Secrets of Apple Inc’s success

Authors - Marketing group GALA:                      Alma Sheren                      Anita Gurney                      Galyna Turrell                      Lee Patient   For attention:                              D.Reed

 

Secrets of Apple Inc’s success

Assignment 1

Analysis the strategies used by the Apple Inc       to build and sustain competitive advantage

Course: Business strategy

11/14/2012

   

Contents

Introduction 200 3

Environment 350 3

Pestel, 5 Forces, Boston  750 3

Internal Capabilities, including brand, employees     550 3

Tangible resources 3

Intangible Resources 5

Human 5

Strategic purpose and direction  450 7

Business Level Strategy 250 7

International Strategy    250 7

New products and markets 300 7

New developments. 300 8

Conclusions 275 9

Quantitative research 10

Qualitative research 10

Comment 10

Link 10

Appendices 12

Appendix 1. 12

Appendix 2.  Apple’s key resources and capabilities. 13

Appendix 3. New markets, new products. 13

 

 

 

 

 

 

 

 

Introduction 200

the key idea of the paragraph

Explain the idea

Environment 350

Pestel, 5 Forces, Boston  750

PESTLE

The macro environment is ever changing and by using PESTLE, an analytical marketing tool, Apple can highlight the key changes and current economic conditions that they face.

Political – Government policies together with such factors as health and safety legislation can have a major impact on businesses.  Recent conflicts in the Middle East and acts of terrorism particularly concerning countries with unstable governments can play a huge part in the way companies operate.  For Apple, political conflicts between the USA and such countries as Iraq are outside of their control but the effects on the company can be catastrophic.

Economic – The potential profit of Apple can be seriously affected by economic factors.  One key area that will have a substantial impact on the Company is the current global economic depression.  With high interest rates and consumer incomes remaining relatively static, the demand for luxury innovative goods, such as those produced by Apple, may become less desirable with consumers having less disposable income. 

Social – It is important that Apple are aware of the changes in the characteristics and habits of the population as this can have a dramatic affect on their sales.  Apple is a brand leader and as such social influences are very positive for the company.  Modern lifestyles demand high quality functional products with a unique design – all of which are conducive with the Apple brand and therefore give Apple the brand loyalty than many competitors can only dream of.

Technological – Because of the speed at which technology changes, the life cycle of products such as those produced by Apple are very brief.  It is therefore essential that, in order to maintain its brand loyalty and position in the market, Apple need to keep ahead of their key competitors, such as Samsung and Blackberry.  Marcousé et al (2003) suggest that changes in technology also offer opportunities, such as the potential to break into new markets by producing a new, radically different product.

Legal – As Johnson et al (2011) suggests legal regimes help to determine the extent to which businesses can enforce contracts and protect intellectual property.  Apple needs to be aware of the implications on the organisation of legislative constraints such as health and safety, employment law and trading and product standards.

Environmental – Apple take a very serious approach to their corporate social responsibility.  The organisation reduces any environmental impact by using recyclable materials, improving energy efficiency and restricting harmful chemicals.  Apple has a recycling programme which encourages consumers to return old products to its stores (Apple, 2012).

In conclusion, Apple Inc can be severely affected by both internal and external factors and a clear understanding of the economic conditions which exist both in the USA and in its trading countries is imperative for the Company to continue to trade successfully.

Boston Consulting Group

A portfolio analysis developed by the Boston Consulting Group analyses the market share of the firm’s products and the rate of growth of the market in which they operate.  The Boston Matrix suggests that there is a correlation between the market share of a product and its profitability.  By carrying out this analysis Apple can determine the position of its products and plan what the organisation needs to do next.  The matrix in Figure ?? shows Apple as a strong contender in the market with the majority of its products being competitive, profitable and able to maintain a high share of the market.

 

The Rising Star is a product that has a high market share and is selling in a fast growing market.  For Apple this includes their key products iPhone, iPod and iTunes.  Despite being relatively new these products proved to be revolutionary and had a major impact on the mobile phone and music industries.

 

Cash Cows are products that whilst generating high profits have a low market share.  Although the Apple Mac range of products are popular among consumers their growth rate is slow.

 

Apple’s Problem Child (sometimes referred to as the Question Mark) includes the Apple TV and iLife ‘09, products that whilst in a growing market do not yet have a high market share.  The main reason for this is because they are relatively new products within an already vast industry.

