Question
3. The market based view of strategy Internationality: Globalisation v Localisation
4. Strategy Formation: Planned v Emergent
Format of the Project:
· The report should display a coherent structure i.e.
a. title page,
b. Table of contents page,
c. introduction,
d. executive summary,
e. methodology,
f. findings,
g. analysis,
h. conclusions,
i. recommendations,
j. references k. appendices.
· All sources must be referenced in the text and a full bibliography must be provided (including visited websites) in the MLA style.
Answer
Contents
Introduction
Founded in April 1976, Apple Inc. has risen to become one of the top global companies in the globe. Recognized by Forbes as one of the top100 companies in terms of innovation and strategic management, the company has executed a systematic procedure to ensure that its brand remains globally acclaimed (Malin and Todd, 223). With a concentration in computer hardware, computer software, and consumer electronics, Apple has set the pace in strategic design and management in a way that extends to its internal and external operations both in the USA and on an international scale. This report will look at the company’s strategy with a focus on the challenges and dilemmas encountered in execution and management. This report will be carefully structured to carefully explain the methodologies for research, the findings, a comprehensive analysis, and recommendations on these challenges. This analysis will take on an expansive approach that includes the company’s background, its geographical expansion, and financial statistics that go well ahead to offer a clear image of the current state of the company. Essentially, this analysis is not limited to the current positioning but on a continuous scale that is reflective of the positive and negative growth over a long, quantitative, and qualitative timeframe.
In 2015, Apple’s revenue stood at $233.715 billion, a 27.85% increase from the previous year (Malin and Todd, 224). With more than 100, 000 employees, the company has efficiently sustained its growth and infrastructure capacity despite strong competition from leading multinational corporations such as Samsung, Dell, LG, Sony, Google and Microsoft. Notably, most of these companies also rank among the top most innovative and strategic companies in the world.
Executive Summary
This report begins by outlining the brand and strategic plan for Apple. After a brief description of the company, its formation and core foundation principles, this report outlines the research on Apple’s case study in reference to its strategic plan and challenges it continues to encounter while implementing this plans. This analysis includes the methods of research, the findings, a comprehensive analysis and the recommendations. A reference list used will mostly include books that develop the theme of strategic planning and management. This analysis will focus on these themes as evidenced by their strengths and weaknesses. Recommendations made for these challenges revolve around modifying these shortcomings that develop from decisions made of their strategy. Evident themes will revolve around their strategy formation, competition, environment and strategic management.
Methods
The research methodology used in this report involves analysis of secondary sources and data. With an extremely good track record, Apple has been referenced in many strategic planning processes and studies at the corporate and education institution levels. Credible international sources such as Forbes, the World Bank are among some of organizations that have carried out comprehensive research obtained from primary sources such as the company itself (Cook, 44). Other international news publications such as the New York Times and the Guardian also offer comprehensive facts and data concerning the company.
To ensure detailed research and analysis, the strategy used will involve qualitative content analysis from the aforementioned sources. With a systematic breakdown, this analysis will look into the growth trends and financial return against the marketing and advertisement put into the company. Essentially, this analysis will look into its internal environment and external environment (Monin, 89). The internal environment normally includes the strengths and weaknesses while the external environment will include the opportunities and threats. This goes to show that a SWOT analysis will be integrated into the whole process.
Findings
Apple’s business strategy has famously been product differentiation in design and functionality. Even though the company had put in place this strategy since its formation, it is the iphone product launched in 2007 that has gone ahead to evolve and spark increased focus on differentiation in their other products (Malin and Todd, 223). Its first iphone product was widely acclaimed immediately it was launched. In the years that followed this flagship product, the iphone has truly evolved into a flagship product that accounts for 50% of its total sales currently (Witzel.68).
Another core foundational strategy has been to build and expand its own online stores and distribution network as a way of promoting exclusivity and authenticity. The company has been able to successfully regulate the quality its products and has reduced the challenge of counterfeit products.
Some of the company’s strengths include their advertising abilities, strong distribution channels, vertical integration, financial stability and brand strength or recognition. In reference to their advertising, this has profoundly supported its brand. The company has set aside an advertising budget close to $2 billion (Malin and Todd, 223). A famous comparison is often made between Apple’s advertising budget and that of its competitors. A specific example is Samsung which uses a much higher budget for its advertising. While Apple will only spend about 1% of its revenue on advertisement, the company effectively utilizes this budget and ensures that this investment generates equal results. This advertisement has included direct and indirect partnerships with network carriers such as AT&T, Verizon and Sprint. Forbes has also listed Apple’s brand as the most valuable in the world, a position that the company has maintained in the consecutive years. With a well established distribution network that grows in proportion to the market and company’s expansion, the company has been able to remain profitable with an extremely high margin.
