Introduction
Along with the development of economy and technology, electronic products have achieved a rapid development. That is mainly because the high electron technology can cater for people’s daily demands such as communication, entertainment, work and some other aspects. Moreover, in modern times, people’s living standards have generally improved, thus their demands of life quality is raising. Therefore, there are many opportunities for the companies that provide electronic products and services. However, along with the development of electronic industry, the competition becomes intense. Thus the appreciate strategies are important for companies to achieve a successful and stable development.
In this essay, it will firstly introduce the history of Apple Inc.. Following that, it will apply Porter’s strategy framework to Apple Inc.. And then, it will outline 3 future strategic options for Apple Inc.. After that, it will evaluate the contribution of ‘culture’ to the strategic success of Apple Inc. At last, it will make a conclusion.
The history of Apple Inc.
Apple Inc was established by Steve Jobs and Steve Wozniak on April Fool’s Day, 1976. They firstly built a computer circuit board which named the Apple I in Los Altos, California. Jobs made it Apple’s mission to bring an easy-to-use computer to market. And then, the company launched the Apple II, which was more convenient for people to use straight out of the box. From than on, Apple became the leader of the industry quickly, selling more than 100,000 Apple IIs by the end of 1980 and it launched a successful IPO in 1980 (Carlton, 1997). Apple introduced the Macintosh to the market in 1984, which reflected the ease of computer use, the breakthrough in industrial design and technical elegance. The stable development of Apple during the 1980s was mainly due to the leadership in the education field. The implementation of the LOGO Programming Language by Logo Computer Systems Inc. had provide the opportunities for the Apple II. The success of Apple and LOGO in the education field brought a broad base of loyal users all over the world to Apple Inc.. Apple’s world wide market share had achieved about 8% by 1990. The major share come from the education market. At that time, Apple controlled all aspects of its computer, and it could offer customers a complete desktop solution involved in software, hardware, and some other aspects. Apple introduced the PowerBook to the market in 1991, which established the ergonomic layout of the laptop computer and the modern form of the computer. Although the Macintosh Portable was produced as powerful as the desktop Macintosh, however, the Macintosh Portable was weighed 17 pounds with a battery which can work 12 hours. And the PowerBook was 7 pounds and with a battery which can work 3 hours. These were more convenient for people to carry and move. Moreover, the Macintosh Portable can be used without electric power source for at most 12 hours. Therefore, the kind of computer became more and more popular with people all over the world. By the early 1990, Apple started to develop the alternative platforms to the Macintosh, such as the A/UX. In 1994, Apple allied with IBM and Motorola in the AIM alliance. In 1997, Apple joined Microsoft to release new versions of Microsoft Office for the Macintosh. In the later years, Apple continued to develop new products to cater for the demands of market and consumers. The company has take various strategies to achieve the business objectives and more profits.
Application of Porter’s strategy framework to Apple Inc.
Brief introduction of Porter’s strategy framework
Porter’s strategy framework involves in 5 forces– competitive rivalry, threat of new entrants, threat of substitutes, bargaining power of suppliers and bargaining power of buyers. The competitive rivalry is influenced by various factors involve in the market growth rate, level of fixed costs, frequency of over capacity, extent of product differences, strength of brand identities, cost of exiting the industry, comparability of competitive rivals and some other aspects. The threat of new entrants depends on the capital requirements, economies of scale enjoyed by existing competitors, cost advantages enjoyed by existing competitors, existing product differences, strength of existing product brand loyalty, access to distribution channels, access to appropriate technology (Porter, 1997), access to long term supplies of raw materials and some other aspects. The threat of substitutes depends on the relative price of substitutes, technical comparability of substitutes, costs of switching, speed of technological development in substitute industry and some other aspects. The bargaining power of suppliers depends on monopoly power in supplier industry, degree of differentiation of supplier’s product, costs of switching supplier, importance of volume to the supplier, importance of supplier’s product to the industry and some other aspects. The bargaining power of buyers depends on buyer volume, availability of substitute products, costs of switching, concentration of buyer’s industry, price sensitivity, product differences, buyer information and some other aspects (Porter, 1998).
