Executive Summary
Apple is among the crucial actors within the scope of the high-tech industry. The below discussion is dedicated to the analysis of the case study related to the company. The paper includes the evaluation of its external and internal environment and the recommendation regarding an emergent strategy. Porter’s 5 Forces and PEST analyses show that Apple is considerably affected by macroenvironmental factors – especially competition and technological trends, which is justified by its position as a global player. SWOT and VRIO tools demonstrate that the company has many strengths, as well as a sustainable competitive advantage in a number of aspects. These findings allowed assuming that the corporation’s expansion of Apple’s product portfolio and entering the new car market with Apple Car are good strategic options.
Introduction
Over the past decades, mankind has managed to step into a new informational era. There has been a global shift from a traditional industry to a digitized, computerized industry based on information transfer (Yoffie and Baldwin, 2016). Today, revenue and sales growth can be achieved through the use of Smart wireless technologies and artificial intelligence. Communication and information technology companies have played an important role in technological growth, progress and success. The American corporation Apple is rightfully considered one of these companies.
Apple is one of the largest American corporations that brings together extraordinary-minded professionals who are constantly improving its products and methods of work so that people around the world can use the latest technologies in their daily lives. In its activities, Apple is primarily guided by the goals and philosophy that define its essence. The company’s goals are determined based on what the company does directly for its employees and customers and its vision for the future. Hence, it would be relevant to discuss Apple’s case in terms of external and internal environments, as well as suggest an emergent strategy.
Report
External Analysis
Apple gradually began to open up new markets and, at the beginning of the 21st century, released an audio player and then a smartphone. Apple’s history has had both tremendous success and the risk of failure (Johnston, 2020). It would be rational to consider what external factors affect this actor. First, it seems reasonable to analyze the competitiveness of Apple on the basis of Porter’s five competitive forces.
First, the emergence of new competitors in the industry is a medium threat. Companies like Samsung, LG and others are aggressively competing with Apple. This aggressiveness manifests itself in rapid innovation, advertising and imitation (Beattie, 2021). On the other hand, switching costs for consumers are quite low, making the competition even tougher. Second, the emergence of substitute products is a serious threat. This threat concerns the ease with which consumers can substitute one product for another – there are many substitutes for Apple products.
Third, consumer bargaining power is a medium threat. Each customer’s purchase is small compared to Apple’s total revenue. This condition makes clients weak at the individual level. But because the transition costs are too low, buyers still have strong power. Fourth, the bargaining power of suppliers is a low threat. Apple has over 200 suppliers of parts for its products; this means that it cannot impose their own conditions (Meier and Manzerolle, 2019; Young, 2021). Fifth, the level of competition can be considered a high threat (Lee et al., 2019). There is fierce competition between the leading manufacturers in the industry in which the company is involved.
When it comes to Apple’s macro environment, within the scope of the PEST analysis, the following is worth mentioning. First, these are economic forces; The company actively monitors changes in this sector but cannot influence it. The only possible response from the corporation is to adjust the pricing policy depending on the region. Second, it is the scientific and technical factor – new developments and technologies are constantly emerging (Boxall, 2020). The latest of them are useful for the company: bendable displays, batteries with long autonomy, lighter alloys, etc., which must be closely monitored and applied in their products.
Then, political and legal factors also play a large role for both the consumer and the producer. Timely monitoring of such changes is a chance to react faster than competitors, incur fewer losses and get more profit against the background of all these changes. Socio-cultural factors, as a rule, include the mentality of citizens and their behavior in various situations, traditions, styles and standards of living, etc. Apple was able to form its consumer base around itself, taking into account all the mentioned aspects.
Internal Analysis
Experts identify many different aspects that influence the company’s success in the market. The author of this study, based on the strategic planning SWOT analysis method, conducted an assessment of the internal and external marketing environment and identified the factors influencing the success of Apple. It can be seen from the table that the strengths of the company, first of all, should be attributed to its desire to constantly improve its products (Table 1). Over the past decade, Apple designers and engineers have developed many innovations to make devices smaller, thinner, and lighter (Podolny and Hansen, 2020). At the same time, Apple gadgets are becoming more powerful every time and require fewer materials for their manufacture.
