Apple Strategic Analysis
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Published: Thu, 06 Jul 2017
This strategic analysis for Apple Computer’s iPhone 3G product is along with how they position in the Global Smartphone market. Apple is considering as marketing leading consumer electronics, innovative, and computing company. The company has a long series of successful products which begin with its iMac computers, Mac Mini, iPod, iTunes, and also the iPhone in many markets. The Apple IPhone 3G is expected and purpose to take number one position in the Global Smartphone market as well as the United States market on the way to provide recommendations and able to maintain sustainable competitive advantage. The Apple’s current mission statement is as follows:
“Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork, and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple reinvented the mobile phone with its revolutionary iPhone and App Store, and has recently introduced its magical iPad which is defining the future of mobile media and computing devices.” (Investor Relations, 2010)
This analysis study will being focus on the last part of the mission statement which is the Apple at iPhone industry. This study first will analyse the general environment of Apple, analyse the industry with Porter’s five forces, organizational analysis with VRIO framework, analyse the firm’s differentiation strategy, and recommend strategy with TOWS Matrix. Then, conclusion is given at the end.
A firm which face any analysis of the opportunities and threats is beginning with the understanding of the general environment of the firm operates. The general environment included six interrelated elements such as political and legal conditions, the economic climate, technological change, cultural trends, demographic trends, and specific international events (Barney & Hesterly 2008). This general environment is to establish Apple’s capabilities and resources as well as to identify the Apple’s positioning within the Smartphone market.
Political and Legal Conditions
Apple relies on third-party patents. If there would be able to found that the firm have infringed intellectual property rights which will affected the result of the firm. The Apple’s ability to offer wide variety of materials and content at available and reasonable price or rates will be affected. Due to the process is extensive and taking time, so that the firm which need the subject to certification and regulation by the government and related standardizing parties is become difficulty.
The global economic crisis has been resulted in Apple for its tight market markets and the volatile fixed income of customer. Therefore, the customers may be postponing spending their money to buy a product of Apple.
In competitive mobile industry, competitive factors such like price, product reliability, quality and innovation will effect in the mobile industry. Service, support and corporate reputation is influence significant due with the rapidly changing technologies and standards. Therefore, Apple have to continue to keep in innovate with the changing technologies as well as can be able to fulfil the demands of consumer.
For the customers of mobile device, they prefer a single device to be able to combine for their business. However, they also pleasure to avoid of lugging the additional gadgets. To be significant in these cultural trends, the Apple iPhone 3G have combine the three products in one which is included a breakthrough internet device with rich HTML email and a desktop-class web browser, a revolutionary phone and a widescreen iPod. Additionally, there also have a high demand for low cost Smartphone in mobile device industry.
According to comScore recent study conducted on the income of customers to purchase iPhone had showing that the high rate of adoption among household with lower rates of disposable income is due to the 50% price reduction of iPhone form the first generation. Thus, this convergent device will wipe off the need of many kinds of gadgets. Although in tough economy, the customers will cutting on a additional gadgets, but the customers demand for a single device will appealing to a new demographic for communication and entertainment in Smartphone market.
The third-party vendors outside of the US had performed the critical components in the supply and manufacture. The sale which is approximately 43% comes from the outside of US. The factors such as terrorism, war, natural disasters and public health issue in the countries of US will cause to create inefficiencies and delays in Apple’s supply chain. In addition, it also will influence the consumer buying behaviour and satisfaction in the Smartphone industry.
Reviews all the analysis on environment factors of the Apple’s external environment which can be conclude that the external environment of the company such like technological change, cultural trends and demographic trends is has huge influences on the Apple’s capabilities and resources. The Apple’s positioning within the Smartphone market has been identify through the analysis of the general environment.
In the mobile devices industry, Apple contest as a manufacturer due to it concluded of all analog and digital handsets which has used in mobile telecommunications. Apple be a substantial contributor in every major market and had found its success at domestic and international. The core competencies such like touch screen capabilities had integrated with the successful commercialization strategies by Apple, so that it able to introduce a new era of phone. An overview of the industry is analysis by Porter’s five forces with the five force of competition such like rivalry, threat of entry, buyer power, supplier power and threat of substitutes (McGee et al. 2005). Therefore, the Porter’s five forces will be able to help to define the Apple’s positioning within the mobile phone market.
Threat of New Entrants
The threat of new entrants was low in the mobile devices market which exclusive of companies that already operates in the mobile phone industry. The cost of capital required for the companies interested be a new entities is exceedingly expensive due to the needed to found development, research and production facilities (Data Monitor 2008). However, the Apple has introduced the iPhone as an example of an electronics firm as well as expanded its product lines in the mobile phone industry (Data Monitor 2008). A start-up company is not able to compete due to Apple’s success is attributed to its ability to produce an innovative product on a reasonable production cost.
