With the vision to own and control the primary technologies used in every product it manufactures and stay innovative, Apple Inc. is an American multinational company that is involved in manufacturing and marketing mobile communication and media devices, and personal computers and potable digital media players(Hull, 2012; Reuters, 2018). The organisation also sells a wide range of related software, services, networking solutions, third party digital content and applications and accessories. It operates in America (North and South), Europe (European countries, India and Middle East), Greater China (China, Hong Kong and Taiwan) and Rest of Asia Pacific (Australia and the Asian countries excluded from its other operating geographical locations)(CNN, 2018).
Figure 1: Products of Apple; Ref. (Reuters, 2018)
Source: Google Images
Apple is a multinational company with, which established its business through own stores mainly. The company also has retail and wholesale distribution. There are 499 retail stores of the company as of 2017, which indicate the success of the company worldwide. The company follows a skimming pricing strategy, which makes it one of the expensive products.
Marketing commercials of Apple have sometimes received criticism. In addition to that, the company has a high price for its products and limited software titles caused problems. Another challenge that the company faced is the power struggles between its executives. These challenges have greatly affected the operation of the company at some point in time. The tough competition that the company faces from the other players in the market also lowered the market.
Success for a company could be measured by several indicators, of which the profitability of the company and the financial gains are the prominent ones. However, there are some other indicators for measuring the success as well.
Balanced score card uses mainly five indicators to measure success, which are core competencies, customer satisfaction employee commitment, increase market share and shareholder’s value. It’s an effective measure of the Apple’s success from different perspectives. The company focuses on product innovation, allowing it to focus on R&D and invest in it. It allows ensuring that continuous innovation in products. Furthermore, balanced score card creates a foundation on which further improvements could be made till reaching objectives. Apple maintains an effective score card, which prompted apple to shift towards customer satisfaction and even prioritised their employees for innovative thinking and product development. Hence, with efficient employees designing and developing new products, the customer satisfaction increased, which stimulated Apple sales globally.
In addition to the balance scorecard, the gross profit is also an effective indicator of the company’s success, it is seen that scrutinising the profitability of Apple is likely to provide an idea of their year on year performance:
|
Period Ending: |
Trend |
9/30/2017 |
9/24/2016 |
9/26/2015 |
9/27/2014 |
|
Total Revenue |
$229,234,000 |
$215,639,000 |
$233,715,000 |
$182,795,000 |
|
|
Cost of Revenue |
$141,048,000 |
$131,376,000 |
$140,089,000 |
$112,258,000 |
|
|
Gross Profit |
$88,186,000 |
$84,263,000 |
$93,626,000 |
$70,537,000 |
Table 1: Gross Profit Margin of Apple
Source: (NASDAQ, 2018)
From the above table, it is seen that the gross profit of Apple was much high in 2015, as compared to that of 2014, however in 2016, it declined considerably. The company made an effort to improve the gross profit margin in 2017. However, it could be stated that the company has been able to maintain an overall high gross profit margin.
The success of a company greatly depends on the extent to which the companies are able to satisfy the customers. The following figures highlight the ACSI rating, which indicating positions in terms of customer satisfaction.
However, the company has hardly been able to achieve any improvement from 2015 to 2016, while Samsung has improved by 6% from 2015 to 2016. Hence, it is a matter of concern for Apple, as it indicates that the company has not been able to increase customer base or product quality. Thus, the company is required to enhance their customer service and ensure product development, to increase customer satisfaction.
Apple is one of the companies which have high employee satisfaction rate; however, the company is not in an advantageous position, as it is in the second position, with Amazon being the market leader in this aspect.
Above figure shows that although the job in Apple is highly stressful, the employees are extremely satisfied, as the work is highly flexible. The same time, the company is also able to retain employees to a great extent, which is indicated in the below graph.
Figure 4: Apple’s number of employees in the fiscal years 2005 to 2017 (in 1,000s)
Source: (Statista, 2018)
Apple is continually evolving. When the company first went public in 1980, it was worth $100 million business under the leadership of Steve Jobs, who dropped the expensive projects and streamlined focus, which was evident in the launch of iMac in 1998. Almost 800,000 units of iMac were sold in the first few months, which was the biggest turning point for Apple. Creation of iTunes and Apple’s App Store are the two prominent examples of the company’s interest and competency in combining new technologies and innovative business models. Furthermore, the launch of iTunes Music Store in 2003 soon became the biggest music retailer. Similarly, the App Store launched in 2008 fundamentally changed the world and attracted several developers who were keen to ‘make easy money’ (Umoh, 2017).
