Business Strategy for Promotion of Apple iPhone 6-6 - Report Example

Business Strategy Report - Apple iPhone 6/6+ Case study Contents Contents 2 Introduction 4 Strategic Position 5 Porter’s Generic 5 Bowman’s Strategy Clock 6 Main Competitors 8 Strategic Group Mapping 9 Key External Drivers 10 PESTEL Analysis 10 Porter’s Five Forces 13 Value addition to strategic position 14 Resource Audit 14 Value Chain Analysis 16 Conclusion 18 References 20 Introduction Apple Inc. is a multinational technology company, founded in 1976. The company was founded by Steve Jobs and has its headquarters located in California, United States. This firm is actively indulged into selling and designing computer software, consumer electronics, personal computers, online services, etc. iPhone and iPod manufactured by the company helped in acquiring maximum percentage of market share. On the basis of revenue margin, the firm is considered to be second biggest information technology firm across the globe. Apple Inc. is the most valuable brand and this is due to its innovative business strategies. Strategic position of the company contributes towards its competitive advantage. Success on a global scale is achieved by the company through designing iPod, iPhone, iPad products, etc. These products introduced innovation in the market place. Apple Inc., facilitated innovation through designing music players, personal computers and mobile phones. In this study a thorough analysis will be conducted on Apple Inc. There are multiple competitors present in global market place and similar kind of products is offered by other players. Different strategic frameworks shall be used in this particular research study. These frameworks would be applied on Apple Inc., in order to understand there various business aspects. Apple iPhone 6/6+ shall be taken into consideration in this study. Strategic position of Apple iPhone 6/6+ would be determined through strategic group mapping and Bowman’s strategy clock. This tool shall even reveal major competitors of the company. External environment of the firm would be analyzed with the support of Porter’s five forces model and PESTEL analysis. Value chain analysis and resource audit of Apple iPhone 6/6+ will outline ability of the company in terms of reducing costs and creating value addition for target customers. In last section of the study sustainability aspect of strategic position of Apple Inc., would be discussed. Strategic Position Porter’s Generic Porter’s generic model encompasses four business strategies that are implemented by real world organizations. These strategies are cost leadership; differentiation, cost focus and differentiation focus (Magretta, 2013). Apple Inc. has always launched products which are appealing to particular consumer market segment. Figure 1: Porters Generic Strategies High end products are manufactured by the company for a specific target market. Focus generic strategy is applicable for this company (Porter, 2008). Focus strategy comprises of two important components such as cost and differentiation. Product costs varies for the company, hence cost focus strategy is not appropriate. Differentiation focus strategy is implemented by Apple Inc., for its wide array of products (Hoskisson, Hitt, Duane and Harrison, 2007). The uniqueness of products being manufactured by Apple Inc. makes it aligned with focus differentiation strategy. High priced products should follow differentiation strategy because it makes customers feel value for money. Maximum market share can be explored by an organization when it offers unique products which cannot be easily imitated by other players (Wintzer, 2007). iPhone 6/6+ has been designed by Apple Inc., for the high income group segment. This indicates that this product is launched for specific consumer market. Focus differentiation strategy is also observed in other product category of Apple Inc. Customer culture plays a vital role in product design and consumption (Cole, 2003). An organization needs to analyze customer culture before offering any product. For Apple iPhone 6/6+ characteristics of customers are individuals belonging to high income segment or those conscious about self esteem aspect. The company retains its market share in technology industry by providing premium products to target customers. Bowman’s Strategy Clock Competitive analysis is an essential factor for all business organizations. Bowman’s strategy clock is one such strategic framework that helps to determine position of a company in competitive market place. Apple Inc., in recent years has to face tough competition from other players because unique products are being designed and offered at competitive price range (Ulwick, 2005). The major competitors for the firm are HTC, Sony, Blackberry, Samsung, Nokia, Lenovo and Motorola. Quality and innovation are two most important pillars in success and growth of the company. Figure 2 outlines the application of strategic clock in context of Apple iPhone 6/6+. Figure 2: Bowmans Strategy Clock Apple iPhone 6 as per figure 2 has acquired a specific position in relation to other competitors. Majority of the products launched by Apple belongs to focused differentiation stage. Premium price is paid by customers for Apple products since in return they are provided with superior product quality. Focus differentiation stage clearly states that products manufactured by the company are for a particular customer segment (Pringle, 2008). This form of differentiation has enabled Apple Inc., to retain its market position over the years. IPhone 6/6+ belongs to a price category ranging up to US$849 (Bowers, 2015). High income group customers are able to afford products offered by Apple Inc. There is an increased fascination towards Apple products since it highlights self esteem (Keller, 2008). Competitive price range is offered by other players in the market place such as Nokia and