Threat of Buyers
In the mobile devices industry, the most frequent buyers are the network operators and retailers. The latest designs and style in mobile device technology is important carry out by these entities so that it can to create the best value for end users (Data Monitor 2008). Even though the network operators sometimes will limit the company’s performance with contracts, but their bargaining power also will be limited because of its success is closely related to the popular mobile device products. For instance, such like Motorola, remove buyers from the supply chain and further lessen the buyers bargaining power in the mobile devices industry as it had perpendicularly synthesized products which sell directly to the end user.
Threat of Suppliers
In the mobile device industry, the suppliers had provided the requisite raw materials to produce phones. Owing to the software and hardware elements are most technical, and then the produces mobile phones are reliant on the suppliers for high quality materials (Data Monitor 2008). Therefore, the suppliers increase the cost or reducing the provided raw materials’ quality to inhibit the performance of manufactures. Additionally, there is a small number of total revenue for suppliers which generated by business in the mobile device industry because the suppliers have supply materials for different industry (Data Monitor 2008). Since the mobile device industry is not a important figure in the suppliers total revenues, they are able to effect the supply contracts.
Threat of Substitutes
The voice-over-internet options and fixed line telephones is the substitutes in the mobile devices market. Moreover, owing to prohibit the users to switch to others services, the mobile devices are providing multiplicity of services (Data Monitor 2008). The threat of substitutes was low in the mobile phone industry because the firms have founded barriers of entry for contending products.
Conclusion of Position
Lastly, the rivalry in the mobile phone industry is considered forceful due to the raised infiltration in domestic and international markets. New technology had been carry out by the rivalry to the market. For instance, in Apple, that the innovative product as an entered to the mobile phone market cause the other companies imitate with its. Even though the Apple iPhone recently has attracted a large number of customer’s attention, but Apple still is at a drawback because of its lacking in product diversification. Thus, the Apple iPhone will provide a better as well as to introduce a more advanced product to fulfill the high demand.
VRIO framework is evaluated a firm’s competencies by analysing its value, rareness, imitability and organization (Wheelen & hunger 2006). For example, Apple beside look its external advantages, its internal advantages also need to be look for the design of Apple iPhone, it has concentrate three main internal advantages on it. The three advantages in it Apple iPhone’s design includes the user interface is simple, the advanced technology, and its brand name.
The new product of Apple like iPhone’s target is to incorporate the phone communications ability together with the data storage, internet, and computer dissemination capabilities and a PDA’s features like quick access and compact. They also will need to make the product more easy and fast to be used. Ever since for the product’s introduction, they have combine the features of their other products such like the iPod photo view and music playback. Hence, the maximal value here is due to the iPhone had combines all the things which people want to bring with them in a portable device.
The others products is much cheaper competing with the iPhone. However, Apple is always using their reputation to provide trouble-free, quality products and the vigorously advertise to having an Apple products as to be a status symbol within young adults as well as making their product worthy of the additional money. But, unfortunately before they have failing provided recently that the malfunction had starting to appear. The real problem was found is the chip which to manage the devices operations status (McLean 2008). This not only will influence the reputation of Apple to loss but also will make they lose some their market share for a period. This design deficiency can be repaired easily in the future models due to the replaceable for the operations chip. During this period, a great probability of the vigorously advertise to having an Apple products and the easy way of phone functions will always continue to maintain their sales increase.
In mobile phone market, Apple iPhone’s features is seldom capable provide by others product. The Apple iPhone biggest competitor most probability is the LG new model such like LG Dare (Zeman 2008). This will be a tough and aggressive competition especially its imitation includes all the features such as its multimedia capabilities in the requirement of video recording and its camera is more advanced, and the touch screen closest reproduce which imitate just like Apple iPhone. Even though the Apple iPhone is design for using on a lot of things well, but its rivalries are still able to combine the essential of the iPhone whereas emphasizing to improve one aspect and to push the sales based on the feature or quality.
The demand of market is huge that people like to see a much more competition substitute of iPhone and no matter spend how much cost to imitate the iPhone. Moreover, when the others company trying to imitate Iphone, they can avoid the initial mistake which the Apple has been done before.
The biggest competitive advantage for the Apple is it has done a great job to exploit its Brand Name. There are always kept in line for the ideals with its brand name such as long lasting battery, easy way for the user interfaces, and trouble-free hardware, even though the malfunction hardware is one piece which will replaced easily in the future models. In spite of that, the applications market is exploiting by Apple to force their consumers only to buy and use the programs which it provides. Apple had used the same tactic on the iPod and iTunes. At the same time, iTunes is able being the easiest and best applications available for music library as well as it is free. But, unfortunately this same tactic is not work for the iPhone.
