Characteristics of the Apple Industry, Stages of Development - Case Study Example

University: A case analysis of the Apple Industry. Name: Date: A case analysis of the Apple Industry. Introduction An industry is a collection of productive businesses in a specific economy, region or field. In this context, we take a look at the Apple Company, an American Multinational corporation, in the larger smartphone and the modern PC industry. Apple, incorporated in 1976, was the brainchild of Steve Jobs and Steve Wozniak (Betz 2001 p.26).Initially, the company was initiated entirely as a computer based company but later diversified its market to producing digital music players, developing and selling softwares as well as other digital devices such as iPhones, iPod, Apple TV, and now with their latest innovation being the iPad. Today, the company is renowned for its personal computer, the Macintosh and its Mac OS X. Apple is one of the most distinguished IT brands in the world. Inarguably, Apple has over the years managed to maintain a very loyal customer base and the customers have consequently been great promoters of the Apple brand. Moreover, it has been able to retain its customer who come for more products and in this way, has had the opportunity to introduce new products in their line. Current market analysis rank Apple as the second largest IT Corporation by revenue streams, closely following Samsung Electronics (Müller 2010 p.95). In the smartphone market, Apple Inc. is also ahead being the third mobile manufacturer after Samsung and Nokia. Characteristics of the Apple Industry. Apple Inc. has managed to be a stiff competitor in the rapidly dynamic Information Technology world. Essentially, Apple has many competitors largely divided into the smartphone and Personal Computers. Samsung has proved to be their biggest competitor in the Smartphone business while in the Pc’s Apple has been engaging in cut-throat competition with Microsoft OS and computer manufacturers such as HP, Dell, among others. Moreover, in the portable music devices, Microsoft’s Zune has also been a big competitor of Apple’s iPods (Shea 2013 p.53). One of the major factors that have enabled Apple to remain competitive has been its unique brand reputation. Considering the fact that the IT industry is very innovative with new products being introduced into the market frequently, Apple has consistently pulled out great products into the market albeit at very high pricing rates. As a result of its impressive brand name, it has achieved a staggering 550 million registered users in the Apple’s iTunes. Accordingly, Apple was among the most valuable brand names in 2012 achieving position 2, closely behind Coca-Cola(Shea 2013 p.17). Furthermore, Apple has been a market leader across a wide range of IT products, ranging from softwares, hardware and services. This has been a major strength for the Company. It is beyond doubt that Apple’s ecosystem is unrivalled in the modern world where consumers have a wide variety of goods to choose from. Apple wittingly locks-up its users by providing quality products and maintaining unique designs that keep their customers loyal to their products. Besides, with over 300 retail outlets, Apple been able to reach out the world over and made their brands accessible in most of the countries in the developing and developed worldsalike(Müller 2010 p.86).Important also to note has been the pricing power of Apple. Both consumers and competitors alike will agree that Apple’s pricing model is oddly surprising. With its gadgets going for premium prices, it is obviously true that Apple rakes in significantly higher revenues than its competitors. If its financial records are anything to go by, Apple’s gross profit margins stood at 44.1% in 2010 with a whopping 10 million dollars in cash and no debts at all with retained earnings accounting for 79% of shareholders equity (Lüsted 2012 p.109). With this kind of financial strength, Apple has over the years been able to enjoy economies of scale and consequently concentrate in building more competitive and technologically advanced innovations in the IT industry. Stages of Development. Apple has taken huge leaps and milestones since its inception on 1st April 1976. Originally, the first Apple computer designed was barely enclosed in a plastic casing (Betz 2001 p.43). It was not until 1984 that Apple unveiled the Macintosh computer, the first personal computer featuring a graphical user interface and a mouse. A year later, Job left the Company and returned a decade later. During this period, the company was in relative decline and did not unveil any new developments in the personal computers. However, in 1997, with the return of Steve Jobs as interim CEO, a new line of computers were released. These were referred to as the G3, still selling under the Macintosh. Moreover, Apple also introduced a new marketing strategy that allowed consumers to order for personal computers online through their website (Betz 2001 p.49). A year later, in 1998, Apple launched a personal desktop computer, the iMac. In 2001, Apple expanded its business and opened two stores in California and Virginia. Furthermore, later that year, Apple revolutionized the music industry with the release of the iPod. Two years later in 2003, Apple unveiled the iTunes music store. Since then, Apple users have been able to legitimately download albums and songs to their computers and send them to their mobile phones (Ireland 2008, p32). Following this innovation, movies, TV shows, apps and books were also included in the iTunes store. In 2007, Apple released its first phone ever, the iPhone taking it on sale the same year. Following this diversification from computers solely to other electronic gadgets, Apple rebranded its name from Apple Computer, Inc. to Apple, Inc. Interestingly, the sales of the Apple’s smartphone have expanded every year since then. The following year, in 2008, Apple introduced the App store providing a platform for third party app developers to come up with their applications to use