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Background of Apple Inc
Apple inc. is a based American corporation that manufactures and designs Smart electronic products ranging from computer software, hardware to other consumer electronics. The company has a an outstanding Macintosh personal computer line, Mac OS X, for its exceptional dependable user base which makes them significantly stand out, the iTunes media application and the iPod personal music player. The company has its base in Cupertino, Califonia, having its CEO and founder to be Steve Jobs, the company can beat its chest to having 284 retail locations spreading across 10 different countries.
On the1st, of April 1976 Apple was established by Steve Jobs, Steve Wozniak and Ronald Wayne to sell the Apple I personal computer kit. Steve Jobs was said to own 45% of the company, Steve Wozniak with 45% and Wayne with the remaining 10%
Apple with time has brought about a significant reputation in the consumer electronic aspect. The users of Apple electronics tend to be fascinated about and loyal to the products and on the other hand those who have no experience with Apples product most times criticize them an being too expensive. On August 15, 1998 Apple released the iMac and was able to cover up its past failures which includes the first Apple portable, which was to wrong looking and bulky and the Newton’s, Apple in entering the PDA market. In 2001, after several years of rigorous developments, Apple came up with Mac OS X a universal operating system targeted at both consumers and professionals. The Mac OS X was a different re designs from its previous the Mac OS 9 which could not constrain the power of UNIX while offering a streamlined user experience with a simplified GUI (Graphical User Interface). The iMac line of professional computers combined with the Mac OS X regained Apples profitability coupled with the release of the iPod portable digital audio player, later in the year which was just to crown its productions. The historical success of the iPod created a platform for future product, including the best mobile device in history, the iPhone and the Mac Book line of portable computers and the latest release of the iPad on the 27th of January 2010.
This report is based on carrying out a strategic logistic analysis of Apple Inc. with a view to developing opportunities to develop logistic capabilities of Apple Inc. in this cognizance to the swot analysis, five forces analysis and Porter’s Generic strategy, Apples frame work. Virtually all these strategic models were done from the logistic perspective. This report addressed the main strategic approaches to logistics that can be done by Apple Inc. This report also look into management issues with regards to the implementation of a new logistics strategy especially from the perspective existing capital, technical and human resources. Finally, this research also helped to evaluate trend and the importance of new technology especially with respect to the future logistics strategy of new companies, critically evaluative the strategic significance of new technology developments and business trends on future logistic strategies for Apple Inc.
Apple Inc. success in the IT world is as a result of the wide range of products varieties portfolio and the strength of the Mac OS X technology.
- Good brand loyalty.
- Giving a face-lift to desktop and notebook lines.
- Well known hardware and software products, the iPod, iPhone, Macintosh Computer, Mac operating system, iTunes.
- Apple Inc. sells a wide range of third-party Macintosh (Mac), iPhone and iPod compatible products, including application software, printers, storage devices, speakers, headphones, and different other accessories and peripherals via its online and retail stores, and digital content and applications through the iTunes Store.
- Apple Inc. sells to consumer, small and midsized business, education, enterprise, government and creative customers.
The Apple SWOT Analysis the source for the top level management and data information. The analysis puts in view the organizations essential business structure and all its activities and gives the update of the revenue lines and strategy. (Data monitor April 2009,page 30)
- Apple Inc. major in developing its own software and hardware.
- iTunes Music store generates more revenue and the iPod which has easy accessibility on the Windows platform.
- Apple has an alcove audience that gives the organization some deceleration from the direct price competition.
- Providing a whole new dimension to desktop and computer lines.
- Its online access technology can be used to promote product awareness and sales.
- Has more maneuverable low debt ability.
- Excellent brand loyalty is associated with Apple Inc.
- Affiliation with Intel computers in 2006 till date.
- Powerful research and development department.
- No strong connection between Intel and Microsoft.
- Weak domination in business sector.
- Most Apple product has a very short life cycle which causes revenues to focus on the release of new products and services.
- Having to major its market in the education and publishing not in other markets.
- Slow turn around on high demand products.
- Its market is lacking way behind its Major competitor Microsoft.
