Background to the study
The computer industry has undergone rampant growth over the past decades. One the factors that contributed to the growth is the high rate of technological innovation (Hitt, Ireland & Hoskisson, 2009, p. 289). In order to attain a high competitive advantage, various firms have incorporated the concept of research and development. This has enabled the firms to deal with the dynamic nature of the industry. Apple Computer Incorporation is one of the firm’s which has undergone rampant growth. Despite the competitive nature of the industry, the firm has been able to survive. The success of the firm is associated with the quality of the strategies adopted by the firm’s management team.
The report is aimed at conducting a comprehensive analysis of Apple Computer Incorporation.
The report entails a number of issues. The firm’s strategic challenges are identified in the first part. The various dimensions which can be used to measure the firm’s success are analyzed in the second part. The third part entails an analysis of the external and internal factors which will affect the firm’s future success. Apples operation strategies and their contribution to the effectiveness with which the firm will deal with industry rivalry are evaluated in the fourth part. Finally, a conclusion and a set of recommendations are made.
Maintenance of its brand image
Customer satisfaction is a key consideration in a firm’s strategic management (Hitt, Ireland & Hoskisson, 2009, p. 28). Apple Computer Incorporation management team has been committed towards ensuring that its customers are satisfied. One of the ways through which the management team ensures that this is attained is via effective marketing. In its quest to develop a high competitive edge, the firm has incorporated the concept of product line extension. As a result of broadening its range of products, marketing the products has become a challenge. One the reason which explains this is the increment in the size of customer base. New customer categories such as the students are incorporating the firm’s products in their consumption patterns. The resultant effect is that the firm is not able to customize its products to meet the needs of the diverse customer categories. By attracting a new customer category, it will be difficult for the firm to retain its positive brand image considering the dynamic nature of the technology industry (Chapman & Hoskisson, 2008, p.188).
Currently, firms in the industry are adopting competitive pricing strategy. In addition, cost cutting and low profit margins have become a key characteristic of the industry. Most of the firms are striving to keep their cost of operation low. Despite these changes, Apple Computer Incorporation is faced with the challenge of ensuring that its products are different.
Dimensions of measuring the company’s success
New product development and product innovation
In the course of its operation, Apple Computer Incorporation has been able to develop a relatively high competitive advantage compared to other firms in the industry. One of the ways through which the firm attained this is via new product development. The firm has launched a number of products. Some of these products include the iTunes, iPods, Apple TV and the iPhones. These products have entirely revolutionized the entertainment industry. Provision of digital music devices have contributed towards an increment in the firm’s level of revenue. In addition, the firm’s market share has been greatly boosted. For example, after launching the iPod in 2007, the firm gained control of more than 70% of the total digital music market. On the other hand, its average level of revenue during the same year was $3.5 billion (Chapman & Hoskisson, 2008, p.188).
In its new product development process, Apple Incorporation ventures into new market segments. This is evident in that the firm has ventured into music industry and it has plans to extend its operations into the movie industry. Upon launching the new products, the firm undertakes continuous product innovation in an effort to ensure that the products are inline with change in consumer taste and preferences. This increases the products competitiveness.
Nature of customer and supplier relationship
Apple Computer Incorporation success also arises from the good publicity which the firm has attained. This has been achieved through incorporation of an effective public relation in its promotion strategy. Its publicity has also been enhanced by the good relationship which the firm has created with the media. In addition, the firm has created a strong customer relationship by listening to their complaints. Information received from the customers is used to improve the firm’s customer service. Strong customer relationship is also enhanced by the free group workshops, personal service and training provided. Not only has the firm maintained a strong relationship with the customers but also with the suppliers. For example, the firm has developed a strong supplier relationship with major record labels companies which include Sony Music Entertainment, BMG, BMI, Warner Bros and Universal. This enabled the firm to deal with labels owned with these companies. Through its strategy, Apple has contributed to an improvement in the revenue of these companies. This means that the firm’s future is bright (Chapman & Hoskisson, 2008, p.189).
Internal and external environmental factors
A firm’s long term survival as a going concern entity is influence by a number of internal and external factors. Apple’s future success will be affected by a number of factors as discussed below.
In its operation, Apple Computer Incorporation is faced with intense competition. The large number of firms in the industry has increased the degree of rivalry on a global scale. Not only will the firm face competition from the existing firms but also from new entrants. Some of the key competitors to the firm include Napster, Kazaa, CinemaNow, RealNetworks Incorporation, Sony, Yahoo Music Unlimited, Amazon Unbox, HP, Movielink, Netflix, Wal-Mart, Virgin Media, Motorola and Disney. Some of the competitors such as RealNetworks Incorporation have adopted competitive pricing which has culminated into price wars. In addition, these firms are adopting new technologies and substitute products aimed at decreasing Apple’s market share (Chapman & Hoskisson, 2008, p.199).
Despite the benefits which Apple Incorporation can attain via technological innovation, the future of the firm’s products is faced with a great risk. This arises from the high rate of insecurity facing the industry. Considering the fact that most of the firm’s products are digital in nature, there is a high probability of the firm incurring huge financial loss as a result of piracy. In addition, software security has become a major concern in the industry. Some competitors may adopt unfair competing practices by developing viruses aimed at destroying Apples software.
Apple’s strategy and company rivalry
Apple Incorporation has incorporated the concept of strategic agreements. The agreements entail firms in various industries. For example, the firm entered into a strategic agreement with Volkswagen in 2003. Other firms which the Apple has entered into strategic alliance include Nike, Burton Snowboards and Starbucks. Through the strategic agreements, Apple will be able to deal with industry rivalry effectively. This is evident in that the firm’s products will be extensively promoted. Due to the high value of the firm’s product design, there is a high probability of the products attracting new customers. This will contribute to an increment in the firm’s market share. The resultant effect will be an increment in the firm’s profitability potential and hence the effectiveness of undertaking research and development. This means that the firm’s competitive advantage relative to its competitors will be enhanced (Chapman & Hoskisson, 2008, p.200).
In an effort to cope with the competitive nature of the industry, Apple Incorporation has incorporated the concept of internationalization. The core objective is to ensure that the firm’s products such as iPhones are accessible on a global scale. Some of the markets which the firm has ventured include Africa, Germany and Middle East. The internationalization strategy adopted entails entering into an agreement with dominant cell phone carriers in the foreign country. This will increase the efficiency of the firm penetrating the foreign markets more effectively by creating a positive brand image. As a result, Apple Incorporation will be able to deal with industry rivalry on a global scale (Chapman & Hoskisson, 2008, p.201).
Apple Computer Incorporation has been successful over the years. The firm’s success can be measured by the number of products which the firm has introduced since its inception. In addition, its success is also evident in its contribution to other industries such as the movie and music industry. The firm has developed a strong relationship with its suppliers and customers. However, the firm is currently being faced with challenges with regard to maintenance of its brand image and product differentiation. Some of the internal and external factors facing the firm include increase in competition and high rate of digital product insecurity. Through its strategic alliance and internationalization strategy, there is a high probability of the firm surviving the high degree of rivalry.
In order for the firm to survive in the long run, the management team should consider the following.
- Increase its investment in research and development so as to cope with the dynamic nature of the industry by developing new products.
- The firm should improve the security of its products by developing strong software. The software should be continuously updated.
Chapman, R. & Hoskisson, R. (2008). Understanding business strategy: concepts and cases. New York: Cengage Learning.
Hitt, M., Ireland, D. & Hoskisson, R. (2009). Strategic management: competitiveness and globalization: concepts and cases. New York: Cengage Learning.