The Apple Company: Company Strategic Management Analysis

Apples Macro environment consists of a number of factors. First is the international aspect of its business. Despite its strong brand in the US market, the company has not penetrated the international market as compared to its competitors. It is noted that this is where the competitors have taken advantage, especially in the emerging economies in Asia and Africa.

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Stakeholders provide what the company need at the right time. However, Apple’s relationship with some of its stakeholders has not been to the best as far as long term goals are concerned. The products that are needed in the market and how services are given, the competitors that are available, and the discontinuities that are in the environment. Identification of stakeholders of Apple’s stakeholders is an important process it helps in the identification of their value proposition more accurately.

The most identifiable stakeholders are the consumers of the Apples products especially the much younger age which use the ipods, iphones and notebooks. The local community is a key stakeholder and their value proposition should be in tandem to the inputs they have placed in the Company. The Regulator of markets also performs necessary stakeholder functions. Pressure groups can also perform stockholder’s functions as they put across their agenda.

The Macro environment of the Apple Company hinges around a variety of factors. It is necessary to understand this factors and how they may influence the performance of Apple. One of the factors is political which may influence taxation policies especially on high level companies such as Apple. The issue of taxation is purely government controlled and it may depend with the policies of a political party that is in power. The increase of taxation may reduce the profit margin of a company. On the contrary tax cuts may enable the company to realize higher profits (Marr, 2006).The policies that influence the actions of Apple Company are formulated, implemented and evaluated by the government especially through the congress and the Presidency. Trade restrictions tend to limit the expansion of the Company’s customers network thus reducing the profit margins that are likely to be achieved. Tariffs are the result of government directives; higher tariffs are disadvantageous to performance of Apple Company.

The economic environment relates to the percentage of economic growth either a decline or an incline. The US economy has not seen better days and it couldn’t be said to be on the incline, this greatly affects the performance of Apple Company as its products are not readily purchased by consumers. Economic growth will determine the amount of goods and services that are available for use to an individual and the country at large. This subsequently affects the consumer base of apple company (Marr, 2006). Hampering the company progress is the fact that it has little penetration in the international market as compared to other companies.

The Market exchange rate is an economic factor that influences the availability of products at different markets and the cost of purchase. This applies to both the local markets and international markets. Inflation refers to the increase in the cost of acquiring certain goods and services in a given period of time while deflation refers to the decrease in the average price of acquiring goods or services, these factors will influence the number of Apples products that can be purchased. In the case of inflation there will be a decline in the amount of purchased goods and vice versa.

The social environment of the Apple group basically refers to the type of consumers that the company offers its goods or services and the likelihood of this being altered. In foreign markets especially the emerging economies the users of Apple company products are the elite community. However, the United States and other developed nations’ consumers are widely spread. The Consumer base of Apple group in terms of age is averagely (12-47).The profits raised in this age group surpasses all other ages (Marr, 2006).

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The technological environment refers to the availability of material resources that aid development of appropriate methods to run the programs of Apple. This includes the software for the ipods and other products. The technological know-how is available to efficiently run the programs associated with the company. Any changes that are exhibited in the technological environment will have an impact on the smooth operation of Apple Company.

There is need for the company to ensure that their services and goods do not pollute the environment. Global warming is here with us, the way the Apple Company disposes off its waste is of importance to the whole organization and the country at large. This is the physical aspect of the environment, for Apple to be prosperous there is need to address the issue of electronic waste disposal that goes in line with ensuring environmental sustainability.

The legal aspect of the macro environment is critical in the attainment of contracts and the advancement of other agendas of Apple Company. Legal disputes are likely to occur and that is where representation for the Apple Company comes in. Legal interpretation of aspects relating to Apple Company usually comes up. The Company has been sued a number of times for various reason and it is important hat it adapts to the legal environment. These lawsuits cause financial losses and damage the company reputation

Summary of industry analysis

There has been considerable growth of worldwide PC usage over the last decades. For example, the global PC market grew by 16% between 2007 and 2008. This growth was particularly spearheaded by the mobile PC. However, PC growth in the US market was not very significant as it only went up by 4.2%. Personal computers industry however has been consolidated for quite a long time. The industry has had five major players who have controlled about 80% of the market share. These are Dell Inc., Hewiett-Packard, Apple, Acer, and Toshiba. The five control more than 55.2% of the international market. However, Apple only has only 2% market share.

