Critical Analysis of the Apple Strategies - Case Study Example

Critical Analysis of the Apple Strategies Critical Analysis of the Apple Strategies Introduction The Apple Company is one of the outstanding entities in the computer and mobile communications industry. The company focuses on mobile communication and media devices, digital music players, personal computers, networking solutions, software development, as well as other digital applications. Some of Apple’s common products include the iPhone, iPad, iPod, Mac, Apple TV, iOS, iCloud, and OSX. The company has also ventured into digital content and applications available in the App Store, Mac App Store, iTunes Store, iBooks Store. Unlike other companies, Apple operates retail stores in different parts of the globe whereby its products are sold. Other customers opt for their online stores. In the recent past, Apple has also been selling its products through third parties. The company is about to launch its newest line of products the Apple Watch. A close analysis of the history of the company reveals that Apple began in 1976 and had since then registered growth to become a market leader in the industry. In 2014, the company was named as the first of the 500 Fortune Companies. This paper will explore the company’s strategic formulation and management. Notably, the company has become a market leader because of its commitment to developing and implementing effective strategies that give the company a competitive advantage. The paper will adopt a critical approach to the company’s current strategies and highlight the potential improvements that can place the company in a more profitable position. In order to understand Apple’s current issues and strategies, it is of significant importance to consider a brief history of the company’s performance. After the company had begun operating in 1976 with Steve Jobs and Steve Wozniak as the main decision makers, it faced some challenges in the 1980s. Both Jobs and Wozniak had developed an interest in computers and electronics at a young age and nurtured their talent. However, in the 1980s, the company’s products flopped badly in the market (OGrady, 2009). At that point, Jobs, Wozniak, and other company leaders needed to develop better strategies in order to get the company back on the right track. Specifically, the company faced a threat of bankruptcy. In order to restore the company’s financial performance, Jobs opted for a cost effective strategy as described by Michael Porter. The company lowered its cost of production, a factor that placed it back on the right track. The 1980s case is presented here as evidence that the company faced critical challenges in the past (Olson, 2015). In the recent past, the company has proven itself a remarkable leader in strategy formulation. Some analysts have made it clear that Apple is a strategy, highlighting its commitment to analysing its environment, the driving factors in the industry, customer needs, and utilizing its resources. In order to critically to analyse the strategy formulation and implementation of the Apple Company, it is important to consider the environment of the company. Understanding Apple’s environment will help in evaluating the efficiency of its strategies. The PESTLE analysis helps in highlighting the external drivers that affect the company’s strategies (Patrick, 2014). The 3P Framework Practices Whittington defines practices as the approaches, frameworks, tools and routines used by organizations in the strategizing process. The Apple Company understands the value of employing the appropriate strategies before developing its strategies. There is evidence that the company carries out a five forces analysis that enables it to identify the competitors in the industry, the substitute products, the supplier power, as well as the buying power. After understanding all these factors, the Apple Company gains the confidence to develop outstanding products that can surpass the substitutes in the market. The company also carries out a PESTLE analysis in order to understand the external environment before launching new products. The Apple Company invests in market research in order to understand the unique need of customers (Ximénez & Sanz, 2014). Therefore, the company is in a position to design products that suit the needs of its target market. Economic, social, and technological factors are more likely to influence the company’s business. Other practices of the Apple Company include the development of reward schemes, as in an effort to retain talent within the organization. Practitioners The Apple Company has benefited immensely from having able practitioners who have the capacity to develop effective strategies. Steve Jobs, a core founder of the company left a legacy of “thinking differently” when developing strategies for the company. As the chief executive officer, Jobs’ capacity to think differently also influences other executive members. As a result, the company was able to develop outstanding business and marketing strategies. Apple’s current chief executive officer Tim Cook has also exhibited remarkable competency in developing effective strategies (Montgomerie & Roscoe, 2013). Tim Cook works effectively with other executive members in appointing managers for each department and ensuring that each department participates actively in the implementation of the company’s strategies. In 2014, Tim Cook demonstrated his expertise as a practitioner in his elaborate acquisition strategy. Apple believes in hiring intelligent engineers who have the capacity to contribute positively to the company’s strategies from the low levels. Engineers are allowed to come up with innovations that may determine future projects for the company (Kourdi, 2009). Praxis Whittington describes praxis as the flow of activities purposed to implement change. The Apple Company has exhibited expertise in this sector. The company carries out workshops training programs, strategy meetings, as well as compiling reports in an effort to ensure that the company is on the right track towards the implementation of its strategies. Both formal and informal communications are a core aspect of the teamwork exhibited by the Apple Company (Ireland, Hoskisson, & Hitt, 2008). Such formal and informal communications explain why all the departments in the Apple Company can function together and successfully achieve its objectives. The ESCO Framework of Apple Company The ESCO framework ensures that there is an alignment between the