Apple Case Analysis

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In 2001, Steve Jobs presented a bold strategy called “Digital hub”, which emphasized its unique strength on the control of both hardware and software. Because of his valuable vision and precise foresight about the digital lifestyle, Apple has subsequently revamped and innovated its diversified products such as iMac, iPod, iTunes, iPhone and Appstore, etc. This product differentiation strategy enables Apple to hold its advantages sustainable, in another word, hard to imitate. In fact, Steve Jobs has always been proud of Apple’s breakthrough innovations and becoming the pioneer in the market rather than followers. According to the financial report of Apple Inc., it is clear to see that from the year 1991 to 2011, the expenditures on research and development has been increased dramatically from 584 to 2872 million dollars, showing its determination to perfect its products and become an industry leader and pioneer.

Apart from the unique products, Retail store location is also an important tangible asset for Apple. Most Apple stores are well-located, for example in the luxurious shopping mall or at the center of downtown commercial districts, which can accommodate a large flow of customers with strong ability to purchase. According to a website called Retailsails, the sales income per square reached 6050 dollars in 2013, ranking the first in the world. This figure was nearly twice as much as that of Tiffany which was only second to Apple. Therefore, it is clear to see that a well-located retail store is also a valuable asset to a company.

In addition to tangible assets mentioned above, another valuable resource that is difficult to imitate is the brand. Based on the Interbrand’s calculations, Apple has replaced the Coke as the emblem of global consumerism in 2013 when surpassing Coca Cola for the first time as the world’s most valuable brand. Apple’s spectacular ascent, fuelled by the iPhone, has boosted the value of its brand from 6.6 million dollars in 2000 to 98 million dollars in 2013. Undoubtedly this successful brand image has gained Apple a competitive positioning in the industry.

Long term prospects

It can be seen from the exhibit 1 that in 2011, the category of iPhone accounted for the largest proportion, at almost 50%, which followed by the iPad at 20%. However, it is noticeable that by 2011, iPad had only launched for about 1 year, which indicated the huge market demand and prosperous prospect of this new product. Most importantly, despite the low price, Apple can still earn an estimated 25% gross margin on the entry model, compared with only 15% at the same retail price products from other companies. Therefore, based on BCG Matrix, as a “star” product, the iPad should deserve more capital investments to support its development and upgrading. In order to improve and stabilize its market share, Apple should also focus on the economies of scale in terms of its production and other processes like marketing.

In the near future, iPhone will still remain the most stable component of Apple’s sales income, this can be referred to the “cash cow” product in BCG Matrix. Therefore, when facing the intense price competition in markets like China and India, Apple should play more emphasis on lowering the cost, for example, giving the channel a lower margin and leveraging its scale in purchasing, etc.

In terms of the PCs, as we have discussed in the industry analysis, the bargain power of supplier and the competition among rivals still remain very strong. Hence, Apple may choose either to weaken the supplier’s bargain power by using its own CPU, or expand the horizontal integration by acquiring some PCs companies to improve its market share.

Last but not least, due to the decrease in future demand of iPod and the challenges from music streaming services, Apple may need to consider integrating existing resources of iPod with other business division such as iPhone, in order to achieve economies of scale. In the worst case, it should gradually exit from the market to give space for other profitable products like iPad.

Conclusion

Apple’s brand name has been one that developed through time by adopting innovations and breakthroughs in different products. It is a perfect example to illustrate how the valuable resources such as tangible and intangible assets interwind with each other and gain Apple a sustainable competition positioning. Most importantly, it is vital to understand how the company should take different actions towards different products, based on the product’s performances.

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