This paper focuses on an American company Apple Inc. commonly referred by the market players as Apple. The company has managed cut a substantial niche in the increasingly competitive personal computer (PC) manufacturing industry. Apple’s success has been attributed to its ability to pursue a unique path of originality to beat other main players. Apple’s focus on quality has made its products distinctive, stylish in design and coupled with superior clientele service orientation (Afuah, 2009).
The company has succeeded in focusing on its key role of innovative technologies while outsourcing the actual manufacturing process to already well established hardware manufacturers (Stenumgård, 2005). Apple has set the competitive pace on its on track record. Cut-throat competition from other established companies in the industry still pose a remarkable challenge to its business.
Increasingly dynamic consumer tastes, the advent of notebooks and personal computers has resulted into an increase in consumption of PCs. Consequently, the major market players have resorted to price wars and intense rivalry in order to cut a larger share in the increasingly profitable market.
To beat the completion from other industry player, Apple utilizes some strategic resources including harnessing the best industry designers besides employing exemplary hardware and software engineers. These strategies are laid upon a strong but sizeable research and innovation team. Besides, sound fiscal budgetary allocation caters for collection of hundreds of Apple’s patents (Stenumgård, 2005). The CEO of Apple, Mr. Steve Jobs has through his leadership come up with thousands of innovative ideas which have successfully made the company to recoup premium market share of the best prices.
Unfortunately, the company cannot afford to be complacent but instead realize that being a leader in the market may be temporary. To spruce up its portfolio and its shareholders besides meeting the dynamic customer satisfaction, the company has to adopt new ways of making profit. This is occasioned by the fact that the personal computer market is increasingly getting flooded, leaving fewer first time buyers and a sizeable consumer who may buy for replacement purposes (Afuah, 2009). Apple must therefore do a massive product diversification in order to grow its revenues and continue expanding is market share.
With realization that the Apple’s market share is under threat from external factors that compounds ability to stay afloat as a profitable company, its strengths, strategic resources and abilities must be harmonized to make stay relevant (Stenumgård, 2005).
Based on its current position in the personal computers market, Apple stands to add a formidable value if it considers product diversification. Its unique products such as the newly launched iPad, iPod and iPhone are a striking substantiation that the company is sufficiently innovative. These historical products have defined and bridged the gap between classical technologies to digital touch technology (Stenumgård, 2005). This real-time digital convergence has effectively captured on-the-move consumers and the sedentary home-based users. The company has seamlessly integrated stylish designs and powerful features within its products which translate to must-have next generation electronic gadgets.
This paper focuses on the Mac brand of Apple’s personal computer production line in the USA. The publicly owned California based company operates basically on portable PCs. The company designs, manufactures and sells these products alongside cell phones, other portable media gadgets, key software and other related accessories e.g. peripheral devices (Afuah, 2009). The modes of sales at Apple consist of a blend of online service stores, retail, wholesales and direct sales besides reseller strategy.
The company employs a generic strategy against competition by producing high quality, stylish designs and customized services (Afuah, 2009). This ensures that the strategy effective spans across all level of consumer ranging from the less techno-savvy user to the sophisticated end users.
Through the process of outsourcing, the company cuts cost of production by using third party to manufacture original equipments on their behalf. This reduces the cost of storage, insurance and human resources while concentrating on the core values. This has made the company to excel in designing trendy or products that are ergonomically user-friendly (Stenumgård, 2005). Also, the company assigns an individualized customer service which adds a unique value to its customers. The products positioned as tailor-made earns the company value above the market prices.
Strategic analysis and deduction
This analysis is narrowed down to the manufacturing and sale of portable personal computers in the localized market within the United States of America despite the presence of other industry players in the same field. The competitor firms are a substantial risk to Apple but the market operating environment however still remains lucrative (Blocher, 2006). Many companies have thrived in the past, producing similar products but they have failed to cope with the competition from their rivals. Ironically, the major suppliers and consumers have had limited influence on the competitor.
Also, formidable threats come from other cheaper alternative that pose a challenge to premium priced products. However, their impact on the market in the projected future is negligible (Afuah, 2009) since most competitor face a myriad of hurdles to establish a product to capture the market like Apple.
