Apple Inc. Case Study Use the case study ” Apple Inc. in 2011: Can it prosper without Steve Jobs?” by John E. Gamble and Lou Marino. Overall Guidelines Organization Break the analysis into the following major headings: Introduction [5 points] 1 page Strategic Issue [10 points] 1 page External Analysis [15 points] […]
In 1976, Steve Jobs and Stephen Wozniak established Apple Computer. Arguably, this was the case when the two started selling Apple I to computer enthusiasts in Silicon Valley. The mentioned product was a sketchily manufactured personal computer (PC). After two years, the founders rolled out the Apple II; it was the main mass-generated (PC), which in the long run, retailed more than 10,000 units. Despite the success, the subsequent generation of the invention line, called Macintosh (Mac), radically transformed personal computing. The product has a user-friendly graphical user interface (GUI), enabling users to relate to the pictures instead of just typing text commands. The introduction of the Mac in 1984 was welcomed as a revolution in personal computing. To this end, the mission of Apple is to use innovative services, software, and hardware to convey the best user experience to its consumers.
The nature of business adopted by Apple is marketing, manufacturing, and delineating portable digital music players, PCs, media gadgets, and mobile communication. The firm operates in various markets, including private computers, tablets, individual media players, and smartphones. Some of the products being sold in the mentioned markets include the following: personal computers, tablets, iPods, and iPhones. The scope of operation Apple involves continuously introducing ground-breaking devices to the market while thoroughly securing the secrets behind its technology. In that sense, it can be argued that the generic strategy adopted by the company is that of broad differentiation. This approach focuses on the main attributes that differentiate the firm and its merchandise from rivals. Apple stands out in the market with this strategy. As an illustration, the establishment successfully differentiates itself with an emphasis on elegant design combined with high-end branding and user-friendliness.
Steve Jobs is credited with much of the turnaround in the company; he introduced idea after idea on how to advance the organization and its endeavours. Apart from progressively pushing for innovative products and ideas, he also implemented numerous structural changes, such as ridding the firm of unprofitable divisions and segments. In that sense, the biggest concern for the company is centred on the most recent events, which undoubtedly, will impact the future direction and decisions of the firm. For example, concerning the internal situation, it is not clear how the loss of Steve Jobs would affect the performance and approach of the establishment. Based on the external circumstance, the entry of Google into the market for tablet computers and smartphone handsets would impact the sales of iPods and iPhones produced by Apple.
Without a doubt, the sales of the iPhone and iPad were the most significant contributors to Apple’s August 11, 2011, position as the most valuable organization globally based on market capitalization. The sales of the two products were also the most significant suppliers to the record third-quarter performance of 2011. Steve Jobs was generally renowned as an ideological force behind the creation of the iPad, iPhone, and iPod. In this way, Google, without a doubt, aimed to venture into its position as the leading smartphone platform to create a dominant market share of tablets, computers and smartphones. At the same time, Samsung, RIM, HTC, and Nokia were advancing to reclaim the market share lost to the iPhone. Apart from that, other companies, including Acer, HP, and Dell, have made efforts to seize considerable shares of the tablet computer market. Indeed, the analyzed strategic issue would significantly impact Apple’s direction and course of operations. The following question will, therefore, help to determine how the company can resolve the strategic issues:
Apple operates in the personal computer (PC) industry, and this sector will likely remain one of the most contested ones for the conceivable future. The business has demonstrated signs of picking up again, having experienced a decline since the recession. The industry has high profitability as organizations attain new levels of the economy of scale. The demand for electronic products, in this case, tablets, phones, and computers, continue to grow. As such, this provides for new companies and existing firms to upgrade to faster and new technologies.
The bargaining power of buyers: medium threat. The electronics sector is susceptible to the bargaining power of consumers. Nevertheless, this is a common threat. In the 21st Century, users are empowered and well-informed. They search for statistics and make buying decisions after carefully contemplating and considering reviews from different sources. At the same time, consumers have multiple options when they want to buy; besides PCs, the users can choose alternatives, including handheld devices, such as iPods, Smartphones, and tablets. The gadgets have similar capabilities as PCs. Even more, unlike the PC, these devices are trendier, sleek, and readily available in the market. Importantly, all of these lead to moderate bargaining power. Each organization is pushing hard to attract consumers based on prices and quality.
