Apple Company’s Operations Case Study

Introduction

The telecommunication industry is one of the fastest growing industries in the world today (Lou & John 2010). This has been made possible by the rapid development in technological innovations and production of equipments capable of supporting the latest technology. Apple Inc. is one of the world’s leading technological companies.

The company has been at the forefront in technological innovations in the world today. The company has in the recent past recorded key developments in this sector. Among them is the invention of the Iphone and the iPad, two of the company’s flagship projects.

These devices have received worldwide recognition and acceptance among the consumers. As a result of this, the company has recorded high sales volumes over the past few years. Among the two innovations, it is noted that iPad has recorded tremendous success as compared to the Iphone.

Technology has been viewed by many people as the driving forces behind most economies thus its worldwide recognition. The use of devices such as laptops, tablets and smart phones have thus become a common phenomenon in almost every company and institution in the world today (Domenec & Manuel 2006). Almost every company and organization has an information technology department in the world today.

The department is charged with the responsibility of ensuring that information flows freely and effectively in the organization. This trend has encouraged the entry of many companies into the industry with the aim of satisfying the economy’s demand for these devices.

There are several companies in the ICT industry in the world today. These are involved in the production and supply of hardware and software to support the industry. These are companies such as those involved in the manufacture of computers, phones and other such appliances. Others are involved in the provision of services such as internet, phone connectivity among others.

Example of such companies includes Vodafone, MTN, Samsung and Motorola among others. Among the most successful of these companies is Apple Inc. This company has operations in almost all countries in the world. As such, it can be said that the company is enjoying a worldwide market.

This paper seeks to analyze Apple Inc., a leading company in the information technology industry (Jon & Joanne 2006). The author will apply several strategies in this analysis. These include the use of macro- frameworks’ analysis, Porter’s 5 forces and the Industry (ILC) theory.

These strategies will be used to analyze the competitive forces and strategic issues shaping the Smartphone and tablet industry in the world. The author will also pay close attention to Apple Inc. as a company. The role of stakeholders as well as their impacts to the company and to the world economy will also be put into consideration. Finally, the author will conclude by making recommendations for the Apple Inc. Company.

Strategic Issues Shaping the Smartphone and Tablet Industry in the World Today

The Smartphone industry has experienced significant developments over the past few years. China’s rapid shift from emulation of technological devices to innovation of the same is one of the recent developments in the smartphone and tablet industry.

In his five forces analysis model, Porter (1980) states that intensity of competition is one of the key issues that companies operating in a certain industry must be ready to contend with (see also Prahalad & Hamel 1990). China’s technology companies had in the past concentrated on emulation of already developed products. Key industry players in the country have however changed their strategies.

Companies such as Huawei have collaborated with Google to produce smartphones such as the popular Ideos brand. This is a significant shift in the industry given the fact that the country has now become an innovator as opposed to a mere consumer of innovation.

Tablet production and marketing has also dominated the market pushing key industry players out of business. In other worlds, new entrants are becoming more significant and are challenging the already established companies. The invention of the iPad and the Samsung Galaxy Tab has come as a big blow to other companies (Stalk et al. 1992).

These two products have dominated the global market today creating a huge market imbalance. From a macro- frameworks’ perspective, analysts argue that large companies pose unhealthy competition to the other smaller companies through the production of superior goods. This is in addition to the introduction of sophisticated applications that are more appealing to customers.

It is noted that most start-ups in the technology sector lack the capital to invest in research and development to come up with effective and up-to-date applications. Large companies such as Apple Inc. can also manage to produce and operate at lower costs as compared to smaller companies. This is given the fact that such huge companies can take advantage of the economies of scale.

Advances and technological innovations in the semi-conductors and emulators industry is also a strategic issue shaping the smartphone and tablet industry in the world today. In an attempt to gain control of the market share, many companies in the industry have formed a habit of emulating or even improving applications introduced by other companies (Abell 1980: p. 58).

Porter’s 5 forces view threat of substitutes as one of the key issues that a company should consider to thrive in any particular industry. This is especially so considering that most industries in the world today are full of substitutes which can effectively take the place and function of a given product with minimal or no alterations in the outcome.

It is noted that most computer and phone applications today can be substituted by others in the market. This being the case, it is important for the company to remain innovative by investing in research and development.

Introduction of substitute products has led to the depreciation of the products’ quality as a result of the production of substandard goods. Presence of many substitutes in the market has also seen the drop in the price of these products.

