Strategic Analysis of Apples iPhone 6-6 Plus - Case Study Example

Strategic Analysis of Apple’s iPhone 6/6 Plus By + INTRODUCTION Apple Inc., the manufacturer of iPhones, is globally being applauded for the massive sales it recently recorded with regards to the sale of its newest smartphone model, iPhone 6. China is considered to have been the hub of sale for the firm’s smartphones as is evidenced in the company’s last quarter reports for the year 2014 (Washington Post Economy 2012). The current global trends in relation to smartphones usage are quite overwhelming given that there is a great surge in the purchase of the smartphones by consumers across the globe, especially in China (Davenport, Leibold & Voelpel 2006.p.86-89). The effect of this growing desire and demand by consumers to own a smartphone, particularly the iPhones manufactured by Apple Inc. is creating a strong competitive force in the market for smartphones. Apple Inc. is a principal designer, producer and retailer/marketer of media devices, mobile communication, personal computers, software, portable digital music players and other peripherals. However, it stands out in the smartphones production and marketing in the global market with operations spread out in several countries including the US, China, and the larger parts of Europe, Asia, Africa and Australia (Afuah 2003). In seeking to achieve its global goals and mandates of producing the best gadgets using the latest and modern technologies available, the company has had to present itself as one that enjoys a strong brand positioning for the smartphones, its main products so far (Kotler & Keller 2012.p.89-93). Therefore, the recorded positive growth as seen in the quarterly, semi-annually and annual reports of the company are to be attributed to its embracing of technology in its innovation bids; hence, enabling the global expansion from the original base in the US to other countries and markets such as in China, Europe, Africa, Asia, and Australia. In this strategic analysis report, the key concern shall be to present the effect of the recent company’s sales trends of iPhone 6/6 Plus will affect its current competitive and strategic position in the market of smartphones (Glance 2012). Subsequently, the study shall seek to present answers to questions relating to the current strategic position of the company; its internal and external drivers of change, and the impact of those to its strategic position; how the organisation adds value to its strategic position; and ultimately present an analysis and implementable recommendations on the sustainability of Apple’s strategic position. The successful presentation of this strategic analysis report shall be enhanced by the application of various representations such as Porter’s Five Forces model and PESTLE analysis in the assessment of the company’s industry’s external environment. Subsequently, the report shall engage the Porter’s Generic Strategy and the SWOT analysis in assessing the internal environment drivers of the company used in measuring its sustainability (Kotler & Kotler 2009). Finally, based on the conducted analyses, a value chain analysis and resource audit shall be undertaken with the objective of evaluating and presenting for discussion the strategic resources and competencies available to Apple Inc. with regard to its production and sale of iPhones 6/6 plus. Recommendations on how and where the strategic resources and competencies can add value to the company’s current operational systems shall also be presented with the aim of furthering the firm’s targets and objectives of uniqueness and sustainability in the smartphones market/industry. STRATEGIC ANALYSIS The strategic analysis of Apple Inc. in relation to the iPhone 6/6 Plus shall be conducted in light of the application of various models such as Porter’s Generic Strategy, Porter’s Five Forces model, SWOT analysis and PESTLE analysis (Kazmi 2007). a. Porter’s Generic Strategy There are three main generic strategies that have been defined by Porter in this model; differentiation, cost leadership, and focus. These strategies are based on the dimensions of competitive advantage and scope that the organisation pursues and are as presented below. Source: http://www.mindtools.com/pages/article/newSTR_82.htm In seeking to meet the perceived value for its smartphones as perceived by the consumers, Apple Inc. was required to ensure that it meets the product, contextual and service quality experiences of its consumers while assessing their purchase intentions (Hutt & Speh 2013.p.145-148). In the case of Apple, this was achieved through a broad differentiation strategy that was characterised by higher costs for its products. As such, the iPhone 6/6 Plus is regarded by the company as a greatly differentiated smartphone having dynamic features from those of the competitors. As a result, the company was able to set itself globally as a highly competitive and profitable than its competitors, an aspect largely seen in its increased sales of up to 70% in China alone, quarterly profits if $18 billion in last quarter of 2014 and net cash revenues amounting to $142 billion in the same period. Apple achieved high growth in the sales of the iPhones 6/6 Plus by adapting to essential factors in their production due to the high-quality, personalized service and exceptional design that it offered in its smartphones (Kotler & Keller 2006). The sale of iPhones 6 Plus by Apple Inc. in the last quarter of 2014 alone was 74.5 million number of phones, an indication of high demand