EXECUTIVE SUMMARY
This case study report evaluates the current position of Apple Plc in the computer and mobile industry from the perspective of external and internal analysis. Furthermore, the strategic model of Apple Plc is critically discussed using various models and then is made some recommendations. The external analysis is conducted using the frameworks of PESTEL and Porter Five Forces analysis. On the other hand, internal analysis is conducted using the frameworks of VRIO and SWOT analysis. For conducting the business model and strategic analysis Business Model Canvas and Porter Generic Strategy frameworks are used.
INTRODUCTION
Apple Inc is a US based multinational firm situated in California in the center of the Silicon Valley. Apple Inc was founded in 1976 and ever since then the firm has had been directing the technique in innovating new products, nevertheless it has had gone through several ups and downs ever since then. The business operation of the firm is concentrated towards designing and developing the personal computers, additional linked software products, and the electronic products in the forms of MP3 players and iPods. The foremost product offerings of Apple are iMac, iPod, iPhone, and its most recent highly developed product is iPad, which is on the threshold of generating an additional revolution subsequent to iPhone. Apple gave to the world the first ever tremendously successful personal computer, and the firm has had been for all time on the front position of innovating fresh products; nevertheless it has generally struggled to preserve the hold on the market share in the product line. Recently, Apple has transformed its image from an innovative computer manufacturer to a fully fledged consumer’s electronic firm (Apple Plc, 2013).
MAIN BODY
EXTERNAL DRIVERS
PESTEL Analysis
Whilst analyzing external drivers or external environment, one of the most described tools is PESTEL analysis. PESTEL stands for political, economic, social, technological, environmental and legal (Johnson and Scholes, 2008). Accordingly, in order to analyse the external analysis of APPLE, PESTEL analysis is undertaken.
Figure : PESTEL Analysis and Apple
Source: Johnson and Scholes (2008)
Apple obtains perhaps more than half of its business from outside US, but because of the horrific international relations, wars and terrorism, Apple is facing unfavourable political environment internationally (Apple Plc, 2013). The appalling political relations amid US and the other part of world have badly affected the business results of Apple. Nevertheless, China has emerged as a prospective market for Apple in view of the fact that gradually political environment of China is developing into favouring for US based firms (Datamonitor, 2012a).
Economic: Apple is too suffering from the worldwide downturn like other global players in the computer and mobile industry under which the firm currently operate. All through the inflation rate is high, at the same time as consumer’s earning fails to show any substantial recovering. Currently the unemployment rate is high restricting people to make expenses on luxury products(Datamonitor, 2012a). Nevertheless, Apple’s revenue is not so affected due economic downturn even though nearly all products of the firm are luxury. However, Apple is successful in such unfavourable economic environment through designing diverse exclusive products from its competitors, the demand of which Apple’s products are on upward trend.
Social: Globalization plays a very significant role in Apple’s products. Seeing that the world might not be imagined devoid of the gadgets, consequently Apple products have marked their existence in the global market. At the present time, the social life of the people is controlled by technology (Datamonitor, 2012a), where Apple is found as the ruler of technology due to its quality and design. An additional big social effect is the music industry, which has had turned out to be virtual and set up its market to the cyberspace (Apple Plc, 2013). Noticeably in this context Apple has created the biggest virtual media store of digital music which is recognized as iTunes.
Technological: Apple has made investment for the most part on its product research and development ground and therefore, its products are at the zenith of the new-fangled innovative products grade (Apple Plc, 2013). The technology has been fast shifting globally and the market for it has developed into enormous, which has added to more and more competition and as a consequence, as soon as technological alterations are concerned the product life cycle has been condensed severely (Datamonitor, 2012a), which the Apple takes the benefit through launching fresh and innovated products in the market, which in due course rule the market.
Legal: Apple is the partaker in a range of legal actions and its competitors and peers are as well involved in lawsuit in its usual course of business for different causes. More importantly, Apple’s success depends on the intellectual property rights. Intellectual property right declarations might amplify against Apple as the firm has grown (Apple Plc, 2013).
