Why Apples Ecosystem Is Its Biggest Advantage - Case Study Example

WHY APPLE’S ECOSYSTEM IS ITS BIGGEST ADVANATGE? AN ANALYSIS Table of Contents Table of Contents 2 Company Introduction 3 Article Analysis 9 Summary of the Article 9 Key issue mentioned in the article 9 Importance of the article 10 Conclusion 11 References: 12 Appendices: 14 Company Introduction Apple Inc is one of the biggest names in the international business segment. The company was founded by Steve Jobs, Steve Wozniak and Ron Wayne in the year 1977 (Leadership & Governance, Investor.apple.com). Inspite of numerous internal disputes and minor conflicts at the managerial level, the company succeeded in maintaining the international brand value and market share in the industry. During the initial years of business, Microsoft and IBM were the key competitors of Apple, but with the growth of their product base and intense competition in the technology market companies such as Samsung, Google, Nokia, Dell, RIIM, etc have added names in the rival list of Apple Inc (Ander and Kapoor, 306-336). However, during the late 80s and early 90s of the 20th century, Apple experienced continuous fall in their profit figures. In the year 1998, Steve Jobs re-joined as the interim CEO of the company and started a new revolution that developed the present brand image of Apple (Strother, 91-113). Under the leadership of Late Steve Jobs, Apple accelerated their growth through the competition and launched revolutionary products such as iPad, iTunes, iPod, iPhones, etc. Their first product Macintosh PC still occupies the second highest market share coming only next to Windows of Microsoft Corp. Steve Jobs introduced many new concepts in the business such as the “Think Different” marketing campaign for reflecting the passion and core value of the company to their stakeholders (Paine, 423-436). However, amidst continuous growth Apple is facing tough competitions in the global market from existing technical giants and potential new entrants in the industry. The following sections of this report will analyze the business strategies, organizational culture and competitive advantages of Apple. Analysis of Apple Beginning with the mission and vision statement of the company, it can be observed that the mission statement redeveloped in the year 2013 has attracted huge criticisms from their customers and other stakeholders of the company. Blodget (Businessinsider.in) opined that the new mission statement of the company is more of an achievement certificate of Apple rather than defining what the company is trying to achieve. The mission statement reflects that Apple develops Mac computers, iPods, iPads, iTunes and iPhones and improves the consumer experience through continuous innovation (Please refer to appendix 1). On the other hand, the vision statement of the company reflects a better goal of the company. The vision statement reflects the efforts made by the company for improving the technical usage of their target consumers with continuous innovation in the technical forte (Please refer to appendix 2). Comparing the new mission statement of Apple with the concepts of Steve Jobs, it can be observed that in simple words, Apple’s mission is to be the best in the industry. Again, as mentioned previously, for a long time Apple focused on their ‘Think Different’ concept that highlighted why Apple wanted to be on top of the industry (Apple’s Mission, Youtube). These little inspirational interactions of the company personnel with their fans and consumers created huge brand equity and helped them sustain in the consumer brand perception. In the contemporary scenario, Apple’s market share in the computer and mobile phone segment has fallen given the rapid entry of firms into the industry (Barlow and Stewart, 69-75). Paine (426-436) emphasized that innovation at Apple has fallen behind the technological growth. The reducing market share also signified that the brand loyalty of the consumers is shifting towards other emerging brands. On the other hand, the innovation culture in Apple seems to be diminishing after passing of Late CEO Steve Jobs. They are providing new products but the concept and themes of these products remain the same which is unable to meet the customer expectations. According to the mission statement of the company, the company has proved itself to be best in each segment of its operation. But in the contemporary scenario, performance of Apple has been overshadowed in the international market by competitors such as Samsung and Google in the mobile phone industry and Dell, Microsoft and Lenevo in the personal computer segment (Barney, 99-120). Apple aims to achieve growth with continuous innovation and improvement in the respective segments. Apple has moved ahead with the changes in the technological industry and also has changed their focus from being one of the best to be the best. This reflects the intensity of the company to provide the best products to their consumers and remain at the top position. In short, it can be stated that strategic planning of the company is directed towards making Apple the best brand in the global technology sector. The assessment of the current mission statement of Apple does not reflect a specific aim of the company rather focuses on their past achievements. The strategic position of Apple can be best evaluated by analyzing their strengths and weaknesses and the internal business mechanisms. SWOT Strengths Strong brand building capability with the help of advertising campaigns and diversified marketing policies. The distribution channel of Apple is well spread and interconnected in US market. Vertical integration is one of the core principles of the company. Strong influence over consumer brand perception and high consumer brand awareness in global