The analysis of Apple Inc.’s 5 competitive forces
Competitive rivalry: the competitive rivalry of Apple Inc. is medium. On one hand, there are many famous brands have great influence in the computer market such as IBM, DELL, Lenovo, Sony and some other brands. These brands provide various computers in different shapes, colors, functions and some other aspects. And the computers suits different people such as student, businessman, common employee and some other people. And the computers are in different prices, thus the computers can cater for the demands of different social classes. However, it is well known that the price of Apple is general very high, and not all of the people can offer it. Therefore, most of the customers may like to choose other brand’s computer. This will weaken Apple’s competitive power. On the other hand, although the price of Apple’s products is high, however, it is well known that the quality of the products is high and the functions of the products have strong power. Thus many customers would like to choose Apple’s products for the good functions. And in the aspect of products, Apple has strong competitive power. Thus in the comprehensive point of view, the competitive rivalry of Apple Inc. is medium.
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Threat of new entrants: The force of the threat of new entrants is low. First of all, Apple Inc. was established in 1976, and it has more than 30 years’ growth. During the 34 years’ development, Apple has cooperated with many companies that have great influence on the computer industry. The company’s business idée and the quality of the products or services are well known by the people all over the world. It can be said that Apple Inc. is the leader in the computer industry. And there is no company can surpass the position of Apple in the computer industry. Moreover, the new entrants are usually the new brands (Stewart, 2004). These new entrants do not have any brand effect. Because the products that they provide are not used before, therefore, they can not provide the proofs for the customers and make them to believe that the quality of the products is high and the products are reliable and practical. The products of the new entrants usually use the software and hardware that produced by other companies and applied in many brands’ products. There is no innovation that the new entrants can provide. Therefore, it is difficult for them to attract customers and competitive with the famous brand such as Apple Inc.. From these points of view, the force of the threat of new entrants is low.
Threat of substitutes: the force of the threat of substitutes is medium. It is well known that the products of Apple have great functions and high quality. The production costs are higher than other brands. And the computer of Apple have special functions that other brands’ computer do not have. That is because the research and development skills of Apple is higher than other companies. However, on the contrary, the substitutes such as the computers, mobile phones, music players and some other aspects become more and more in the market. There are some famous companies that provide the similar products or services such as Sony, IBM, DELL, and some other brands. The quality of the products also very good, and the functions can generally meet the common consumer’s demands. What’s the most important, the price of the substitutes is lower than Apple’s products. Based on these aspects, the consumers may consider the substitutes that can provide the similar services and cost lower. Therefore, the force of the threat of substitutes is medium.
Bargaining power of suppliers: the bargaining power of suppliers is high. Because Apple has its own fixed suppliers. The software, hardware, and some other fitting parts are provided by the certain suppliers. Because Apple Inc. has strict and high requirements on its products, thus the components must have the quality assurance. Thus Apple can not choose the suppliers at random. Based on this, the suppliers display important and essential roles in the business of Apple. Thus any requirements that the suppliers point out will have great influence on the normal operation of Apple and its decision-making. Thus the bargaining power of suppliers is high.
Bargaining power of buyers: the bargaining power of buyers is low. First of all, the brand of Apple is popular with the people all over the world, the famous reputation has already set up in the whole world. Thus Apple Inc. has the qualification to positioning its products and the price. Moreover, more and more people become to pay attention to Apple’s products because their special functions, and the number of Apple’s customers is raising. Although the price of Apple’s products is high, however, many people would like to buy the products. In addition, the new entrants and substitutes can not bring great threat to Apple, which means that Apple can still occupy great market share (Segal-Horn and Faulkner, 1999). Therefore, Apple will not adopt the strategy of reducing the product’s price. According to these factors, the bargaining power of buyers is low.
The unusual aspects of the way Apple Inc. does business
First of all, Apple Inc. cooperate with the companies that display great even dominant roles in the industry such as IBM, Motorola, Microsoft and some other companies. This cooperation will strengthen Apple’s competitive power and comprehensive power, because it will obtain the support of its partners (Linzmayer, 2004).
Moreover, Apple Inc. applies itself to the research and development of high-end products which have special functions that other brands can not provide the same services. Although this needs much costs, however, the products will achieve more attention by people, and attract more customers (Linzmayer, 2004).
In addition, Apple has its own management methods and business strategies. All of these will help the company make a smooth and successful operation, and achieve a rapid development (Linzmayer, 2004). Because the management and strategies deal with the problems, and create new opportunities for the company to obtain development.
The future strategic options for Apple Inc.
There are some major future strategic options for Apple Inc., thus the company can obtain a more rapid and successful business and development.
