and Shanley, 2012) Part 2: Strategy model application in Apple Inc. Three main strategic management models viz. Resource based view including VRIO analysis; the Porter’s value chain analysis framework and the SWOT analysis are used for analyzing the strategic functions and position of the chosen company, Apple Incorporation. Resource based view The Resource Based View (RBV) model is a technique that views the resources of a business as the key to sustainability and competitive advantage. There may be two types of resources available within an organisation which are tangible assets like land, buildings, equipment, machinery and capital, and intangible assets like brand value, intellectual property, trademarks, copyrights and goodwill. The VRIO analysis technique is used to take a comprehensive view of the various resources and capabilities available in the business. The VRIO analysis is used as a technique of developing a resource based view of a business and can be employed for the purpose of assessing the value, rarity and inimitability quotients of the resources after which it is assessed whether the company is adequately organised to leverage on or exploit these resources and capabilities. If all the four categories are met with, this indicates the creation of competitive parity and sustainable competitive advantage. The VRIO analysis of Apple Inc. is conducted for the purpose of understanding the level of strategic fit between the resources, capabilities, competencies and critical success factors within the organization and the challenges and opportunities arising in the evolving external global business environment. Brand Value: Apple is one of the largest brands in the world as measured from the perspectives of brand value and brand awareness. It is the second largest information technology company in the world in terms of revenue generation. It is also the second largest publicly traded business with an estimated market capitalisation value of USD 414 billion as of January 2013. As per the Fortune magazine, Apple has continued to remain the most admired corporation in the world from 2008 to 2012. Since Apple Inc. can be identified as an obvious and nearly incontestable leader in the technology industry, therefore it can be said that the brand of the company as an intangible resource is valuable, rare and inimitable. Also the fact that the company has been able to maintain its brand image and value through years of its operation indicates that the business is sufficiently organised to exploit this intangible resource for generating competitive advantage (David, 2011). Global Operation: Apple Inc. being one of the largest multinational technology companies of the globe conducts its operations across various geographical locations and markets. The extended base of loyal consumers of Apple and the prominence of the products of the company in the various developed as well as the developing economies clearly indicates that the international product distribution capability of the business is rare as well as highly valuable (Hitt, Ireland and Hoskisson, 2013). The business is also managed efficiently and organised in a robust manner to leverage on the international product distribution competencies. However it can be identified that the global market penetration and product distribution systems of the company are not imitable in nature and can be replicated by other resource rich companies like Samsung and Microsoft. Thus, this capability cannot be identified as a high value adding competency of the business. Supply Chain Management: Apple Inc. operates in a market of one buyer and many sellers that is a monopsony market structure. This makes it possible for the business to dictate the terms of procurement to its suppliers and distribution to its vendors. This kind of dominance of Apple in the supply chain management system is the key driver that has enabled it to develop a highly efficient supply chain and cost effective procurement systems. The global supply chain management of Apple is clearly a core capability of the company which is valuable, rare and inimitable because it is marked with effective management, experience and market dominant position of the technology giant (Doole and Lowe, 2004). Top Executives: The human resource group of the company is argued to be one of the most impressive and value generating resources available inside the business. Apple Inc. is renowned for rolling out the most technologically advanced and innovative products in the global consumer technology segment. The recruitment and retention of highly skilled and tech savvy people in the company are the key strategies that enable Apple to maintain an impressive innovation and technology driven product portfolio. Thus, the human resource group of the company including the top management are probably the most valuable, rare and difficult to imitate tangible resource of the company. Value chain analysis The value chain analysis is used as an analytical framework for the identification of business activities that can contribute to the generation of competitive advantage and value for the business. A general example of the essence of a value chain analysis is given below (Figure 3). Figure 2: A value chain analysis framework (Source: Besanko, Dranove, Schaefer and Shanley, 2012) Primary Activities Inbound Logistics: Apple Inc. operates with a vast global supply chain management system which includes thousands of suppliers located in various corners of the world. The supply chain of the company is maintained in highly sophisticated and advanced manner. The purchase commitments of the procurement system typically cover the requirement of materials for periods up to 160 days (Nag, Hambrick and Chen, 2007). The CEO of the company Tim Cook has started applying new strategies of supply chain management to enhance the competitiveness and efficiency of the suppliers. Also, he has significantly cut down on the number of suppliers included in the supply chain of Apple through a careful supplier evaluation technique. Figure 3: Supply chain management system of Apple Inc. (Source: Koufaris, 2012) Operation: The operations of Apple are conducted by 92,600 permanent equivalent employees and 4400 temporary employees and contractors. 