Market assessment, planning and strategy of Apple Inc - Essay Example

of the organization Apple was co-founded by Steve Jobs and Steve Wozniak in California in 1976 as a micro-computer manufacturer. The following year the company was incorporated and released one of the first commercially successful personal computers, the Apple II. In 1984, the company released the Macintosh, which changed the computing world with its revolutionary graphical user interface. Following the success of these two products in the market, Apple had its IPO in1984 (Siegel & Gibbons, 2009). In 2001, the company changed from being a personal computer manufacturer to a consumer electronics company. Today, the company designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications (Apple, 2011). Apple Inc. has a worldwide presence and sells its products globally through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers (Apple, 2011). Between 1994 and 1997, the company experienced record-low stock prices and severe financial losses, a scenario that only begun to be corrected with the re-instatement of Steve Jobs as the CEO in July 1997 (Siegel & Gibbons, 2009). Currently, the company boasts of being the most valuable company in the world with one share valued at US$ 598.35, net sales in 2011 of US$ 108.6 billion and free cash flow of US$ 33.27 billion (“AAPL Stock Price Today - Apple Inc.,” 2012). As at September 2011, Apple has a workforce of 63,300 employees (Apple, 2011). Organizational self-assessment Apple does not explicitly express its mission in its annual reports or on its corporate website. However, in 2009 while responding to financial analysts questions during Apple's quarterly conference call, Tim Cook, then acting CEO, alluded to the company’s core values and implicitly its mission. Apple believes in making great products through continuous innovation. To do so the company believes that it has to own and control the primary technologies behind these great products. Apple believes in having strong collaborations and cross pollination of ideas to achieve excellence. The company’s obsession with excellence means that it only participates in markets where it can have a significant contribution (Chaffin, 2009). For this reason, Apple Inc. believes in focusing on few projects at any given time. With this mission statement, Apple categorizes its customers into three segments: consumer, small and mid-sized businesses; education; and enterprise and government. The company believes in giving its customers a high quality buying experience, therefore, in its major markets Apple sells many of its products and third-party products directly to consumers and businesses through its retail and online stores. In other markets, the company invests in programs to enhance reseller sales by placing high quality Apple fixtures, merchandising materials and other resources within those locations (Apple, 2011). To better meet the needs of its global market, Apple’s business is divided geographically into the Americas (North and South America), Europe (Europe, Middle East and Africa), Japan, Asia-Pacific (Australia and Asia) and Retail (Apple-owned retail sales globally). Examination of the Market Environment Cooperative environment With the introduction of services such as iTunes Store, iBookstore, App Store, Mac App Store and iCloud, Apple moved from being merely a product manufacturer and seller to providing a platform that supports different business ecosystems. For example, the iBookstore supports the eBook business that comprises of authors, publishers and customers. In fact, in 2009 Apple came up with a new type of pricing strategy in the eBooks industry that shifted pricing power from the retailers to the publisher. Under the iBookstore agency model, publishers set their own prices individually and online retailers then sell eBooks for a 30% of gross revenues fee (PwC, 2010). Other eBook retailers such as Amazon also adopted this approach. The iTunes store supports the music and entertainment business industry and the App Store supports mobile software development business. All players in these three business sectors, therefore, are very much affected by development and growth of Apple’s products and services. Competitive environment Apple Inc. faces stiff competition on three different perspectives: platform, devices and services. On the platform perspective, three other major players challenge Apple: Google, Facebook and Amazon. The platform competition is probably the more intense of the three perspectives given that all the four players involved have demonstrated competitive excellence, strategic genius, and superb execution (Manjoo, 2011). All four players, Google, Facebook, Amazon and Apple have their presence in or are working towards entering social networking, eBooks, mobile apps, mobile phones and tablets and more, such that Manjoo (2011) named it the Great Tech War of 2012. The platform approach to business is very attractive given that competition in this arena is on dimensions other than price such as product features, support services, and brand image. Porter (2008) argued that this makes the threat of entry high because investors are willing to support businesses entering the market, which further adds to the competitive rivalry. In the device segment, Apple faces similarly strong competitors in all the products it manufacturers for example Dell and Acer in personal computers, Samsung, Nokia and Blackberry in mobile phones, Samsung and Amazon in tablets and Sony in portable music players. In the services, competitors include Amazon in eBooks and Cloud storage, Spotify versus iTunes and Windows and Android in operating systems. Economic environment In its annual outlook of the global retail industry, Deloitte sees the US economy on an upward trend for three reasons: there is considerable pent-up consumer demand, the likely rise in demand for credit due to the Federal Reserve’s aggressive expansionary policy on lowering interest rates, and increasing job growth (Deloitte, 2011). In the other Apple key markets of Western Europe and Japan, the indicators predict low consumer and business spending. However, the report continues to state that