As a result, many companies may find that their profit margins are greatly affected as they have to sell at very low prices to beat competition. All of these factors have affected the performance of Apple Inc. as a company.

Information security has also been a strategic issue in the industry. Companies producing tablets and smartphones should be keen on protecting their technology from competitors. This is for example protection from new entrants in the industry such as Apple Inc. (Bowman & Faulkner 1997). Taking into consideration the assumptions made in the Industry Life Cycle theory, one can analyse a new entrant in any given industry.

It is noted that for a new company to thrive in an industry, it should possess unique features likely to attract the customers in that industry. These are features that will set the company apart or differentiate it from others in the industry. Companies such as Apple Inc. find it hard to compete with the original market players such as Samsung.

Competitive Forces in the Smartphone and Tablet Industry

The Smartphone and Tablet industry has in the recent past witnessed stiff competition among the key players. Apple Inc. and Samsung Company can be considered as the biggest companies in the industry. They are two most significant players in this industry. In a bid to control the market, the two companies have engaged in cut- throat competition to the extent of producing almost similar products (Porter 1980: p.58).

A comparison of the companies’ latest innovations will prove this point. For example, the iPhone produced by Apple Inc. is almost similar to the Samsung Galaxy series while the iPad can be compared to Samsung’s Galaxy tab. Nokia has also joined the two companies in the industry increasing the level of competition.

According to Porter’s 5 forces theory, many players in an industry will heighten the intensity of rivalry. It is considered that only the best of the companies will survive. It is survival for the fittest and the companies that fail to meet the requirements are pushed out of the market.

The entry of Chinese companies into the market has also increased competition in the industry. These companies have shifted from emulation to innovation as already indicated above. For example, Huawei has partnered with Google to develop new brands of phones such as Ideos. This brand has emerged as one of the most popular in the smartphone industry today.

Taking advantage of the Android operating system, Chinese mobile vendors have staged strong competition against traditional mobile handset innovators. With reference to the ILC theory, entry of powerful players in an industry threatens the life of previous players (Treacy & Wiersema 1993).

Development of new applications in the smartphone and the tablet industry can also be viewed as a major contributor to competition in the market. Developing new applications and features is vital in marketing products to consumers. Players in the industry have in the past advertised and introduced new applications in their products thus attracting customers (Gale & Swire 2006).

It is this superiority of products that determines a company’s position in the industry. Many smartphone brands have been developed but their performance in the market varies. In other words, the performance of the tablet manufactured and marketed by Samsung is different from that of the iPhone produced and marketed by Apple Inc. in spite of the fact that the two are similar.

This variation means that one of the products or one of the applications emerges as superior to the other, skewing the market to its favour. This can be summarized by the macro-framework analysis which states that only the best of the companies will remain competitive among strong players in an industry.

Presence of many companies in the Smartphone and Tablet market has also contributed to stiff competition in the industry as already indicated. This scenario is more common in the Smartphone industry where almost all companies in the handset industry have embarked on a mission to develop their own version of the Smartphone.

This practice has seen the saturation of the market with largely similar products and applications (Svensson 2003). The cut- throat competition in the industry is proving to be disadvantageous to some of the players in the industry since the market has to be shared among all the companies.

The Porter’s 5 forces analysis states that threat of substitute goods and services decreases the company’s market share. In the case of Apple Inc., the presence of substitutes such as Samsung’s Android negatively affects its market share.

Internal Aspects of Apple Inc.

Leadership, Power and Politics

Just like other companies in the industry, Apple Inc. is headed by a chief executive officer (herein referred to as a CEO). The death of Steve Jobs (the company’s former chief executive officer) must have come as quite a blow to the company. The Industry (ILC) theory states that the departure of a key leader from a company may have devastating effects in the organisation.

Tim Cooke is the new company chief executive officer and he has come under sharp criticism as the leader of one of the world’s leading companies (Stalk et al. 1992). It is however not possible to discuss Tim Cooke’s leadership since he has not been in the company long enough to cause any visible changes.

The company also has an executive group comprising of the top hundred personalities in the company who are of great assistance to the chief executive officer in the execution of polices as well as in the decision making process.

A company’s leadership hierarchy is distributed evenly among the founders and investors in the company. Steve Jobs being a founder member in the company as well as a major investor held significant influence and power in the company. It is because of such factors that Steve Jobs served as the company’s chief executive officer for over a decade.

It is approximated that Steve Jobs owned about fifty percent of the company’s shares. The industry (ILC) theory states that most chief executive officers normally control a large portion of the company’s shares giving them greater control in its leadership (Gale & Swire 2006). This also acts as a motivation to them since they have a vested interest in the affairs of the organisation.

