Introduction
Thus a corporation requires a “Global Strategy” which again is defined by Professor Lynch (2012) as a term that covers three areas (global, multinational and international) which is designed for an international organization to achieve its corporate goals as it operates in locations outside its location of origin. The online website Quick MBA defines the importance of Global Strategy (Quick MBA, pp 1). For the corporation, Global Strategy is important for the corporation because operating in a new country will is essentially a newly opened market that would drive both sales and profits. For many corporations that have “exhausted” the market or is competing in mature markets, this is a welcome addition. Foreign markets also offer valuable resources that may make the corporation more competitive. For example, operating in low-wage seeking countries such as China would make production more cost effective. If costs are lowered, customers naturally benefit. A corporation operating in this scenario will pass on its cost savings to the consumer, making its market position more attractive. If it can do so successfully, then operating overseas has given this corporation another layer of comparative advantage over its competitors. Trade between countries is also a worthwhile activity for international organizations because in the long-run it brings the cost of products and services to a more competitive level, thus helping provide equitable distribution of wealth to all countries.
Apple Corporation
Apple is a US company whose business is the design, development and marketing of personal computers, portable digital music players, media devices, cellular phones and other personal electronic devices. Apple also develops and markets software, software services, networking services and solutions, peripheral equipment, and internet applications. The company is one of the most recognized consumer brands in the world and is poised to become the first trillion dollar company of the world. The Apple brand is so strong that it already commands a very strong brand premium. The base customers of Apple’s products span the entire world, across all demographics. Apple’s products are now household names such as the iMac, iPhone, iPad and iPod. Apple has a market capitalization of US$ 650 million, a profit margin of 26.9%, a return on assets of 24% and a return on equity of 44%. Apple’s revenue is around US$150 billion annually, and is considered a “strong” buy by analysts worldwide. A lot of competitors are playing catch-up with Apple, with Samsung recently launching a salvo of similar products, targeting Apple’s very market – and succeeding. Another threat is the emergence of the Android operating system which is also eating into the Apple IOS system, and may have a long term effect on Apple’s market share and dominance in the consumer electronics industry.
Apple believes that man is the master of change in the world. In their products and services, the company strives to make customers masters of these products. This vision is cascaded through all of Apple’s employees, in that all employees are made to understand the vision and strive to participate in reaching it. Similarly, its mission of bringing quality products to the world is evident in the type and level of innovation that Apple brings with each product that they release. It satisfies the need of students, educators, professionals and customers around the world for products that push the importance of technology in our daily lives.
Apple is a capitalist corporation that seeks to make profit and provide its shareholders optimum value. Apple’s strength is in ensuring that it delivers excellent products which in turn ensure that leading position in the electronics industry. Apple’s objective is also be highly competitive. It is a phenomenal success in the last 10 years, being the world’s most admired company in 2008, 2009 and 2010, owing that to a distinct out-of-the-box thinking that has led to the world now enjoying such innovatively designed products. This same distinction has made Apple one of the most profitable companies, this year posting a gross revenue of about half a trillion US dollars and a return on equity of about 44%! Apple now seeks to further differentiate itself by instilling an honest work ethic in its organization. Apple is seeking further growth, seeking even to change its objectives from time to time to prove that established boundaries do not limit the company.
Internal Capabilities and External Forces
- Technological
The two critical issues in the technological environment is the convergence of devices and the relatively shortening of the product lifecycles of these devices. Apple is threatened by innovation coming from competitors and in the fast moving consumers electronic market, the threat does not go away. More and more, products are converging into one another (phones having high resolution cameras, music players and fitness devices, etc.) thus making Apple’s broad line of products obsolete. Because of constant and fast innovation among the players in this industry, the product life cycle is getting shorter and shorter, with more and more innovations launched periodically to satisfy the ever increasing demand of the market for what’s next and what’s hot. This is an excellent opportunity for a company such as Apple, who is known for its constant innovation, strong research and development, and industry leading innovations and offerings that constantly excite the consumer electronic market. Apple is leading in this field and its ability to integrate portable devices into a convergent, seamless, exciting new platform has helped the company retain its leadership position.
