Apple is a company that was founded in 1976 by three men, Ronald Wayne, Steve Wozniak, and Steve Jobs. It was created with the primary intention of selling their first personal computer that was designed by Wozniak. Despite the computer failing to achieve the standard of a finished product, a millionaire by the name of Mike Markkula was attracted in the idea who invested in it (“Apple Computer Inc.”, 1982).
Five years later the company came up with their first Macintosh. Their design with the use of Mac OS was a revolution in the design of personal computers. The computers came with their graphic user interface that allowed one to use a mouse in operating it. Issues surrounding the development of the hardware of the computers led to the departure of Ronald Wayne from the company. Wozniak left one year after Macintosh was launched. This left Steve Jobs with the company.
Jobs changed the focus of the company to the production of high-end products which they referred to as High-Right Policy. These led to the creation of unique products such as Macintosh portable, and PowerBook. In 1984, Jobs suggested that Macintosh should be sold at $1000. This played a part in what led to his resignation from the company in 1985. With the High-Right Policy proving unsustainable, the company started introducing products at consumer-friendly prices. This did not help in the success of the company, and by 1977 the company was struggling to make ends meet. With the resurgence of Steve Jobs, the company started restructuring and growing. The company shifted its focus from the production of computers to smartphones which proved to be a success. While the company may have been a subject of mockery in the past from the way, it operated its business. The leadership of Jobs led to the company growing into one of the world’s most recognized brands (“A Brief History of Apple Inc”, 2017).
Apple is in the technology industry, and its main business is in the designing, manufacturing, and marketing of the media and mobile communication devices. It is also involved in the production of portable digital music players and personal computers. Its principal products include the iPhone, iPad, Apple watch and iPod. Its business is managed basing on geographical area, and these areas are responsible for the marketing and sales of the products in their jurisdiction (Rothman, 2018).
These regions are made up of five critical areas. One of these is the American segment. This is made up of both the north and the south. In the 2015 fiscal year, for instance, this region was the highest generator of sales bringing the company $31.2 billion operating profit. This was collected from $93.1 billion worth of sales. This profit was made through the sales of the company’s major products which are the iPhones.
The company also has another segment known as the greater China. This is made up of China, Taiwan, and Hong Kong. This segment makes up the second largest contributor to the firm’s operating profit. In 2015, it brought the company $23 billion in operating profit having made sales of $58.8 billion.
Other significant segments in the company include Europe which trails behind the greater China, Japan, and the rest of Asia. The company’s main products are in the field of technology, and they are high-end products, and therefore their primary target market would be the high-end customers who can afford their products. Consequently, the firm carefully looks at segments where technology is on the rise and considers the economic status of the region before setting up a branch.
The external environment is the one responsible for the creation of both threats and opportunities to an institution. Therefore, understanding the external environment is essential to the survival of a company. This is because the external environment plays a major role in influencing a firm’s strategy. Apple Company has an external environment which is divided into macroeconomic, social, technological and demographic factors. There are economic factors in the firm’s external environment that are seen as opportunities for the company. Due to the declining global economy, there is a need for low-cost technological products that can satisfy the needs of customers. There is also the socio-cultural trend where the world is moving to more sophisticated and portable devices which are more user-friendly and have a sleek design. The technological, on the other hand, provides an opportunity to the company in that there is a growing need for innovations and the firm, therefore, needs to be at the forefront to ensure that they produce products to meet the standards of the new technology. However, it is clear that Apple did not follow this trend but instead was a trailblazer in championing for new technology.
Porter introduces the five forces responsible for shaping the industry. These forces are buyer’s bargaining power, suppliers bargaining power, the intensity of rivalry, threats of new entrants to the market and risk of substitute services and products (Morrison, 2010). In the technology sector that Apple Company is in, buyers have high bargaining power in the long run since they can decide to switch and purchase a rival product and use it. The industry also gives them the ease of turning to rival devices because the cost of changing from one company to another is minimal if not zero. To be able to beat this ease of switching, companies should, therefore, ensure that they employ the strategy of differentiation in their products to eliminate the risk of the bargaining power of buyers. When a firm differentiates a product, it ensures that there is less loss of sales caused by price change premiums. Differentiation brings about customer loyalty which in turn reduces the sensitivity of products to changes in price. These are the factors that have primarily influenced Apple’s differentiation policy.
