- Use at least five (5) quality references. Note: Wikipedia and other Websites do not quality as academic resources.
Introduction
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 are 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.
Determine the impact of the company's mission, vision, and primary stakeholders on its overall success.
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.
External Analysis
Analyze the five (5) forces of competition to determine how they impact the company. Create a SWOT analysis for the company to determine its major strengths, weaknesses, opportunities, and threats.
- 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 is 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.
- Threat from Suppliers – 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.
- Bargaining Power of Consumers – 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.
- Competitor Rivalry - 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.
SWOT Analysis
Based on the SWOT analysis, outline a strategy for the company to capitalize on its strengths and opportunities, and minimize its weaknesses and threats. Discuss the various levels and types of strategies the firm may use to maximize its competitiveness and profitability.
Shown below is a SWOT analysis of Apple Corporation.
Apple has numerous competitors in the market such as Dell, Alineware, Gateway, Microsoft, Google, Samsung, Nokia, Amazon, Sun, HP, SGI, Cisco, Netgear, and others. In terms of price and quality of design, Apple strategy is to position itself in the higher priced but more elegantly designed segment of the market it competes in. Whether the product offered are personal computers, mobile phones, or music players Apple positions itself for at the premium priced level. This makes the products less accessible to lower tiered socio-economic levels but has helped Apple keep a core customer base that continuous to patronize the company’s offerings.
Apple’s competitors however, hover around the more functional and less pricey segment of the market, which Apple does not fully service. In terms of quality of products versus price, Apple positions itself on the highly priced and high quality segment of the market. Again, Apple’s competitors position themselves on the lower priced and lower quality build, to offer products at more competitive price levels. This segment of the market is not serviced by Apple.
With this positioning, Apple has kept its strong leadership position in the consumer electronics industry. Apple is the most dominant player in the United States and has maximized on opportunities that the US market has offered the company. Its ability to integrate and innovate has given Apple the ability to remain competitive despite focusing on the higher priced segment of the consumer electronics market, a segment that not a lot of players position themselves in. This philosophy is very divergent from what the competitive landscape offered to customers, that is, products that are non-differentiable and cost-competitive but has worked in Apple’s favor.
Communications Plan
Apple shall continue creating a communication strategy that is sober, simple, clear, very clever yet minimalist. For example it started with the “I am a Cam, I am a PC” TV series that was very popular in the early 1990s. Apple uses irony and ridicule as a way of creating an intriguing communications plan, often making recipients amused and entertained. Apple continues to produce unique advertisements that are about great products, packaged in very minimalist, no-mistakes kind of way. It boosts sales revenues and has kept Apple at the top. This should be continued and communicated to Apple’s clients.
Corporate Governance
Select two (2) corporate governance mechanisms used by this corporation and evaluate how effective they are at controlling managerial actions.
With the passing of Steve Jobs, the leadership has now turned over to Tim Cook. Tim is guided by the company’s corporate governance guidelines for ethical day-to-day operations. To be proactive yet focused, Apple has adopted the following guidelines for effective corporate governance. This is the first mechanism Apple uses, which is a Standardized Corporate Governance Framework. So far, the adoption of this framework has been effective for Apple.
- Governance Documents
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- Committee Charters
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All of these are available for download from the Apple website ().
Another corporate governance mechanism is the installation of a board of directors (BOD). The BOD is installed so that the interests of the shareholders of the company are protected. The gap between the BOD and the managers enable the company to check and balance itself. The addition of independent members of the board put a different dimension to the company’s operations, making important aspects such as corporate social responsibility and workplace equity significant additions to the company’s mission and strategic plans. The BOD of Apple has been responsive, effective and responsible. With the BOD and Steve Jobs, the company has reached its highest valuation to date.
Leadership
Evaluate the effectiveness of leadership within this corporation and make at least one (1) recommendation for improvement.
Leadership has been a core strength of Apple, with Steve Jobs taking command of the company and turning it around into the most valuable company in the world now. Steve was Apple’s CEO and Chairman of the Board and was responsible for driving innovation leading to undeniable success for the company. With Steve Jobs gone, Apple’s core leadership team must not lose the momentum created by Apple and will have to step up to continue the high performance expected from the company.
First and foremost, Apple’s board should support the current leadership of the company, which means that Tim Cook should receive favorable endorsement from the board especially when the company releases its next quarter’s financial report. Cook will be making public the company’s plans and the board and the rest of the shareholders should stand by their new CEO. Apple’s leadership must now look transparent, visible and credible and should ask the tough questions about growth and new potential. Apple’s new management must show that they are committed to continue what Steve Jobs did for the company, and are more than capable to take on even bigger projects and tasks.
Corporate Social Responsibility
Assess efforts by this corporation to be a responsible (ethical) corporate citizen and determine the impact these efforts (or lack thereof) have on the company's bottom line. Provide specific examples to support your response.
Apple’s financial performance has always been lauded and admired, however its social purpose has always been its Achilles heel. According to Apple’s SVP Bob Mansfield, the company makes “the most environmentally responsible products in the industry”. It does so by designing everything with environmental consciousness in mind without sacrificing the company’s bottom line goals. To add to that, Apple has an initiative called Apple Distinguished Educators program that pioneers teaching and learning with recognition of the educational program called K-12. Critics say however, that this is just another way of churning profit because the largest company in the world should have a more refined social purpose. In fact, the company uses CSR strategies that are common place such as:
- CSR position statements
- Online reports
- Employee communication programs
- Advertising
- Social media
- Stakeholder involvement
Apple’s CSR strategies require reinvigoration because the company is acting like a slumbering giant, not like Microsoft or Samsung or other tech companies that have taken up the mantle of improving the lives of those that they employee and the communities they work in.
Conclusion
Apple is a company that will continue to grow and succeed. Currently, the company is pushing its commitment for stronger intellectual property rights, which translates to a commitment to licensing and the formation of stronger relationships between hardware and software. Apple must continue becoming an organization that learns. It could form strategic alliances with other entities having strategic competencies. Apple can work with companies that enhance their already competitive position, through a sharing of knowledge or the opening up of new platforms that would expand the company’s market dominance.
References
Apple Inc. 2012. Various Press Releases and News Articles. Retrieved from
Businesswire. 2012. Research and Markets: Consumer Electronics Market Forecast for 2012. Retrieved from
Esch, SV., 2004. Apple's Success and Jobs' Succession. Macscope. Retrieved from
Investor Guide.com 2012. Apple Inc. Retrieved from
Klein, P. 2012. Apple: Performance Without Purpose. Forbes. Retrieved from
Marcus, L. 2011. What’s next for Apple’s board? Reuters. Retrieved from
Masi, B. 2009. Strategic Analysis of Apple, Inc. University of Hartford. Retrieved from SWOT Analysis: Where is Apple going now? SWOT Analysis of Apple Inc. 2012. Retrieved from
Mitchell, J. 2010. Apple Inc. Corporate Social Responsibility Case Study. Retrieved from