the iPhones fetched in China and increased the gross profit margin. Subsequently, the scope of the strategy used in their marketing was a broad one; thus, targeted consumers of diverse ranges such as from unsophisticated beginner users of the iPhones to users with special needs powers, and gained competitive advantage in the market (Mcloughlin & Aaker 2010). Therefore, based on the Porter’s generic strategy, Apple Inc. was able to maintain a culture of global consumers made to feel trendy with their brand equity, which is distinctive and prestigious (Afuah 2003.p.126-128). b. SWOT Analysis This is an indicator used to assess the strategic ineptitude of an organisation involving the assessment of the strengths and weaknesses offered by the product. However, this analysis shall present the strengths and weaknesses of the iPhone 6 Plus as marketed and sold by the company in the China market (White & Bruton 2011). This is as presented in table 1 below. Strengths Weaknesses Sale of a universally accredited brand (iPhone 6 Plus) that is well-known led to the revolution of the smartphones’ industry. Apple being a big name in the technological world brings with it much responsibility with the design of the iPhone 6 Plus, which can map to it application problems that might result in the frustrations of consumers. Incredible brand loyalty as witnessed by the massive purchase of the new iPhone 6 Plus model by consumers. For instance, people can line up for long hours and in freezing conditions just to obtain the new models. Most consumers perceive iPhones as luxuries from an anti-capitalism point of view; hence, most opt to spend the amount used in purchasing the iPhones in other economic units. Employing high-end technology that is used to offer unique iPhone features for the purpose of first-degree price discrimination and satisfaction of luxury of consumers (Hutt & Speh 2013). The utilisation of the high technology and quality hardware have resulted in the iPhone becoming costly; hence, cannot be afforded by low-end income consumers. iPhone 6 Plus presents the ease of use to the consumers; thus, utilising their designs for user-friendly elements for both the software and hardware parts. iPhone 6 Plus is only equipped with iOS which are a closed operating system from Apple; hence, making it hard to obtain apps that work with the iOS elsewhere apart from the App Store, as opposed to Android that has several distribution channels. Based on the above analysis, it is evident that the achieved sales by Apple in China of about 74.5 million iPhones 6 Plus was achieved by the adoption of the strengths against the weaknesses of the product in the market. Consumers were largely directed by the benefits that were derived from the use of the product rather than from the competitor products; hence, setting a competitive advantage to Apple Inc. in the market (Cant 2006.p.102-105). For instance, while no breakdown of the sales is given, the result was a rise in the shares of Apple by over 5% in trading. EXTERNAL ANALYSIS a. PESTLE Analysis In order for Apple to be effective in its operations and gain a competitive advantage in the current market for iPhones that is rapidly gaining recognition in the manner by which it changes lifestyle, it will be essential for it to undertake an external analysis of the environmental factors that are beyond its market control, but affecting its operations and sales turnover (Dodgson, Gann & Salter 2008.p42-46). This external analysis is essential in the foreseeing and outlining of the strategies that can be applied by the company in order to attain a competitive environment. i. Political Factors According to the financial report by Apple in 2012, much of its supply and manufacturing of the critical parts for the iPhone 6 Plus is undertaken by sole-sourced distributors or outsourced partners that are not from China, but from other areas such as Asia, Europe, and US. As such, the outsourced partners within China where the final assembly of the hardware is done may be affected by the presented logistical or manufacturing factors that are presented in these locations or while the required parts are in transit. The disruptions may include failures in the information technology systems, natural and man-made disasters, political issues, military actions, environmental, and economic actions among others (Saxena 2009.p.56-59). Subsequently, the manufacturing process of the iPhones 6 Plus might be affected by the political factors of war, public health issues, geopolitical uncertainties, terrorism, and other business interruptions that can cause a damage or disruption to the global economy and international commerce. Thus, the effects of these on the company would be of a material nature as it would result in the loss of the competitive advantage it has acquired from the sale of the iPhones 6 Plus. Largely, the company may be affected in areas such as logistics, manufacturing, supply, customers’ satisfaction and channel partnerships. Finally, in China, there have been witnessed revolts from workers’ unions for the presumed poor working conditions offered by Apple Inc. In addition to this, the business operations may be subject to interruptions caused by fire, natural disasters, labor disputes, terror attacks, and public health issues among others (Davenport, Leibold & Voelpel 2006.p.78-79). ii. Economic factors Economically, the company’s operations and production of the iPhone 6 Plus may be affected by aspects such as global recessions that would affect its retail