Sustainability of Apple's Competitive Advantage - Case Study Example

Critically Evaluate the Sustainability of Apples Competitive Advantage Table of Contents Introduction 3 Part 4 Competitive Environment Changes Providing Apple with a Robust Competitive Battleground 4 Strategic Decision Making Post Steve Jobs 6 Part 2 8 Three Dimensional Strategic Analysis of Apple (TOWS) Market Share 8 Financial Strengths 8 Relative Market Share 9 Relative Market Strengths 9 Apple’s Understanding of Industry CSFs 13 Part 3 14 Conclusions and Recommendations 14 References 16 Introduction Changes in the current competitive environment have become much apparent and rapid, raising serious concerns among entrepreneurs and intrapreneurs in the global field. While on one hand, if aligned with organisational objectives and developmental needs, these changes can be highly beneficial, on the other hand, in absence of such alignment, an organisation is quite likely to witness severe challenges in preserving its long-term sustainability as well as competencies. Apparently, leadership practices play a pivotal role in ensuring effective alignment of organisational objectives with the changes taking place in the external environment (Duncan & et. al., 1998). The case scenario of Apple Inc. shall be best suitable for evaluation the perceived phenomenon as stated. It is primarily owing to the fact that within the last decade the company has not only witnessed massive changes in its external business environment, but has also undergone completely distinct leadership practices –under the leadership of Steve Jobs succeeded by Tim Cook (Paroutis & et. al., 2013). As argued in Lazonick & et. al. (2013), the changes occurring in the Information Technology field in liaison with the Consumer electronics sector have offered Apple with a robust competitive battleground that was quite efficiently explored with the strategic decision making of Steve Jobs, its former CEO. Emphasising these arguments, the paper presents a brief overview to the performance of Apple in the recent decade, during and after Steve Jobs. A three dimensional strategic analysis of Apple have also been included in this study, based on TOWS matrix with an intention of understanding industry’s Critical Success Factors (CSFs). To be noted in this regard, Apple is regarded as one of the most popular companies in the world producing software tools emphasising the benefits of Information Technology (IT) in the 21st century context. Co-established by Steve Jobs in the year 1976, the company is known for its groundbreaking innovation tactics to produce attractive and the quality goods to create customer demand rather than to follow it (Lazonick & et. al., 2013). Undoubtedly, the leadership strategies used by the company have been a major contributor to its pioneering brand image within the industry. However, in the plight of rising competition, within the global market, such as the rise of Xiaomi in China, the company has gradually shifted towards a declining phase, which can also be related to its witnessed leadership changes in the post-Steve Jobs phase (Lehuan & et. al., 2011). Part 1 Competitive Environment Changes Providing Apple with a Robust Competitive Battleground Technology changes occurring in the current phenomenon have also explored a series of alterations in the competitive environment of businesses, with its direct implications on the operations of Information Technology (IT) companies, including Apple. A major implication of such changes can be witnessed in terms of strategic gaps causing challenges to managers and political decision makers to a certain extent. It is in this context that the current trends indicate shortened life span of products innovated, making rapid development of products and frequent changes in the innovation processes essential to attain competitive advantage. The development of technology also leads to massive changes in the strategic direction of a company. The development of telecommunication and the technology improvements identified in computing, using mobile gadgets such as laptops, phones, tablets or palmtops have imposed greater influences for the management in Apple, pressurising it to innovate aggressively so that it can preserve its competitiveness as a pioneer. Growing knowledge power and the appearance of positive responses amid the targeted market have also emerged as a major concern to Apple in the current era, when emphasising product differentiation and creation of competitive advantages (Bettis & Hitt, 1995). The increasing degree of variances in the technological directions of supporting industries to the telecommunication sector has also indicated the need of aggression amid the industry players to utilise the superior power of shared knowledge and information. Another vital change that was observed in the current era was the increasing value of developing a learning organization system, as one of the major components in supporting the competitive advantage in the new technological landscape (I & et. al., 2008). Undoubtedly, critical changes were required