Introduction
Continued advancements in the information technology front have provided the impetus for market competition currently being witnessed among portable device manufacturers. Apple Inc., one of the world’s leading manufacturers of mobile phones, portable music players, and personal computers is renowned for its high innovative skills in the industry.
Apple single-handedly revolutionized the industry with its unique and high performing gadgets that outwitted other rival manufacturers in almost all areas. However, competition in the industry is stiff following the determination by all the rival players in addressing innovation, targeting to gain commanding market shares, and improving their profitability.
This paper addresses a possible strategic plan that can be used by Apple to strengthen its market position and performance, especially in the mobile phone industry.
External Environment Analysis
Political and legal factors
Apple depends on the international market to supplement its domestic market performance and boost its overall earnings revenue. However, the world is experiencing an increase in wars and incidences of terrorism. These might eventually affect the company’s performance in the international market.
The US’ bad political relations with other countries of the world could also fuel a negative campaign against products from the country, including the iPhone.
As competition within the industry continues to grow, there have been accusations and counter accusations from rival firms accusing each other of copying ideas and technologies. Apple Inc. has been sued by Nokia, for instance, for breach of patent (Thompson, Strickland III and Gamble 54). Such legal battles are costly especially for firms found to be guilty as they result in heavy court fines.
Economic factors
The global economy has not yet fully recovered from the financial crisis suffered in early 2008 and which has continued for several years. The European market, which is among Apple’s most lucrative markets, suffered great consequences as most governments were declared insolvent (Reuters para 3).
This means that the market will take some time to achieve its full buying potential as consumers only have little disposable income left for their expenditure.
Social factors
The globalization concept has brought about the need and urge for people to maintain constant touch and relations even in cases where they are separated by physical distance. With the integration of browsing capabilities in Apple products, such as the iPhone, iPad, and the iMac, most people consider these as the right devices to help in maintaining close touch.
Technological factors
Advancement in technology has forced Apple to invest heavily in this subject area in order to enhance its overall innovation and create a huge demand for its products. Users seek to acquire products with multiple technological capabilities and design. Firms, therefore, have to invest heavily in technology if they wish to achieve a competitive edge.
Population demographics
Latest technological devices mostly seem to attract the youthful populations more than the case is with people of advanced age. This is an issue of great challenge because of the general situation in advanced economies where the population demography comprises of many older people. On the other hand, the developing countries have their population demographics comprising of many youthful people, although with a relatively poor buying power.
The Immediate Industry and Competitive Environment: Porter’s Five Force Analysis
Substitute products
More substitute products are available in the market that buyers can settle on in case they fail to acquire an Apple iPhone. However, the substitute products have a relatively lower performance. This gives Apple the upper hand when it comes to market competition.
Buyers’ power
Buyers have a lower bargaining power owing to the high level of innovation that the company commands. In essence, Apple has been manufacturing and releasing premium products that cost more than what rival firms quote, but the firm still manages to make huge sales. While consumers still have other existing low-cost alternatives, they opt to acquire Apple with its high prices.
Suppliers’ power
Suppliers have a higher bargaining power in this industry. The industry comprises of many players, including Samsung, Nokia, and HTC, among many others. These companies are rivaling each other to gain market dominance. However, some players are seeking to reduce this high supplier bargaining power by making forward integration plans.
Threat of new entrants
The threat posed by new entrants seeking to operate in this industry is low. A high capital requirement rules out the possibility of manufacturers successfully venturing into the business and competing effectively with the established industry players.
Equally, the established firms, such as Apple and Samsung, have built strong brand names that they rely upon to sustain their impressive market performance (Reuters para 8). New entrants need a long time span for them to build a similarly strong brand name. This is generally impractical.
Rivalry intensity
The intensity of rivalry is strong as the buyer demand appears to have slowed down in the recent times, particularly due to the poor global economic situation. Apple faces high rivalry, particularly in the phone industry where its iPhone brand competes with a range of other Smartphone brands. The Samsung Galaxy surpassed the iPhone as the global Smartphone leader in sales.
