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Apple Case Analysis

Nguyen Dang Quang

Strategic Business Management

January 17th, 2016

Dr. Lam Nguyen

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Executive Summary

Apple Inc. is an international American company that produces computer software, cell

phones, personal computers and consumer electronic products. The well-known products of

Apple include: the iPod, the iPhone, the Macintosh line of computers and the iPad. The

purpose of this essay is to critically analyse the context within which the company develop

and manage its competitive strategies. In order to achieve this, different analytical tools and

models will be applied such as its Business Model, SWOT, Porter Five Forces, External

Environment Forces, Product Portfolio, and Product Mapping. Then the key strategic issues

of Apple will be identified and evaluated. There are some conclusions and recommendations

for the company strategy at the end.

Introduction

Established in 1976, Apple and its founder had become the legendary in the

technology industry by leading product innovation strategies. Through all these years,

Apples products still stand at their leading in design and differentiation to competitors.

Although starting with personal computer, Apple nowadays have their largest revenue on

smartphone market.

In 2015, two years after Apple had its new CEO, there are much changes and

challenges happen. Obviously, there are some differences in the current status of Apples

products. The BCG Growth Share matrix, also called product portfolio analysis tool, can help

the company to divide their product into difference dimensions by market shares and market

growth rate (Grewal & Levy, 2010). In Appendix E shows, the most profitable product is

iPhone, which is still on its development growth. Therefore, iPhone market is maintaining its

potential and opportunity for Apple, though the company seems to face their hard in renovate

this smartphone in a new version.

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On the other hand, the firm did not have a strong decision on their old products like

iPod, which is on the downgrade phase. Similarly, personal computer as well as laptop are

another challenges for company when they cannot find a new strategic plan to develop them,

except upgrading their hardware and operation system. After all of those difficulties, Cook

decided to launch apple watch in 2013, which became the new and only one strategic product

of the company. However, Could it be the next iPhone for apple? is the big serious

question that Apple even cannot answer at the moment.

Key Strategies Analysis

SWOT Analysis

In order to analyse the strategic management for Apples products, SWOT model is

used as the first basic tool. The SWOT analysis can show the summary of organization by

identify its internal (strong, weaknesses) and external (threats, opportunities). According to

Apple (2011), the main strategy of the company is focusing on making unique not only in the

products but also in the added values. In Appendix B, it is clear to see that from the

beginning, Apple apply the differentiation strategy for all of their products and services. This

is also the key drives them to become the innovation leader in the market. In fact, iPhone was

the most popular strategy to prove the innovation leadership of Apple when it was launched

in 2007. The iPhone then gradually takes the large market share of mobile phone as well as

smart phone, which account for 14.8% in 2014.

Strategic Mapping

To illustrate the firm performance, the Strategic group mapping can be use to

compare the proposition of this firm with its competitors (Harrison & John, 2013). As from

the beginning, Apple choose to lead the product not only in designed differences, but also in

high price and value. According to Aaker & Mcloughlin (2010) this marketing strategic of

Apple is obviously aim to the high-end segment of the customer. This is also another unique
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strategic pricing of Apple. Setting the price difference from other competitors not only aim to

bring more product for the firm, but also ensure the mind-set of customer about the

domination and value of product itself (Bastien, 2015). In Appendix A, Apple shows their

effort to provide more and more values to customer through each product. The added

substantial values combine with outstanding design outlook contributes to the unique strategy

of the company throughout years.

External Analysis

On the other hand, the changing of factors that influences the company operation is

also likely effect the driver strategic management of the organization (Hambrick &

Fredrickson, 2004). To get an overview of the organization performance, there are four

common forces often used such as politics, economics, social, and technology (Porter, 2006).

Apple is an international company, so their strategies are always diversifying and designed to

adapt with the international environment. Appendix D can show that the company would

have more expand opportunities on the global if they can deal with the steady changes in

differences countries. For instant, establishing direct distribution channels in almost potential

country market can help the company minimize their cost from retailers and easily interact

with their customers. The international strategy of Apple is clearly demonstrated by the

identification of brand and stores around the world to bring the same experiences to customer

wherever they come to Apple Store.

Five-Forces Model

Porters Five-Forces Model is a popular method that often used to develop

organization strategy by deeply understand its own performances in the market. There are

many difference of competition between companies in various industries (David, 2011). It

makes Apple even faces more challenges when setting competitive strategies for its products.

