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Internal and external analysis of Apple Company Research Paper


Company Description

Apple organization was established by Steve Jobs and Steve Wojniak in the year 1976 and integrated in February 1977. The company’s head office is located at Cupertino. The present CEO is Tim Cook. Apple Company chiefly engaged in sector associated with computer accessories and consumer electronic appliances. Apple Inc.

Chiefly develops, fabricates and promotes products that vary from handy digital entertainment systems, mobile communication gadgets, personal computers and diverse associated software, service, secondary, and social network systems. The major distribution avenues are the Apple’s electronic shops, direct selling, and others. In addition, the clients vary from users, organizations, small and medium enterprise, trade, education, government and innovative consumers.

The company presently has more than 35,000 workers and expansion of approximately 63%. Based on financial period ending report of August 2011, the organization had generated total income of $32.5 million, gross income of $11.1 million, net profit of $4.8 million, total asset amount of $41 million and indicates expansion of about 35% for 12 month expansion and approximately 38% of revenue increase (Hunger & Wheelen 2012).

Regarding vision the company is guided by view that man is the creator of change in this universe and therefore, man ought to be above any system and structure, and not inferior to this system and structure. Concerning mission Apple is dedicated to creating the best individual computing exposure to learners, teachers, innovative specialists and users worldwide through its creative software, hardware and internet-based applications (Apple in education 2008).

Internal analysis

Apple Company creates a disparity in the personal computer (PC) sector via its creative merchandise design and high level utilizations. Macintosh has been the strong instrument in building the performance episode of Apple Inc. The “incorporated framework” of PC was Apple’s distinguished strategy which supported the Macintosh together with its individual operating system (OS).

The fresh stride in “User Electronic Sector” has outperformed the company’s success as a smart organization. The creative goods such as iPhone and iPod have been extremely effective in prospective entertainment marketplace. Consumers have an enormous confidence on Apple’s smart items and they constantly look forward to be steadfast to the various brands. The company maintains its pricing strategy different from that of its rivalries which provide personal computers and other music systems at low cost.

The great price (specifically PC) keeps Apple access restricted to only individuals with great revenue position. The Apple PC had compatibility challenges with IBM computers and MS office, which stimulated the R&D at the organization. Since Apple has a broad item range, each newly developed item makes the former product unexciting against it; the concern of cannibalization may be an aspect of derailing the desired income stream of the items (Alexander & Campbell 1994).

Regarding major capabilities, the company has been at the top of the User Electronic Sector and has kept unique images in personal computer processing and entertainment as well. The major capabilities accountable for the performance are chiefly the “Special funds” and “Delineation approach”.

The company presents the best structured software and distinct hardware in its computers. It has been proving “Insert and Play” alternatives. The hard drive oriented device known as iPod has an astonishing structure which has turn out to be the image of the digital era. The apple has an “Imagine Different” inspiration and the company focuses on “Price Proposition”.

The performance of a few items such as iPhone and iPod cannot determine Apple’s long term competitive edge as the sector has high competition and piracy is in addition a threat. Therefore, creativity plays an important task in remaining the leading organization in the mechanisms of rapid-expanding market, and the company absolutely can tolerate the shifts with its creative knowledge.

The company has been capable of commanding a premium in market share and achieve more than average returns due to the Apple’s differentiation and novelty of technologically competitive items (Baker 2008).

Origins of Apple’s competitive edge

The company’s strengths can be associated with various resources. First, the company’s moderate pricing or product differentiating system in addition to its trade system have confirmed to be key to the company’s earlier period and will keep on playing an important function in the company’s future.

As an outcome of its previous performance as appreciation as leaders, the company has won the attention of various organizations whom have credited the company’s capability for effective tactical coalitions for instance, the company’s effective coalition with AT&T, presented the company with the chance for improving its iPhone’s knowledge. Apple was capable of lowering the iPhone’s price to users, in addition to, improve the iPhone’s capability.

