Apple - Function and Form - Essay Example

Apple- Function and Form Executive summary 3 Introduction 4 Background about Apple 4 Explaining Business Level Strategy 5 Defining Competitive Advantages 5 A Brief Description of the Model being applied in this Report 6 Task 1 6 Differentiation 7 Task 2 7 Advantages of the differentiation Adopted by Apple 7 Disadvantages of Differentiation strategy Adopted by Apple 8 Task 3 10 Conclusion 10 Recommendations 11 References 12 Bibliography 14 Executive summary The differentiation element of Porter’s generic strategy entails the effective designing of the products and services of a company subject to those products of its rivals. Apple has been successful in designing its devices with a new look in a bid to be identified by the customers in comparison to the other companies. According to Bordes (2008), the element of differentiation has led to the creation of unique brand feature and improvement of customer service delivery. In the current scenario, the personal computers of Apple have been providing its customers with best quality services and products besides offering them at affordable price. The company has also diversified in its business areas such as development of mobile devices, iPod and iPhones applying the notion of differentiation in its business-level strategies. There are various advantages and disadvantages of differentiation to the company. A productive differentiation strategy is one of the strengths of Apple. The implementation of this strategy has resulted in the expansion of its product line from personal computers to mobile communication devices, software applications and operating systems. Moreover, the differentiation strategy has led to development of premium price for its products. The premium price is the process, which comprises a hike in the price of products so that a positive and healthy perception can be created among the buyers of the company. The company is also renowned for its highly efficient personnel. Apple had also created numerous products with advanced technology so that its customers are satisfied at the full (Bertone, 2009). Apple faces the negative effects of the imitation strategies practiced by its rival companies. This can be curbed through the adoption of focus strategy, which emphasizes a particular market segment, so as to build its customers’ loyalty to a greater extent (Baxter & Wainwright, 2013). In addition, the company has faced strong competition regardless of the adoption of differentiation strategy. Apple has also failed to consider the price conscious buying behaviour of its customers. This has culminated in loss of cost leadership due to enticing of customers through price reduction. Moreover, the differentiation strategy has led to change of customer preferences, which has reduced the demand of some products. Apple should maintain the application of Porter’s Generic strategies framework. In addition, the company should fully adopt the differentiation strategy and emphasize on its innovative strengths and its IT prowess with regard to improving its customer service and products. The company should also be proactive with regard to identification of potential risks of increasing competition facing the enterprise in order to harness resources to curb the risks. Introduction Background about Apple Apple Inc. is an American manufacturer and designer of mobile devices, digitalised music player and personal computers since January 3rd of 1977. Few years after its foundation, it expanded its business by manufacturing variety of items, such as software applications, operating systems and also provides with the requisite support services. The company introduced its first Apple I computer in the year 1976, followed by its major success in the following year (Alacra Inc, 2013). Explaining Business Level Strategy Appreciation for the continuous success of the company can be delivered to the business-level strategies applied by Apple. Conceptually, business level strategies tend to assist companies to develop their products and/or services as well as their marketing strategies in better alignment with the market trends and the various facets of the targeted customers’ demand, delivering competitive advantages to the organisation. As effective business level strategies contribute to brand image and better brand loyalty for a company, it also enhances sustainability prospects of the company to a substantial extent (Ashridge Business School, n.d.). Correspondingly, one of the major business level strategies adopted by Apple is its differentiation strategy. To expand its market share and gain competitive advantages in the IT industry, Apple has also taken initiatives for entering into lease contracts, with the establishment of its stores, which has been quite effective to diagnose and respond to the consumer demands in the modern market periphery (Stony Brook University, 2013). Defining Competitive Advantages Arguably, the business-level strategies adopted by Apple have been of great help in gaining competitive advantages. Competitive advantages is generally referred to the benefits derived by companies over its major rivals by providing its customers with greater attention such as offering low price and quality products and additional benefits, which can be obtained through the payment of high price (Ehmke, n.d.). A Brief Description of the Model being applied in this Report In this essay, the model that has been applied is differentiation in the Porter’s Generic Competitive Strategies, which determines whether the profitability of the firm is above or below the average level of the industry and hence, assists in predicting the competency level of the organisation. This Porter’s model consists of three elements, i.e. differentiation, cost leadership and focus, which assist the companies in practicing their business level strategies to attain their desired objectives and obtaining competitive advantages accordingly (University of Cambridge, n.d.). In this essay, the competitive strategy that Apple has adopted for maintaining its leadership position (differentiation) has been explained along with the advantages and disadvantages of the strategy. Task 1 Apple is completely a technology based company, which has been widely appreciated for its sustainable development whilst in its course of preserving its competitive positioning in the global market. The majority of the sales has always been utilised by Apple in designing its strategies for gaining the benefits of successful positioning in the global marketplace. Correspondingly, its competitive strategies can be critically assessed applying the Porter’s generic framework, which focuses on three wide dimensions, i.e. cost leadership, focus and differentiation. The description of one of these strategies, differentiation, as adopted by apple in accordance to the different aforesaid elements of Porter’s generic strategy has been mentioned below. Differentiation The differentiation element of Porter’s generic strategy emphasises the effective designing of the products and/or services of one of the company in comparison to its rivals. Correspondingly, Apple has been successful in designing its devices with a new look so that it can be easily identifiable by the customers in comparison to the other companies. This action of Apple has been argued to be quite beneficial for the company to reward it with better competitive advantages within the IT industry. The other benefits that Apple has derived with the use of the differentiation strategies include creation of unique brand feature and improvement