Porters generic strategies in relation to Apple
Companies all over the world employ countless strategies in other to have competitive advantage over their competitors. Each company’s strategic approach entails custom-designed actions to fit its own circumstances and environment in which it operates.
It is therefore obvious that managers of companies have slightly different ideas as to how the future market trend and condition would be. These necessarily translate to the fact that the strategies deployed by managers to mitigate a common market challenge differ from one firm to the other and from one industry to the other.
How best a company aligns its strategy with these challenges depends on how corporate management understands the market dynamics, and the type of strategy to deploy.
In a competitive industry, the best strategy to deploy should be directed towards how to maneuver rivals, and at the same time entice customers to patronize the firm's products and/or services. The strategy must also aim at creating brand image in the mind of the users of the product, thereby causing customers to be delighted whenever they come into contact, or even hear of the product.
In other instances, firm’s strategy may depend on market share. That is whether it has a bigger market share or smaller market share, or whether it is the market leader or the market follower. All this factors determines the formulation of a good business strategy.
According to Michael Porter, a firm's strength in developing strategy falls ultimately into one of the three headings. These are low cost provider strategy, differentiation strategy and focus strategy.
He however, Arthur A. T. Jnr. et al. Crafting and executing strategy, the quest for competive advantage concept and cases, ( 2005) expanded the three generic strategies to five generic strategies and explained as shown in figure 1 below:
For the purpose of this discussion I would deliberate on the five generic strategies as propounded by Michael Porter, as expanded by Arthur A. T. Jnr. et al.
Figure I, below demonstrates the five generic strategies.
Called from Arthur A.T Jnr. (2005).
Overall low cost provider strategy
Broad differentiation strategy
Low –Cost Strategy
A low cost provider strategy appealing to a broad spectrum of customers by being the overall low cost provider of a product or service.
A broad differentiation strategy seeking to differentiate the company’s product/service offering from competitors in a way that will appeal to a broad spectrum of purchasers.
A best cost provider strategy giving the customers more value to their money by incorporating good-to-excellent product attributes at a lower cost than competitors.
A focus (or market niche) strategy based on low cost – concentrating on a narrow buyer segment and offering unique product at a lower cost than competitors .
A focus (or market niche) strategy bus on differentiation – concentrating on a narrow market segment and offering unique product with customized attributes that meet the taste and requirement of buyers than that of competitors.
Apple, since its inception in the computer industry gained a lot of advantages which eventually became its hall mark and which none of the players in the industry like Dell and IBM could march up with.
These core competences makes Apple computers stand unique even among the giants in the industry. This has sustained Apple even through the hectic industry change over the time. Apple has been able to strategies and is now matching up with the challenges in the industry. As a result Apple has chalked a lot of strength and unique core competence.
The core competence which Apple chalked for itself includes:
Creativity: Apple’s agile and innovativeness way of developing computers and software differentiates it from the other players. This has mad Apple stand tall among competitors in the industry.
Apple was noticed to be at the fore front of revolution technology by integrating music, images and animation. This has brought Apple to the forefront of industrial revolution.
Apple has a first mover advantage by developing the Macintosh operating system. This has compelled Microsoft to request for the registration of the Macintosh operating system with Microsoft.
Apple had Konoclastic (revolutionary) design which no other competitors was able to emulate.
Despite the aforementioned strength and capabilities of Apple, Dell, IBM and Microsoft became a threat to Apple. Dell on seeing the weakness of Apple decided to capitalize on it. This Dell did by driving down costs through its direct sales approach to computer users.
The difficulty Apple had was the leadership quality in terms of the Chief Executive Officer, when John Sculley was in the herm of affairs. John Sculley took bad unilateral decisions which affected the prosperity of Apple.
The business virtually went on its kneels only to be salvaged by the timely exit of John Sculley, and the re-entry of Steve Jobs as the interim Chief Executive Officer (CEO).
Michael porter’s generic strategies are generic strategies which could be deployed by any firm in other to be competitive. Generally, firm exist by crafting varying strategies to outweigh their competitors.
For that matter any firm that decides not to think strategically and deploy strategies to outwit competitors is bound to fail. The firm may even be more vulnerable when it operates in a competitive environment like in the case of Apple Computers.
Analyzing Michael Porters generic strategies in relation to the competitive strategies employed by Apple.