Success of Apple Inc. as a company has also made it a force to reckon with both economically and politically. This power has been as a result of admiration and respect from competitors, consumers and the shareholders. Many organizations and governments look up to the company for its unique knowledge in the industry (Svensson 2003).

This is the reason why the company is consulted by governments and other large organisations when it comes to ICT matters. The macro-framework theory states that a respectable company will have the ability to influence policies in the industry. The company will wield significant influence not only within the industry but also in other sectors of the economy and the society as a whole.

It is common knowledge that powerful people and organizations will like to be associated with such a powerful organization (Patric & Duane 2008). Apple Inc. as an organization also has to be influential enough so as to oversee implementation of favourable policies both at the national and international levels.

Decision Making

Apple Inc.’s decision making largely depends on the company’s chief executive officer. This decision making right is earned by virtue of an individual’s shares in the company. Steve Jobs for instance owned approximately fifty percent of the company’s share as already indicated. This resulted to the domination he had over the company’s decision making process. This means that he had absolute authority in decision making.

The Industry (ILC) theory argues this concept out by stating that those executives with considerable number of shares will be interested in the success of the company as compared to others controlling a few shares. Apple’s prosperity can be largely attributed to the chief executive officer’s personality (Domenec & Manuel 2006). He was regarded as a charismatic leader with the ability of influencing people positively.

As earlier mentioned in this paper, the company also has a group of top one hundred decision makers. This group of individuals has been aptly branded as the “Top 100” and their selection is not necessarily based on seniority. The group is known to hold a three day session annually to discuss key innovation ideas in the industry as well as discuss the company’s achievements and failures in the past year.

This is in addition to a critical analysis of how to improve the company’s performance in the future. New products and ideas are also presented to these individuals before their introduction into the market.

The location and timing of such meetings is kept secret so as to protect the company’s technology and ideas from leaking out to the competitors (Gale & Swire 2006). In the Porter’s 5 forces theory, it is indicated that failure to protect a company’s technology and ideas will negatively affect its competitive advantage over other key industry players.

Apple Inc. as a company has been known to run operations with small product groups. This means that decision making pertaining to a particular product is left in the hands of only a small group of individuals. This measure ensures fast and effective decision making processes in the company.

This practice may however be injurious to the company since the opinions and contributions of some individuals in the company are not put into consideration. The macro- framework theory states that the involvement of many individuals in decision making is time consuming (Stalk et al. 1992).

In other words, the theory does not advocate for a participatory decision making process. The theory however warns that hasty decisions would be more costly to a company than carefully thought- out and mutually agreed decisions.

Some analysts have described the decision making processes in the company as dictatorial. This is the reason why Steve Jobs has been described as aloof and controlling in the company. In fact, it is noted that he was in a constant collision course with other stakeholders such as employees, investors among others.

The former chief executive has been criticized of reinforcing key decisions in the company without consulting other key stake holders. Such practices lead to insecurity among workers and may be a cause of conflict where other decision makers feel alienated from the company (Bowman & Faulkner 1997).

With the exit of Steve Jobs, analysts are keenly observing the company’s new decision making processes under the leadership of Tim Cooke. With regard to the macro- framework theory, decision making at the executive level hastens the decision implementation process. The practice would also cause conflict of interests in the company.

Finance and Resource Appraisal

Apple Inc. as a company has been keen on ensuring that its operations are run by some of the highly trained individuals in their respective fields. The company has over the past decade maintained its original niche of professionals ranging from graphic designers and other technocrats. This practice helps companies to maintain their good performance over long periods of time.

This practice is evident in Apple Inc. considering that Steve Jobs served as the company’s chief executive officer for many years. According to the Industry (ILC) theory, maintenance of skills in a company will help in the maintenance of excellence (Stalk et al. 1992).

The practice can however be injurious to a company in the sense that the company does not get the chance to explore new talent in the industry. The same technocrats and technicians are maintained with minimal or no infusion of young and fresh talent into the company.

Apple Inc. as a company has also adopted numerous financial appraisal mechanisms to keep track of its financial development. One of the most notable practices is the reinvestment of profits back into the company. This practice has seen rapid growth in the company’s portfolio.

The practice is also beneficial to the company in that it does not have to borrow money from financial institutions that always come with hefty interest rates (Gale & Swire 2006). It is noted that heavy financial burdens in organisations is caused by heavy borrowing from financial organisations. As a result of this, some of the company’s profits are used to pay for these interests.