The suppliers of material resources to the company also form a part of the microenvironment. The materials supplied may be intellectual or physical. The smooth operation of the company is dependent on the timely delivery of these resources. It is necessary to maintain good relations with the suppliers (Elmer-DeWitt, 2009). Although Apple has enjoyed large economy of scale and strong brand identity, the competitors have managed to go into the music market which has been one of their main revenue sources.

Porter’s Framework

Porter’s framework of analysis basically looks at the threat of substitute products. This directly affects consumers of Apple’s products and services, as alternatives to their products are made available especially by Intel and Ibm. The aspects of Porters framework that is evident in Apple include the buyer’s likelihood of settling for the substitute products, other companies offering products similar to the ipod and other products at a cheaper price have actually altered the consumer base of Apple. The threat of entry of new competitors into the market pioneered by Apple has been an issue the management and stakeholders have considered. Basically, such changes in the industry environment may lead to decreased profitability of Apple, making it struggle to cope with its competitors. Porter’s framework looks at this aspect in detail and Apple Company has responded to this in a number of ways, considering its reliance in ipod and music marketing for the young population, mostly in the United States.

It may sound crude but Apple has been accused of trying to block entry of competitors in a number of times by imposing imaginary barriers which may include patent and rights by colluding with authorities. New entrants to the market also have to consider other factors such as “economies of product differences, brand equity, capital requirements, absolute cost advantages, learning curve advantages, expected retaliation by incumbents and government policies” (Marr, 2006, p.6).The intensity of competitive rivalry in Apple and other Companies has led to growth of the industry in innovation and marketing. This has made Apple to come up with a variety of new services including the down loading of music into ipods for its users.

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Porter portrays that the customer is an important aspect of the micro environment. The bargaining power of customers puts the Apple firm under a lot of pressure. Today, customers are more sensitive to changes in the price; hence any high and exorbitant price will not go down well with the company’s strategies. The bargaining power of customers “brings into focus the buyer concentration ratio”, where the apple company has established that buyers are more concentrated around urban areas especially in places outside the country (Spechler 1986, p.7). Degree of dependency upon existing channels of distribution is high since the consumers of Apple Product purchase mainly from their local stores. Buyer volume is properly documented in this case clearly showing the number of buyers and buyer information availability (Philip, 2009).

Suppliers also make up the microenvironment by supplying the raw materials to the Apple Company. These may include computer chips, connection wires and other materials. They also provide labor and expert services. Suppliers in a number of cases have refused to work with the Apple Company in order to blackmail them into higher rates of service; this has made the Apple Company search for other sources for their requirements. According to porter, the Key aspects of supplies that need to be looked into are “supplier concentration to firm concentration ratio, employee solidarity (e.g. labor unions), and threat of forward integration by suppliers relative to the threat of backward integration by firms and cost of inputs relative to selling price of the product” (Sunder, 2004).

Summary of internal analysis

The key competencies of the apple company include the huge sales that have arisen from Ipods, Macintosh computers and its notebooks. This has raised a considerable amount of money to the tune of 320 million dollars. The company has large cash flow and growing profit each year.

The brand of a company is the most distinguishing factor in its identity. Apple is branded as the most established and healthy IT organizations in the world. This relates to economic and social environment. The strengths of Apple distinguish it from other Firms.

The technological weaknesses that are associated with Apple Company are its faulty screens that crumble under pressure. However efforts have been made to correct this anomaly and compensation issued to the affected customers. Early ipods had faulty batteries which could not store power for a long period of time (Collett, 1999).The company’s low cost music presents a weakness since producers take advantage of that strategy to reap more at their expense. The broken relationship between Apple and IBM has confused Apples consumers as it was said that they were about to switch to Intel (Sunder, 2004). The opportunities that are available to Apple are numerous. It also has the ability to “develop its iTunes and music players into a mobile phone format” (Sunder, 2004, p.14). The high product substitution of electronic products in the market is critical for the technological environment.