They have to deal with the interaction in all the products. As the cooperate strategic level,
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Apple need to make sure the associate among their business and products to support for each

other. It is clear to see that the diversification and convenience of App Store is one of the key

factors that helped to increase the sales of iPhone. In fact, Apple now applies the same

strategy for its smart watch by syncing it with iPhone and creating Health Kit as the key

added value.

Five forces model of Apple is analysed in Appendix E with those extents such as:

threat from new entrants and competitors in market, bargaining power of suppliers and

buyers (Porter, 2006). Base on this exploration, Apple seems like is on its right way to

position the organization strategy. However, there are ideas believe that Apple is no longer in

the innovation leader of the market in recent years (Worstall, 2013). Even the technology

changes day by day, Apple sometimes shows its weakness in lack of improvement for their

product.

Recommendation

From the beginning of the report, there are two strategic issues that Apple is facing in

their development process. The first issue is about how to deal with some current products

that are near and right on the decline period. The other one is the consideration of their future

product and the strategic direction for the most potential product and newest product, which

are iPhone and Apple Watch alternatively. From analysing the business model and

organization performance, there are three recommendations that the report suggest for the

firm:

For all the current products, applying the key strategy of the organization can help

them maintain the position in the market. Apple should keeps developing and improving

them follow the changes and trends of the industry to satisfy customers needs. However, to

compete with other strong competitors, they still have to deal with the investment in R&D as

well as product design function.

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The largest earned revenue of Apple is come from iPhone, which is expected to be

followed by Apple Watch in the near future. When technology becomes easier to approach

for all business, Apple smart phone and smart watch are not the only pioneer or leader in the

market. Then it is hard for them to follow the trends and create the new one at the same time.

Thus, adding more values for customer and making the product friendlier seem to be the best

practices for those products.

Finally, innovation brings evolution for Apple in the past, and it might be applied at

present. As their starting by personal computer, then became a boom in smart phone industry,

they still can take this pinnacle again with another technological product. Investment in

research and develop of the new unit of technology market might help Apple once again take

back the pioneer position.

Conclusion

In this report, the cooperate level of strategy is investigated to see how Apple control

and manage their business follow the driver strategies of the organization. To sum up, base

on the main competitive strategies from Porter (2006), Apple is remaining its differentiation

strategy right from the beginning. This strategic driver is demonstrated by innovation of

technology, value of the products and the comprehensive of the services.

Firstly, the strong historical innovation from Jobs generation brings too much

expectation for Apple at the moment. Although the company tried to show their changing to

follow the market trends, Tim Cook so far obviously had no strong impression to totally

bring Apple back to the highest peak. Secondly, dynamic improvement in design of the

product in both hardware and software seem to be the only highlight of Apples strategies.

However, with the massive number of similar products and competitors in the current market,

product design might no longer be the priority factors of consumer purchasing decision.
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Beside that, by the new Heath Kit added into iPhone and Apple Watch, the firm is trying to

provide significant values for customer. Finally, Apple is quite cautious in working with their

retailers around the world to ensure the similar product and service quality among them. The

worldwide customer service is also strongly developed as the key strength of the company.
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References

Aaker, A. D., & Mcloughlin, D. (2010). Strategic market management global perspectives.

Chichester: Wiley.

Bastien, V. (2015, September 20). Marketing To A High-End Consumer, Using The Luxury

Strategy. Retrieved from Entrepreneur : http://www.entrepreneur.com/article/250745

David, F. R. (2011). Strategic Management Concepts (13th Edition ed.). Pearsons.

Grewal, D., & Levy, M. (2010). Marketing (2nd Edition ed.). Boston, MA: McGraw Hill.

Hambrick, D., & Fredrickson, J. (2004). Are You Sure You Hace A Strategy? Academy of

Management Executive, 15(4), 48-59.

Harrison, J. S., & John, H. C. (2013). Foundations in strategic management (6th Edition ed.).

Ohio: South-Western College Pub.

Hitt, M. A., Ireland, D. R., & Hoskisson, R. E. (2015). Strategic Management: Concepts:

Competitiveness and Globalization (11 ed.). Cengage Learning.

Porter, M. (2006, January). The Five Competitive Forces That Shape Strategy. Harvard

Business Review, 23-41.

