Strategic Management- Macro-Environment Analysis of Apple Industry - Case Study Example

APPLE INC. STRATEGIC ANALYSIS Executive summary Apple inc. is one of the greatest companies in the computer and the MP3 player world. The competition that Apple faces is one of the toughest from its gigantic competitors as Microsoft, Sony, Toshiba, Dell and so on. To keep up with the competition, Apple has to have some strategic implementation made sure to sustain the growth in the future as well. In this report the strategies of Apple for growth in the market that have been used in the past and the present will be examined and analyzed. Based on this analysis newer recommendations will be made to design newer strategies in the face of the challenges yet to come. The main areas that are to be focused in this report are the Macro-environment analysis, Apple Industry analysis and the internal analysis of Apple inc. from this analysis it has been found that thigh cash that Apple has needs to be spent on better marketing approach and opening of the retail centers. In addition the relationships with the resellers needs to be improved. Table of contents Introduction……………………………………………………………………………….03 MACRO ENVIRONMENT ANALYSIS………………………………………………..04 1. Economic issues…………………………………………………………………..05 2. Socio culture forces………………………………………………………………05 3. Political and legal issues………………………………………………………….05 4. Technological issues……………………………………………………………..05 INDUSTRIAL ENVIRONMENT ANALYSIS 1. Threat of new entrants…………………………………………………………..08 2. Threat of substitute products……………………………………………………08 3. Bargaining power of suppliers………………………………………………….08 4. Rivalry among competition…………………………………………………….08 5. Bargaining power of buyers…………………………………………………….09 INTERNAL ENVIRONMENT SUMMARY Competing industries and the market share…………………………………………….11 Making best use of resources available…………………………………………………11 Resource analysis……………………………………………………………………….11 Internal capabilities……………………………………………………………………..12 Outbound logistics……………………………………………………………………...12 SWOT analysis………………………………………………………………………….13 Strategies implied by Apple……………………………………………………………14 Goals of Apple…………………………………………………………………………14 STRATEGIC ALTERNATIVES RECOMMENDATIONS AND IMPLEMENTATIONS……………………………………18 Conclusions…………………………………………………………………………………..19 REFERENCES………………………………………………………………………………20 APPENDICES……………………………………………………………………………….22 Introduction The following report is a detailed analysis of Apple in the computer manufacturing industry. The report will be conducting a detailed analysis of the macro environment, industry and core competencies analysis so as an analysis of the strategic capabilities can be carried out. On the basis of this analysis the future directions for Apple shall be devised. For this analysis the industry is known as the computer industry. Vision of Apple Williams (2007) argues that Vision that encompasses the performance of Apple is that the customers should be made available with the best possible, most innovative product and the product should be available on the cheapest price that is possible. MACRO ENVIRONMENT ANALYSIS Pest analysis 1. Economic issues Scott (2008) says that the global recession has effected almost every organization. Therefore in the case of Apple also, the consumer spending has been lesser because of the slow economics however there are some improvements in the current economy which leads to the consumer spending is improving. There have been deficits in budgets in many states in US in the educational departments which indirectly affect Apple. Owing to international trade currency rate fluctuations also lower the sales value of the product. 2. Socio culture forces The use of computers and internet is growing day by day which makes it beneficial for the computer industries. This also adds up to the fact that the customers are growing literate day by day. 3. Political and legal issues Countries legislations have an effect on the company’s growth. Regional trade, NAFTA and European Union has helped Apple in opening their markets in countries as Asia, Latin America and Europe. Terrorism has also had an effect on Apple’s overall sales. Recently Beatles launched a lawsuit against Apple which has harmed the company’s reputation. In the case of environmental issues Apple has to comply by the recycling and safe disposals. 4. Technological issues O'Grady (2008) says that with the advancement in technology, the customers demand more complex gadgets with more style and advancements. Opportunities are making ways for the company when the internet availability is growing day by day and this makes the demands for the technology rise from the schools and the professionals. INDUSTRIAL ENVIRONMENT ANALYSIS Porters five-force analysis 1. Threat of new entrants Scott (2008) says that in computer market any new product that is innovative, economic and efficient is a threat to the industry. However it has been seen that the challenge that new entrant faces in this regard is the established standards being followed by the established brand names. Threat has been estimated to be medium to high. 2. Threat of substitute products High range of threat is being faced by Apple in this case. Newer faces of information appliances as the HDTV, LCD TVs, internet phones are gaining popularity among the customers and this can be a threat to the industry. 