Analysis of Apple Company Strategies - Case Study Example

Apple Inc. Case Analysis Name Institution Course Date Table of Contents Table of Contents 2 1.0 Strategy and Competitive Advantage 3 1.1 Company Business 3 1.2 Apple’s Strategic Approach to Gaining a Competitive Advantage 3 1.3 Analysis of Whether Apple’s Strategy Resulted in Good Company Performance 4 1.4 Analysis of Changes Taking Place Today in the Company’s Environment 5 2.0 Industry and Competitive Analysis 6 2.1 Analysis of Attractiveness of Apple’s Markets 6 3.0 Defining Vision & Mission 7 3.1 Analysis of Conflicts Between the Company’s Actions and its Vision Or Mission 7 4.0 Organizational Resources and Capabilities 7 5.0 Implementing Strategy 8 References 10 Apple Inc. Case Analysis 1.0 Strategy and Competitive Advantage 1.1 Company Business Apple is one of the world’s largest technology companies. The company was founded in 1976 by Steve Jobs and Stephen Wozniak with the formation of personal computer called Apple I (Gamble & Marino, 2011). Since then, Apple has grown to become a global and iconic technology company. As a technology company, Apple operates in different market segments that include personal computers, tablets, and smartphone and personal media player industries. Its key products include Mac computers, iPads, tablets, iPods, Apple TV, iPhones, personal media player, watch and software applications, as well as their accessories (Gamble & Marino, 2011). According to Gamble and Marino (2011), Apple is the most valuable brand in terms of market capitalization. 1.2 Apple’s Strategic Approach to Gaining a Competitive Advantage Apple commands a huge market share in the technology industry in all the segments, where it operates. For instance, its iPads and iPhones command a huge following going by the 2011 profits as reported by Gamble and Marino (2011). According to the report, Apple iPad registered 183% growth in sales while iPhone posted about 142% sales growth in 2011 compared to 2010. Presently, Apple products dominate different segments of the industry. However, the competitive advantage that Apple enjoys in the technology industry is all attributed to its strategic approach. Michael Porter (2008) argued that, for a company to achieve a competitive advantage, it must adopt an effective strategy that is capable of enabling its appeal to the targeted customers in a market. Apple has been able to achieve a competitive advantage in the technology industry because of its strategic approach in the market. The first key source of competitive advantage for Apple is in its commitment to innovation. Today, innovation is not just a necessity; rather a source of competitive advantage for companies. Eldring (2009) indicates that, in the 21st century, a company cannot compete effectively without being innovative. Apple is one such company that achieves its competitive advantage because of its strong commitment to innovation, a culture that was introduced by its founder Apple. Apple continuously comes up with innovative products and services that ensure that the demands of consumers are always met. Just recently, Apple released its iPhone 7 that has better features and functionalities from its previous iPhones. Same commitments to the development of innovative products has ensures that Apple stay ahead of its rival companies like Samsung. Apple also gains its competitive advantage through the adoption of differentiation strategy. Differentiation is one of the generic strategies proposed by Michael Porter as a source of competitive advantage. Differentiation is a strategy, where a company seeks to become unique in terms of product and service features by making them more appealing compared to rival products (Porter, 2008). Apple differentiates from competitors by developing devices with seamless connectivity, coupled with cutting-edge aesthetics in design. For instance, Apple offers better-integrated operating systems for competitors, which is a strategy that differentiates it from its rivals in the market. Besides, this capability cannot be imitated by competitors and this gives it an edge over rivals in the market. Other than differentiating through product design, Apple also derives its competitive advantage from pricing differentiation strategy. Apple differentiates from competitors by adopting premium pricing strategy. Apple products are relatively expensive compared to those of the competitors in the market (Gamble & Marino, 2011). However, the prices are always commensurate with the quality of its products that is superior to those of rivals. As such, consumers are always willing to pay more to acquire Apple products instead of cheap ones provided by competitors. The premium pricing strategy explains why Apple makes huge profit margins compared to rivals like Samsung. Additionally, Apple derives its competitive advantage from its excellent retail store locations. Apple products are found in the majority of big malls and supermarkets, as well as individual electronic shops across the globe and this ensures that Apple products are easily accessible to the customers in all corners of the world, thus a source of competitive advantage (Gamble & Marino, 2011). 