Ploughing some of the profits back into the company reduces this reliance. This is the case in Apple Inc. This can be explained from a macro-framework theory perspective. According to the macro-framework theory, cutting down on borrowing from lending institutions reduces the company’s losses.

These are losses that are brought about by high interest rates charged by the financial institutions. Re- investing of interests can however be injurious to the company if the project being invested in is not as profitable as expected. The company may end up making more losses in the process.

Value Chain Linkages

Value chain linkage analysis involves the breaking down of a company’s primary functions putting into consideration several factors involved in the production process. These are factors such as input and output logistics, operation, services, sales and marketing. All these aspects are however interlinked. They are not stand- alone phenomena.

Sales and marketing is often linked with input logistics to determine cost, pricing and branding of products. Product innovation is the most important factor in the value chain linkage analysis. Apple Inc. as a company has been associated with high quality products in the market.

This ensures that the products fetch a high market price as well as boosting of the company’s sales volumes (Lou & John 2010). Porter 5 forces theory states that a company can sustain its competitive advantage over others through innovation.

External Stakeholders’ Issues Facing Apple Inc

For a company to be successful, a good relationship must be maintained between the company and both internal and external stakeholders. The management at Apple Inc. is very much aware of this fact. Apple Inc. must fulfil its corporate social responsibility to gain acceptance and recognition in the industry. Apple Inc. must also be ethical in its operations.

To this end, it should avoid marketing products that are harmful both to the public and to the environment. Public relation matters are also crucial for a company’s existence. Big companies often come under sharp criticism from stakeholders as a result of bad and unethical practices (Svensson 2003).

Such practices pose a potential blow to a company’s reputation since such scandals normally portray the company in negative light. This is for example pollution of environment, abuse of workers’ rights among such other practices.

One of the major external stakeholders affecting Apple Inc.’s operations is the environment conservation lobby groups. A report from Greenpeace criticized Apple Inc. for what it termed its poor environmental practice ranking the company behind some of its fierce competitors.

Greenpeace being one of the most vocal environment activist groups has worldwide audience and such a report is likely to bring about bad publicity for the company.

Social corporate responsibility states that a company has the responsibility to improve its surrounding conditions as well as ensuring that its operations do not pose harm to the community. Apple Inc.’s poor performance in the Greenpeace report brought about negative publicity for the company (Treacy & Wiersema 1993).

The Greenpeace report brought about sharp criticism from around the globe. Worldwide campaigns to raise awareness of Apple’s environmental shortcomings were then started to the extent of creating mock websites for the company. Some of these websites contained pictures and stories showing children handling discarded toxic electronics from Apple factories.

Failure by the company to respond immediately to this report caused further public outcry with the Greenpeace activists stating that the company should transform its operations. This is with the aim of ensuring that the products are environmentally friendly and that the use of toxic chemicals should not be an option.

The company at the time faced sharp criticism with a huge chunk of the market viewing it as an environment pollutant. Better ranked competitors such as Samsung gained a competitive advantage over the company (Gale & Swire 2006).

Apple Inc. also has to fulfil its social responsibilities to the society. People look up to big companies as leverage to the surrounding communities. Many large companies have taken it upon themselves to provide services such as education and health facilities to the communities surrounding them. This is as part of their social responsibility initiatives.

Apple Inc. has often come under sharp criticism from analysts who feel that the company should try and participate in charitable activities in the society. Failure to properly dispose their waste materials has also been a major short coming for the company.

This aspect has left key industry players viewing the company’s activities as exploitative in nature (Stalk et al. 1992). This may or may not be true, but it is up to the company to ensure that a positive image is sustained at all times.

Strategic Options for Apple Inc

Apple has experienced considerable success in the recent past that have seen the company dominate the market and elbow out its arch rivals such as Microsoft, Dell and Samsung. Retaining this position will require considerable skills on the part of the management and the employees. The enormous success in the company has been accompanied by huge cash accumulations.

The company will have to define strategies on how to utilize this money or distribute it among its shareholders as dividends (Stalk et al. 1992). In this section the author will propose a rational approach to this by providing a discussion of the strategic options for Apple with reference to Porter’s 5 forces theory.

Apple Inc. can resort to the creation of new devices to consolidate the company’s future position in the Smartphone and Tablet industry. The company’s diversification in the production of technological devices has seen its name change from Apple Computer to just Apple Inc. To remain competitive in such an industry, introduction of new innovations and applications will be vital in ensuring continued success in the company.

