Apple Inc 2015

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an open platform removed several barriers relating to application development on the Apple PC. Apple also streamlined the supply chain system and reduced sixteen product lines to four.

I consider Apple’s struggle in the personal computer industry during the Sculley to the Amelio years to be characteristic to surviving in the red ocean, that is competing with its rivals in the existing market. However with the return of Steve Jobs, he clearly followed a blue ocean strategy (Kim and Mauborgne 2015) by creating new markets with products like the iPod, iPad and iPhone.

How sustainable is Apple’s competitive advantage in smartphones?

Apple seems to have learnt from their PC experience as they have led the revolution smartphones and tablets which will influence the next generation of personal computing and is referred to as mobile computing and is the weapon of choice for the younger generation (Erickson 2012). With their entry into the smartphone market it revolutionized the way consumers used mobile phones, the way service providers sold mobile plans and increased the utility of mobile devices.

Existing smartphones in the market were limited in their touch screen capability and many still required a physical keyboard to complete its functionality. Apple’s new iPhone had multi-touch, a full operating system and near PC like quality graphics. Complementing the iPhone was the Apple AppStore which allowed an iPhone owner to extend the capability of the iPhone with customized applications.

iPhones also replaced the iPod line of devices as they could play music and integrate with the iTunes music platform. iPhones also included the Siri electronic assistant which allowed the owner to interact with the phone in a new way by using voice to dictate texts, perform searches, get help on any topic and send emails, i.e. common tasks.

Apple also continued their innovation with increasing screen size, speed, memory and camera quality. Still charged premium price and initially limited to a small number of carriers. It was only until the 4th generation of the iPhone could an average consumer purchase an unlocked device and use it on their preferred mobile network.

The trouble was the technology could easily be replicated. Apple’s main rival in the smartphone industry is Samsung’s flagship Galaxy S line of devices which every year competes favourably against the iPhone. Depending on the focus of the reviewing firm, either phone could be given the edge.

The Galaxy S line is powered by Google’s Android mobile operating system. Apple Inc. is the manufacturer of the iOS while Google is the manufacturer of the Android system which it gives away for free to manufacturers. This significantly reduces the cost of the phone as manufacturers of Android phone need only invest in customization of the android OS for their phone rather than develop or maintain huge amounts of code.

Both platforms also sport an application outlet or App Store where third party developers can provide apps such as games, utilities, entertainment and productivity software. Firms such as Netflix also leverage the platforms to push their products. Maintenance of the Apple app store however is done by Apple while Google maintains the Android apps store thus removing that responsibility from android phone manufacturers. This lowers cost.

I believe that, considering hardware and software alone, no manufacturer has a sustainable competitive advantage with smartphones. However this can change if new use cases for the devices are found. An example is discussed later in this paper.

An evaluation of Apple’s strategy for the Apple Watch

When Apple Inc. entered the wearable technology space with its Apple Watch in 2014, one opinion was that the Swiss watchmakers had nothing to worry about (Raffaelli 2014). Fast forward to 2016 and CEO Tim Cook displayed a list of top watch manufacturers at Apple’s September 7, 2016 Special Event, where he pointed out that the Apple was now the second biggest watchmaker in terms of revenue, behind only Rolex (Charara 2016). The list included other brands such as Fossil which placed third, followed by Omega, Cartier, Citizen, Seiko, Patek Philippe, Longines, Tissot and Casio. It is worthy to note that the Apple and Fossil are the only smartwatch manufacturers on the list and came second and third respectively. Charara (2016) also pointed out that in February 2015, sales of smartwatches passed the sales of traditional watches by 200,000 units. This indicates a trend towards greater adoptability and demand for the smartwatch.

Apple’s strategy for the Apple Watch is to make it easier for consumers to be connected to their digital lifestyle by providing quick access to emails, text messages, calendar and other applications without their having to reach for their iPhone. At the time the case study was written, Apple would have just entered the market with what one might say was a basic device with features common to similar products that were already available. The model available today in 2017 has improved and now includes additional capabilities such as GPS, water resistance and additional sensors that seem targeted towards people with active lifestyles, as well as the expected luxury models (“Apple Watch Series 2” 2017). Clearly Apple’s strategy works as, when ranked against Samsung, Fitbit and other smartwatch manufacturers, Apple cornered 49% of the US market in 2016 (Bredan 2017).

The Apple Watch, however, works only with the iPhone. CEO Tim Cook continues to follow in the footsteps of Steve Jobs by keeping the Apple ecosystem closed. My opinion is that extremely closed systems can lead to a faster death by today’s characteristics. The competition between Apple and its closest rivals is becoming steep and it is harder for any company to differentiate themselves. For example, a new feature no longer takes years to replicate but can easily take months. Additionally, rival products in the form of counterfeit goods are a no longer a threat but a reality. Consider China as the manufacturing capital of the world (Economist 2015) for top brands. An authentic looking but counterfeit iPhone 6 was available for sale in China on the same day the official product was launched (Lee 2015). The counterfeit products are lower in quality and limited in functionality but are readily available to the global market from Amazon.com and eBay.com. I therefore believe that Tim Cook must change his approach and an easy change would be to allow the Apple Watch to function with an Android phone thus expanding the market and creating potential iPhone customers.

If I were CEO of Apple