1.3 Analysis of Whether Apple’s Strategy Resulted in Good Company Performance According to Gamble and Marino (2011), the above strategies have enabled Apple record good performances in the past years. For instance, the authors indicate that Apple is currently the world’s most valuable brand in terms of market capitalization and this is attributed to good performance that Apple has been registering in recent years. The strategies have also produced good performance going by the sales growth that the company registered in various product categories in 2010. According to Gamble and Marino (2011), Apple iPhones and iPads recorded sales growth of 142% and 183% respectively in 2010. The same growth is sales was seen with its Mac computers that recorded sales growth of 14%. iPod has also been recording significant growth in terms of market share because of the effective strategies that Apple employs as it seek to enhance its position and dominance in the technology industry. For instance, in 20015, high customer satisfaction witnessed with the iPod resulted in renewed interest in personal computers with its share of the market growing by about 4% in 2005. Additionally, analysis of the company’s financial report between 2008 to 2010 indicates that the company’s sales for almost all its product categories have been growing, which indicates that Apple’s strategies have produced good performance for the company. For instance, in 2010, Apple’s desktops recorded sales growth of 43% compared to 2009 and the same applies iPod that recorded sales growth of 2% and this trend could be seen across the entire business segment (Gamble & Marino, 2011). 1.4 Analysis of Changes Taking Place Today in the Company’s Environment Although Apple enjoys significant growth, there are a number of changes taking place in the technology industry today that are likely to affect Apple’s operations and performance. First, competition is getting stiffer in Apple’s business environment and this pose a threat to Apple’s market share. In the smartphone market, for example, Apple faces a growing challenge from other tech giants, such as Samsung, Microsoft, Sony, Techno and other upcoming Chinese companies. The company also faces a strong challenge from Google in the Smartphone market with its Android. Similar stiff competition also exist in computer segment, where the company experiences a growing challenge from HP, Lenovo, Samsung, Microsoft and Dell to name but a few (Gamble & Marino, 2011). In addition to the growing competition, the business environment, where Apple operates experiences constant technological changes. New technologies keep emerging and this means that, for Apple to remain competitive, it must work creatively and expeditiously in order to sustain its competitive advantage. In this regard, to remain competitive at the face of changing technologies, Apple has had to ensure that it become as innovative as possible by integrating new technologies to its products and services. Additionally, the technology industry, where Apple operates also experiences changing consumer needs and preferences. Consumer needs and preferences keep changing, especially in the technology industry and Apple has had to be keen to study the consumer trends to ensure that the changing needs of consumers are met all the time. For instance, modern consumers want electronic products, such as computers, iPhones and tablets that are user-friendly (Gamble & Marino, 2011). Similarly, most consumers of electronic product have become increasingly environment conscious and this means that Apple has had to produce products that are environment friendly to attract these growing consumer trend. Moreover, consumers of electronic products now look more at quality and design of electronic products that the prices. Accordingly, Apple has had to ensure that these needs are identified and products developed using designs and features that meet this trend in the market. 2.0 Industry and Competitive Analysis 2.1 Analysis of Attractiveness of Apple’s Markets Whether or not a market is attractive depends on whether the market is in growth, or is in maturity or decline stage. According to Gamble and Marino (2011), the computer industry was expected to record positive growth in 2012 to worth $354 billion. However, the global financial crisis of 2007/2008 affected the industry growth, thus the revenue generated by firms in the industry. Despite the difficult economic time in 2010, the PC market recorded shipment growth by 13.6%. Although the market recorded a decline in growth in 2011, industry analysts projected the market for personal computers to record significant growth in the coming years with estimates indicating that PC industry was to grow from 77 million units of PC being shipped in 2011 to 100 million in 2012 (Gamble & Marino, 2011). Accordingly, the fact that the world PC marketing is growing makes it a lucrative market for Apple to exploit. The only notable major challenge for Apple in the personal computer market is the strong challenge it faces from established competitors, such as Dell, HP, and HP among others. The key success factor in PC market as indicated in the case study includes innovation in terms of product design, features and functionalities. The analysis of tablet industry also indicates that the industry is attractive for Apple. The industry has been recording growth as more and more customers are buying tablets. Apple’s iPad tablet is currently doing very well in the tablet industry despite the challenge it faces from rival companies like Google Android, and Samsung Tab. For instance, reports indicate that Apple iPad recorded about 183% growth in 2010 compared to 2009. The high sales growth that Apple recorded with its iPad coupled. However, Apple must be wary about the tablet market as it is approaching maturity and is now bought by fewer people than in the past (Dredge, 2015). The key success factor in the tablet market as indicated in the case study includes innovation in terms of product design, features and functionalities, as well as prices. Apple also has a strong presence in the personal media player industry. As at 2011, Apple controlled about 73% of the personal media player market share, according to Gamble and Marino (2011). Although Apple controls a large