The smart-phone industry is one of the budding industries in the modern world. The advent of smart phones replaced the laptops as well as the computers and brought technology on the palm top of the people, at an affordable price. The smart phone industry is a highly competitive one. This is because, with the increase in the use of the smart phones, thousands of companies all around the world started developing smart phones (Boone & Kurtz, 2013). The competition in the quality, along with the company providing the lowest price of the smart phones flooded the markets all over the world. Apple is one of the key players in the smart phone industry. The smart phones of Apple use the Mac operating system (Apple, 2017). They have joined the revolution of the smart phone industry with their exclusive features and launched the iPhone (Pitelis & Teece, 2015). Most of the smart phones that have flooded the industry include the use of Android as the operating system (Danaher, Sajtos & Danaher, 2016). However, some of the phones use Windows by Microsoft as the operating system. Apple created a revolution with the use of the Macintosh Operating system in the smart phones that they launched.
IBM , launched the first smart phone in 1995, named the IBM Simon. In the year 1996, Nokia launched Nokia 9000. This was the first attempt of Nokia to launch the smart phones. In the year 2000, Ericsson released their first smart phone (Danaher, Sajtos & Danaher, 2016). After these first attempts, the smart phone industry started flooding with the smart phones of various companies. In 2007, Apple launched the iPhone with iOS, which marked the introduction of an iPhone (Apple, 2017). Thus, the smart phone industry is an ever-growing industry and is a strong platform for business (Boone & Kurtz, 2013).
With the increase in the number of competitors in the smart phone industry, the iPhones and well as Apple faced various threats from the other smart phone companies. After various threats faced by Apple from the PC industry, in 2007, the attempt of regaining the leadership, position was by the launch of iPhones. Apple and it’s the then CEO Steve Jobs expected that the launch of the iPhone would be a successful attempt to ensure a secure position in the business of smart phones, as well as technology (Boone & Kurtz, 2013). The company and its employees had invested two and a half years, under high secrecy to develop the iPhone. The estimated development cost was around $150 million (Apple, 2017). Apple’s entry in the smart phone industry was welcomed with major threats and high competition from the various players namely Nokia, Samsung and Motorola (Danaher, Sajtos & Danaher, 2016). These three companies had been holding 60% of the market share. Moreover, the products of Apple had short product life cycle, with the use of sophisticated technology. However, Apple had very little experience in the use of such technologies (Pitelis & Teece, 2015). Moreover, the smart phones of Apple also faced strong resistance from the cellular carriers. Thus, the entrance of Apple in the smart phone industry was not welcomed warmly.
However, Apple has been able to neutralize the threats as well as the capitalization on the opportunities that were posed by the various forces of the smart-phone industry. However, iPhone changed the rules of the industry. A revolution was brought it, with the introduction of the smart phone by Apple (Boone & Kurtz, 2013). The phone could be operated using commands and typing was done without physical keyboards. The entire iPhone operated on a specially adapted version of the OS of Apple, known as the iOS (Apple, 2017). The company initially gave the iPhone to only one network named AT&T (Danaher, Sajtos & Danaher, 2016). The network provider agreed to an unprecedented revenue sharing with Apple, thus giving Apple the sole control over the distribution and pricing (Pearlson, Saunders & Galletta, 2016).
The first generation of the iPhone itself created a revolution, and it sold over 6 million units over five quarters (Danaher, Sajtos & Danaher, 2016). This established Apple as the leaders in the smart phone industry. with this success, the company upgraded their systems to be thinner, faster as well as incorporating new features, to make it even better. In the next few years, Apple upgraded and released iPhone every 12 to 15 months, thus expanding gradually (Apple, 2017). The release of iPhone 6 and 6 plus had the screen of 4.7 inches and 5.5 inches respectively and gave a tough competition to the best selling android smart phones in the market (Boone & Kurtz, 2013). Thus, the threat is neutralized and Apple overcomes the capitalization of the opportunities successfully.
One of the key drivers behind the success of the iPhone is the launch of the Apple App Store. The strategy that Apple took in order to enhance its iPhone business includes the extensive use of innovation, incorporation of the latest technology, along with ensuring a closed ecology being maintained for production and distribution of the products of Apple (Danaher, Sajtos & Danaher, 2016).
One of the most essential business strategies that are taken up by Apple to ensure the success in the iPhone market includes the extensive use of innovation (Boone & Kurtz, 2013). The iPhones created a revolution in the smart phone market, and unlike the Android based smart phones, iPhone developed its own OS, software and hardware on their own (Apple, 2017). The use of iOS, for the iPhones itself was an innovation, and different from that of the conventional smart phones.
The technological advancements in the iPhones on every release, along with the wide use of the smart and fast processors gave the customers the exact combination of technology and speed, as they wanted (Apple, 2017). Moreover, the technological quotient of Apple is high and ensures the satisfaction of the users. The technology platform that is offered by Apple is unique and unlike Android is not used by all smart phone companies (Danaher, Sajtos & Danaher, 2016). The iOS has been developed solely for the use in the smart phones and hence is much more efficient.
Figure 1: Use of the various platforms of Smart phones
(Source: Danaher, Sajtos & Danaher, 2016 )
Figure 2: Loyalty of the Smart phone users
(Source: Heracleous, 2013)
Apple ensures that only licensed distributors are selected for the distribution of the products. Moreover, the operating system platform that is used, along with the software and the hardware are al manufactured by Apple and its authorised companies (Heracleous, 2013). Thus, in the closed ecosystem, the confidentiality of the innovation and use of technology is maintained.
