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Apple’s Strategy

Apple was established by Steve Wozniak and Steve Jobs in the year 1976. Steve Jobs used innovation in his leadership to change Apple to one of the leading computer companies in the world. The competitive strategy of Apple’s management has been based on a series of innovations that involved the manufacture of products such as Mac PCs, iPad, iPhone, iTunes Radio, and iPod. Steve Jobs’ leadership was marked by advances that centered Apple’s success on innovation. According to Gamble and Varlaro (2015), after the death of Steve Jobs, there appeared questions about the ability of Tom Cook to sustain the success of Apple based on innovation that ensured products vision at Apple (p.268). However, despite the economic recession that had occurred in the past, Tom Cook maintained Apple and ensured positive growth.

Gambler and Varlaro (2015) state that Apple had a 275 percent increase in net sales between 2010 and 2014 while in 2015, the company’s market capitalization rose to approximately $760 billion (p.268). Yet, despite Tom Cook maintaining success at Apple after post economic recession and ensuring products vision, the company faced challenges that resulted in the drops of the sales of some products. In 2014, the rise in the sales of iPad and iPhones led to an increase in Apple’s revenue that accounted for $102 billion and $182.8 billion respectively (Gamble &Varlaro, 2015, p.268). However, the drops in the sales of iPad and iPhones due to competitors’ predominance in the market might pose challenges to Apple. The Android operating system dominates the mobile industry with Samsung alone dominating 24.5 percent of the total market shares (Gamble &Varlaro, 2015, p.268). Moreover, iTunes, Apps, and Mac PCs that have increased revenue by 40 percent face stiff competition in streaming industries, Android apps, and Windows operating system laptops respectively. Due to an increase in competition, Apple may need to reconsider its marketing strategy since the company has high bargaining power and great intensity of rivalry since consumers are now seeking alternatives to Apple’s products.

Strategic Issues

Apple’s current strategy involves establishing products vision through innovation that ensures the company creates a competitive edge. Gamble and Varlaro (2015) state that Tom Cook came up with Apple watch in 2014 to guarantee the future of Apple. Though Apple became the foremost company in innovations, businesses such as Dell and IBM regulate the market due to a price advertising strategy and compatibility advantage. According to Gamble and Varlaro (2015), despite Apple incorporating the PowerPC chip, it was unable to compete with Microsoft because Windows 95 has features that matched the Mac operating system (p.269). Apple manufactures brands that ensure Apple hardware is complementary and is in line with other Apple products. According to Gamble and Varlaro (2015), Apple lacked software in 1984 because it put restrictions on Apple Certified Development Program that prevented developers from acquiring information about the Mac Operating system to build software (p.269). In the process, IBM managed to build powerful software and outcompete Apple in 1981 (Gamble &Varlaro, 2015, p.269).However, due to advancement in technology, currently, companies have made products that easily synchronize with the products from a wide range of suppliers including Apple. Therefore, Apple has lost the ability to guarantee the complementary nature of its products.

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Gamble and Varlaro (2015) claim that Windows PCs dominated 97 percent of the market shares in 1990 despite Apple releasing a revamped Mackintosh computer (p.269). The premium services and software have resulted in customers switching to Android. While Apple applications have fixed processes, Android offers a wide range of apps at varied prices that ensure Android captures a large target market (Gamble &Varlaro, 2015, p.271). Moreover, Apple makes one product model that does not offer the consumers a possibility to choose from a variety depending on their purchasing power. Apple’s fixed price marketing prevents the company from penetrating the market in developing countries and rebuilding relationships with the sectors of economy that offer the target market to Apple such as the educational sector.

