Apple Inc.

Group2
CoreyBrown
ThomasAllen
NigenYadegari
MiraVerma
NicholasJones

TableofContents

ExecutiveSummary3

Introduction.4

Analysis...
PartICompetition
PartIIEntrytoNewMarkets
Recommendations...
PartI
PartII
Conclusion...

ExecutiveSummary

This analysis of Apple describes problems withcompetitionandentryintoemergingeconomies.

The methods used in this comprehensiveevaluationincludesaSWOTanalysis,Porters5forces
analysis, VRIO framework, and a study of the internal and external challenges Apple faces by
entering into foreign markets. The findings reveal problems with the companys product mix,
scalability, and protection of its design from industry competitors.Problemswithcompetitionin
addition to political and legal barriers have hindered Apples ability to capitalize on its
commitment of resources in over 100 different countries. Recommendations such as strategic
alliances and trade in programs offerfeasibleoptionsthatApplecanuse todecreasecompetition
andincreasemarketshare.

Introduction
Apple,thelargestpublicallytradedcompanyintheUnitedStates,wasfoundedbySteve
JobsandSteveWozniakinabasement,in1976.Applebeganasasmallcomputercompany
focusedonpersonalcomputers.Today,Appleisatechnologicaljuggernautproducingseveral
differenttechnologies.Theirproductlineincludeswearabledevices,phones,tablets,and
softwareapplications.Apple,unlikeitscompetitors,producesitsownproprietarysoftware
ecosystemwhereconsumershaveincreasedbenefitsofbuyingmoreApplerelatedproducts
andsoftware.Withtherapiddevelopmentintechnologyoverthepastfewdecades,everydaylife
nowrevolvesaroundphones,tablets,andotherdevices.Thesetechnologieshelpincrease
productivityanddiminishthetimespentdoingroutinetasks.
Theimportanceofinnovativetechnologycannotbeoverstated.Evenwithitssize,Apple
facesintensemarketcompetition,whichhaslimitedgrowthopportunities.Appleslargest
competitorisSamsung,amultinationalelectronicsanddurablegoodsproducerbasedinSouth
Korea.Samsunghasshownprominentgrowthandremainsastrongmarketcontender.Itssales
arenearlydoublethatofmanyiPhonesatvaryingpricetargets.WhileSamsungisthemajor
competitorofApple,therehasbeenanincreasingamountofentrantsintothesmartphone
market.
Competitionhasincreasedsimilaritiesinsoftwareuserinterfacesbutsoftware
ecosystemshavedivergedinthepastfiveyears.Applehasarobustsoftwareecosystemthathas
facilitatedthecreationmorethan100,000applications,securitizedmobilepaymentsthrough
ApplePay,andrevolutionizedthemusicindustry,allwhileplacingconsumersatthecenterof
innovation.Whilethisecosystemhasgreatbenefits,usershavecomplainedaboutiCloud

Services,thelackoforiginalityintheWatchandthehighcostofsmartphonesrelativeto
competitors.

AppleproducesseveralproductlinessuchastheiPhone,MacintoshComputer(Mac),the

iPad,Watch,iPod,andvarioushomedevicessuchastheAppleExpress,iTunes,andtheApple
TV.Evenwiththislistofproducts,morethan56%oflastquarter'searningswerederivedfrom
iPhonesales.WithiPadsalesdecliningandtheiPodsalesplummetingby48%,Applemayface
increasedfinancialproblemsiftheiPhonedemanddiminishes.

Analysis

Applecanbeevaluatedfrombothaninstitutionalbasedview(formalandinformal)anda
resourcebasedview.Regulatoryforces,alongwithculturaldifferences,makeitdifficultfor
evenacompanyasdominantasAppletoenterintoforeignmarkets.Challengeswithreducing
transactioncosts,protectingintellectualproperty,andinflationareamongthemostdifficult
growthobstaclestoovercome.

