The Competitive Forces and Strategic Elements of the External Environment Shaping Apple - Case Study Example

The competitive forces and strategic elements of the external environment shaping Apple

Apple as a company has achieved success in its operations as one of the most valuable companies globally. The Five Porter’s analysis of the company gives vision the external factors that have affected the firm and also how the company has ensured success despite the external forces to the organization (Arthur, 2012). The strategies of Apple are partially based on the need to address forces in the external environment as it is through the forces that there is limiting or reducing the market share and revenues. The paper will analyse the five forces of Porters applicable to Apple Company. This ranges from the market competition to the threats of new entrance in the market by other firms.

With the consideration of competition rivalry, Apple Inc. has developed a well-diversified portfolio of technological products. The firm sells software and hardware which makes in well compete globally (Arthur, 2012). The firm compete with other firms such as Samsung, LG and Blackberry. The aggressiveness that the company has to maintain the competition is observed in the aggressive advisement, aggressive innovation and imitations the company makes.

The impact of high competition in the market is observed in the lesser sales growth for the company that is observed in America from 50% to 9%; decrease in Europe and in individual countries such as Japan (Arthur, 2012). The product line of the product line is user-friendly, and this has given it a competitive advantage in many markets.

The bargaining power of Apple has been strong affecting the business. The bargaining power of the company has been achieved through low switching cost and a weak force where there is the small size of individual buyers. The organization enjoys the bold image of being and innovator and big investor. The organization has been successful in many situations when they tend and attempt to with the customers of the competitors towards itself (Budnikas, n.d.).

Bargaining of the suppliers is a weak force in the market such that even though the organization has less than 200 suppliers for the products it produces, the company has other options for it supplies. The factor makes individual suppliers be weak in imposing their demand to firms such as Apple. The bargaining power of the suppliers is also considered at some point to be moderate since they have a unique capability to manufacture products and supply Apple. The company, however, is not manufacturing their products from a single supplier, but they obtain their supplied from different suppliers. The company buys more from the suppliers hence giving it a high buying power.

The threat of new entrants in the market is another factor considered in determining the competitive advantage of the company. Apple Inc. experiences moderate forces in the threat of new entrants into the business. The factor in the company analysis shows the possibility and the effect of new competitors into the market. In the case of the organization, the new entrants have moderate force due to various factors.

Starting a company that will complete Apple Inc. require a high capital investment hence many organization are discouraged from entering the market. The business also requires the development of a strong brand to compete the organization. The factors make new entrants into the market discouraged as they feel weak and not able to compete the company better. There are large firms that have the capital that can enter the market and impact the operation of Apple. Organizations such as Google have the resource needed for competition and have developed Nexus smartphones. Samsung was also a new entrant but in the current situation have developed products to compete Apple Inc. The threat of new entrants into the market is hence considered moderate.

In the analysis of the external environment, Apple Inc. has strengths, opportunities, weaknesses and threats in their operations. In consideration of opportunities, the products that are produced by the company have the market, and the market has continued to be strong. The introduction of iPhone 6 raised the sales of the organization showing the good reception that the products have had to the market. The competitive nature of the organization may be a potential threat to the business existence. The competitors in the market have brought threat to the organization resulting in low-profit margins and negative pricing.

Through global procurement change, the company has been able to release a list of suppliers and the company mandates changes for the suppliers and some have shown improvements and others have remained at the same level and have been persistent for years. Change in the number of suppliers has made the company have a competitive advantage over the other companies. Apple has determined through the changes that there are the right suppliers to meet the demand of the consumers. The company produced a list of their suppliers. The list that was released the list that consisted 156 companies which accounted for 97% of what the company said it pays for its suppliers. The company has been able to count its suppliers including the many big name suppliers.