Their strong financial standing and support aided by continuous cash flows and investment has served as one of the biggest strengths in developing its technological capacity. Their cash reserves are equally strong in the US and in their international distributors. This has allowed their US success to match their international expansion and presence success. Finally, one of the biggest strengths that Apple holds is their vertical integration and the subsequent ability to synchronize and balance operations in all these categories. The four elements of Apple’s business activities include hardware, software, service provision and retailing components (Drejer, 147). The company’s ability to integrate all these elements as separate yet integrated units and still have one of the biggest and most comprehensive supply and distribution chains is a top achievement. In the US, it has won recognition as the best company in building such a seamless integration and remaining profitable in each individual unit at the same time.
While the company’s strengths demonstrate the company’s success and strengths in terms of strategic plans, it has also encountered numerous challenges and shortcomings in their design and implementation of these strategies. While it continues to promote creativity and innovation in management, morechallengesare emerging with the continuous rolling out of individual processes and steps. Surprisingly, some of its strengths also lead to other forms of challenges. This creates a tight dilemma on whether or not to eliminate a strategy that essentially brings challenges since it may equally bring advantages and benefits (Curtis, 48). These challenges will be expounded in the analysis following a reference of the strength of the company and foundational strategic management plan.
Analysis
A great challenge for Apple arises from technological advancements in the form of high expectations among consumers, who view it as industry leader in the adoption of innovative technologies. While the brand has indeed designed products and services that exhibit high technological input in design and performance, this hype does not live up to this expectation and projection especially with the iphones. This has become more obvious with other competitors now making strong technological improvements, an occurrence that was not common. In recent times, Samsung and Microsoft have grown as worthy competitors and have in fact integrated innovative technological improvements in their gadgets. This has been worsened by the fact that the Android market share which stands at about 40% dominates the market as compared to their 28% market share (Malin and Finkle 225). Furthermore, most Apple products, both hardware and software are largely incompatible with other systems. Users who may be used to the Microsoft operating system may find it difficult to adjust to the Apple operating systems and will sometimes revert back to Microsoft. This problem arises from its vertical integration and overconcentration on iphones for sales and revenue.
Another dilemma encountered by Apple in relation to this technological challenge is its failure to expand its budget to cover for more research and technological development. This has limited the technological advancement or a brand that mostly relies on expectations of innovation and differentiation in design and efficiency for its services and products.
While Apple has a comprehensive distribution network, its inability to have direct distribution channels in India is one of its biggest challenges yet. As India is the third largest smart phone market, the company’s lack of stores in the country demonstrates a weakness in what is essentially a strong distribution network. All these shortcomings hurt the company due to their direct effect on the credibility of the company’s brand. While the company maintains its position in the US and North America its expansion in the international market has been slow following to this types of limitations in the distribution and supply chains. With assembly of different parts being carried out at different places and countries, the brand has maintained a profitable margin (Hawkridge and Kaye, 206). However, with this dilemma in terms of global expansion, the company does not attain its full potential. With competitors such as Microsoft and Samsung gaining huge ground in recent years, Apple risks being overtaken and displaced in future years. In addition to the heavy investment that this companies are allocating to their advertising, marketing, technological and development components: these competitors collectively posses a competitive advantage or characteristics such as affordability and use of Android. In proof of this, Apple has not released products that have cutting edge or innovative technological improvements in recent years, while Samsung and Microsoft have in act surpassed their technological standards especially in design.
All the same, the opportunities for Apple remain open especially with the trends and evolution of communication and technology. Firstly, the Internet of Things market is set to grow exponentially over the next ten years. With an already established software platform, Apple is placed at an advantage coupled with the move towards subscription based software provision. With a great mastery of system integration, Apple will be at the top as a provider of integration solutions. Evidently, the move towards integrated markets is inevitable with the only factor being time. Another opportunity that lies ahead or Apple is its entry into wearable gadgets such as the smart watch which is already projected to be a dominating trend also in the next decade. Finally, as markets also move towards mobile related payments, Apple’s integrated system and entry into mobile payments through Apple Pay will promote the distribution chains of their hardware as well as their services and apps.