The supplier’s bargaining power is also another factor that can influence the strategies of a company. This has played a significant role in the way Apple has handled its suppliers. A company is therefore expected to ensure that it limits the suppliers bargaining power and reduce the cost of its products to ensure that they have a high demand for their products. This will attract more suppliers to the company since they will see the company as a good and a constant market for their products. Despite the leadership and innovative status of Apple Company, the firm failed to construct enough barriers to reduce the threat of new entrants to the market and to eliminate the availability of substitute and cheaper products to the market. The company’s strategy for dealing with competitors has changed over the years, and they uniquely handled every competition. Despite this strategy, the company needs to change the way it approaches its competitors if they will need to sustain their position because there are significant competitors such as Samsung and other brands that are growing fast in the industry.
` The main aim of Steve Jobs in establishing the company was to create value. This was the main strategy that led to the success of his innovation. The value that he brought to the company was mainly based on several unique main competencies that formed an important part of the firm’s value chain. The main activities that the company is involved in include marketing and sales, operations, human resource, and R&D. Many other institutions classify R&D as a support activity while Apple, on the other hand, saw it as a driving force to its development. The company’s support activities are made up of supply chain management, design and customer service. The company is recognized for its supply chain management. It has been ranked as the company with the well designed and efficient supply chain management in the globe. The company can put their products in the market to their consumers at the right time at an affordable price. This has put them an edge above its competitors. The company also uniquely produces its products based on the ease of usage. Their technology is mainly tailored to meet the needs of their customers, and this has worked well for the company bringing average returns over the years.
The main concentration of the company was on R&D. Despite the higher cost that R&D imposed on Apple, it presented the company with a new technological era marked with innovations that would take the firm to new markets such as the music industry and the communication market. These factors played a significant role in the development of the company’s main competencies which are based on resources and capabilities. This is through the design of a new product from scratch while using unique but straightforward designs that gives the consumer user-friendly experiences. It was also achieved by the use of a talented team of product designers and engineers, focused product lines, a well-financed and excellent R&D department and the use of national chain in their distribution system. It is therefore clear that Steve Jobs realized how volatile the industry was and employed the method of R&D to ensure that the company survives in the market. He had understood that by cutting costs in the main competencies, the company would then fail to pick up.
SWOT analysis framework
The company has been recognized to have strengths that are broken down into three major segments. These are the strong brand, high margins of profit and fast and effective innovation process. Apple is recognized as one of the most influential and most valuable brands across the globe. Due to its strong brand image, the company can introduce new and profitable products to the market (Bernroider, 2002).
Furthermore, the firm’s marketing mix is made up of premium marketing strategy which brings the company high profits. This factor, therefore, acts as a major strength since the company can maximize its earnings even in situations where there is limited sales volume. According to the SWOT analysis, the power of the company has proven to be hard to compete with, and the company will thus continue to be a leader in the market.
Three significant weaknesses can be noted in the Apple Company. These are; limited distribution network, high prices of products and the overdependence on their sales in high-end markets. The firm has an inadequate system for distribution that is brought about by the exclusivity policy in the company. This can be seen in the way that the company makes a careful selection of its dealers. This strategy is a weakness because it limits the reach of its products. The company’s premium pricing strategy is another weakness to the company because it limits the company to a high-end market. This limits the majority of the population which is low-income earner from accessing their products. By concentrating on these market segments, the company loses out on the other markets segments which make up the larger population in the industry.
The company has several opportunities in the industry, and these have been broken down into three significant sections. These are: an expansion of its distribution networks, an increase in sales volumes brought about by the growing demand for their products and introduction of new products in the market. The company has the opportunity to overturn its weakness of limited networks and change its strategy of distribution. This will help the firm reach more people in the market which will, in turn, transform into more sales. Through the use of aggressive marketing, Apple can be able to increase its sales volume significantly. This will be achievable especially due to the increasing demand for mobile products. Because the company has had successful product lines, the company has the opportunity of introducing new lines in the industry that can ride on the brand image that has already been established in the company.