Table 1. SWOT
To maintain and strengthen the position of the leader in terms of sales in the market of modern IT technologies, the company is updating the product range in combination with a complementary approach to innovative companies. It was the leading position in the production of devices that are in high demand around the world that dramatically improved Apple’s financial position, and bringing the company record profits (Apple Inc., 2020). In addition, the company has its own unique brand with a large number of customers who are ready to buy a new product at any price (Jeanningros and McFall, 2020). Thus, the company gets the maximum profit on the sale of a new product, and then, when demand falls, it lowers the price for this product when the market is saturated.
When developing new products, Apple tries to take into account the interests of all market participants – consumers, employees, and intermediaries, in combination with a set of solutions to environmental problems. Hence, to protect the rights of everyone who is involved in one way or another in the creation of Apple products, much attention is paid to supply chains (Milkau, 2019). All products incorporate assistive technologies to ensure user-friendliness for people with disabilities. Part of the company’s funds is invested in educational programs to develop and realize the potential of more people. In addition, the company claims to be a leader in the fight against climate change, as well as in the creation of environmentally friendly materials and the preservation of valuable resources of the Earth (Nieborg, 2021). The high quality of products and services provided, acting as one of the main requirements of the corporation, is the key to a high level of user loyalty. Creating the company’s own operating system allows it to form a “closed” ecosystem, of which more and more people are striving to become a part.
However, even a multi-billion dollar corporation like Apple has a number of weaknesses, such as pricing issues. It is no secret that since the company has established itself as a market leader, it has successfully applied a high-price strategy when launching new models (Paharia, 2020). There are many reasons why the original price is higher. First, to work out the demand curve, that is, to profit from that part of the market that is willing to pay a lot before dropping the price and attracting the majority of buyers (Mukul, Rao and Kundu, 2021). Secondly, the main benefit of this strategy is that a high anchor price is set in the minds of consumers. Each subsequent decrease in which turns the product into a desired and profitable purchase (Seenarine, 2021). The company can use this strategy for all its innovative products.
The circle of potential buyers is limited due to the incompatibility of Apple products with other software. For example, the functions of the Apple Watch smartwatch are significantly limited when used without an iOS smartphone. Another weakness of the company, which is the short life cycle of products, is directly related to the company’s desire to remain a leader in innovation and the high dependence of revenues on the launch of new products and services (Apple Inc., 2020). Here it is worth paying attention to attempts to work in technical areas that go beyond the competence of the company’s specialists. Apple is rapidly developing and launching new services such as video streaming, games, and credit cards. Thus, the company gains its competitors the dominant players in these areas, such as Netflix, Disney, Citi, Chase, Paypal, etc. However, such ambition does not always correlate with their capabilities.
The company’s policy in the field of advertising and promotion is of great interest. Apple has strengthened its position with tens of thousands of repeat customers, even with limited advertising resources (Gilmore, 2017). Apple’s marketing strategy in this area relies heavily on its iconic flagship retail stores. Because of its success, Apple does not feel the need to spend excessively on advertising compared to other big brands such as P&G, Coca-Cola, and Samsung.
Despite all of the above factors, one of the company’s opportunities is to steadily increase the number of buyers. Apple has dominated the tech sector for years. They provide the highest quality and cutting-edge technology that deliver breakthrough customer service (Angerhofer and Blair, 2021). The company’s customer retention rate is phenomenal. Apple can always look to the power of the Internet in the future to find new customers and forge new alliances.
Still, Apple can generate higher revenues and sales if it focuses on building an extensive distribution network. Apple’s distribution network is currently very limited and leaves little room for growth. Lawsuits also have a significant impact on the company’s activities (Rodenberg, 2019). Consumers were upset and confused when Apple announced deliberately reducing processor performance on iPhones with old and damaged batteries. The tech giant said it did this to prevent unexpected stops. Despite the clarifications, consumers felt cheated because they felt that Apple did not believe in transparency.