in the leadership framework applied by Apple with the rising number of leading players in the sector as well as augmented degree of consumer information on technology. In subsequence, with individual companies evolving as an option to the informed customers, the changes observed within the competitive environment emerged as a robust competitive battleground to Apple. In this milieu, competitive advantages could only be achieved through innovation and with the incorporation of advanced technology, in which Apple is often regarded as competitive enough. However, unlike many of its competitors, rather than following the consumers’ demands, the leadership approach of Apple, especially during the phase of Steve Jobs, was to act as a trendsetter and change the environment according to the organisation’s competitive needs, which was also criticised as monopolistic to an extent. Nevertheless, changes have also occurred in the competitive environment to promote new technology and new idea for innovation through shared information and greater participation of stakeholders in the entire process of product development. Globalization has also played an important role to steer changes in the competitive environment making it uniform and beneficial to almost every market player. Subsequently, with increased ability to retain market share at a larger proportion, each brand in the IT sector has emerged as a potential threat to Apple, provoking it to be more aggressive following its past leadership trends (Paik & Zhu, 2013). Overall, these changes have indeed reshaped the environment as a battlefield for Apple to preserve its achieved leadership positioning. Strategic Decision Making Post Steve Jobs Leadership has always been crucial to Apple, since its establishment, which have had its benefits in yielding the striking leadership position to the company. However, when focused on its generic strategy intent since the leadership of Steve Jobs till date, under the leadership of Tim Cook, a vast difference can be observed in the operational pinhead of the organisation. For instance, intensely emphasising innovation and unique services to the customers, Steve Jobs focused on apparent differentiation of Apple’s products and brand image to gain competitive advantage, which also denotes the company’s intention to obtain the benefits of a first mover in the sector. Steve Jobs also adopted other strategies to keep customers of the targeted market to enjoy innovation as well as uniqueness of the brand, but in the latter period, the company had to witness massive challenges owing to the shortened life span of the product (Owarish, 2013; Xu & Quaddus, 2013). Overall, it can be asserted that the company was intensely focused on differentiation strategies under the leadership of Steve Jobs. While the strategic intent of the company was apparent under the leadership of Steve Jobs, it has somewhat blurred currently in the hands of Tim Cook, who seems more focused on stakeholder involvement in determining Apple’s long-term goals. However, Tim Cook has been delivering much effort in redesigning organisational processes in Apple with relevancy to its previous managerial framework, as was implemented by Steve Jobs. It is worth mentioning in this context that the strategic intent of the company to emphasise differentiation persists although the company has evidently slowed-down in its innovative exposure to preserve uniqueness in its product lines. Tim Cook, in his leadership approach has also been concentrated on gaining pricing competitiveness within the market and therefore, lowered prices of many models in the product range to increase adaptability within targeted customers. It has consequently permitted the brand to expand its customer population within the global marketplace. However, the first mover advantage seems to be blurred for Apple currently, as it focuses more on extending its life cycle for each product category and faces critical competitive challenges thereafter. Nevertheless, critics have been of the view that Tim Cook is currently emphasising long-term sustainability of the company with equal significance to differentiation needs and cost leadership benefits within the industry. It is thus that he has applied focus on developing advanced technology and utilizing the innovative idea of employees at every level to generate quality product in the market. Correspondingly, a major difference observed between the leadership traits of Steve Jobs and Tim Cook is that the former adopted a pioneering approach, or rather a first mover approach to create demand within the market, while the latter implemented a followership approach according to the demand of the market to suffice it (Heracleous, 2013; Dhingra & et. al., n.d.). Hence, the current generic strategy applied by Apple can be considered as present in the middle, wherein the influence of all three types of directions are observable, which has been reflected through the diagram below. Part 2 Three Dimensional Strategic Analysis of Apple (TOWS) Market Share Financial Strengths Apple has the strong position