Porter’s Five Forces Analysis

Threats from New Companies. New companies take Apple’s global market share for PC. The market shares of Apple PC products faced a continuous decline until 2012 while new companies such as Lenovo experienced a steady rise in the PC market shares. Despite the PC market shares at Apple rising, the market shares of new companies rise faster when compared to Apple. For instance, between 2013 and 2014, Apple had global PC market shares of 5.4 percent that rose to 6.4 percent while Lenovo’s market shares rose by 2 percent (Gamble &Varlaro, 2015, p.272). On the other hand, not all new companies have been performing well in the global market. Apart from top companies such as Dell, Lenovo, HP, Acer, and Apple, other PC companies have experienced a continuous drop in the global market shares for PC. For example, Gamble and Varlaro (2015) show that other PC companies global market share was 41.2 percent in 2012 and dropped to 34.7 percent in 2014 (p.272). Therefore, new companies experience difficulties in entering the PC market because top companies have economies of scale that enable them to outsource services and jobs leading to an excess of their products in the global supply chain. On the other hand, new companies lack such economies, which results in fewer products in the global market and leads to reductions in the dependability of PC products from new companies. The intensity of the threat posed by new companies is low because top PC companies have economies of scale that prevent upcoming companies from competing in the PC industry.

Consumers Bargaining Power. Apple consumers bargaining power is high due to the existence of premium pricing that makes many customers hesitant in seeking Mac PCs. Comparing the bargaining power of Apple and its competitors such as Dell and HP, the former shows higher bargaining power due to steep premium pricing (Gamble &Varlaro, 2015, p.273). Despite Apple offering a variety of computers depending on the needs of the consumers such as MacBook Pro for professional use, MacBook Air for education, and iMac for business, the prices of Mac products are high, which limits the importance of producing a wide range of products in marketing. According to Gamble and Varlaro (2015), the cheapest Mac Pro costs $2,999 that represented a $500 increase when compared to the 2012 price (p.273). However, the prices of iMac, MacBook Air, and MacBook Pro are $1, 099, $499, and $899 respectively that represented a decrease of $100 when compared to the 2012 prices (Gamble &Varlaro, 2015, p.273). Therefore, the high prices and premium pricing result in high consumers bargaining power that make Apple customers consider alternative products from Dell and HP. The high bargaining power of Mac PCs accounts for the reason why the global market of Mac PCs has grown slowly. Hence, the intensity of consumers bargaining power is high and makes consumers choose alternative PC products from other companies that offer devices performing similar functions as Mac.

Suppliers Bargaining Power. Due to high purchasing prices for Apple products, suppliers have high bargaining power. Considering the total number of shipments made by Apple to the global market compared with other PC companies, the company’s records are lower than those of HP, Dell, and Lenovo. Gamble and Varlaro (2015) show that HP made more than twice global PC shipments when compared to Apple that accounted for 18.322 and 8.085 million units respectively (p.272). Therefore, due to high prices at Apple, suppliers choose alternative PC products from other PC producing companies such as Dell and Lenovo. Considering the market shares occupied by Apple PC products, there exists a significant difference between Dell, HP, and Lenovo when compared to Apple. The global percentage market shares for HP, Dell, Lenovo, and Apple in 2012 accounted for 27 percent, 21.3 percent, 51 percent, and 8.0 percent respectively (p.272). Apple made fewer global shipments but attained much revenue when compared to Dell and HP. This shows a considerable difference in the prices of Apple PCs compared to the devices of other PC producing companies. For instance, in 2013, HP made a total of $32,179 million, Dell made a total of $56,940 million while Apple made a total of $111 billion (p.272). Therefore, Apple has few global suppliers due to high bargaining power among them. The intensity of suppliers’ high bargaining power is moderate because, despite the high prices of PC products at Apple, the company still meets global market shares that account for the high revenue.

Competitive Rivalry. Apple has high competition rivalry due to a significant difference in the market shares occupied by its competitors. According to Gamble and Varlaro (2015), under the leadership of Scullery in 1990, Microsoft Windows 3.0 dominated over 97 percent of the PC market shares; despite Apple incorporating PowerPC chip to Mac in 1994, Windows 95 still outcompeted Mac since it matched several Mac Operating system capabilities (p.269). In addition, Apple displays high competition rivalry due to accepting Tom Cook in 1998, a rising star in leadership at Compaq computers who aided in creating a competitive edge at the company (Gamble, 2015, p.270).Considering the market shares for Mac PCs in between 2014, Hewlett-Packard had the highest global market shares of 27.6 percent that accounted for 18.322 million global shipments, Dell had 24.3 global market shares that accounted for 16.158 million global shipments while Apple had 12.2 percent global market share that accounted for 8.085 million shipments (Gamble &Varlaro, 2015, p. 272). Comparing the 2014 and 2010 global market shares, Hewlett-Packard, Dell, and Apple have all increased their global market shares; however, there exists a significant difference between the global market shares of Apple and Hewlett-Packard or Dell (Gamble &Varlaro, 2015, p. 272). Apple has experienced a small percentage of domestic market shares with regards to its PCs. According to Gamble and Varlaro (2015), in 1984, Apple was unable to meet 5 percent of the U.S. domestic market shares (p.273). The competitive rivalry was intense because there was a fundamental difference in the market share owned by Apple when compared to the rival competitors such as Dell and HP. Moreover, despite Apple performing best during the economic recession in 2008, the rival competitors such as HP and Dell ensured positive revenue. They use a price marketing strategy to create a competitive edge while Apple uses innovation and luxury. Therefore, to reduce high rivalry, Apple must incorporate value pricing in their marketing.