Competition

Samsung,Applesmaincompetitorinthehardwarespace,hassimilarresourceand
productsthatmakedifferentiationdifficultforeachcompany.Thebiggestdifferencebetween
Appleproductsanditscompetitorsissoftwareandhardwarecontrol.Applebuildsdevicetofit
itsproprietaryoperatingsystem(iOS)ofapplicationandserviceswhileSamsungbuildsdevices
thatoperateonGooglesthirdpartyAndroidoperatingsystemtopoweritsphones.While
softwarehashelpedApplelockinconsumersovertime,Samsunghasslowlybeentakingmarket

sharefromothercompetitorsthroughmultiplesuccessfulmarketlaunchesmakingitaviable
alternativetoAppleshighpremiumdevices.
Applehighpricepointhaslimiteditsexpansioninemergingeconomieswherethecostof
aniPhoneoriPadwouldbemorethanthatpercapitaGDP.Applestandsattheforefrontofthe
marketwithitsflagshipproductstheiPhone6andiPad3,butpricinghaslimitedfurther
expansion.
Marketshareinemergingeconomies,suchasBRICcountries,havebeendifficultfor
Appletoattract.Customersintheemergingeconomiesareoftenpricesensitivewhenitcomesto
foreignproducts.Thehighcostofproductsrelativetotheannualincomeofcustomersin
developingandemergingcountrieshaveslowedexpansionandgrowthopportunities.
Appleisfacingmanylatemoverdisadvantages.WhilethepricedifferenceofApple
productsaresmall,otherproblemshavelimitedmarketshare.Forinstance,Indiancellphone
providersusuallydontsubsidizethecostoftheirphonesandSamsungoffersmultipledevicesat
pricepointslowerthanmanyofApplesmostpopularproducts.Thetotalcostofpurchasingan
iPhoneinIndiaismuchhigher,andintheIndianculture,peoplearelessapttospendlarge
amountsofmoneyoniPhones,liketheywillintheUnitedStates.Applehasalsofacedproblems
withlocalregulationsthatmakeowningretailstoresnearlyimpossible.
ChinaisoneofthefewcountrieswhereApplesaleshaveincreasedsubstantiallyoverthe
years.ApplehasposteddoubledigitgrowthyearafteryearbecauseofChinasfocusonluxury
brands.Chinaaccountsfornearly20%ofgloballuxurysales.Localsarewillingtoexpendmore
foragloballyrecognizedbrand.However,theMNEhasfacednotablechallenges.Increased

governmentinterventionmayincreasethecostofmanufacturingmanyofthedevicesApple
sells.
PrivacyconcernsareespeciallyimportanttotheChinesegovernment.InJuly
of2014,
ApplerespondedtoreportsbytheChinesestateownedTVnetworkCCTVthatclaimedthe
iPhoneposedathreattostatesecretsanduserprivacy.Applereleasedasupportnoteshortly
afterthepublicizedleakin2014whennewsbrokethataChinesehackingringobtainedand
releasednudephotosfoundontheaccountsofmanycelebrities.
SincethereleaseoftheiCloud
inJune2011,Applehasbeenstrugglingtostayastepaheadofhackerswhoareattemptingto
stealpasswordsandotherdatafromtheircustomers.ThereleaseoftheiPhone6inChina
exposedAppletoawholenewnetworkofinternationalfrauds.
Applesreactivepositionfollowingthebreachlastyearwasquestionable.Insteadof
acceptingresponsibilityforthebreach,theyinsteadshiftedblametotheChinesegovernmentfor
supposedlyencouragingatelecomcompanyinChinatobreakin.Whetherthisistrueornot,
[2]
Applefailedtoproperlyanticipatevulnerabilitiestomaninthemiddleattacks.
Applehasnow

createdsecuritywarnings,sentemailstousersafteranyaccountchangesorbackupstoforeign
devicesaremade,tohelpreassuretheircustomersthattheyarenolongeratrisk.However,the
perceptionremainsthatApplecoulddomoretoprotectuserprivacy.Withthedevelopmentof
softwareinnovationsandupdatedappsinordertoincreaseusersecurity,Applecangainmarket
shareinemergingeconomies.

