Strategic Management of Apple Company - Case Study Example

STRATEGIC MANAGEMENT OF THE APPLE COMPANY By Location Strategic Management of the Apple Company Introduction The telecommunication industry is one of the most competitive industries in the market. This is because is a high-tech industry and companies must invest in investing innovation as well as carry out rigorous research and development. This industry requires companies to develop effective strategies in order to achieve a competitive advantage over other companies. Failure to do so implies that, a company will eventually lose its market share, and begin to register declined profits. Many companies in this industry face the compulsion of keeping up with the addiction of consumers to both speed and connectivity. Moreover, the industry faces security issues because of the increasing availability of malware. This means that consumer protection qualifies as a priority in the industry. In the recent past, the industry has been registering vertical markets and companies have to develop effective strategies that conform to vertical integration. The purpose of this essay is to analyse some of the strategies adopted by companies operating in this industry. It is critical to understand how these companies have managed to cope with the constant pressure of innovation and the launching of new devices into the market. Moreover, it is possible to analyse future prospects in the industry considering the fact that technology has registered immense transformation in the society. Three analytical processes will be of critical use in this essay, in order to analyse companies in this industry. Michael Porter designed a unique model that analyses the generic strategies adopted by a specific company. In his views, the adoption of generic strategies helps companies have a unique competitive advantage over their competitors. In the telecommunication industry, some companies have adopted a generic strategy that gives them a competitive advantage in the market. The Porter’s generic strategies will be one of the processes used to analyse case studies in this industry. In addition, the Bowman’s strategic clock will help analyse the position of case studies in the telecommunication industry. The clock has eight different positions with each one of them presenting a company with either competitive advantages or disadvantages. The position of a company in the clock depends on its strategies (Wilcox 2012, p. 28). Finally, the McKinsey’s 7-S Framework will form the third process in the analytical process. This framework offers a model that presents an example of how companies can achieve holistic and effective organization. It comprises of seven factors that determine the organization of a company and its efficiency (Xie & Liang 2013, p. 212). Analysis of the Apple Company using the Porter’s Generic Strategies Process Michael Porter described three different strategies that fall under the generic strategies used by companies in an effort to gain competitive advantage. The three strategies include cost leadership, differentiation, and focus strategies. Cost leadership involves low production cost by the company. Evidently, when the cost of production is low, higher profit margins result. Low production cost can enable a company to fix lower prices for its products in an effort to gain an advantage in the market share. This does not mean that a company should price its products at similar rates with inferior products. The prices only need to be lower than those of rivals in the market are. In the case whereby the rivals engage in a price war, a company can have the assurance that it will continue registering profitability. When a company relies on the cost leadership strategy, its focus is the broad market. In the 1980s, the Apple Company faced a threat of bankruptcy (Tasini 2013, p. 16). This presented the company with the compulsion of developing new strategies and one included lowering the cost of production. Through the help of Steve Jobs, the company minimized its production cost, a factor that enables it to register profitability in the market. During that time, Apple relied on low-cost direct materials in their venture to develop products that could trade at lower prices. This served to place Apple back to the map of leading telecommunication enterprises. In addition, Apple has continued to create business agreements with other companies such as AT&T for different application as well as web hosting, reducing costs of operation. This allows the company to focus on other strategies that have propelled it to greater success because of the competitive advantage it enjoys. This strategy was effective for the Apple Company at that given time. It helped the company register improved sales (Tasini 2013, p. 17). However, the Apple Company no longer relies on cost leadership. This is because it has moved on to achieve a higher level of differentiation. Differentiation is an additional generic strategy described by Michael Porter. Prior to differentiation, a company should focus on understanding the unique needs and the preferences of the consumers. In the telecommunication industry, the fast-paced technological waves have made consumer preferences very dynamic. Companies that intend to achieve differentiation must strive to keep up with the dynamic needs of the consumers. In addition, differentiation requires a company to exhibit a measure of commitment to the customers. Experts have also highlighted that the company should recognize its capabilities as an additional key to achieving differentiation. Innovation is the fourth and most critical key for any company indenting to achieve differentiation. The differentiation strategy requires a company to launch products into the market that exhibit unique characteristics and that can present value to the customer. If the customer perceives such products as valuable, or as better than other products in the market, then the company is likely to enjoy certain benefits. For example, the company can attach a premium price to such as product. Consumers are less likely to consider the premium price as an issue because of the associated value. Since the launching of products with unique characteristics translates to higher production costs, the premium price serves to cater for the high production cost (Shakhshir 2014, p. 980). Of most critical importance is the value attached to the product because it moves the consumers to buy the product despite the price. The Apple Company has succeeded in achieving differentiation. It