Apple Business Strategy - Research Paper Example

APPLE BUSINESS STRATEGY 0 Introduction  Apple has effectively managed to be a triple-crown company in a very competitive consumer industry by being innovative and differentiating the company’s brands with similar brands within the market, by providing top quality brands and sensible client service whereas the particular production of the brands is outsourced to definite third party suppliers (Suarez 2004). On a wider perspective, the corporate has set high standards that even the corporate itself has got to get on its boundary to keep up the standards that it has set. This report will apply the relevant theories like the resource based view to reveal the position of Apple Inc in its ability to sustain its current success within the consumer electronics industry. 1.2 Porter five forces analysis These five forces that help in determining the position of the organisation in the industry include the threat of substitutes, the bargaining power of consumers, the bargaining power of suppliers, and threat of new entrants into the industry and competition from the rivals (Porter 2008). 1.2.1 Competition Apple has very good strategies put in place to ensure that it overcomes the pressure from its close rivals such as Samsung and Sony Ericson. First, the culture of the organisation stresses on doing things differently from any one of the other players in the industry (Shepherd & Ahmed 2000). Apple does not allow other organizations to affect the brands and services it creates and supplies to the market. The Apple executive, since the times of Steve Jobs until today, embraces the culture of invention and innovation, which enables the company to constantly, introduce new products in the market (Bryant 2003). This has resulted in innovation in MP3 players, tablets, computers, smartphoines and other products. This behaviour ensures that the organisation will always meet consumer interests and earn loyalty and recognition of its brands and hence gaining a strong competitive advantage that will ever make the company dominant. There is another necessary manner that Apple sets itself aside from its competitors; the manner the corporate is run and controlled. Selections in several firms square measure created by committees and by having to urge approvals from one or additional of their silo businesses before they will move ahead with one thing. However, Apple has one central governing committee that works along seamlessly to style merchandise and builds selections regarding the manner the corporate moves forward (West 2003). Apple conjointly own its own hardware, software, applications and services, all tied along rather showing neatness with its new Cloud design. There are no any silos within Apple and every one selections square measure created by this single governing committee. That is why everything Apple will work along seamlessly. This difference within the manner Apple runs its company compared to competitors cannot be emphasised enough. It provides Apple an enormous edge over the competition. The other factor that sets Apple aside from its competitors is the design. Excellent designing doctrines are persistent within the DNA of Apple. In Steve Job’s Stanford commencement speech, he talked concerning his love for penmanship and the way this influenced his brooding about the design and drove him to be a compulsive (Belk & Tumbat 2005). You will be able to see this style DNA in everything Apple brings to plug currently. Though Steve Jobs is not with Apple to any extent further, the leadership is currently tasked with embedding this style DNA all told of Apple’s product and teaches it to new workers because the company grows. Due to Apple’s ability to think totally special, the leadership vogue and the design, Apple will keep its competitors following it rather than actually leading the market forward themselves. The chart below shows how much worth is iPhone to the overall business of the company. Source; businessetc.thejournal.ie/apple-iphone-ipad-sales-1736530-Oct2014/ 1.2.2 Threat of substitutes Apple has a well strategy of dealing with all the threats from substitutes offered by other players. For example, the ability of the company to introduce new and innovated products constantly ensures that its products are unique in the view of consumers. The company has also embraced the system of differentiation of its brands to ensure that it is easy for consumers to identify its products from those offered by the rivals (Rosen, Schroeder & Purinton 1998). Differentiation also enables the company to add features that makes difficult for the rivals to imitate and hence successfully, neutralizing the pressure offered by these brands to the brands of Apple. This therefore means that the company has the ability of preserving its power in the industry. 1.2.3 The bargaining power of consumers Massive innovation of the products coupled with differentiation ensures that high quality products reach consumers. This culture continues to build strong bonding between the company and consumers that continues to reduce the bargaining power of consumers against the brands offered by the company (Ketchen, Hult & Slater 2007). When the brands adequately meet their needs and consumers get the real value of their money, they tend to bargain less and accept the price offered by the company. This also ensures sustainable growth for the company. 1.2.4 Bargaining power of suppliers More negotiation power of supplier will verify less gain in any company. On the opposite hand, it will seek advice from the good thing about the customer who can earn quality merchandise. Apple continues to enhance the potency of their suppliers so as to fulfill their expectation and should cut back the negotiation power of their supplier (Linden, Kraemer & Dedrick 2009). There is diminutive doubt that Apple Company remains speedily expanding, so the corporate still yearning for new suppliers. Moreover, Apple has developed a system to get the most effective attainable worth and profit to their customers and stakeholders (Hendricks & Singhal 2003). To decrease the negotiation power of Apple’s suppliers, the corporate permits new suppliers to register on-line on the company’s web site. Moreover, attributable to the very fact that Apple is the leader technology company that has massive demand of stuff. Thus, there square measure a many suppliers that are registered so as to be the Apple’s suppliers. Then, once there square measure additional competitive among sizable amount of suppliers, the negotiation power of them is going to diminish. 