The complex VRIO analysis of Apple shows that the company has a number of significant resources that are utilized appropriately. The SWOT analysis demonstrated that the corporation has no issues in terms of the value of its products, brand, financials, and HR. Moreover, given the fact that significant reputation and experience enhance the rarity of its offers, it might be assumed that the products are rare as well. They also possess the necessary organizational support, which is visible from advanced supply chain management. However, the material resources of the company are not inimitable. Hence, it might be stated here that Apple possesses a sustainable competitive advantage in terms of its brand, HR, and financial assets. However, there is a temporary competitive advantage in terms of its offers and material resources, given the absence of inimitability in this vein.
From the evaluation of Apple’s strategy through various perspectives, it became clear that the company tends to follow the focus differentiation strategy, given high prices, exceptional products, and emphasis on its current leading products – iPhone, MacBook, Mac, Apple TV, and Apple Watch. However, it seems reasonable to recommend expanding the company’s product portfolio by entering a new market, as the corporation has a sustainable competitive advantage in terms of its brand, financials, and human resources. These are essential prerequisites of the successful implementation of such an approach, and operating in the car industry would be a great option here by introducing Apple Car.
Emergent Strategy Justification
Apple is able to integrate its current focus differentiation strategy with the expansion approach. The case has shown that the company is fully capable of dealing with the harsh competition in any segment in which it is involved. Hence, the fear of competing with such giants as Tesla or General Motors does not seem to be a sufficient reason to neglect the mentioned opportunity. The strong brand and reputation will be a significant foundation for Apple’s success in this market (Weinstein, 2020). Over the past several years, internal disagreements and management issues have affected the automotive project. Rumors in 2016 even suggested that Apple made a negative decision regarding the car (Owen, 2020). However, the most recent information indicates that Apple has overcome development challenges and is moving forward. Plans to develop an autonomous electric vehicle focused on the consumer.
Apple will work with a manufacturing partner to build the cars, and the company is developing “next-level” battery technology to expand the range and improve efficiency. Moreover, Apple and Hyundai may sign a cooperation agreement. This, in turn, is consistent with the company’s current approach to the value chain. Apple’s automotive team is reportedly keen to make a self-driving car that would allow the user to enter a destination and reach it with little or no input. Apple analyst Ming-Chi Kuo believes this car will be Apple’s next stellar product (Owen, 2020). The company will be able to offer better integration of hardware, software and services than potential competitors in the automotive market, thanks to the company’s vast experience in developing chips manufactured by TSMC.
Then, from the analyses conducted in the report section, the following aspects may contribute to Apple’s success in the car industry. First, it is value creation; for Apple, not only the uniqueness of the product is important, but also its quality, high-tech, and versatility, as well as other characteristics of the future product. These would help it reach as many consumers as possible on the market, fully satisfying their various needs. Then, the company tends to repeat purchases and elaborate on recommendations continuously. Apple is firmly entrenched in the minds of consumers as an innovative company producing unique high-end appliances (McClay, 2020). The owners of its devices acquire some status and public approval. The corporation is famous for its high level of customer loyalty, which in the marketing aspect plays a more significant role than advertising. Apple maintains consumer interest by regularly releasing new products that are complementary to the basic product of the device, which causes significant excitement among buyers (Daniel, Neves and Horta, 2017). They start the race for new products from the very first purchase.
Moreover, there is the constant stimulation of sustainable growth. The combination of a quality product and high customer loyalty contributes to the stable enhancement of the customer base, which in turn guarantees reliable growth in the company’s profits and market share. This is accompanied by an increase in efficiency and quality (Delventhal, 2021). Having dedicated his life to creating a unique product, Steve Jobs broadcast to the public the main idea of the Apple brand – each new product of the company should be improved, taking into account the wishes and needs of customers (Kim et al., 2017). Hence, with each new series, the company produces goods that are even more convenient to use, productive and fashionable. Based on surveys conducted among users of Apple technology, the company has the opportunity to understand what the consumer does not like in the product. If possible, it eliminates the shortcomings in the current version or fixes them in the next one.