has focused on innovation and the team working at the Apple Company comprises of smart and intelligent individuals who have proven to be highly creative. This explains why the company has been launching unique premium products into the market. For example, some of the Apple’s unique products include the iPhone, iPads, iPods, and Macintosh. There is evidence that consumers have associated Apple products with value and do not mind the premium prices. This has ensured that the company registers profitability in the market. However, Apple faces the challenge of maintaining a high quality in its differentiated products. Evidently, the high production costs associated with the unique products may prompt the company to compromise on quality. For example, complaints from the public concerning the bending of iPhone 6 had the potential of causing a flop of the product. Other risks associated with differentiation include imitation from competitors. Competitors have also been working hard to achieve a higher level of differentiation (Shakhshir 2014, p. 984). Since competitors in the telecommunication industry follow in the footsteps of the leader, the Apple Company has to keep up high levels of innovation so that competitors will not match the uniqueness of its products. The focus strategy is the third strategy described by Porter that helps companies to enjoy a higher level of competitive advantage. Companies rely on this strategy to identify a narrow segment of the market and launch products targeting that specific segment. The focus strategy may have its basis on cost advantage or differentiation. A company applying the focus strategy identifies a target group and launches products that seek to meet the needs of these specific groups. The target group eventually exhibits the customer loyalty towards the products. The Apple Company has advanced to apply the focus strategy. With differentiation, Apple targets the technologically perceptive individuals who value innovative devices and who can afford the premium price of the products. This explains why Apple sells premium products in the developed world where the dynamic consumers who value innovation and who want to make a statement with their devices live. The focus strategy has been beneficial to the Apple Company because its products, target a specific segment of the market. The customers who exhibit loyalty to these products cover most of the production costs because Apple products do not have substitutes in the market (Singh 2013, p. 43). Although there is the possibility of imitation, Apple enjoys loyalty from its customers and invests in innovation. Analysis of the Apple Company using the Bowman’s Strategic Clock The Bowman strategic clock represents eight positions of companies in the market depending on their price/ value combinations. The eight positions present varying combinations based on the price of the product and the perceived value of the customers. Some positions in the strategic clock prove to be highly competitive and have helped companies gain a remarkable market share. The first position defines the products of low value sold at low process. Many organizations begin at this point in an effort to attract some customers for their products. With time, they move to the second position where they rely on cot leadership to offer products with low prices. After some growth, a company may achieve cost leadership offering products at moderate prices and an increased value perceived by the customers. This is usually a hybrid position and is at the third place in the Bowman strategic clock. Companies that have achieved differentiation occupy the fourth place (McKinsey 7-S framework 2007, p. 4719). They can increase their prices because customers consider their products as valuable. They enjoy premium prices because of the benefit in accordance with the customer’s perception. The fifth place is for companies that have achieved focus differentiation. These companies most offer designer products and very premium prices. They enjoy high profits because customers associate their products with value. They focus on a specific target market that can afford their products. The sixth place is for companies who risk increasing process when still offering standard products. This is a risky strategy because it contributes to the loss of market share after the revelation of the unjustified premium prices. Companies in the seventh position offer low value products at high prices (Faarup, Aabroe, & Grafisk 2010, p. 75). This only happens to monopolies because customers lack options in the market. The eighth position is for companies that are likely to decline and lose their market share because their products are of low value but attached to standard prices. A close analysis of the Apple Company reveals that it enjoys the competitive advantage presented by the fifth position. The company has achieved the focused differentiation and offers products perceived highly by the customers. Therefore, these products come at premium prices. The company has identified a unique target market and this segment is the focus of its entire products. Evidently, Apple’s products present high value to the consumers. Its commitment to launch premium products has earned customer loyalty and these consumers are willing to purchase the company’s products irrespective of the price (Faarup, Aabroe, & Grafisk 2010, p. 83). In the telecommunications industry, the Apple Company is the only one enjoying the competitive advantage presented by the fifth position. This has resulted from increased research and development as well as highly innovative products. Analysis of Apple Company using the McKinsey’s 7-S Framework The 7-S framework developed by McKinsey’s is an effective model when analysing the level of effectiveness in a company’s organization. The framework focuses on seven factors, namely strategy, structure, system, staff, skills, style, and shared values. Shared values form the central position, which interconnects the other factors. This is because shared values represent the company’s goals, belief systems, and attitudes. Shared values represent what the company stands for. The strategy of a company denotes the way in which the company allocates its resources and uses its capabilities and core competencies in an effort to achieve the defined goals. On the other hand, the structure of the company describes how different units of the organization interrelate. There are different types of organizational structures used by different companies. The structure of the