Strategic Analysis of Apple Inc
Introduction
Apple Inc is one of the most successful companies on the international smartphone markets today. This success is attributable to among other factors the production of quality products through value addition and differentiation of products such as the iPhone. Success is also attributable to high quality customer services and an organizational culture defined by systematic leadership. In addition, the company has also been successful due to the organizational culture that has defined its structure and system of leadership. The main objective of this paper is to analyze the current position of Apple Inc in the smartphone industry through a discussion of the company’s strategic framework using models such as Porters five forces, PESTLE analysis the report will alienage in resource audit and value chain analysis to evaluate the company’s competencies and resources and propose areas of value addition.
External analysis
PESTLE Analysis
Political and economic factors
The sale of the iPhone is considered as the most profitable product for the company. However, the company has been able to forecast the possibility of a fall in its sales of the iPhone. The fall can be attributed to the rise and popularity of new competitors in the smartphone industry. Smartphone companies such as Samsung, Huawei, Xiaomi, and Lenovo have continued to gain dominance on the international smartphone market. This has partly been attributed to the ability of companies such as Samsung to provide lower cost smartphones in Southeast Asia, Middle East and in Africa (http://www.bbc.com/news/business-35412892).
Apple operates on the high-end market with its main source of revenue being China. Despite its popularity in China emerging Chinese smartphone companies such as Xiaomi, continue to expand their dominance in the Chinese market by providing high quality smartphones to Apple customers (Apple Inc 4).
The recent reported slowdown in iPhone sales cannot be used as an indication that the industry is in the maturity stage. This is because the growth rate of an industry is defined by the activities of the companies that comprise it. Failure by these companies to engage in technological innovation that can disrupt industrial operations can be cited as the major reason for the slowdown (Kim and Renée 28). The production of iPhone 6 is an indication that Apple has stopped its ability to disrupt other smartphone manufacturing companies with the iPhone (Pablo & Sampere 1). This does not mean that Apple cannot disrupt other industries. Other than focusing on new products to boost its position and sales on the international market, the smartphone industry still presents Apple with a myriad of opportunities on how to creates and maintain a competitive advantage against competing rivals on the international market (Pablo & Sampere 1).
Social factors
Customers are considered as the most important asset for any company. This is because they exist as the source of revenue for companies when they purchase their products and services. Customer preferences are often considered as the most essential element defining the approach that companies give to their products with regard to sales and promotions (Lussier 18).
The dominance of Apple Company on the international market can be attributed to the ability of the company to provide its customer with quality products. This elucidates that despite increased competition on the international market, Apple is still a dominant player in the market. Providing variety not only serves to retain customer but also establishes customer loyalty to the brand (Lussier 22). The possible decline in the sales of Apple Company can be attributed to an increase in the number of available and high quality smartphone alternatives in the market. In addition, minor improvements in the iPhone 6 can be considered as the demotivating factor among loyal customers (http://www.bbc.com/news/business-35412892).
Technological factors
Technological improvements are considered as defining elements of change in a company. When Apple launched the iPhone in 2007, it made functions of different mobile devices accessible to millions of users across the international market (Kim and Renée 21). Subsequent versions of the iPhone, while responding to technological changes and consumer needs introduced essential aspect such as multitasking through different mobile phone applications (Kim and Renée 21). Other versions such as iPhone 4 and iPhone 5 were able to improve and refine new functionalities of the smartphone. iPhone 6, which was considered as a game changer, has not been able to provide consumers with the expected technological disruption as the previous versions. An increase in the screen size and memory capacity comprises the major difference between iPhone 5 and Iphone 6 (Pablo & Sampere 1). This is however not a technological disruption because an increase in screen size is only an industrial feature that other smartphone companies have already introduced (Pablo & Sampere 1).
Legal factors
Customers have considered the decision by Apple Company to introduce Error 53 codes that permanently disables iPhone 6 software after software upgrades as outrageous and consequently disturbing. This is because it destroys the property belonging to customers (Brignall 1). Inasmuch as Apple introduced this technique as a security measures, there are suggestions that it is possible that the company introduced the policy as a revenue increasing strategy, which would compel iPhone 6 users in need of repair to pay the company (Brignall 1). Customers who have been affected by this policy have been compelled to purchase new handsets and this has proved to be relatively expensive. The decision by the company to introduce a software damaging technology with the objective of protecting the customer and securing the product has been perceived as a breach of basic consumer laws. Any decision by the company to continue with the implementation of this policy could introduce the company to multiple litigations and encourage scrutiny into the company’s operations (Brignall 1).