During the mobile phone market, iPhone is highly valued. The new models should be keep the simple functions and overall design other than highly expected to remove any malfunctions. That is hard for the others alternatives to take a place in their share market that includes much more superfluous features. The market for the next generation mobile phone is huge, although they hardworking to rival with Apple and without regard to the cost in develop imitations, but, the other big mobile phone manufacturers are still continue to rival for their share of market and it will cause the basic and cheap mobile phone became obsolete.
5.0 Differentiation strategy of Apple iPhone
Apple authorized the iPhone customizable downloadable applications and the process of authorization is less consumer’s options and taking time. For instance, the Google phone has supply third party software with open installation forum to provide multiple-choice for end users (Quittner 2008). The applications are assumed safe which finally launched to end users owing to Apple has refuse to some third party software. But, however, the introduced applications of this process which has mentioned previously had to be recalled. A differentiation strategy which is seeks to provide products or services unique or different from those of competitors in terms of dimensions widely valued by consumers have been apply by Apple (Johnson & Scholes 2002). Apple using this differentiation strategy and solve this problem by authorize particular software developers rather than the applications themselves. In order to avoid claim of lawsuits action such as Apple’s monopolistic, it is by increasing competition between software developers (Elgan 2007). Apart from that, Apple may develop customization options to offer hardware arrangements such like movie, internet surfing, gaming, etc depend on consumer favors. This will target specific customer groups to increase iPhone marketability although that service just only providing to AT&T consumers. Furthermore, the package options to fulfill consumer satisfaction with adding raw materials thus to increase iPhone’s cost. Hardware and application customization are the solutions which will cause a larger consumer base and sales increased as well as a customization options being integrate to minimize its disadvantageous diversification limitations.
6.0 TOWS Matrix
TOWS Matrix is using to illustrate how the Apple’s external opportunities and threats can be matched with its internal strengths and weaknesses to summary in four sets of possible strategic alternatives (Wheelen & Hunger 2008).
The iPhone’s advanced Smartphone technology had created an online opportunities as to provide a new generation of phone mobility and usage while also offer customers a new level of personalization with their daily phone. Apple’s innovative style and technological capabilities with user friendly products as the main factor that has carry out to the mobile device market. Nevertheless, Apple has entered a highly competitive market with such firms like LG, Sanyo and Samsung. Apple can be proving that it is success in the competitive market as long as it is able to stay ahead of the pack with advanced improvements in online surf through its mobile device. Apple had creates a new area in the different telecommunications market so that the online competencies of its mobile phone can be to develop. Additionally, Apple needs to focus in the current system flaws of its 3G model.
Besides that, Apple has created a potential weakness to meet customer demand due to a niche market needs less product differentiation. In spite of the fact that a single and dependable device creation can be meeting a lot of customer’s demand, then the Apple is able to eliminate among the enterprise market. In the enterprise market, it is involve that which employees is allow to send and perusal emails, as well as to exchange the significant company information to each other through their mobile phones. The enterprise’s monitoring not only cause a inherent problem to the mobile phone company security while it also have to fulfill the demand of employees on use the mobile phones for personal usage and outside of work. Apple may lose for a profitable market if it not able to produce a product which can compete directly with Blackberry at the enterprise market.
Lastly, Apple is able to keep a strong control for its products price because the selectively of its service suppliers (AT&T, Orange, etc). Besides that, Apple also able to limit the total number of service suppliers by maintains the high demand for its products in order to maximize total profits with restricted total costs. For instance, the new iPhone 3G which had included a value service plan currently is set at a surprising price range of $340 to $400. Apple is still having vast weaknesses and threats at technological competencies of its service supplier’s although it has shown great success. Apple’s hardware suppliers are perceived threats while it uses third party suppliers to manufacture and produce its products. Apple will probably be flimsy to the lacking of products if occur sharp increase to the demand of products. Apart from that, Apple is facing a risky firm partnership at the software side while via its service suppliers which have include multiple defects, general glitch and bugs in the iPhone and also its wireless connections. Apple may face and see huge losses in customer trust and satisfaction if these problems did not fix immediately.
In conclusion, Apple is facing the restructuring changes and different policy while the strategic plan is implementation of the iPhone market is open up to other service suppliers. By diversifying Apple’s product line to fulfill customer satisfactions, that it have to develop policy with other worldwide suppliers. Even though Apple had launched new iPhone model annually, but it still have to provide new products frequently in the market as a multiple providers.
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iPhone 3G Launch Analysis: Growth of iPhone Owners by Annual Household Income
Source: comScore Mobile
Three-month average ending June, July and August 2008
% Growth June to August 2008
$25,000 to $49,999
$50,000 to $74,999
$75,000 to $99,999
$100,000 or more
Installed Base and Consumption Trend Among Mobile Subscribers with Income of $25,000-$50,000
Source: comScore Mobile
Number of Users: Three-month average ending June and August 2008
Overall Market Growth
Listened to mobile music
News/Info via Browser
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