Apple Inc.: Strategic Management Case

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Introduction

Strategic management involves a continuous process that includes setting targets, implementing them, evaluating them, and making changes where necessary. “As performance results or outcomes are realized at any level of the organization, organizational members assess the implications and adjust the strategies as needed” (Lamb, 2000). In today’s constantly changing business environments, management strategies have to be flexible enough to allow a business to adapt to new needs and opportunities. It is supposed to be a continuous effort aimed at achieving a business’ long and short-term objectives (Oxford Business Group, 2008).

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According to Selznick (2000), “the strategic management process is up of four elements; situational analysis, strategic formulation, strategy implementation, and strategy evaluation”. When developing a strategic management plan, the elements are implemented in a specific order aimed at achieving ensuring necessary improvements in a business (Jensen, 2000.). “Situational analysis is an important step when a business is formulating its mission statement. It involves scanning and evaluating the organizational context, the external environment, and the organizational environment” (Ansoff, 2003). Different organizations will use different techniques and tools among them being communication and observation. A company’s internal environment is an important consideration in the process and key factors include employees, management, shareholders, and their interaction (Pommerening, 2007).

Another important element is strategy formulation which involves designing an organization’s objectives and strategies to achieve them. This step is necessary when evaluating an organization’s strengths and weaknesses. The formulation is further divided into different levels such as corporate, operational, and competitive (Drucker, 2000). The strategies are also divided into the short and long term. The third element is strategy implementation where all the formulated strategies are put into work. “It involves developing steps, methods, and procedures to execute the strategies and it also includes determining which strategies should be implemented first” (Chafee, 2005). The last element is strategy evaluation which involves measuring the strategies’ results and how well they have worked. It includes putting in place metrics and time scales, all of which should be realistic and achievable (Hudson, 2010).

Organization analysis: Case study Apple Inc.

For a business to successfully implement their strategy, there needs to be clearly defined mission and vision statements (Tahir, 2008). The business must also have what they consider as their core competency. “It outlines the overall goals of a company, guides decision-making and gives the company a sense of direction” (Daft and Dorothy, 2009). Vision on the other hand defines what a company intends to achieve in future in terms of its strategic direction (Levinson, 2005). It offers a long term view of what a business would want to be or the business’ fundamental objective. Core competency in any business refers to a unique factor, which the business considers as being fundamental to the way it operates (Kessler, 2000). Core competencies are supposed to have a positional advantage applicable to many products and should not be easily imitable by competitors (Cleland and Lewis, 2006).

Apple Inc. is among the global organizations that have used strategic planning to maintain good positions in their industries. Its mission statement is:

Apple’s business strategy leverages its ability, through the design and development of its own operating system, hardware, and many software applications and technologies, to bring to its customers around the world compelling new products and solutions with superior ease-of-use, seamless integration, and innovative industrial design (Miller, 2010).

Its vision statement is “Introducing innovative, high quality consumer electronics to the masses through impressive performance and leadership” (Miller, 2010)

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The company’s core competences are its marketing mix, technology and their product Lifecycle Management (PLM). Technology and design have allowed the company combine functionality and beauty. Its marketing mix puts together all the P’s (Product, Price, Placement and Promotion) to give its customers an intuitively working product.

Apple’s internal and external analysis

Apple’s strong market presence has been influenced by different factors. Its iPhone market has grown from 21% to 25.3% in the last four years. Bigger gains have been predicted for the business. Apple is considered one of the most successful companies in the consumer electronics industry. The company’s iPod product and the iTunes music store is currently enjoying a market lead and giving the business good revenues.

Swot analysis

Strengths Weaknesses Opportunities Threats
-Apple enjoys a market leadership
-It develops its own hardware and software
-Apple can afford modern technology to allow it better marketing tools
-It has a good financial position and low debt level
-Its products have a short life cycle
-Apple puts more focus on its ”i” products, neglecting the others
-Weak reputation as an employer
-Increased demand for anti-virus solutions
-Increased populations and bigger markets
-Online marketing opportunities
-Growth in the computer market
-Hardware incompatibility with competitors’ software
-High levels of competition
-Highly priced products

PEST analysis

Political-legal factors

Apple has an international presence, making it vulnerable to global legislation and regulations. Since different countries have different legislation concerning consumer electronics and their trade, Apple may be restricted in some regions and denied opportunities in viable markets. Regional trade such as the European Union offers the company enormous potential by making it possible to operate in bigger markets under the same regulations. Political unrest in different regions, such as the ongoing riots in Arabic countries and terrorism, largely impacts Apple’s overall business operations and revenues. “Since Apple largely relies on access to intellectual properties from third parties, it is constantly faced with infringe issues in different countries” (Bach, 2010). Legal suits against it may then impact its reputation and costs it a lot of money. Different environmental regulations in different countries may be a challenge for the business in its attempt to comply to all of them.