1.2.5 Threat of new entrance The entry of new players like Xiaomi in China into the market can result to decreasing the market share of the corporate. However, differentiation of product as well as the brand also as having a robust promoting strategy like competitive advantage would possibly facilitate the corporate to take care of the market share and generate profit. Apple’s software of Mac has been designed to unable to infect any computer viruses or any malware whereas Windows that is the software of Microsoft brand is infected by types of computer viruses. These are some of the unique feature that make consumers to readily, accept Apple’s products upon introduction in the market (Miller 2001). The Chart below shows an increase in share values by one percent just a day after the announcement of new iPhone unveiling and by two percent after five days. Source; http://blogs.wsj.com/moneybeat/2013/09/10/how-apple-shares-react-to-new-iphones-in-two-charts/ In addition, Graphical program (GUI) of Apple’s applications is additionally completely different from the other brands offered by rivals. Moreover, as is seen Apple is differentiated from the other brands that make it have a robust position within the market. However, their competitors of MP3, OS, phone, PC, Laptop and therefore the alternative merchandise (Nokia, Sony, Dell, Microsoft, etc) have tried to contend with Apple and that they try and improve themselves also as Apple Company. Consequently, the threat of latest entry in Apple Company’s level is low to medium. 1.3 PESTEL Analysis This involves the political, economic, social, technological, environmental as well as legal factors that affect the operation of the business. 1.3.1 Political factors Nowadays, Apples has diversified its business operations in all corners of the world. In step with monetary report of 2009, over a half the sales of Apple products are returning from totally different countries apart from America (Stats 2009). There are many problems that are on the far side the management of company. A decent example is that the war against coercion, government uncertainties, public health problems and sanctions on totally different countries. Such problems impact on sales of Apple brands worldwide. The company has outsourced the business activities to totally different firms to scale back overhead. These functions embody product producing, transportation and supplying management. Such firms unfold in numerous components of world like Ireland, Cork, China Korea as well as Czech Republic. 1.3.2 Economic Factors The world’s economy continues to gain improvements after the recession. In past few years, oil costs recorded high level that causes inflation in world’s economy. Owing to such economic factors, consumer’s buying power reduced and that they do not wish to pay cash on such merchandise like iphone, iPod as well as change laptop computer or personal computer. Last year high percent was discovered in USA and Europe that causes sharp fall in Apple merchandise. Moreover, currency rate of exchange is seen terribly volatile throughout recession, particularly dollar’s rate against British pound and monetary unit. Though world’s economy is overcoming recession however it is expected that USA economy can take longer. However, continued diversification and discovery of new markets for the company’s products continues to weaken this adverse effect of the economy (Castells, Hall & Jennings 1995). 1.3.3 Social factors Nowadays, our social life is influenced by technology and Apple Inc receives consideration because it is the king of technology due to its quality products as well as the design (Hong, Yang & Rim 2010). Another massive social impact is that the music business has become digital and thus established its market to the Internet. Apple Inc. has created the biggest virtual media store of digital music that is understood as iTunes. Additionally, the typical age of world’s population is growing due to a decline in fertility. These factors can increase the amount of persons aged on top of sixty five years throughout to 2030. However, Apple Inc. targeted music enthusiasts and fans of ages between twelve to thirty five years recent. For that reason, it should be a challenge for Apple Inc as on top of sixty five aged populations is increasing within the recent years. Moreover, the recent trend of making use of the social network like Twitter, Face Book and LinkedIn etc has conjointly influenced the business of Apple. The employment of iPhone app is increasing owing to the increasing use of social network web site. Thus, trendy social life vogue influences favourably the business of Apple Inc. 1.3.4 Technology factors The market share for computers, moveable music player, mobile phones as well as different shopper electronic products is in those natures of products that have serious competition and quick technological changes. The businesses that manufacture such form of products need to pay enough cash on analysis and development due to speedy improvement in electronic products, short product life, frequent introduction of recent products and also the continual improvement in product performance and the design (Tassey 2000). It is a fundamental demand to survive within the market. It is conjointly a good advantage for Apple to its competitors that the company has full management over the whole production procedures of non-public laptop and also the continual innovation on iPod and iPhone (Poon 2004). Currently, there are several products introduced within the market to vie Apple’s product. Therefore, it becomes a necessary to pay a lot on R&D that causes an enormous disbursement of its capital reserve compared with its competitors. That is, Dell utilises Microsofts software system altogether of its product whereas Apple installs its own complete software system that increases the cost of production. 1.3.5 Environmental New United States laws and rules making producers accountable for exercise, and Apple introduces home recycling services rather than shipping the wastes to overseas (Ferguson & Browne 2001). Moreover, Apple Inc. has increased their expectation regarding greener production. Moreover, Apple Inc operates in an exceedingly approach that conserves the atmosphere and protects the health and safety of their workers and consumers (Quariguasi & Bloemhof 2012). 