Environmental factors
Apple faces the environmental concern of safe dumping of used and damaged smartphone devices. Pollution resulting from manufacturing facilities in China is a growing concern, which necessitates the development of, polices regulating the manufacturing process
Summary of genetic factors
Apple considers iPhone sales as one of the major sources of revenue for the company. This is because of the prevalence of the smartphone devices on the international market. The predicted drop in sales of the Iphone threatens the revenue capacity and the dominance of the company as a technological giant (Müller 14). The differentiation strategy adopted by the company provides Apple with a differential advantage over existing competitors such as Samsung (Hill et al 21).
Despite embracing innovation as defining elements of the differentiation strategy, there is need of the company to improve on the application of its growth and value improvement strategy through the development of techniques that can be used in penetrating markets in developing economies where the popularity of the company’s products is still relatively limited (Hill et al 34).
Product development, market development, and market penetration are considered as the main intensive growth strategies of the company. These strategies are in agreements with the company’s generic strategy. Apple is strong in product development through its ability to embrace innovation (O’Grady 18). However, for the company to ensure any form of improvement in its performance there is need to develop additional techniques of enhancing market penetration capabilities through market development strategies (Krosinsky 1).
Apple brand development strategy serves the important role of improving and maintaining the company’s competitive advantage in the international market (Kapferer and Bastien 56). The innovative and beautiful designs of Apple products deliver not only the intended purpose of the products but also seek ways of improving its ability to establish a highly competitive brand (Meyer 1). The development of products such as iPhone 6 embraces varieties of aspects about customer experience (McFedries 10). The company has also been able to expand and improve on its distribution capacities by opening hundreds of retail outlets in major markets populated by the target customers (Kosaka and Kunio 18). An additional aspect that defines competitive advantage the brand loyalty of Apple in markets such as China is the ability of the company to produce products that are appealing to customer emotions. Thus makes their product not only aesthetically appealing to the customer but also contributing to the cultural operations that define the satisfaction of customer needs (Daft 112).
Despite the perceived advantages resulting from the differentiation and brad development strategies associated with Apple the company can also be accused of reluctance concerning the ability to ensure sustainable innovation and the protection of customer interests (Wit et al 44). Marginal differences between iPhone 5 and iPhone 6 are an indication of failure by the innovative team to provide the customer experience that defines the value proposition statements of the company (Morris et al 56). Furthermore, through the introduction of Error 53 codes the company has not only infringed on consumer right of ownership of property but it can also be accused of the introduction of reckless polices for profit making at the expense of satisfying consumer needs (Brignall 1).
Porter’s five forces
Power of Buyer:
The company’s differentiation strategy provides Apple with a competitive advantage considering that the company maintains customer brand loyalty while at the same time sustaining the prevailing market. With the introduction of iPhone 6 and iPhone 6s, Apple was able to adopt the focused differentiation strategy, which was accompanied by improvements from the previous iPhone 5 including an increase in memory capacity and screen size.
The company’s strategy of differentiation helps the company in maintaining its position as a leader in the technological market. Differentiation in function and design affirms the objective of the company to provide customers with high quality experience using technological innovations (Meyer 1)
Power of Supplier
Manufacturers and suppliers of component products if Apple products are mainly in China Suppliers from China are highly influential because they the dominance of resources which enable them to decide particular prices making it difficult for Apple to control. Apple has price-to-fixed contracts while price is independent as it varies due to the nature of its products.
Rivalry among existing competitors:
Smartphone companies such as Samsung, Huawei, Xiaomi, and Lenovo have continued to gain dominance on the international smartphone market. This has partly been attributed to the ability of companies such as Samsung to provide lower cost smartphones in Southeast Asia, Middle East and in Africa (http://www.bbc.com/news/business-35412892). Apple operates on the high-end market with its main source of revenue being China. Despite its popularity in China emerging Chinese smartphone companies such as Xiaomi, continue to expand their dominance in the Chinese market by providing high quality smartphones alternatives to Apple customers (Apple Inc 4).
Threat of Entrants
Market for smartphones is relatively saturated on the international platform with countries such as South Korea and China, engaging in the development of high quality smartphones (Market line, 2014). The demand for relatively cheaper, easy to use and high quality smartphones in Asia and developing countries has made the threat of new entrants in the international market high. Smartphone production is capital intensive and sustaining such a brand is challenging. That is why entry barriers in smartphone industry are differentiation and access to wider distribution channel, group analysis and this puts Apple as the leader in the production and marketing of high quality smartphones.
Threat of Substitutes
The company faces challenges in the implementation of its value addition strategies. This is because existing competitors such as Samsung, Huawei, and Xiaomi are in the process of incorporating similar strategies hence increasing the level of competition in the market (http://www.idc.com/prodserv/smartphone-market-share.js).
