Introduction
Apple Inc. is a multinational company that produces personal computers, cell phones, computer software, and consumer electronic products. Some of the eminent products by Apple include the iPad, the iPhone, the iPod and the Macintosh computers. The corporation has established substantial value in the exceedingly competitive consumer electronics sector through innovation and by shaping a path considerably different from its major competitors. Apple has also effectively differentiated its products from those offered by its competitors by focusing on superior customer service, design elegance, and quality while working with reliable, innovative equipment manufacturers in outsourcing its actual manufacturing. However, Apple experiences formidable challenges associated with the stiff competition as well as other external factors.
In the consumer electronics industry, Apple has dominated the market by producing high quality and innovate products. The company has well-known products that provide a competitive edge because of high brand awareness. As a leading electronics company, Apple supplies mobile communication devices, portable digital music players, and personal computers to thousands of customers. Furthermore, the company has made a substantial profit for the last few years, indicating that Apple Inc. is one of the best performing companies across the globe. Apple has engaged in several approaches such as strategic management and planning in the attempts to sustain its recent success in the customer electronics industry.
Background
Apple Inc., formerly known as the Apple Computer Inc., was created in 1977 by Steve Jobs and Steve Wozniak. The two founders released their first product, Apple 1, in Cupertino, California. As of 2014, Apple Inc. is a multinational company dealing in diversified products, including hardware products like, Macintosh computers, iPad, iPhone, and iPod music player. In addition, the company also deals in software products such as OS X, iOS, iLife, iTunes, and iWork. Apple Inc. has stamped authority among its competitors in the personal computer industry (Arora 2014).
Over the decades, Apple has recorded tremendous growth in its cash flow, and although it faced a downfall in the 1990s, it recovered in 2001 after the release of Apple iPod. The company is now one of the leading giants in the field of consumer electronics. The company’s share price shot from $3.30 to $339.87 between 1997 and 2007 (Apple Store 2014). Its value is estimated to be US$626. The company’s competitors have tried to challenge it, but Apple remains unique in its product and service offerings across the globe. Notably, the regular formulation and implementation of operating strategies play a critical role in the company’s success. As such, Apple’s remarkable performance can be attributed to its strategies (Schneider 2011).
Apple Inc. CSF
The critical success factors are essential for the future success of the company. These factors constitute product attributes, competitive capabilities, resources, market achievements, and competencies, among others (Ireland, Hoskisson & Hitt 2008). Strategists must consider the external environment that indicates the most significant competitive success factors. For Apple Incorporation, the key success factors include consistency, extensive research and development, innovation, product differentiation, ease-of-use and the extensive product line. These factors have a substantial role in influencing the competitiveness of Apple in the consumer electronics industry (Lashinsky 2012).
One of Apple’s critical success factor is extensive R&D. Apple Inc. has robust research and development initiatives that are based on the development of the Infinite Loop Campus, which mainly focuses on R&D. These initiatives are intended to advance the quality and performance of Apple’s products as well as promote the introduction of new innovative products. In addition, research & development structure plays a significant role in Apple’s efforts to establish new possibilities and develop new business pillars, particularly in the fields of consumer electronics. It has facilitated the development and incorporation of strong technologies in producing unparalleled as well as competitive products or offerings. The company also focuses on reinforcing its core technologies on pre-competitive fields through research.
Innovation is another critical success factor of Apple Inc. Apple is ranked among the most innovative corporations. It has a committed in innovation and deploys its resources effectively to ensure value for its customers (Ogg 2010). The launch of iPod (portable digital music player) in 2001 marked the beginning of Apple’s innovation. In addition, the Apple TV and iPhone signifies Apple’s focus on innovation. It is apparent that the company continually advances its technology, with its unique design and high-performance devices, such as the latest revolutionary product, the iPad (King 2012).
Furthermore, Apple focuses on product differentiation in order to succeed in the consumer electronic industry. In the current competitive global market, customers have multiple choices of services and products. Differentiation is the underlying aspect that offers customers the opportunity to select a service or product among different options. Apple emphasises on innovation and maintains its product quality in order to satisfy customer preference and differentiate itself from competitors (Heracleous & Papachroni 2014).
Ease of use is a significant aspect that contributes to Apple’s success in the electronics industry. Apple Inc. has attained significant growth in the consumer electronics industry because its products are easy to use. The company’s customers are mainly attracted to its products since they are unique and easy to use. Apple Inc. ensures that its products are simplified to the consumer’s satisfaction (Moscaritolo 2014). Most of the product’s interface, for instance, those of the iPhone and iPad, are designed in a way that consumers can understand and use easily. This is because the company believes that it is futile to make products that are difficult to use since the consumers will find them worthless (Lusted & Elmaghraby 2012).
