Businessand Corporate Level Strategies of Apple
Apple’sBusiness Level Strategy Analysis
Appleachieves its cost leadership strategy through minimizing theproduction expenses as much as possible. Innovation is the core ofthis strategy because employees are encouraged to be as creative aspossible to avoid spending a lot of resources in manufacturingprocesses. Additionally, the company also achieves this plan byestablishing long contracts with other businesses to prevent the costof new transactions. For instance, Apple`s iTunes provides a digitalplatform for music companies to distribute songs worldwide, thuscutting costs they would incur when using compact discs. Lastly,Apple uses a unique production process that enhances the authenticityof its items, thus making them difficult to imitate. The premiumstatus of the merchandise allows the organization to chargerelatively higher prices compared to other firms.
Apple’sdifferentiation approach is arguably very outstanding compared toother strategies. The company differentiates its products from othersby focusing on enhancing design, advanced aspects, and capabilities.As a result, the business has become popular in the market because ofthe elegant nature of its products. They are simple and exudesophistication and a sense of worth among users. For instance, Applewas one of the few companies to have introduced aluminum cases fortheir phones, a fact which attracted many people to its products.Other companies such as Samsung followed suit when Apple had alreadybenefitted from the tactic. Correspondingly, the products areuser-friendly, thus making them prevalent among the large segment ofusers who do not have a high-level technology expertise.
Apple`sdifferentiation strategy does not compromise the quality of products.The prices differ according to the extent of the capabilities of themerchandise. For instance, the prices of iPhones vary depending ontheir storage specifications. Devices with plenty of room for storingapplications and personal data such as music and videos cost morethan those with limited space. The company uses this approach tolower costs with the aim of targeting people in the lower and middleeconomic tiers in various countries. Arguably, this approach has beenadopted by other companies. As a result, it lowers the switchingcost.
Arguably, Apple offers products which can be used casually orofficially. It does not have a focused differentiation plan in placeunlike its closest rivals such as Samsung. For instance, Samsungproduced the Note series of phones which target business users. Inthis case, consumers` power is high due to high competition and lowswitching costs.
Ofall the strategies, differentiation is the most efficient because itinfluences how the company sets its prices as well as the perceptionof people. Apple’s customers have remained loyal for a long timedespite the high prices of the devices because they are unique andhigh quality. It is rare to see a company charge premium cost despitethe high competition in the industry. Therefore, it shows that thephones and computers produced by the corporation are considered amongthe best in the market when considering design and performance. Forinstance, iPhones have been known highly efficient despite handlingnumerous applications at once. The organization`s long-term successrelies on continued innovation and the desire to provide deviceswhich are superior and relatively more effective compared to others.In this context, people will find it difficult to switch to otherproducts because the company meets their needs adequately.
Between1976 and 1999, Apple only focused on computers (Apple, 2016). Thesingle line of business exposed the company to financial risks. Thetechnology industry had started to become highly competitive at thetime. Therefore, the company’s profitability was limited. Also,they did not have a fallback plan in case of a financial crisis suchas the ones which occurred after the establishment of the company.Correspondingly, it also meant that the organization had a singlemarket segment to rely on as opposed to other businesses. Theyproduced products such as Apple 1, Apple 2, and Macintosh. However,one of the positive things was that Steve Jobs, and Steve Jozniakincorporated the firm in 1977 thus offering protection to theirpersonal assets, perpetuating the existence of the company, andproviding brand protection (Johnson, Li, Phan, Singer & Trinh,2012).
Theincorporation also enabled the young company to enjoy tax flexibilityand incorporate tax benefits among others. In 1996, Apple expandedits product lines by purchasing Steve Job’s NeXT software which wasused to create Pixar (Johnson et al., 2012). Consequently, the firmexpanded its market base, thus enhancing its profit margins in thesame period. In 1997, the company partnered with Microsoft in a $150million deal which allowed the company to put the famous InternetExplorer and Microsoft Office applications on Apple computers. As aresult, the computers offered great appeal because they usedapplications which were popular among people.
Moderateand High Diversification
In2001, Apple launched iTunes applications which allowed customers toaccess various songs (Apple, 2016). It also provided an opportunityfor music-related companies to distribute songs to different parts ofthe world, thus enhancing their value chain process. This move led tothe further diversification of products and the growth of thecompany. At the same time, the firm released its iPod products whichbecame an instant hit, especially among youngsters. The devicesprovided a chance for people to store and replay their favoritesongs. Arguably, it led to the rapid expansion of the organization’sconsumer base. In 2006, Apple sold Pixar to Disney for a recordingprofit, thus increasing their resource base. From 2007 onwards, thecompany produced iPhones which facilitated its subsequent expansionto become one of the largest technology-oriented businesses in theworld.