in the IT industry, which has yielded it substantial returns on its investment. It was during the leadership of Steve Jobs that the company gained much appreciation for its innovation in the stream of iPhones as well as iPads, which brought about a turnaround within the technology industry. In the year 2012, Apple witnessed massive increase in its financial growth in terms of its quarterly profits, which was recorded as the highest for the company even as compared to the performance during Steve Jobs’ leadership. To be noted in this regard the quarterly profit of Apple was recorded at $46.3 billion with a sale record of iPhone at $37 million and iPod at $15.4 million in 2012. In subsequence, in the year 2012, the cash and assets of Apple was also recorded to have increased by $ 100 million (Paroutis & et. al., 2013). Overall, its financial performance reflects the enhancing strength of the company in this particular domain. Relating the same with the generic strategies adopted, the performance of Apple depicts that the leadership approach currently taken by Tim Cook, which focuses on long-term sustainability and stability within the organizational environment, has been much beneficial to enrich financial strength of the company that was declining post declaration of potential changes in its leadership directions. Relative Market Share To describe the position of Apple in the market, studying its relative market share will be crucial. Since the declaration of leadership changes, stock price of the company began declining, with continuous decrease in its market share within the global market that further raised noteworthy challenges for the company to preserve its competitive positioning (Jinjin, 2013; Heracleous & Papachroni, 2012). For instance, with the rise of substitutes, such as Google’s Android system and Windows iPhone, as well as the penetration of large competitors through backward and forward integration increased challenges for Apple to retain its previously attained market share. In consequence, the company began losing its leadership positioning within the market, primarily owing to lack of innovativeness in its approaches, especially those related with product development, product designing and customer retention (Paroutis & et. al., 2013). Relative Market Strengths Relative market strength describes the relation between the stock price performance and the market performance of Apple, which is also deemed as a major criterion in evaluating a company’s performance. As apparent from the discussion conducted above, with the changes in its leadership approach, the competitive stance of the company was becoming weaker under the leadership of Tim Cook. Being a major player in the sector, the dip in Apple’s competitive stance, evolved as a significant and most beneficial opportunity to the smaller players of the industry, such as Sony, Samsung, Nokia, Microsoft and Google as well, who pursued the intention to enter the IT industry as a competitor to Apple. As a consequence thus, Apple’s products had to witness major constraints of substitution along with other forces in terms of rising customer bargaining power, new entrant threats and lowering entry barrier to the industry. Such changes in the industry scenario further resulted in high volatility in the company’s stock prices, wherein investors sought better returns from other companies as compared to Apple, which was then undergoing massive leadership alterations and noteworthy scepticisms regarding its future growth (Ashcroft, 2012; Heracleous & Papachroni, 2012). While it proved a challenge for Tim Cook to re-gather the confidence of its customers and investors, its relative market strength declined substantially, irrespective of the fact that the company was doing well on financial terms. A better understanding to the context can be obtained with reference to Threats, Opportunities, Weaknesses and Strengths (TOWS) matrix as formed below. STRENGTHS – S 1. Record growth in financial revenue 2. Stability in its product management domain 3. Emphasizing long-term sustainability 4. Advantage of previously accomplished brand image and stakeholder confidence 5. Better alignment of stakeholders with organizational vision WEAKNESSES – W 1. Increased volatility in competitive performance of the company 2. Decline in stock prices 3. Reduced market share 4. Changes in leadership approaches making stakeholders confused to an extent 5. Weakening control on substitution effects within the industry OPPORTUNITIES – O 1. Increased availability of resources 2. Increased chances of joint ventures with monopolistic characteristics of the industry getting subsided 3. Better flow of finances 4. Augmenting confidence among stakeholders with better alignment and stability within the supply chain network of Apple SO STRATEGIES 1. Involve into aggressive promotion to reassure brand imaging 2. Use financial strengths to merge or acquire smaller competitors to gain a leap in the market share proportion enjoyed 3. Encourage stakeholder participation in strategic decision making WO STRATEGIES 1. Make