Introduction
Steve Jobs, Steve Wozniak, and Ronald Wayne incorporated Apple Inc. in 1975 with the aim of trading the Apple I personal computer kit (Boudreau & Lakhani 2012). The kits were the sole products that the company marketed at the time. However, due to advancement in technology and innovation that has characterized the company, it has recently managed to introduce more products in the market. Being in the technology industry, Apple Company manufactures and sells mobile communication and media devices, which have attracted the attention of customers in the past few decades (Morgan & Rego 2009). In addition, the company also markets a variety of software and provides networking services. The company has built great confidence among its customers due to its exceptional branding of its products and customers tend to buy the products only because the company manufactures them (Schilling 2005). The company’s products are of high quality with different features contained in almost all devices manufactured by the company. Since its incorporation, Apple has been actively involved in extensive research and through trial and error concepts; the company has managed to introduce exceptional products in the market. The company has invoked findings from research and reviews from customers coupled with the Porter’s five forces model to outsmart other companies in the technology industry (Lasserre 2012).
Analysis of Apple Using Porter’s Five Forces Model
Porter’s five Force Model
Porter’s five Forces Model centers on the assessment of the competitive factors in the environmental setting on which an organization operates in order to determine chances of its success in the market (Cravens, Piercy & Baldauf 2009). The concept is based on the following 5 key components:
- Knowledgeable customers can force down prices by pitting rivals against each other
- Influential suppliers can drive down profits by charging higher prices for supplies
- Competition can steal customers
- New market entrants can steal potential investment capital
- Substitute products can steal customers
Forces that Determine Sustained Innovative Ability
Power of BuyersCustomers are the determinants of the success or failure of a company and in most cases, they are influential since they have the ability to choose where to procure their commodities due to the high number of personal computer vendors in the market (Lasserre 2012). Apple Company has embarked on research and has innovatively managed to introduce devices that are all-inclusive thus attracting more customers (Lüsted 2012). In addition, the company has a well-established customer loyalty and it benefits from economies of scale due to its large size thus lowering its production cost which translates to the low cost of its products.
Bargaining Power of Suppliers
Apple has the ability enjoys from economies of scale due to its large size thus the aspect of bargaining power of suppliers is not a major threat to the company. In addition, there are numerous choices for apple due to the high number of companies producing substitutes that apple can purchase from. The main suppliers for apple are Microsoft and Intel and they have been forced to lower their prices in order to remain competitive in the competitive market.
Competition
Competition is overtly one of the greatest challenges faced by Apple in its efforts to maintain its competitive advantage. The technology industry is growing a very speedy rate due to innovation leading to the introduction of completely different devices. Companies in the technology industries such as Dell, HP, and Lenovo are equally big enough to enjoy economies of scale just like Apple. This leads to lowered costs of their devices prompting apple to lower the prices of its products in order to remain relevant.
The Threat of New Entry
Competition in the field of technology is limited by the fact that the industry requires high startup capital that keeps investors away (Trott 2008). Companies such as Dell, HP and Lenovo and Apple which are the main players in the technology industry have the ability to maintain the costs of electronic devices at a low rate due to economies of scale enjoyed by the companies as a result of their large size. This is a major strength for the company since it has already acquired a large market share and new entrants cannot compete with the company as they will be suppressed before they establish a market share.
The Threat of Substitutes
Apple has faced a great threat from competitors who have attempted to introduce similar products as those produced by the Apple Company (Hitt, Ireland & Hoskisson 2012). In response to this threat, Apple has embarked on research and has come up with all inclusive devices. In other words, the company has installed many features in their devices to make them more attractive to customers. An example of this strategy is evident in the iPhone which is designed in such a way that users can text, call, take pictures and videos, use the internet, use GPS, play games and check multiple email accounts. The presence of these features in both iPhone and iPad makes the products unique, valuable, and exceptional as counterfeits lack such features. Customers, therefore, tend to purchase an iPad in place of purchasing a GPS and a cell phone since the iPad can perform functions performed by the duo.
External Environmental Analysis of Apple
PESTEL Analysis
Natural Environment
Environmental pollution has in the recent past turned into a global issue as the problem of global warming intensifies. Electronic devices have been attributed to environmental pollution due to poor disposal and the radioactive substances contained in such devices. Numerous legislations have been enacted to ensure that companies act ethically regarding conservation of the environment. In response to the environmental pollution concern Apple has embarked on research to find ways of greening its supply chain.
Socio-Cultural Environment
The invention of the internet has been a key driving force towards communities and individuals needs and preferences. Today, most customers in the world are going for devices that best suit their needs. Customers are looking for devices that have high speed internet connectivity as opposed to the traditional computers. This has greatly boosted Apple’s devices since they are viewed as all inclusive. Apple has innovatively included almost all applications in its devices making them attractive to customers.
Political Environment
Politics has largely influenced the operations Apple in the various countries it operates. In most countries, politicians have enacted laws that withdraw certain privileges enjoyed by the company in attempts to protect local companies. Piracy has also been a great challenge to the company as laws regarding intellectual property rights are not clear enough in the global market. This has posed a great challenge in the company’s global market due to piracy that has characterized the international market.