The iPhone owners have been seen to be loyal customers, unlike that of the other brands. Thus, the brand appeal of iPhones attracts the customers and ensures their retention. Thus, the brand appeal is a major factor that attracts thousands of customers and retains them, thus ensuring customer retention. Owing an iPhone is often considered as a privileged for the customers, and thus once an iPhone users, tends to remain one. Thus, the brand appeal has a key role to play in the business of Apple.
The business strategy of Apple that they pursued for their iPhone, has a wide scope. Since the business strategy was based on innovation and extensive use of technology, hence the scope increases with the increase in innovation and increase in the use of technology (Heracleous, 2013). With further research and development, the company is able to enhance its scope of innovation. With every release, Apple enhanced the features of iPhone, thus increasing the scope of business enhancement (Apple, 2017). Moreover, the business strategy of ensuring a closed ecosystem also facilitates the copyright protection and prevents forgery (Khan, Alam & Alam, 2015). The use of pirated software in the iPhones is restricted since all supporting software for iPhones are made by Apple itself. Thus, Apple, ensuring that it will provide all supporting software, easily retains the iPhone users.
The value chain activities identify the business activities that need to be taken up by any company, in order to create value and help the company to gain competitive advantages.
Figure 3: Value chain of Apple
(Source: Ford, 2016)
The inbound logistics of Apple ensures that the products are delivered on time. The outbound logistics involve warehousing and the distribution of the assembled iPhones and iPads (Heracleous, 2013). The operations of Apple include sourcing, manufacturing, warehousing, distribution and return (Hagiu, 2014). The sourcing is done in places such as United States, China, Europe and other Asian countries (Boone & Kurtz, 2013). All these are assembled in China, and send to the Intermediate Warehouse. From the warehouse, the distribution of the products are done to the online stores, retail stores, direct sales forces, as well as wholesalers, retailers and network carriers (Ford, 2016).
Apple sells its products through Apple retail stores, online stores, direct sales forces, authorised wholesalers, authorised retailers and value added resellers (Yoffie & Cusumano, 2015). The advertising budget of Apple has increased consistently, with the takeover of Tim Cook as the CEO in 2011 (Apple, 2017). The marketing budget reached a record of 1.8 billion USD in 2015. Thus, the value chain adds competitive advantages to the company, and helps it to be established as the leader in the market of smart phones (Laudon & Laudon, 2016). The value chain is effective in ensuring the successful working of Apple, and helps in establishing a leadership position in the market, among high competition.
The value chain activities are tailored in order to deliver the competitive advantages. 116,000 full time employees, according to the record in 2016, conduct the inbound logistics of Apple (Danaher, Sajtos & Danaher, 2016). The outsourcing of the manufacturing of the various parts to various locations with low cost of the resources is the source of value for the operations of Apple. This has been tailored in order to meet the requirements of Apple (Apple, 2017). Only specific models, with high technology are manufactured in USA and Ireland. The majority of the components of the products of Apple are outsourced to various locations of Asia, where the company has their manufacturing units (Grant, 2016). The e-commerce sales of the company are given high priority. This indeed adds value to the company and Apple has succeeded in becoming the third largest retailer of the world after Amazon and Wal-Mart (Hagiu, 2014). The attempts of market penetration in the Asian market, is also an additional source of adding value to the company. All these activities ensure that Apple gains competitive advantages, over the other competitors.
The business strategy that has been chosen by Apple in order to sell the iPhones and ensure business in the smart phones is effective in delivering sustainable competitive advantages (Grant, 2016). The innovation and the wide use of technology are the two most important and effective business strategies that are used by Apple in order to ensure that the company gains sustainable competitive advantages, over the smart phone competitors such as Samsung, Motorola and Nokia (Boone & Kurtz, 2013). The innovations of the products of Apple are way behind that of Nokia and Samsung. Moreover, the extensive use of high technology is also effective in attracting the customers, as well as ensuring that Apple achieves competitive advantages (Danaher, Sajtos & Danaher, 2016). The effectiveness of the competitive advantage and success lies in the success and leadership that the company has gained. Thus, the chosen business strategies of Apple for the iPhones are effective and helpful in gaining competitive advantages and ensure successful delivery of the business.
References
Apple. (2017). Apple . Retrieved 16 September 2017, from https://www.apple.com
Boone, L. E., & Kurtz, D. L. (2013). Contemporary marketing. Cengage learning.
Danaher, P. J., Sajtos, L., & Danaher, T. S. (2016). Does the reward match the effort for loyalty program members?. Journal of Retailing and Consumer Services, 32, 23-31.
Ford, R. (2016). Smart Grid Edge Technologies Case Studies of Early Adopters.
Grant, R. M. (2016). Contemporary Strategy Analysis Text Only. John Wiley & Sons.
Hagiu, A. (2014). Strategic decisions for multisided platforms. MIT Sloan Management Review, 55(2), 71.
Heracleous, L. (2013). Quantum strategy at Apple Inc. Organizational Dynamics, 42(2), 92-99.
Khan, U. A., Alam, M. N., & Alam, S. (2015). A Critical Analysis of Internal and External Environment of Apple Inc. International Journal of Economics, Commerce and Management, 3(6), 955-961.
Laudon, K. C., & Laudon, J. P. (2016). Management information system. Pearson Education India.
Pearlson, K. E., Saunders, C. S., & Galletta, D. F. (2016). Managing and Using Information Systems, Binder Ready Version: A Strategic Approach. John Wiley & Sons.
Pitelis, C. N., & Teece, D. (2015). Dynamic capabilities, the multinational corporation, and (capturing co-created value from) innovation.
Yoffie, D. B., & Cusumano, M. A. (2015). Strategy Rules: Five Timeless Lessons from Bill Gates, Andy Grove, and Steve Jobs. HarperBusiness.
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