1.3.6 Legal Factors Environmental protection, health as well as safety became major problems in those countries where Apple is performing well. A range of rules and laws in such countries that can unfavorably, have an effect on the companys status and results by requiring a secure disposal or employment Apples brands. Notably, such laws area unit adopted in international organization and a few components of North American countries that are huge markets of Apple merchandise. Some merchandise of the corporate is literally facing health problems as a result of the planning downside (Hildesheim et.al. 2001). It is reportable that the improper use of iPod might result in loss of hearing power of users. However, Apple continues to consider such factors to restore confidence in consumers about the suitability of the products in protecting health as well as the environment. 1.4 Value chain of Apple Apple features a fascinating offer chain, which is terribly and totally different from ancient offer chains. This offer chain that comes by pre-built benefits. First, the demand administration is less complex. Apple does not need to obtain the demand estimate for a replacement of right of the product. As long as it underrate demand of a hot novel brand, the company can have loyal customers’ vociferation for the novel devices and enthusiastic to attend (Talluri, Baker, & Sarkis 1999). Indeed, the predictable backlog guides buyers to line up for many hours before shopping stores hospitable purchase a replacement brand. This assists to form encouraging buzz. Consequently, the company has grown therefore massive; it is acquisition blessings alternative rivals cannot match. Economic analysts are starting to target Apple’s chain of supply. Samsung lost ten billion dollars in value when the company placed a large order for nonvolatile storage with the Elpida, thus securing quite a half of the company’s offer. The company reportedly has value benefits in obtaining key parts, producing capability, capital instrumentality, and airfreight capability (Linden, Kraemer & Dedrick 2009). Like different firms that have big clout procurement, once the company asks a provider for a worth quotation, it requires a close accounting of however the manufacturer fell upon the quote, as well as estimations for labor as well as material prices and expected gains. Producers will get strike with punishments for the quality problems and guarantee claims. The company is changing into thus huge that despite the fact that it is variety of tailored elements that it is to pay additional for, the value structure of the company is setting out to correspond that of a number of the competitors that solely supply common elements (Mascarenhas, Kesavan & Bernacchi 2004). However, different elements of the availability chain become harder for a corporation that differentiates it supported product superiority. Apple struggles to fasten up the availability of key elements, significantly custom elements, with inimitability contracts. This provides to guard the individuality of its product. In various cases, the company invests in the capital instrumentality to create these special elements. The corporate lends the assembly instrumentality to its producing partner. Sometimes, this machinery of production becomes the company’s exclusive both as a result of inimitability contracts or as a result of Apple is thus massive that a build up for the instrumentality becomes horribly long (Prater, Biehl & Smith 2001). 1.5 VRIN model of Apple The VRIN model is simply a resource based view, which provides an examination of whether a company is capable of utilizing adequately the resources it owns to gain a competitive advantage over its rivals. The figure below shows Apple VRIN analysis. Resources Value Rarity Imitability Non substitutable Competitive advantage Apple brand Yes Yes Yes No Sustained Ease of use Yes No No Yes Sustained Hardware used Yes No Yes Yes Parity Apple software Yes No No No Temporary Figure1. Apple VRIN model 1.5.1 Value The major objective of the products created by Apple is to combine many functions in a single product to enable the consumers to acquire great value from the brands they purchase from the company. This strategy enables the products offered by Apple to give the highest value to consumers with a single product compared to a similar product purchased somewhere else. A good example is the iPad that provides very high value to consumers since with the same product the user is capable of making voice call, listening to music, watching movies, taking photographs, internet browsing as well as editing documents (Shang, Chen & Liao 2006). 1.5.2 Rarity There exist various brands within the market that directly contend with Apple’s brands. However, Apple has maintained a competitive edge, which is the reason for its growth. This has been realized through innovativeness, performance and responsibility as customers read them to be of upper quality when equated to similar brands (West & Mace 2010). 1.5.3 Imitability There exist numerous merchandise within the market, which will to associate extent supply an equivalent options offered by Apple merchandise. More specifically, the Android platform of Google developed when iPhones and iPads established popularity in customers (Shang, Chen & Liao 2006). However, Apple has already managed to position its merchandise as been the simplest that the market must supply implying that it is troublesome for Apple to lose its position within the market. 1.5.4 Non Substitutable It is possible to substitute the brands of Apple with the other brands offered by the other players in the industry. However, it is impossible to substitute the esteem, which emanates from the name of the brand. This factor continues to help the company in attracting more customers as well as maintaining the original customers with good experience of the products offered by the company (West & Mace 2010). 1.6 Conclusion The ability of doing things in a special manner, the good leadership and excellent designing principles makes Apple to ever remain the leader in the world of consumer electronics. High innovation, good brand differentiation and value chains enable the company to maintain its dominance in the market. Apple offers brands that provides high value to consumers that are almost non substitutable hence attracting more consumers and winning the loyalty of the existing ones. With all these factors therefore, means that Apple will continue dominating the industry even in the future. 1.7 Bibliography Belk R. W. & Tumbat G. 2005, ‘The cult of Macintosh’, Consumption markets & culture, Vol. 8, No.3, pp. 205-217. Bryant S. 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West, J., & Mace, M. 2010, ‘Browsing as the killer app: Explaining the rapid success of Apples iPhone’, Telecommunications Policy, Vol. 34, No.5, pp. 270-286. Read More