The larger companies in the USA have extremely expensive PCs which are competing cut an edge in the million population market niche. This has led to advent of cheaper versions from other manufactures. Thus, massive and aggressive adverts are placed in all sorts of media. This has consequently resulted in massive consumer awareness making the PCs a necessity (Stenumgård, 2005). For majority of consumers, the business economy is preferential leading to many manufacturers focusing on cheaper or affordable-cost strategy. Low cost forgoes basic features while middle ground players like Dell and Hp have turned to offering a variety of products at range of varying price tags.
The industrial need to procure large numbers of PCs at discounted prices has tremendously influenced the market price. Advent of new integrated technologies is also pushing down the prices per piece. These are focused on improved processor speeds and energy saving technologies occasioned with reduced cost of critical components of PCs (Stenumgård, 2005). This perpetual increase in innovation lays pressure on PC manufacturers to reduce costs. However these products must still conform to standardized legal requirements thus maintaining a certain extent of uniformity.
Effects of suppliers
The industry regulatory bodies determine the licensing and entrants of new technology in the market. Other open or collaborative technologies may not however have an immense effect on product development (Dewalch, 1986). Most manufacturers of PCs rely majorly or personalized/ privately owned standards on some computer specifications. However this till require membership to licensing groups as a rule.
Again, the fact that many PC manufacturers rely on both Intel Corp. and AMD to supply the CPUs, the domination of the semi-conductor market by Intel translated into AMD requiring licenses to manufacture its CPU(Dewalch, 1986). As a result, the chip technology compatibility complicates the business. In some cases the Pc manufactures therefore have to make special preferential treaties to procure the micro-chips in bulk hence influencing the cost by pressing the suppliers that dominate the market to reduce costs.
Power of the consumer
With increasing consumer awareness on their products, the PC makers have eventually succumbed to the pressure form the consumers to customize their products. The high end market users need the most modern and greatest while the average consumer may need ‘’just a good PC’’. This has forced manufacturers who would wish to net a wider consumer market to diversify their products. This has led to wider product acceptance through brand loyalty and closed-systems (Stenumgård, 2005).
New market entrants
These include Dell, Hp and Lenovo which have managed to capture a substantial market share with popular brand recognition in USA despite hindrances to successful entrance to the American market. Massive investment capital requirement are major impediment to new entrants (Hooper & Newlands, 2009). However, by enjoying economies of scale they have managed to lower PC prices.
To eliminate such obstacles most companies have resorted to relying on original equipment manufacturers (OEM), lean organizational staffing cuts on marginal costs. The success comes with collaborations in Asia as a cost cutting strategy. The demand for smart phone has seen rapid divergence of phone markers to computing industry with Nokia beginning to manufacture the ‘’netbooks’’ as a result of market demand (Hooper & Newlands, 2009). This poses a major challenge to Apple with which they are currently involved in patent infringement wars.
Threat from alternates
Over the past decades, the consumers have experienced massive growth in the emergence of complementary substitutes such as PDAs and currently the “smart-phones”. Despite flooding the American living room, the emergence of “smart-phones” and Blackberry as a result of massive technological growth beyond the PCs is unlikely to have a significant negative bearing in the future consumption of PCs (Dewalch, 1986). This is due to the fact that the consumers’ digital lifestyle would still have a key role to play in turning the tides.
On the basis of this analysis, I would recommend Apple to introduce a differentiation strategy. This is because the PC market has exhibits a persistent pressure on pricing, which may erode Apple’s profitability (Blocher, 2006). Apple should develop a strong brand image to avert the destructive completive price wars.
Operating costs can also be reduced by creating stronger relationship with the suppliers of vital hardware components other than sourcing them from the lowest bidder. This can be done through exclusive agreement to mitigate the supplier forces and earn attractive prices (Hooper & Newlands, 2009). Thirdly; Apple should diversify consumer digital lifestyle by producing complementary products to lessen the saturation of the market. This is an alternative in accessing broader revenue base amidst intense competition.
Major PC makers design their products to suite the consumer scarification. Thus, most products are customized. However, major player and similar products, Apple’s Mac products outcompete the others based on the high extent of compatibility. These are pegged on price, style, support matrices and value as extrinsic dynamics.
Intrinsic features such as customizability, peripheral integration with the main systems coupled with gamming capability are the major driving forces in computer manufacture (Blocher, (2006). The ability of Mac PCs to integrate with iPod and iPhone represents Apple’s seamless integration in its software, hardware and loads of applications such as iLife, iMovies, iTunes and iPhoto (Hooper & Newlands, 2009). This is a significant contrast to other competitor since it only requires the customer to go online after setting up the Allienware on Mac PC.