Then there is sustainable profit growth – this approach ensures significant commercial success for the company, allowing it to maintain a significant market share over a long period of time. Sustained earnings growth, in turn, provides a commensurate increase in net income, and hence shareholder dividends. Apple’s market capitalization grew by more than $ 2 trillion (McCreary, 2020). Apple, entering new markets, is already a giant company, resilient to the challenges of the industries. This, of course, has a significant impact on the investor’s choice of a company to invest in. The latter aspect, again, would contribute to attainments in the car market, given the necessity of vast investments in this industry.
Conclusion
To conclude, the above discussion is dedicated to the analysis of the Apple case study, focusing on the evaluation of its external and internal environments, as well as providing recommendations. Porter’s five forces, PEST, VRIO, and SWOT analyses, were applied to shed light on the company’s affairs from different perspectives. It was found that the corporation follows the focused differentiation strategy, and the recommendation was to expand its product portfolio by entering the car industry with Apple Car.
Reference List
Angerhofer, T. J. and Blair, R. D. (2021) ‘Economic reality at the core of Apple’, The Antitrust Bulletin, 66(2), pp. 308–321.
Apple Inc. (2020) Apple annual report 2020.
Beattie, A. (2021) How did Apple get so big?
Boxall, M. (2020) Sell Apple before the worm turns.
Daniel, M., Neves, R. and Horta, N. (2017) ‘Company event popularity for financial markets using Twitter and sentiment analysis’, Expert Systems with Applications, 71(1), pp. 111–124.
Delventhal, S. (2021) Apple’s 5 most profitable lines of business.
Gilmore, J. N. (2017) ‘From ticks and tocks to budges and nudges: The smartwatch and the haptics of informatic culture’, Television & New Media, 18(3), pp. 189–202.
Jeanningros, H. and McFall, L. (2020) ‘The value of sharing: Branding and behaviour in a life and health insurance company’, Big Data & Society. doi: 10.1177/2053951720950350.
Johnston, M. (2020) How Apple makes money.
Kim, J. et al. (2017), ‘An integrated social network mining for product-based technology analysis of Apple’, Industrial Management & Data Systems, 117(10), pp. 2417–2430.
Lee, W. et al. (2019) ‘The Samsung–Apple patent war: Socio-cultural comparative study of news frames in a business conflict issue’, International Communication Gazette, 81(1), pp. 46–65.
McClay, R. (2020) What makes Apple so valuable?
McCreary, M. (2020) Apple becomes the first company to reach $2 trillion, doubling its value in just 2 years.
Meier, L. M. and Manzerolle, V. R. (2019) ‘Rising tides? Data capture, platform accumulation, and new monopolies in the digital music economy’, New Media & Society, 21(3), pp. 543–561.
Milkau, U. (2019) ‘Value creation within AI-enabled data platforms’, Journal of Creating Value, 5(1), pp. 25–39.
Mukul, K., Rao, K. N. and Kundu, S. (2021) ‘Individual freedom vis-à-vis integrity of the state: A study with reference to Apple iPhone’, Emerging Economies Cases Journal, 3(1), pp. 16–20.
Nieborg, D. B. (2021) ‘Apps of empire: Global capitalism and the app economy’, Games and Culture, 16(3), pp. 305–316.
Owen, M. (2020) Apple Car arriving in 2025 at the earliest, says Ming-Chi Kuo.
Paharia, N. (2020) ‘Who receives credit or blame? The effects of made-to-order production on responses to unethical and ethical company production practices’, Journal of Marketing, 84(1), pp. 88–104.
Podolny, J. and Hansen, M. (2020) How Apple is organized for innovation.
Rodenberg, R. M. (2019) ‘Antitrust standing after Apple v. Pepper: Application to the sports betting data market’, The Antitrust Bulletin, 64(4), pp. 584–593.
Seenarine, N. (2021) Apple falls far from my wallet.
Weinstein, A. (2020) ‘Creating superior customer value in the now economy’, Journal of Creating Value, 6(1), pp. 20–33.
Yoffie, D. and Baldwin, E. (2016) Apple’s future: Apple Watch, Apple TV, and/or Apple Car? Web.
Young, J. (2021) 9 major companies tied to the Apple supply chain.