market. Weaknesses Inability to segment their product pricing based on market cultures. Inefficient consumer communication process in emerging markets as China and India. Excessive dependence on existing product lines such as iPhones and iPads. Operating systems of the company are incompatible with other products. Opportunity Acquisitions of emerging technological companies. New innovations such as wearable gadgets, Apple Watch. Expansion in international market places. Threats Consistently growing competition in the technology market. Legal cases related to copyright issues of products. Rising value of US dollars. (Powell, 119-134). From the above SWOT analysis, it can be observed that Apple’s strength mainly relies on its internal management and brand building process. The advertising and marketing campaigns of the company are interactive and well communicated. This helps them in building strong and long-term relationships with their stakeholders (Powell, 119-134). On the other hand, limited focus in the developing markets such as India and China can hamper their international growth and reduce the market share. However, Apple is trying to increase and expand their operations in the international market places by acquiring firms with potential for success that is enhancing their brand value. But, the rapid entrance of new firms in the mobile sector is heating up the competition for them; firms like Micromax, Nexus, etc have developed a strong market in emerging countries such as Brazil, India and China (Yaprak, 297-302). Focusing on the internal business mechanisms of the company, Apple is known to have one of the best internal business management processes in the world. Their concept of vertical integration has allowed them to streamline the business activities. Vertical integration has created a chain of relationships among the internal stakeholders of the company such as owning chip manufacturers, static standards of quality in software and hardware development, company owned retail chain, etc (Annual Reports: 2013, Investor.apple.com). Apart from this, the organizational culture of Apple is focused on the employee motivation and enhanced performance. Apple is an employee oriented company that believes in the potential of the employees to help the company move forward. Dess and Lumpkin (113-134) stated that the core of internal management of Apple is that they do not try to micro manage the employee activities and allows them space for completing their tasks. The organizational structure of the company was flat during the reign of Steve Jobs as the CEO of the company. However, it has been changed to a matrix structure that has allowed them to utilize their human resource in a more productive manner. Figure 1: Previous organizational structure. (Source: Barney, 99-120) Figure 2: Matrix Structure being followed in Apple (Source: Paine, 426-436) Apple the structure of Apple reflected above shows the connection between the different segments of internal functions of the company. The employees are informed of the objectives they need to achieve and also are connected directly with the managerial bodies which help them to develop their personal interests in alignment with the organizational aims and values (Paine, 426-436). The strong internal communication within the internal management updates the top management of the company to direct their company in a suitable manner. Apple has developed a non-imitable competitive advantage based on their internal managerial functions and operations process. However, with lack of innovation the risks in the market is increasing for Apple, the growing competition and changes in consumer behavior have to be comprised for maintaining their leading position in the industry. Article Analysis Why apple’s ecosystem is its biggest advantage? Summary of the Article The article mainly focuses on the importance of vertical integration for developing a competitive advantage for Apple. The article reflected as a pioneer in managing the internal functions of the company for enhancing the efficacy of the operations process. The comparison of Google and Microsoft’s acquisition moves reveals the success of Apple’s vertical integration process in the technological industry. New features adopted by Apple for enhancing user satisfaction and service availability have influenced their market share and have provided them a top position in the growth curve (Nielson, MarketRealist.com). The article provides a brief but in-depth reflection of the thinking behind the vertical integration process incorporated at Apple. The aims, objectives of the company for introducing vertical integration has allowed them to increase their product compatibility but also helped them in retaining their existing customer base (Dess and Lumpkin, 113-134). The article further reflects the role of Apple’s vertical integration system by comparing Apple services with that of its competitors where Apple has an upper hand in terms of financial growth, market growth and consumer engagement level. Key issue mentioned in the article The theme of the article is based on how the vertical integration concept of Apple has allowed them to develop a competitive advantage for the company. Apple tried to develop a transparent business culture and communicate with their internal and external stakeholders of the firm. They developed the vertical integration process by acquiring chip manufacturing houses, control departments and implementing uniform and stringent quality level across all operational units. As reflected in the beginning of the article, then CEO Tim Cook stated that Apple is leading the software, hardware and technical services industry and provide their customers better and new services (Nielson, MarketRealist.com). Nielson (MarketRealist.com) mentioned