Apple has a broad product line, which helps it to maintain customer loyalty (Kotler 2012). The company’s diversification strategy is part of the corporate strategy, which is designed to increase profits through the intensification of sales volume. By identifying new market segments and launching new products, Apple can increase its sales volume (Myers & Kalmanovitz 2013). Additionally, the company has diversified its products in the digital music market through the innovative portable music player such as iTunes, iPod as well as the iPhone. In the electronics industry, Apple has easily obtained customers’ intimacy and loyalty. It is evident that Apple understands the needs and preferences of its consumers by selling diverse as well as wide-ranging products (Ireland, Hoskisson & Hitt 2011).
Financial Strength
Apple has considerable financial strength following years of high turnover and profit margin. The majority of stock market analysts recommend Apple Inc. shares to investors. They predict that the company shares will grow at a rate of 35-percent within the next one year. The prediction is based on the company’s market capitalisation, which is increasing day by day. Currently, the company market cap is $350 billion, showing that the company financial strength is very high. The anticipated ascent of the Apple earnings growth is reliant on its sales that depend on the strong consumer demand for the company product (Nesto 2011).
Apple has enhanced its technological capabilities over the years, and it is doing remarkably better than its competitors. Its great success is attributed to its ability to understand what their consumer wants even before they realise they want the product. Furthermore, the company products are affordable and use-friendly. Customers have trust in Apple’s products because of their high quality and value beyond those of their competitors. This genius in marketing has contributed to more sales, which is the most significant financial strength of the company (Kane & Sherr 2011).
Another factor contributing to Apple’s financial strength is its high interest coverage ratio, which is 97.09. The ratio is an indication of the company’s capacity to reimburse interest charged on unpaid debt without any financial constraint. Also, the company has a low debt to income ratio, which is 0.84. The above-mentioned factors have greatly contributed to Apple Inc. financial strength (Apple Inc. (NAS: AAPL) Financial Strength Rank 7 (As of Sep. 2014) 2014).
Relative market share
Apple’s products are to some extent revolutionary because of Apple’s marketing strategy, which seeks to add business functionality rather than entertainment in a popular consumer device (Cusumano 2011). Although IT administrators, media analysts, technical experts, and competitors described some of Apple’s products as consumer toys as opposed to business tools. They are considerably trendy among consumers with their inevitable invasion in the business world (Harps 2002). Apple’s market can be arbitrarily segmented into business-oriented and personal use consumers. Further, Apple’s devices integrate requisite entertainment and functional features, thus broadening its potential consumer base. Apple tends to have an undifferentiated marketing approach since its target market cannot be discretely divided into specific consumer groups. This challenge exists because Apple seems to take a more expansive approach in satisfying its consumers’ needs (Kotler 2007).
Apple products target eighteen to late thirties technology conversant consumers and the corporate world. They have various features and application supporting internet browsing, video-viewing, multi-media services, social networking and business-oriented application, which allow its use at individual and corporate level (Boulton 2012). Further, the products tend to target students for it provides a bookstore feature along with an interface that allows access to e-books. They constitute several functional applications that allow students to check emails, use the Internet, as well as access entertainment. For instance, Apple’s iPad has iBooks application that enables students to create iBooks manuals via various iBook Authors (Rossello 2012). Besides, video-chat consumers such as consultants and CEOs of multinational companies form part of Apple’s target market. With video streaming and video conferencing capabilities, the iPad has more profound appeal to individuals interested and involved in video-chatting. The traveling sales personnel and executives use Apple’s iPad to share presentations as well as in meetings as a personal digital assistant or for other functions (Hughes 2011).
Furthermore, Apple targets the media and music industry. It has immersive, as well as visual capabilities that facilitate several operations in the media and music industry. Apple’s devices have applications that support music video production and broadcasting, concert recording, music composition, and interviews among other functions. Apple’s products, such as the iPad provide on-demand viewing capability with its link to television contents, which has greatly influenced its use in TV-based entertainment. Besides, media and music industry considers iPad as one of the technologically advanced marketing tool that provides relatively easy, Internet-based marketing approach (Wilson 2010).
Apple focuses on the corporate world with the intent to dominate the market through its beneficial and revolutionary technology savvy. To achieve this objective, Apple has business-oriented products with a more professional outlook that technology proficient corporate personnel find considerably appealing (Angelelli 2008). Apple has enhanced integration of technological innovations in workplaces resulting in IT corporations’ need to streamline their designs to establish devices that can be understood and used with ease. Apple provides a device that corporations can rely on not only as support tools, but also as integral devices coordinating or housing most of their operations (Strahler 2010).