Also, the company collaborated with Google with a view of providing its iPhone consumers with competitive search and entertainment characteristics. Such coalitions allow the company to further distinguish its items and instil value to its consumers.

Similarly, the company’s recognition as a leader and producer of simple-to-utilize competitive items keeps on strengthening Apple by sustaining the company on the edge of the knowledge savvy user, in addition to offering support for the company’s product differentiation method (Beeghley 2004).

Strengths and weaknesses

Strengths

  • Technology knowledge – Apple’s products are stable and simple to utilize. Latest link to Microsoft product line and Intel processors illustrate capability and readiness for adapting to a broad client collection. This novelty, however, would be unsustainable without an education atmosphere tolerant of flaws. Whereas the clean technology alone is an invaluable or scarce resource, it turns out to be extremely expensive to copy when the resource continues living within the collectively compound, industrial culture of Apple (Crossan & Killing 2002).
  • Economic liveliness – financial reserves remained strong and steady in spite of sluggish market segment expansion in the PC software and hardware areas. The company utilized this by defying marketplace forces for lowering prices, strongly incorporating product features, and developing strategic partnerships (Dinan 2008).
  • Brand reliability – the only way that the company could keep the economic liveliness explained above is through an obsessive, nearly cult-based, link to its consumers. This brand reliability is very expensive and time-wasting to reproduce (Dinan 2008).

Weaknesses

  • Price – generally, the price of any Apple product is in most cases high and only can be purchased by financially stable people. Most of the Apple’s products range from $250 to approximately $350 for both MP3 and MP4 in relation to other brands such as Samsung. Hence, numerous clients from low-income class could not purchase Apple items and choose other trade names (Dupai & Pinter 1999).
  • Market segment – the company has previously been toughest in the United States physical and learning upward market. With the learning marketplace encountering threatening budget barriers and the United States moving towards a personal computer saturation level, the company may require spending funds more rapidly and yield to promotion cost forces on Apple items without an alternative novelty, incorporation, or divesture (Evans & Gupta 2001).

Internal Factor Analysis Summary (IFAS)

The IFAS merges Apple’s major strengths and weaknesses, presents a brief remark, a weight from 0 to 100 and a rating from 5 (very significant) to 1 (not really significant) and computing the ultimate weighted score.

Table 1: Internal Factor Analysis Summary

Internal Factor Weight Rating Weighted-Score Remarks
Strength
Novelty & structure 15 5 75 Concerning PC not simply as product but as a premium item (daily life).
Creativity 24 4 96 Legendary for technology creativity, innovations and growth, technical distinction.
Promotion knowledge 22 4 88 Consumer-based promoting, merging electronic and merchandise avenues, strong brand reliability.
Weakness
High costs 18 2 36 Increased price for Apple product compared to similar product.
Absence of significant volume 21 3 63 Challenges to maintain profitability as result of low general PC market segment.
Total 100

Source: Wheelen & Hunger 2008

Apple’s current strategies

Corporate strategy

Corporate-level strategies involve selecting the businesses in which organizations ought to invest their money and potential opportunity to expand or contract (Morden 1993). Since Apple is concerned with horizontal incorporation and strategic subcontracting, this section will discuss the organization’s unique roles and goals along these avenues.

Horizontal integration

Horizontal incorporation refers to the guideline of buying or combining with sector players with a view of maximizing sustainable profitability (Kerin & Steven 2009). Even though there are two potential strategies of applying horizontal incorporation, Apple Company only concerns with acquisitions and apparently does not plan mergers currently (Jade 2008).

Indeed, the company has acquired and may keep on acquiring organizations that have items, services, staff, and skills that complement Apple’s strategic path. Indeed, the company understands that such acquisitions may comprise critical threats and risks, for example regarding the incorporation of the acquired organizations, costs associated with the acquisition, lawful barriers, or product quality concerns (Investor relations 2008).