proper and accurate investment planning 2. Focus on customer relationship management and stakeholder management THREATS – T 1. Rising customer bargaining power with enhanced information 2. Augmented substitution effects within the industry 3. Rising threats of new entrants 4. Alterations of the industry structure from monopolistic to an oligopolistic nature 5. Intensified competitive rivalry against Apple ST STRATEGIES 1. Enhance stakeholder management initiatives, investing more on promotional approaches 2. Define the strategic intent clearer 3. Reassure the visionary adaptations of the company 4. Greater attention to research and development strategies WT STRATEGIES 1. Take a firm step to combat competitive challenges 2. Reassure investor confidence through better portrayal of company performances and clarifying company objectives 3. Focus on increasing market share with possible options of joint ventures Apple’s Understanding of Industry CSFs In recent years, under the leadership of Tim Cook, Apple has used various strategic elements and tactics to increase its growth rate that further projects a strong understanding of the company regarding the industry CSFs. Among the several factors, a major point of concern is organisational or brand size that in turn refers to its market share as well as the growth rate. Another crucial CSF that can determine the performance trend of organisations within the industry is the consumer factor. In order to align with this criterion, Apple has divided its target market strategies with a dual perception, i.e. one focusing on the demographics of the consumers as well as the cultural aspects inherent to it. It is in this context that Apple mostly targets the male consumers who belong to the age group of 25-34 years and have high spending capacity also taking due note of the fact that this particular section are strongly steered by cultural factors associated with the uses of smart phones as well as mobile internets. It is worth mentioning in this context that the concept of business followed in Apple is different from its competitors that can be assessed as focused on the differentiation strategies with due significance to market needs, i.e. another CSF identified within the industry. In order to align itself with the market changes when following the differentiation strategies, Apple has also focused on training its employees on a continuous basis to suffice consumer needs. Technology is another aspect, which is also important for the innovation of the product. It is thus that by using advanced technology, Apple can introduce new products in the market to satisfy the customers. Apple also understands that as a CSF, environmental factor is vital for the development of Apple, whereby the company has remained focused on implementing green strategies (Laugesen & Yuan, 2010; Holmberg & Holmberg, 2009). Part 3 Conclusions and Recommendations Apple, under the leadership of Steve Jobs performed as the first mover in the industry, often creating the trend rather following it. For instance, Apple was the first to have introduced iPhone and iPod technologies in the market that reshaped the perception of mobile technology in the IT sector. Although only a limited number of competitors reflected their dare to compete with the stream of products introduced by Apple at rapid frequency, after the Steve Jobs era, the company witnessed a sudden augmentation in the competitive forces causing substitution effects and thereby, diminishing first mover advantages the company had once attained (Eggers, 2009; Abel, 2008). Apparently, it was a major change observed in the performance and strategic direction of Apple witnessed in the current decade. Another major change that could be observed with reference to the discussion conducted above, was the shift of company’s leadership focus from product innovation towards process innovation. For instance, Tim Cook focused more on the involvement of stakeholders at almost every level of the strategic decision making process but paid limited emphasis to innovate products with similar rapidity as was implemented by Steve Jobs. In addition, Tim Cook delivered significance to customer relationship management as well as reassuring investors’ confidence by shifting the strategic intent of the company from retaining monopolistic benefits to maintaining greater stability in its overall approaches (Thomke & Feinberg, 2010). While the shift in its strategic vision helped the company to gain record financial returns, it also increased competitive challenges to the same causing intensification of the pressure where differentiation became an almost impossible task. For instance, with the introduction of Xiaomi in China, the sustainability and competitive advantage of Apple decreased substantial within the market. This not only reduced customer loyalty to the brand, irrespective of the fact that Apple was a larger brand than Xiaomi, but also retrenched the market share that Steve Jobs had acquired (Warburton & et. al., 2014; Ahrens & Zhou, 2013). 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