3. Bargaining power of suppliers Bargaining power is estimated to be very high. Apple is highly dependent on the component suppliers therefore the suppliers can start to exert pressures on the companies by increasing the rates of the components to make profit. Apple is working with selected suppliers therefore Apple is at the greatest risk. There has been a reinvention in the supply chain as well as some cut downs are also experienced from Apples side to the suppliers. 4. Rivalry among competitors Linzmayer (2004) says that the rivalry against Apple is very high. The main competitors for Apple is Microsoft and this competition is very high where the giants are looking for the greater part of the market share, price cuts and changes in the prices. The list of competitors also include Dell, HP, Sony, and Toshiba. 5. Bargaining power of buyers The estimates say that the bargaining power is seen to be very low in case of Apple. This is due to the fact that there are higher number of suppliers in the computer industry which makes the customer to have the greater number of options and he can buy the cheapest and the best product in the market. INTERNAL ENVIRONMENT SUMMARY Kawasaki (2004) argues that Apple is an organization that has given its customers the most innovative products which are diverse in every sense. The markets that are targeted in this case are the education segments, music segments, including the consumer creative professionals and the government customers. In my opinion, Apple has been evolving since 1975 and the evolution along with innovation has not been separate in their ways. In the year of 1997 first online store of Apple was launched. In 2002 a switch advertising campaign had been launched to make the people switch from PC to Mac. Competing industries and the market share The industries with which tale competes with are the computer, multimedia and the entertainment industry. Market share that is currently held by Apple is 15% of the market share is taken by Apple desktops, and the rest if the 10% by their portable devices. Making best use of resources available Graham (2003) says that recently it has been seen that Apple has been innovative enough in designing it’s on computer chips. For the making of the computer chips Apple has been very initiative in building the team of internal expertise and it is being anticipated that the manufacturing will begin form 2010. High quality hardware is the main competency level achieved by Apple. In addition to this the better inventory system has given higher economic profitability to Apple. Apple currently focuses on the distribution of digital music in the consumer market. The product differentiation strategy needs to be focused on by Apple so that innovative products can be introduced. Resource analysis In my opinion the resources that Apple has can be categorized as being organizational, innovative and technological. The innovation has been noticed in the recent year with Apple stands to manufacture its own chips in the market reflecting the organizational skills making us e of the expertise from within an organization. Internal capabilities Marketing with management with leadership are the main capabilities that make Apple stand as a competitor against the giants. Marketing at Apple Derdak, Pederson, and Gale (2007) say that it is said that the greatest factor which makes Apple survive in the cut throat work of competition is the marketing strategy that is applied at Apple. Ads of Apple include the testimonial that are given by the PC users that have recently switched to Mac. These advertising campaigns are being planned to be enhanced. In my opinion as the computer sales are declining these days the alternative strategy that has been applied by Apple is the increase in promotion of IPod. Thereby the sustainability of Apple remains because the alternative choices that it has as the computers and the portable MP3 players. Award winning marketing strategy of Apple has created a competitive edge for Apple in the market. In order to make the sustainability remain in the market Apple has designed many versions of their operating systems. Apple has been responsible for the creation of some peripheral products as E Mac which is the category of educational product with learning applications and are portable where these kinds of products have increased the market share of Apple. Outbound logistics Cham (2007) says that Apple highly depends on the third parties for the operational and the logistics centre. The third parties are the distributors that Apple has and therefore the performance of the company is reflected the