Latest acquisition of Emagic highlights that the company’s acquisition framework is focused on increasing Apple’s value through addition of significant products, talents, and skills of the acquired organization. Indeed, this acquisition of comparatively small organization did not offer Apple an enormous opportunity for enhancing the competitive advantage that stems from economies of scope but attached important value to the company’s product collection (Hunger & Wheelen 2012).

Since the company is basically concerned with the sector of product accumulating, these additional products in addition provide Apple with new opportunities to offer new and diversified product ranges and can promote cross-buying.

Strategic subcontracting

Strategic subcontracting encompasses isolating out a few of an organization’s value addition roles within an organization and letting them be carried out by a separate company. In fact, the company has subcontracted different roles based on activities and logistics as its contract designers and subcontracting organizations can carry out various value-addition roles at a lesser cost as a result of low operational costs and other competitive benefits (Hruska 2008; Hill & Jones 2004).

Since the company’s focus depends on the design of its items and its capabilities can be viewed in terms of novelty, planning, and promoting, it is rational that Apple aims at such value addition roles and subcontracts its processing function to companies that focus on this role (Hickey & Thompson 2005). Therefore, the company can obtain gains as far as costs, chances of differentiating its products, and enhanced attention to its unique capabilities.

Business strategy

The business-level strategies propose how an explicit company system can result to a competitive benefit over other players in the sector. There are 3 basic aspects impacting the direction of Apple’s business system. These include: consumer needs, client categories, and unique capabilities – i.e. the company has to find solutions to what and how a customer need is fulfilled and who is going to be fulfilled (Hellmann 2000).

Consumer needs

Apple, right through the sectors it contributes in, attempts to initiate its mission of being the entertainment focus in a sector where linking between service, hardware, and software is turning out to be increasingly significant, as users need complicated in addition to incorporated digital systems which can easily link to each other. The company has been trying to separate itself from possible rivalries with a view of justifying the high cost.

It is significant in finding the precise balance between costing alternative and client fulfilment since such a mix is critical for maximizing value for the client and for increasing profitability (Dickel 1994; Yoskowitz 2008).

The company is known for its high-cost design, since establishment of product plan and novelty is an expensive issue. However, product differentiation is an effective competitive tool since Apple can enhance the expected quality of its product portfolio and be as successful as any other competitor in spite of the higher-cost policy.

Client categories

For organizations it is essential to understand their clients. Knowing your clients implies to be capable of performing an accurate market demarcation, since each category of customers requires to be accurately differentiated. Such policy aids organizations in targeting specific clients in an improved manner with enhanced and highly suitable products, expanding client receptiveness (Bernardin & Russell 1998; Wilcox 2008).

There are 3 kinds of strategy on hand for market grouping. The initial alternative would be that the company could focus on serving the moderate consumer without making impacts in meeting their needs, secondly the company could still focus on all clients, but identify the various preferences and therefore develop distinct products for every client group or third the company could just locate itself into an environment and focus on simply particular client segments (Ehrenreich 1989; Evans & Gupta 2001).

Unique capabilities

Apple’s business system has to recognize its unique capabilities and embrace business models which enable the company to design and implement its competitive benefits. With Apple as sector leader in product novelty and development the role of the leader is for choosing strategies which are compatible with the high-cost design and the differentiation strategy (Watson 1993; Fortt 2008).

External analysis

The company operating in the hi-tech sector, is, as the name already shows, greatly impacted by technical changes. The organization has already made the cruel exposure of losing a famous fight against Microsoft and thus Apple is enthusiastic not to experience similar situation (Frommer, 2008; Gilbert 2002).

Opportunities emerge via Apple’s digital focus system which focus on generating not only user-friendly devices, but in addition focus on the Wintel marketplace with its fresh novelties. Besides that the critical obstacles to entry signify secure havens for the company since they can satisfy its major marketplaces via novel and greatly competent product portfolio and equally sell at a high price (Thompson & Hickey; Graham 2008).