Economic factors

Economic environments in different countries largely affects Apple’s revenues and profits. The recent global crisis and reduced profits for Apple was a good example of just how big a factor the global economy is for it. A slow economy growth in recent years has resulted in a slow growth rate for Apple due to decreased consumer spending. In the educational segment, Apple has faced decreased sales, after many governments cut their expenditures in their educational sectors in recent times due to the global crisis. Any products dependent on foreign supplies affect the company’s costs of operations and profit margins. Tariffs and tax rates also differ in different markets, causing fluctuations in the company’s revenues.

Social-cultural factors

Apple’s products are embraced differently in its many markets. Computers and internet usage in developed countries has been much higher than in developing markets. Currently, computers, phones and other consumer electronics are experiencing increased demand in almost all markets. This presents a good opportunity for Apple and has resulted in better revenues for the company. Education is a priority for many nations today, a key factor in Apple’s business.

Technological factors

New problems in the market call for new solutions each day and this demands that Apple keeps pace (Harrison and Edward, 2007). Technology forms the basis of Apple’s business and therefore, the business cannot afford to offer outdated products in the market. As more and more people appreciate technology, Apple is forced to invest more in technological innovations and development. Technology therefore has a major influence on how Apple does business and its results.

Environmental audit

“Apple’s environmental record has been marred with conflict and confrontations by different environmental organizations for promoting non-recyclable hardware components” (Bach, 2010). In 2003, different organizations led by Greenpeace campaigned against Apple’s chemical policies especially in relation to their use of BFRs and PVS in their products. In 2008, the company was listed last among the greenest electronic companies by Climate Counts. Through its continued environmental efforts, Climate Counts ranked Apple first in the same list this year. The Environmental Protection Agency also ranks Apple highly in the list of most environmentally conscious companies.

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“Apple’s designs ensure that its products use less material, are free of toxic substances, are as recyclable as possible, and are shipped in smaller packaging” (Bach, 2010). The company follows strict environmental standards from its manufacturing, to transportation, product use and finally recycling. Its designers and engineers pioneered the development of small, thin and light products to minimize amounts of raw materials used. Its engineers also ensure that the raw materials they use have the lowest levels of toxic materials possible and suppliers are put to task to ensure that they only supply raw materials free of such toxins. Packaging and transportation is done in such a way that it minimizes toxic emissions to the environment and products are designed is such a way that they use minimum energy, giving environmental advantages to the final consumer. “Most of Apple’s products today meet and exceed the energy star guidelines for energy efficiency” (Bach, 2010).

Porter’s generic strategies

“If the primary determinant of a firm’s profitability is the attractiveness of the industry in which it operates, an important secondary determinant is its position within that industry” (Thompson and Strickland, 2000, Pg. 11). A business succeeds in a market through its power to act effectively, ability to influence a system and strength to multiply the outcome of its strategy. In his analysis of business strategies, Michael Porter argues that a business’ strength can fall into the cost advantage or the differentiation category (Fuller, 2007). Porter discusses the cost leadership strategy, focus strategy and the differentiation strategy. “The cost leadership strategy calls for being the low cost producer in the industry for a given level of quality” (Nag, 2006). It is not one of Apple’s strategy and instead, the company has chosen to implement the focus and differentiation strategies.

The focus strategy has found a place in Apple Inc. For most of its products, Apple has concentrated on a high class market segment. As a result, it enjoys better customer loyalty than most of its competitors, a factor that discourages them from direct competition with Apple. Through this strategy, Apple has also been able to develop strengths in the markets it has focused on. A major risk in this strategy is imitations, which Apple has been able to curb by using unique technologies that imitators may not have access to.

Even though the focus strategy has been applied in Apple Inc., the company has focused on the differentiation strategy by developing unique products with attributes that keep its customers loyal. The products’ uniqueness adds value to them, making the favourable regardless of their price. As a result, Apple is able to charge a premium price for some of them. This way, the business can easily afford the costs that go into making its products unique. When the company’s cost of production goes up, it is able to easily pass it down to the consumers, who may not be able to enjoy the services anywhere else other than in Apple’s products.

Apple has been able to succeed using a differentiation strategy by implementing several internal strengths. It has established a good reputation for quality for itself and has ensured it stays as the best firm in terms of innovations. The company’s stable financial position allows it access to the best research technologies. The position also allows Apple the privilege of being able to hire and retain the best designers and software developers. The company invests enough on advertisements and its financial status allows it to hire the best talent in the marketing industry, perfectly capable of making the products’ strengths well known in the market.