The management of Apple Company is an important micro environment that is necessary in order to achieve the success that it needs. The Chief executive officer of Apple who is the President is responsible for overall policy work relating to the company. Under him are general managers who direct and coordinate functions that relate to the organization. Departmental heads also form part of the management of the organization

Gap analysis and assessment of current strategy

The decision making system of the Apple Company has its highest level in the board that basically ratifies all the decisions that the company makes. The decision making structure at the company is more decentralized. The President makes the overall decisions regarding implementation and evaluation of policies that have been recommended by the various teams.

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The vice presidents who are in charge of the various locations around the world only receive general guidelines for policy implementation within their region which they implement. There exist a number of functionalities and departments at the Apple Company headed by their respective managers. It is therefore necessary to understand the roles played by the various heads of departments especially relating to efficiency within the organization. The mangers worldwide, e.g. product marketing manager makes decision relating to creation of awareness in the market. This may include aggressive advertisement and promotion. The leader of the ipod division makes the necessary decisions concerning structural division of his area. The managers in other areas perform critical functions relating to their area. It is evident that the management of Apple is more decentralized. However, sometimes the company has not managed to integrate good management structure with innovation and production process. It is necessary to integrate management functions into the overall performance of the organization.

The comparison between the model of The Apple Company with strategy models needs the analysis of certain aspects and how they relate to the decision making process in the organization. The strategy model advocates for vision, missions and goals, it is upon this that decisions are realized. Apple has all these aspects within its structure. It is therefore necessary to draw this comparison.

The resource Based View strategic model has in one way or another been used by the Apple Company. It also establishes the company property, plants and equipment which have been achieved in the report (Gallagh, 2009).

This method makes the company achieve control of their resources. The Apple Company has been able to achieve the control of its resources especially the intellectual property that is capable of innovations. This creates a certain effect of a competitive environment in an organization. The resources available at Apple are unique, i.e. “it is not easy for another competitor to imitate the technology and produce the same” (Gallagh, 2009, p.4).The resource based view has provided Apple with the Competitive advantage that offers the firm above average performance for a long period of time.

The Stakeholder View strategic model takes a critical look at the groups both inside and outside an organization that have clear interest in the decisions made by the company. It is necessary to manage stake holders as a means of enhancing strategic management and also carrying out stakeholder analysis (Gallagh, 2009).

Stakeholder analysis involves “identification of stakeholders and then evaluating their needs, wants and ideas and also gauging their contribution to the success of an organization, hence the need for Apple to evaluate the impacts of their actions on stakeholders” (Linzmayer, 1999, p.52).

The risks return factors Paradox is an important factor to consider in the study of strategies especially relating to Apple. The expected results between risk and positive outcome are difficult to come across since measuring outcome is never easy. This is one of the factors regarding risks in Companies that need to be analyzed. Apple Company has spread it risks in a variety of products thus ensuring that a positive outcome is always achieved (Linzmayer, 1999).

Options, recommendations and implementation issues

There is need to maintain good relations with stakeholders, this can be achieved through enhancing proper communication, negotiations and contracting. There is also need for stakeholders to be constantly and properly motivated in order for them to be beneficial in the performance of the firm. Good relations between a Company and Stakeholders has led to reduced risks for the organization thus a competitive advantage is acquired by the organization over its competitors (Spechler, 1986).The clarity that needs to be achieved in making, communicating and understanding of decisions is based on the basic design dimensions of an organization. The strategic model looks at the centralizations, formulization, integration and span of control that organize the human resources of an organization. All these are critical for proper dissemination of information. The Apple method is a decentralized kind of procedure thus making it easier for decisions to be made.

System thinking is necessary for the effective performance of a company. It is important that various branches of Apple coordinate in an effective manner in order to make sure that they achieve their goals especially in a complimentary manner, with adequate integration of efficient manufacturing and management. When one system of a Company fails it tends to bring down the other sections of the organization, the discipline of the various parts therefore comes in handy. Decision making therefore needs to be hinged on aspects of the environment, culture, technology and structure. Timely decision making as exhibited at the Apple Company is a necessary ingredient for good leadership.