Apple is not restricted to focusing on own operations, but also keeps an eye on its competitors, their activities. Jobs noticed how Google is utilising Android and even warned the mobile operating system (Android) as he felt it copied iPhone. At the time of the first launch of iPhone, the Blackberry Smartphone was using QWERTY keyboards. This was kept in mind by Apple and thus, the organisation took a different approach towards its first iPhone launched in 2007 by adding a ‘multi touch screen’. The simple yet innovative feature brought revolution in the Smartphone design and helped the company in conquering the mobile phone market (Umoh, 2017). Apple is not afraid to shift on to the ‘next more’ in innovative products and services.
The current business world is marked by high level of industrial rivalry, thus compelling companies to try out new products. For example, Microsoft ventured into the gaming business (XBOX), music business (Zune Player), Smartphone and internet etc. However, Apple concentrates majorly on four core products- iPad, iPhone, iPod and Mac. Concentration of the resources and focus on fewer products enables the organisation to ensure greater quality and efficiency.
Apple offers its products equipped with advanced thereby focusing on narrow target audience who are educated, tech savvy, technologically aware and have a sense of style. Teenagers, including college students, and business people are a major targets of the company, as it offers them iPad, MacBook, iPhone , etc. Generally the brand targets premium end of the market but to broaden its horizon, it has focused on “consumers at different price points” by offering products like iPhone SE (Lovejoy, 2017).
The buyers are always influenced by supplier’s activities and vice versa (Lebowitz, 2015). Value chain is range of activities that the organisations undertake for ensuring buyers’ value. As per the Porter’s Value chain, the activities of the company are classified in primary and support activities. With this the activities of Apple could be identified, which adds value to the company, while ensuring competitive advantage and thereby maximising the company’s profit.
Inbound logistics for Apple includes the receipt of raw materials from the suppliers and storage. Apple maintains a purchase and inventory for up to 150 days. Apart from that, Tim Cook ensures that the supplier compete with each other, so that the company could source the best products (6% copper (wiring), 6% silicon (microchips), and more than 5% cobalt (lithium-ion battery)) (Merchant, 2017 ). Apple also lowered the number of suppliers greatly. The main aim for the company was to achieve economies of scale, through development of strategic relation with the suppliers.
The operations of Apple, which includes conversion of the raw materials to final products, could be classified into four segments including:
-Greater China- China, Taiwan and Hong Kong
-Japan
-America- North and South America
-European countries, Middle East, Africa, India and Australia/.
The operations of the company are carried out in these countries with approximately 124,000 employees as of 2017 (Apple Inc., 2017). The operation has been outsourced so as to lower the cost of operations.
The outbound activities of Apple includes, warehousing and distribution of the finished goods including iPhone, iPod, iPad, Mac etc. The company involves in e-commerce also, as it is cost- effective. In the US, Apple has the third largest e-commerce business behind Amazon and Walmart with sales of US $12 billion, equivalent to 5.1% of the company’s total sales (Zaczkiewicz, 2016). Apart from that, the company does not depend much on third party dealers, except in some of the countries where it has wholesalers and retailers.
Marketing and sales is one of the important activities undertaken by Apple. The sales are done by the company mostly through the retail stores, online site and retailers. The sales promotion is mainly done through advertisement in newspapers, television magazines, and even hoardings. The domestic and international sales account for 37% and 63% respectively of the total sales of Apple (Zaczkiewicz, 2016). In addition to that, the company has Store location in some of the prominent locations to attract mass people.
Due to the increasing product demand, the company has been trying to improve the performance of the employees. The Post-purchase customer service of the company is impressive with unique iPhone trade-in programs which allow the iPhone users to upgrade their phone to newer models with additional payment
The organisational structure of Apple is one of the factors contributing to its success. It follows a hierarchical structure, topped by the CEO. The success of the company is associated with innovation and leadership style of Steve Jobs. Under this structure, Apple has ensured that there is Function based and product based grouping.
Figure 5: Apple Organisational Structure
Source: (Apple, 2018)
Product-based grouping has ensured products like iPad, iPhone, iPod, Apple TV, MacBook and iWatch. Function-based grouping has enabled managing finances, human resources, infrastructure, and design effectively. Hence, the company has been able to achieve great success in terms of product development, employee satisfaction and customer satisfaction.