Cost leadership strategy
Cost leadership is the comparative advantage of the business which compared with competitors. If the cumulative cost of the value activities of the company is lower than the cost of its competitors, it has cost advantage. If a company knows about the cost difference between itself and its competitors, there are two main ways to achieve cost advantage, one is to implement cost control to all of the aspects of value creation, another is to re-structure a new lower cost value chain which is to use higher efficacy ways to design, produce and sale the productions (Willis, 2001). Generally speaking, cost leadership strategy necessarily requires a company to become the cost leader, but not to be a member of the companies that compete for this position. Many companies have not realized this point so that they have made great errors in planning the strategy. When there is not only one company looks forward to becoming the cost leader, the competition between them is very intense because each percentage point of market share are considered essential (Jeffrey, 2005).
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This is a very important strategy for Apple Inc. Because Apple Inc. is a worldwide famous company, and it is business covers all over the world. Thus the cost of the business arrangement is huge, which involves in the employment cost, raw material cost, technology research and development cost, transportation cost, sale cost and some other aspects (Wright, Kroll and Parnel, 1996). Therefore, the various costs occupy a great part of the company’s competitive power. If the company does not pay attention to the power of the cost, and take measures to reduce the costs, it will waste more on the products or services research and development. Moreover, if Apple Inc. has special strategic chains management: the optimization of enterprise value chain, smooth supply chain management, win-win chain and customer satisfaction chain, it will have a rapid development., because these will support the cost leadership strategy. Apple Inc. may insist ‘CHAMPS’ management policy, which is comprehensive and with consumer-oriented, Apple Inc. also can take the strategies that growth-centered, for instance, it can target one of the means of achieving profits-cost leadership (Peter and Donnelly, 2004). If Apple Inc. takes full advantage of these strategies, it will strengthen its competitive advantage.
Market penetration strategy
Market penetration strategy is the development strategy that making market expansion, the strategy can be launched through expanding the production scale, increasing production capacity, adding product features, improving product use, expanding sales channels, exploring new markets, reducing product cost, concentrating resources and so on. The strategies core is reflected in two aspects: one is to use the present products to open up new markets, another one is to provide new products to present market. Market penetration strategy is special of the competitive strategy, it is a company development strategy that based on existing products and fully develops its market potential, it also be called basic business development strategy (Nonala and Kenney, 2002). Because market penetration strategy is formed with existing products and existing market, so the managers of the enterprises should have systematic consideration of market, products and marketing mix strategy so as to achieve the purpose of promoting market penetration.
For Apple Inc., the market penetration is one of the major strategies. Although the company has occupied many markets all over the world, however, not all of the markets can meet the company’s demands, in other words, the company can not achieve its business objectives and expected profits. Therefore, the company needs to take measures to promote the products in more markets and attract more customers. Expect the production of computer, the company also produces cell phone, music player, and some other products (Harris, 997). However, the demands of market and consumers continue to change, thus the company should keep researching and developing new products and services, so as to cater for the customers’ needs and meet their satisfaction. Moreover, in some small cities, as the commerce is not very developed, and the people’s living standard is not high, thus some famous brands especially the products or services that have high price may not provided in the small cities. However, there will be some consumers who live in the small cities would like to buy the products of Apple Inc.. Based on this situation, the Apple Inc. should promote some products in the new markets, so as to expand the sale scale.
Diversification strategy
Diversification strategy is a development strategy of operating the products or service of more than two different uses. Enterprises can occupy and explore more markets and avoid the risk of single operation with the diversification strategy. The so-called product diversification means that the enterprise’s new products across a wide range of profession that may not relative to the same industry. The general sense of diversification mainly refers to the diversification of production. Diversification is different from product differentiation. Product differentiation is the segmentation of the same market, but essentially the same product. Production diversification is the same company’s products into a heterogeneous market, it adds the kinds of new products and enters new market (Harris, 2003).
For Apple Inc., the diversification strategy is not a strange strategy. Because the company has already take the strategy to develop its business. At present, the business scope of Apple Inc. refers to computer industry, mobile telephone industry, player industry and some other industries. However, the products in the industries can not always meet the consumers’ demands. Because the technology develops very fast, and the speed of electronic products’ regeneration is very fast, thus in order to keep in pace with the market’s development and change, Apple Inc. should continue to research and develop new products that in different industries. Therefore, Apple Inc. can keep its competitive advantages in the various industries (Wit and Meyer, 2010). At present, Apple Inc. has not done very well in this aspect, thus it needs to keep creating new products or services in the various industries that it refers to.
These three future strategic options can be considered by Apple Inc., as each option is suitable for Apple Inc.’s some certain operation situations. If the company can do something that related to the options, it will get some help in its business.
The evaluation of the contribution of ‘culture’ to the strategic success of Apple Inc.