Apple should focus on the foundation of lifestyle branding while resisting going a common ground to match Dell and Hp. Developing innovative brands by concentrating on vital internal resource would make it competitive (Blocher, 2006). More research should focus on user interface capabilities to ensure ease of usage. This may go in line with expanding online store sites to provide more direct contact with the buyer.e.g. by including e-book reader capabilities.
Value sequence and tactical implementation
As a company policy Apple’ goal is to provide the consumers with” the best personal computing experience” by offering product that are easy to use, integrated and stylish (Afuah, 2009). This is outlined in the company goals and its implementation. The implementation process hover poses the risk its success. Reliance on third part OEM from partner companies may have a negative effect on the quality of their products (Blocher, 2006). Despite OEM guideline of product specifications, Apple has no direct influence on sourcing of the raw material used. Thus, any quality control contravention may be detrimental to image Apple that prides in Quality.
Despite reliance on non subsidiary firms in Asia to make it hardware, Apple has maintained stronger relations with the supplier and workers to foster mutualism. This is achieved in treating the worker as equals (Hooper & Newlands, 2009). Any quality control lapses have been patched up through replacement. This hassled to stronger customer opinions and satisfaction in line with the company policy. Apple’s ability to quickly fix defects is made possible by having a strong cash base.
Apple should adopt first-party excellence verification in OEM industries instead of being complacent of their partnerships. This will protect its esteem on excellence through arbitrary quality control and audits on fair samples of PCs produced (Blocher, 2006). Again the company should plough back the excess monetary reserves that are yearly set aside to make its portfolio attractive. This ensures that any excess money is put into productive use since unspent cash do not produce any fiscal benefits in the near future (Blocher, 2006). This can be achieved through tactful expansion of their stores to retail wider variety of appealing products and services. Thus, the company must be wise to prevent over saturation of the market.
Trends and opportunity – Overall market analysis
The general American environment poses challenge to apple in that majority of the population are bogged down by perpetually increasing utility bills and health-care cost soaring above the roofs. This is compounded by wages that disproportionately level (Hooper & Newlands, 2009). Thus, the company must be keen to explain to the general population why they have to buy the relatively expensive product from Apple in order to marginalize the external threats.
With the current global recession punching holes in consumer pockets, the uncertainty of the future economic status makes consumer weary of investing in expensive stylish PCs that may dent their fiscal status as they may be perceived as luxury. This makes Apple susceptible to their less expensive alternate competitors like Dell and Hp (Blocher, 2006).
Apples high costs may see the potential buyers resort to its competitors. Consumers are faced with low wages and high bills to pay especially the America middle class (Afuah, 2009). However the high value perceptions of Apple products have made them to stay afloat during the economic recession.
These threats can be averted through emphasis on the value for the dollar spent by the consumer. Paying attention to customer satisfaction and excellent service would help to keep away their competitors. Also, the company should campaign for net neutrality to reduce product usage as a result of narrowed interest of profitability on content access using the PCs. This can be done through integrated device compatibility, innovation and lastly convergent applications.
Expected economic recovery would give Apple an opportunity to make more sales through increased consumer expenditure as evidenced in signs of recovery but the consumer still remains skeptical of premium prices (Blocher, 2006). From the demographic realm, the flattened wages amidst soaring bills is an opportunity to sell longer lasting products giving consumer value for their dollar. However the political and legal environment e.g. the healthcare restructuring and the would be FCC regulation on internet presents an opportunity to customize portable PCs to modernize access to healthcare related information thus increasing demands in American market (Afuah, 2009).
Technological environment through device convergence and reduced lifespan pose the threat of skipping some vital ideas in innovation as a result of faster obsolesce of prior product versions. Being a market leader, it can still appropriately use the technology to spur convergence and remain the leader for longer periods of time. The socio-cultural environment occasioned by increased on-the-move digital device usage and increased environmental concern may reduce Apple’s relevance in market as the effectiveness of the product would be measured through environmental impact assessments such as level pollution. Adopting environmentally sound policies and practices would give a higher competitive edge through the use of appropriate technologies.
The global environmental threat such as the robust Chinese economy and potential globalization of environmental policies aimed at reducing carbon emission may impact negatively on Apple thus reducing its profit margins (Afuah, 2009). Also, the Chinese economic development may require proportional increased wages for employees thus increasing the cost of production. This can be leveraged through adoption of environmentally friendly practices already in place. On the other hand, increased Chinese population is a potential market target for Apple’s products.
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