company’s environment, strategy, competencies, and organizational factors. An organization should study its environment effectively before developing its strategies. The Apple Company carries out market research, PESTLES analysis as well as the five forces analysis in order to determine the critical environmental factors that can affect its business. The practitioners rely on findings from the environment when developing their strategies. The strategy must conform to both internal and external environment. The external competitive environment is of critical importance to the strategies defined by any company (Lazonick, Mazzucato, & Tulum, 2013). The strategies adopted by Apple reveal that it takes into consideration environmental factors since it can thrive in the industry. The company uses its unique competencies in ensuring that it implements the strategy. In addition, it aligns the organizational culture with the business strategies. Apple’s outstanding competencies include high levels of innovation, expertise in product design, ability to respond to customer needs, and the fact that it offers unique products to the customers. Organizational factors such as alignment of reward schemes, and the company’s corporate culture work in favour of the company because they support the business strategy. Apple expects employees to be highly innovative and creative. Employees are only rewarded after their innovative ideas prove to be viable in the market (Leonard & Gonzalez-Perez, 2013). The organizational structure ensures that line managers have a measure of control eliminating any tensions that could arise at different organizational levels. The ESCO model through the Macro and Micro Lenses Critical Analysis of Apple’s Strategies The Apple Company has demonstrated a remarkable commitment to innovation. Notably, Steve Jobs and his partners understood the meaning of launching unique products into the market that rely on emerging technologies. From the conception of the Apple II to the Mac Computers, the launching of iTunes, iPhones, and its latest innovation the Apple Watch serves to highlight that the company has relentlessly proved to be innovative. Due to its highly innovative nature, the Apple Company has become a standard in the computer and telecommunication industry. For example, other companies evaluate their progress based on Apple’s newest products. One clear example is Samsung’s efforts to launch smartphones that have features close to those defining Apple’s iPhones (Lazonick, Mazzucato, & Tulum, 2013). Due to its commitment to innovation, the company has earned a remarkable reputation for the outstanding product design exhibited in its products that have desirable features. Steve Jobs created a legacy of giving detail to every part of the product a factor that has seen Apple’s products prove to be valuable to consumers. Apple does not disappoint when it launches its premium products because its gadgets exhibit both aesthetic value and outstanding functionality. Without a doubt, such innovation has given the company a competitive advantage over other companies in the industry (Wilcox, 2012). Apple customers will choose the company’s products any time because they are well aware of the outstanding product design, coupled with outstanding functionality. Apple’s innovation is not limited to, product design but extends to customer service. The company has sought to introduce remarkable customer service to all its customers across the globe (Lazonick, Mazzucato, & Tulum, 2013). Through its direct sales, customers have an opportunity to interact with employees and customer care department as well as receiving demonstrations on how the new products function. The Apple Company has not ventured into innovation without giving attention to customer needs. Currently, the company has achieved focus differentiation. Focus differentiation is one of Porter’s strategies, which ensures that companies release designer products at premium prices. Notably, the Apple Company specifically targets high-end consumers who are technologically perceptive and lead luxurious lifestyles (Lashinsky, 2012). In addition, Apple customers are individuals who need to achieve maximum functionalities from a gadget. Evidently, Apple’s customers recognize the value of their products. Many of the customers have remained loyal to the company’s products because they are assured of remarkable functionality as well as aesthetic features. In the recent past, the company has given attention to customized products, a factor that gives the company an opportunity to deliver a product that suits all the needs of the customer. For example, the launching of the Apple watch will see customers placing orders online and receiving customized watches with the right band size (Xie & Liang, 2013). Evidently, Apple’s innovative strategy is highly successful. The company uses the latest technologies to develop amazing products that can win the interest of the customers. The engineers working for the Apple Company recognize that meeting the customer demands is one of the company’s priorities. Therefore, they develop exciting products that add value to the lives of customers. The buzz created by the launch of Apple’s new products serves to reveal the level of success achieved by the company’s innovative strategy. For example, in the last quarter of the 2014 financial year, Apple sold 74.4 million iPhones. Notably, the company had only launched iPhone 6 and iPhone 6+ in September 2014 (Sadeghi, 2012). Reports have highlighted that the launching of the new phones was a response to an increasing customer demand for a phone with a larger screen size, but that has a better functionality than the existing iPhones. The sales of the two models of iPhones surpassed the company’s expectations. On average, it is estimated the company sold over 34,000 iPhones. Notably, many customers were excited by the fact that Apple had responded to new technologies and new phone models with bigger screens. It is evident that the company had calculated its moves of launching the two models because customers had noticed that Apple had not advanced to releasing phones with big screens. The excitement of an iPhone with a bigger screen and more features, but still with the outstanding product design explains why the sales surpassed the company’s expectations (Schneiders, 2011). Worth mentioning is the fact that the Apple company does not focus on inventing new products. On the contrary, the Apple Company has exhibited