performance. Subsequently, the follow-on impacts from the global economic conditions on its suppliers may influence the ability of the corporation to acquire the prerequisite apparatuses for the manufacture of the iPhones 6 Plus smartphones; hence, affect the productivity and competitive advantage of the firm. Therefore, the company has often remained vulnerable to risks of significant price increases and supply shortages that result in the decrease of its gross margin percentages. Finally, the continued strengthening of the US dollar against other currencies would negatively impact on the gross margin of Apple Inc.; hence, the gross profit margin from the sale of iPhones 6 Plus (Ahlstrom & Bruton 2010). iii. Social factors The requirements of the company during the purchase processes is that it obtains, stores and uses the personally identifiable information of its consumers, employees and business partners. This move of obtaining such private information by the company would result in the company incurring greater risks of the target in order for attackers to obtain the high profile information of some of its clients stored. Thus, the storing of such information by the company could affect its competitive advantage position as an external driver given that most potential clients would shy off from purchasing the iPhone 6 Plus for fear of their private and confidential information being compromised (Dodgson, Gann & Salter 2008). There is also being witnessed a massive change in the consumption behaviours of consumers across the globe given that most do not prefer high-end technology for reasons personal and in other instances for not knowing how to use it (Le Masson, Weil & Hatchuel 2010.p.156-158). Subsequently, most people don’t perceive a significant difference in the brands of the iPhones as iPhone 5 is equally liked as iPhone 6 Plus; hence, very few consumers would prefer the change in the brand or model. iv. Technological factors The company is faced with high costs or expenses incurred in production/manufacturing and marketing of the products that becomes a crucial matter in the competitive market of smartphones (Mascarenhas 2011). For instance, the expenses in 2010 were $1.8 billion and rose to $3.4 billion in 2012. v. Environmental factors The company was able to attain a competitive advantage over its competitors such as Samsung through the sale of its hardware and software products to government and enterprise consumers in the China as is in other geographical segments where it operates (MacRumors.com 2008). As a result, the iPhones 6 Plus were deployed in the market based on their productivity, performance, seamless integration with other technologies and the ease of their use by consumers (White & Bruton 2011.p.78-82). Competitive advantage was gained in this aspect in the manner that the iPhone 6 Plus was more compatible with other thousands of third-party business services and applications. This was an external driver to the recorded high profits and sales of the products in that the tools and applications contained in the iPhone 6 Plus allowed for the secure development and deployment of custom applications and remote administration of the device (White & Bruton 2011). vi. Legal factors The processes of the corporation are exposed to domestic and international laws and regulations. These laws and regulations have had an impact on the company’s activities such as advertising, consumer protection, labor, real estate, digital content, telecommunications, e-commerce, promotions, anti-corruption, requirements for data privacy, restrictions on cash repatriation, foreign exchange controls, environmental and public health and safety issues, among others (Cheverton 2004.p.88). b. Porter’s Five Forces Analysis This is a modest but dominant tool that seeks to comprehend where power lies in a product or business situation. The five forces analysis, when combined with PESTLE analysis, have often resulted in the creation of useful views of an industry’s future structure. To Apple Inc. this analysis is significant as it will enable it to know where its strength lies in relation to the competitive position it takes while moving to other competitive advantage positions. This is as highlighted by the following diagram. Source: http://commons.wikimedia.org/wiki/File:Porters_five_forces.PNG a. Bargaining power of suppliers: The microprocessor that was used to make the iPhones 6 Plus was supplied by other companies such as Philips and Samsung. Other firms supply chips essential for the making of cameras, motion sensors and other display features of the smartphone. In regard to this the behaviour of the suppliers is critical to the growth of Apple’s iPhone 6 Plus since without good relations with the suppliers, Apple Inc. will it hard to manufacture the iPhones adequately and maintain its competitive advantage (Ahlstrom & Bruton 2010). Suppliers have an influence on the continued growth of sales turnovers for the iPhone 6 Plus as the price they set for the supplies influences the pricing strategy adopted by the firm for the finished products. b. Bargaining power of consumers. Consumers’ choices for a brand are largely influenced by factors such as brand equity, product quality, price and services offered by the product. Largely, most consumers perceive the iPhone 6 Plus as a luxury commodity due to being expensive as compared to other smartphones from other firms (Roy 2009). While massive sales were registered for the last quarter of 2014, care needs to be taken to ensure that dissatisfaction is not