Environmental: Latest US laws and regulations are creating manufacturers accountable for recycling, and Apple brings domestic recycling facilities and does not ship waste out of the country (Datamonitor, 2012a). More importantly, Apple has boosted their expectation about green production. In addition, Apple operates in an approach that preserves the environment and protects the health and safety of their staff (Apple Plc, 2013).
Porter’s Five Forces Analysis
According to Porter (1980, 2008), there are five competitive forces in an industry that shape the strategy of a firm operating in the industry. These five competitive forces are threat of new entrants, competitive rivalry, bargaining power of suppliers, bargaining power of customers and threat of substitutes. This is shown in the Figure. The Porter five forces analysis of computer and mobile industry is presented under which Apple is operating.
Figure: Porter’s Five Competitive Forces
Source: Porter(1980, 2008)
Threat of new entrants: The level of competition is very high in the computer and mobile phone industry. As a result, entering of potential competitors certainly is not easy in the industry. Apple had edge in this regard, Non-Apple customers do not have the matching point of brand loyalty such as that of the Apple customers (Datamonitor, 2012). Noticeable here that the brand loyalty achievement of Apple can be attributed to power of research and development and product innovation. More importantly, Apple’s cost benefits perform in line with the computer and mobile markets. For that reason, it is tough for prospective competitors to enter as the cost is too high to enter in the market.
Competitive rivalry: Competitive rivalry is very high in the computer and mobile industry. This is shown in the Table. The fact is that the rivalry in the industry is very high and is addressed by aggressive pricing systems, profound innovation and design in products, powerful Internet marketing, direct selling, and after-sale services. The major players in the industry that are in the race of competitive rivalry are Dell, HP, IBM, Samsung, Sony, Toshiba. However, recently Oracle and Google have emerged as the major competitors of Apple so far as computer industry is concerned (Datamonitor, 2012). In order to stay ahead of the competitors, Apple exercise differentiation competitive strategy to build their products and services poles apart from its competitors. The firm as well utilizes the focus strategies. For case in point, Apple utilizes focus strategy to target iPhones to customers users rather than business users.
Bargaining powers of suppliers: Bargaining power of the suppliers is high in the industry. This is for the reason that software processing suppliers are numbered in the industry, and in such a situation strategic alliance with the suppliers is advantageous from the perspective of attaining competitive advantage. Strategic alliance of the Mac of the Microsoft is an illustrative example (Datamonitor, 2012). Apple can also form such strategic alliance.
Bargaining power of customers: Bargaining power of customers is as well high in the industry. Noticeably here that customers might decrease purchasing laptops in panic of economic downturn, where retailers might star pressing for lower prices, customers might download and share music with friends devoid of paying for it (Datamonitor, 2012). Apple needs offer differentiated products on low cost to successfully compete in such a market situation.
Threat of substitutes: The product costliness is itself a threat of substituting the offered products in the market, as substitutes at a lower price are all the time obtainable. The continued recession might as well be a threat to its products. moreover, Windows 7 software is attaining more market place subsequent to vista flopped and more importantly the technological advancements (Datamonitor, 2012) that have been occurring each next day, is a big threat to Apple, and therefore Apple needs to demonstrate it innovation capability for which is known for in the market.
INTERNAL DRIVERS
VRIO Framework
The VRIO analysis is an effective tools of analyzing internal driver or environment of a firm, where VRIO stands for value, rarity, imitablity, and organization as a whole (Johnson and Scholes, 2008). Hence, VRIO analysis is tremendously significant for the internal analysis of Apple here. This is shown in the Table.
VRIO Analysis of Apple
Source: Al-Darorah, J.(2012)
As shown in the Table, brand name of Apple is sustaining competitive advantage in VRIO framework, whereas simplicity is in competitive situation of parity. So far as hardware is concerned, hardware of Apple has temporary competitive advantage. Finally software of Apple is in competitive situation of parity. In this way, VRIO analysis of Apple suggests that the firm has position of a huge and stable market nevertheless it continually requires to bring up to date in relation to its methods and technologies to cultivate further.