- Past communication between the founder and employee which brought about its loss of reputation.
- Large market population which tend to be brand driven.
- High rate of virus on personal computers to provide a constant market for its anti virus software’s.
- The ties of apple other companies are weak, Apple can develop good relationship for joint ventures.
- The high rate of music downloads and Mp3 are increasingly marketable.
- The sale of computer via the online platform are on the increase.
The laptop market growth is increasing so Apple Computers should concentrate on the improvement and development of new models to satisfy the needs of individual customer.
- Incompatibility with other organizations software’s.
- Dell, HP, Sony and Toshiba are major competitors facing Apple in the laptop sector.
- Free download of music and other software is common with other sites which has high impact on sales for online store sales of music and MP3 download.
- High prices of its product compared to its competitors which make them loose their market.
- The long lasting recession may impact the sales of the company due to higher prices of the products and services.
- The launching of the new Microsoft vista windows 7 which is gaining market share.
- Speedy change in technology is on the increase.
The SWOT analysis above gives us a view that Apple Inc. has strengths that it can use to further develop the brand and invariably increasing its market and gaining an edge over its major competitors. Apple is a company with great success, the iPod music player sales increased its second quarter profit to $320in June 2005 same with its Macintosh computers. The iPod allows the company to in viewing other segments to go into. Apples Mac note books also contribute to the Apples high income. The brand name is one of the most popular brand names in the world, which offers good customer views of its products in the customer’s satisfaction.
Early in 2005 Apple made an announcement on the putting an end to its relationship with IBM the supplier of their micro chips and switch to Intel specialists commented on saying it may make them loose their customer’s confusion. There is weight on the company to pump up the price of its Mp3 and music download from the music industry since most other company make their income from iTunes than selling their compact discs, |Apple has made sales of 22million on sales of its music player the iPod and further sales of 500million on the downloading of songs from its iTunes store. This shows a statistic of 82% of legitimate downloaded music in the US.
The development of the iTunes music store to ease users on tracking their music and downloading it, this was made available, and by the use of the USB cable. Software was made in such a way it allows the pausing of music on incoming calls. There is a great deal of new technological strategies alliance opportunity for Apple. another new software is the Podcast which are downloadable media which is done via the internet and plated back on later events that suits the user. It has a free subscription which Apple can make it a paid subscription to generate more income
The biggest fear of Apple Inc is the high level of competition in the IT markets. As a successful company the rate of competition is high so the company has to work rigorously on its market research in order to maintain and retain its position in the market The vast popularity of iPod and Apple Mac are on high demand, and will be affected if economies begin to falter and demand falls for their products. The level of close product substitution effect in the innovative and fast moving IT market. There for the iPod and MP3 are in the trend today, but only yesterday it was CD, DAT, and Vinyl. The future technology might be completely different and the music player could be displaced by the Wireless technologies.
Five forces analysis
The five forces strategic analysis was developed by Michael Porter. The Five forces framework is widely used as a type of industry analysis b (Johnson et al., 2005). The understanding of the way each of the five forces allow organizations have the basic insight in allowing them model the best fit strategies to be successful in their market (Thurlby, 1998).
Apple operates in two primary industries:
- Computing – Hardware and Software
- Delivery of Entertainment and Media
Apple has always been under intense competition within the computer, software, and entertainment industries.
Figure 1: Five forces analysis for Apple Inc
Apple Inc top competitors include Dell, Microsoft, HP, Alien ware, Gateway, IBM.
Strategic position is aimed at achieving profitability and competitive advantage. Apple’s strategic position is to offer users the best computing experience by innovating in hardware, software, and Internet offerings.
Environmental Analysis of Apple Inc.
Apple, Inc operates as a multinational corporation that designs and manufactures consumer electronics and computer software products. The external environment is the institutions and people outside a business organization that affect it; these include national and local government, trade unions, competitors, customers, suppliers, etc. The external environment is one of the contingency factors that has to be taken into account in designing an organization.( Ed. Jonathan Law.)