Strategies by the Apple Company

Corporate strategy

Apple Company has made several changes in its strategy with the main aim of satisfying their supplies and consumers. The recent change that the company can make is to select right international supplies. The company can also choose a proper management of the identified international suppliers. The most appropriate strategy that can be applied to achieve this is by considering the global manufacturing networks such as the right supplies identified by the company. The corporate strategies enable the Apple Company to practice the choice of direction that the company adopts. The corporate strategy enables the company to transfer its resources from one set of business to the other. The company has used global supply strategy. The strategy included publishing of the names of all the suppliers they have in the supply chain including the free conflict certification status that it has.

Through global procurement change, the company has released a list of the suppliers it has and the company mandates changes for the suppliers which some have shown great improvements while others have remained at the same level for a long period. Through the strategy, the company has been able to count its suppliers including the major ones like the NVidia and Intel which usually makes chips for the company together with other suppliers such as Samsung.

The list however did not include a large number of secondary suppliers which provides parts to firms that engage in direct contract with Apple. Timothy D. Cook, the chief executive, in an email to the employees said the company has utilized its influence to improve the living standards of the people who use its products including employees housing. He then wrote that to meet their requirements; the suppliers have either built new residences or they have renewed their residences. This was the sixth report that the company had written. The company then initiated conducting reviews and printed out reports after new article in 2006 which evidenced poor working situations at Foxconn which is a Chinese manufacturer of Apple products.

Strengthening the company’s position

In order to strengthen the company’s position, the company mainly focuses on the key factors that can result to their massive success. The key factors they consider are the variables that can have a significant effect on the overall competitive position of the company. To strengthen the company’s position, the company identifies if the resources that are required to carry on the production of the company (Budnikas, n.d.). The company usually identifies the key factors of success by evaluating the technological and economic characters of the company.

The company also strengthens its position by pursuing the aggressive initiatives. Aggressive initiatives usually add a competitive advantage to the company since the initiatives enables the company to search for the improvements that challenge the prevailing assumptions in the market and ensures that the breakthroughs are achieved. The company usually applies this method when the key factors of their success are no longer relevant to offer a competitive advantage on it.

Favourable competition

The company often have a favourable competition in the market. The firm usually achieves this by observing the factors that govern the actions of their competitors. The factors that they analyses are the objectives and the goals of their competitors, size, and growth of the competitors, strengths and weaknesses of the competitors, profitability of the rivals and the cost structure in the market. When analysing the competitor’s goals and objectives, the Apple Company predicts whether the competitor’s current performance is satisfactory in the market or not satisfactory and when the strategic changes they make can affect the competitors move. The analysis of competitor’s objectives offers to the company an indication of their competitor’s future strategy.

Expansion strategy

Since the growth of the company offers it an ample opportunity for crucial survival, the company usually strives to expand and occupy a better position in the market. The company designs expansion strategies to allow them to maintain their competitive position and growth in international market. The company follows the expansion strategy to satisfy the long-term growth goal. The apple company adopts the expansion strategy to accelerate the growth rate of profits, market share and sales faster than the expected rate. The strategy allows the company to enter into new markets, develop new technologies, create new managerial strategies and acquire new resources. By achieving the long-term growth objectives, the expansion strategy enables the company to maintain their competitive advantage even under progressive phases of market and product evolution. The growth experienced as a result of the strategy offers scope and economies of scale to the company that reduces its operation costs and increase its earnings. The growth is also advantageous to the company because it has a greater control over its immediate market due to its large size which influences its survival in mature markets where there are aggressive competitors.

Business strategy

When the company was started, Apple Company was concerned about releasing tablets and mobile phones to allow for long development cycles which grow anticipation and showcase of innovation. The company has been able to gain a big portion of the market and supply due to the successful release of iPhone through continuous innovation in the mobile device market by launching smartphones and then proceeding to tablets. The release of tablets was as a result of the strategies that were done before (Budnikas, n.d.). On a wider market base, Apple Company has been able to attract and keep many consumers by bundling their alternate products offering such as iTunes with the help of other tablet and phones.