The company also faces several factors in the form of threats. These come through aggressive competition from other companies, imitation of their products and the increase in the cost of labor in many countries. With companies like Samsung in the industry, the firm faces a significant threat in aggressive competition. Samsung uses rapid innovation strategy just like Apple and thus posing a major threat to the company. Apple should, therefore, impose solid fundamentals to ensure that they maintain a competitive advantage in the industry. There is also a major threat that is brought about by the imitation of the firm’s products. Several Chinese companies produce products that have similar designs as Apple products and hence dividing the market. There is also the increase in the labor costs especially from the company’s contract manufacturers that have led to a reduction in the profit margin. It is therefore clear that Apple can adversely suffer from the threats of aggressive competition from other players in the industry and imitation of its products.
Short Term and Long Term Action Plan
Based on the external and internal factors that have been discussed in the SWOT analysis, the firm, therefore, needs to come up with a short term and a long term action plan to ensure that it maintains its success in the industry. Apple has a significant strength that can be used to handle the firm’s weaknesses effectively. It can employ these strengths to explore the opportunities available to it. However, the aggressive competition that the company faces poses a significant threat to its growth, and the company should, therefore, ensure that it takes a rapid response to this aggression. This need to be done as soon as possible as the institution still enjoys a reputable brand image. The company needs to come up with an aggressive sales campaign to ensure that they beat their competitors before they can set up their base in their markets.
In the long run, the company needs to continue with its rapid and aggressive innovation to ensure that they maintain their relevance in the industry. The technology industry has a very fluid market and therefore, for one to keep their place, they need to come up with the new idea that are in line with the latest trends in the market. By using this approach, the company will also be able to overcome the severe effects of imitation since the introduction of new product lines will mean that the competitors will take up much time to come up with a replica. The company also needs to consider a shift towards the automation of its production process to cut the costs that are associated with the increasing labor costs.
During the early years of the company’s inception, its primary focus was on Macintosh. The main strategy that the management employed in an industry that was mainly dominated by major brands like IBM, Dell, and HP was the use of differentiation. Apple’s first creation was Mac which allowed the users to plug and play. By designing Mac from scratch with unique disk drives and chips, the company was able to attract loyal customers from their competitors who were not concerned of the high product prices but were more concerned on quality and exclusivity. This led to a decline in the prices of IBM products. Being the company’s CEO then, Scully decided that he needed to reduce the prices of the company’s products to match those of IBM which proved to be a costly strategy that led to the decline in the company’s profits. The company then shifted to the approach of cost leadership with differentiation which still failed to take off until the introduction of Steve Jobs as the CEO in 1997. Jobs, therefore, shifted from cost leadership and relied more on differentiation. By employing this strategy, the company was able to beat its competition since they produced an exclusive line of products that its competitors were not able to compete with and thus monopolizing the market. This consequently led to the growth of the company that was on the verge of collapse.
The company under Steve Jobs had significant growth through his strategy of diversification. He saw opportunity in the diversification of the company’s products which could be achieved through innovation. One of his greatest policies was also the expansion of the company and entrance into the global market. This allowed the company to gain more market share in countries where technology was rapidly being embraced. He also employed a focused strategy where he allowed a certain range of products to represent the image of the company while products that he felt did not have potential were slashed. By making iPhone the brand image of the company, Apple was able to grow its reputation to one of the biggest brands in the market despite the high-end prices associated to it (Lehman & Haslam, 2013).
The company then went ahead to create a bookstore which went ahead to dominate the publishing sector. This was in their diversification strategy. Despite this being a new industry to the company, it was able to ride on the reputation that it had accrued to go ahead to compete with the giants in the sector such as Amazon (Ledenyov & Ledenyov, 2015).
During the inception of the company, Apple was able to initiate a technological revolution that improved the profitability of the PC industry. It managed to topple over the industry leaders in the sector beating them with their new technology. This is, therefore, evidence that one needs to change the external environment to their advantage to ensure that they succeed in this extremely volatile environment. , therefore, means that for the company to remain relevant in the industry, it needs to use its main competencies to be both differentiation and a cost leader in the increasingly sensitive market. It should also look for strategies to block the entrance of new players in the market and fight off their competitors who are rapidly catching up with the firm’s innovations. Despite its innovation and differentiation strategy making the company a market leader, it did not stop its competitors with imitating its products and offering their customers lower prices. The company, therefore, needs to rethink its strategy to ensure that they fight off these competitors.
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