the future of retailing looks most promising in emerging markets that have strong growth prospects and demographics such as Brazil, India, Turkey, Egypt, South Africa, Colombia and Indonesia (Deloitte, 2011). Therefore, Apple should aim to develop its markets in these promising regions. The good part is that currently Apple has more than sufficient financial resources up to US$ 100 billion in cash reserves (Nuttall, 2012) that can be channeled to market development. Technological environment In its annual report, Apple acknowledges that rapid technological advances characterize all the industries in which it competes. This means that the company’s ability to compete successfully depends heavily on its ability to ensure a continual and timely flow of competitive products, services and technologies to the marketplace. Therefore, the company invests substantially in research and development and has seen this expense increasing over the years from US$1.3 billion to US$ 1.8 billion to US$ 2.4 billion in 2009, 2010, and 2011 respectively (Apple, 2011). Where the company is unable to develop the technology it needs, it has ready financial resources to make acquisitions such as what it did with the Siri technology. Social environment Society today is drawn towards information sharing and collaboration. As a result, a new and rapidly growing breed of consumers referred to as prosumers has emerged. These consumers are not merely satisfied with consumption but are also interested in significantly influencing the success or failure of a product. These consumers demand tools, technologies and devices that will enable them to share their experiences, and the freedom to recommend or not recommend a product (Gunelius, 2010). Apple’s products and services are not as strong on information sharing and collaboration as some of the products and services offered by its competitors such as Google’s Google + and Facebook have better value propositions. Political / Legal / Regulatory Environments Apple’s offerings have largely not been targeted with either political or regulatory constraints in the market. However, this does not imply that at some point in the future it may not face the same challenges that Microsoft begun facing when it became dominant in the software industry. SWOT analysis Strengths From its sustained innovation, the major strength that is manifest is that Apple has identified, focused on and built a portfolio of core competencies. Prahalad and Hamel (1990) argued that identifying the core competencies to focus on is one of the difficult tasks for organizations to muster. The duo further added that focusing on core competencies creates a systemic advantage that competitors cannot imitate. Apple’s core competencies are in designing of user interfaces from its first Macintosh, unique operating system built for multimedia, strong research and development culture and secretive organizational culture. When looked at individually, the following competencies may not be as strong as when looked at as the synergy that Apple has managed to make of them. From this core competencies Apple has invented new markets, exploited emerging ones and delighted customers with products that they never imagined but needed (Prahalad & Hamel, 1990). Other Apple strengths include a very strong financial position, up to US$ 100 billion in cash reserves (Nuttall, 2012); a very strong brand; and an extremely loyal customer base. Weaknesses The company’s current success makes it easier to identify the company’s strengths than its weaknesses. However, like any organization Apple too has its weaknesses. They include the iconic personality of its former CEO Steve Jobs. All the products and services that are driving the company’s current success have “his fingerprints all over them”. Investors and consumers are not fully confident with the company continuing to be as innovative or revolutionary in its future offerings in the absence of Steve Jobs. Secondly, Apple products are relatively more costly than their substitutes. This makes the products out of reach for the majority of the developing world, which is a vast and emerging market that Apple’s rivals could exploit to their advantage. Thirdly, Apple products and services have a relatively low presence in government and business segments. These two markets too could be exploited by its rivals to gain the resources with which to beat Apple in future. Opportunities Apple has numerous opportunities for it exploit. To begin with, the growth of the middle-class in Brazil, Russia, India, China, South Africa and other parts of the developing world is good news for Apple for two reasons: the middle-class can afford to pay for the premium prices and they reduce the impact of Western Europe’s economic squeeze on the company’s bottom line. Another opportunity are for the company to use its market leadership of tablets to enter into strategic alliances or deals with major players in the entertainment industry for exclusive content almost akin to iTunes dominance of the music industry. Threats Apple’s major threat comes from the fact that it is in an industry that experiences both rapid and disruptive change in technology. This means that the company could easily lose its market share to the next new thing from a new entrant or its stronger rivals in the platform business: Amazon, Facebook and Google. Secondly, Apple is still largely over reliant on the US and Western European markets whereas companies such as Samsung, Acer and LG that have experienced growth from the emerging markets could use their experience in these regions to beat Apple in these high volume markets. Potential opportunities for growth From the company’s mission it is clear that Apple believes in focusing on few projects at any given time. In addition, the company believes that it has to own and control the primary technologies behind its products. Much like Prahalad and Hamel (1990) advocated, Apple focuses on developing products and services that emanate from its core competencies. With these statements in mind, at the current moment intensive growth strategies would offer Apple the best opportunities. According to Kotler and Keller (2008) intensive growth makes