From a personal user perspective, Apple has integrated multiple features that comply with individual needs and preferences. Besides, Apple’s iPad has features that provide a more personal touch to various consumers in order to get them attracted to the multi-functional tablet computer. Its retina display producing superior images and a black or white bezel provides brands that are appealing and irresistible (Lochhead 2011). In addition to corporations, individual consumers have contributed a substantial share of iPad sales. People with disabilities are provided with multiple apps and features in the iPad. The apps address many of their special needs, facilitating them to carry out their responsibilities more effectively and efficiently (Bulik 2011).
Relative market strength
Apple’s rationale for attaining success in the marketplace is to capitalise on stockholder value and maintain a balance of growth, profitability, as well as liquidity, which are its major financial metrics. The company’s strategy integrates a direct business model characterised by an exceedingly effective manufacturing, as well as a supply chain management framework and standards-based technologies (Shmuel 2013). Apple focuses on product leadership and customer intimacy as its customer value propositions as evidenced by the emphasis on customers’ requirements. The company also plans through a business model offering up-to-date information concerning customer trends of their needs, plans as well as preferences. It provides customers with flexibility while maintaining high performance, customer service and friendly cost through standardisation of services and standards-based technologies (Masi 2009). Furthermore, Apple’s business strategy also concentrates on the enterprise business as well as increasing its competence in its product group. Although the company maintains a leadership position in notebooks and desktops, it invests in consumer electronics products, which include plasma televisions, among others. It is apparent that Apple has demonstrated substantial customer satisfaction through superior execution in the provision of standard and superior product as well as service offerings (O’Grady 2009).
Apple also depends on the customer intimacy basis for its success in the marketplace. It focuses on services as well products that it offers as a means of ensuring optimum realisation and satisfaction of customer requirements as well as needs. For instance, Apple has an online support program that provides diagnostic and management services for its customers through a private, virtual, and secure network. In addition, the company continually works on its devices to ensure that the specific needs of its diverse customer base are satisfied. This strategy ensures that multifaceted and all-encompassing product and services are at their customers’ disposal. Furthermore, Apple retains the advantage related to customer intimacy in expanding its services as well as product offerings in order to increase its customers and partners (Finkle & Mallin 2010).
Sustenance of Competitive Advantage
Apple’s competitive strategy, capabilities, resources and objectives indicate the company’s market position as a market leader. Apple has the largest share in the consumer electronics market over its competitors such as Samsung, Dell, Toshiba, HP and Sony (Hamilton & Webster 2012). Apple’s cutting-edge technology and products’ quality surpasses that of other gadgets available in the market explaining Apple’s dominion in the electronics industry (Barney, 1995). From a marketing perspective, Apple has a competitive advantage because of its premium brand image, product development, technology patents as well as leadership, and a wide range of ancillary service offerings. With the different generations of iPad, Apple has consistently remained the pacesetter in the tablet space (Perenson 2012). For instance, Apple iPad has iCloud and Face Time as its exclusive services. Apple is the leading firm in research and development, which ensures that its products maintain superior performance and functionality compared to those of its competitors (Stein 2011).
Furthermore, Apple has a global approach of marketing its product, elevates product use and integrates the needs as well as preferences of different users in an attempt to maintain its first position in the market. Apple is based on innovation strategies, which ensure that it maintains a vast market share. To enlarge its market share, Apple is constantly updated through appropriate brand, advertising and quality strategies. It is the custom of Apple to maintain market leadership by introducing and incorporating novel technologies (Hitt, Ireland & Hoskisson 2014). Apple continues to dominate the consumer electronics industry. The corporation, however, encounters high competition from new vendors, especially in the lower price segment. The increase of manufacturers the media tablet segment with the introduction of over 220 tablet models has posed a challenge to tablet producers (Moorhead 2013). Apple’s capacity to remain dynamic in the tablet space has contributed to its market and competitive leadership. Emphasis on technological incomparability has also facilitated Apple’s success in this segment (Bonnington 2012).
The company targets to increase its customer base by creating unique market segments and developing specialised products to satisfy the diverse needs of the customers. Additionally, Apple has increased its share of the market by introducing new customers, including the research specialists. The production of specialised equipment follows extensive research on the needs and expectations of special customer groups. Since the company has a competent R&D team; it can develop customised gadgets (Useem 2007).