noted among customers of iPhone 6 Plus for the future c. The threat of new entrants. The market for smartphones is intensively getting saturated with new companies and rebranding by already existing ones. Thus, it is expected that Apple Inc. will strategise well so as not to be overtaken by competitive firms such as Samsung and Android. Samsung has recently grown a lot of interests in smartphones and Android being a partial free operating system could influence the competitive nature of the smartphones market (Ahlstrom & Bruton 2010). d. The threat of substitutes. In the highly technological world in which Apple Inc. operates, it should be wary new substitutes to the smartphones technology that it uses as consumers would easily try out such technology owing to its revolution or new invention (Hill & Jones 2010.p.68). e. Competitive rivalry in the industry Porter’s generic strategy and PESTLE analysis as highlighted above point to a high competition of smartphones among firms; hence, Apple Inc. should be focused on the highest quality, differentiation and moderate pricing strategies to combat the threat of competition given at the moment it has the highest share of the smartphone market (Afuah 2003). Overtime, Apple has been able to combat the challenge of competitive rivalry by engaging in research and development and innovation practices. Specialising in smart technology as witnessed by the soon to be released smart watch should give the firm a competitive advantage over rivals as it is driven by innovation. Increased competition is also noted by the nature of technological development in the industry that has continued to become more efficient with less energy consumption and increased processing power (Basu 2004.p.225-228). Type of threat Magnitude Entry Moderate Power of suppliers High Buyers/Consumers’ bargaining power Moderate to high Substitutes Moderate VALUE CHAIN ANALYSIS Value chain activities Equivalent practice, procedure or practice The infrastructure of the firm High organisational culture. Commitment to high quality for the iPhone 6 Plus brand. Main operating segments in China, US, Europe, Asia, Middle East, Africa and Asia Pacific. Human Resources Selective hiring process as it attracts and finds talent. Generous employee benefits program seeking to retain talented employees. Procurement Smartphones, iPods, personal computers, digital motion cameras, and portable digital music players as products. Machines and equipment for manufacturing and assembly. Rational self-interest with the merchants/suppliers. Technological development Patent filing that protects its significant innovations and inventions globally. Research and development that has seen the expenditures rise. Inbound logistics Delegated acquisition of raw materials. Automation of receiving systems; thus, reduces space and facility footprint requirements. Outbound logistics Stylish and economic packaging that is eye-catching takes less space and weight and reduces shipping and disposal costs. Use of authorised dealers and Apple stores; hence, maintained standards over presentation. Direct shipment from China to minimise on inventory build-up costs. RECOMMENDATIONS AND CONCLUSION This strategic analysis report sought to analyse the market position of Apple’s iPhone 6 Plus smartphone following recent releases of outstanding profits. Given the company’s global reputation consumers line up willingly to purchase the phone due to satisfactory results already achieved from the same (Hill & Jones 2010.p.75-79). While acknowledging the competitiveness of technology, the firm needs to engage in research and development and innovation constantly. This analysis utilised various strategies such as PESTLE analysis, Porter’s generic strategy, SWOT analysis and Porter’s Five Forces strategy. While Apple is on top in relation to market domination and sales of smartphones, this is not assured for the long run given the stiff competition and rivalry from firms such as Samsung (Basu 2004.p.254). Given the trends in the external environment, technological and socio-cultural aspects, Apple Inc. should strive to ensure ultimate convergence of its devices that will define its market. It should also leverage its internal knack for partnerships, usability and close OEM partnerships to enable it develop more innovative devices to suit its consumers and unique systems (Henry 2011). Finally, it should seek for environmentally friendlier partnerships with firms such as Samsung to enhance learning and provision of better technology. Subsequently, it should streamline its system as an integral part of enhancing its operations, administration and development of the convergence device (Hill & Jones 2010). References List Afuah, A. (2003). Innovation management: strategies, implementation and profits. New York, Oxford University Press. Ahlstrom, D., & Bruton, G. D. (2010). International management: strategy and culture in the emerging world. Australia, South-Western Cengage Learning. Basu, R. (2004). Implementing quality: a practical guide to tools and techniques. London, Thomson Learning. Cant, M. C. (2006). Marketing management. Cape Town, South Africa, Juta. Cheverton, P. (2004). Key account management in financial services: tools and techniques for building strong relationships with major clients. London [u.a.], Kogan Page. Davenport, T. H., Leibold, M., & Voelpel, S. (2006). Strategic management in the innovation economy strategy approaches and tools for dynamic innovation capabilities. 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