Effect of Recent Recession on Apple Strategic Marketing Management Practices - Essay Example

?Critically evaluate how the recent recession has been affecting strategic marketing management practices of Apple Critically evaluate how the recentRecession has been affecting strategic marketing management practices of Apple by (NAME) to (DEPARTMENT) in partial fulfillment of the honors requirements for the degree of (DEGREE NAME) (INSTTUTE NAME) April 23, 2013 Introduction and Background Apple has made its mark in the technology and computer industry over the years but during the last decade it has been more famously known for its i-phone range, which has turned into world’s leading smart phone. Apple began its journey by launching the first Apple computer on the 1st of April, 1976; Apple I was launched, by Steve Wozniak and Steve Jobs (Bellis). Apple I was the first that used a single circuit board, but did not gain attention of the customers until it debuted in the 1977 in one of the local computer trade shows (Bellis; apple-history, 2013). By 1980 as the sales of the company were experiencing a high the company also grew considerably in size, by the time the Apple III was launched, the company employed several thousand people and was conducting international business (apple-history, 2013). Lisa and Macintosh are hall mark products of the Apple Company. During the 1980’s the Mac II gave the windows a really tough time, taking it to the verge of a flop, due to its expandability and viability (apple-history, 2013). The release of power books in 1991 put Apple back in the race it was losing against windows 3.0, and advancements were being made at the same time towards the PDA (Personal Digital Assistant) (apple-history, 2013). Formerly known as Apple Computer; Apple Inc. is currently the biggest tech company in the world that employs more than 49,400 people and gross profit of more than $ 65 billion (Rodrigo, 2012). Competitors Apple’s competitors in the technology and computer industry are Microsoft, Dell, Motorola, LG, and Nokia. I-phone has been damaging the sales of companies like Nokia and Motorola (Rodrigo, 2012). LG might be selling high percentages in phones yet they are not experiencing the same profitability as apple (Rodrigo, 2012). Competitive Advantage The competitive advantage that apple holds against its competitors comes from its diverse line and range of products and the software and hardware integration of their range of products; which they have achieved over the years (Magee, 2011). Apple has led to the jointed manufacturing of computers and mobile devices, whereas this was previously done by separate companies (Magee, 2011). This allows for shared functioning and information processing, connectivity is the main feature giving these products a competitive edge (Magee, 2011). Impact of Recession The recession did not impact Apple Inc. as expected and rather than suffering massive losses like its counterparts it just received a jolt at its retail stores (MaCNN, 2009). The number of visitors per Apple retail store suffered a drop of 1.8%, and the revenues fell 17.4 percent (MaCnn, 2009). 2008 saw a drop for the company’s revenues by 0.6 percent in the last three month period (Oliver, 2009). Apple saw the revenue decrease on per store basis but as a whole the Mac sales increased year over year as compared to 2008 (Oliver, 2009). Apart from suffering a drop in terms of visitor per retail store the concept that Apple retail store follow, showed the success of the strategies employed by Apple (Oliver, 2009). According to Carl Howe, who is the director of consumer research for the Yankee Group said that the company is really tested during a recession, and for Apple, the ‘ think different’ motto appears to be working really well (cited in Rodrigo, 2012). Where economies, banks and companies have drastically suffered at the hands of the recession, Apple has maintained its record sales. Recession tests companies by better execution and Apple is achieving that (Howe, cited in Rodrigo, 2012). Apple’s share value doubled during 2008, the year the recession hit the hardest and computer companies all around were collapsing (Matthews, 2009; Jones, 2009). As the economy gets worse Apple thrives, and without bargaining on its brand (Matthews, 2009; Jones, 2009). Times of India (2012) also declared Apple to be recession proof. Analysts believe that I-phone cushioned apple from the effects of the recession and the smart phone industry which was not as developed in 2008 – 2009 leaves companies like Apple more vulnerable to economic shocks in the coming years (Carew & Virki, 2012). Strengths of Apple The expertness of development in software and hardware for computers (Rodrigo, 2012; SMI, 2013) High Brand Loyalty (SMI, 2013) Since 2006 has a partnership with Intel computers (Rodrigo, 2012) R&D department that is strong (Rodrigo, 2012) Low Debt (Rodrigo, 2012) Weaknesses of Apple Small life cycle of products and services (Rodrigo, 2012). Prices are High (SMI, 2013) Market Share behind Microsoft (Rodrigo, 2012) Apple has a weak business presence (Rodrigo, 2012) Incompatibility with other OS (SMI, 2013) Defects