Low Cost Provider Strategy: Apple on studying the computer market identified specific needs and designed tailored to meet such needs. This they did by designing IMac computer and iBook computer for basic computer buyers. The costs of this model of computers is relatively low.
Broad Differentiation Strategy. This strategy has to do with differentiating the company’s product/servicing from competitors. Apple differentiated its product by focusing and producing on two market segment, the consumer and the professional market. Apple designed computers for beginners which does not necessary have too many complex functions.
Best cost providers. This strategy is crafted to give customers by incorporating good-to-excellent product attributes. A typical example is the incorporation of ipod digital music player, iTune websit for the sale and download of music in the computers provided users of Apple Computers Value for money.
Focus strategy based in differentiation: Apple has differentiated it products focusing on the professionals and producing computers tailored to meet exact needs professionals. Computers designed for professionals have complex functions that meet their today’s requirements.
Focus strategy based on cost. This strategy is concentrating o narrow market segment by providing low cost products to the segment. Apple has achieved this through the production of iBook computers to serve the customer section.
Apples’ competitive strategies are in tune with the generic strategies of Michael Porter. The strategies deployed by Apple are very good strategies except that they had some managerial problems in the beginning, however Apple has to deploy market penetration strategy in other to expand its market share.
(2) Discuss the concept of strategic alliance by competing companies as a means for strategic growth. By forming strategic alliance with IBM and Microsoft, what competitive risk face Apple.
Strategy Alliance is a business relationship established by two or more companies to cooperate out of mutual need to share risk in achieving a common objective. Strategy alliances are sought as a way to support weakness and increase competitive strengths companies. Cateora P. R. et. al. (2002).
Companies that establish strategy alliances are exposed to tremendous benefits that when harness could change the fortunes of their business. When companies are engaged in strategic alliance one partner’s strength offset the weakness of the other, thereby positioning the company in the market to compete against other competitors.
The good thing about Strategic Alliance is the, the allying companies may have unique core competences that when brought together would obviously introduce a new dimension into the operation of the business.
The numerous advantages and benefits companies accrue form strategic alliance includes:
Opportunities for rapid expansion into new market.
Access to new skills and technology.
More efficient production and marketing costs.
Risks sharing when there is much uncertainty and instability in a particular market.
Enhance product development.
Access to additional sources of capital.
High productivity and maximization of profit.
Enhance competitiveness in domestic/global market.
Synergy and competitive advantage.
Strategy alliance which is a synergistic relationship established to achieve a common goal in which both parties benefit can be in the form of; joint venture, licensing, or franchising.
Joint Venture is a legal entity formed between two or more parties to undertake an economic activity together and sharing the risk in formation. The parties agree to develop for a finite time, a new entity and new assets by contributing equity. They both exercise control over the enterprise and consequently share revenue, expenses and assets.
Licensing: This is giving a foreign company the technology or production right to produce the company’s products in the foreign country. By licensing the technology or the production rights to foreign based firms, the firm does not have to bear the costs and risks of entering foreign markets on its own, yet it is able to generate income from royalties.
The only disadvantage of licensing is the risk of providing valuable technological know-how to foreign companies and thereby losing some degree of control over its use.
Franchising has the same advantages as Licensing, but franchising bears most of the risks and costs of establishing foreign locations. Here the franchisor has to expend the resource to recruit, train, support and monitor the franchisees.
Strength of Strategy Alliance
When firms come together to form alliance, they tend to be stronger than when they are independent. They pull their expertise together, develop new technology, and in most case new products are developed.
Strategic Alliance blends two core competences, (in most cases a blend of more than two unique core competences) to help the company rejuvenate the operation of the business, thereby bringing about total transformation, as well as develop a very strong competitive edge in the market.
Strategic Alliance again can be used to pursue radical strategy such as a defense strategy. In this scenario, it may term as a deliberate strategy to deter other potential new entrants from entering the market.
However, it is not all alliances that succeed. Most alliances fail and never achieve their objective. Failure of alliance can be attributed to a lot of factors. Some of these factors includes:
Mistrust between allying firms as business operations progresses.
Incompatibility of allying partners.
Difference in distribution of earnings.
Potential cost of anatomy in the individual firm.
Despite the aforementioned challenges in forming Alliances, it is worth mentioning that Alliances are healthy venture that companies must resort to when they confronted with severe competition from competitors, or even when the intend to enter the international market with ease.