sense if opportunities have not been fully exploited in the company’s products and markets which is the case for Apple. Apple’s key products iPod, iPad, iPhone and their associated services iTunes, iBookstore and App Store are still in the growth phase of their product lifecycles. I. Market penetration Apple has largely concentrated on the consumer segment and has made limited impact on the corporate and government segments of the market. This is a very lucrative market segment largely dominated by Windows and Intel powered devices. The Apple iPad could potentially be used to increase the usage of Apple products and services in the corporate and government establishments. II. Market development As discussed under company threats in the SWOT analysis, Apple is too reliant on the US and Western European markets yet other nations such as Brazil, India, Turkey, Egypt, South Africa, Colombia and Indonesia are predicted to be the future of the retail industry (Deloitte, 2011). Apple has to focus on growing its presence in these new markets if it is to achieve global leadership and to reduce the effect of the cannibalization of its product sales in the US and Western Europe. For example, the iPhone is the number one smartphone in the US by market share but globally it lags behind Nokia and Samsung. III. Product development Apple consumers are accustomed to continual improvements in the company’s products and services. In addition, having introduced previously un-exploited products to the mass market such as the iPad, consumers are discovering new uses as well as new needs. To add to this the company is offering a platform that supports other businesses that are also stretching the capabilities of Apple’s products and services. To fulfill both its customers’ needs and its business needs the company has to continue to improve or augment its products and services. Proposed Growth Strategy All the three growth strategies proposed above – market penetration, market development and product development – present viable alternatives for Apple to pursue. However, from the discussion conducted in this paper with regards to market environment analysis and SWOT, product development is the most suitable for Apple to pursue now. The biggest threat to the organization is the rapid and disruptive change in technology. Product development ensures that the company continues to identify and build upon its current portfolio of competencies. According to Hamel and Prahalad (1996) companies that want to sustain their competitiveness in future must focus on building and continuously modifying their portfolio of core competencies as competitors imitate or learn to imitate their old competencies. The second reason why product development portends the best strategy for Apple is that it can also enable the company to grow its products in the emerging markets without lowering its brand image. Apple’s biggest challenge in the emerging markets and the developing world has largely been the high cost of its devices. With its strong research and development abilities, the company could adopt frugal innovation tactics to design products specifically targeting these cost-conscious market segments. Finally, product development could also enable the company to design products that are suited for the government and corporate market segment. Apple needs to differentiate its products given the possibility of either quickly saturating its consumer market or cannibalizing its own sales with each new product that it releases. Moreover, one cannot ignore the fact that most of its competitors have differentiated their product offerings to suite the different customer segments. For example, Facebook has individual, group and company pages, Google has Google Apps for individuals, businesses and nonprofits and so on. Product positioning and communication of value In this section, we assume that Apple takes the challenge to differentiate its product offerings and develops an iPad for corporate clients. Some of the features it will have are: (1) push-to-video where employees with iPads can quickly use video and audio to discuss on the go; (2) video conference, for telecommuting staff; (3) for marketing or corporate sales calls to replace PowerPoint’s on projectors such that the presenter simply sends whatever she is presenting to the clients device on-site, as the meeting is going on. References AAPL Stock Price Today - Apple Inc. (2012, March 23).WSJ.com. Retrieved March 23, 2012, from http://quotes.wsj.com/AAPL Apple. (2011). Apple Inc., Form 10-K for the Fiscal Year Ended September 24, 2011. Apple Inc. Chaffin, B. (2009, January 21). Apple COO Tim Cook Lays Out Apple Manifesto, With or Without Steve Jobs. The Mac Observer. Retrieved March 23, 2012, from http://www.macobserver.com/tmo/article/apple_coo_tim_cook_lays_out_apple_manifesto_with_or_without_steve_jobs/ Deloitte. (2011). Leaving Home: Global Powers of Retailing 2011. Deloitte LLP. Gunelius, S. (2010, July 3). The Shift from CONsumers to PROsumers. Work in Progress. Retrieved from http://blogs.forbes.com/work-in-progress/2010/07/03/the-shift-from-consumers-to-prosumers/ Hamel, G., & Prahalad, C. K. (1996). Competing for the future. Boston, MA: Harvard Business School Press. Kotler, P., & Keller, K. (2008). Marketing Management (13th ed.). New York: Prentice Hall. Manjoo, F. (2011, October 19). The Great Tech War of 2012. Fast Company. Retrieved October 22, 2011, from http://www.fastcompany.com/magazine/160/tech-wars-2012-amazon-apple-google-facebook Nuttall, C. (2012, January 26). Apple’s $100bn reserve ripe for spending. FT.com. Retrieved March 23, 2012, from http://www.ft.com/intl/cms/s/2/2c1c3c1a-47f0-11e1-b1b4-00144feabdc0.html#axzz1pwSF4h5b Porter, M. E. (2008). The Five competitive forces that shape strategy. Harvard Business Review Online, R0801E, 1–18. Prahalad, C. K., & Hamel, G. (1990). The Core competence of the corporation. Harvard Business Review, (May-June), 79 – 91. PwC. (2010). Turning the Page: The Future of eBooks (Technology, Media & Telecommunications). PricewaterhouseCoopers. Siegel, M., & Gibbons, F. (2009, July 13). Apple Inc and the E-book Reader. Stanford University School of Engineering.  Read More