company determines the decision making process as well as the span of control in the organization. Systems denote both procedures and processes that define the performance of the organization (McKinsey 7-S framework 2007, p. 4720). This range from hiring procedures, training of employees, performance assessment, information systems, as well as the promotion processes. Other systems include the distribution systems, reward systems, planning as well as budgeting. The staffs of the organization are comprised of the employees, their core competencies, as well as other skills. It also takes not consideration processes such as recruitment, human resource development, and socialization. Skills represent the unique competencies exhibited by the individuals in the organization. Some capabilities reflect the organization as a unit. The style adopted by an organization is evident in the type of leadership or management exhibited by those in power. These seven factors exhibit a high level of interconnectivity. Each of the factors serves as a form of reinforcement to the others. This means that making changes in one of the factors should compel other adjustments in the other factors as well. Some of the factors such as strategy, structure, and systems prove to be easier when introducing change, while the rest need time for the effectiveness of change (McKinsey 7-S framework 2007, p. 4722). The Apple Company operates in conformity of core strategy that focuses on innovation. Over the years, innovation has proved to be one of the aspects that have propelled the company to higher success in the industry. This is because innovation is one of the driving forces in the telecommunications industry. In addition, the company has a functional structure, which ensures that divisions occur in accordance with competencies, expertise, as well as experience. Resource allocation to each unit of functional line depends on the tasks of the line. Line managers exhibit a measure of control because they supervise organizational activities in each different unit. Apple’s structure allows managers in lower levels to initiate innovation in an effort to foster the company’s greatest strength. The company has different systems in place. The unique aspect about these systems is the way the company integrates them, ensuring a central control system. Effective communication lines are of critical importance in the Apple Company in an effort to ensure that all the systems remain functional (Holston 2011, p. 67). When it comes to staffing, the company focuses on hiring smart and intelligent individuals who prove to be highly creative and who can contribute positively to the innovation efforts of the company. This aspect contributes to the increased innovation exhibited by the company over the years. The company focuses on strengthening skills such as teamwork and innovation. It invests highly in research and development and empowers the employees to be more creative. The skills, especially those related to innovation, teamwork, and research form the core competences of the company. This explains why the company has been launching unique products into the market and enjoying a competitive advantage. The company has a unique leadership style established by Steve Jobs who was the former chief executive officer. The company adopted the decentralization in an effort to promote effective decision-making and control processes. Finally, the company has exhibited unique shared values by its employees. Their commitment to customers is remarkable with efforts to provide value in their products (Frieden 2001, p. 28). Moreover, the determination to focus on innovation and teamwork while promoting quality are also outstanding values shared by the employees in the company. Recently, the company has introduced initiatives of going green, which foster a positive reputation of the company. Without doubt, the Apple Company has ensured interconnectivity between all the factors in the 7-S model. These factors have ensured that the company is highly successful in its operations, enjoying profitability in the market, and a remarkable market share. Conclusion Evidently, the telecommunications industry proves to be highly competitive. Since innovation, research, and development are some of the critical driving forces in the market, companies face the compulsion of investing highly in innovation. The need to launch new products into the market that can satisfy the needs of the dynamic customers is the motivating factor for companies to focus on innovation. Effective strategy management is of critical importance if a company is to achieve a competitive advantage over rivals in the market. The strategies of a company determine the market share as well as the profitability levels. In order to understand and analyse strategies used by different companies in this industry, three different analytical processes were of great use (Stylianou 2011, p. 221). The Porter’s generic strategies, helped in the analysis of the Apple Company used as a case study in this paper. Without doubt, the Apple Company has succeeded in using differentiation and focus strategy in an effort to gain competitive advantage over its competitors. The Bowman’s strategic clock was the second analytical process used in analysing the Apple strategies. Apple occupies the fifth position, which is the focused differentiation strategy because it offers products of high values at premium prices. This gives the company an opportunity to enjoy high levels of profitability. Finally, a consideration of the Apple’s organization using the 7-S framework developed by McKinsey’s revels that the company’s strategy, structure, skills, style, staff, systems, and shared values exhibit a high level of interconnectivity that defines the company’s efficiency (Elmer-De 2014, p. 1). This interconnectivity has served to propel the company to its current market position. Without doubt, the Apple Company has understood the market conditions and developed strategies that exhibit a perfect match to the market conditions. This explains why it enjoys a high level of profitability. For the company to continue enjoying such high levels of profitability, it must remain highly innovative beyond its competitors. This is the only way its premium products will continue to sell at premium prices. Bibliography Elmer-DeWitt, P 2014, The Apple-Beats deal: What the analysts are saying now, Fortune.Com, p. 1, Business Source Complete, EBSCOhost, viewed 28 November 2014. Faarup, P. 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