Worstall, T. (2013, September 17). The iPhone 5S, Proof That Apple Has Given Up On

Innovation. Retrieved January 12, 2015, from Forbes:

http://www.forbes.com/sites/timworstall/2013/09/17/the-iphone-5s-proof-that-apple-

has-given-up-on-innovation/#2715e4857a0b1eb100eb44f9
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Appendix A: Business Model of Apple

Vision Apple is committed to bringing the best personal computing

experience to students, educators, creative professionals and

consumers around the world through its innovative hardware,

software and Internet offerings (Apple, Inc., 2012).

Mission Apple designs Macs, the best personal computers in the world, along

with OS X, iLife, iWork and professional software. Apple leads the

digital music revolution with its iPods and iTunes online store. Apple

has reinvented the mobile phone with its revolutionary iPhone and

App Store, and is defining the future of mobile media and computing

devices with iPad (Apple, Inc., 2012).

Values We believe that were on the face of the Earth to make great

products.

We believe in the simple, not the complex.

We believe that we need to own and control the primary

technologies behind theproducts we make.

We participate only in markets where we can make a significant

contribution.

We believe in saying no to thousands of projects so that we can

really focus on the few that are truly important and meaningful to us.

We believe in deep collaboration and cross-pollination of our

groups, which allow usto innovate in a way that others cannot.

We dont settle for anything less than excellence in every group in

the company, andwe have the self-honesty to admit when were

wrong and courage to change. (Apple, Inc., 2012).

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Financial Revenue raised up to 70% from 2010 to 2014.

Comparison Market capitalization surpassed $700 billion

Apples stock price increased nearly double from 2011 to 2014

Target Middle and upper class income people are a primary focus for Apple

Customers/Market because these demographics are usually willing to pay slightly more

for a better user experience because $500 for a laptop is not a

stretch for them people who like to have fun with technology;

Apples extensive line of entry level devices and tools is beginning to

appeal to people of all ages and not just the coveted 18 to 34-year-old

demographic that seems to be thoroughly enthralled by the company

and its products target music enthusiasts from a large age

demographic target professionals that work in media and design

While Apples prices are generally higher (a new iPhone could be

$800 or a new iPad almost $2000), they are able to appeal to people

of all ages and demographics due to their reputation of impressive

technological breakthroughs, while still managing to focus on

targeting the customers that were just discussed

Products Personal computer

Macintosh

iPod

iTunes

iPhone

iPad

App Store
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Apple Music

Apple Watch

Apple TV

Competitors Microsoft, Dell, Intel, Lenovo

Samsung, Sony, LG

Google, Nokia

Appendix B: Apple SWOT Analysis

Strengths

- Apple is the leader in the market, especially for innovation technology products.

- The company now is on its highest growth with $18 billion recorded profit in Q4 of

2014.

- Apple brand have the huge amount of loyal customers, in which most of them owned

more than one product.

- Apple offers excellent technology operate system which can comprehensive all the

apple product.

- The company is a big global brand that have high awareness in many countries.

- Apple owns its own distribution system around the world through direct and indirect

retailers.

- Apple owns its own AppStore, which brings to Apple the giant amount of money

from downloaded application, music, video, etc.

Weakness

- Apple products are considering as high price product line.

- Most of product is on its decline stage because it has a very short product cycle life.
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- When technology develops, security concern of the operation system become a new

problem.

- Lack of excellent product innovation in the recent years. Apple have not introduced

any product, which can become billion-dollar product like iPhone before.

Opportunities

- Growing demand in the music industry can continue to bring Apple more profit from

its new Apple Music.

- Smart watch is on the introduction stage, and the customer is still waiting for the

innovation one to lead the market.

- Higher demand in the intelligent home system will open a new chance for Apple to

invest more on the HomeKit products, which already have AppleTV

- Convenient transaction by mobile phone is also brings more market for mobile

company to utilize and develop more on its product to gain more customer.

- Online sale channel and delivery systems are improved and developed day by day

around the world helps Apple to reduce cost from its retailers.

Threats

- The Integrated multifunction in one product seems to decrease sale of some old

products like IPod.

- The growth and development of Android OS phone made the competition more and

more severe.

- The rapid rising of new market and brand from China will become a big challenge for

Apple in near future.

- The quickly move and change of technology industry required all the company like

Apple have to adapt customers needs.