In innovating smartphones, the company has changed its strategy in a fundamental way. The company has adopted a better approach that has been favoured by the most successful consumer brand rather than the realising annual premium product (Creeber and Martin, 2009). The company has also attained the best suppliers and they have also reached the consumers effectively through the middlemen. Through the middlemen, the company has been able to acquire about other companies that deal in the same goods and services which have increased its competition position in the market (Creeber and Martin, 2009).

Deployment strategy

The company has used various deployment strategies to satisfy the needs of its consumers. One of the strategies is to the staff and users where the company has allowed the employees to bring their individual innovations into the company. The company has also focused on the security of its products especially before launching new products in the market. The company strategizes on creating policies prior to launching of a product in the company. The company has also used tweak policies after the launch of a product.

The external stakeholder issues that faces the Apple Company and their impacts

The analysis by the Apple Inc. management reveals that there are some factors that affect the performance of the company.. The political factors that are identified to be affecting the company include the political stability of a country and political intrusion in their company management affairs. The political instability that results from terrorism usually affects the sales of the Apple Company since some citizens migrate to other countries while others are displaced by the wars. The company is also affected by corruption where some political leaders ask for bribe to permit the sales of the company’s products. Corruption greatly affects the company because they are sometimes forced to pay a bribe to the political leaders to obtain their sales permits and licences.

The company is also affected by legal factors. The legal factors that affect the performance of Apple Inc. include barriers to entry of more businesses in the foreign market and the legislative changes that occur in various countries. Some countries amend strict rules to protect their local consumers from the international competitors that have an effect on the company’s expansion strategies and sales performance of the company (Creeber and Martin, 2009). Being that the company operates globally; the company has been influenced to adapt various legal systems and legislations in the new areas to carry on with the expansion strategy of the company.

The company’s operation and performance are also affected by social factors such as the need for innovative solutions, consumer demand for integrated services and environmental concern. The company has tried to solve the social problems by making fashionable, innovative products with the main aim of carrying a fashion statement. The company has conducted research that has them that the global trend of technology is the usage of smartphones or computers, and they have used the findings to improve on their productions.

The economics factors that results into increase in the demand for the company’s products include an increase in the consumer spending habits, availability of credit to the customers and increase in the disposable income of the consumers. The company is also negatively affected by high customer debts, restrictive trade tariffs and barriers, bureaucracy and unstable economic environment that results from recession in the international market. The current recession has decreased the demand for the Apple computers. The company is also affected negatively by the purchase of their computes since a large number of their products are bought by the government, and any political or economic collapse in the government has a direct influence on the performance of the company. The company has strategically met this decrease by an increase in the sales of the company’s products.

Apple Company also greatly considers the interests of their main stakeholders in the company’s programs and policies. The company usually treat the consumers as their priority in stakeholders. The company has been meeting the customer’s interests of quality products at a favourable because the company has been producing high-quality products and offering them at a price that matches the quality. The company therefore corporate social responsibilities of satisfying the consumers’ interests since customers are the main stakeholders of their business continuity.

The second group that is the concern of the company is the employees. The major interests of the employees as stakeholders are career development and proper compensation. The company handles their employees by offering compensation packages in Silicon Valley since the employees are significant in the prosperity of the company. The employees directly determine Apple’s human resource abilities to create profitable products and also innovate in the company. The company therefore offer great efforts to meet the concern and interests of their employees.

The other groups of stakeholders that are treated carefully by the company are the investors of the company and the employees of their suppliers and distributors. The Apple’s main interest on investors is to maximise the return to the investors to maintain a condition of financial stability. The employees in the supply chain are also significantly considered by the company. The company usually strive to meet their interest to consider a smooth flow of resources in and out of the company.

3. Summary of the company strategy

The generic strategy by Apple and the intensive growth that the company has had relates to the pricing strategy of the company, marketing and the other areas of the organization. Being one of the most valuable organizations in the world, it has shown that the generic strategy is a major consideration and determinant of advantage against the other competitors. The intensive growth strategy that the organization has had has helped it maintain a stri9ng position in the global market (Creeber and Martin, 2009). The strategy has been an important factor in maintaining a strong position in the global market. The generic strategy of the organization is in line with the Porter’s model and the growth factors.