Suppliers’ bargaining power (low threat): In the electronics industry, in this case, PCs, tablets, and phones can be categorized as service suppliers, hardware suppliers, and software suppliers. The basis of their products and services is homogeneous, and they compete by concentrating on forming highly advanced and ideal products at a reasonable price. For this reason, the organizations within this industry can effortlessly switch between suppliers. The company is the one to determine whether or not a low or high-end supplier. The quality of the products is, for the most part, determined by their microprocessors and application systems. In that sense, the dealers of hardware and software within the sector play a fundamental role in pricing the devices. Higher prices can be expected if a firm applies a high-quality method, considering what the suppliers are paid. As an illustration, Apple employs OS X, which in the industry is one of the PCs mirrored in the product’s price.
Although there are many suppliers, each brand has different options for choosing a supplier. None of the suppliers holds any substantial clout since they are not large enough. It is, therefore, the brands that control the game. They set the rules the merchants are expected to comply with, such as environmental compliance and labour-related regulations. The various brands in the industry are all large. As a result, they hold vast clout considering their financial strength. In this case, the outcome is the suppliers’ low bargaining power.
Threats of substitutes (high threats): There is an increase in the risk of substitute products in the industry, particularly those that can replace PC. The development of mobile technology has resulted in a drop in the demand for PCs. This is because users have unlimited choices in the category of portable gadgets, such as tablets and phones, that can offer similar characteristics without needing to carry a large laptop. The point, then, is that, compared to smartphones and gadgets, PCs and laptops are compatible with more software and offer unique applications. Nevertheless, these gadgets are likely ideal alternatives to PCs if they attain similar features.
New entrants – low threat. Several reasons make the threat of new entrants in this sector low. For example, building a brand for producing PCs requires a high level of investment. Establishing brand equity and brand is demanding since it requires investment in skilled human resources, supply chain, and production. At the same time, advertising and marketing need substantial assets to generate significant sales. More so, the already established brands in the industry can exploit economies of scale, which enables them to manufacture high volumes at lower rates. Attaining this requires a considerably large infrastructure for any new brand. Therefore, a new player cannot enter the market unless they have a substantial sum to invest. A new entrant must also form a trustful association with customers to make everything work. Therefore, the game becomes entirely challenging for a new player in the long run.
Rivalry among existing players (high threat): There is high contention between the five leading players: Acer, Apple, Lenovo, Dell, and HP. All these combatants compete for low-cost and great products with the most efficient operating system. These players’ financial strength and size lead to a fierce battle in marketing that gives rise to intense rivalry.
Speed of actions and decisions. In electronics, swiftness of operations and judgment are of the essence. The market trends and fast technological changes have required PC organizations and their value network of partners, suppliers, and customers to keep up effectively. Corporations in the PC industry work quickly to integrate technological advances, whether a feature or function, industry-standard, or next-generation chip. Speed of actions and decisions has been an influential force. The reason for this is that since marketing continues to be as much art as science, recognizing the change of interests and tastes of consumers late can lead to missed opportunities. Also, this can be the case due to the late recognition of new global competitors. The rule for business domination was simple in the past: the established and large corporations would rule the smaller ones. Nevertheless, based on the new standard, the rapidly adapting and fast-moving organizations currently dominate the slower ones, whether they are small or big. Various factors are essential for maintaining the speed of action in the PC industry. For example, a firm may adopt networks to create gadgets for new market segments. A company may also implement cost-efficient and effective trading-partner processes in the supply chain.
Innovation. The ability to bring in fresh ideas to keep services and products new and the operation running are critical to any successful business. Innovation plays a significant role in the PC industry. In this sector, the concept is not only about offering new products, services, and ideas; it also involves adapting to changes to attain better outcomes and modifying current business models. The PC industry is a competitive environment, and there is a need for each brand to innovate to stay competitive. Apart from that, the requirements of consumers in this sector are continuously evolving and dynamic. Due to innovation, companies such as Apple have the power to anticipate the changes in the market and offer solutions to the customer even before they feel the necessity for them. The approach ensures that users are satisfied most of the time. Refusing to introduce new ideas and being happy with the state of affairs means that a business in the PC industry will begin to struggle. Pleasing and exciting the customers and ensuring a company stays relevant to require innovation at all times.
Challenging business insight. The deficiency of reflectiveness in the status of partners, suppliers, and customers is only one component. Many organizations continue to stumble on divergent internal data. Such detachments threaten quality as well as the speed of decisions in the course of the business. As the risk demonstrates, enterprises require more than data; they need intuition into the operations are running to keep risk low and speed high. Many firms are implementing balanced scorecards centred on shared data and consistent metrics. In this respect, a business can focus on operational efficiency, customer satisfaction, and improved margins rather than reporting issues. The problem revolves around gaining insight across the frequently changing and sophisticated partners and operations involved. Developing a business intelligence (BI) layer of information system is one way to tackle the challenge. At the same time, business scorecards and tools can streamline the manufacturing process, manage profits and costs, improve global value chain efficiency, and develop new products. When all workers attain business insight, they can make more relevant, faster, and better decisions. As a result, this spurs performance improvement, uniquely when every person is leveraging a constant set of data in making those choices.