in new products (SMI, 2013) Strategies adopted by Apple As the recession hit, many companies immediately changed their policies towards their customers, products and employees; but Apple persisted on following its approach of innovation in continuing to overcome recession. Apple has relied on the following strategies to maintain its market presence during the financial recession. Innovation One of the prime strategies Apple has utilized during the recession is innovation and quality. According to Steve Jobs, “A lot of companies have chosen to downsize, and maybe that was the right thing for them. We chose a different path. Our belief was that if we kept putting great products in front of customers, they would continue to open their wallets.” (cited in Razeghi, 2010). Steve believes that it is by doing this that they have been able to achieve the status of being one of the two companies in the business of personal computers who are making profit; providing customers with new products like never before is the game changer (cited in Razeghi, 2010). Apple rather than downsizing, invested in R&D to turn out new and high tech products that led to capturing the attention of the customers (Riley, 2010). Through the use of innovation Apple has been able to maintain its visibility for its customers and has not been subject to stagnation (Razeghi, 2010). New products are important to customers and through innovation the company is able to maintain importance in the lives of customers and vice versa (Razeghi, 2010). Cost optimization Apple has employed not cost-cutting but cost-optimization during the recession. When recession hits, businesses focus on reducing costs but that is not exactly the best choice especially for business in technology, it is better to optimize costs that cut them (Riley, 2010). Many companies focus on cutting R&D costs where as Apple invested significantly in this department which proved to be beneficial in the long run for the company (Riley, 2010). Apple has employed cost optimization to focus on the development of new products to compete with recession (Riley, 2010). Apple has focused on long-term profits rather than short-term costs, and rather than minimizing costs it is more focused on maximizing revenues from the incurred costs (Riley, 2010). Apple is also acting as a significant part of the US economy due to its strategy; 500 companies grew 6% over the year 2012 and if Apple is removed from the equation, the growth would be lowered to a mere 3% (Bajarin, 2012). Customer Value To cope with the recession Apple laid specific focus on customer value. Customer value refers to the customer’s willingness to pay the maximum price for a product; a business should create such customer value that is more than the production cost and then monetize it for generating profit (Fern, 2010). Apple has been able to create this customer value that is distributed across the range of the computers to smart phones; and it has been able to achieve that by providing customers with value that matters to them, like branded products, complementary music, and industrial design (Fern, 2010). Like the i-pod, combined with i-tunes has been able to create significant customer value for Apple (Fern, 2010; Razeghi, 2010). Apple currently has a market capitalization that is second in the U.S, next only to Exxon Mobil (Fern, 2010). Generic Competitive Strategy Michael Porter’s generic competitive strategy outlines three approaches for performing above the competitors in the market (Essa, 2005). Apple has mostly focused on differentiation in outwitting its competitors. Differentiation implies to bring forth a product or service that is considered unique and innovative to the industry (Essa, 2005). Apple has brought forth products like i-pod and i-phone that have become the hall mark of the company and are mainly associated with Apple (Essa, 2005). Products that mark uniqueness of the company increase brand loyalty and make the customers less sensitive to paying a high price, as has happened in the case of Apple (Essa, 2005). After the launch of i-phone, Apple reported an increase in its share value of $11.65 or 6.14% (Caulfield, 2009). Where companies and economies have been suffering at the hands of the recession Apple has remained virtually resistant to the impact of the recession and mainly due to its loyalty towards its customers. It has managed to remain unscathed and maintained its place in the industry by innovation and catering to the trust of its customers. It has found a way across the recession that has not impacted its business and profits during the hard times. References Apple-history. (2013). Company History. Apple –History. Available at: http://www.apple-history.com/h4 (last accessed 1 May 2013). Bajarin, B. (2012). Why America Needs Apple. Time. Available at: http://techland.time.com/2012/04/02/why-america-needs-apple/ (last accessed 1 May 2013). Bellis, M. The History of Apple Computers. About Inventors. Available at: http://www.bbc.co.uk/blogs/technology/2009/01/is_apple_recession_proof.html (last accessed 1 May 2013). Carew, S. & Virki, T. (2012). 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