SWOT Analysis
Another important and perhaps most described tool of internal environment analysis is SWOT analysis, where SWOT stands for strength, weakness, opportunity and threat (Johnson and Scholes, 2008). The SWOT analysis of Apple is presented in the Figure.
Figure: SWOT Analysis of Apple
Source: Datamonitor (2012b)
Strengths: Apple has a worldwide presence ranging from America (North and South), Europe to Asia Pacific. Another strength of Apple is its reputed and powerful brand which is perhaps most recogniziable brand in the market in its segments consumers. Moreover, Apple enjoys an elevated rank of brand awareness and brand recognition for its products all through the markets in which Apple operates. Besides Apple designs, manufactures and markets personal computers and connected software, services, peripherals, and networking solutions; a portfolio that is very much synergistic in temperament. Last but not the least, the extension of Apple’s iPod and iTunes products has demonstrated exceptional success in recent times.
Weaknesses: Apple has recorded feeble returns on assets and investments so far as recent years are concerned. On the other hand, the firm is vulnerable to a supply risk for major components.
Opportunities: Rising demand for wireless connectivity and networking products is prospective from the perspective of Apple’s business growth. The firm is if at all possible positioned to make the most of this boost, as it by now offers arrange of offerings in this quarter. Moreover, Apple is concentrating on altering its Mac platform into a digital hub that joins together iTunes video content to customers’ television screens and portable devices. Besides, Apple’s US MP3 player market share is increasing offering huge opportunity to Apple.
Threats: Apple is coming across with strapping competition in every area of its business. Formerly and even presently, price competition in the market for personal computers has been predominantly severe. The threat is that the Eurozone economy is fast going down, where the slowdown has had accompanied by means higher oil prices and enhanced unemployment. Another notable threat to Apple is its involvement in legal actions.
CASE DISCUSSION
Current Position of Apple
The Figures maps out Apple’s profit pools by product, demonstrating that the iPhone and iPad make up a vast share of the firm’s revenue and profit margin. The contribution of personal computer is negligible in the revenue and growth of the firm. Therefore, the firm can increase its revenue and growth in computer segment, particularly through focusing on laptop.
Figure: Apple’s Profit Pools
Source: Noren, E.(2013)
Business Model of Apple
Alexander Osterwalder and Yves Pigneur have extended a popular Business Model Canvas, that is used to evaluate effectively the business model of a firm. In Business Model Canvas framework, the canvas is illustrated as a shared language for elucidating, visualizing, evaluating, and shifting business models. The Business Model Canvas of Apple is presented in the Figure.
Figure: Business Model Canvas of Apple
Source: Noren (2013)
Considering the evaluation of Apple’s Business Model Canvas it would be interesting to see in the long-standing as how Apple carries on to expand its mobile and computer operating systems, which appear to be rising more and more similar as the times to come. Apple carries on to push for a future where media is with it all over the place on any device. Hence, if there is one firm that might make us forget as regards the distinction amid mobile and desktop, the stuff on a hard drive and the substance in the cloud, it is none but Apple.
Porter Generic Strategy of Apple
Porter Generic Strategy is an effective framework that may well be utilized to evaluate the current strategic approach of a firm and the likely approaches available. As per Porter (1980), a firm has three generic strategies for attaining competitive advantage in the forms of differentiation, cost leadership and focus. This is shown in the Figure.
Figure: Porter Generic Strategy and Apple
Source: Porter (1980)
Apple’s strategic approach has had been primarily differentiation and the focus of the firm has had been on quality and design, and the firm never looked for cost leadership or offering products on low price competitively. However, the current strategic approach cannot be said practical, as Apple has negligible market share in personal computer and laptop segment which is prospective segment in the market in upcoming times. Therefore, Apple is recommended to fill the space between cost leadership and differentiation through balancing approach of focus strategy. This is shown in the Figure.