Several factors impact the general attractiveness of the PC manufacturing business. They consist of available macroeconomic dynamics and industry-specific factors, such as the critical success factors, expected behaviour of different competitors, market position, forces of change, competitive forces, and unique economic features. Within the PC industry, the scope of the competition is exceptionally aggressive. The top players are Sony, Dell, Apple, and HP. The dynamics of competitive edge include customer service, new technology, reliability, and custom build PC. The sector is in a life cycle stage that can be defined as mature. Nevertheless, the product’s growth has not declined due to the globalization trend occurring within multinational corporations. There is a diverse interest in PCs. The benefits are different for each customer. There are many uses for the product, including science, school, research, money management, enhancement of video, and music manipulation. In that sense, the consumers who purchase PC are diverse and use their gadgets differently. Computers provide an effective method of entertainment, such as playing games and running a business. The point is that any individual can find a valuable feature for a PC. The industry, therefore, generates higher revenue than the chemical and auto industries combined.
The PC industry was moderately amalgamated with the five major players accounting for 59.7% of worldwide shipments and 77.4% of the US consignment in 2010. The sector was projected to grow at a rate of 5-6% to reach $354 billion by 2012, before the 2008 recession. The impact of the recession led to a vivid decline in sector revenue in 2008 and 2009. Furthermore, in 2010, the shipment of the PC industry increased by 13.6%. This growth is because demand in some countries accelerated, and businesses were compelled to replace the ageing computers. However, in the first quarter of 2011, the shipment of global PC declined by 3.2%, with Japan and the US experiencing a steep decline. During the second quarter of 2011, China became the largest PC market worldwide due to the modest single-digit growth in emerging markets.
The PC market weakened for several reasons, and the most crucial among them is the increase in the sales of smartphones and tablets. The reduced development in the shipment of global PC was ascribed to poor economic situations in different countries, including the US. The rise in the popularity of tablets and the absence of captivating new PC applications were some other factors. Businesses were beginning to adopt tablet computers, including the iPad, widely. For this reason, they were becoming joint replacements for PCs and laptops among users. In brief, the sector felt the bite of innovation when smartphones and tablets pushed down the sales of laptops and PCs.
Furthermore, there have been continuous technological changes, which have led to a downward impact on current technologies. The PC industry is fiercer because innovation, as well as technology, is advancing each year. Although the competition level is aggressive in the industry, it is primarily an attractive market. Nevertheless, the substantial investment required to grow and raise a PC brand makes it difficult for new players to enter the market. Apart from that, the PC industry does not manufacture only PCs. Every organization that manufactures PCs also has ventured into other markets and industries. The sector is, therefore, extremely profitable and competitive. Moreover, in this market, the number of purchasers is relatively stable and is increasing with the population.
Originally referred to as Apple Computers, the company, at present, ventures into other sectors apart from computers, such as portable music players and phones. At the same time, the company is presently one of the significant leaders in innovation in phones, mobile devices, computer software and hardware. As evident in the organization’s vision, mission, and vision, it is evident that Apple has a clear set goal and strategy. The following financial and SWOT analysis indicate that the company is projected to grow faster than other market players.
The financial analysis, as shown in the Appendix, indicates that Apple’s industry life cycle is in the maturity stage. It is a stage with a slowing in total revenue and sales. The company has been manufacturing products, such as the iPhone, progressively over the years, and clients are well aware of them. Apart from that, many of the users of products produced by the company are “repurchasers,” implying that they do not switch brands and consistently buy the devices. In this way, the company is in the maturity stage of the industry life cycle.
Apple has been devoted to conveying the paramount user capability to its clients through its state-of-the-art services, software, and hardware. Apple’s business approach leverages its unique ability to develop and design its application services, software, and hardware. It also uniquely creates an operating system to offer its clients solutions and products with smooth amalgamation, greater simplicity of use, and ground-breaking design.
Strong brand image. Based on its strengths, Apple is the most recognizable and valuable brand globally (see Appendix). The company is known for manufacturing well-functioning, well-designed, and highly innovative gadgets. It is also renowned for delivering sound financial performance and excellent customer experience. The influential marketing and advertising capabilities have also enabled the firm to attain a strong reputation and brand recognition. In brief, Apple can bring profitable new products into the market under its full brand image.