First of all, Apple Inc. pays much attention to the management, especially the leadership. The company has strict requirements on the leaders, and the management of the company. The reason why the company can achieve such a stable and smooth development is that it insists the ‘strict management’. This is one of the important culture factors in Apple Inc. It requires the people in the manage layer must have personal knowledge and skills to organize and control the related work. What’s the most important, the managers must have strong ability to make decisions. From the company be established, the managers continued to formulate the strict management system, thus the company can be arranged in the order, and the operation can rely on the internal regulations (Bartol, Martin and Tein, 2004). A company’s business and development can not leave the effective management, and the effective management can not leave the correct and exact decision-making. Thus the company can make the most appreciate strategies to do the business, and grasp the opportunities correctly and avoid the threats in time.
Moreover, Apple has a reputation for fostering individuality and excellence that reliably draws talented people into its employ. The company has training system and train many groups talented employees every year. In order to recognize the best of the company’s employees, Apple Inc. established the Apple fellows program, providing reward to the employees who have made extraordinary technical or leadership contributions to the individual computing while at the company. The Apple Fellowship has provided much reward to many employees who made special contributions to the company, and the reward also drive the employees to work hard and try to bring more benefits to the company (Smith, 1994). This kind of culture help the company foster many talented people, and help the company encourage and drive the employees to require themselves strictly, and become more professional, thus they can complete the mission perfectly, and make more contributions to the company. The company very value the employee’s self-management. For instance, during a certain period, Apple Inc. did not establish the rules and related regulations that requires the working time, the duties and the salary of the employees, on the contrary, it asked the employees to plan these aspects by themselves. This kind of management can make the employees to have a better realization of their own such as the professional skill, the knowledge, the physical energy, the intelligence, and some other aspects. Therefore the employees can make a self management and improve their comprehensive ability. In addition, Apple Inc. promises some employees to choose to work either in the company or at home, and give them freedom to participate in the meetings that hold by the company (Rusaw, 2007). The freedom of the choices can provide the employees much convenience to arrange the work and the daily affairs. Based on this, the company can obtain the employees’ loyalty and love, they may support the management methods of the organization, and have enough enthusiasm to work for the organization, thus they can promote the organization’s development in a large extent. The culture of employee management not only can promote the company to have a good development and achieve more profits, but also can promote the employees to have a rapid growth and obtain more benefits.
Furthermore, Apply Inc. continues to make the culture innovation. The company always creates an environment that can motivate innovation. The company has established some rules to encourage and promote the employees’ innovation. Moreover, Apply Inc. provides the material and spiritual support for the employees who can make the innovation such as the idea innovation, the production innovation, the technology innovation and so on. During the process of innovation, the company always gives much encouragement, and provides attractive reward to the employees who have made the innovation. According to this, the employees will be aware of the importance of innovation, and they may pay attention to the various aspects that may contribute to the product or service innovation (Bouchikhi and Kimberly, 2008). During a certain period, Apple Inc. promises the employees to do what they would like to do and make the behavior according to their interest. The employees do not need to obey the strict and hidebound roles or regulations in the company, thus their thought is also be restricted. Therefore, in Apple Inc., the dream of enjoying the staffs themselves can come true. By this way, the employees can foster their interests by making full of time, thus they can have enough time and energy to create new things or new thoughts for the company. Thus the company may collect more resources or thought to make the innovation in the aspects of product, service, technology, management and some other aspects. Therefore, the company can maintain the leader position in the computer industry, strengthen the competitive power in various industries it refers to, and keep in pace with the market’s change, and finally achieve more profits and successful development.
In addition, Apple Inc. pays much attention to the customer’s feelings. The company make efforts to research the customer’s demands and collect the related information as the product creation basis. One of Apple’s business objective is to meet the customer’s needs and satisfaction. Because the customers are the consumers, and the profit is achieved finally from the consumers. Thus the company very values the customer’s feelings about the products or services that it provides (Caldari, 2007). Apple continues to create new products so as to cater for the customer’s different demands. The company provides the products not only in the stores, but also sells the products online, this will bring much convenience to the customers. The company also sets up many after-sales departments, thus the customers can obtain the help any time if there are some problems with the products. This kind of culture will help Apple Inc. to attract more customers and obtain their loyalty.
Conclusion
In conclusion, Apple Inc. has a long development history. And with the long-term growth, it has achieved a certain successful development. The various strategies have contributed much to the rapid and successful development. Therefore, the company can not neglect the influencing factors of the strategies such as the culture. However, it is difficult for the company to maintain the leader position in the computer industry, thus it must take the correct and appreciate strategies and make full use of them. Therefore, Apple Inc. can keep in pace with the market development, and achieve the stable and long-term development.
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