Samsung. Differentiation and low price strategic position is acquired by firms like Sony, Motorola, HTC, etc. Main Competitors The main competitors of Apple Inc. in mobile market are Samsung, HTC, Sony, Blackberry and Nokia. These companies have designed innovative products in order to stay competitive. However price range of products usually differs from one company to another. This factor helps in determining market share of companies. Customers prefer different brands based on product quality, price range, product characteristics, etc. iPhone 6/6+ operates on the operating system of iOS7. This particular device has a battery backup of almost ten hours. Price range for this iPhone falls between US$649 to US$849. These product features are completely distinct for other players in global market place. Samsung mobile phones are based on Android operating system. Some of the products launched by Samsung possess battery life up to 25 hours. Low priced products are offered by Samsung as well as Nokia. The different versions of Samsung Galaxy fall in the price range of US$579 to US$699 (BBC News, 2015). On the other hand, there is another strong contender present in the market place, HTC. The products manufactured by HTC are of high quality and belongs to affordable price range. Price of HTC One is $679, and is a highly preferred brand of customers in current scenario. Blackberry launches competitive products and targets upper middle income segment. Essential features are incorporated in all Blackberry products and it constitutes a price of US$399. Nokia has wide set of products which can be purchased by middle income as well as upper income class segment. Nokia Lumia based on Windows operating system has captured desirable percentage of market share. Strategic Group Mapping Strategic group mapping is another effective strategic framework that is used for analyzing similar business scenario. Unique selling proposition of different firms can be easily assessed with the support of strategic group mapping. The below given figure portrays strategic group mapping in context of Apple iPhone 6/6+. High Market Share Low Low Price High The above figure states that there are different strategic positions occupied by brands. Consumer markets are usually separated on the basis of price conscious and quality conscious customers. Strategic group mapping conducted on this brand is in context of price and market share. Price can be either low or high of products and its consumption is closely knitted with affordability of customers (Henry, 2011). On the other hand, market share of companies depend on their customer base and brand reputation. Apple Inc. has always encompassed high priced products and acquired highest percentage of market share. This is simply because this firm has always believed in innovation and quality. High income customer segment is targeted by the company and it eventually requires maintaining superior product quality. Other players like HTC, Sony, Samsung, Nokia and Blackberry are regarded as close competitors of Apple Inc. As per the strategic group mapping, HTC occupies lowest percentage of market share and offers products at low prices. Sony, Nokia and Samsung offer products within price range of moderate to high, and possess desirable percentage of market share. Samsung in recent times has been acquiring market share of Apple Inc. by offering similar products at low price. Key External Drivers PESTEL Analysis PESTEL analysis is a strategic tool outlining key influencing factors in business operations. External forces present within business environment are political, economic, social, technological, environmental and legal forces. Political Force Governmental support is an important criterion when it comes to successfully executing business operations. Taxation structure or interest rates differ across geographical regions. This factor is responsible for decreasing profit margins of organizations. VAT has been triggered by 20% by UK government. Customer’s disposable income is dependent on wide array of factors. Increase in VAT percentage denotes that buying power of customers would be confined to a particular limit. This trend is not appropriate for high end companies like Apple Inc. Apple iPhone 6/6+ is a premium product and is integrated with high disposable income of customers. Economic Force The revenue margin of any business organization is based on economic stability of a specific geographic region. Financial turmoil or credit crunch which occurred in many locations have disrupted many business models. The profitability ratio of the firm is affected due to economic turmoil. Consumer base is reduced to a great extent because of economic downturn (BBC News, 2015). Customers belonging to high income group is target segment of iPhone 6/6+. Economic instability decreases purchasing power of customers and they are inclined towards investing in essential items rather than premium goods. Social Force UK customers are more quality conscious compared to Asian customers. Quality is a prime factor that drives business operations. In United States, individual purchase decision is undertaken by customers. Customer taste or preference plays a critical role in shopping environment of United States. On the contrary, customers in Asia purchase products through external influence or peer review. Individuals residing in UK or U.S. prefer technology based products (Lasserre, 2012). This enables Apple Inc. to launch innovative or high tech products. iPhone 6 was mainly launched for this target segment. Technological Force Technological advancements have facilitated long term growth of various organizations. Foreign markets along with domestic markets have been greatly benefitted by technological advancements. This force has made customers choose products from wide array of brands. iPhone 6 was manufactured by Apple in order to satisfy hidden demand of tech savvy