A number of companies, Apple included are concentrating on the improvement of their operations as a means of ensuring their success in markets. As much as this may improve the quality of products, speed and productivity, it is also necessary to improve the position of the firm in other aspects such as trade offs taxation. This can only be achieved through a comprehensive approach to management especially of the internal and external environment. This therefore brings out the weaknesses that are present in the Apple Company and therefore need to be corrected.

Apple Company has done a spectacular job satisfying the need of the consumers more successfully in the United States. However, it has been less keen on the need to attend to emerging markets especially in the third world countries in Africa and Asia. It is therefore necessary for the Apple group to employ expansionist’s strategies in the management. Its products should be readily available to niche markets in developed countries (Duncan & Tarcy, 2000). This will give Apples competitive advantage and they are likely to improve their profit base. This brings about a critical aspect of the decisions managers make and the effect it has on the expansion of the company. The aspect of utilization of accumulated resources also comes into play and the ways in which they are engaged.

There is need for the Apple Company to secure its future in the business world thus the formation of a future focus strategy. The formation of this strategy begins with the competencies both in the personnel and the products capability. There is need to establish a strategic architecture which basically ensures that the customer satisfaction is achieved in the view of providing the necessary requirements (Duncan & Tarcy, 2000).

It is important to emphasize the qualities that go in line with successful strategic management especially among managers in Apple organization. These qualities need constant education and enlightenment in line with the changes that are perceived in the environment. It is therefore important that the managers and Apple company share a bond and exhibit certain types of characteristics, if not then it will mean that one of the above mentioned to compromise his or her values. There will be need for a manger to reflect the same value as an organization.

The strategies that are employed by Apple group need to be flexible. The world that we are currently living in is bound to changes either in the macro environment or the micro environment (Duncan & Tarcy, 2000).The Vision of Apple therefore has to be broadened to adapt to conditions. There is need for Apple Company to “form new roles and relationships among suppliers, customers, business partners and allies in order to produce innovative ideas” (Duncan & Tarcy, 2000, p.8). Performance of Apple Company can be boosted by when clients can be satisfied, which can help them “outperform their rivals” (Duncan & Tarcy, 2000). This therefore calls for strategic positioning of the company based on the customer’s needs, customer accessibility in relation to the products that the company offers.

Indicators provide information to the company on the progress of its products to the market. Financial indicators need to be properly structured in order to show the effects of the economic status in the United Status on the purchase and usage of Apple’s company’s products. These will point out the reasons behind poor performance or good performance of a company’s product in the local and international scene (Jay, 2001). Social indicators show the levels of acceptability of Apples product among a certain social group be it in terms of age, financial capability and level of education. In emerging markets especially in Asia and Africa, it is noted that the use of the Apple products is common among the educated and financially empowered. This fact can make Apple improve its usage among all social groups as they can offer cheaper products for the low end market. Indicators therefore need to be properly established as they offer guidance to the Company.

There is need for the company to integrate good management structure with innovation and production process. It is necessary to integrate management functions into the overall performance of the organization so as to make it part of the organizational culture instilled across all branches of the organization.

It has been acknowledged that Apple’s stakeholders need more attention as far as their needs are concerned. This will help enhance strategic management and also assist in the process of resource and stakeholder integration (Gallagh, 2009). Since stakeholders, especially consumers have been in legal tussle with the company in several occasions, it is high time Apple considered stakeholder analysis, which involves identification of stakeholders and then evaluating their needs, wants and ideas and also gauging their contribution to the success of an organization (Linzmayer, 1999).

Reference List

Collett, S. (1999) SWOT Analysis. Computerworld, Vol. 33, No.29, p. 58. Web.

Duncan, P., & Tracy, B. (2000) Simplified Strategic Planning. New York. Chandler House Publishing.

Elmer-DeWitt, P. (2009) “Why Apple’s shares rose as its market share shrank”.