In order to maintain its position in the market in terms of innovation, Apple invests heavily in R&D as well as on product development. It is essential to collaborate with technological innovators and R&D partners to lower the cost of operation and fetch best results (Gupta, Kim, & Levine, 2013). Apple has partnership with Accenture for the simplicity and security of iOS, while Cisco provides leading networking, security and collaboration solutions (Apple, 2018). It also has partnered with IBM, GE, Deloitte, SAP for product improvement (Apple, 2018).
From the above figure, it is seen that the year on year investment of Apple is increasing in their R&D implying that the company is trying to maintain its position in the market while providing customers with innovative and quality products.
Apple mainly relies on skilled employees for most of the product design and development. However, they rely on partners as well, for ensuring cost lowering and increasing revenues. Hence, Apple leverages on their suppliers and works with them closely for better product offerings to the customers.
There are four core competencies- resources, capabilities, competitive advantage and strategy (Umoh, 2017). Apple has effective resources ranging from latest technologies and efficient supply chain management to skilled human resources. It has the capability to imitate its competitors’ products while developing highly innovative products to please the tech-savvy customers. Its capability lies in its industry experience and global presence, as these help in gaining an insight to the scope and challenges of the industry. Its strong international presence points towards strong global brand awareness, making it easier to enter any other international market and thereby boosting its global market share. Strong brand image, international presence, technology and product design enable Apple to gain competitive advantage in terms of higher sales and wide loyal customer base. The biggest competency of Apple lies in its ‘blue ocean’ strategy. The organisation created an uncontested market space rather than competing in the existing market. Its brands iPhone, iPad, MAC and iPod virtually eliminated competition in the market, with product- uniqueness. Apple doesn’t believe in just exploiting the existing product demand, but in creating new ones. This enabled Apple in establishing a strong foothold globally.
Figure 1: Hamel and Prahalad Core Competencies Matrix (1994) for Apple
Source: Self
Figure 2: VRIN Framework for Apple
Source: Self
Apple’s products like iPhone, MAC and iPad etc. are the examples of breakthrough technology. Their unique features are difficult to imitate by its competitors. The organisation can develop an more efficient supply chain that would contribute along with its brands for competitive advantage. Skilled employees, just as seen in Apple, can be found in its direct competitors too. Thus, its top executive team can be imitated and substitutes are available in the market. Although the technologies used by Apple are available with other brands too, their optimum utilisation could be a challenging task, where Apple has developed expertise. The designs and product features of the various brands of Apple are its differentiating factors. However, currently, such designs are not extremely unique and not inimitable. However, the leadership style of Steve Jobs which was very effective, even when compared to that of Tim Cook (Lebowitz, 2015). Even though Tim Cook has an excellent leadership style, it is unique.
Leadership is defined as the action of leading people or group of people and organisations (Karp & Helgø, 2008). An effective leadership includes inspiring the followers towards the vision of future, while at the same time motivating and engaging people to achieve the company’s objectives.
The managerial style of Tim Cook the CEO of Apple, could be broadly classified as democratic. Rather than completely contrasting the style of former CEO Steve Jobs, Cook, is seen to have adopted some of the practices of Jobs and developed a uniquely blended leadership style. Cook provides the right to the employees to share their views and ideas so that innovative products can be developed while making effective decision(s). The employees in the organisation are encouraged to explore innovative product ideas so that the effectiveness of Apple products can be enhanced and thereby, elevating market share. However, the final decision is taken by the senior management only, considering their industry knowledge and expertise.
Product-development through innovation is the fundamental growth strategy of Apple. It focuses majorly on developing innovative products for meeting the changing demands in existing markets and enter new ones. This is reflected in Cook’s growth strategy that involves doubling the products of the company and moving away from the minimalist strategy of Jobs. The website of Apple conventionally showcased 14 Apple products, but now under the leadership of Tim Cook, 27 products are available in more than 200 versions, thus indicating that Apple has adopted two growth strategies proposed by Michael Porter i.e. ‘product development’ and ‘market development’ (Bloomberg News, 2017). The organisation has further scope for using ‘diversification’ strategy, where new products can be developed to enter new market(s). ‘Market penetration’ would be a difficult strategy to be used by Apple since the organisation has already developed strong brand awareness in the existing markets.