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Appendix C: Porters Five Forces Analysis of Apple

Threat of new entrants:

In the technology generation, entering in this industry is no longer difficult for new business.

The development of information communication and Internet makes it even more easy to

build and raise. It seems like there are no obstruction to entry in this market (Barrow, 2011).

The key that drive successful in the field is innovation. Economics nowadays see a lot of

steady growth of the new technology business like XiaoMi from China. However, there are

also many problems for new entrants when they have to overcome the big wall of market

share. It is not easy to compete with experienced brands like Apple, Samsung, or Microsoft.

Threat of substitutes:

Even on its high position of the market, some of Apples product like IPad still have to fight

with many alternatives. A thousand similar products come from big brands such as Microsoft,

Samsung, Sony and many other small one from China are looking for that position. In recent

years, the improvement and development of Microsoft Surface become the biggest

competitor of Apple in tablet market. The same is also happens in other business unit, like the

flight with Samsung and Sony in smartphone and smart watch market.

Bargaining power of suppliers:

Even having many problems with the suppliers in China, Apple seems like they never stuck

in this situation for a long time. The experiences in working with many suppliers and

manufacturers help the company avoid those issues. In 2014, Apple tried to bring back the

manufacture back to US for their personal computer unit. However, in their main strategy,

producing their own product within the US may not the main strategy.
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Bargaining power of buyers:

Customers always have a choice, especially in the large market. The convenience experiences

of using all the products as one that Apple brings to their customers is one of the main factors

make customer do not want to switch to other brands. However, Sony and Microsoft have

started to create their own ecosystem that help users easy interact within products. Maintain

customers now become more and more important for the company as well as gaining new

one.

Appendix D: PEST Analysis of Apple

Political factors

The most significant political external factors in Apples remote/macro-environment

present opportunities. This aspect of the PESTEL analysis model indicates the influence of

organizations, such as the government, on business. In Apples case, the following are the

most important political external factors:

The difference in VAT between nations can make Apple faces to reduce their

consumers.

Improving free trade policies (opportunity)

Stable politics in developed countries (opportunity)

More free trade policies are created over time, especially with developing countries.

Additional free trade policies increase the opportunities for Apple to distribute more of its

products to various markets around the world. On the other hand, the stability of the political

landscape in many developed countries presents opportunities because Apple can expect

minimal political issues affecting its business. Based on this part of the PESTEL/PESTLE

analysis model, Apple can improve its performance by taking advantage of these political

opportunities in its remote/macro-environment.

Economic Factors
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Most of the economic external factors in Apples remote or macro-environment create

opportunities. This aspect of the PESTEL analysis model indicates market and industry

conditions that impact firms. In Apples case, the following economic external factors are the

most significant:

Rapid growth of developing countries (opportunity)

Stable economies of developed countries (opportunity)

The economic stability of most developed countries creates opportunities for companies

like Apple to expand their businesses. However, the rapid growth of developing countries is

more significant. For instance, the high economic growth rates of Asian countries are major

opportunities for Apple to increase revenues through sales in these foreign markets. Based on

this part of the PESTEL/PESTLE analysis model, Apple must ensure that it effectively

exploits these economic opportunities. Speed and effectiveness are important because

competitors are also targeting these high-growth economies.

Social Factors

Apples business is subject to the effects of social or sociocultural factors. This aspect of

the PESTEL analysis model points to the social influences on consumer behaviours and

expectations. In Apples case, the following social or sociocultural external factors are the

most significant in the firms remote/macro-environment:

Rising use of mobile access (opportunity)

Rising use of social media (opportunity)

The main social/sociocultural factors identified in this section present opportunities for

Apple. The trend of the increasing popularity of mobile access is an opportunity for Apple to

continue providing easy-to-use mobile devices. The firm has already taken steps to exploit

this opportunity, such as through the iPhone, iPad, and Apple Watch. The rising use of social
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media is also an opportunity because it increases demand for digital devices like Apple

products.

