Apples Overall Competitive Strategy - Assignment Example

Apple Inc. Case Study Analysis Apple Inc. Case Study Analysis Question One Apple’s overall competitive strategy consists of the following elements: a) High-end products for high-end consumers. b) Innovation. c) Differentiation. These elements combine perfectly to create a potent and dynamic corporate strategy that is unmatched in the technology industry. Since its founding, Apple has made it known that it creates the highest quality products for consumers who care more about quality than cost. All Apple products are, on average, more expensive than rivals’. However, they are so well-designed that competitors’ customers do not hesitate to switch allegiance as soon as they can afford the company’s products. Apple is a global leader in innovation (Thompson, Peteraf, Gamble, & Strickland III, 2015). It is one of the most innovative companies in the world and, in fact, its success has come from innovation. Through the introduction of novel, game-changing technologies, the company has stolen a march on its rivals and established itself firmly as the go-to company in technological innovation. For example, through the development of extremely sharp retina displays with unprecedented graphical qualities, the company demonstrated that it is capable of outfoxing its competitors through innovation alone (Thompson, Peteraf, Gamble, & Strickland III, 2015). In fact, it does not indulge in aggressive marketing activities to sell; it lets its innovation market itself. The company has also differentiated itself through pricing, excellent positioning, the attachment of tag of exclusivity to its products. This has made it the only elite technology brand in the world. Finally, the strategy explained in this section is not evolving. Like other exclusive brands, Apple found a winning formula and stuck to it regardless of prevailing conditions (Thompson, Peteraf, Gamble, & Strickland III, 2015). Even after Steve Jobs’ death, the new CEO (Tim Cook) stuck to the company’s corporate traditions. Question Two The key elements in Apple’s strategy for computers, personal media players, tablet computers, and smartphones are similar to those used in its overall strategy: differentiation, high-end products for high-end consumers, and innovation. For computers, such as the iMac and MacBook, the company has distinguished itself from competitors by developing highly innovative products with unique and revolutionary technologies (Thompson, Peteraf, Gamble, & Strickland III, 2015). This also applies to tablet computers, smartphones, and personal media players. A quick glance at these products reveals a distinction in product design that is unparalleled in the consumer electronics industry (Thompson, Peteraf, Gamble, & Strickland III, 2015). For example, when it comes to smartphones, Apple has been producing the most appealing (design, aesthetics) phones since it introduced the iPhone 8 years ago. The iPhone also boasts some of the most innovative technologies in the market, always coming out on top in comparison to other smartphones. Upon its introduction, the iPod revolutionized the personal entertainment segment in a way that no other device can match. The MacBook, iPad, and the iMac are industry benchmarks in their own segments, with price being the only hindrance to more sales (Thompson, Peteraf, Gamble, & Strickland III, 2015). The quality and the innovation are, however, unparalleled. In summary, unlike its rivals, Apple has ensured that all its products leave a mark on the global technological industry. It innovates to inspire change, and that is why even people who criticize its products for being too expensive cannot deny their quality, and always ready to buy them when they can afford them. Question Three Compared to the leaders in the computer industry, Apple’s computer business is very competitive in the United States and less competitive globally. In the US, the company ranks 3rd in PC market share, while it does not appear in the top five when it comes to global PPC market share. This shows that the company’s PC brand is very strong in the US, which is its core market ahead of foreign markets like China. The poor showing in global PC market share could be explained by the affordability of other rivals’ products (Thompson, Peteraf, Gamble, & Strickland III, 2015). Majority of consumers cannot afford Apple’s PCs and would rather use their limited resources to buy cheaper PCs from companies like ASUS instead of stretching their budgets for exclusivity. Due to the pricing barrier, it is unlikely that Apple will dominate global PC sales the same way it does in the smartphone market. However, in the US market, it could surpass Dell and HP in the future if it adopts a similar pricing strategy like it did with the iPhone 5C (Thompson, Peteraf, Gamble, & Strickland III, 2015). It showed an unanticipated willingness to drop prices on the iPhone by introducing the more affordable 5C alongside the more expensive 5S, and more phones than it ever had. A similar approach in the PC segment could change its fortunes for the better in the PC segment. The figures provided also show that the smartphones portfolio is the most important to Apples future growth and profitability. This is because the company ranks second in the world (slightly behind Samsung) in the smartphones segment while in the PC portfolio it does not even feature in the top five globally (Thompson, Peteraf, Gamble, & Strickland III, 2015). The iPhone is Apple’s flagship product, one that is responsible for driving most of its sales, growth, and profitability. Industry data and the company’s financial results show that not only is the smartphones line Apple’s most profitable product category, but it is also the future of the company. In fact, the iPhone and the iPad are widely