Business Strategy of Apple iPhone - Example

BUSINESS STRATEGY REPORT-APPLE IPHONE Table of Contents Table of Contents 2 Introduction 3 Porters Generic Strategies 4 Figure: The External Environment 8 Porter’s Five Force Model 8 Porter’s Five Force Model 10 Resource Audit 10 Reference List 11 Introduction Over the last decades, the level of technological advancement has grown rapidly. Technological progress has become of the weapons employed by a majority of global industry leaders in solidifying their position ahead of their competitors. The rapid advancement of technology has created opportunities in the telecommunication industry that remain untapped. Although, the possibilities have not been exhausted entirely; some companies have come out strongly as the primary controllers of the telecommunication market (Apple, 2015). Apple incorporation is arguably the leading technology company in the whole world. The company whose headquarters in based in the United States of America has been in operation since the 1970s.Apple has managed to grow to become one of the most profitable organization in the whole world. Their products consists mobile phone, iPads, iTunes and iPods among others. One of the strategies that have helped the firm grow to its current status is its ability to produce quality goods and services. Just recently, the company recorded a historical profit margin that has never been reported by any other business entity. According to a BBC report, the business entity recorded a net profit of $18 billion (BBC, 2015). The objective of the report is to evaluate the present position of Apple in the technology market. Consequently, some models will be applied to give the accurate picture of Apples’ current position in the technology industry. The Porter’s generic strategy will be used to analyze the current strategic position of Apple. Besides, the Porter’s Five Force model will also be used in to monitor how changes in the external environment affect the company’s growth and success. A critical analysis of the PESTLE forces will be analyzed. Apple exists in a volatile business environment that is constantly changing. Conversely, the technology environment is among the diciest environments. The business entity must strive to adapt to the changes in technology otherwise their products might be rendered obsolete. Finally, the report will also conduct a resource audit to examine the resources that are available at the disposal of the reputable company. A closer analysis of the value chain will also indicate how Apple has managed to produce quality products for customers. The organization provides quality products something that has enabled Apple to control a large market in the telecommunication industry (Keller et al., 2011). Apple Strategic Analysis Porter identified three aspects that organizations could apply to maintain their competitive edge in the industry. Differentiation, cost leadership and competitive advantage. Customers consider a variety of parameters in examining the value of a product. Apple has managed to establish itself as one of the most preferred brands in providing quality electronic products (Muža, 2014).The differentiation strategy that the company applies has been one of the instrumental factors that have contributed to its success. Apple offers quality products something that has helped the business entity distinguish itself in the telecommunication industry (Guardian News, 2015).The electronic manufacturer offers a broad range of products. Interestingly, the products manufactured are unique. For instance, Apple was the fast company to launch the iPod electronic devices under the leadership of the then Chief Executive Officer Steve Jobs. Apart from the product, the firm also produces the iPhone series of phones, the Ipad and plans to introduce new brands of watches in less than three months time. Last year the company managed to sell more than 75 million iPhones something that industry player’s term to be a remarkable achievement (Barney and Hesterly, 2008). Porters Generic Strategies Strategy Approach Differentiation Premium pricing Focus High end customers Cost Leadership Producing a small number of products (Akan et al., 2006). Although Apple produces a broad range of products, the organization uses a uniform strategy. The company has managed to control the cost of production by manufacturing a limited number of Smartphone and other devices. The approach has helped the firm control the cost incurred in the manufacturing of the products. They limit production of their devices to meet the lifestyle of their consumers since they have a better understanding of their culture. It upholds the global culture of consumers making them have a distinctive feeling of prestige. Therefore, this enables the apple company achieves its profit maximization objective because it saves on the cost of production (Akan et al, 2006). As the leading technological company, Apple has many upcoming competitors globally in the industry. The company compares current prices to the market with that of its competitors. Apple products are expensive but of good quality with a particular brand. Apple competitors include Samsung, Nokia, Sony, HTC and Lenovo in the Smartphone mobile industry. The Apple iPhone surpasses other Android phones in the industry produced by Apple competitors. Therefore, this makes Apple yield more profits than competitors. Significant in the entertainment media, Google is another competitor of Apple since the two are the major companies in that industry. Google Android operates on tablets and most phones of Apple competitors while Apple iPhones are run by Apple iOS. Apple Company provides specialized and quality services are therefore making it outdo its competitors. The operating system of the two media players borders with iTunes and Google play store, therefore, this paves the way for the users to purchase applications and media. Apple offers a broad range of services and products. Microsoft software is another Apple competitor. For example in through the grapevine market research shows that compared to competitors of Apple, Apple iPhones maintains its value for a long time. The distinctive features of Apple products are unique and useful, reliable and superior. Its devices, therefore, do not have many defects compared the products of its competitors (Hill and Jones, 2010). Apple incorporation faces similar environmental challenges like any other organization. The external environment forces expose business entities to threats and opportunities that emerge. Conversely, the forces that affect business include the political, economic, socio-cultural, technological, environmental and legal. The forces are represented by the acronym PESTEL. Firms like Apple operate in the dicey environment and