Figure: New Strategic Approach for Apple
Source: Noren (2013)
CONCLUSION AND RECOMMENDATION
Apple is facing unfavourable political environment internationally.China has emerged as a prospective market for Apple in view of the fact that gradually political environment of China is developing into favouring for US based firms. Apple is found as the ruler of technology due to its quality and design. An additional big social effect is the music industry, which has had turned out to be virtual and set up its market to the cyberspace. Noticeably in this context Apple has created the biggest virtual media store of digital music which is recognized as iTunes. The technology has been fast shifting globally and the market for it has developed into enormous, which has added to more and more competition and as a consequence, as soon as technological alterations are concerned the product life cycle has been condensed severely, which the Apple takes the benefit through launching fresh and innovated products in the market, which in due course rule the market. Intellectual property right declarations might amplify against Apple as the firm has grown. Apple has boosted their expectation about green production. Apple’s cost benefits perform in line with the computer and mobile markets. Apple needs offer differentiated products on low cost to successfully compete in such a market situation. The technological advancements that have been occurring each next day, is a big threat to Apple, and therefore Apple needs to demonstrate it innovation capability for which is known for in the market.
Brand name of Apple is sustaining competitive advantage in VRIO framework, whereas simplicity is in competitive situation of parity. So far as hardware is concerned, hardware of Apple has temporary competitive advantage. Finally software of Apple is in competitive situation of parity. In this way, VRIO analysis of Apple suggests that the firm has position of a huge and stable market nevertheless it continually requires to bring up to date in relation to its methods and technologies to cultivate further. Apple has reputed and powerful brand which is perhaps most recogniziable brand in the market in its segments consumers. Moreover, Apple enjoys an elevated rank of brand awareness and brand recognition for its products all through the markets in which Apple operates. However, Apple has recorded feeble returns on assets and investments so far as recent years are concerned. Rising demand for wireless connectivity and networking products is prospective from the perspective of Apple’s business growth. Besides, Apple’s US MP3 player market share is increasing offering huge opportunity to Apple.
The contribution of personal computer is negligible in the revenue and growth of the firm. Therefore, the firm can increase its revenue and growth in computer segment, particularly through focusing on laptop. Apple carries on to push for a future where media is with it all over the place on any device. Hence, if there is one firm that might make us forget as regards the distinction amid mobile and desktop, the stuff on a hard drive and the substance in the cloud, it is none but Apple. Apple’s strategic approach has had been primarily differentiation and the focus of the firm has had been on quality and design, and the firm never looked for cost leadership or offering products on low price competitively. However, the current strategic approach can not be said practical, as Apple has negligible market share in personal computer and laptop segment which is prospective segment in the market in upcoming times. Therefore, Apple is recommended to fill the space between cost leadership and differentiation through balancing approach of focus strategy.
REFERENCES
Porter, M. E. (2008). “The Five Competitive Forces that Shape Strategy.” Harvard Business Review 86(1), pp.78-93.
Porter, M. E. (1980). “How competitive forces shape strategy.” McKinsey Quarterly, (2), pp.34-50.
Johnson, G., K. and Scholes, et al. (2008). Exploring Corporate Strategy, Prentice Hall Inc., London.
Datamonitor (2012a), Global Computer Industry: Industry Analysis
Apple Plc (2013), Website of Apple Plc
Al-Darorah, J. (2012), “Strategic Management: Apple Inc –Keeping Innovation”. [Online] accessed from http://www.academia.edu/3996787/STRATEGIC_MANAGEMENT_EA [1st August, 2013]
Datamonitor (2012b), Apple Inc: Company Profile
Noren, E. (2013), “Analysis of the Apple Business Model: One Company, Many Business Models”. [Online] accessed from http://www.digitalbusinessmodelguru.com/2013/02/analysis-of-apple-inc-business-model.html [1st August, 2013]