Discuss about the Apples Competition Strategy in a Global Market.
Thre are a variety of strategies that companies adopt to remain competitive in a Global market. Apple includes product mix, product features, reputation as well as links to other firms to attain a high positioning in comparison to its competitors. The establishment of a reputation as an innovative company in the case of Apple was as a result of offering a selection of easy to use products that deal with a wide range of segments. Since the debut of the first iPhone as well as other products, the company has acquired an ever-growing number of followers due to the company’s ability to offer products that are innovative and easy to utilize amidst rapid technological advancements. This paper seeks to identify ways in which the company has strategically positioned itself to access the niche market as well as the impact of Strategic alliances to the firm.
Product differentiation has economic value especially for industries operating in a monopolistic competition. The fundamental economic value with regards to product differentiation occurs as a result of reduced environmental threats. Product differentiation costs act as an entry barrier thus reducing the new entrant’s threat (Johnson, 2012). Notably, a firm has to bear the cost of business standard as well as the costs associated with overcoming differentiation intrinsic in the incumbent. Due to the particular nature of companies pursuing markets that are niche, there is little threat of rivalry among the industry players. Apple strives to gain market demand for all its products via product differentiation. Ideally, this entails making the company’s products attractive and unique to the customers. Apple’s products are designed to set the standards compared to other competitors in the same industry (MEYER, 2016). In spite of high competition, Apple’s products remain highly demanded thus giving the firm power to regulate prices via innovative advertising, product differentiation, new product hype, as well as ensure brand loyalty. By concentrating on a niche market of a clientele willing to pay more as well as maintenance of a premium price at the unit volume cost, the company set an artificial entry barrier restricting entry into the particular market. This has seen the company grow its market share not only in the United States and China but also across the globe.
Apple has a competitive advantage due to vertical integration as it controls manufacturing, manufactures its chips, operates in an ecosystem that is nearly closed comprising of proprietary retail stores, as well as following extremely strict standards of software. Due to these advantages, Apple has more control of the company’s value chain as well as its component costs. Apple has one of the most addictive, popular, as well as tightly incorporated ecosystems of all the companies in the technology industry(Nasr, 2014). The software and devices produced by Apple are designed to operate efficiently with each other and sync with ease making media and preferences easy to copy or share with numerous devices. Applications work on numerous devices at the same time and user interfaces are similar.
A firm attempts to make strategy intrinsic to its operation a sustained competitive advantage. Essentially, for this to happen, the strategy of product differentiation that is economically valuable must also be difficult to imitate, rare, and the organization must have the resources to exploit such a strategy(Nielsen, 2014). In cases where there are fewer companies differentiating than the number of companies necessary for perfect competition dynamics, such a strategy is rare. Instances where there is no direct, easy duplication or easy substitutes, then such a strategy is difficult to imitate.
Tim Cook echoes those of Steve Jobs whose strategies involved four pillars which included offering a small number of products, creating a halo effect; thus making the customers starve for new products, giving priority to profitability as opposed to market share and focusing on high-end quality products(Nielsen, 2014). The company sells its products as well as third-party products directly to customers and small and medium Businesses via the company’s online stores, direct sales force and retail stores. The companies supply chain is revered as one of the best thereby reaching a global market while they are still high in demand.
In a critical review of past decisions, evidence suggests that there is economic value in strategic alliances. In the past, Apple had the opportunity to share cost and manage risk, facilitate tacit collusions, as well as manage uncertainty through Strategic alliances with key technological firms. Strategic alliances remain a valid source of economic value in an industry characterized by networking (Johnson, 2012). Managing uncertainty, sharing costs, as well as managing risks are all sources of economic value similar in all industries. In fact, researchers have voiced strong confidence to Alliances building with statistics showing the companies with that more joint ventures across company operations had higher market value (Johnson, 2012). However, Apple should have identified the significance of strategic alliances earlier.