 

The fourth category within the matrix is the Dog, a product with a low market share within a low growth market.   The Apple Keyboard and iWork 09 have been the least successful of the Apple product portfolio, the Keyboard primarily because it was not conducive with Apple’s ideals of wireless technology and iWork 09 was equivalent to Microsoft Office 2007 and a distinct lack of sales led to its demise (Belich et al, 2009). 

 

 

High	iPhone iPod iTunes     Rising Star	Apple TV iLife ‘09       Problem Child
Market Growth       Low	Macbook Macbook Pro Macbook Air     Cash Cow	Apple Keyboard iWork ‘09       Dog

 

      High  Market Share  Low

 

Figure ??

 

 

 

 

Porters Five Forces

 

A theorist, Michael Porter, developed the ‘Porters’ Five Forces’ model which helps organisations to identify the opportunities and threats within the industry in which they trade (Figure ?).

 

 

 

  

Figure ??

 

 

Rivalry

 

The very nature of the personal computer industry displays a degree of rivalry where price is key and companies are constantly reducing prices.

 

Threat of New Entrants

 

The Apple Corporation has a unique product range which is innovative in the industry.  The biggest threat to Apple are competitors such as Samsung, Toshiba and Microsoft.  Samsung and Toshiba have tried to enter the market by developing products to rival those of Apple but fortunately for Apple its competitors are unable to compete with the innovation and creativity they have established.  In an industry that is very competitive with low margins, there is little appeal to new entrants.

 

Buyer Power

 

Apple is in a position to command a premium in the market with products primarily being sold to business, education and consumer markets.  Buyer power is high with price a key factor.

 

 

 

 

Substitutes

 

Over recent years there have been many substitutes to replace PCs due to technological advancement, including smart phones and games consoles. 

 

Supplier Power

 

In essence, Apple are suppliers of electronic products and as such their suppliers can have an effect on the cost of the necessary components.

Internal Capabilities, including brand, employees     550

 

Hiroyuki Itami in 1945 linked resources capabilities and competitive advantage and centralised an attention on technological intangibilities (Figure 5.4).

Source: (Hiroyuki Itami and thomas W.Roehl, 1991)

Tangible resources:

Financial - According Apple three-year financial history in 2012 Apple spent 3.381$bn for R&D it nearly doubled compares in 2010.

J.Golson says that major profit Apple has from iPhone (53%), iPad (20%) and CPU (14%) sales (Chart 1).

According to Financial Times (2012) Apple has announced plans to pay a dividend and institute a share buyback programme as it deals with a cash mountain that has grown to more than $100bn. They intend to roll the $10bn share buyback scheme out over three years. Apple (2012)? back up this statement, explaining the reasons behind it: “The repurchase program is expected to be executed over three years, with the primary objective of neutralizing the impact of dilution from future employee equity grants and employee stock purchase programs”. This will also enable the organisation to regain control over its financial future.

 Source: (J.Golson, 2012) (Apple Press Info, 2012)  

 

Physical – Physical capabilities of Apple are likely to be greatly increased by purchasing a piece of land from Hewlett Packard. This is because Apple has submitted plan to build a state of the art research centre in Cupertino, California. This will reduce overheads on renting premises and increase productivity by better interaction between employees. 

 

Intangible Resources:

 

Technology – Technological resources and human resources in Apple Inc appear to be intertwined. For example massively success for iPhone, which is technological resource, is only able to be so successful because it is human resources writing the application and software systems the iPhone uses.

On the other hand G.Johnson and R.Whittington (2011) noticed that rise of technologies can sometimes damage the traditional business methods as is shown by rising use of Electronic resources such as Wikipedia and Microsoft’s Encarte nearly destroyed the market of Encyclopaedia Britannica.

Within his first year as leader of Apple Tim Cook has voiced several concerns about the leaking of information. He stated Apple would “double down on secrecy on products” to preserve the reputation of being the first to produce innovative technological products (Couts, 2012).

Reputation – In August 2012 the Financial times, The Guardian and many others sources named the Apple Inc the ‘most valuable company of all time’ $623.5bn (£397bn) of market capitalisation. But on November 2012 (Financial Post) has informed that Apple Inc. shares fell on their lowest level since March and market capitalisation dropped below $500bln in November.

