Apple Iphone - Business Strategy

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As it is a technology-based company, it falls within the discontinuous and unpredictable section of the turbulence model. Cromar (2010) characterises the smartphone market as rapidly changing, with constantly evolving technology, short product life cycles and rapid levels of product imitation. These characteristics present both opportunities and threats for Apple in the smart phone market, and the intensity and frequency of change showcases high levels of dynamism and unpredictability (Vijolen & Dann, 2013). This is coupled with high levels of complexity – smartphone markets, consumers, competitors and products are highly interconnected. Apple cites its business strategy as being leveraged from its ability to “design and develop its own operating systems, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative design” (Apple Financial Report, 2014, p1, Appendix B). There is a need to focus on formal strategic planning and appropriate flexible management strategies to adapt to these high levels of change.

Further analysis on Apple’s competitive position within the smart phone industry was undertaken utilising Porters Five Forces Model (plus government) (fig. 1).

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Figure 1 – Porter’s Five Forces

While all five megaforces present opportunities and threats for the organisation, the most relevant to Apple include threat of new entrants, rivalry amongst existing firms and bargaining power of consumers.

Smartphones are fast approaching market saturation if it has not already been reached (Guglielmo, 2013). New high performance arrivals with similar hardware, at lower prices such as Xiaomi provide a threat to Apple (Reisinger, 2014, Appendix C). This is coupled by rivalry amongst competing firms, with companies such as Samsung and HTC providing similar products and levels of innovation with lower pricing making it difficult for Apple to retain its current market share. However, Back (2014) suggests that Apple’s design cachets and software ecosystem are differentiators, which allow them to apply premium pricing. Furthermore, individuals have large levels of choice in the smartphone market, which gives consumers high levels of bargaining power – Mandel (2014) suggests that Apple rely on ‘blind’ brand loyalty to sell their products. This can be seen in growth in iPhone sales despite overall smart phone sales slowing in the US and Europe (Chen, 2014, Appendix D).

Internal or competitive analysis

Core competencies

Apple’s research and development function is one of its core competencies (Hanson, Hitt, Ireland & Hoskisson, 2014), allowing them to develop products that are deemed innovative in the marketplace. Another one of their core competencies is their internal ecosystem – a combination of vertical and horizontal integration that allows it to have almost total control when positioning their products to the end user (Marketline, 2014, Appendix E). Furthermore, Apple has a very strong brand image and reputation. These elements of Apple are rare, valuable, costly to imitate and non-substitutable (Hanson, Hitt e.t. al, 2014).

Strategic Competitive Advantage

The strategic competitive advantage of Apple is its internal ecosystem - a combination of horizontal integration (through its multiple devices across the personal electronics market) and vertical integration through connecting these devices through software, hardware and content creating the whole user experience (Marketline, 2014).

Internal weaknesses

Apple is becoming increasingly reliant on its iPhone sales, which provide approximately 70% of its profits (Chen, 2014). Although the sales do not appear to be slowing down, it is a risk to their sustainability of their company if they do not have income coming in from other products.

Another weakness is that one of Apple’s core competencies, innovation, is perceived as deteriorating. A Lack of consistent product launches combined with less innovative products (Kim, 2014, Appendix F) have resulted in a falling brand image.

Conclusions about organisation’s competitive position in its market.

Apple is operating in a highly turbulent environment that is consistently changing. Two main market trends have been working against Apple in particular – the continuing rise of Android and the fall of prices (Grobart, 2013, Appendix G). Despite a strong brand image and strong iPhone 6 sales, a perceived lack of innovation is eroding its competitive position in the market.

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3. Strategic directions and strategic objectives

Vision and Mission

Apple does not appear to have an official mission or vision statement readily accessible to stakeholders on its website. Steve Jobs initial vision has been quoted as incorporating ‘sell dreams not products’ and think differently to ‘create great expectations’ (Hanson, Hitt et.al, 2014, p1). Apple has a statement on the bottom of all media releases:

“Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad” (Apple, 2014).

A key purpose of these statements is to inform stakeholders of what the firm is, what it seeks to accomplish and who their target market is (Hanson, Hitt et.al, 2014). While providing stakeholders with an outline of their products and past innovations, further accomplishments and whom it seeks to serve are not clearly articulated. This is, however, defined in the Financial Report (2014, p1): “The Company is committed to bringing the best user experience to its customers through its innovative hardware, software and services”.

The success of which Apple lives up to its vision and mission is debatable. Recently, Apple’s innovation cycle has been criticized as slowing, perhaps due to the high expectations placed on the company and its reluctance to deviate from its current product line (Kim, 2014).

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