Apple is one of the prominent multinational companies operating in the market, with 499 retail stores in 2017. The company adopted standardisation policy while entering the international market, which allowed the company to establish a global identity in respect to its brand. However the marketing approaches and promotional strategies are as per the taste and preference of the local people. Apart from that, the company also ensures that enters the international market through its own retail stores.
Apple has used ‘Blue Ocean’ strategy. This involves creating a demand by introducing a completely new and unique product. For instance, Apple identified difficulties of people in text messaging and thus, it offered keyboard instead of keypad. It raised user interface and improved navigation while introducing wireless internet on phone and mobile application based money management etc. It further reduced the need for carrying separate devices like phone, MP3 and PDA and always carrying a computer along with minimising difficulties in operating touch screen mobile phones. The organisation developed a device to download music directly, hold more music and developed sleek designs for its smartphone.
Apple has partnership with Accenture for the simplicity and security of iOS. Also the partnership with Cisco provides the company with leading security, networkingsolutions for Apple (Apple, 2018). Apple has also partnered with Deloitte,IBM, GE, SAP which ensure that the company is able to provide good quality and innovative products to the customers (Apple, 2018).
Apple has used ‘differentiation focus’ strategy to position its brand as the one that offers unique products and satisfies the tech savvy customers. Under this strategy, the organisation focuses on product uniqueness and target a narrow market. This is because all the products offered by Apple are highly technology oriented and thus, not suitable for every customer. It is preferred majorly by the customers who have the willingness and interest in using latest technologies and have an inclination towards using the most recent technology before others. This strategy helps in developing a small yet strong customer base. However, it might restrict the brand within few customers having homogeneous needs and preferences. As a result, once the product becomes common, a need for introducing a new version or a completely new product emerges.
It is seen that with the current business performance of the company, it is likely that the company would continue to perform well in the market. However, Samsung (its closest competitor on the smart phone market) is providing the company with tough competition, which has lowered the market share of the company to a certain extent. It is expected that with the current performance, and high price, the market share of Apple would decrease further.
Although Apple has continued to emerge as one of the strongest organisations in terms of increasing sale of its electronic devices, there are certain factors, which could inevitably affect the company’ sustainability in the market. With the help of the PEST analysis, it would be possible to present a bigger picture of Apple’s situation in the future.
Political
Government plays a crucial role in affecting the way(s) Apple does its business. Since, Apple is heavily dependent on low cost manufacturing in China, and political instability in the nation could disrupt the company’s manufacturing cost(s). Moreover, the US government’s ban on the import of Chinese imports in an effort to boost American manufacturing market could also hurt Apple’s business strategies (Einhorn, 2018). The company therefore, could have to search for alternatives to Chinese manufacturing, which in a way might increase its products’ price. Hence, Apple should work closely with other emerging markets to make associations for manufacturing its devices’ parts t a lesser cost.
Economic
Apple operates globally, and therefore, fluctuation of currencies could affect the company financially. However, as Apple could not do anything to control of influence the global currency fluctuations, to be sustainable in the future, the company would need to supervise its operations effectively. Moreover, the company should focus on the markets like South- East Asia, Vietnam, etc as those are emerging economies and growing faster than the Western economies.
Social-cultural
Changing lifestyle and growing brand awareness might motivate target groups to switch to more advanced technologies than iOS. However, the rise in the income of the Americans prompts consumers to prefer Apple over other brands (Martin, 2017). Consumer spending in Asian and African nations is expected to increase. Hence, Apple should focus on increasing its brand awareness in the emerging market. Nonetheless, ethical concerns about Apple’s manufacturing in China could hurt the conscience of socially-conscious consumers.
Technological
Competition from Google and Samsung could prove adversely affect Apple’s uniqueness (Gupta, Kim, & Levine, 2013). In technologically advanced US, Apple still has the opportunity to sustain in the market based on its cloud computing trend and app market. Besides, technological integration of devices could also prove beneficial for the company in adding competitive. However, Apple must continue to update its existing technologies to save itself from being obsolete.
From the above discussion, it could be recommended that in order to increase the market share of Apple, the company is required to offer a competitive pricing strategy. In addition to that, the company is also required to maintain an effective relationship with the suppliers, which would increase the efficiency and effectiveness of the company. The company would adopt penetration pricing strategy or adaptation strategy in the context of price. With this strategy, the company is likely to attract potential customers.
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