performance of the distributors. Apple has realized the need of vertical integration in the case of holding the control over these distributors. In my opinion it is seen that Apple only works with the suppliers who meet the criteria of commitment to environment, safety and the diversity. After a fixed period, Apple runs a review on the demand forecasts, inventory and the status of the product lifecycle. SWOT analysis Strengths Bach (2007) says that the main strengths that Apple holds is that it is a successful company and all of the customers on a global scale recognize the brand. The customers that Apple has are very brand loyal and logo of Apple is easily recognizable in the world. In addition to this the advertisements that are given by Apple are innovative and have gained the respect. The innovations that have been used in the MP3 players are very strongly recommended. Weakness The weaknesses that Apple faces are the recently declining market shares and this is due to the fact that the computer industry is heavily saturated. Apple has a lessee number of the customers situated overseas and the software that it provides are proprietary. Opportunities Main opportunities that have been utilized by Apple are the introduction of the educational software so that it can target the educational market to increase the overall market share that Apple has. In addition to this Apple is aware of the innovatory skills that it has and that can be utilized in making and designing newer MP3 players. Threats The competition in the PC market as well as the MP3 players industry is increasing with the increase so the new entrants in the market as well as the higher rates of substitution, which makes the competition, grow higher. Strategies implied by Apple Scott (2008) says that the mission of Apple is to provide the customers with the newer products that are according to the latest demands that the customers make. It is in the mission statement to meet all the environmental and safety requirements that every organization is required to fulfill. In this case if there are no laws specified than the mission statement has it that Apple will have its own rules to protect health and safety issues. The products that are created should be the ones that are safe and easy to use, and conserve energy. All the employees in an organization should be made aware of their roles and responsibilities. In my opinion increasing marketing and advertising segments so as to increase brand awareness, using the vertical growth strategy by making expansions in the retail segments by opening more of the retail outlets for the customers are included in the strategies of Apple. Goals of Apple Graham (2003) says that all the products being designed should be highly innovative and the sales in the market should be increased as much as possible. User friendly, highly stylish, innovative products should be produced for the customers providing the after sales services as a token to the valuable customers. In addition to this it has been realized at Apple that the education segment in the market is the most profitable therefore the education segments in the market needs to be the target market. Investments need to be made in the newer areas as the rack mount servers and the wireless technologies. STRATEGIC ALTERNATIVES RECOMMENDATIONS AND IMPLEMENTATIONS 1. Cham (2007) says that expansion of the retail segment needs to be thought over so that the relationships with the distributors is improved whereas this is the strategy that will decrease the costs and the investment that is to be made on the stores. 2. Apple can decide on work on vertical growth and the forward integration and this can be possible by making expansions in the retail store. This will help Apple in having the control over quality related to the buying experience and the improvement in brand awareness will be possible. 3. Non Mac users can be compete by using the high cash so as to make a new price strategy and than by implementing it. In this case the brand image can be at risk therefore the precaution here is to increase the marketing incentive. 4. Bach (2007) says that the pain of the resellers needs to be alleviated by Apple so as the reputation can be sustained. After the departure of Steve Jobs from Apple there are many changes that are needed in Apple and that also include some of the compromises that need to be done with the resellers. In this case the advantages can be the improving financial results and better relationships with the resellers. 