On the other hand, Google’s Android software has been enjoying great market performance as it surpassed Apple’s iOS operating system in market performance. Given Android’s flexibility and open source policy, the operating system continues to pose threats to Apple as many devices powered by the software stand a good chance of challenging Apple’s iPhone dominance.
Internal Environment Analysis: SWOT Analysis
Strength
Apple has a strong innovative capability that has contributed immensely to its market competitive advantage. The company spends heavily in research and development activities. This enables Apple to produce highly effective products that meet the demands of the market.
The firm has also managed to build a strong brand name following years of its efficient market performance. This contributes positively toward enhancing its overall performance.
Weaknesses
Apple’s iOS operating system does not support an open source policy for its app development as the case is with its greatest market competitor and leader, Android. No other manufacturer in the world, apart from Apple Inc., is allowed to use the iOS operating system. This policy has curtailed the popularity of the iOS software and, to a greater extent, Apple’s products.
Android has taken advantage of this situation and propelled its overall popularity in the market to an extent where it currently enjoys a global market leadership. The table below depicts how the high popularity of the Android operating system has successfully influenced the performance of Samsung, which mainly relies on the platform, to surpass Apple’s iPhones as the world’s leading Smartphone device.
Source: (Gamble and Lou 196)
Opportunities
The global economy is on the recovery path and there are greater possibilities that it will soon achieve full recovery (Reuters para 5). This will come with improved and renewed demand for mobile gadgets, such as Smartphones, laptops, tablets, portable music players, and personal computers. This offers a good opportunity for companies such as Apple Inc. to improve their sales and profit margins.
Threat
With the ever increasing competitive rivalry amongst industry players, there are possibilities that the profit margins may eventually fall to insignificant levels. This may end up diminishing the industry’s productivity, thus pushing out players. With Apple Inc. targeting the premium customers, the firm is set to lose quite significantly in case the profit margins tumble to insignificant levels (Gamble and Lou 197).
Competitive Strength Assessment
Recommendations
Although Apple Inc. still enjoys market control in many aspects, the company should consider revising its policy on content use. This will be helpful in containing the growing market popularity of the Android operating systems. Many handset manufacturers whose technology is comparably inferior to Apple’s iPhone are riding on the advantage of Android’s popularity to gain volume sales.
This is, in turn, affecting the iPhone because fewer buyers and potential buyers have knowledge and experience about the iOS’s capability. Allowing other device manufacturers to use the platform will provide an opportunity for the market to have a feel about iOS’s functionality and general capability.
In essence, it will help in building demand for the iPhone device itself as buyers will be convinced that the compatibility of the device and the software will likely give them a greater performance experience.
Conclusion
Apple Inc. is among the leading global manufacturers of technological devices, including mobile phones, personal computers, portable music players, and tablets. Although the firm has registered remarkable performance in the Smartphone sector in the recent years, increasing industry competition has seen other rival firms gain ground on the firm.
Samsung’s Smartphone brand, Galaxy, has surpassed the iPhone in overall global sales, while the Android platform used by other device manufacturers enjoys a comfortable market leadership compared to the iOS platform. The industry is facing a promising future following the marked improvement of the global economy that suffered a slump in 2008.
Although the industry players are not worried about the likelihood of new players entering into the market, there is a major threat of profit margins dwindling. High competition amongst the players in their quest to gain market leadership could eventually result in lower margin profits, thereby rendering the whole industry’s value worthless.
Works Cited
Gamble, John and Lou Marino. “Apple Inc. in 2012: Can it Sustain its Growth and Defend against New Competitive Threats.” Crafting & Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases. Ed. Thompson Arthur, Margaret Peteraf, John Gamble and Arthur J Strickland III. New York: McGraw-Hill Higher Education, 2013. 187-197. Print.
Reuters. Research and Markets: Apple Inc. – SWOT, Strategy and Corporate Finance Report. 2012. Web.
Thompson, Arthur, Arthur J Strickland III, and John Gamble. Crafting and Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases, 17/e. New York: McGraw-Hill Higher Education, 2010. Print.