should, therefore, strive to adapt to the changes otherwise they risk being phased out. For them to survive they must formulate and implement sustainable strategies for them to survive in the chaotic environment. Consequently, Apple managers must continually monitor changes in the environment before making a major decision in regards to its operations (Hill et al., 2014). Political Environment The management of Apple considers the prevailing political situation before making a decision to enter a new geographical market. The political climate entails concepts such as government regulations, political stability, taxation policies and employment policies among others. One aspect of the political environment that Apple has always considered is political stability. Political turmoil causes instability in governance something that affects business operations directly. Furthermore, political instability can spark violence and war whereby businesses have to close down to avoid being looted or burnt down. On the other hand, trade barriers may also restrict the organizations from expounding to new territorial areas. The factor is a threat that businesses should always consider. Interestingly, the American government has been having a lot of trade agreements with many countries. The favorable trade relationship between the US and other economies has opened up new markets and opportunities for Apple and other American owned corporations. The favorable political environment in most countries where Apple has managed to penetrate new markets can be attributed to the current success the organization enjoys (Bivolaru et al., 2009). Economic Environment The economic factors also offer Apple opportunities and threats. Inflation, GDP, economic and other economic variables influence firms success. Apple applies the premium pricing strategy for most of its products. The procedure entails capturing the market segment occupied by the affluent members of the society. Consequently, the organization considers market segments where consumers have a high purchasing power. Apple mainly distributes its products to developed countries where the GDP of the countries is performing well implying consumers have a high purchasing power. Additionally, the foreign exchange also affects the operations of the business. Fluctuations in the exchange rate of the dollar may make it costly for the business entity to export its products to the market (Bivolaru et al., 2009). Social-cultural Environment The attitudes, perception, lifestyle and beliefs of people sometimes affect their purchasing patterns. Customers hold certain practices and thoughts deep in their hearts making it difficult to change their mindset. The above factors affect the general performance and sales of the organization. For instance, the youth prefers products that appear to be trendy and fashionable. Apple targets such customers who prefer to pay higher prices for newly innovated products. The company has been in the forefront in introducing new products that designed according to the preference of customers (Bivolaru et al., 2009). Technological Environment Technology has businesses. The technological environment is among the diciest environments. On a daily basis, new products and services are introduced to the markets. Consequently, firms must strive to cope with the new developments otherwise their products may be rendered obsolete (Karagiannopoulos et al, 2005). Apple has been at the forefront of introducing new products in the market albeit having stiff competition from other established mobile phone manufacturers such as Sam Sung, HTC, and Sony. Part of the factors that have spurred the organization to prosperity has been the promotion of innovative ideas and products. Almost every year the company introduces a new series of the iPone with the most recent being iPhone 6. Furthermore, the company plans to introduce new watches in the market. The move indicates the willingness for the company to start offering new product lines. Technology has enabled the company to reap immense sales revenue given that customers yearn to acquire newly introduced products. Also, the culture of innovation has helped Apple establish a positive brand image among customers (Karagiannopoulos et al., 2005). Environmental Factors Environmental protection has become a major issue of concern in the recent years especially after the effects of global warming. Global warming has interfered with the weather patterns in most countries forcing environmentalist to come up with new guidelines and policies for environmental protection. In the United States, bodies have been established to oversee the safeguarding of the environment. They control issues such as environmental pollution such as poisonous fumes that come from manufacturing entities and other businesses. Consequently, Apple is also expected to abide by the environmental standards that have been set by adopting sustainable methods of production. Firm that fail to abide by the requirement sometimes finds themselves in murky waters. The environmental agencies are sometimes forced to impose fines on organizations that fail to follow the guidelines provided. Such issues pose threats to Apple given that the fines imposed are usually very costly. In the long run, the fines may dent the image of an organization something that will have a direct bearing on its profitability (Hitt et al., 2012). Legal Environment Legal issues affect the operations of an organization. Organizations such as Apple must operate within the law. Otherwise, they risk being sued. Some of the legal issues that may create both opportunities and threats for the firm include workplace safety for employs, employment and intellectual property laws. Most frequently, legal matters affect businesses negatively. Google and Microsoft are classical examples of companies that have found themselves in the tricky situation for defying the law. Both companies were heavily fined for breaching the antitrust laws. Consequently, the managers of the company must avoid such legal tussles since they drain the financial resources that could have otherwise been used for other meaningful purposes. However, Apple is not a saint. A majority of the organizations find themselves violating the laws of the land. Therefore, the managers have always set aside financial resource to tackle such issues (Hitt et al., 2012). Figure: The External Environment (Hitt et al, 2012). Porter’s Five Force Model Similarly, Porter’s Five Force model identifies the forces that must continually monitor. The model is compatible with the PESTEL analysis since they share similar concepts. The five forces include the power of suppliers, buyers, rivalry among the existing competitors, threats of substitutes and the threat of new entrants (Yüksel, 2012). i. Rivalry