One of the most important features of internal capabilities of Apple is the brand. Lashinsky (2012) tells us that Apple’s ‘think different’ attitude is not simply a slogan, stating that they have a culture of doing the exact opposite of how most organisations do business, both in theory and in practice. For example, rather than concentrate on making profit as the ultimate goal, the organisation places great importance on attracting and retaining those with a ‘magnetic personality’ (Gallo, 2012), and those who are forward thinkers, prepared to take a leap of faith (Apple, 2012a).

Human

The  Apple employs  more than 60 thousand full-time and 2,900 full-time equivalent temporary employees and contractors (United States Securities and Exchange Commision, 2011).

The key of Apple’s HR policy are:

• Effective recruitment, incentive and retention mechanisms
• After great changes since 1990’s, and death of S. Job current personnel and management perform intensive and operative. 
• General administration – effective planning system to establish goals & strategies, access to capital, effective top management communication, relationships with diverse stakeholders
• S.Jobs and T.Cook seem to excel at this. The World’s recession does not affect Apple’s performance. Apple posted for the fourth calendar quarter of 2011revenue of $46.33 billion and first fiscal net quarterly profit (2012) of $13.06 billion.

 

Falkenberg(1996) extends this model to all types of resources and adds a dynamic perspective between strategy and resources. The Resource Based View (RBV) provides that growth is unwavering by resources available to a company as they collect over its history and allow companies sustain a competitive advantage.  Key points of RBV models are:

1. Identify the company’s potential key resources
2. Evaluate whether these resources fulfil the following criteria, defined as VRIN (Figure XX)
3. Care for and protect resources that possess these evaluations, because doing so can improve organisational performance.

Figure XX

Value of strategic capabilities

Rarity

Inimitability

Non-substitutability

Resource-Based View

VRIN model

Sustainable competitive advantage

 

 

 

 

 

 

 

Henry (2011) defined internal capabilities as a determination of the strategic choices which makes in competing in its external environment. The Apple Inc ‘s capabilities are seen to be supreme of competitive advantage, it pays attention to the configuration of its value chain activities.

B.Masi (2009) evaluated the Apple’s key resources and capabilities and ranked them depending from importance of the source 1 to 4 as shown in Figure XXX

 

After Steve Jobs left his name still works for the company as an integral component of the Apple’s brand.

Strategic purpose and direction 450

It has been said that Apple Corporation bears no outwardly visible signs of strategy or direction. Rather, the organisation’s success hinges upon its ability to nurture and reward innovation and excellence, combined with luck, timing and a broadly shared sense of purpose (Couillard, 2011). There is evidence to suggest, however, that there is more to Apple’s global success than this.

McGraw-Hill (2009) states the process of crafting and executing a company’s strategy consists of five interrelated managerial stages (please see Appendix 1). A set of values, or vision should be defined as a guide for long term direction. When Jobs was at the helm, Apple produced an avalanche of ideas and creative visions that were brought into reality by ensuring those involved in the company were of a high value, technically, creatively or in an engineering capacity, and were able to pull together and make each product a reality. More recently, the company has continued to project itself as an organisation that welcomes forward thinkers into its culture. “We’re perfectionists. Idealists. Inventors. Forever tinkering with products and processes, always on the lookout for better. A job at Apple is one that requires a lot of you, but it’s also one that rewards bright, original thinking and hard work. None of us here at Apple would have it any other way” (Apple, 2012a). Couillard (2011), although arguably critical of Apple’s lack of apparent direction, does concede that what sets the organisation apart is a complex combination of skilled individuals working within a culture conducive to innovation. In 2009, Jonathan Ives (Senior Vice President of Industrial Design) stated their goal wasn’t to make money; it was to design, develop and bring to market good products. This, he stated, drove all their decisions (Walters, 2009).

Other stages of the process include setting objectives, crafting a strategy to achieve these, executing the strategy efficiently and effectively monitoring, and evaluating/adjusting in light of experience, changing conditions, new ideas, and opportunities (McGraw-Hill, 2009).

 

Apple gives little away in the context of its strategic processes, however it can be deciphered, from examining the organisation’s financial strategy, that risks they take financially are calculatedly low, and therefore it may enable them to be freer than most other peer companies to take more risks innovation-wise. Appendix 2 shows a comparative balance sheet between Apple and some of its rivals (Morgan & Herman, 2009), indicating they keep a low inventory (keeping their capital in assets that perform rather than stay still). They also keep a higher level of equity in relation to their liabilities meaning they can pay off their debts more easily, and crucially, they carry no long term debt. Also, although most of their products are more expensive than close competitors, they produce them more cheaply. These factors allow Apple to use a decreased financial risk strategy to allow a higher risk in the way it diversifies itself with new innovative products.