of the customer services. Arguably, it has been with the virtues of these strategies that Apple is regarded as one of the most renowned brands in the IT industry. In the current scenario, the personal computers of Apple have been providing its customers with best quality and defect less services and products besides offering them with the advantages of low cost. In the current phenomenon, Apple has also been observed to be focused on diversifying its business areas such as development of mobile devices, iPod and iPhones applying the notion of differentiation in its business-level strategies (He, 2012). Task 2 Advantages of the differentiation Adopted by Apple In the previous section, it has already been mentioned that among Porter’s generic strategies, Apple gives much of its focus on applying productive differentiation strategies. With the adoption of this strategy, the company has been able to expand its product line from personal computers to mobile communication devices, software applications and operating systems. It has also been able to expand a wide range of products in such an effective manner that none of its competitors have still been successful in competing with it. Moreover, through the adoption of differentiation strategy, Apple has been able to develop premium price for its products. Conceptually, the premium price is the process, which comprises a hike in the price of products so that a positive and healthy perception can be created among the buyers of the company. The other advantage that Apple has been able to derive through the use of differentiation strategy is the development of highly skilled and creative team of personnel. This team of personnel has been obtained during the unique brand identity and improvement of the customer services. Apple had also created numerous products with advanced technology so that its customers are satisfied at the full (McAfee, 2002). Disadvantages of Differentiation strategy Adopted by Apple In the course of implementing the differentiation strategy, the foremost challenge that Apple has to face indicates towards the effects of the imitation strategies practiced by its rival companies. The only way to overcome the product expansion facility of differentiation strategy is possible with the adoption of focus strategy, which emphasizes a particular market segment, so as to build its customers’ loyalty to a greater extent. Although Apple has been extracting many of the competitive benefits from its differentiation strategy, it has also witnessed a lacuna remains in higher rate of risks regarding the strong competition given by its competitors. Another disadvantage that has been observed in the case of Apple’s differentiation strategy is that the company does not give emphasis to the price conscious buying behaviour of its customers. Rather, it gives much of the importance to the customers who are willing to purchase irrespective of its high pricing strategy. For this reason, the company has often discarded the cost leadership strategy as it gives emphasis to the reduction of costs for attracting a greater base of customers. Consequently, the challenge that the company have been facing due to the implementation of differentiation strategy is the potential risk of change in customer preferences. One of the major reasons for the change in taste of the customers is the competitors who adopt the focus strategy will develop newer products in lower prices. In this situation, the customers might switch on to the other company’s similar product and thus, Apple will have to witness a decline in its product demand and preferences within the market (Duncan & et. al., 1998). In precise, the advantages and disadvantages that Apple had obtained with the adoption of differentiation strategy has been well represented in the below table. Advantages Disadvantages Expansion of Apple’s product line ranging from personal computers to software applications Risk of competitors adopting focus strategy to give back strong competition Develop premium price for its products and services Lack of importance to the customers’ price conscious purchase behaviour Development of highly skilled and creative team Potential risks of change in customers’ tastes and preferences Task 3 Conclusion The findings obtained from study have given a clear idea of the differentiation strategies that Apple has been adopting with the aim of developing and preserving its competitive position. With the application of Porter’s Generic Strategies framework, Apple has been observed to be highly inclined towards adopting differentiation strategy whilst focusing on its innovation strengths and IT related core competencies for improving its product line and also the customer service, which contributed to its augmented brand value. Through this strategy, Apple has not only been successful in developing its product line but also direct the premium pricing system on its products and services. The other benefited obtained by the company through its adoption of the differentiation strategy were identified in terms of the acquired skilled and creative group of personnel delivering adequate efforts on development of newer products along with the attainment of higher customer loyalty. Apart from all these benefits, there were also some drawbacks identified as witnessed by Apple, with the implementation of the differentiation strategy within the company. For instance, Apple’s failure to identify the potential risks of increasing competition and cope with the imitation strategies applied by its rivals, change of customers’ tastes and preferences and also the absence of attention towards the price conscious customers had been observed to impose serious threats to its competitiveness in the current market scenario. Recommendations As was observed, with the implementation of the differentiation strategy, Apple had to face the risk of change in the customer’s tastes and preferences. Suggestively, in order to deal with this risk, the company must frequently keep a track of the changing tastes and preferences of the customers, which can be possible with the regular obtainment of customer feedbacks. As per the study findings, Apple has also been lacking in paying due attention towards the customers’ price conscious buying approach, being entirely emphasised towards quality development and niche market appraisals. It was in this context that because, product demands in the niche market of IT industry alters rapidly, creating a severe impact on product lifecycle transformations and substantial pressure on the company to innovate new products at frequent intervals. Thus, focusing on its turnaround strategies, Apple must take special initiatives towards the reduction of the price of its existing products. On the whole, it is quite essential that Apple delivers greater focus on aligning its product strategies with the altering market trends rendering due significance to its customers tastes and preferences as well as competitors’ initiatives. References Alacra Inc, 2013. Apple Computer, Inc. Company Profile. [Online] Available at: http://www.alacra.com/acm/2009_sample.pdf [Accessed December 31, 2013]. Ashridge Business School, No Date. Corporate Level Strategy – Executive Summary. Blacklock. [Online] Available at: http://www.ashridge.com/Website/Content.nsf/FileLibrary/899F159F551DEBC980257A D900438027/$file/CorporateLevelStrategyExecutiveSummary.pdf [Accessed December 31, 2013]. Bidgoli, H., 2011. Using Information Technologies for Competitive Advantage. Premier Thoughts: The CSUB Business Blog. 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