Consumer focus. The firm continuously manufactures its gadgets with an emphasis on users while keeping their minds in the future. Apple often attempts to imagine things that even users have not yet imagined.
Margins. As a company, one of the critical benefits of Apple includes the margins that it commands over its products. The company keeps a substantial margin for itself in brand building, research, and development and is a leader in technology with the highest brand equity. At the same time, the pricing of Apple is such that the cost of its products does not break in the market, and users always find the company selling at the same price in different retail stores.
Design and Technology. Apple’s technology and brand are the reason for its fantastic brand equity. The products introduced are very user-friendly, and it is also easy, which, in turn, captivates consumers. The point, then, is that there is always a taste of innovation in Apple products, which is why consumers are fully informed to purchase the gadgets.
Effective rapid innovation. Over the years, a critical strength of Apple has been its innovative product lineup. At first, the company introduced the MacBook. Afterwards, it introduced ground-breaking devices like the watch, iPad, iPhone, and iPod. In brief, the company has covered entirely everything that consumers would desire.
Reliance on a few products. Apple has few products in its portfolio; it has around 7-8, a small number compared to different products produced by its closest rivals, including Google and Microsoft. There is a universal demand for the organization to increase its product portfolio because it depends on each product. This means the company will be at a loss if one product fails.
High selling prices. An additional significant weakness for Apple is the high price point for its products. Many customers are of the view that the company is charging too high. The reason for this is that there are similar gadgets available at a much lower cost.
Incompatibility. Another critical issue in Apple is that most of its gadgets are incompatible with third-party accessories and software. In that sense, when consumers purchase a product from the company, they enter the Apple universe, and there is no other option than to continue with the product. Indeed, this has a significant influence on the decision-making of users.
Utilize artificial intelligence (AI). Apple should adopt artificial intelligence in its products to have a strong market position and increase its profit margin. The technology will benefit the company in various ways, including introducing gadgets that assist users in arranging features and apps with a string of commands. The firm can also incorporate the iPhone with an intelligent search for the photos app. The focus of Apple should be on spreading its AI portfolio to have a solid base in the future.
Smart wearable technology. It is projected that innovative wearable technology will soon dominate the world. In this regard, Apple has the chance to capitalize on this trend.
Introduction of green technology. Apple lacks green technology. The organization is yet to launch gadgets that are manufactured using green technology. In that sense, the firm has the opportunity to participate in creating or implementing eco-friendly and sustainable technology.
Expand on distribution networks. At present, the distribution of Apple leaves room for minimal growth because it is constrained. Therefore, creating an expansive distribution network will generate higher sales and revenues for the company.
Imitation. Apple faces the threat of imitation. It is a significant threat due to many multinational and local organizations that feature and design Apple’s products. Therefore, the organization has become vulnerable to developing countries unlawfully using the brand’s image to sell counterfeit products, which are often sold at the same price as original products from Apple. Due to these fake products, potential customers may believe that Apple has made the merchandise with low quality. The news is likely to lead to bad publicity and negative reviews.
Rising labour costs in different nations: The increase in labour expenses concerning contract manufacturers, such as the ones in China, pushes the selling price higher and reduces profit margins.
Increasing competition. Despite solidifying itself as a brand, Apple still faces a rival threat. With the development of technology, brands such as Dell, Google, and Samsung are giving the company fierce competition. The competition is getting stiffer, and thus Apple has to either revise its pricing policy or introduce new technologies ahead of the other players.
Apple is facing internal and external concerns that will have a massive impact on its operations. Internally, the organization is concerned about its performance and strategy following the death of Steve Jobs. Externally, the sales of iPhones and iPods are also in jeopardy, especially with the entry of Google into the market for tablet computers and smartphone handsets. At the same time, other organizations, such as Dell, Samsung, and Nokia, aim to capture considerable shares of the tablet computer market. The following research question is, therefore, vital in determining how Apple can tackle such challenges:
Based on the SWOT analysis, it is evident that its products by Apple are charged much more than those of other players. Due to such fierce competition in the sector, some critics contend that the price is unjustified. The approach is a weakness for the company since customers can switch to similar devices with lower rates and the same quality. The generic strategy currently adopted by Apple is directly linked to its marketing and pricing techniques. Being one of the most cherished organizations globally, Apple has demonstrated that its generic strategy is a vital factor of competitive advantage against other organizations, such as Sony, Dell, and Samsung. Apple’s intensive growth strategy supports its ability to sustain a stable position in the international market. With an emphasis on excellence and a high rate of innovation in the design of its products, the company has succeeded despite its relatively high selling price. Arguably, this strong position portrays Apple’s effectiveness in utilizing its generic strategy for competitive advantage.