among existing competitors Competition in the telecommunication industry is getting stiffer on a daily basis. Apple’s iPhone 6 faces competition from products offered such as Sam Sung S7.Interestingly, Sam Sung leads the pack as one of the companies that have distributed the highest number of phones. However, although Apple managed to sell more than 74 million iPhone 6, it made the most remarkable achievement in the corporate world recording historical profits in the last quarter. The technological environment globally indicates that there are vast opportunities that remain untapped in the telecommunication sector (Porter, 2008). Although other players have already established their presence in the industry, Apple occupies a unique market position. It has managed to claim a fair share of the market as the most innovative company. The current success of the iPhone demonstrates how innovation is key to the prosperity of the organization. Furthermore, the company has managed to penetrate the Asian market. Specifically, Apple enjoys a commendable achievement having managed o penetrate the Chinese market where other US brands such as Nike have failed. Consequently, the organization has invested heavily in extensive research and development activities a decision that has paid off. Therefore, for the mobile phone manufacturer to retain its present status, it must continue with its culture of innovation (Schilling, 2005). ii. Power of Buyer Economic factors influence the buyer’s purchasing power. Countries that enjoy a favorable economic environment offer Apple a ready market for its products. Apple primarily targets the affluent members of the society who can afford the high prices offered in the market. The company offers quality products something that has enabled them to retain a large base of loyal customers. A majority of clients often evaluate the quality dimensions of a product before making a decision to purchase (Narayanan and Fahey, 2005). iii. Power of Supplier The supply of mobile phone devices has increased rapidly in the last decade. The availability of many suppliers has given freedom Apple and other corporations the freedom to fix their prices. Suppliers determine their prices considering the cost of production and the profit margin (Porter, 2008). iv. Threats of Substitute The iPhone 6 faces a threat from substitute products such as tablets and laptops. Sum Sang and other company’s manufacture tablets that provide users with all telephone services. Such products are a major threat to the iPhone 6. An analysis of the threat of new substitutes indicates the mobile phone industry is very competitive and uncompromising. Competitors engage in cutthroat competition by seeking to introduce substitute products to counter the sale of iPhone 6 (Porter, 2008). iv. Threat of Entrants In the recent years, the mobile phone industry has witnessed an influx of many players. Previously, Nokia controlled a significant market in the industry. However, the company failed to solidify its position. It is the slow paced decision to enter into the Smartphone market ruined the company’s fortune. Within a short time frame, the organization lost its position to Sam Sung. Similarly, Apple is not an exemption. It also faces similar threats from new entrants such as HTC. The current management under the leadership of Tim Cooke must be aware of such facts that befell Nokia (Porter, 2008). Porter’s Five Force Model (Porter, 2008). Resource Audit Apple has managed to integrate and re-engineer its external factors to mitigate the threats that originate from the ever changing business environment. The strategy introducing new products has been successful. Apple has successfully managed to claim a share of the mobile phone sector due to the quality of outputs (Saponas et al, 2008). Apple has also been in the forefront when it comes to value addition. The company has been able to challenge other mobile manufacturers by engaging in extensive research and development of new appealing products. The research work has enabled the firm to introduce newly improved products. For instances, the iPhone has managed to evolve into a better version that also have improved features. The iPhone 6 is the most current version that has improved features. Besides, it is anticipated the business will continue another series of the phone in future. The development of the iPhone demonstrates how Apple pays keen attention in value addition (Saponas et al, 2008). Reports indicate that has a very efficient supply chain management system that operates in many countries. The company sources for manufacturing materials from reputable suppliers who must meet the strict specifications. The primary element used in the production of iPhone 6 is glass that is from the France and Asia. Interestingly, Apple also outsources for assembling services from China. However, it has been suggested that the company should consider using robots in its assembling units. The move will help the company reduce its costs significantly. The decision to outsource some services from other countries has also helped the company to earn the contribution of experts from other countries. Also, outsourcing of the services has led to the enhanced value addition (Grundy, 2006). Apples remain arguably one of the most successful corporations in the whole world. The organization has moved from an average company to become one of the most admired brands. Although, Steve Jobs died a few years ago, the company that he cofounded remains to be profitable. The production of quality products has been embraced as part of the organizational culture (Grady, 2009). Conclusion In the report, the current status of Apple was evaluated. The PESTEL analysis considered some of the external forces that affect the running of the business. The forces affect the operations of the enterprise. Also, the Porter’s five force model was also used to analyze the current position of the company. The framework evaluated the impact of new entrants, substitute products, the buyer of powers and other forces. According to the report, the Porter’s five force model can be termed to be supporting the PESTEL analysis (Gillespie, 2007).From the report, it can be clearly stated that Apple has tremendously grown. Behind the company’s success lies the application of effective strategies that have bore fruits. Innovation has been instrumental for the current success the company enjoys. However, Apple needs to acknowledge that it faces stiff competition from other competitors such as Sam Sung (Dicken, 2015). Reference List Akan, O., Allen, R. S., Helms, M. M., and Spralls III, S. A. (2006). Critical tactics for implementing Porters generic strategies. Journal of Business Strategy, 27(1), 43-53. 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