with the iPods and iPhones. In 2010, Apple launched the first generation iPad, a 10-inch touchscreen tablet. This release saw a record sales of 500, 000 units sold within the first week of its release. Prior to the death of its founder, Steve Jobs in 2011, Apple launched the iPad 2 (Lüsted 2012 p.56). Apple is currently at the center stage of one of the greatest revolutions in technology in the modern age. Shareholders who started out with the company have reaped profitably with over 900% gains. With extensive expansions in its retail outlets and App store, Apple has flourished and its current rankings are indicative of a company that is not only high competitive but also flexible and keen on consumer tastes and wants. Presently, the iTunes store alone boasts of revenues amounting to $ 16.4 billion and these revenue rates are likely to go higher in the near future (Lüsted 2012 p.118). There are more opportunities such as integrating ad support to video streaming which would increase revenues in future. Moreover, with other innovations expected such as the Apple iWatch and the iRadio, we can only expect the company to generate more revenues in the future. Porter’s Five Forces Model The porter’s five forces analysis model is an essential tool for providing insight on where potential is in any form of a business setting. Basically, this helps a business to determine the strong point of its current competitive situation as well as the strength of a position that a company anticipates to move. Even as Apple, Inc. enjoys lofty market dominance, it is becoming undeniably clear that the high profit and skyrocketing growth rates margins will be relatively harder to come by in the near future. By using Porter’s technique to analyze Apple’s competitive strategy, we have the following analysis: 1. Potential entry of new competitors. Essentially, any industry with a ready market and a steady availability of goods makes it harder for penetration of new entrants. In this regard, Apple has successfully managed to provide its suppliers with a ready market for its goods. Moreover, it has succeeded in maintaining customer loyalty thus creating considerable barrier for new entrants. However, new innovations such as online streaming of audios and videos via v-cast and companies offering online services similar to iTunes have been potential threats (Shea 2013 p.40). Overall, Apple has fared relatively well in this area 2. Rivalry among competing firms. Industry rivalry inadvertently results to competitive pricing of services and products. Samsung, has been a strong competitor in the smartphone business with its wide range of cheap and high end phones alike. A rising demand for the open source Android OS has also been a major concern. Moreover, alternative computer hardware such as Dell, HP, and Lenovo have sparked major competition within the industry (Müller 2010 p.134). Besides, the Windows OS has over the years been a stiff competitor of the mac OS. 3. Bargaining Power of Consumers. Pricing competition among firms largely comes from customers. Customer behaviors and attitudes largely affect sales. For instance, in events where they anticipate economic downturn they might not spend(Müller 2010 p.106). Moreover, retailers may demand better terms or reduced prices. With the introduction of peer to peer networks, customers may share music freely and hence fail to pay via iTunes. Apple therefore needs to strive to satisfy its customers by providing affordable services. 4. Bargaining power of Suppliers. A look at a disassembled iPhone discloses chips such as the microprocessor chip is supplied and manufactured by Phillips, Samsung and other different companies (Ireland 2008, p76). It is, therefore, crucial that Apple maintains good supplier relationships as well as exercising prudence to find a balance for the best and cost effective suppliers so as to stay at the top of its competitors. 5. Potential development of substitute products. For this part of the analysis, we take a look at totally different products that have the potent capabilities of smartphones and computers in particular aspects of service or product delivery. Thus, we explore alternative media and music sources such as the Play Stations and XBOX (Shea 2013 p87). These substitutes among others such as satellite radios are potent competitors to Apple’s market segment. Moreover, alternative methods of accessing musing such as DVDs have also developed significantly to offer competition. Conclusion Overall, Apple still has within its capability several options to increase its leverage in this competitive market. Increasing retail stores to allow easy access is possible. Continuous innovations to grow and expand business is also a brilliant idea. Lowering product costs while maintaining quality standards would be critical if Apple is to widen its market base.In addition to this, Apple can also explore the possibility of embarking on joint-ventures with other Corporations to ensure survival in the future. Finally, as described by Steve Jobs, Apple’s astoundingly effective strategy of identifying with the customer experience first and then working back towards the appropriate technology has ultimately propelled it to the $2 billion Company that it is today(Shea 2013 p136). REFERENCES. BETZ, F. (2001). Executive strategy strategic management and information technology. New York, J. Wiley. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=71426. IRELAND, R. D., HOSKISSON, R. E., & HITT, M. A. (2008). Understanding business strategy: concepts and cases. Mason, OH., South-Western Cengage Learning. SHEA, T. (2013). Steve Jobs and Apple. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=619273. LÜSTED, M. A. (2012). Apple the company and its visionary founder, Steve Jobs. Minneapolis, MN, ABDO Pub. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=432606. MÜLLER, C. (2010). Apple's approach towards innovation and creativity: how Apple, the most innovative company in the world, manages innovation and creativity. München, GRIN Verlag. Read More