EntrytoNewMarkets

Forlargemultinationalenterprises,enteringintoforeignmarketsareoftenfacedwith
oppositionfromgovernments,thepeople,andtheeconomicsofthenewmarkets.Intheprocess
ofApplesglobalization,theyhavefacedlegislativebarriers,differencesinculturesandnorms,
andthechallengescreatedfromdifferingeconomicsituationsofeconomies.
Inundevelopedanddevelopingcountries,todobusinesswithinthecountryoften
requiresbribestothegoverningbodiesofthearea.AsaresultoftheForeignCorruptPractices
Actof1977,theabilitytoparticipateinsuchactivitieshavemadeitdifficultforAppletosellits
productsandgrow.Brazil,inparticular,hasbeenadifficultcountryforAppletoenterand
[8]
grow.

Russia,acountrywhereApplehassuccessfullyoperatedanonlinestorefortwoyears,
nowfacesincreasedgovernmentregulationspecificallytailoredtohinderthewayAppledoes
business.TheCEOofAppleTimCookpubliclycameoutasahomosexual,andinRussia,itisa
crimetoallowminorstoviewanygaypropagandaortoencouragesuchlifestylechoices.
Russiasgovernmenthastransitionedfromatotalitariantoademocracy,butresidualcontrol
overbusinessbythegovernmentcanbeobserved.Inthecomingmonths,Applemaybeforced
[11]
toleavethecountry,duetoconflictingRussianculturalvaluesinfluencingtheirlegislation.

AnotherchallengeApplefacesisthehighpricepointofitsproducts.Inemerging
economies,thereisasubstantiallylowerGDPpercapitaandPPIincomparisontomanyof
Applesmajormarkets,andoftenwillfacehigherinflation.InBrazilforexample,thecostofan
[7]
iPhone5Sis140%ofthemonthlywageofacitizen.
Withlowerbuyingpowerofcitizens,

emergingeconomiesposeunfavorableconditionsforAppletooperatewiththeirhighvalued
newproducts.Thesehighpricesarealsometwithresistancefromconsumers,particularlyin

culturesthatdonotvaluelifestyleluxuriesasmuchastheUnitedStates.InIndia,forexample,
consumersdonotwanttospendlargeamountsofmoneyonluxurygoodswhensubstitutegoods
areaviableoption.
SocialresponsibilityhasnotbeenakeyinitiativeforAppleinrecentyears.Applefaces
toughissuesaroundlaborandhumanrightsinitsrelationshipwithitssuppliers,someofwhich
managemassiveworkforcessuchasinChina.ThenewsovertreatmentoftheworkersinChina
canpotentiallycauseproblemsforAppleinthefuture.Lowwages,excessiveovertime,
dangerousconditionsandotherfactorsthatareviolatingbothChineselawandApplesown
supplierguidelinesarespreadthroughoutthecompany'ssuppliers.
Corporatesocialresponsibility(CSR)referstoabusinesspracticethatinvolvesparticipatingin
initiativesthatbenefitsociety.Asconsumers'awarenessaboutglobalsocialissuescontinuesto
[12]
grow,sodoestheimportancethesecustomersplaceonCSRwhenchoosingwheretoshop.

Accordingtoaresearch,donebyNielsenGlobalSurvey,Morethanhalfofglobalrespondents
(52%)saytheyhavepurchasedatleastoneproductorserviceinthepastsixmonthsfroma
sociallyresponsiblecompany,withrespondentsinLatinAmerica(65%),AsiaPacific(59%)and
MiddleEast/Africa(59%)exceedingtheglobalaverage.Fourin10respondentsinNorth
[13]
AmericaandEuropesaytheyhavemadeasustainablepurchaseinthepastsixmonths.