As earlier discussed, the company have developed an effective corporate strategy. Apple Company has made several changes in its strategy with the main aim of satisfying their supplies and consumers. The recent change that the company can make is to select right international supplies. The company can also choose a proper management of the identified international suppliers. Expansion growths that have been in the organization are due to the expansion strategies by the organization. Since the growth of the company offers it an ample opportunity for crucial survival, the company usually strives to expand and occupy a better position in the market (Gutek and Welsh, 2000). This is a major factor that has made the company to effectively compete with the other organization producing the same goods. The company designs expansion strategies to allow them to maintain their competitive position and growth in international market.

The generic strategy of Apple Company is broad differentiation. This strategy has put much consideration on main features that make the company unique from the ones produced by the competitors. This has made the business stand out in the market. The generic differentiation has shown that the company has the aim parting itself from the competitors not through pricing mechanisms but through other features that benefit the consumers. The factors that the company have used to differentiate the products are the connectivity in them and have unique designs for the products (Gutek and Welsh, 2000). Through the strategy, the position of the company has been strengthened. To strengthen the company’s position, the company mainly focuses on the key factors that can result to their massive success. The key factors they consider are the variables that can have a significant effect on the overall competitive position of the company.

In making sure the consumers are satisfied with the products they receive from the organization, Apple has created a network with the consumers to help them meet the needs of the consumers. The creating new network is a strategy that has been used by companies. Through creation of networks, the consumers are reached easily and hence they can determine the products that will satisfy their needs and those which do not. Apple can create new networks that link the innovation vision which performs the strategies of a company that fits with the prevailing attitude of life. Apple has been the most successful company that have used this perspective of entrepreneurship as it has been able to sell a world view in which the hardware devices are connected with the providing content in a good design. The company has been able to make people communicate with friends and families, take photos and listen to music. The consumers have loved the operations and the strategies that the organization has had in meeting their preferences.

In terms of smartphones, Apple is oligopoly in its operation but regarding computer operation system the firm is duopoly. In recent considerations, the firm is seen to be rising to monopoly. Operation in oligopoly and duopoly increases market sales for the company. Monopoly that the company is rising to brings the worry that it will produce goods that are of law quality to customers.

In achieving product development, the company has used the strategy as a main intensive strategy to achieve its growth objectives. The development of the products requires that the company offers products that are attractive to the consumers to grow in performance and in market shares. The strategy is implemented by the company through investing much in innovation and research to come up with the right products and for effective competition (Gutek and Welsh, 2000). The mission and the vision of the organization make an emphasis to product development as evident in the statements. Apple considers innovation as a critical factor for its success.

Market penetration is the second most used strategy by the organization to compete effectively and for growth. The strategies have been implemented to enable the company gain a larger market share through selling much of their products to the consumers. Strategies by the company have been used in predicting the performance of the market and change their operations to meet the competition. As earlier discussed in the paper, Apple Company predicts whether the competitor’s current performance is satisfactory in the market or not satisfactory and when the strategic changes they make can affect the competitors move (Gutek and Welsh, 2000). Intensive strategies have also been applied in the organization for its growth. The generic strategy of the organization helps it stand out among the competitors. Differentiation in the design and the function supports the goals of leading the electronic market through much innovation in the products. Innovation is the main activity the organization has been involved.

Recommendations

Apple does not have a complex marketing strategy as compared to those that have been developed by the competitors, but this is because the company is not a typical technology company. The competitors of the company have mainly got to promote their business activities through the media. The success of the company has confirmed that if a business has products that are mazing and launch a few main campaigns that put the customer first. The strategies implemented are strong and the company should emphasize the strategies. To improve on the application of the generic strategy of the company, the organization should get concerned with aggressively penetrating the markets. The penetration should be mainly in the developing countries where the reach is still limited.