people. The entire supply chain process of the company is dependent on technological infrastructure. Order placing to product delivery is enhanced by technological advancement. Digital marketing strategy is incorporated by the company to attract customer attention. Online platform helps in faster delivery or order placing activities. Environmental Force Environmental norms and regulations have gained significance in current scenario. Any business needs to abide with these norms in order to sustain their business operations. United States and United Kingdom encompasses strict environmental laws. Green business practices are followed by majority companies operating in this geographical region. These practices are included within supply chain framework of Apple Inc. Waste management or energy efficient strategies if not properly implemented might lead to total stoppage of business operations of Apple Inc. Legal Force Legislative infrastructure governs functioning of business firms. Government legislation has a direct impact on policies or strategies framed by an organization. Taxation or business certification is important aspects associated with organizational functioning. Mergers are occurring at an increased percentage in UK due to eradication of legal barriers by European government. High tax rates in United States decreases revenue margin of Apple Inc. However the firm is able to retain its market share through targeting higher income group. PESTEL analysis reveals that all external forces are key drivers of change for the company. iPhone 6/6+ would achieve set target only when it meets customer expectations. Political support and economic stability are essential components which govern business success and growth. Technological forces influence an organization to incorporate advanced practices. On the other hand, understanding culture facilitate long term growth. Porter’s Five Forces Competitive Rivalry iPhone was initially launched by the firm in order to establish unique position in the industry. Tough competition is witnessed by Apple from other mobile manufacturing companies. The strongest players in the industry are Samsung, Nokia and Sony. Smart phones launched by Samsung have acquired high percentage of market share (Mintzberg, 2006). Competitive rivalry is high and is a key driver of business operations. Bargaining power of buyers Brand loyal customers of Apple would easily not switch to other product brands. There are similar products available in market place at much low price range. Bargaining power of buyers is from moderate to high. Availability of wide range of brands makes it easier for customers to switch. Bargaining power of suppliers There are many companies present within mobile market and this is added advantage for suppliers. Suppliers possess high bargaining power due to greater availability of business options. Suppliers of Apple Inc. has to enter into a contractual agreement which indicates that quality standards should be maintained in raw materials being supplied. This gives power to the company in terms of controlling business activities. Threat of new entrants The threat of new entrants is significantly high in this industry. Technological advancements have supported many business organizations to enter into this industrial segment. Greater threat from new players tends to increase competition in the industry (Franzen and Moriarty, 2008). The major difficulty faced by new entrants is to compete strongly with established players like Apple or Samsung. Threat of substitutes Substitute products are more in this specific industry regulated by technology and innovation. The threat of substitute is higher and it would adversely affect profit margins of Apple Inc. Competitive prices are offered by other firms and it drags customer attention. There are smart phones manufactured by competitors which acquires market share of iPhone. Value addition to strategic position Resource Audit Industry Wide Sources of Competitive Advantage Necessary Resources Capital Equipment Finance Technology Infrastructure Unique Resources Apple’s cash reserves have grown to $178 billion in 2015. It is one of the largest amongst the public corporations across the world (Bowers, 2015). The company in the year 2015 reported $18 billion in net profits in a single quarter which is the biggest quarterly profit by any public limited company ever. Apple in the last quarter of 2014 Apple sold 74.5 million iPhones (BBC News, 2015). The company’s sales in greater China increased by 70% (BBC News, 2015). iPhone has been able to transform the mobile phone industry. Others like Samsung have bigger share of the market in terms of no. of Phone sold but Apple makes extraordinary amount of money through iPhone. By the year 2013 the company has 7,723 patents to its name. Threshold Competencies Human Resource Innovation R&D Customer Base Product Core Competencies The company believes in continuous innovation and spent $6,041 million dollar an increase of 35% from the year 2013 in Research and development (Apple, 2014). The company supports diversity at workplace. The company is one of the top 15 companies in the world in terms of no. of patent applications that it receives each year. The company’s products like iPhone, iPad and iMac are hugely popular. • Apple’s sold more no. of iPhones in China than in the United States. In China Apple became the largest Smartphone Company. The company’s net sales figure for China surpassed the data for United States (Higgins, 2015). By the end of 2013 the company had 7,723 patents to its name. Some of these patents cover the foundation concepts in the field of personal computing. However, it is less as compared to IBM which has 82000 patents to its name and its rival Samsung which has about 60,000 patents in its name. However, the company has been able to use the intellectual property that it has to win a series of legal battle against