Market development is a value addition strategy that Apple uses in establishing its strategic position in the technological world to limit the threat of substitution. Market development involves the creation of new markets for new products or venturing into a new market. Market development is an essential value addition strategy for the company because it focuses on the development of new technique that can be used in entering new markets (Hiriyappa 32).
The introduction of different versions of the iPhone can be considered as market development strategy used by Apple to expand its market share. Through the innovative measure applied in every subsequent product, Apple has been able to establish an effective customer base in different reigns around the world (Ferrell and Michael 34). The introduction of new products such as Apple watch can be perceived as a value addition strategy aimed at improving the image of the company in the smart watch market.
| Threat of Entry | High |
| Threat of Substitutes | Moderate |
| Power of Supply | High |
| Power of Buyer | Moderate |
Resource audit
| The table below is a summary of the relationship between Apple’s unique resources and core competencies in the company’s value chain | ||
| SAME AS COMPETITORS | BETTER THAN COMPETITORS | |
| Necessary resources | Unique resources | |
| Resources | · Procurement of device components from manufacturers in China
· Varieties of Iphone 6 versions in the market · Company investment in additional outlets stores in the Asian market to boost sales
|
· An established presence in the high-end market
· Unique product features · Strong financial position · Different Brand Portfolios such as iPhone 6 and iPhone 6s
|
| Threshold competencies | Core competencies | |
| Competencies | · Engaging in innovations as part of product and value development
· Customer service is tailored in accordance with diverse and unique customer needs to provide the Apple experience · Apple operates on a strong brand equity in the t international market · Apple is popular as a dynamic, innovative and the production of high quality. · Apple embraces employees and customers as essential partners in organizational development and profitability. · The company owns its brand logos, copyrights, product packaging and web domain names
|
|
Value chain
|
Support activities |
Firm infrastructure | Strong financial position and corporate social responsbility
Effective compliance process using verification and strategic knowledge Effective technological systems across the supply chain Strong brand |
||||
| Human resource management | Effective management team
Effective management and corporate strategy globally Rational ethical values for employee Effective employee relationship |
|||||
| Technology development | Research and development in technology
Ability to embrace change Ability to embrace great product technology |
|||||
| Procurement | Long term relationship with suppliers
Operates through just in time strategy where finished products are shipped immediately Bulk procurement |
|||||
| Primary activities | ||||||
| Inbound logistics | Operations | Outbound logistics | Marketing and sales | Services | ||
| Focus on product design and marketing
Inventory control Specialized material importation |
Collaboration with best service providers
Outsourcing manufacturing and assembly Investment in research and development Effective supply chain management |
String control over its global distribution channel
Effective supplier relationship Involvement in forward integration |
High brand reputation and recognition
Price value and leadership Aggressive marketing Strong customer base Differentiation of products offered |
Secure operating systems
Easy to use devices After sale service Repair warranties Improved customer satisfaction Product customization |
||
The introduction and popularity of the iPhone presented the technological world with the understanding that the core competence of Apple Company was to deliver exceptional customer experience through superb user interfaces. The company’s value proposition can be sustained through the touch screen gestures used in the iPad, iPod and the iPhone (Hart-Davis 12). Other products such as iMac, iCloud, iTunes remains dedicated to the delivery of quality customer experience through easy to use and elegant technological interface. Since launching the Apple brand and the subsequent launching of the iPod in 2001, Apple was able to harmonize its value by improving its brand and product strategy toward commonly used consumer products (Lüsted 15). The company rebranded itself Apple Inc instead of Apple computers as an indication that it intends to surpass its computer-manufacturing role. Apple has been able to ensure that services and functionality is made accessible to consumers irrespective of the apple devices that they are using (Schneiders 22).
The company’s value addition strategy focuses on the emotions of the targeted consumers. The product is about enhancing the lifestyle, social status, passion, imagination, and aspirations in ways that provide power to the users (Zylla-Woellner 22). The ability of that company to produce portable devices that remove complexities from people’s lives led to the creation of people driven designs hence improving on the humanist nature of the products with regard to creating a heartfelt connection with the customers (Hitt et al 12).
Conclusion
From the external analysis of Apple Inc, the dominance of the company on the international market can be attributed to the ability of the company to provide its customer with quality products. Apple is still a dominant player in the market since it provides variety of products to not only serves to retain customer but also establishes customer loyalty to the brand.to improve on its sustainability, the company must expand and improve on its distribution capacities. This can be realized by opening hundreds of retail outlets in major markets populated by the target customers. An additional aspect would be to improve on its brand loyalty in markets such as China by producing products that are appealing to customer emotions and technological needs.
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