Among the generally significant threats are the increased competitions in the technology sector, which persistently brings down charges and creates high-end, highly priced inventive product portfolio less striking and the negotiating authority of Apple’s main part suppliers, which can result in an upper cost design and low profitability (Schumpeter 2001; Hartley & William 2009).

For the potential, as additional companies where Apple is engaged in will have significance, concerns in the entertainment marketplace and digital marketplace will gain an upper influence on Apple. In this, socio-economic pressures appear to emerge as major factor of how effective the company will be in the future.

If the company is capable of maintaining the smart aspect of not only iTunes, but also iPod, Apple will be capable of generating above sector incomes for the future. The following section summaries the key opportunities and threats (Table 2).

Table 2: External Factor Analysis Summary (EFAS)

External factor Weight Rating Weighted-score Remarks
Opportunities
Barriers to entry in the technology sector 22 3 66 High product reliability, soaring economy of scope, soaring client switching cost as a result of distinct hardware & software, charge benefits via copyrights & secret procedures.
Complements 17 3 51 Powerful and reliable designer group – high quality and value addition
Technological pressures 18 5 90 High novelty and R&D headship – potential first mover benefit.
Threats
Competition among developed organizations in technology sector 25 3 75 combine sector with pricing issues – decreasing price circle
Social pressures 18 3 54 Increasing unreliability among young people
Total 100

Source: Wheelen & Hunger 2008

Key challenges facing Apple

Pricing

Generally, the price of any Apple product is in most cases high and only can be purchased by financially stable people. Most of the Apple’s products range from $250 to approximately $350 for both MP3 and MP4 in relation to other brands such as Samsung. Hence, numerous clients from low-income class could not purchase Apple items and choose other trade names (O’ Brien 2007; Krazit 2008).

Market segmentation

The company has previously been toughest in the United States physical and learning upward market. With the learning marketplace encountering threatening budget barriers and the United States moving towards a personal computer saturation level, the company may require spending funds more rapidly and yield to promotion cost forces on Apple items without an alternative novelty, incorporation, or divesture (Martin 2008; McGrath 2006).

Functional strategy

A functional strategy is focused on enhancing the roles of an organization’s value chain and therefore achieving competitive advantages via better competence, excellence, novelty, and receptiveness to consumers (Musgrove 2006; McLean 2008).

As a result, there are various techniques, guidelines, and strategies for all value addition roles that were identified as Apple resources in the evaluation of the company’s internal situation, namely Promoting, Funding, R&D, operation & Logistic (O&L), Human Resource Management (HRM), and Information System (IS).

Table 3: Tow matrix

Strengths (S)
  • Novelty & structure
  • Creativity
  • Promotion knowledge
  • Economic liveliness
  • Brand reliability
Weaknesses (W)
  • High costs
  • Absence of significant volume
  • Pricing
  • Market segment
  • Low technology absorption
Opportunities (O)
  • Barriers to entry
  • Complements
  • Technological pressures
SO Strategies
  • Strong overseas marketing will promote expansion in emerging markets lowering reliance on local market.
  • Recognize effective leaders across the globe via internationalization and add more duties with a view of reducing reliance of CEO in foreign activities
WO Strategies
  • Novelty in technology would generate additional opportunities for partnerships
  • Utilizing brand value and CEO personality in emerging sector market with a view of leveraging more brands trust and push novelty.
Threats (T)
  • Competition
  • Social pressures
  • Substitutions
  • Failure to sustain contracts
  • Dwindling economy
ST Strategies
  • Utilize promotion strategies and continuous novelty with a view of differentiating product line form rivalries and change user assumption on inexpensive substitutes.
  • Focus on generating more joint ventures that stimulate continuous novelty.
WT Strategies
  • Focus on a more various products and quicker upgrades with a view of increasing demand, reducing price and combating inexpensive goods.
  • Utilize senior management’s potential in strategic scheduling with a view of minimizing economic decrease to combat financial effect.

Source: Wheelen & Hunger 2008

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