- Economic and Global
The world economy is evolving, with the US economy the base of Apple’s operations, is still in a state of recovery. This is a threat because consumers may remain unconvinced to spend more. Apple, with its higher-than-competitor prices or “premium” maybe too unattractive to consumers in a bear economy. However this is an opportunity for Apple to produce value-for-money products with higher-than-average quality to corner the now more discriminating market. Related to the US economy is the emergence of the Chinese economy. The Chinese market for consumer products such as Apple’s are fueled by increasing relative wealth of the Chinese consumers. This means that economically speaking, there may be a shift in markets from the US to China. This is an opportunity for Apple to create marketing schemes that would capture the Chinese market.
- Demographic
Slowing economy causing flattening of wages. The slowdown of the global economy has caused wages to increase less over time (flatten). This resulted in people spending less on luxuries and more on basic necessities. Again, the opportunity this creates for Apple is the affirmation of its loyal fan base, those customers seeking high value for their money, which only Apple products can deliver.
The attractiveness of this industry that Apple operates in can be categorized using Porter’s Five Forces Model of Competition.
- Threat of New Entrants
The consumer electronics market can be penetrated in a number of different ways. In the last 10 years, the number of entrants in the market has increased significantly, however there are several critical barriers to entry that plague new entrants. Apple is one of the several large, well-entrenched and known brands that are in this market and its popularity is a key factor that has enabled the company to keep a leadership position. Developing a successful brand is one the most critical barriers to entry for new entrants into the consumer electronics market. Needless to say, Apple has cultivated brand loyalty thus, deterring competitors from eating into Apple’s markets. Apple has done so through the successful use of its capital resources and its size advantage, utilizing economies of scale to fend off threats that are “leaner” in nature (i.e. those relying on third party suppliers to keep costs down). Another threat comes from Apple’s own suppliers, those that have established the same competitive economies of scale as Apple, and are diversifying their businesses towards the consumer end of the electronics market. This type of entry is known as a forward-vertical integration. For example Acer Inc., a relatively new and unknown brand brought its products to the market through forward vertical integration, and is now an US$ 8 billion company with worldwide operations.
- Substitutes
The convergence of products is a real threat for Apple, which is why the appropriate response of the company is to lead in the move for further, more innovative convergence as well. Personal computers and mobile phones are converging in terms of use, with more and more people treating their phones as if they are computers. To create value from this trend, Apple has made the interaction of its products seamless. You can now use your mobile phone and integrate it with your Mac book so that what you do in one is reflected seamlessly and automatically to the other. This creates a singular feeling of use for both products, even though they are offered separately to the consumer. Products such as this are rare since not a lot of Apple’s competitors have the same type of advantage. However, Apple must keep exceling in the field of seamless product convergence to ensure that the threat of substitutes is averted.
The other threats to Apple, such as those coming from suppliers, the bargaining power of customers and the rivalry among competitors is less in significance than the first two but are still of significance. These are discussed below.
The threat from suppliers is minimal, because of Apple’s ability to utilize its supplier base effectively. However, this reliance may become a threat if Apple does not manage quality standards and costs. If Apple relies on just one supplier, then there is a possibility of costs being too high but if there are too many, there is a threat of poor quality. So far, Apple’s suppliers have earned a reputation of loyalty to the brand as well. For example the recent launch of the iPhone 5 showed the world that Apple’s suppliers adhere to the company’s demand for loyalty and strict confidentiality, that none of them leaked out information about the product before the actual product launch last September 2012.
The threat from consumers is also minimal, since Apple is known for its brand loyalty and customer focus that has provided Apple a cushion in terms of market share. Consumers have varying needs and the convergence of consumer electronic devices is addressing that. Apple is at the forefront of that convergence so the threat coming from the consumers are minimized.
The largest threat comes from increasing competitive rivalry. This industry is characterized by growth and break-neck innovative pace that demands high capital investments and robust research and development from both entrenched companies as well as from new entrants. However, Apple is protected from competitor rivalry because of its commanding position in the market.