regarded as the most important product lines at Apple, as well as its biggest sources of competitive advantage. When it comes to the smartphones segment, Apple can take on any rival (Samsung) in any competitive area. Question Four It makes perfect strategic sense for Apple to be a competitor in the computer, personal media player, smartphone, and tablet computer segments. First, it is important to understand Apple’s capability in each of these product portfolios. Unlike rivals like Samsung that exhibit formidability in one area (smartphones) and moderate success in others (computers and personal tablets), Apple demonstrates excellence in all its product categories. Also, unlike rivals (e.g., Samsung, HP, Dell, Microsoft, etc.) that compete fiercely in one category, Apple is a recognized leader in all the product classes it specializes in (Thompson, Peteraf, Gamble, & Strickland III, 2015). Each of Apple’s product categories contributes a significant amount of revenues to the company, and helps it maintain its position as the world’s premier technology firm. In lieu of this information, it would be naïve for the company to drop any of its products. Since Steve Jobs took the reins at the firm, Apple has always developed products that outmatch any of its rivals’. Unlike other companies that develop products just to have a presence in the market, Apple targets industry leadership. All its products are premium and built to combine high performance and pristine design. All Apple products complement its corporate strategy; no product is designed to play second fiddle to any other rival’s (Thompson, Peteraf, Gamble, & Strickland III, 2015). Apple is the most valuable brand in the world because of capability in all its product categories. Looking at its rivals, it is clear that they do not enjoy as much general success as Apple. The company demonstrates all-round excellence in its product classes, and this supports its strategic vision. Question Five From the financial data available in Exhibit 1, it is easy to decipher that Apple’s overall net sales have been increasing steadily since 2009. As a matter of fact, they have increased substantially since 2007, but the last three years have seen a considerable rise. For example, the net sales figure was $42,905 million in 2009, and in 2011 it was $108,249 million. This represents an increase of almost $66 billion in just three years (Thompson, Peteraf, Gamble, & Strickland III, 2015). This is an impressive result that demonstrates Apple’s rapid growth since the iPhone was launched in 2007. Other items like gross operating expenses and cost of sales are important not very revealing because an increase in net sales is often accompanied by a rise in operating expenses. Between 2009 and 2011 Apple’s net income more than tripled, from $8,235 million to $25,922 million. A most revealing statistic was the drastic increase in earnings per common share, which also more than tripled from $9.22 to $28.05. This is commensurate with a drastic growth in Apple’s valuation since 2007, which has seen it become the most valuable brand in the world. This also shows that the company is financially secure and sustainable, since it has gained the public’s trust and attracted the interest of investors who want good returns on their capital. The shareholders’ equity also increased substantially between 2009 and 2011, demonstrating that the company can pay good dividends to stockholders in the long term (Thompson, Peteraf, Gamble, & Strickland III, 2015). Finally, despite these impressive performances, it is worth noting that the total liabilities have been increasing steadily since 2007, and have increased considerably in the last three years. The company should work on reducing its liabilities and operating expenses to achieve even higher profitability. Question Six Apple is in a healthy financial position and things could not have been any better. However, it must send out clear message to its rivals that it does not intend to give them any reasons to gain ground on it. Steve Jobs’ death was a massive loss, but the company must retain its identity and position as the world’s leading Technology Company. To do this, it must innovate without compromising the fundamental principles that supported its rise to the top of the global technology industry (Thompson, Peteraf, Gamble, & Strickland III, 2015). Through the new CEO, Tim Cook, Apple must embrace the fact that the playing field is no longer the same as three or four years ago. As a result, to secure and promote brands like the iPad, it must aggressively protect its core market segments and work towards venturing into new markets to bolster its global presence. This approach must not be construed as a disregard of its exclusivity, because market share can be increased without losing touch with core target markets. Direct rivals like Samsung have adopted an all-inclusive marketing strategy that is driven by a “something for everyone” mantra, and this is diluting Apple’s market share in some of its main markets (Thompson, Peteraf, Gamble, & Strickland III, 2015). Apple should consider lowering the price of some of its previous products instead of maintaining constantly high prices that scare away potential customers and push them to opt for cheaper offerings by Samsung and HTC. Finally, Apple should intensify its innovative efforts so that it becomes more differentiated from its rivals. Innovation is its biggest selling point and it should exploit it as much as possible so that it can gain greater competitive advantage. Reference Thompson, A., Peteraf, M., Gamble, J., & Strickland III, A. (2015). Crafting; executing strategy: The quest for competitive advantage: Concepts and cases the quest for competitive advantage: Concepts and cases (20th ed.). London: McGraw Hill Higher Education. Read More