The external environment has three components: the remote macroeconomic environment, the industry environment, and the operating environment within the organization itself. There are key macroeconomic variables that affect Apple: inflation, unemployment, and competition.
The first key macroeconomic variable that affects Apple is inflation. Inflation in an economy can be the result of an increase in aggregate demand that is unaccompanied by an increase in aggregate supply. A rise in any component of aggregate demand can bring about inflation. One reason for a sudden, unanticipated rise in aggregate demand can be an unanticipated rise in the supply of money. Inflation can also result from a decrease in aggregate supply that occurs when businesses find that production inputs have risen in price. Such occurs when labor costs and the price of raw materials such as plastics or metals. Decreases in productivity can also have a negative impact on aggregate supply and, therefore, cause a rise in prices. Apple has been in a situation where the aggregate demand for the iPod touch and the iPhone have been really high but the prices for these products it as a reasonable cost to the consumer.
Another key macroeconomic variable that affects Apple Inc is unemployment. The unemployment rate is the percentage of people who are not working but who are actively seeking employment. Shifts in labor market that can create unemployment. At any given time the unemployment rates may differ greatly among nations. Two reasons for the difference are
- Different natural rates of unemployment and
- Nations may be in different phases of business cycle.
McConnell C.R. and Brue S.L. (2004, p. 140). Between 2001 and 2006 the United States unemployment rate was considerably lower than that of Canada. If the unemployment rate is high then that means Apple may have had to lay off a bunch of employees because of the economy. If there aren’t many employees working at Apple then productivity will go down. Wages are an industry variable that is determined by the unemployment rate. If the economy is bad and Apple had to lay off employees then the wages of the existing employees may not go up for a long period of time or may even go down.
The last key macroeconomic variable that affects Apple is gross domestic product (GDP). The gross domestic product (GDP) is a basic measure of a country’s economic performance and is the market value of all final goods and services made within the borders of a nation in a year. It is a fundamental measurement of production and is very often positively correlated with the standard of living. If there is an announcement in the news that there has been an increase in the GDP this will be an indication that the economy is, in all likelihood, in a growth phase. If the GDP number is comparatively weak or declining, this reflects a negative economic environment for the country, indicating a depressed economy. The world economy is depressed and facing a great recession. These facts will lead consumers finding themselves with less disposable income which will eventually cause them not to spend much consumption on luxury products. Apple will be largely influenced by the reluctant consumption needs. However, Apple has better positioned itself in the market. The introduction of new iPhone with a relatively cheap price is reflecting a very good sales strategy to accelerate consumption. Apple has successfully sustained a better profit rate in the last three years despite global economy slow down. However, there is no company that can always increase its profit while the national GDP is decreasing.
There are many opportunities and challenges that exist for Apple, Inc. A big opportunity that Apple has is they open their stores in a slow, even-handed way to make sure each one is profitable. Other companies that over extended themselves in the boom could have to pull back drastically as their customers are reluctant to spend. That opens opportunities for Apple to negotiate more favorable lease terms in struggling shopping malls. Another opportunity would be that as Apple opens more and more international stores, that sector of Apple’s business will be less and less affected by financial troubles in the U.S. An ongoing challenge that Apple faces is keeping the price of their products affordable. Apple’s business plan includes pricing their products so the consumer can afford them. Even with the current recession Apple is still making a high profit from their computers and electronics. Another challenge according to( www.macobserver.com), “Apple’s Mac growth is three times the average PC sales growth, and they’ve sold 120 million iPods, burying the competition. Apple has branched out into the mobile phone market gaining even more consumer awareness. As a result, Apple has had to invest heavily in customer service. Some wonder if they can keep up the pace.
Implementing a new logistics strategy within an organization
Apple has historically taken a far different path than the traditional Windows and Intel combination. Microsoft provides the Windows operating system to separate downstream hardware producers such as Dell. Apple vertically integrated both the operating system software and hardware completely under Apple. A consumer running Microsoft Windows can choose from a myriad of systems based on the Intel processor, while a consumer running Apple’s OS X must purchase Apple hardware.
