Electronics Industry’s Primary Business Activities
The electronics industry comprises companies designing, manufacturing, assembling, and servicing electronic products. These products range from discrete equipment, such as integrated circuits (smartphones, personal computers, television sets), medical equipment (dialysis machines and heart rate monitors), and industrial equipment (robotic devices), to networking and communication equipment like switchboards and routers. The industry is driven by innovation; thus, significant pressure is placed on design and engineering teams to design and develop innovative products.
Major Competitors and Their Market Shares
The various markets that Apple Inc. competes in are characterized by constant innovation and short product life cycles. The smartphone market is massive and fast-paced as it has quickly evolving technologies. Product lifecycles are often much limited, with associated companies releasing new phone generations after every one or two years. As of October 2019, the top companies in the industry included Apple with a 20% global market share. It is followed by Samsung (18.8%), Huawei (15.2%), Xiaomi (8.9%), Oppo (8.3%), and others (28.7%) (T4, 2020). Most companies in this segment compete based on price and feature; however, Apple charges a premium for its iPhones. It is essential to note that Apple was a market leader in both the UK and US, where it had a 54.3% and 49.2% market share, respectively (T4, 2020).
The tablet market is almost similar to the smartphone market as companies compete based on features and price. However, tablets have a comparatively longer lifespan because of the less usage that results in less damage. In 2019, the top five companies in this segment included Apple Inc., which was the dominant leader with a global market share of 34.6% (Alsop, 2020). It was followed by Samsung (17.3%) with its range of Galaxy tablets, Amazon (3.8%), Huawei (1.34%), and Asus (1.2%) (Alsop, 2020). On the other hand, in the smart wearable market, including wristwear, eyewear, and footwear, Apple and Samsung were the dominant ones (T4, 2020).
The PC market is relatively mature and is on the decline since companies are extending their upgrade cycles; hence, increasing the PC lifespans. Companies are competing based on price. As of 2019, Lenovo was the global market leader with a market share of 24.1%. Hewlett Packard Inc. followed this with 22.2%, Dell having 16.8%, and then Apple with 7% (T4, 2020). Lastly, with regards to the software segment, Apple Inc. competes with rising Chinese companies across its range of product lines, which comprise Apple Music (Streaming), Apple Maps (Location Services), iCloud (Cloud Storage), Apple Keychain (Password and Identity Management) and Apple TV (Over-the-top Streaming Services).
Industry Growth Rates
The electronic industry that Apple Inc. competes in is characterized as being extremely competitive and fast-paced. Mobile devices, such as smart wearables and smartphones, continue to witness growth and increased market penetration. However, the mobile phone segment is by far the most crucial in the industry as it has the highest volume of shipments and is associated with generating the most significant revenue. Today’s proportion of smartphone users exceeds 3 billion and is expected to increase by a considerable amount over the next few years (Statista, 2020). Currently, The US, China, and India contain the highest numbers of smartphone users globally. In the past five years, approximately 1.4 billion smartphones were purchased yearly (Statista, 2020). This reflects the stagnation of the smartphone market in the past few years. Nevertheless, this segment continues to have a high potential for growth as the market’s rate of penetration is less than 70% in highly populated regions, such as India and China (Statista, 2020). It is essential to note that the revenue generated from the smartphone market continued to grow despite the stagnation in sales volumes.
The tablet market has witnessed tremendous growth since the release of the iPad, the first touch screen tablet, by Apple in 2010. The iPad’s positive reception encouraged other companies, such as Samsung and Huawei, to release the Galaxy tablets and Matte pad. However, after its peak in 2014, the global demand for tablets started decreasing. The volume of sales is forecasted to reach 122 million units in 2023, which is a reduction of 108 million units seen in 2014 (Alsop, 2020). Changes are also evident in the PC market in which vendors are shifting towards expanding the software industry to facilitate the integration of new technologies into the PC experience.
Effect of Demographic and Significant Economic Trends
The economic growth in emerging markets is expected to be faster as compared to developed markets. This growth might be substantial enough to generate growth in the overall smartphone market. Emerging markets alone contribute to 59% of the smartphone shipments worldwide, and even after excluding China, they contribute to 32% of the total volume sales (Srivastava, 2019).
Recent Technological Development
In the smartphone market, the introduction of the 5G network coverage is expected to influence the global smartphone market growth. Samsung, LG, and Motorola have already released a variety of 5G Android phones (Statista, 2020). In concurrence, Apple is expected to add 5G to one of its 2020 iPhone models. The current sales of 5G mobile devices are estimated to be 221 million, which is 12% more than the overall mobile phone sales (Statista, 2020). In 2021, the volume is expected to be more than double. Furthermore, with the increase in internet penetration, the sale of smartphones, PCs, and smart wearables is likely to increase.