Recommendations

Aswithalmostallmultinationalenterprises,Applesimpendingthreatsderivefrom
directcompetition.Keyindustrycompetitors,suchasMicrosoft,Samsung,andGoogle,are
constantlyreinventingtheirbusinessdesigntohelpthemstayrelevant.Therefore,customer
retention,innovation,andexpansionoftheircustomerbaseareamongthehardestchallenges
Applefaces.ItisrecommendedthatApplefocusonstrategiesthatenhancebrandloyalty,both
domesticallyandoverseas.Thisbeginswithtopnotchcustomerserviceandsupport.Apple
shouldadoptcustomeracquisitiontechniquessuchasatradeinprogramsinIndia,whereusers
ofcompetingdevicescanswaptheirequipmentinforanolderApplemodel,suchastheiPhone
4.ThesetechniqueswillhelpApplecarveoutashareofuntappedregions.
TopreventApplefrombeingleftinthedustbehindSamsungintheemergingmarketof
India,Applewouldbenefitfromacontractualalliancewithamajormobileprovideralready
establishedinIndia.Toovercomethelocalsreluctancetopayhighpricesforluxuryproducts,
ApplewouldusepreviousmodelsofiPhonesthathavefeaturescompatiblewithIndias
technologicalcapabilities.Withtheabilitytouselessdevelopedmobileservicesforreuseofold
hardware,ApplecanestablishanalliancewithVodafone,Indiassecondlargestmobileprovider.
Throughstrategicsupplieranddistributorrelationship,AppleandVodafonewouldcreate
asystemfordistributionofAppleproductstotheIndianmarket,usingthealreadyestablished
investmentsfromVodafonetoacceleratetheirentrance.Applesrecyclingprogramoftheir
electronicdevicesworldwideallowsAppletohaveinventoryoftheoldergenerationiPhones
thatfitthecapabilitiesofVodafoneslimitednetworkcapabilities.TheseolderiPhones,manyof

whicharenotwidelysoldinmoredevelopedmarkets,wouldbesenttoIndiaasexportsafter
Apple'srefurbishmentprocess.ThesephoneswouldbesoldthroughVodafoneoutlets,making
theiPhoneamarqueeproductforVodafone,whilenotbeinginaccessibletoconsumersbecause
ofiPhonessteepprices.Byremovingthemanufacturingaspectofthesupplychain,Applecould
significantlylowerthecostoftheiPhonesbeingsoldbyVodafone,reducingtheburdenonthe
Indianconsumers.
ApplesmodeofentryintoIndiasmarketwouldbemorebeneficialwithacontractual
alliance,specificallystrategicsupplieranddistributor,ratherthanequitybasedalliance.The
benefitsofusingstrategicsupplieranddistributorcontractualallianceincludethecostofentry,
sharingofresourcesandcapital,andtheavoidanceofformalbarriers.BecauseAppleand
Vodafonewoulduseanonequityalliance,ApplecanexpandintoIndiawithoutdealingwith
antitrustlawsandgovernmentinterventionthatequitybasedentrantsface.Thisbypassingof
formalinstitutionsallowsApplequickerandlessexpensiveentranceintoIndia.Vodafone
currentlyoffers3Gservices,whichisafewyearsbehindwhatisnowusedintheUnitedStates
(subsequentlydestroyingrelevanceof3GonlycapableproductsintheUnitedStates).Tobridge
thedistancebetweentheculturaldesireforlowpriceforfunctioningproductsinIndiatothe
desireforthelatestandgreatestnamebrandintheUnitedStates,Applesutilizationofthe
3Glimitedserviceswouldallowforsalesanddistributionofrefurbished,usedphones.Usingthe
olderphonesthathavebeenrecycledthroughApple,thepricepointforsaleinIndiasemerging
economywouldbelowerthanApplesnormallyhighstandard.

Fromaresourcebasedview,AppleandVodafonesalliancewillbenefitbothcompanies
inIndia.ByusingthealreadyestablishedmarketshareofVodafoneandApplesoldproducts,
thecomplementaryassetsprovidedaddvaluetothealliancebyacceleratingtheentranceand
establishmentinthemarket.BecauseApplesiPhonescurrentlylacksignificantmarketsharein
Indiaincomparisontoitscompetitors,theuniquedistributionthroughVodafonewouldadd
rarityinthemarket.WithVodafonesmarketshareandcapabilitiespairedwithApplescapital
resources,thescaleofentryandthefunctionalityofthealliancewouldnotberepeatablewith
otherfirms,givingtheallianceimitability.OrganizingthealliancetorideVodafonesmarket
shareasentrance,Appleeliminatesmanyrisksandcomplicationsthattheywouldotherwiseface
whentryingtoenterandgrowinanemergingeconomy.