market share in this industry, its iPod recorded a decline in sales from 9.41 million units sold in 2010 to 7.54 million units in by the third quarter of 2011. The drop in sales means that the personal media player has reached maturity thus is no longer attractive for Apple. Because personal media player market is in its maturity stage, competition has shifted from innovation and design/features to price, which is the key success factor. Lastly, the analysis of the case indicates that the smartphone market is an attractive market for Apple. The smartphone market is growing due to the increasing demand for smartphone. In 2010, Apple recorded 172% growth in sales of its iPhone tablet, which demonstrates the extent to which the market is attractive to the company (Gamble & Marino, 2011). The key success factor in the smartphone market as indicated in the case study includes innovation in terms of product design, features and functionalities. Although all the segments of the market have been posting good performance, the smartphone segment appears to be the most attractive considering that the smartphone market is growing and the fact that Apple has been registering high sales in these market segments. Besides, Apple already controls a huge market share in these two market segments. 3.0 Defining Vision & Mission The company is working hard to ensure that it become the world’s leader in the technology industry. The case analysis also indicates that Apple has the vision of enhancing people’s lives through the provision of quality, innovative and user-friendly products. 3.1 Analysis of Conflicts Between the Company’s Actions and its Vision Or Mission From the case study, there is no notable conflict between Apple’s actions and its mission and vision. The case indicates that Apple is committed to becoming a leading technology firm through the development of quality and innovative products that meets the diverse needs of customers in the market. 4.0 Organizational Resources and Capabilities The success of Apple is based on the vast resources and capabilities it has at its disposal. The resources and capabilities of Apple can be grouped into tangible and intangible resources. The first key resource for Apple is the strong leadership that has been provided by Steve Jobs and the current CEO Tim Cook (Gamble & Marino, 2011). Both leaders has been a great asset to the company as they have cultivated a culture of hard work and innovation that has ensured that Apple remain successful in the technology industry. The other critical resources that Apple has are hardware and software products that give it a competitive advantage over rivals. For instance, Apple develops its own software applications and do not depend on third-party software and hardware products. Other critical tangible resources that support the company’s capabilities include reliable suppliers and retail stores (Gamble & Marino, 2011). Apple also has a variety of intangible resources that that helps its implement its strategies and success. The first key intangible resource for Apple is the highly skilled employees. Apple not only higher the best talents in the market, but also provide them with training and this help in skill development, which it uses as its source of competitive advantage. The other key resource is Apple’s strong brand name. According to Gamble and Marino (2011), Apple’s brand is recognized worldwide and the company enjoys strong brand reputation, which is a key resource for the company. Third, Apple has strong innovation capability as indicated in the case, which is an invaluable resource for the company. The other key intangible resources include unique design capability. 5.0 Implementing Strategy There are a lot of companies that have good strategies but fail to implement them properly, thus resulting in organizational failure. However, Apple happens to be one of the companies that have successfully implemented its strategies that include differentiating itself from competitors in terms of product design and features as well as prices. The strategic location of the company’s stores also indicate that the company has successfully implemented its strategy of ensuring that consumers get easy access to its products. Above all, the good performance that Apple has posted as indicated in the company’s annual report, coupled with the fact that the company has managed to grow its market share in all product segments is a clear indication that it has managed to successfully implement its strategy. However, going forward, Apple needs to consider implementing the following recommendations as far as strategy is concerned. First, Apple needs to consider introducing products that target not just the high-income earners, but also the low-income earners as these segments is huge and remains underexploited. Second, Apple needs to consider adopting low-cost strategy to enable it lower its prices, and increase its market share and profits (Alkhafaji & Nelson, 2013). Lastly, Apple needs to increase its investment in promotional campaigns to highlight the values that the company stands for, as well as create more product awareness. References Alkhafaji, A., & Nelson, R. A. (2013). Strategic management: Formulation, implementation, and control in a dynamic environment. London: Routledge. Dredge, S. (2015, Feb. 3). Why are people buying fewer tablets? The Guardian p. 1. Eldring, J. (2009). Porter ?s (1980) generic strategies, performance and risk. New York, NY: Diplomica Verlag. Gamble, J. E., & Marino, L. (2011). Apple Inc. in 2011: Can it prosper without Steve Jobs? Case 9, 350-363. Porter, M. E. (2008). Competitive strategy: Techniques for analyzing industries and competitors. Cambridge, MA: Simon and Schuster. Read More