that the products of Apple are developed in a manner that allows the customer to reduce their switching cost and also develop a long term connection with the company. This has allowed Apple to influence their existing relationships with their customers and provide them better services. The service development group of Apple consists of more than 7 million developers who have made iOS 7 one of the most popular operating systems in the world. According to GfK research, 84% Apple phone users again opt for the same brand shows the brand loyalty among the consumers of Apple (Nielson, MarketRealist.com). Even in the app market, Apple is leading with 63% share in comparison to Google Play’s 37% (Nielson, MarketRealist.com). The ruthless chase for innovation has helped Apple be among the top notches of the global technological industry. Apple has converted itself to a one stop solution for every Apple product and technical requirements for their consumers with help of vertical integration and truly the ecosystem of Apple is its biggest non-imitable competitive advantage. Importance of the article The article reflects one of the primary processes of developing a competitive advantage in the contemporary scenario of cutthroat competition. The technology industry is one of the most competitive market places in the international market places. New firms are entering rapidly providing the consumers with increased numbers of alternative products and services. The buyer and consumer bargaining powers are also increasing as the brand switching cost has reduced considerably. In such as scenario, Apple has successfully maintained their competitive advantage amidst the tough competition and their implementation of vertical integration has allowed them to remain in a favorable position in the organization. Apple targets mostly the high end customers which form the smallest group in consumer segment but Apple developed a strong communication network with this consumer group with their advertising campaigns (Dess and Lumpkin, 113-134). The internal ecology of the company was reframed in a manner that supported the messages sent to customers through their brand promotion activities (Powell, 119-134). The example of Apple’s map application gaining market response shows that customers prefer to find a complete solution for their requirements in their brand and Apple has met this demand of the customers with the help of vertical integration (Nielson, MarketRealist.com). Conclusion This study focused on the process of gaining competitive advantage by Apple in the competition filled market scenario. The researcher has considered a similar article for further analyzing the subject matter. The key element mentioned in the article was the vertical integration process of Apple and how it has helped them in developing strong competitive advantage. The SWOT analysis of Apple reflects the authenticity of the article and reveals similar results and facts relating to Apple and its performance in the market place. Apple’s implementation of vertical integration is now being followed by other market leaders such as Google and Microsoft. Apple has focused on setting trends in terms of offerings to their customers and developing new strategies for business sustenance. References: “Annual Reports: 2013” Investor.apple.com. Apple Inc. 2013. Web. 15th September 2014. http://files.shareholder.com/downloads/AAPL/3476420327x0x701402/A406AD58-6BDE-4190-96A1-4CC2D0D67986/AAPL_FY13_10K_10.30.13.pdf. “Apple’s Mission” Youtube. Youtbe, LLC.2009. Web. 15th September 2014. http://www.youtube.com/watch?v=r1GlJWMeffA. Ander, Ron. and Kapoor, Ranbir. "Value Creation in Innovation Ecosystems: How the structure of technological interdependence affects firm performance in new technology generation," Strategic management Journal, 31, 2010, 306-333. Print. Barlow, James. and Stewart, Patrick. Branded Customer Service: The New Competitive Edge. 5th ed. London: Routledge. 2008. Print. Barney, Jay B. “Firm Resources and Sustainable Competitive Advantage,” Journal of Management, 17, 2008, 99 – 120. Print. Blodget, Henry. “Apple’s New “Mission Statement” Is Making People Worry That The Company Has Gone To Hell” Businessinsider.in. Times Internet Limited. 2013. Web. http://www.businessinsider.in/Apples-New-Mission-Statement-Is-Making-People-Worry-That-The-Company-Has-Gone-To-Hell/articleshow/21581584.cms. Dess, Gregory. and Lumpkin, Alan. “Strategic Management: Creating Competitive Advantages.” 6th ed. London: McGraw-Hill Education. 2009. Print. “Leadership & Governance” Investor.apple.com. Apple Inc. 2014. Web. http://investor.apple.com/corporate-governance.cfm “Mission Statement of Apple” Strategicmanagementinsight.com, Strategic Management Insight.com. 2013. Web. http://www.strategicmanagementinsight.com/mission-statements/apple-mission-statement.html. Nielson, Samantha. “Why Apple’s ecosystem is its biggest competitive advantage” Market Realist. Market Realist.com, 2014. Web. 15th September 2014. http://marketrealist.com/2014/02/ecosystem. Paine, Lynn S. "Corporate Policy and the Ethics of Competitive Intelligence Gathering," Journal of Business Ethics, 10. 2010. 423-436. Print. Powell, Thomas C. “Organizational Alignment as a Competitive Advantage,” Strategic Management Journal, 13, 2007, 119– 134. Print. Strother, Judith, Service leadership: the quest for competitive advantage. 4th ed. Belgium: Peeters Publisher. 2010. Print. Yaprak, Attila. “Globalization: Strategies to build a great global firm in the new economy.” Thunderbird International Business Review 44 (2), 2008, 297–302. Print. Appendices: Appendix 1: Apple Mission Statement 2014 (Source: Blodget, Businessinsider.com) Appendix 2: Apple Vision Statement 2014 (Source: Mission Statement of Apple, Strategicmanagementinsight.com) Read More