its capacity to reinvent existing products and develop premium products. For example, Apple Company was not the first developer of smartphones. However, the company has revolutionized smartphones and redefined customer expectations from a smartphone. The principle behind Apple’s strategy is to design better products that give customers more value than what is already available in the market. In addition, the company recognizes the stiff competition in the industry and manages to stay ahead of all the competitors. In order to ensure that Apple remains a leader in the market, the executives ensure that the engineers are developing products that will be launched two years later. Therefore, the company ensures that they exploit new technologies and plan ahead, taking the time to develop products with appealing features. Apple’s approach focuses on ensuring that the company is an outstanding digital hub for technologically perceptive customers (Sadeghi, 2012). The Apple Company has exhibited its expertise in developing partnerships with other entities in an effort to ensure that it brings forth the required talent and resources that can lead to the development of premium products. For example, the company has developed strategic marketing agreements with companies such as Nike and Starbucks. Apple has also developed an outstanding marketing strategy. The company has expertise in communicating the language that appeals to the audience. In addition, the company offers outstanding customer experience in its direct and online stores. The prices for Apple products are justifiable. For example, the MacBook Air is the thinnest laptop in existence justifying its premium price (Patrick, 2014). Over the years, the Apple Company has created a tribe that comprises of fans and loyal customers of its products. The fact that customers are always assured of premium products with outstanding value, the company is likely to maintain its current market position. Organizational Factors Notably, the Apple Company has recognized the value of the human resource development. In addition to hiring smart and intelligent individuals, the company has training programs as well as reward schemes that promote and retain talent in the organization. The company’s outstanding competency is its innovative capability. Over the years, the company has sought to retain such talent. In addition, the company’s culture has innovation as its core value as well meeting customer needs. Apple’s organizational structure allows low-level managers to have a remarkable control, a factor that promotes the efficiency of each functional unit (Harriga & Harrigan, 2003). . Recommendations and Conclusion Although the company has adopted effective strategies that have made it a leader in the market, it can implement the following recommendations that will increase its profitability and ensure that it stays ahead of all its competitors. The company should make more acquisitions in 2015 that bring talent to the organization in an effort to improve the Apple watch, which is the company’s newest product line. The company has also been making acquisitions in an effort to bring forth new talent into the company. In 2014 alone, Apple made 29 acquisitions. The last acquisition made in 2014 was the Israeli Camera Tech Company LinX Imaging. Evidently, the acquisition will seek to ensure that the company’s iPhones will have outstanding camera features in the future. Notably, the Israeli Company has developed cameras that receive light from different angles. It is expected that such technology will be integrated into the company’s iPhones. A close analysis of Apple’s partnerships and acquisitions reveals that the strategy has been highly successful. The company’s marketing agreements have served to increase the percentage of sales while the different acquisitions ensure that the company has outstanding talent that is a precondition for the development of premium products (Schneiders, 2011). Therefore, a similar trend in the future will benefit the company. The company should seek to minimize errors and product design such as the bending of iPhone 6, which disappointed some customers. Many customers did not mind the premium prices attached to the iPhones because the new models presented them with an outstanding experience better than what they can receive from Android phones, with bigger screens and retailing at lower prices (‘Apple Inc. SWOT Analysis’, 2015). The example of the iPhones highlights the efficiency of Apple’s innovative strategy. The company has exhibited its expertise in gaining a competitive advantage by offering customers a unique experience with its products. Therefore, the company should ensure that customers receive a high value that matches the product price. The company can improve its core structure of human resource management in an effort to retain talent within the organization. In the past, the company has invested in training programs in an effort to retain talent. The strategy seems to have paid off well for the company (‘Apple Inc. SWOT Analysis’, 2015). Therefore, Apple needs to redesign training programs, in order to ensure that the engineers associated with product design have outstanding competencies. The company should give attention to the needs of the middle-class customers, who want to become part of the Apple community by launching unique products retailing at a relatively low price, especially in the developing world (Leonard & Gonzalez-Perez, 2013). Evidently, the company has focussed on the upper class in the past, with only a few products targeting the emerging middle classes. With the developing world exhibiting an outburst of the middle class, the company can benefit from targeting such customers. Without a doubt, the Apple Company has set new standards in the computer and telecommunication industry. It has revolutionized the computer industry and introduced premium products in the mobile phone industry. Its innovative strategy has made it a market leader. Apple has been keen to integrate its innovative strategy with a remarkable marketing strategy and a human resource development strategy. References Apple Inc. SWOT Analysis. (2015). Apple, Inc. SWOT Analysis, 1-10. Harrigan, K. R., & Harrigan, K. R. (2003). Vertical integration, outsourcing, and corporate strategy. Washington, D.C: Beard Books. Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2008). Understanding business strategy: Concepts and cases. 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