Fromthe assessment of the company’s diversification levels, it isapparent that it has always prospered by diversifying its productsaccording to the new trends in the market. So far, the company hascreated high-quality devices and applications that support theiroperation in a way that has attracted a large number of people(Mallin & Finkle, 2011). In this context, it is realistic to saythat the ability of the company to read the market appropriately andintroduce new technologies to meet emerging needs is the firm’sstrongest tool for growth and expansion in the future. Technologywill continue to evolve and progress, thus presenting new platformsfor the development of unique products. For instance, the company caninvest in more business lines such as the production of music systemsand fridges among others. This approach will facilitate theorganization’s financial security in the highly competitiveindustry.
TheComparative Analysis of Apple’s Competitive Environment usingPorter Five Forces Tool
Applefaces a high intensity of influence from other companies due to theiraggressiveness and low switching cost (Khan, Alam & Alam, 2015).Companies such as Samsung, HTC, Sony, Blackberry, and LG are highlycompetitive as evident in their rapid marketing and advertisement,innovative strategies, and imitations. However, Samsung offers thegreatest competition to Apple of all the forces because of its uniquemarketing and pricing strategies. Additionally, customers can quicklyswitch from one product to another because all the companies operatealmost within the same price range. In fact, Apple products are themost expensive, thus making it easier for people to shift to Samsung.In most cases, customers who abandon Apple products tend to considerSamsung as another better option.
Consumershave a strong bargaining power because of the low switching cost(Khan et al., 2015). The increased competition has facilitated theflooding of affordable phones and computers in the market, thusproviding a greater opportunity for customers to dictate Apple’sbusiness processes. Arguably, Apple and Samsung share the samecustomer base because they offer similar values in the market. Theformer cannot boast of a robust customer loyalty it used to have inthe past because of Samsung`s relentless innovation strategies.Therefore, Apple must consider the interests of customers throughvalue co-creation approaches when developing strategies to drive thecompany forward.
Thebargaining force of suppliers is relatively weaker for Apple comparedto Samsung because the former produces a majority of itsapplications. As a result, it only requires few suppliers whereasthere is a significant number of potential suppliers as well as theabundance of supplies. As a result, the company has a broad range ofoptions, thus making it difficult for suppliers to impose theirrequirements. Unlike Samsung, Apple should not prioritize onsuppliers because they are unlikely to influence its operationssignificantly.
Thethreat of substitutes has been moderated by the moderate influenceimposed by the availability of substitute products such as digitalcameras (Johnson, 2014). The risk has been further weakened by thepoor performance of these commodities. However, Samsung has beendeveloping devices, especially phones, which are almost similar toApple products in design and operation. In this case, the companyshould not spend a lot of resources to counter the resulting risks.
The dangers posed by new businesses is moderate because of thesignificant amount of capital required to establish a mobile orcomputer company in the industry successfully (Hamilton &Webster, 2015). Furthermore, it also requires a lot of resources todevelop and sustain a brand such as Apple. However, Apple should payattention to this threat because companies with a lot of resourcescan still emerge and exert their influence on the market.
However,Apple is likely to be more successful than Samsung in the long runbecause it has always facilitated its growth and expansion throughinvention rather than imitation (Folliard-Monguiral & Miniotas,2013). For instance, the iPods became an instant hit around the worldbecause Apple was the first company to come up with them.Correspondingly, Apple has minimized quality-associated risks andthreats imposed by suppliers by deciding to produce their software(Folliard-Monguiral & Miniotas, 2013). Apple also could invest inother lines of businesses and excel because it has a strongreputation for producing high-quality products.
Slowand Fast Market Cycles
Applewould still triumph over Samsung in slow cycle markets because theupgrades of its products are relatively slower compared to othercompanies (Mohr, Sengupta & Slater, 2010). Samsung, inparticular, has been known for its rapid release of phone models,thus requiring a market with a lot of activities. However, theattribute would also make Samsung the best financial performer in afast market cycle. On the other hand, Apple would lag behind othercompanies because it does not have the experience to perform in ahigh-intensity market (Mohr et al., 2010). They prefer to take theirtime in research because they prioritize on quality rather thanquantity.
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Mohr,J. J., Sengupta, S., & Slater, S. F. (2010). Marketingof high-technology products and innovations.Upper Saddle River, NJ: Prentice Hall.