Threats of Substitute Products. Mac PCs face threats from tablets used as substitute products. According to Gamble and Varlaro (2015), the global shipments of PCs have declined since 2011 and are expected to decrease by 30 percent in 2018 due to an increase in the popularity of tablets that are replacing PCs in offices and at home (p.271).The rise in cloud computing and business applications makes tablets a better alternative to PCs owing to their increased portability. Between 2013 and 2014, the global market for tablets increased by 4.4 percent that accounted for 219.9 million units in 2013 and 229.6 million units in 2014 (Gamble &Varlaro, 2015, p.271). The threats posed by increased market shares for tablets are moderate to Apple because it also produces tablets that compete in the global market. Moreover, PCs are used as a backup of information in both offices and business sectors. Therefore, increase in the market of tablets does not result in significant reduction in the PCs market shares because the use of tablets and PCs is complementary. However, increase in the global market shares for tablets poses threats to Mac PCs from other rivals because they cannot easily synchronize with other devices, which may result in users replacing Mac PCs with hardware that allows multimodal synchronizing. According to Gamble and Varlaro (2015), the market shares of Apple dropped to 27.6 percent from 68 percent between 2012 and 2013 because the population increased the use of devices that do not synchronize with Apple products, especially Mac PCs (p.273). HP entering the tablets business posed a threat to Mac PCs, as tablets do not share computer components having smartphone components that make them cheaper.

Key Success Factors

The key success factors for Mac products include the strong Apple trademark name. Apple is considered the top PC company leading in innovations in the PC industry. Mac’s quality and high price enable luxury marketing that allowed Apple to compete despite using value price marketing in both domestic and global market. Apple products are complementary; hence, their users need to have Mac to enable synchronizing of the products. Therefore, the market of Mac can be derived from the use of other Apple products.

Financial Analysis

Apple has maintained positive revenue regardless of global economic recessions. According to Gamble and Varlaro (2015), Apple had 275 percent growth in revenue during and after the global economic recession (p.268). The net sales of Apple products have experienced increased revenue between 2012 and 2014 except for iPod. Apple’s tablet market experienced a continuous increase in 2013 and 2014 that account for 219.9 million and 229.6 million respectively. The smartphone innovation in 2007 increased Apple’s revenue significantly. Gamble and Varlaro (2015) state that smartphones’ shipment in 2012 almost doubled from 725 million and 1.3 billion (p.275). However, with stiff competition from Android and Microsoft smartphones, Apple has suffered a continuous drop in smartphone revenue. Still, with the launching of Apple watch in 2015, the demand for Apple products has shown a rise due to increased complementary nature of Apple watch with regard to Apple devices.

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Strength. Apple is a leading innovative company that has a competitive edge. With the invention of smartphones and Apple watch, the company will experience increased revenue that offsets stagnant revenue obtained from iPad and the dropping revenue of iPod. Apple has a wide range of products that are complementary and enable one product to create demand for another one. Apple collects its revenue from iTunes and App store. According to Gamble and Varlaro (2015), Apple music store had over 43 million songs for downloads with the complementary nature of Apple products enabling Apple products users to integrate applications and songs through iTunes, iCloud, and iMatch thereby creating demand for additional Apple services. Apple has a stable and strong financial position even during the global economic recession.