5. Educational segments and music segment of the market needs to be approached to a greater extent where this needs to be realized by Apple that it is a competitive market and profitable. Implementation of alternative strategies Williams (2007) says that Apple has an innovative management which should be focusing on only two market segments at the moment. The core competency of Apple should be focusing on the music segment of the market by making more investments in these two segments. For this purpose the price strategy needs to be implemented and that can be done by lowering the prices to be more competitive in the market. Quality of the buying experience can be improved by having the control over the salespersons and the retailers. These implementations can be made possible as the company is very strong financially and it has been seen that Apple is one of those companies that have low debt to equity ratio. The future of Apple Linzmayer (2004) says that many critics agree that the financial situation of Apple has been very strong ever since owing to the fact that the alternatives have been set by Apple to appear in the market with even more of the innovative products in the market that has lead to the increased share of the market. However there have been some ideas about sustaining the profit margins that will be difficult for Apple because of increasing competition in the market. It has been acknowledged by Apple that the current quarter can result in the fall of the profits from 35% to 31%. Moreover Nokia and Samsung are coming up with the powerful substitutes to the iphone in the market which is proving to kill the market for Apple iphone. Therefore it is believed that having the best innovative brains at the organization Apple can come up with even more competitively innovative products. Conclusions Apple is one of the leading companies in the computer word where the innovation has made it to step in the MP3 world as well being where the competitors are Creative, Sony, Iriver and so on. Apple has been very successful in creating the Mac customers by making use of the most innovative marketing strategies. The competitors in the computer worlds are gigantic as dell, Toshiba and most of all Microsoft when it comes to the software markets. Apple needs to have better strategies as these are the strategies that will help in the increase in the brand markets as well as the customers all around the world. Many innovative versions of the products are coming in the markets as the Mac products and the ipods. Still the innovation is need in the case of standing fast against the competition. The relationships with the customers have to be improved so that the business runs smoothly and the high cash needs to be incorporated in the strategic implementation of the plans for the future. References Bach, B. (2007). Implications of Enabling Technologies for Apple Inc.: Cybermarketing & Enabling Technologies. GRIN Verlag. Cham, T. (2007). Advances in Multimedia Modeling: 13th International Multimedia Modeling Conference, MMM 2007, Singapore, January 9-12, 2007 : Proceedings. Springer. Derdak, T., Pederson, J., and Gale, T. (2007). International Directory of Company Histories. St. James Press. Graham, B. (2003). The Intelligent Investor: The Definitive Book on Value Investing. 4th edition. HarperCollins Publishers. Kawasaki, G. (2004). The art of the start: the time-tested, battle-hardened guide for anyone starting anything. Portfolio. Linzmayer, O. (2004). Apple confidential 2.0: the definitive history of the world's most colorful company. 2nd edition. No Starch Press. O'Grady, Jason, D. (2008). Apple, Inc. Greenwood Pub Group. Scott, Missy. (2008). Apple, Inc. Greenwood Publishing Group, Incorporated. Williams, Kevin. (2007). How Apple Inc. is Becoming More Common in the Graphic Arts Industry and how Apple's Technology Improves Productivity. California Polytechnic State University. Appendices MACRO ENVIRONMENT ANALYSIS 1. Economic issues Medium 1. Global recession Consumer spending has been lesser 2. Deficits in budgets in many states especially educational departments 3. International trade currency rate fluctuations 2. Socio culture forces High Use of computers and internet is growing 3. Political and legal issues Medium 1. Countries trade legislations 2. Opening their markets in different countries. 3. Recycling and safe disposals. 4. Technological issues Medium 1. Internet availability is growing 2. Demands for the technology rise INDUSTRIAL ENVIRONMENT ANALYSIS 1. Threat of new entrants High 1. New product; innovative, economic and efficient is a threat to the industry. 2. Threat of substitute products High HDTV, LCD TVs, internet phones. 3. Bargaining power of suppliers Very high. 1. Apple; highly dependent on component suppliers. 2. Apple; working with selected suppliers 3. Rivalry among competitors Very high. Microsoft, Dell, HP, Sony, and Toshiba. 4. Bargaining power of buyers Very low 1. Higher number of suppliers in the computer industry 2. Customer to have the greater number of options INTERNAL ENVIRONMENT ANALYSIS Strengths Very High 1. Successful company 2. Customers on a global scale recognize the brand 3. Customers brand loyal 4. Apple advertisements are innovative Weakness Medium 1. Recently declining market shares 2. Lesser customers overseas Opportunities Very High Introduction of the educational software Threats Very High Competition in the PC market as well as the MP3 players industry Read More