Competition analysis

Apple’s business strategy has allowed it stay ahead of the competition for a long time now. The company develops its own hardware and software and is an expert in doing so, giving it an advantage in cost saving and products’ perfection. It’s niche audience protects the company from the effects of competition on the basis of price. Since its customers are more concerned about the products’ quality and experience, they are hardly influenced by price competitions in the market. Utilizing the web technology and marketing has also accorded the business a major advantage. The brand enjoys a strong brand loyalty and its healthy financial position and low debt level allows the business to take advantage of new opportunities.

Porter’s five force analysis

Rivalry

The consumer electronics market is not yet mature, offering Apple opportunities to experiment. Apple’s brand identity is strong putting it in a better position to market itself. Microsoft’s windows OS and media player for video and music still remain a big competition for Apple. Rivalry in the OS and computer hardware market still remains a challenge especially in the Linux applications. There are many upcoming online music stores with similar features to those of Apple such as Napster while other companies now have music playing devices such as MP3.

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Supplier power

Apple’s market is experiencing a positive growth as it establishes a presence in more countries. However, lack of substitute inputs poses as a major challenge for the company. Apple’s processors suppliers include IBM and Motorolla, both companies with high bargaining powers. Strategic alliances between suppliers Apple will offer the business considerable advantages. Its music suppliers such as BMG, Warner and Sony are all big companies with high bargaining powers. A strategic alliance with Apple’s competitors will harm Apple’s online music store, which is among the company’s strongest products.

Barriers to entry

Due to high levels of competition today, Apple may not enjoy absolute cost advantages as it tries to penetrate new markets. In its existing markets, Apple’s brand identity serves as an advantage, making it hard for new entrants to gain market share. Its financial position also makes it easy to meet the capital requirements for new markets and fight new entrants’ strategies. However, there is a bigger threat from businesses offering streaming video and audio technologies such as Verizon. “There is also a threat for new entrants who come with disruptive technologies” (O’Grady, 2009b).

Buyer power

Apple’s brand identity once more offers Apple a big advantage over its competitors. The company ensures buyers have the right information about its products through advertisements and Apple stores. Many countries are today experiencing positive economic growth, which results in bigger buyer volumes (Werther and David, 2011). Price sensitivity is an issue of concern and may play a key role in product differentiation. Apple’s products are much more expensive and may discourage buyers in the low end markets.

Threat of substitutes

Due to high costs of doing business in many parts of the world, switching costs are high. A majority of consumers of Apple’s products exhibit brand loyalty, minimizing their inclinations to substitutes. As a result, performance is not very much affected by new the entrance of new products.

Strategic planning

Current strategy

Apple has focused on a differentiation strategy to stay ahead of its competitors so far. Its business strategy is centered around attracting and keeping new customers, building a bigger market share and staying ahead of its competitors. Its rule since the beginning has been to design their own software to work on their hardware and not to use anybody’s else. This strategy has raised complains from different competitors but customers don’t seem to mind. They are willing to trade freedom for quality and efficient alternatives. In regard to communication, the company has now developed and adopted a “never talk to the press” strategy after too much publicity which almost ruined their reputation under the leadership of the former CEO. By doing this, the company is able to shut down rumors easily. It does not leak out new products until it is ready to announce and then uses the same discipline to create huge attention and coverage with new announcements.

Apple’s initial approach to staying ahead in the industry was to acquire small businesses with products that can be easily integrated into the company’s products and business. “A good example is their 2002 acquisition of Emagic which led to creation of Apple’s digital audio workstation software” (Miller, 2010). “Apple’s first acquisition happened in1998 when they acquired Network Innovations and since then the business has acquired more than five small companies, the biggest number of acquisitions taking place in 2002 with five acquisitions” (Linzmayer, 2004). The company enjoys a world wide presence with offices in almost every region of the world.

The other approach to its business strategy is making sure it stays ahead of the competition and being in a position that allows it to easily influence the market. Competitors at the moment don’t seem to have a real solution to the company’s inventions which means they remain very powerful in the market with an amazing advantage over the competitors. The company has in the recent past announced that its product iPod touch is the best selling portable game machine in the world. Any company making games therefore would want to ensure that its product is compatible with Apple’s products. Apple enjoys much more power over its competitors, business partners and even stakeholders due to the kind of reputation it has built for itself.