Apple Inc. must however place the needs of the customers at the centre of this innovation rather than putting the company’s interests first. Porter’s 5 forces theory states that the intensity of competitors can only be challenged through sustainable competitive advantage that can only be brought about through innovation (Porter 1980: p.58).

In a bid to tighten its grip on information security, Apple can resort to hiring content creators and making them part of the company. This comprises the individuals who are the brains behind some of the company’s key innovations. By holding content creators within it, Apple will effectively reduce the possibility of the competitors emulating their products and technology.

According to Porter’s 5 forces theory, the absence of substitute goods in the market will increase a company’s bargaining power (Svensson 2003). This strategy aims at turning the company into a monopoly as far as its own technology and information is concerned.

To maintain its success in the Smartphone and Tablet industry, Apple can also expand its distribution platforms and channels. Apple has proved to be a skilled distributor and a retailer with an excess of over three hundred chain stores around the world. To ensure a wide distribution of its products and applications in the market, Apple can increase the number of such outlets.

Over the years, individuals and families have been identified as the company’s main customers. Efforts should be made to increase the availability of these goods to this group. Porter’s 5 forces theory states that a company should be able to avail its products to the end users to counter the effects of substitute goods (Gale & Swire 2006).

Apple can also launch a customer sensitization program to create awareness in the market. This is a key marketing strategy where target consumer groups are equipped with the knowledge regarding the existence of the products in the market and how each feature or application can be beneficial to them.

Porter’s 5 forces framework explains that customer sensitization is the first step in promoting products in the market. Sensitization will also aim at cushioning the product against substitutes designed by other companies (Domenec & Manuel 2006).

Recommendations for Apple Inc. to Sustain Performance

To maintain Apple’s position as a leading company in the Smartphone and Tablet industry, the company has to concentrate on market penetration. In the past decade, Apple has allocated more resources to the innovation of new products and applications and in the process it has failed in selling of the already existing products in the market.

Market penetration can be achieved through aggressive sales promotion as well as introduction of more competitive pricing. Porter’s 5 forces framework identifies market penetration as one of the most successful ways to counter the threat posed by substitute products. This would be achieved by allocating more resources to the company’s marketing department (Prahalad & Hamel 1990).

Apple should also concentrate on market development to maintain the company’s top position in the Smartphone and Tablet industry. Market development involves seeking to sell existing products into new markets. Apple should analyze the distribution of its already existing products and venture into new geographical markets.

This can also be achieved through aggressive marketing of products in areas where they have not gained recognition and acceptance. Porter’s 5 forces framework states that the level of advertisement is directly proportional to sales volume recorded by a company (Svensson 2003). The new geographical regions will widen the company’s market leading to better returns.

Apple Inc. should also continue with the ongoing product development programs to maintain its top position in the Smartphone and Tablet industry. The company has in the recent past experienced tough competition from companies such as Samsung and Blackberry. Some of the competitors have come up with almost similar products hence the need to improve product’s applications.

Porter’s 5 forces framework identifies innovation as an effective way to counter competition. Innovation also entails production of superior goods that are readily acceptable in the market (Abell 1980: p.28). New innovations also promote the company’s bargaining power in the market.

In product development, Apple should also seek to introduce completely new products into the already existing market. These products may come as completely new ideas while others may involve making improvements on the already existing products. This has become a common practice in world markets today where companies produce different versions of the same product but with different applications.

Porter’s 5 forces framework however acknowledges that for this to happen, the company must engage in both intensive and extensive research to identify the various aspects and needs in the market that have not been fully exploited (Jon & Joanne 2006).

Apple as a company must also embrace diversification to sustain its top position in the Smartphone and Tablet industry (Gale & Swire 2006). This requires the company to acquire new skills, technology and facilities that are in line with the growing market’s needs.

Apple should make efforts to integrate new technologies into the product’s applications. Individuals with up-to-date skills and expertise should also be contracted to help the company in its efforts to control and dominate the Smartphone and Tablet industry.

Conclusion

Apple Inc. can be considered to be one of the world’s leading companies. With the departure of Steve Jobs, both competitors and analysts have taken a closer look into the company’s operations to assess its performance under Tim Cooke.

This has seen the introduction of several technological initiatives by consulting firms to review the company’s reports (Patric & Duane 2008). Analysts have to wait and see the company’s performance. The competitors are some of the parties watching each and every step the company makes to try and exploit its weaknesses.

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