Notably, Apple’s main challenges seem to be extremely peculiar. While the company is undeniably innovative, it sometimes seems unsustainably ahead of time to a point where it cannot sustainably cater for current expectations among consumers. Hence, even though most of its technology demonstrates potential in projections and future markets, its lack of concentration on current trends threatens to displace it from its position. Obviously, Apple’s position plays a huge role in its brand and continued sales. Losing this position would mean losing its brand, its ability to offer any competitive advantage and eventually, its inability to grow into these projections. While analysts have stated that this is very unlikely, other analysts have countered this by demystifying the idea that surrounds Apple. As the 2008 financial crisis demonstrated, even the most stable and old companies are threatened in tough market conditions especially when they make the wrong choices or are unable to adapt to market changes (Witzel, 121). In the same way, Apple is not immune to these market changes in the wake of these dilemmas and challenges involving their strategic plans.
Conclusion
This report has outlined the dilemmas and challenges that Apple Inc faces. A dominant theme in all these challenges is the company’s brand and its inability to sustain the innovation expectations that arise from this brand. The company takes up a planned strategy formation that is exquisitely accurate in its projections and trend prediction. However, the company does not place as much emphasis on the emergent formation which is extremely necessary for players in the telecommunication industry which now records the most dynamic and rapid growth and changes currently. Thus, Apple’s slow adaptability to current processes threatens to incapacitate their future market trend projections and plans. Furthermore, low budget allocation in advertisement and research functions has reduced its rate of growth. The strengths and opportunities that have shaped the company’s competitive advantage for years may in the long run create more challenges or hinder the process of innovation. Luckily, the management and leadership of the company heading by a manager (Tim Cook) who has been hailed for his legendary ability to learn and adapt to the contemporary strategic environment. The company’s leadership’s mastery of financial markets and American consumer trends has exponentially boosted the company’s fortunate, and will continue to do so in the foreseeable future, despite the growing challenges.
Recommendations
Without a doubt, Apple must allocate more resources and funds to technological research and development. This funding ought to expand to the advertisement portfolio and diversify to support other elements of Apple instead of the previous concentration on iphones. An example would be to market the Apple pay platform through supporting companies and other corporations to upgrade their systems into Apple products and services. This would include a combination of hardware and software products (Drejer, 220). If the company is able to expand its integration systems and mobile payment at the same time, it is bound to diversify its revenue streams in even more sustainable ways.
The second recommendation has to do with boosting their innovation and technological capacity and design new products that will shake the market, increase their market share over Android stakeholders and reiterate their brand as one that offers differentiation in design and efficiency. Apple must also acknowledge that their previous dominance in the market is now threatened by Samsung and Google that have slowly rebranded, redesigned their products and nowoffer a wide varietyof products to serve different markets. While Apple concentrates on one particularmarket, the shifting market may not support this strategy singlehandedly (Lowson, 97). Thus, while Applemay choosetomaintain their target market,they have to expand their brand to cut across their other products an offset integration off gadgets and systems. Evidently,this means that whilethe iphone market continues to generate most of their revenue, a concentration of this product willnotsustain the brand.
As consumers continue to look for new trends and the latest technology,Apple’scompetitors stand a chance at gaining even moremarket presencedue totheiraffordability and global acceptance in countriessuch as India. Samsung has established a wide market presence in Africa and Asia which nowhave the largest growth in Smartphoneownership. It is in act this that has boosted the potion of Samsung and allowed it to rise to the top. Applemust thus focus on international expansion and research on different markets. While the company has mastered the American market, a look into new and upcoming markets with a particular concentration on Asia and Africa in extension has been cited as the biggest potentialforgrowth in almost allindustries. It is this reason that internet providers have alsoshifted their market concentration tothese markets. Apple must thus re-strategizeand designmore creative ways ofglobalexpansion that stillremain true toits brand and target market.
Works Cited
Cook, William. Strategics: The Art and Science of Holistic Strategy. Westport: Quorum Books, 2000. Print.
Curtis, Keith. From Management Goal Setting to Organizational Results: Transforming Strategies into Action. Westport: Quorum Books, 1994. Print.
Drejer, Anders. Strategic Management and Core Competencies. Westport: Quorum Books, 2002. Print.
Hawkridge, David and Roland Kaye. Learning and Teaching for Business: Case Studies of Successful Innovation. London: Kogan Page, 2003. Print.
Lowson, Robert. Strategic Operations Management: The New Competitive Advantage. London: Routledge, 2002. Print.
Malin, Michael and Todd Finkle . “Steve Jobs and Apple Inc.” Journal of the International Academy for Case Studies (2010): 16 (7). Web.
Monin, Nanette. Management Theory: A Critical and Reflexive Reading. London: Routledge, 2004. Print.
Witzel, Morgen. Fifty Key Figures in Management. London: Routledge, 2003. Print.
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