Over time, the company has developed a policy which allows them a good relationship with its customers by having shops all over each country they have establish a market in. This way, customers are able to make connections easily, ask questions and have technical problems solved easily. Its relationship with suppliers and other stakeholders has been without major hitches in the past, helping Apple earn trust in its external environments.

Even though Apple has faced several challenges with its reputation as an employer, especially in the Asian region, it still remains one of the most attractive companies for talented professionals. Good salaries, benefits and rewards have made it easier for Apple to attract highly skilled people in the labour market, and most importantly retain them. Retention saves the business a lot of money that would have otherwise been used for recruitments and training new employees. Apple also allocates a big percentage of its budget on training and team building, allowing the employees an optimum performance.

The company has a better financial status than most of its competitors right now making it more attractive to organizations seeking partnerships in the market such as music content providers. Apple has a stable business model, a big market share, a high level of technology and ability to keep inventing new products, factors which keep it at the top and once more favourable to consumers. Other strategies for Apple include consistency, education sales, developing products that deliver, outsourcing most of its operations, new innovations and attractiveness.

Strategic plan for the future

Apple Inc. seems to have everything in place for a brighter and better future. However, it still has areas which need to be addressed if the company has to stay at the top. The company’s reputation as an employer is under threat after proven allegations that one of its contracted manufactures in China has been overworking employees and paying them badly. “Foxconn company has been accused of having more than 200,000 workers living in the factory and working for over 60 hours a week”” (Bach, 2010). It is for this reason that the company needs to put more emphasis on labor audits. The strategy will help the company retain most of its employees and attract better talent in the market.

The company is also faced with challenges in its advertisements. Even though it has very professional commercials, the adverts are criticized for giving very little information to the consumer. The business’ future strategy must include better advertisement methods that will help Apple’s customers make more informed decisions. The company’s digital rights management doesn’t allow easy sharing of content and this is causing a lot of criticism from both the competitors and customers. This could be a potential threat for the company as it could cause content providers to withdraw if they got better offers. With proper considerations, the company’s future strategy should include a revision of this policy to allow its customers access more content from the competitors’ online stores.

Strategy evaluation and selection

Apple’s hardware and software integration has received a major step after it introduced its own iPad’s chipset. As a result, the company will not need the third party chips from other designers, making it less independent of third parties. It will have cost saving effects on the business and it will help it make a chip that meets the specific needs of its products. Other bigger manufactures of chipset include Qualcomm and Nvidia, who Apple is hoping to outperform. According to O’Grady (2009a), “Apple has moved from buying something off the rack to buying something where they have the pieces and they can tailor it themselves to their unique body shape”. The A4, chipset is one of the pieces expected to be very successful.

Apple seems to be moving away from the adobe Flash, which is currently still commonly used for access and use of video and animation products. “This campaign is aimed at steering its customers to its iTunes and app stores, where they can find video content and applications that replicate the flash content, often at a price” (Linzrr, 2010). The companies strategy is to move more things to the app store from the web. This also allows the company attract a lot of attention from the developers, giving it an advantage.

The computer making industry still holds a lot of potential for Apple. Currently, Dell seems to be a real threat to Apple in the computer industry by offering affordable products. Just like it has done with its digital products, Apple is investing on developing high quality and unique computers and taking advantage of its global presence to sell them. Another area of major focus for Apple is solving the current challenges it is facing such as poor employment terms and advertisement strategies. The business needs to offer more information about its products to its customer when advertising them. It also needs to carry more employment audits to ensure its reputation as an employer remains intact.

Conclusion

Strategic management involves a continuous process which includes setting targets, implementing them, evaluating them and making changes where necessary. “As performance results or outcomes are realized at any level of the organization, organizational members assess the implications and adjust the strategies as needed” (Lamb, 2000). Many business today appreciate the concept of strategic management as they try to adapt to constantly changing business environments and consumer needs. It has become an important tool as organizations try to meet their short and long term goals.

“Strategic management is reliant on an organization’s capacity to maximize trends, express decisions by constantly reassessing progress and on the availability of enough resources” (Karami, 2007, Pg. 20). An important resource in this process include efficient and enhanced management and organizational structures. Other important resources include competent employees, financial capability to launch new strategies and strong business tools. Lastly, time is an important resource in strategic management.

In strategic management, targets and timescale are relevant in evaluating the bench-marked outcomes (Hage, 2007). Time as a resource must be used well when implementing strategies and the only way to tell whether this is being done is by using timescales. A good strategy is one that is timely and relevant for the business at that period (Sharma and Mark, 2004). Timescales must be realistic and put in place in consideration to the available resources. Smaller businesses with less financial capacities might take long to implement strategies (Shonfield, 2001).

Reference list

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