Technological Factors in Apples Business

The technological external factors in Apples remote/macro-environment generally

provide opportunities for the company. In this aspect of the PESTEL analysis model, current

technologies and technological changes affect business conditions. In Apples case, the

following technological external factors are the most significant:

Cloud computing trend (opportunity)

Technological integration (opportunity)

Growing apps market (opportunity)

Cloud computing is becoming popular among individuals and organizations. Apple can

exploit this opportunity by offering cloud-friendly devices and apps. On the other hand,

technological integration of devices is a major trend. Apple can take advantage of this

opportunity by continuing its strategy of providing products that can be seamlessly connected

to each other. In addition, the apps market is growing. Apple has the opportunity to grow its

App Store. Based on this part of the PESTEL analysis model, Apple is in a positive position

to exploit such major opportunities in the technological dimension of its business

environment.

(Source: Apple Inc. PESTEL Analysis & Recommendations, Panmore Institute)

Appendix E: Apple Products Porfolio

The dimension of relative market share (horizontal axis) is defined by the product

lines market share as compared to its largest competitor in the industry. Market growth rate

(vertical axis) is a measure of how attractive a particular market is to the firm and is

quantified by the annual growth rate (usually expressed as percent growth) for that product

line. Given the estimates of relative market share (low-high) and its market growth rate (low-
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high), a product line can be categorized in one of the four cells illustratively named for the

amount of resources generated from and requires from the firm

The smart phone market is still in a growth phase and as a result, smart phones for

Apple plotted as a half a star and half a question mark on the BCG matrix. If dollar market

share was considered, then it is likely that the Apple smartphone portfolio would be clearly

classified as a star.The iPhone can be classified as a question-mark due to its relatively low

market share (14.4%) as compared to the industry leader which was Nokia (36.4%) and the

high market forecast for demand and projected growth rate of the Smartphone industry

(upwards of 45% in 2010). Smartphones are quickly becoming the portable choice for music,

applications, and communication therefore the Apple iPhone has the potential to build into a

star (with increasing market share).

This approach gives an Apple a diversity of product portfolios across the four

quadrants of the BCG matrix. The MP3 market, where Apple is a market leader, is in decline

due to sales switching to smart phones instead. Despite this declining market size, the iPod

portfolio is still classified as a cash cow for Apple. This is because it remains quite profitable

without any real need to continue to support the portfolio to any significant extent. Therefore,

at this time, it is a cash generator, whose profits can be reallocated to other parts of the

business that offers great potential.The iPod line of products can be classified as a cash-

cow mainly driven by Apples (71%) share of the MP3 market and relative to the next

largest competitor (Scandisk with 11%). The project growth rate for standalone MP3 players

was negative but with 2010 forecasts (- iPhone iMac Portable Computers iPod iMac Desktop

Computers Page 52 Journal of the International Academy for Case Studies, Volume 17,

Number 8, 2011,2.1%) improving over the 2009 levels (-16%). Most Smartphones have

music playing capability which may contribute the declining demand for standalone MP3

players.
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The computer division would be classified as a dog. This means it is operating in a

mature market and they are a relatively small player in the market. As a result, the BCG

matrix considers this portfolio to provide little long-term potential and the outcome of the

matrix guidance would be to limit future investment.The iMac desktop computer was

classified as a Dog due to its low relative market share (8.8%) as compared to the industry

leader which was Dell (26.2%) and the low market forecast calling for a decline of over 20%.

The industry outlook for desktop computer demand was rapidly eroding.

The MAC portable line of computers (or MacBook) can be classified as a question

mark due to its relatively low market share (8.8%) as compared to the industry leader which

was Dell (26.2%) and the high market forecast for demand and growth potential in the

portable computer segment of 52.4%. Seeing that computers are continuing the trend of

smaller and more portable, This Apple line has the potential to be built into a star (with

increasing market share).

However, as we know, many of Apples products are interrelated as they use the

same operating system and rely upon each others components Apple would see their PC

division as having strategic value in an overall customer relationship strategy. This means

that Apple would adopt a different reinvestment strategy than the one suggested by the BCG

matrix due to this strategic outlook.

Their tablet portfolio the iPad is currently making the transition from a star to a

cash cow. This is happening because the tablet market is maturing and as a result the BCG

matrix suggests that less reinvestment will be required in this product portfolio, primarily

because market shares and stabilize and the level of competition intensity should reduce.

Obviously technology advancements will continue, so Apple will continue to reinvest

sufficiently to ensure that their product offerings remain leading edge.

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(Source: APPLEINC.: PRODUCTPORTFOLIOANALYSIS. Journal of the International

Academy for Case Studies, Volume 17, Number 8, 2011)