Apple is adjusting this strategy by migrating their microprocessors from IBM and Motorola PowerPC to Intel. Analysts believe that the Intel-based Macintosh may be able to run Microsoft Windows applications by the end of 2006. (Burrows)
In addition to switching processors, Apple positioned their computers as an immediate option for the traditional Microsoft Windows user. With Apple Boot Camp, users may now use Mac OS X or Windows on an Apple computer. (Sutherland).By allowing users to run Windows on an Intel Mac, Apple reduced the switching costs for traditional PC users. Apple may steal away customers that are willing to pay a premium for a system that runs both Windows and Mac OS X.
Apple continues to retain a strategic option to license its technology to clone makers such as Dell. Past attempts at licensing Apple technology (to IBM, Gateway, and others) failed on accord of Apple’s rigid demands. Many technology leaders (such as a 1985 letter by Bill Gates to Apple CEO John Sculley) criticized Apple for keeping a closed architecture. Apple cofounder Steve Wozniak criticizes this strategy, “We had the most beautiful operating system, but to get it you had to buy our hardware at twice the price. That was a mistake.”Whether Apple would be willing to pursue this reversal of vertical integration is unclear. Although such a move would cannibalize a portion of Apple’s own hardware sales, it would also provide royalty-based revenue that could approach $1 billion annually. (Burrows) Jobs traditionally sided against licensing Apple technology. He referred to Mac clone producers as “leeches” and he personally killed Power Computing by terminating their license in 1997.
Despite a weakening economy and a need to meet customer demand, Apple has been able to maintain a fast inventory turnover rate. The Mac and iPhone maker is sitting at five days worth of inventory on any given day, beating Dell’s seven days worth of inventory, according to data from UBS.
Other PC makers are having even more trouble matching Apple’s inventory efficiency. Lenovo, for example, is averaging 15 days of inventory, and HP is sitting at 32 days. Intel, however, is showing a much slower inventory turnover rate at 89 days, and D-Link is sitting on a staggering 131 days worth of inventory.
Apple’s quick turnover rate may have been due in part to preparing for its just announced iMac, Mac mini and Mac Pro updates. The company released new desktop computer. Models on March 3, and keeping inventory low helped assure that there would be fewer of the previous model machines sitting on store shelves. While maintaining a higher inventory level can help a company cope with sudden increases in demand, it can also show a company’s inability to adequately gauge market interest in their products. For now, it looks like Apple is managing inventory better than its competition. (Jeff Gamet)
Future logistic strategies for Apple Inc
The development of Apples coverage device and Once developed the Apple convergence device will provide a wide range of functions and powerful processing capability that can be applied to the field of medical care to enhance efficiency and modernize the industry. Apple should work with medical device companies and care providers to develop a set of criteria for necessary capabilities for consideration in developing the platform.
The device will function as an integral part of an overhauled recordkeeping, care giving, and medical administrative system modernized for the twenty-first century. The device and software it runs will make use of compatible equipment to measure, document, and file measurements, symptoms, and diagnosis in an easily accessible and fully-portable medical files system. The system will help to streamline care giving, administration, and claims filing, by eliminating mountains of paperwork and cumbersome filing systems.
This research will give the reader an overview of the logistics implementation strategy adopted by Apple Inc and how the organisation can help improve its supply chain network now and in the nearest future.
- http://www.brighthub.com/computing/mac-platform/articles/65346.aspx#ixzz0jRgxpiYB Michael Dougherty
- http://www.researchandmarkets.com/reports/555326 Data monitor April 2009,page 30
- Apple SWOT Analysis. November 23rd, 2009 | Adam | Posted in Marketing www.mba-tutorials.com/marketing/273-apple-swot-analysis.html
- Jeff Gamethttp://www.macobserver.com/tmo/article/apple_beats_competitors_at_inventory_turn_over/
- Thurlby B (1998) “Competitive forces are also subject to change”, Management Decision London
- Johnson, G., Scholes, K. & Whittington (2008) Exploring corporate strategy: text and cases. London: Prentice Hall
- McConnell, C.R. and Brue, S.L. (2002).. Economics: Principles, Problems
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