Weakness. Some Apple products act as threats to the sales of other products. The increased demand for tablets in offices and at home has resulted in reductions in the sales of Apple computers. Gamble and Varlaro (2015) claim that with increases in cloud computing, Apple computer users see Apple tablets as an alternative device which resulted in decreased sales of Mac (p.277).The premium services, fixed prices, and single model products prevent Apple from capturing a wide target market. As a result, Apple products impede users with devices that are not Apple from synchronizing with Apple products thereby reducing the size of Apple’s target market. Apple has a luxury price marketing strategy that is not based on valuing price marketing hindering the company in penetrating the global market, especially third world countries.

Opportunity. The use of computers has experienced global acceptance across several cultures, which allows Apple to have an increased market to exploit. Apple already has online products such as iTunes and iCloud that it can use to improve the online sales platform reducing operation cost and increasing revenue. In addition, Apple watch has increased the sales of Apple products due to its complementary nature thereby boosting the sales of products that have stagnant sales such as iPad and iPod.

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Threats. Apple faces stiff competition from PC companies and smartphone companies. According to Gamble and Varlaro (2015), the biggest challenge of the company in 2015 was how to handle the shrinking market of Apple computers and smartphones due to increased competition (p.277).Moreover, in 2012, Apple owned 68 percent of the global tablet market shares that dropped to 33.8 percent in 2013 (Gamble &Varlaro, 2015, p.273). Despite global recession not causing negative revenue at Apple, it resulted in the reduction of the total revenue collected. Some Apple products such as iPod are up against severe competition from substitute products, which led to reductions in their net sales.

Recommendations

Apple Inc. should make products and software that are compatible with those of other companies. The recommendation aims at ensuring Apple’s increase in the size of its global target market and acquiring back the education sector that uses much software that is not compatible with Mac. The recommendation is justified because Apple loses global market due to the incompatible nature of its operating system in relation to other software and PC devices.

Apple should integrate streaming services and reduce the cost of accessing music through offering free music to create traffic. In addition, it should use advertisements to increase the revenue of Apple Music, a strategy used by Google. The strategy aids in creating a competitive advantage through a vertical transition that enables Apple to explore new opportunities that provide more revenue while integrating the competitive strategy used by other online music companies. The recommendation is justified because companies such as Google, the major competitors to Apple in the music industry, provide streaming services and free music to create traffic for advertisements, a strategy that results in decline in the revenue acquired by Apple.

Furthermore, Apple should focus on developing strategies such as creating Apple watch that aid in building new competencies rather than focusing on leveraging the already existing products only. The recommendation aims at reducing the gap created by competitors’ predominance and improving the efforts of the products marketing mix, which ensure Apple products remain unique thereby enhancing brand identification. The recommendation is justified because Apple is the leading PC Company in innovation and if it merges value price marketing and innovation, it will be able to become the foremost PC Company regarding global market shares.

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Apple should manufacture wide range software and hardware that will enable the company to get more target market instead of developing a single model or software with fixed prices. The recommendation aims at ensuring that Apple products are purchased by the upper, middle, and lower class. The recommendation is justified because Apple’s competitors such as Samsung produce a wide range of products that have aided in Android capturing more than three quarters of the smartphone sector’s global market shares. Moreover, fixed price software faces competition against free or wide range priced Android software that makes consumers shift to products from alternative companies.

Therefore, Apple should use a combination of value price marketing, luxury price marketing, and free enterprise price marketing to capture a large target market. Apple’s price marketing is the major cause of the company’s constantly losing global market shares after making innovations. Despite not inventing new products, Apple’s competitors still dominate the market.

Conclusion

Apple is able to compete and regain its global market shares if the company adopts value price marketing. Innovations ensure that Apple has a competitive advantage over other technology companies. The company has high consumer and suppliers bargaining power. The intensity of the rivalry between Apple and its competitors is also high. However, the company experienced low-intensity threats from new companies. Substitute products exert a moderate impact on Apple PC products. Therefore, Apple should manufacture a broad array of products and software with varying prices to ensure that the company captures a wide target market. Moreover, the company should make products that are more compatible with other devices and software because advancement in technology has resulted in the company losing complementary products marketing.

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