90% of the hardware products used in the business is manufactured by the outsourcing business partners who are primarily concentrated in the Asian regions. The company appoints a large number of small manufacturing enterprises as the main outsourcing partners. Outbound Logistics: The net sales of the business through the direct as well as indirect distribution mediums contributed to 28% and 72% of the total revenue of the company in the year 2014. Apple aims at minimising the expenses and volumes of its inventory due to which the company split its USD 2.1 billion inventory to USD 1.6 billion of finished goods and USD 525 million in the components of products. Marketing and sales: Apple sells its products through four main distribution channels which operate across different nations. The marketing budget of the company is USD 1.1 billion and a major part of this allocated budget is spent on developing marketing communication mix and strategies for implementing the same. Service: The Company is extremely famous for its exceptional quality of customer service facilities. Apple Inc. gives high priority to customer satisfaction and customer value creation due to which it implements robust service provision mechanisms in all stages of the product sale including the pre purchase period, during purchase as well as during the post purchase phase for all its customers (Koufaris, 2012). SWOT analysis Figure 4: A comprehensive SWOT analysis of Apple Inc. (Source: Baker, 2008) Part 3: Strategic options for Apple Incorporation and recommendations for future strategy formulation The analysis of the internal capabilities and external environment of Apple Inc. suggest that the company is in a strong and sustainable position in the global consumer technology market. Also, there are polity of opportunities available to the business in the domains of electronic commerce, technological product innovations and emerging markets. As such, Apple Inc, should consider leveraging on the extensive resources, capabilities, critical success factors and core competencies of the organization to facilitate research and development and innovation and further extend its product portfolio widen its loyal customer base and market reach in terms of geographical locations of international product distribution (Mulcaster, 2009). Figure 5: Strategic management framework that can be applied in Apple Inc. (Source: Besanko, Dranove, Schaefer and Shanley, 2012) The strategic management of Apple Inc. should be done in a three layer structure including the operating strategies, functional strategies and business and corporate strategies. It can be seen from the above analysis that the technology company is in a highly favourable and incontestable as well as profitable position and has created a unique name for itself in the global consumer technology market. However, in order to remain competitive and successful in the dynamic, complex and highly competition and innovation dominated global consumer technology industry, the management of Apple Inc. have to consider innovating in the strategic management decisions, plans and implementation procedures alike (Kvint, 2009). Apple Inc, should consider updating the product portfolio with the introduction of technologically advanced and innovative products in the market so that customers do not lose interest in the products of the company and also to ensure that completion can be negated in an efficient manner (Homburg, Kuester and Krohmer, 2009).Keeping on improving the process, technologies, products and designs is thus, the first strategy that should be employed by the management of Apple to maintain its leadership position in its industry of operation and also retain its loyal customer base and hold on the markets of direct operations and global product distribution (Laermer and Simmons, 2007). The second strategy that should be used by the company on a priority basis is to develop the sustainability areas of the business. In an external business landscape dominated by environmental consciousness, the role of ethical operations and Corporate Social Responsibility (CSR) remains incomparable to the other brand value and goodwill generating strategies (Anderson, 2000). Especially, in a situation wherein, Apple Inc, has faced many criticisms in the near past due to the sweatshop practices in the factories of its Chinese manufacturing partners and component suppliers, the company has to employ more sustainable, ethically and legally compliant and value bearing strategies in managing the business and in maintaining positive, ethically compliant and socially acceptable types of supplier, vendor and business relations (Radebaugh and Sullivan, 2014). References Aaker, D., 2008. Strategic marketing management. Stamford: Cengage.    Andersson, S., 2000. Internationalization in different industrial contexts. International Studies of Management & Organization, 30, 1, pp. 63-90. Baker, M., 2008. The strategic marketing plan. New York: John Wiley.  Besanko, D., Dranove, D., Schaefer, S. & Shanley, M., 2012.  Economics of Strategy. New York:  John Wiley & Sons. David, F., 2011. Strategic Management Concepts, 13th edition. London: Pearson. Doole, I. and Lowe, R., 2004. International Marketing Strategy. London: Thomson. Hitt, M. A., Ireland, R. D. & Hoskisson, R. E. 2013. Strategic management: Concepts and cases: Competiveness and globalization 10th Ed. Mason, OH: South-Western Cengage Learning. Homburg, C., Kuester, S. & Krohmer, H., 2009. Marketing management - a contemporary perspective 1st Ed. London: Sage Publication. Koufaris, M., 2012. Applying the Technology Acceptance Model and Flow Theory to Online Consumer Behaviour. Information Systems Research, 13, 2, pp. 205-223. Kvint, V., 2009. The Global Emerging Market: Strategic Management and Economics. London: Routledge. Laermer, R. & Simmons, M., 2007. Consumer marketing. New York: Harper Collins. Mulcaster, W. R., 2009. Three Strategic Frameworks. Business Strategy Series, 10, 1, pp. 68 – 75. Nag, R., Hambrick, D. C. & Chen, M. J. 2007. What is strategic management, really? Inductive derivation of a consensus definition of the field. Strategic Management Journal, 28, 9, pp. 935–995. Radebaugh, D. & Sullivan, D., 2014. International Business: Environment & Operations, 15th Edition. New Jersey: Pearson/Prentice Hall. Shaw, E. 2012. Marketing strategy: from the origin of the concept to the development of a conceptual framework. Journal of Historical Research in Marketing, 41, 1, pp. 30–55. Read More