Problems in Apple Corporation Apple seems to be a formidable company and barring the hiccups it has been experiencing as of late, it still a leading organization in the world. While the company is setting corrective actions to regain stock prices and revenues, its biggest concern is in itself, its success. The problem of the company currently is how to out-innovate itself. After the wide success of the iPhone and other ground-breaking products, it is very difficult to say if the company is poised to present the general public with a product that would re-captivate everyone’s imaginations. The paltry response to the dismal improvements in each succeeding iPhone version is leading a lot of experts to believe that this will be Apple’s Achilles heel. A business problem that is globally strategic in nature, since the company is one of the most successful global companies today.
According to Shaughnessy of Forbes Magazine, Apple has not been able to utilize its cash holdings of about US$ 137 billion for new products, which by any standards is alarming. This is so because Apple is focusing on a customer-centric mission. It has not explored outside this model and has narrowed down the definition of its capabilities to the point where its money, which can be used for innovative products, is literally useless. Shaughnessy further argues that this is an abnormality since other companies, Google for example, have forward-thinking products that challenge what technology could offer the market (such as Google Glass and Driverless cars).
Experts also believe that Apple has failed to strengthen the three tiers of innovation that is critical for the success of a company. This includes innovating on daily basis, innovating for long-term commitments and innovating the process of wealth creation. These experts feel that Apple is relaxing into a comfort zone instead of being the global leader in technology that it is instead of capturing the growing global middle class population which is the natural customers for Apple’s products and services. According to the Senior Associate Dean of International Business & Finance Bhaskar Chakravorti of the Fletcher School at Turfs University, the survival of America’s economy is dependent on the innovative system of the global economy. Apple should have a hand in this because the global GDP comes primarily from emerging markets (about 40%) but only a small portion of the US GDP comes from these markets (only 10%). Apple being one of the world’s biggest corporations should be contributing more for the US GDP, based on its reach and size alone. Apple seems to have stagnated. It needs to develop a new approach and a new vision for the global technological company that it is. The company needs to rethink its global strategy if possible, 10 to 30 years beyond and fulfill its vision of becoming more than a US$ 1 Trillion company (Shaughnessy, pp 1).
References
Apple Inc. (2013). Various Press Releases and News Articles. Retrieved from http://www.apple.com/hotnews
Businesswire. (2012). Research and Markets: Consumer Electronics Market Forecast for 2012. Retrieved from http://www.businesswire.com/news/home/20090904005206/en/Research-Markets-Consumer-Electronics-Market-Forecast-2012
Esch, SV. (2004). Apple's Success and Jobs' Succession. Macscope. Retrieved from http://lowendmac.com/scope/04/0121.html
Investor Guide.com (2012). Apple Inc. Retrieved from http://www.investorguide.com/stock-analysis.php?ticker=AAPL
Hofstede, G. (2013) Integrating Corporate Practices and National Cultural Values. Retrieved from http://geerthofstede.nl/dimensions-of-national-cultures
Lynch, R. (2012). Global Strategy. Global Strategy. Retrieved from http://www.global-strategy.net/categories/WhatisglobalstrategyKlein, P. 2012. Apple: Performance Without Purpose. Forbes. Retrieved from http://www.forbes.com/sites/csr/2012/08/22/apple-performance-without-purpose/
Marcus, L. (2011). What’s next for Apple’s board? Reuters. Retrieved from http://blogs.reuters.com/mediafile/2011/10/06/whats-next-for-apples-board/
Masi, B. (2009). Strategic Analysis of Apple, Inc. University of Hartford. Retrieved from http://www.scribd.com/doc/24134877/Strategic-Analysis-of-Apple-Inc-Brian-Masi SWOT Analysis: Where is Apple going now? SWOT Analysis of Apple Inc. 2012. Retrieved from http://www.divisiontwo.com/articleshttp://www.cnet.com
Mitchell, J. (2010). Apple Inc. Corporate Social Responsibility Case Study. Retrieved from http://jmitch150.files.wordpress.com/2010/04/apple-inc-final-csr-case-study.pdf
Quick MBA (2012). Global Strategic Management. Retrieved from http://www.quickmba.com/strategy/global/
Shaughnessy, H. (2013). Solving Apple’s Innovation Problems. Forbes Magazine. Retrieved from http://www.forbes.com/sites/haydnshaughnessy/2013/02/08/solving-apples-innovation-problem/
Wikiwealth (2012). SWOT Analysis: ABB. Retreived from http://www.wikiwealth.com/swot-analysis:abb