 

In 2011, Tim Cook took over Apple’s leadership, and is starting to open the doors on their future plans. He has indicated t they will soon be attempting to dominate the Chinese market, will continue to produce the iPhone and iPad (growing at a phenomenal rate), and there will also be a new platform, Apple TV, which looks to be the next innovative product to dominate the technology market (Meyer, 2012).

Business Level Strategy 250

International Strategy    250

 

New products and markets 300

Apple under hypercompetitors business environment tends to invest heavily in destabilising innovation, expensive market initiatives and aggressive price cuts, increasing their share aggressively and there are many strong challengers. (Johnson, G. Whittington, R. and Scholes, K., 2011).

For over than last six years Apple uses chips supplied by Intel. N.Brookwood, principal analysis an Insight 64, in his interview with B. Crothers, correspondent of CNET, (2012) said that Apple has become a challenging chip designer with it is (Brookwood, 2012) A series chips. It will open opportunity to the company to choose graphics engine they want.

As stated above Apple’s innovative technologies they attempt to predict what the customers may want in the future based on their previous experience.

Apple TV TV box that connects not only to your TV, but to all your iOS products. Keeps you on the edge of your seat with Netflix, YouTube and more. Use your iOS devices and a remote control and tons of other possibilities.

http://www.workingwider.com/strategic_innovation/apple-business-strategy-2012/

To analyse different sources and ideas of future possible products can be substituted several potential markets for ipod such as Communication, sport, intelligent home etc (Appendix 1).

Apple from leading in computer industry fast expanding in every aspect of humans’ life and try to create the unifitete it in one communication network. Authors may predict ‘applelisiation’ of the World.

 

New developments. 300

The magazine Forbes referring to the tech site Gazimodo published a leaked Apple’s Secret Employee Training Manual. Agreeing with that sells for Apple is a science and rules defines by an acronym (APPLE):

‘Approach customers with a personalized, warm welcome.

Probe politely to understand the customer’s needs (ask closed and open-ended questions).

Present a solution for the customer to take home today.

Listen for and resolve any issues or concerns.

End with a fond farewell and an invitation to return’ (Gallo, 2012)

 

In 2016 Apple has plan to move into the new research centre in California (Cupertino). Apple submitted building a new Apple Campus 2 on land purchased from Hewlett-Packard in 2010. New research centre, 2.8 million-square-foot circular building will hold about 13.000 employees.

 

From the way you are greeted when you walk into the store to the way Genius Bar experts (technical/troubleshooting specialists) communicate with agitated customers, Apple carefully considers the experience its customers have at every touch-point. (C.Gallo, 2012)

China market

http://www.workingwider.com/strategic_innovation/apple-business-strategy-2012/

Conclusions 275

 

Procurement      http://www.apple.com/procurement/

Quantitative research

Qualitative research

evidence in support of your point

Comment

on the evidence and how it proves your point

Link

show how this paragraph fits in the context of your assignment and link it to the next paragraph.

01707285412 James Gifford

 

	Qualitative Research	Quantitative Research
Objective / purpose	To gain an understanding of underlying reasons and motivations To provide insights into the setting of a problem, generating ideas and/or hypotheses for later quantitative research To uncover prevalent trends in thought and opinion	To quantify data and generalize results from a sample to the population of interest To measure the incidence of various views and opinions in a chosen sample Sometimes followed by qualitative research which is used to explore some findings further
Sample	Usually a small number of non-representative cases. Respondents selected to fulfil a given quota.	Usually a large number of cases representing the population of interest. Randomly selected respondents.
Data collection	Unstructured or semi-structured techniques e.g. individual depth interviews or group discussions.	Structured techniques such as online questionnaires, on-street or telephone interviews. » Click to see an example of a short online questionnaire
Data analysis	Non-statistical.	Statistical data is usually in the form of tabulations (tabs). Findings are conclusive and usually descriptive in nature. » View video showing typical analyses and cross tabs
Outcome	Exploratory and/or investigative. Findings are not conclusive and cannot be used to make generalizations about the population of interest. Develop an initial understanding and sound base for further decision making.	Used to recommend a final course of action.