Business Strategy for the Apple Inc.

Strategy formulation

Mission statement, vision and core competencies

A mission statement defines the purpose of the business. It is formally written down and well known to everyone who is part of the business. “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. Core competency in any business refers to a unique factor, which the business considers as being fundamental to the way it operates.

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)

The company’s core competences are their marketing mix, technology and their product Lifecycle Management (PLM). Technology and design has allowed the company to 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.

Shareholders and their role in implementing selected strategies

Stakeholders are people or groups of people who have invested in a business or have an interest in it (Kessler, 2000). One does not have to be a shareholder to be a stakeholder in a business. Apple’s stakeholders include preferred and common shareholders, creditors, manufactures of Apple’s products, employees, suppliers, customers, its software developers and now the music industry.

Stakeholders play an important role in a business’ implementation of selected strategies. A business’ strategy must work for the benefit of all the people linked to it, including the community in which the business is operating in. It is important for a business to gain stakeholders buy-in when implementing a strategy to ensure that it benefits from a good relationship with them and is in agreement with them. When stakeholders are in a disagreement, suppliers may not be consistent, employees may not be loyal, shareholders may not support various investments and customers may shift their loyalty.

Environmental and internal audit

PEST analysis

Political-legal factors

Apple has an international presence, making it vulnerable to global legislation and regulations. 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.

Economic factors

Economic environments in different countries largely affect Apple’s revenues and profits. 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. 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. 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.

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.

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 Motorola, 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.

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.

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. Price sensitivity is an issue of concern and may play a key role in product differentiation. 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.

SWOT analysis

Product’s positions

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. The company’s iPod product and the iTunes music store is currently enjoying a market lead and giving the business good revenues. iPod’s accessibility on Windows platform is a unique attribute that has seen it gain favor among many IT lovers.

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, giving it an advantage in cost saving and products’ perfection. 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.

Value chain analysis

Apple’s inbound logistics is strong and well established. The business has partnered with logistics companies such as DHL to ensure easy and timely delivery of supplies, raw materials and finished products. Operations are divided into production, IT, corporate, sales, marketing, human resources, research and development, logistics and warehousing. The value chain analysis runs from new product idea to designing and funding, product creation, distribution, sales and marketing and finally customer service. The company produces all its unique chips and has a strong national presence after eliminating all the small outlets in the mid 1990s. Marketing and advertisement have been successful and customer service is mostly developed through satisfying the customers’ needs.

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). In his analysis of business strategies, Michael Porter argues that a business’ strength can fall into the cost advantage or the differentiation category (Daft and Dorothy, 2009). 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” (Daft and Dorothy, 2009). 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.

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. 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.

Strategy planning

Plan of business strategy

Apple has focused on a differentiation strategy to stay ahead of its competitors so far. Its business strategy is centered on attracting and keeping new customers, building a bigger market share and staying ahead of its competitors. 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. 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).

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. The company has in the recent past announced that its product iPod touch is the best selling portable game machine in the world. 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 established a market in.

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. It 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.

Future direction

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. 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 relationship between Apple and its competitors still stands as an obstacle in exploring new markets. By working out its relationship with companies such as Intel and Microsoft, Apple may be able to save a lot by benefiting from other companies’ market knowledge.

Ansoff’s matrix

Implementing a market penetration, product development, market development and diversification strategy for an already developed company such as Apple may not be easy. The company already has an upper hand in the industry and seems to be far ahead of the competition. For it to maintain its position, Apple Inc. needs to implement marketing and development strategies that will be hard for the competition to catch up with. Currently, Apple seems to be putting more attention on specific products such as communication devices and music players.

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. For a proper products development initiative, the business needs to work on introducing more new generation products. The iPhone is becoming more of an internet device for more people and the business needs to develop it to meet the needs of the internet users.

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. According to Miller (2010), “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. The company’s strategy is to move more things to the app store from the web.

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. 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.

Strategy Implementation

Comparison of strategy in two organizations

Strategies in Apple Inc. and Dell have significant differences. While Apple Inc. may have a better hand in the telecommunication devices, Dell has focused more on the computer products. Dell has adopted a cost leadership strategy while Apple Inc. has adopted the differentiation strategy for its products. In the area of technology, Apple has adopted a more flexible strategy by constantly upgrading its products to the latest technologies. Dell on the other hand tries to sell what is more familiar to its customers by changing only a few things on its products.