Apple, however, should take into consideration the rise of Xiaomi, which is a Chinese Smartphone maker. It is apparent that Xiaomi poses a significant threat to Apple’s business by providing products of higher quality at a lower price. Based on a survey carried out in China, Xiaomi’s phones, especially the Mi3 outsells Apple’s iPhone. As such, the company is facing increasing competition in the marketplace, which threatens its capacity to maintain the competitive advantage, In addition, the superiority of Xiaomi’s products is likely to disrupt adversely Apple’s performance not only in China, but also globally. With increased penetration of Xiaomi in the global market, Apple may be highly vulnerable to decline of its market share, especially in the emerging markets (Chang 2014). Therefore, Apple should devise an effective strategic plan for ensuring that it sustains its competitive advantage, taking into consideration its pricing strategy, innovation and marketing strategy.
First Mover Advantage
Apple commits itself to creating significant decisions concerning its strategies in the emerging industry in order to achieve a competitive advantage by addressing changes in demand, technological innovations, and dynamic customer preferences as well as needs. In respect to its iPad, iPhone, and iPod, Apple managed to identify the trends in the market and revolutionise the consumer electronic industry. By introducing the famous iPod, Apple was able to monopolise the portable music industry. In addition, the company took the advantage as the first-mover to develop the touch screen technology and create the basis of the market of touchscreen smart phones. Apple also attained the first mover advantage by creating the iPad, because it revolutionised the tablet industry by introducing the touch screen technology (Lloyd 2013).
It is evident that Apple capitalises on first mover advantage to achieve significant competitive edge in the consumer electronics industry by establishing its framework. In this industry, first-mover advantage is fundamental because the competing companies seem to compete in the Nash equilibrium, which involves taking the most effective strategic moves taking into consideration those of the competitors. Further, Apple dictates the outcome of the strategic approach in the industry by fashioning an effective strike plan for fighting or accommodating entry by its competitors. The company has generated a competitive advantage by developing its strike plan that ensures its success as a first-mover Huzefa, Deepti, Gaurav & Harmanjeet 2009).
Product/process innovation
Apple is ranked among the highly innovative electronics companies. Its founder Steve Jobs was a genius in inventing novel products that turned out to be a necessity for Apple’s customers. One of the greatest innovations of the company is the iPhone with its tool iPod. In addition, the company is renowned for creating hardware for each of the software it creates (Yarow 2013). The company has largely invested in research and development of its product by maintaining great innovators. Apple ensures that its products are of high value such that even when an established product is being launched, it is usually perceived as a new product. As a result, the company is highly ranked in product innovation, because technological changes enable it to launch new products (Iftikhar 2013).
To be successful in innovation Apple Inc. has created an “innovative business model” that propels the company to the top among its competitors. For instance, the newly discovered iPhones are said to have matched with App and iTunes, which are earlier innovation of the company. Therefore, the company’s innovation is a culture, as opposed to process driven invention. They have built an effective novelty system to harness creativity in its workforce, which stimulate fresh ideas, rationalise the design and launches successful and profitable new novelties (Kotelnikov 2014).
Apple Inc. has elaborate design processes that ensure their products are easy to use. This is facilitated by the company innovation management, which follows a few key elements (D’Orazio 2014). The first element is matching of top-down strategies. The senior executives describe the product they want. This description is followed by a design team consisting of juniors who select the best ideas. The ideas are presented to the managers for evaluation. This evaluation process is followed by a design meeting twice per week to work out on a new product. Finally, a mock-up product is created before the innovation (Kotelnikov 2014).
Conclusion
Some of the key success factors of Apple include consistency, extensive research and development, innovation, product differentiation, ease-of-use and the extensive product line. The company has considerable financial strength following years of high turnover and profit margin. Additionally, Apple’s rationale for attaining success in the marketplace is to capitalise on stockholder value and maintain a balance of growth, profitability, as well as liquidity, which are its major financial metrics. It has a global approach of marketing its product, elevates product usage and integrates the needs as well as preferences of different users in an attempt to maintain its first position in the market. Furthermore, Apple is based on innovation strategies, which ensure that it maintains a vast market share. Apple’s competitive strategy, capabilities, resources and objectives indicate the company’s market position as a market leader. Apple has high performance in the consumer electronics industry; because it formulates and implements new strategies that ensure its continuous success and improve its financial performance in the attempts to match it with that of its competitors. It is recommendable that Apple emphasises on research and development of new products. This is because high profits can be obtained by selling high products while increasing the company’s penetration or presence in the consumer electronics industry with high market potential.
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