Forming strategy alliance with IBM and Microsoft would mean harnessing its core competences with IBM and Microsoft to achieve competitive edge in the computer industry. By this, and Apple having a very good and enviable core competence but lacks marketing technique, would have the ability to sell its products, and distribute them to reach computers user directly around the globe.
Even though Apple has good and innovative products out to the users, how to get them out there to the end user was their problem. As result Apple is unable to capture a bigger market share even though it has good products.
However, Apple has unique competences that give it a competitive advantage over competitors. These competences such as, creative renovation, iconoclastic design which none of the competitors was able to emulate, and as such was seen as being at he fore front of revolution technology.
The prospects of Apple Computer are very good, and would only need to rejuvenate its marketing strategy to be able to penetrate the market and possibly expand its market share.
By allying with IBM and Microsoft, Apple losses all its strength and core competencies to its partners.The uniqueness of apple that is seen by its loyal customers would be eroded.
Apple therefore stands to loose by allying with these industry giants. What Apple has to do is to engage in aggressive market to achieve aggressive growth.
(3) What are the strategic competencies and resources of Apple that when sustained could serve as a competitive edge over its competitor. Please discuss.
Corporate management of organizations are confronted with complex, confusing and continuous challenging macro environmental issues throughout the existence of the business. These challenges stretch from economical through fierce competition.
For a business to survive these environmental challenges, it is imperative that corporate management ensures the development of strategic competence across the facets of the business. They must therefore device prudent strategies in other to mitigate these challenges.
In the process of managing this challenges, and continuously solving the problems over time generates some competences. This brings about better understanding and competence required for improving working practices and enhancing individual and organizational effectiveness.
Strategic competence is the ability to acquire knowledge, experience, information, develop and archive them, and be able as intellectual capital and be able recall and use same for the long term survival of the organization.
These processes do not have to be managed by a specific section of the organization. They are achieved as a result of the continuous execution of tasks the company goals and objective which are being driven by the company mission and vision.
From piece, strategic management can be define as …………………………….
With reference to the organizational of chart Apple Computer, Apple has able and competent human resource capacity that necessarily aided in chalking the successes over the period.
The high caliber human resource at the Corporate level of Apple computer includes, Senior Vice President Avadis Tevanian Jnr. Ph.D. (chief software Technology officer and Bertrand Serlet, Ph.D. – Senior Vice President (software Engineering).
It imperative to note that, for a company or organization to have Ph.D. holders at the corporate level of a strategic business like Apple Computer is no mean an achievement. What makes it strategically important is their area of expertise which are in software Technology and Engineering.
The other competent corporate staffs are Bertrand Sina Tamaddon – Senior Vice President, Computer Application and Jonathan Rubinstein - Senior Vice President - iPod Division just to mentioned just a few.
The background and credentials of these top management staff of Apple (according to the organization chart) speaks of why Apple has proactive strategies in designs, and had been able to design computer products that no firm in the industry was able to emulate. No wonder Apple was identified as being at the forefront of the digital computing age.
Apple may have some authority in terms of market leadership, but fall short of some competences. The shortfall enabled other competitors like Dell and Hawlett- Parkard to overtake it. The down side of Apple computer has been its inability to drive down costs through direct sales approach, and not producing the computers as and when the market demand.
Unlike Dell which was able to practice the Just-In-Time and at the same time engage in direct sales of computer to computer users, Apple relied solely on the traditional retail system of getting the computers to the end user.
However, Apple with its unique characteristics has a lot of competitive advantage over the other competitors.
The strategy competences of Apple that made it to be seen among the Computer giants include:
Fore front or revolution technology.
However Apple with its unique characteristics has a lot of completive advantage over the other competitors on the industry.
These competitive advantages of Apple even though has barely a market share of about 5 per cent, year become the most profitable computer company in the industry despite the dampened economy and is small size relative to the computer …………
As a result Apple has gain strategic competence that when sustained could serve as a competitive edge over its competitors.
Apple’s development of consumer products like the ipod, …………., which was very difficult to emulate places. Apple at a strategic lever and differentiating it invention from competition.
Whilst competitors were thinking of how to fight ……. That attack their computers, Apple has already taken care of the management of various in the Mauntos operating system.
Apples history of immolations and its motor of thinking differently has enabled it gain key advantage for keeping its customer and at same time enticing new ones.
The hall mark of Apple is its originating from the very beginning even in this mist of stiff competition. These strategic competence of Apple are so unique and
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