Management of Internal and External Environments
Apple Incorporation is an American multinational corporation which is successfully designing, and marketing electrical consumer goods, personal computers, and software throughout the world. The corporation has expanded its operations in ten countries by opening 317 retail stores along with an authentic online store through which consumers can buy software and hardware products. Since September 2010, Apple is the largest publically traded company in the world by capitalization of market and biggest technology company in terms of profit and revenue. In the third quarter of 2011, the company sold 20.34 million iPhone which was equivalent to unit growth of 142% and iPads worth 9.25 million that is 183% unit increase.
Key Success Factors for Industry Competition
- Follow the standard Wintel combination for personal computers as it is widely used for computers.
- Application software’s are broadly available.
- The commodity product personal computer must achieve the low cost of production and assembling along with maintaining the market prices.
- For large vertically integrate systems collaborative production relations should be considered with contract manufacturers mostly based in Taiwan and China in order to keep the prices low. The labor costs are less in Taiwan and China as compared to US rates estimated 10% to 20%.
- Compatibility related to support and services.
- As compared to R&D breakthroughs, it is important to maintain to be innovative in manufacturing, marketing, and distribution, as it provides competitive advantage.
- Traditional build to order production should be increase relatively in comparison with build to stock production can help in reducing inventory cost by ten percent (Wernerfelt, 1995).
Stage of Industry
- Maturity phase in the United States
- Witnessed by extreme price and cost decline in personal computers competition.
- Simpler electronic devices replaced or supplemented personal computer due to the advent of “PC-plus” era.
- Growth stage in emerging markets, especially in Asia
General Environment
- Technology—rapid rise of online retailing
External Analysis
In the external environment of Apple Inc, and personal computer industry there are two conditions that has significant importance:
- The requirement of the consumers should be incorporated, due to wide availability of software applications Wintel (combination of the Windows operating system and Intel processors) is considered as a standard for PCs and leading requirement of consumers.
The above mentioned factors of key success and industry condition stages show the significance of selling computers based on Wintel applications and cost competitiveness in the industry (Jay, 1991).
Five Forces of Competition
Threat of New Entrants: High
- Easy to assemble standard component
- R&D requirement reduced
- Expensively created local, national global brand name
Power to Supply: On suppliers demand
- Manufacturers can easily switch to an assembler of difference kind. Contract medium power manufacturer/assemblers of computer.
- For the application software of Apple computers establish high power supply especially for Intel and other like Microsoft.
Threat of Substitutes: VERY HIGH
- Total market is dominated by Wintel PCs, which is 90% of all the personal computers and according to industry standard technology.
- Application software’s are widely available due to demand.
- Video game boxes, smart phones, PDAs, and other devices handheld devices replaced PCs in PC-Plus era.
Competitive Rivalry: Low
- No other competitors have achieved the position acquired by Apple computers.
- Personal computers industry faces high rivalry.
- Declining prices of products offered with similar capabilities
- Equal resources players but operating at massive scale and aggressively like HP-Compaq and Dell.
- Dell’s strategy to build on order and low cost model was copied soon by Compaq and others to meet the customer demand of preference by offering precise product and reducing the cost.
- Assembling of computer became easier at small shops
- United States had slow growth rate causing intensified competition
Buyer Power: VERY High
- Less cost for switching to Wintel PCs
- PCs are almost similar commodities less product differentiation.
- Attraction for price conscious customers.
- The market of Apple computers decline due to dominance of standard Wintel PCs and increasing price competition.
Complementators: High Power
- Majority of the software’s developed are used in PC’s: Windows operating system.
- The inclination of software developers is more towards Windows operating reducing the attraction of Apple computers. In 2000, the Windows application covered 88% which caused a decline of 11% to 5% in the market of Mac software during the year 1996 to 2000.
In the five forces of competition, it is evident that there is dominance of Wintel standard personal computers present as a potential threat to Apple and due to low switching cost, even buyers that are high price conscious show preference towards Wintel PCs. The product similarities and slow growth of market is intensifying the competition among the rivals. High power is still with the complementary primary software developers. Since the sales potential of Apple application is very small developers don’t prefer making applications for Apple computers (Christopher, et.al, 2002).
Increasing growth has been witnessed in the economies of emerging markets particularly in China. At present Wintel PC’s are preferred in China, since Apple did not accommodate Chinese characters and lost its original advantage. The competition among PC’s makers is mainly on leading greater standardization, reducing cost, and R&D to only spend 2% to 1.5% of total sales. Attribute of being price consciousness provides more direct sales to PC users that have potential knowledge through telesales, low cost providers, and Internet for instance Wal Mart and Dell. The cost competition continues to rise even though more computers are built to order to be according to the specification of the buyers. Apple has faced such challenges as these conditions are not suitable for it as Apple computers as not of industry cost price requirement and Wintel standard (George, et.al, 1992).
Internal Analysis
Competitive Advantage Building Blocks
Apple has always captivated the market through innovation, and by bringing blockbuster products to its users for instance iPods and iMac. The distinctiveness of innovation remains an attraction for short time period as similar products based on Wintel enter the market and dominate it. Sales of the company drop due to rival products and it also makes an impact on the financial performance. Apple has always been considered as user friendly computer which is an important aspect of its own operating system, which leads to highly brand loyal customers. The drawback faced by Apple was conversion of loyal consumer to Wintel PC users or creating new target market. An example to prove it can iMac a success of apple sell 6,000,000 units during the period of 2008-2011, whereas there were 300 million units sold of PC sales in same duration (Woellner, 2013).
Internal Analysis Apple Value Chain
The strength and weaknesses of the company are represented through the internal analysis of Apple’s value chain; it has been regrettable that distinctiveness and innovation limits the company’s acceptance in the market. Products offered by Apple’s are high priced compared to the substitute Wintel, the brand is spending higher on both R&D, along with other expenses such as administration, marketing, and selling which leads to less or negative profit and high priced products (Zack, 2004). Losing market share and high prices was compensated through reducing the employee benefits which didn’t helped a lot as the financial result have been consistent, the morale of employees and investors declined (Peteraf, 1993).
Strategic Issues for Apple Computer
At present, Apple mobile phones are prospering but Apple computer is in a vicious circle. The most important problem faced by the company is that the operating system is not used widely and the application developers are not willing to create applications for a small target market which is the cause of further reduction in the sales and demand of Apple computer (Jay, 1995). The company has always appreciated its committed employees but due to cut down in the benefits is unfortunate for Apple as well; with reducing demand survival of the company in the PC industry will be very hard (Danny, et.al, 2002).
Strategic Recommendations for Apple
The survival of iMac computer is largely dependent on its acceptance by majority of users. It is recommended on the alternative that Apple should concentrate on computer peripherals and other electronic devices. The main strength of Apple of being an innovator can be witnessed through these devices which are not limited on the level of applications and even sales are more. Increase sales in iPod and Apple mobile phones is an indication that there is a potential for these devices and the innovative experience to produce new products will enhance the experience of the company. In order to generate higher sales Apple should concentrate on creating devices that Wintel compatible also develop supportable peripheral devices. To motivate the employees and increase their morale, the company should implement a bonus program to address the issues of productivity. Apple should adopt the strategy of rewarding the employee as per their performance.
References
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