Samsung to win $1 billion judgment in its favour (Arthur, 2012). iPhone 6 counts as the top selling product amongst all smart phones in the world and contributes to the increased net profit and cash pile of Apple. The customers of the company are across the world and are segmented on the basis of six operating segments. There are 55% while, 15% Asian and so on who work for Apple in the America (Apple, 2015). The company builds on its innovative design and technology to emerge as the company that is built on aesthetically designed products which attract the customers (Shaughnessy, 2013). Value Chain Analysis Support Activities Infrastructure Six operating segments globally Americas Europe Greater China Japan Rest of Asia Pacific Retail (Apple, 2014) Organization culture is based on innovation and is designed to support innovation and decisions being taken at local level thus cutting red tape. H.R. Management The company employs 92600 full time employees and an additional of 4400 temporary employees and contractors Apple supports diversity and inclusion at the workplace with people from different backgrounds working together at the company. Technology Development The company regularly files patents for the new products that the company designs The company expenditure in the area of research and development in the year 2014 was at $6,041 million dollar an increase of 35% from the year 2013 and 3% of total net sales. Procurement Components are obtained by the company from a no. of different sources. Primary Activities Inbound Logistics. The company procured components from different countries across the world. Operations The company uses the economy of scale of the Original equipment manufacturers in order to manufacture products for the company. Outbound Logistics The company increased the no. of own retail stores. 28% sales occurred through direct and rest 72% occurred through indirect distribution channels in the year 2014. Marketing & Sales Apple products are designed as different from the products that are offered by the competitors. Service Customer service is provided through customer care The information and support to the product is available at the official website. There are many things in the value chain that Apple outsources. However there are two unique things which are the company’s USP and the company does not outsource these things. One of these things is the designing part. The company is committed to the design and aesthetics of its products more than any other technology company ever does about their products. Apple understands what its customers desire and delivers the desire of the customer every time. Another important area in the value chain is the sales and marketing. 46200 of the total no. of full time employees of the 92600 full time employees work in the retail sector. In order to give better service to the customer the company is increasing the no. of stores that the company owns. The company spends a considerable amount in Research and Development Company. The company has to do this in order to maintain its position in the market. The company has filed numerous patents till date. The company is known for the design of the products. Most of the employees at the manufacturing centres in china where iPhone is manufactured outside the US are not in the payrolls of the company. The company procures semi conductors from Samsung and other companies that are in Germany and Taiwan, memory card is purchased from Korea and Japan, chips are purchased from Europe, Display panels and other circuits are purchased from Korea and Taiwan. The company does not use toxic products in the manufacture of the products of Apple. The company used a network of direct and indirect distribution channels. The products and the iPhone are designed to increase the value offered to the customer for the money that is charged. Conclusion As per the study, strategic position of the company has initiated long term success and growth. There are different strategic frameworks incorporated in the study which outlines innovative business policies implemented by Apple Inc. iPhone 6/6+ was launched by the company in order to satisfy demand of customers. There are different external forces which drive business operations of Apple Inc. PESTEL analysis and Porter’s five forces model indicates that external forces are key drivers of business operations. Sustainability aspect is accomplished by the company through continuously inventing innovative products for target customers. Product line of Apple Inc. is different from other players because it addresses hidden consumer demand. Innovation and quality exist within all products designed by the firm. Competitors like Sony, Nokia or Samsung focuses on differentiation and cost leadership strategy. On the contrary, Apple has always adopted focus differentiation strategy. This strategy has also contributed towards sustainability of the firm. Focus differentiation strategy denotes a particular consumer market segment explored by Apple. Over the years, premium products are launched by the company. This helps the firm to analyze characteristics or culture of particular consumer market segment. Sustainability in business operations is all about fulfilling business goals without affecting external environment or local community. Quality has always been an integral component for Apple Inc. This factor has supported business sustainability through enhancing brand reputation and developing a wide base of loyal customers. High profit margins are secured by the company and this is later converted into value added services for customers. References Apple., 2014. 10K. [Online] Available at: http://files.shareholder.com/downloads/AAPL/215012788x0x789040/ED3853DA-2E3F-448D-ADB4-34816C375F5D/2014_Form_10_K_As_Filed.PDF [Accessed 24th May 2015]. Apple., 2015. Race and ethnicity data. 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