Domestic/InternalRecommendations

Inordertoremaincompetitive,Applemustkeepitstechnologyreliableanduserfriendlyto
appealtotheconsumerbase.Akeyrecommendationconcernssecurityleaksandglitcheswith
iCloud.SteveKovachfromBusinessInsidernotesthat,ApplesIDsseemveryeasytocrackif
youhavetherighttools.Hegoesontodetailbruteforcetacticsandhacksthatselfproclaimed
iCloudRippersutilizetostealinformationfromcelebrities.
TheCEO,TimCook,has
previouslyacknowledgedthatthecompanyshouldhavetakenmoremeasurestoinformusersof
securitythreats.Inordertobecomebettertrustedbyusers,Appleneedstotaketangiblestepsto
internallydevelopafirewalloracquirearespectedcompanysuchasAvast,knownforits
securityfeatures.ThebenefitsofacquiringAvastisthatithasalreadydevelopedVPNservices
andencryptionsoftware.Inordertohelpuserstofeelmoresecure,Applemayalsotake

measurestoimplementHTML5insteadofAdobesFlashplayertominimizesecurity
vulnerabilities.
Withincreasedinternationalcompetition,Applehastomaintainitscompetitivepotential.In
ordertoretainloyalusers,ApplecoulddevelopspecificapplicationssuchasApplePay.The
companycouldalsoinvestinauniquesocialmediaplatformtokeepgroupsofAppleusers
connected.OtherthanaGameCenterandItunes,Appledoesnothavethesocialnetworktokeep
usersinvestedinthesamemannerthanGoogledoes.

Conclusion&LearningOutcomes
Applesstoriedhistoryofgrowthandinnovationhasaffordedthemgreatsuccessinthe
UnitedStates.AsApplebeginstopenetratenewmarkets,theywillneedtocarefullyconformto
certainregulatoryagencies,adapttonewcultures,andutilizecreativestrategiestoovercome
inherentdisadvantagesassociatedwithoperatingmultinationalenterprises.Amongthedirect
takeawaysfromthisreportareAppleswillingness(andreluctance)toimplementconcepts
foreigntomostU.S.companies,howforeigncurrenciescanaffectthesupply,demand,andprice
point,aswellastherolestrategicallianceshaveingrowingsalesandmarketshare.
Applecanbecomecompetitiveandtakeovermarketsharefromkeyrivalsifitadapts
totheuniqueinstitutionspresentintheBRICnations.Barrierstoentryincludepricing,software
concerns,andinformalinstitutionssuchassocialresponsibility.Thesebarriersinemerging
marketsrequireAppletomakechangestoitspricingpointinnationswithlowerwagessuchas
Braziltoattractconsumers.Throughsellingrefurbishedphonesandallowingsecondhand
tradeins,Applecansignificantlyreducepricesofthephonessoldabroad.Formalinstitutions

thatlimitretailcenterskeepventuresfrombecomingsuccessfulinhighlyregulated
environments.Inordertoappealtonewconsumers,thecompanymustincreasebothits
reputationanddistributionnetworkinIndia.ThisispossibleifAppleimplementsastrategic
alliancewithalargelocalprovidersuchasVodafonetoattractuserswithintheSouthAsian
market.ApplecanalsoaddresssoftwareconcernsinChinaifthecompanyacquiresasubsidiary
thatspecializesinnetworksecuritytopreventfurtherleaksandnegativepublicrelations.
Theanalysisofthismultinationalgianthasshownthatinordertothriveinacompetitive
market,Applecannotutilizethesamepricingstrategyanddistributiontoacquirecustomers
overseas.SamsungandlocalmanufacturerswilloccupyemergingmarketsifAppledoesnot
tweakitsstrategytoaddresscurrentweaknesses.

References

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