Economic Environment
The global economy is speedily growing increasing the overall spending among the global population. This has the impact of increased turnover for the company’s products since customers can now spend the extra income in buying electronic devices. The growing economy has seen most industries upgrade their technology leading to increased demand for the company’s products. This is favorable to Apple Company since it boosts its sales due to increased customer spending and low unemployment rates afforded by the growth of the economy.
Technological Environment
Another strength that Apple has is the current trends in technology that has seen most industries embrace new technology (De Wit & Meyer 2010). Most public and private sectors are replacing the old systems with new ones in order to increase efficiency. Given that the company is one of the leading companies in the technology industry, it has managed to win tenders to modernize such systems in various countries. This has increased the company’s profitability through increased turnover. China and the US are among the global countries that have embraced changes in the operating systems replacing the old technologies with the new one. Given that, the company’s major branches are located in the two countries the company stands to gain a lot through increased turnovers.
Legal environment
Apple is a global company operating in various countries in the world. Different countries have different legislations governing the conduct of businesses in their respective countries. This has seen apple locked in a number of unethical issues ranging from mistreatments of employees to pollution. In reaction apple has introduced a more strict ethical code and has embraced the concept of corporate philanthropy in order to cope with the legal challenges.
Strategic Management in the Apple Company
Flexibility and Innovation
The company’s branding is exceptional such that customers tend to purchase its products simply because they are made by Apple. Innovation has characterized the company’s operation since its incorporation. The introduction of iPod in 2002, for example, replaced the mp3 players that could not hold many songs (Hussey 2007). The newly introduced iPod could hold up to 1000 songs, the reason why most customers embraced it. As soon as competitors introduced an imitation of the iPod, the company went ahead to improve its device by introducing iTunes. Through such innovations, the company has managed to outsmart competitors who include Microsoft and Android. The company’s products are unique and can hardly be imitated by the competitors. Attempts by other companies in the market to imitate Ipad have failed since the counterfeit ones lack certain applications that Apple Company has installed in theirs (Dedrick, Kraemer & Linden 2009).
Customer and Employee Satisfaction
Apple Company has since its establishment embarked on serious research pertaining to customer satisfaction. The company has used the internet and social media to gain customer views and has used such views to improve its products. The new Ipad for example only differs slightly from the earlier one with only a few features added to the second one (Seidler-de Alwis & Hartmann 2008). This is a clear indicator that the company uses customer reviews and redesigns its products to ensure customer satisfaction and retain its market share. In addition, the company engages competent employees with the ability to maintain tremendous improvement of the company. Going by the company’s website, it is clear that it recruits its staff members based on their skills and expertise. Due to the company’s commitment to hiring qualified employees and embarking on innovation, its products have impressed their users thus helping the company gain a bigger global market share (De Wit & Meyer 2010).
An analysis of the company’s financial statements sheds light on the company’s excellent performance both strategically and financially. The company has through innovation managed to block new entries in the technology industry by incorporating different features in a single device. In addition, Apple has a healthy income statement and balance sheet that are indicative of its good performance in the technology industry. Its financial strength is demonstrated by the company’s failure to rely on both short term and long term loans as can be deduced from its financial statements (Hill, Jones & Schilling 2014). In addition, the company’s income statement illustrates the company as having increasing annual profits.
Recommendations
Since the company has already established good reputation among its customers and it has great strength compared to its competitors, it needs to focus on innovation to produce an improved must have device with more features that the iPhone (De Wit & Meyer 2010). The company should invite reviews from customers through the social media and comment cards in order to gain insight into the customers’ needs not fulfilled by the iPhone and the iPod. There is a need for a more integrated device since the company’s customers are mainly young people that are very slippery to the technology and therefore retaining them will require improved devices.
Given that the company’s products have a wide acceptance in all parts of the world, the company needs to invest more in research to come up with more useful technology to keep up with the changing needs of customers (Trott 2008). The company needs to partner with other technology companies to improve their products and services and to ensure that customers’ wants are satisfied. Apple should go ahead to impart more features on the iPad so that customers will go for the device instead of laptops. This will have the effect of increasing their market share and help the company outshine its competitors since counterfeits will lack the additional features.
Lastly, the company needs to invest a considerable amount of money on its employees which should be done in the form of introducing a nondiscriminatory training program that will see its workers acquire additional training (Lüsted 2012). Employees’ remuneration should be matched with their performance and new ideas should be rewarded in order to encourage innovation. Motivated employees will see the company retain its competitive advantage, as they will continue being innovative resulting into more integrated products.
Conclusion
Apple Company is one of the most successful companies in the field of technology and has won customers’ loyalty over the past few decades due to its high quality products. The company applies a product mix founded on life style, value, and reliability, which has boosted its reputation. Since the company introduced iPhone, the threat of substitute products decreased greatly due to the innovative inclusion of various features in the device. To retain the competitive advantage that it has acquired in the past, the company must remain innovative and embrace the new technology. The company has overcome different challenges in its operations through the application of strategic management. For the company to remain competitive, it has to remain innovative and embrace the new technology.
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