List and briefly discuss 3 distinctive competencies of Apple
Based on this case study, it is possible to distinguish several competencies of Apple Inc. First, this company has been able to develop products that are believed to be innovative, well-designed, and easy to use. This increases customers’ loyalty to the company. Furthermore, the vast experience of this corporation can be viewed as a competency. Apple has been specializing in consumer electronics since this industry was in its embryonic stage. Since then, they have already formed many partnerships and gained expertise in many areas. The third competitive strength of Apple is its brand. Apple is one of the most recognized companies in the world and its products appeal to customers living in different countries.
How has the structure of the personal computer industry changed over the last 20 years? (b) What impact did the structural changes have on Apple’s competitiveness/profitability?
Over the last two decades, the personal computer industry has become more consolidated. There were numerous mergers and acquisitions such as the merger of eMachines and Gateway. These changes can be explained by using Porter’s Five Forces Model. One of these forces is the intensity of competition. For instance, the price of a PC fell from $ 1700 to $ 1000 (Hill, 2011, p. 40). It is easier for consolidated firms to cope with such price competition.
Secondly, the threat of substitute products also affects many companies. For instance, for a long time, Apple was the only manufacturer to sell PCs with a graphical user interface. Yet, after the arrival of Windows 3.1, Apple lost its advantage over others (Hill, 2011, p. 31). This threat prompts companies to work closely with one another so that they could create more innovative products regularly. Partnerships and mergers allow companies to share resources, especially technologies and expertise with one another.
Finally, over the last twenty years, the bargaining power of customers has increased. These people can buy either established brands or assemble PCs from very components as it is done in developing countries. The producers of PCs make that their products compatible with the most widespread software, especially the operating systems developed by Microsoft. To some degree, this strategy also exemplifies the consolidation of this industry.
This structural changes within the industry reduce the competitiveness of Apple in this market. Its products are not compatible with Windows and other software that was designed for this operating system. Therefore, many customers may buy PCs produced by Apple’s competitors because it is more convenient for them to use these products.
Evaluate Apple’s strategies since 1990
The strategies of Apple since 1990 can be questioned. One of the decisions that John Sculley took was to compete with other companies such as IBM through price differentiation. In particular, the company introduced Mac Classic that was priced at $999 (Hill, 2011, p. 32). Certainly, this strategy did increase the sales volumes of Apple, but at the same time, it reduced the gross margins. Moreover, the strategy of price-differentiation was not suitable for Apple, but this company normally emphasized the innovation and design of its products.
Secondly, John Sculley stressed the necessity to produce innovative products every 6 to 12 months (Hill, 2011, p. 32). The strategy had several limitations. First, it might be difficult to develop such products within such a short period. It may take two or even more years. This unrealistic approach to innovation increased the R&D costs of Apple.
Thirdly, Apple formed an alliance with IBM that became their supplier microprocessors. This decision can certainly be justified because former suppliers of Apple such as Motorola did not have the scale of IMB or Intel. Yet, this decision came too late. Overall, John Sculley’s policies were unrealistic and untimely.
Evaluate Apple’s strategies since the return of Steve Jobs
Steve Jobs’ strategies were based on the premise that Apple had to offer well-designed or innovative products. Such a product as iMac illustrates this point of view. The main distinctive feature of this desktop computer was not its price or performance, but its design that distinguished it among products of similar type. Overall, this strategy was very successful because it was based on one of Apple’s competitive strengths.
Secondly, Steve Jobs attempted to diversify Apple’s products. This is one of the reasons why Apple entered the smartphone industry. This strategy enabled Apple to attract many new customers. Again, as in the previous case, Steve Jobs focused on the design of Apple’s products. The use of touch screen technology in the iPhone ensured the almost instantaneous success of this smartphone. This strategy achieved its objective because it relied on the premise that Apple is one of the most recognized brands that sell only innovative products.
Finally, Steve Jobs tried to reduce Apple’s dependence on retailers. This is why the management opened stores that marketed only the products manufactured by the company. Moreover, one can speak about the establishment of iTunes where consumers could purchase songs. Again, this approach was very effective because it enabled the company to become a retailer that can work with customers without any intermediaries.
Opportunities and threats facing Apple
There are several opportunities that Apple can exploit. Currently, this company retails mostly music and software via the Internet. They may also market films, cartoons, and other cinematographic works via the iTunes store. Certainly, it will be necessary for them to develop agreements with major film studios but these organizations may cooperate with Apple because, in this way, they will increase their profitability. Secondly, they can enlarge the market share in the PC industry by making their computers compatible with Windows architecture. More people may be willing to buy their products if these devices are consistent with a variety of software solutions that are designed for Windows architecture.
Yet, there are several threats that this organization faces. First, its financial performance is too dependent on the sales of iPods and iPhones. Certainly, these products currently enjoy great popularity among customers, but other companies can introduce very similar table computers or smartphones and sell them at lower prices. For instance, touch screen technology is now adopted by many companies. Initially, it could give an advantage to Apple since Apple was the first company to use this technology in consumer electronics.
Yet, this technology has now become very widespread and it can no longer differentiate Apple’s products among others. As a result, Apple may lose its competitive edge in this particular market and its profitability can decline in the long term. Secondly, Apple faces strong competition in the PC industry. Currently, the majority of PCs are compatible with Intel-platform and Windows operating system. Apple’s desktop computers and its software are not compatible with the technologies of other manufacturers. Hence, customers may eventually prefer PCs offered by Apple’s competitors.
Recommendations for Apple
To remain competitive, Apple should implement several strategies. First, they should make sure that their products, especially desktop computers appeal to a larger number of people. As it has been said before, it can be done by making the PCs compatible with Windows architecture and the software designed for this operating system.
Apple’s products are valued for their innovative design, however, this company should provide more opportunities for customers by expanding the choice of software that can run these PCs. Secondly, Apple should adopt a different attitude toward software that it develops, for instance, Mac Os. Currently, it can be used only on Apple desktop computers. Apple can make it compatible with the hardware of other manufacturers. This operating software may appeal to many people because they know that Apple’s solutions are usually well-designed and easy to use.
Reference List
Hill, C. (2011). Apple in 2008. In C. Hill & G. Jones (Eds.), Essentials of Strategic Management (pp. 27-42). New York: Cengage Learning.