Apple Inc.’s Primary Product Lines
Apple Inc. was first established in 1976 as a computer company; however, with the iPod’s release in 2001, it experienced considerable traction (T4, 2020). Therefore, it started transforming itself into being a mobile device company. Currently, the company designs and manufactures products and services that can be categorized under the IT segment in the electronic industry. Nevertheless, the vendor continues to widen its range by establishing the possibility of including non-IT products. Its main product lines include the iPhone, iPod, iPad, Mac, Apple TV, Apple Watch, Software, digital content, and the iCloud (T4, 2020). These product lines are linked to business processes based on product-based divisions; for instance, the Mac product line comprises laptops and PCs of varying sizes for the various market segments. Furthermore, the iPad, iPod, Apple Watch, and iPhone are mobile devices with functions comparable to that of the iMac. Moreover, through the digital content product line, Apple Inc. can distribute digital music and video streaming services, mobile applications, and iCloud. Apple’s main revenue generator is its smartphone segment comprising of the iPhone.
Apple’s Recent Growth and Position in the Industry
Technological innovation, combined with the employment of minimalistic designs, has propelled the growth of Apple Inc. and facilitated its establishment as a global brand. This is translated in the form of unparalleled revenue growth, which was from $8 billion in 2004 to $260 billion in 2019 (T4, 2020). Furthermore, unlike other companies in the electronics industry, Apple uses its distinct premium pricing strategy. It has still managed to be a dominant leader in the global smartphone, tablet, and smart wearables market. However, this has not been the case for the PC industry as it is in the fourth position (T4, 2020).
SWOT Analysis
Strength – Apple has a strong brand image; it is one of the world’s renowned electronics brands. Their product lines are aesthetically designed and are a reflection of simplicity, wealth, and creativity. The company uses this brand image to sell a lifestyle. In addition, it has excellent research and development teams, which is reflected in its innovative product designs.
Weaknesses – Apple’s products are highly-priced, limiting their buyers to individuals in the high and middle classes. Although the lower class are the majority of buyers globally, Apple’s products do not target this demographic. This can be attributed to being a limitation of the business model. Second, the company conducts limited advertisements and promotions. Apple’s marketing is heavily dependent on the iconic and flagship retail store, and because of its established loyal customer base, the company does not feel the need to spend excessively on promotion. The third is the entry into the area of incompetence. Apple is expanding its product lines to encompass video and music streaming, and credit cards, which already have dominant players, for instance, Netflix and PayPal, respectively. This might fail such products, similar to that of the Apple maps. Lastly, the Apple software is incompatible with other software or technologies; thus, customers have to purchase Apple Apps using their Apple devices explicitly.
Opportunities – Apple Inc. is collaborating with other large brands in the world to boost their financial growth. It has illustrated the potential benefit of collaborating with other strong brands, for instance, during the release of the AirPods, the vendor teamed up with Beats headphones to launch the wireless BeatX alongside their iPhone 7 reveal. Second, the company has a team of highly qualified researchers, developers, and product specialists; therefore, it has an opportunity for growth. Lastly, Apple has not embraced the use of green technology, and with the direction of consumer trends, this is an untapped market segment that is highly profitable.
Threats – Imitation is a major issue facing Apple; illegal vendors sell counterfeit products at prices similar to the original. As a result, this might generate negative publicity. Furthermore, the company faces competition from other tech giants, such as Samsung, Huawei, and Google. There are also the tariffs imposed by the US government for imports from China (Statista, 2020). Since Apple sources its raw material from China, the high tariffs increase the overall cost of products, thereby lowering the profit margins. Lastly, the company is facing several class-action lawsuits when consumers realized that it is deliberately interfering with the performance of old iPhone models.
Significant Recent Acquisitions or Divestitures
Apple Inc. has been using mergers and acquisitions to diversify its product line, and facilitate expansion. The most recent top acquisitions include Intel and Shazam, which were acquired in 2019 and 2017. Intel’s smartphone modem business was worth $1 billion, and it aimed to develop modem chips for 5G phones. On the other hand, Apple intended to use Shazam, a phone identification app, to bolster its music streaming service.
References
Alsop, T. (2020). Tablets – statistics & facts. Statista, Web.
Srivastava, S. Huawei’s Global Smartphone Market Share Reaches Highest Ever Level in Q1 2019. Web.
Statista. (2020). Telecommunications. Web.
T4. (2020). Apple Market Share – iPhone, iOS, Mac, Apple Watch, iPad. Web.