Gallagh, D. (2009)Chip gains give big boost to tech stocks”. Web.

Jay, W. (2001) Success Stories of Leadership and Strategic Planning by Riding the Storm: Strategic Planning in Turbulent Markets. New York. Baron Publishers.

Linzmayer, O. (1999) Apple confidential: the real story of Apple Computer. New York. No Starch Press Series.

Marr, B. (2006) Strategic performance management: leveraging and measuring your intangible value. London. Heinemann Publishers.

Spechler, J. (1986) Strategic Planning and Management Control Systems for Survival and Success. Chicago. Howard publishers.

Sunder, S. (2004) Contract Theory and Strategic Management: Expectations and Actions . Connecticut. Yale University Press.

Appendix 1: Macro-environment analysis

FACTOR Issue The Effect on Growth Importance Rating
International
  • Offshore outsourcing
  • Globalization
  • Rise in disposable income in developing nations (Asia and Africa)
  • Widening technology gap
Positive (+)

Positive (+)
Positive (+)

Negative (-)

Political/ Legal
  • Tariffs
  • Deregulation of telecommunications industry
  • Legislation
  • Piracy/copyright/privacy Laws
  • Legal suits by consumers
  • Reduced global trade barriers
  • Move to censor parts of the internet
  • Cyber crime
Negative (-)
Positive (+)Negative (-)
Negative (+)

Negative (-)
Positive (+)
Negative (-)
Negative

Economic
  • Global recession
  • Low disposable income in developed countries
  • High unemployment rates in developed countries
  • Interest rates increases
  • Exchange rates fluctuations
  • High Cost of raw materials
  • Growing world economy
  • Exchange rate fluctuations
    $ value increase in PC shipments by 5/6 % in 2012
    Growth in PC market from 2007 to 2008 -16%
  • Stimulus Packages
  • Outsourcing through technology
Negative (-)

Short term negative outcome (-)

Short term negative outcome

Negative

Positive (+)

Positive (+)

Positive (+)
Positive (+)

Positive (+)

Socio Cultural
  • Highly Educated population
  • Cyber bullying
  • Tendency for consumers to download pirated music from illegal music stores/ file sharing sites
  • Baby boomers big market
  • Consumers spending a much higher proportion of their time on computers/ internet/ phones/ personal media devices
  • Acceptance of technology in developing countries
Positive (+)
Negative (-)
Negative (-)Positive (+)

Positive (+)

Negative (-)

Technological
  • Poor screen resolution
  • Production line efficiencies
  • Safety features
  • Portability
  • Increased speed and memory of PC technologies
  • Development of music formatting
  • Internet – wireless and broadband
  • Decrease in size of technologies
  • Decreasing costs of technologies
  • Touch screen technologies
  • Quicker broadband
  • Convergence of technology
  • Nanotechnology and superconductivity
Negative (-)
Positive (+)
Positive (+)
Positive (+)Positive (+)
Positive (+)
Positive (+)
Positive (+)
Positive (+)
Positive (+)
Positive (+)
Positive (+)
Sustainability
  • Poor disposal of E-Waste
Negative (-)

Appendix 2: Industry Analysis

FACTOR ISSUE EFFECT ON PRODUCERS
Threat of new entrants
  • Economies of scale large
  • Brand Identity is strong for existing company
  • Capital requirement are large
  • Growing industry
  • Existing Competitor extending into the music market
+
+
+
+
Bargaining Power of Suppliers
  • Low bargaining power from suppliers: Many electronic companies with hundreds of suppliers therefore bargaining power is low
+
Bargaining Power of Buyers
  • Luxury item and buyers are not forced to buy it giving buyer less power
  • Strong with other International brands , leading to fierce competition amongst their products
  • Threat of foreword integration
+

Power of Substitutes Switching costs are low
Relative Price/ Favorable performance of substitutes

Industry Rivalry
  • Opportunity for further growth in the industry
  • No strong exit barriers – merger activity
  • Product differentiation
  • Brand identity important
  • High switching costs
  • Intermittent overcapacity – other companies can capitalise on demand outstripping supply
+