To this end, Apple Inc. should continue to differentiate its brand from competitors aiming to reclaim the market share lost to the iPhone and iPad by maintaining the broad differentiation strategy. Despite the identified strategic issue facing the firm, the comprehensive differentiation strategy will likely enable the firm to continue offering unique services and products. It will continue to do so to a wide range of consumers and with sound strategic clarity and entrepreneurial outlook. Despite the turbulence mentioned in their history, the strategy in question will enable Apple to take steps to move the company into a more prosperous position than it currently occupies in the industry. Moreover, the focus of this approach is on critical characteristics that differentiate Apple as well as innovative products from its rivals. As an illustration, the high-end branding of the product, combined with the user-friendliness and elegant design, efficiently differentiates the technology business.
The broad differentiation strategy implies that the objective of Apple is to always set itself apart from other players not by the cost of the products but by competitive advantage centred on the design of products that attract consumers. For example, the design comprises cutting-edge aesthetics and seamless connectivity among devices. The company, therefore, still widely reaches different market segments despite this generic strategy making it different. The firm’s products support a broad market reach because they are designed for everyone. As an illustration, Apple can target business organizations and individuals through the MacBook product line. In that sense, Apple should uphold the broad differentiation generic strategy. The reason for this is that through the implementation of the approach, the company has maintained its position as a high-value and high-end technology business leadership and competitive advantage.
Additionally, the generic strategy of broad differentiation, as adopted by Apple, dramatically impacts the company’s strategic objective. It aims to differentiate its brand from competitors seeking to reclaim the market share lost to the iPhone and iPad. The point, then, is that for the broad differentiation approach to continue bringing success, Apple must progressively focus on innovation through research and development. At the same time, it must develop innovative products continuously so that it maintains its competitive advantage. Taking the mentioned steps is crucial because, in the long run, other players in the market catch up with new products and technologies. For this reason, the broad differentiation strategy compels Apple to innovate to ensure it remains ahead of its rivals consistently. To this end, based on the comprehensive differentiation strategy, constant innovation is one of the strategic objectives of Apple that has helped the firm attain a competitive advantage.
Apart from maintaining business growth, Apple must continuously increase its market reach, including in the global consumer electronics market. The company does not concentrate on any exact market segment considering its generic strategy for competitive advantage. Instead, Apple competes by selling different services and goods that suit the different sections of information technology services and the consumer electronics industry. To this end, based on the broad differentiation strategy, another strategic objective by Apple should be to penetrate markets to ensure an extensive reach. Such growth of business and expansion could be attained through intensive growth strategies.
Apple should utilize the “Fitzgerald and moon building blocks framework” as a system for its performance evaluation. Based on this model, the organization can use three key performance indicators. The first is “dimension,” which consists of the performance aspects that Apple must measure. They include the following ones: innovation, flexibility, resource utilization, and quality (which are referred to as determinants), as well as competitiveness and financial performance (which are seen as results). The second one is “standards.” It entails setting three main goals that managers should target. The standards include equity, achievability, and ownership. The last one is “reward schemes.” It should be connected to performance whereby the managers are paid bonuses for attaining their goals. It is centred on three principles: controllability, motivation, and clarity.
Broad differentiation, as the generic strategy adopted by Apple, should be maintained by the organization because, compared to other approaches, such as low focus cost, it has made the business stand out. Apple can, therefore, differentiate its brand from competitors aiming to reclaim the market share lost to the iPhone and iPad using this strategy. The reason for this is that the differentiation in the design and function of the products supports the goal of Samsung of being a thorough market innovation in technology. Some of the critical dynamics of the success of Apple based on this approach include improvement of existing products, redevelopment of the devices, being first to market with innovation, and increasing the appeal of commodities to users by meeting different demands through product diversification and addition of product lines. Change is at the core of Apple’s undertaking. The firm must aggressively infiltrate markets to advance its execution of this generic strategy for competitive advantage.
(Revenue – Cost of Goods Sold) ÷ revenue) = Gross Profit Margin
(65,225-39,541) ÷ 65,225) = 0.39
(Revenue – Operating expenses) ÷ revenue) = Return on Shareholder’s Equity
(65,225 – 7,299) ÷ 65,225) = 0.89
Total liability ÷ Total Shareholder’s Equity = Debt to Equity Ratio
27,392 ÷ 47,791 = 0.57
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Published On: 01-01-1970