Dell has in the last few years unveiled measures to help them realize their strategic plans. The company sells their concepts to the market through campaigns and advertisement. For example, in the year 2009, the company announced a strategy that would market its technological innovations to small and medium businesses using teams assigned with specific campaigns. “Through their Take Your Own Path campaign the business aimed at targeting pioneering entrepreneurs and showcase their use of Dell technology to help make their businesses successful” (Bach, 2010).

Responsible teams in implementing Dell’s strategy include marketing, advertising, sales and development teams. The marketing and advertising teams are responsible for recruiting new clients and ensuring the existing ones stay loyal to the products. Developers are responsible for ensuring new and relevant products are available in the market. They ensure that consumers have a satisfactory experience with the products. To move its products, the business has its focus on selling what they have using incentives such as price to shift demand to products that are more easy to make and market. Such initiatives are made possible through the company’s strategic development teams. The company’s management has a structure that allows the management more control and monitoring of different teams at the ground level.

Apple has also unveiled its strategic plan of small steps. According to the management, “the company needs to refocus on smaller, more diverse and clearly defined products with a greater emphasis on ‘megatrends’ like the internet and multimedia products and services” (Miller, 2010).

Teams responsible for implementing the strategy include the finance, operations, sales and products development teams. The finance and operations teams are responsible for ensuring that the strategy is well financed, sales teams ensure that company ideas are sold and accepted in the market, and products development teams are responsible for the experience that the customer has. To sell their strategy to the markets, the company has tried to focus on real-time feedback from customers, something that is made possible through their information technology team. Through such an initiative, the business is able to get real-time and accurate market insights. Apple’s management has a non-traditional structure that allows its different teams room to experiment their creative ideas. By reducing the management layers, the company encourages more innovations from its employees.

Resources required to implement new strategies

“A strategy’s success is reliant on its capacity to project and maximize trends, make express decisions by constantly reassessing progress and on the availability of enough resources” (Karami, 2007, Pg. 20). The computer industry is today among the most competitive and therefore, the company will need to commit to providing its customers with unique and efficient personal computers.

Important resources in this process will include efficient and enhanced manufacturing technologies. The business will also need to improve on its communication concepts to involve every stakeholder. Just like it is with its iPod and iPhones, Apple can outsource manufacturing to companies with well able technologies. Other important resources will be competent employees, financial capability to launch new products and strong marketing tools. The internet is a big resource and opportunity for the business today and an open channel of communication to a big number of consumers. Lastly, time is an important resource for the business to implement the strategy.

Targets and timescales

Targets and timescale are relevant in evaluating the bench-marked outcomes. For a global business such as Apple Inc., preference can be given to specific markets if the business is not able to roll out a strategy on a global scale. For such a company, timescales and targets are important to ensure that its global operations are synchronized. In less than a year, Apple has been able to successfully introduce the A4 chipset to be used on its devices. The most immediate activities for the business include growing its overall share market, investing in new manufacturing technologies to increase capacity and grow its computer market. According to Steve Jobs, Apple’s CEO, its computer market is also expected to grow to 10% from the current 6.4% in the next four years.

Overall activity Gantt chart

Reference list

Bach, B. 2010. Implications of enabling technologies for Apple Inc. Ohio: South-Western College Publishers.

Daft, R. and Dorothy, M. 2009. Understanding management. Mason, OH: South-Western Cengage Learning.

Karami, A. 2007. Strategy formulation in entrepreneurial firms. Aldershot[u.a]: Ashgate.

Kessler, E., 2000. Innovation Speed: A concept model of context, antecedents and outcomes. Academy of Management Review 21 (4), pp. 1143.

Miller, F., 2010. Apple Inc.: History of Apple, Litigation, Time line of Apple’s Products, iPod, iPhone and Apple TV. New York: Routledge Publishers.

Thompson, A. and Strickland, A., 2000. Strategy formulation and implementation: tasks of the managers. Homewood, IL:Irwin.