Organizations that are expanding or entering into new markets minimize their exposure to political and market risk by engaging in strategic alliances with other firms in their target market. Notably, this is because local organizations have experience as well as an understanding of the local laws, cultural as well as customs climate in the target market. Such partnerships work efficiently in cases where the partner’s portfolios compliment with each other (Yeung, 2016). When arranging for strategic alliances, it is vital that a company considers whether such alliances are equity or non-equity. Notably, a non-equity alliance between companies should possess explicit legal and contracts sanctions to facilitate business operations.
There are many benefits associated with Strategic alliances. Other benefits include R&D resources and IP rights, accessing new technologies, improving the flow of materials and lifecycle of products, diversifying services and products, reduction of overhead and administrative costs, as well as making operations agiler. There are numerous articles regarding the cons and pros of strategic alliances. Nevertheless, a balanced perspective remains vital. Notably, companies with marketing and manufacturing alliances, more joint ventures, as well as other forms of joint ventures have significantly higher market values in comparison to companies with no forms of partnerships. As such, companies operating in the technological industries require such ventures to maximize its value(Masi, 2009). Ideally, in an age of connectivity as well as the connected economy, having joint ventures with other companies especially in the same industry as the firm significantly reduces risks arising from entry into an uncertain market with existing players.
In the case of Apple, the company has in the past shunned strategic alliances A particular examples it where the company refused to license its operating system, the Mac OS for distribution. The company’s strategies were ineffective, having failed to license the Mac OS to a Third party Manufacturing firm that would have seen the Operating system being used on any computer apart from their own. According to Steve Wozniak, co-founder of Apple, the company was a hardware company with the best operating system in the market. However, Apple company hoarded its operating system in which case, to acquire the software, one had to purchase the hardware at almost double the price (Johnson, 2012). Despite the fact that Apple had the best operating system at the time, the cost of its products made it highly unattractive to the vast majority of clientele and its ability to gains a wide market penetration. On the other hand, if Apple had licensed the operating system, today, the company would have been the biggest technological company in the industry surpassing Microsoft.
Conclusion
In conclusion Apple’s Unique differentiation strategy and premium pricing of its products have played a big role in creating a wide market for its products. Being at the forefront of innovating quality and trendsetting products enables the products to develop their market base. The perceptions of superiority of Apple products due to their pricing and quality coupled with the development of an exclusive eco-system allows the company to remain highly positioned in the minds of its customers in comparison to competitors. Concerning strategic alliances, Apple realizes that strategic alliances in many aspects gives the company a stronger base for development as well as become efficient in its operations. While the company did not readily accept alliances, in the beginning, Apple has come to appreciate the advantages associated with strategic alliances.
References
Johnson, K. (2012). The Innovative Success that is Apple, Inc (Master’s thesis, Marshall University ). Retrieved from https://mds.marshall.edu/cgi/viewcontent.cgi?article=1420&context=etd
Maiga, E. (2016). Case Study on Apple’s Business Strategies. Retrieved from https://unt.academia.edu/ElKoubouraMaiga
Masi, B. (2009). Strategic Analysis of Apple Inc. Capstone Strategy Course (MGT440), Professor Linda Cohen, Barney School of Business, University of Hartford.
MEYER, P. (2016). Apple’s Generic Strategy & Intensive Growth Strategies – Panmore Institute. Retrieved from https://panmore.com/apple-inc-generic-strategy-intensive-growth-strategies
Nasr, R. (2014). Apple’s blowout success in China: What it did right, and what US companies can learn from it. Retrieved from https://www.cnbc.com/2015/01/29/apples-blowout-success-in-china-what-it-did-right-and-what-us-companies-can-learn-from-it.html
Nielsen, S. (2014). Why Apple’s ecosystem is its biggest competitive advantage – Market Realist. Retrieved from https://marketrealist.com/2014/02/ecosystem/
Nielson, S. (2014). Apple’s premium pricing strategy and product differentiation – Market Realist. Retrieved from https://marketrealist.com/2014/02/apples-premium-pricing-strategy-product-differentiation/
Yeung, N. (2016). The marketing strategy of Apple: A concise analysis. Retrieved from www.versiondaily.com/the-marketing-strategy-of-apple-a-concise-analysis/
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