+

Appendix 3: Internal Analysis

RESOURCES
TANGIBLE INTANGIBLE
Financial:
  • Large cash flow
  • Strong borrowing capacity
  • Growing profits
  • Strong return on equity
  • Reputation: Strong brand identity and value in the US
Physical:
  • Plant facility in the US
Human Resources: well organized human resource structure
Organizational:
  • Hierarchical Management organizational structure
Innovation:
  • Trademarks
  • Licensing
  • Research and development: new products and improvement
  • Intellectual property
  • Broken relationship with partner IBM
Technological:
  • Modern technological ability to create new products such as music gadgets
  • Faulty Screen crumbling under pressure
  • Weak batteries for earlier ipods
  • Low cost music reducing profitability

FUNCTIONAL AREAS CAPABILITIES
Distribution
  • Strong distribution relationships and support
Human Resources
  • Employee empowerment
Marketing
  • Strong and high lifestyle with Apple products
  • High sales turnover
  • Merchandising
  • customization whenever need be
  • Customer service and support
  • High customer loyalty
Management Hierarchical Organizational structure with effective management and decision-making process
Manufacturing Variety in manufacturing with high quality
Research and Development Good R&D record

CORE COMPETENCIES

Capability Valuable? Rare? Costly to imitate Non-Substitutability? Is it a core competency?
Efficient Organization Structure Yes Yes Yes No Yes
Strong Lifestyle Identity/ Culture Yes Yes Yes Yes Yes
JIT Manufacturing Yes No No No No
Customer Relations and Support Yes Yes Yes Yes Yes
Product Differentiation through Customization Yes No Yes No No
Strong Brand Yes No Yes Yes Yes
Strong Dealership/ stakeholder Support and Standards Yes No No No No
Empowering and Motivating Employees Yes Yes Yes Yes Yes

Appendix 4

Performance of Apple Inc. against top competitors
Competitor Financial Performance Market position Technological performance Service performance
Apple Good Average Good Poor
DELL Poor Poor Poor Poor
HPQ Poor Average Average Poor
MSFT Excellent Good Good Very good
AAPL DELL HPQ MSFT Industry
Market Cap 116.39B 21.77B 82.88B 181.69B 21.17B
Employ­ees 32,000 76,500 321,000 91,000 32.00K
Qtrly Rev Growth 8.70% -16.00% -3.20% -5.60% 6.50%
Revenue 33.69B 61.10B 117.79B 61.18B 33.69B
Gross Margin 35.15% 18.17% 23.37% 79.67% 22.83%
EBITDA 7.21B 4.24B 14.96B 26.21B 4.24B
Oper Margins 19.67% 5.69% 9.13% 38.78% 5.59%
Net Income 5.02B 2.48B 7.71B 15.82B N/A
EPS 5.555 1.248 3.097 1.737 1.25
P/E 23.49 8.94 11.18 11.75 22.05
PEG (5 yr expected): 1.29 0.9 0.83 1.12 1.29
P/S 3.24 0.35 0.69 2.87 1.48
DELL = Dell Inc.
HPQ = Hewlett-Packard Company
MSFT = Microsoft Corporation
Industry = Personal Computers
COMPUTER HARDWARE (US) RANKED BY SALES
Company Symbol Price Change Market Cap P/E
International Business Machines Corp. IBM 105.52 3.56% 139.43B 11.71
Hewlett-Packard Company HPQ 34.62 1.41% 82.88B 11.18
Dell Inc. DELL 11.16 2.86% 21.77B 8.94
Cisco Systems, Inc. CSCO 18.55 3.63% 107.68B 15.52
Xerox Corp. XRX 6.95 2.51% 6.01B 11.94
Sun Microsystems Inc. JAVA 9.04 0.44% 6.75B N/A
Seagate Technology STX 8.73 3.44% 4.29B N/A
Apple Inc. AAPL 130.47 6.51% 116.39B 23.49
NCR Corp. NCR 10.75 2.38% 1.70B 10.65
EMC Corporation EMC 12.0201 3.53% 24.20B 19.29
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