Global Strategy

Table of Contents 1.

Introduction ............................................. .................................................................... ............................................. ............................................ .............................. ........ 2

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Global strategy............................................. ................................................................... ............................................ ............................................ ........................... ..... 2 2.1

Porter’s 5 forces analysis...................... analysis............................................ ............................................ ............................................ ........................... ..... 2

2.1.1 Competitive rivalry ........................................ .............................................................. ............................................ ...................................... ................ 2 2.1.2 New entrants ............................................................. ................................................................................... ............................................. ........................... .... 2 2.1.3 Suppliers bargaining power .............................................. .................................................................... ......................................... ................... 3 2.1.4 Buyers bargaining power ........................... .................................................. ............................................. ......................................... ................... 3 2.1.5 Substitute products ............................................ .................................................................. ............................................ .................................. ............ 3 2.2 PESTEL analysis .................................................. ........................................................................ ............................................ ...................................... ................ 3 2.2.1 Political factors ......................................................... ............................................................................... ............................................. ........................... .... 3 2.2.2 Economic factors ........................................... ................................................................. ............................................ ...................................... ................ 3 2.2.3 Sociological ............................................ .................................................................. ............................................ ............................................. ....................... 4 2.2.4 Technological ............................................ ................................................................... ............................................. ......................................... ................... 4 2.2.5 Legal factors ........................................... ................................................................. ............................................ ............................................. ....................... 4 2.2.6 Environmental ........................................... .................................................................. ............................................. ......................................... ................... 4 2.3 Market segmentation ................................................... .......................................................................... .............................................. .............................. ....... 5 2.4 SWOT analysis ................................... ......................................................... ............................................ ............................................. .................................. ........... 6 2.4.1 Opportunities ............................................. .................................................................... ............................................. ......................................... ................... 6 2.4.2 Threats ............................................ ................................................................... ............................................. ............................................ .............................. ........ 7 3.

Apple’s internal analysis ............................................ .................................................................. ............................................ .................................. ............ 7 3.1 Boston matrix ............................................ .................................................................. ............................................ ............................................. ........................... .... 8 3.2 Ansoff matrix ............................................ .................................................................. ............................................ ............................................. ........................... .... 9

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Strategic Options Options ............................................. ................................................................... ............................................ ............................................. ....................... 9

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1. Introduction Because of the globalisation effect, the companies are expanding their businesses to various countries and into diversified business sectors to attract more customers and to make good revenues. In light of this, this essay is aimed at identifying the strategic paradoxes which an organisation is experience and how this can be overcome with the help of the strategic directions. Also this essay will discuss the strategic implementation challenges which need to  be addressed and solutions to overcome these challenges. Apple Inc. is one of the largest companies in terms of revenues and sales and this extraordinary success has been achieved through the implementation of the innovative strategies. With the innovative products, Apple reached the customers of many countries and these versatile products include iPod, iPad, IPhone, ITunes, Mac books (computers) and software application online market store. The company has its manufacturing plants in United States and China but most of the products will be manufactured in China because of the cost cutting strategy and will be assembled in California, United States.

2. Global strategy The core analytical tools which have been used to analyse the external position of Apple Inc. are Porter’s five forces, PESTEL analysis and partial SWOT.

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Porter’s 5 forces analysi s

2.1.1 Competitive rivalry The most important competitors are Samsung, HTC, Sony, Blackberry, Google Android and Microsoft Windows. Because of the strong competition, Apple needs to revisit its innovation strategy. Though Apple’s products are innovative, many companies are copying the design and functionality of these products because of which the company is losing the business to the competitors.

2.1.2 New entrants Though the entry of the new competitors is tougher in the segments of Apple, there are still few products which support the competitors of Apple. For example, the competitor product of Apple, Microsoft windows operating system is being supported by the personal computers which are being manufactured by many companies. Apple Macintosh is not supported by many computers and the competitor operating system is being supported by any computer in the world.

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2.1.3 Suppliers bargaining power A competitive supply chain is necessary for a continuous supply of the products or services to the customers. But the supply chain of Apple is not stronger to meet the demands of the customers and whenever a new product is launched the customers are not being satisfied in terms of delivery. But it is very important to maintain a strong supply chain in order to serve the customers.

2.1.4 Buyers bargaining power The products and services of Apple are highly demanded and the buyers have strong affinity towards the brand. Because of the various types of products and wide accepted variations, Apple is able to gain a high valued customer base. The customization of the products, multi  benefitted products, high quality and stylish products and brand image helped the company to reach more customers. However the Apple products are never cheaper but the value for money can be guaranteed by the company. A typical Apple iPhone will work for at least 5 years and this says about the quality of the products of Apple.

2.1.5 Substitute products The substitute products always will have a strong impact on any product. The products of Apple themselves act as the substitute products. The Apple MacBook Air customers cannot  buy Apple iPad as both of them will serve the customers with the same purpose and thus those two products themselves compete with each other. Apple iPhone and iPod will have the same features expect that a cellular signal is restricted in Apple iPod. So, the customers who wish to buy iPod can buy iPhone and can avoid buying an iPod. So, Apple needs to take necessary steps in order to prevent such a competitive market which establishes a substitute  product model.

2.2 PESTEL analysis 2.2.1 Political factors The government taxes, import and export duties are highly affecting the business of Apple. The price variation of Apple’s products  between US and the rest of the world is higher and the company is directly being affected by the political factors. Also Apple is being benefitted from incentives from the governments of different countries for its operations.

2.2.2 Economic factors The customers’ spending capacity, unemployment rate and the recession periods are affecting the sales of Apple worldwide. The sales dropped during the recent recession period of 2008

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 because of the loss of the jobs across the globe. Though the prices of Apple are higher compared to the competitors, the customers are ready to buy these products. The customer spending capacity for Apple brand is higher than the other companies. But the taxes and VAT are increasingly bothering Apple’s products. For example, the VAT is 20% in UK on every product which is increasing the product price of Apple. The disposable income of the customers has been reduced during 2008 which reduced the sales of Apple. Also there are few provisions for any offers on Apple products which is prompting few customers to go for competitor products.

2.2.3 Sociological Though Apple’s products caused high pollution and reached worst position in terms of toxicity, the situation has been changed considerably currently. The life style, education, income groups and cultural factors had severe impact on the Apple business.

2.2.4 Technological The technical innovation is higher in the Apple business however there is a need to improve the supply chain competency which requires a technological involvement and cooperation  between Apple Inc, suppliers and logistics.

2.2.5 Legal factors The legal obligations include the introduction of Europe standard electronic device chargers, recycling etc. which are making Apple to spend additional funds to meet these legal requirements. Also, few court cases with Samsung regarding the privacy and patent issues are still pending in the European courts.

2.2.6 Environmental The criticism includes the protests against environmental unfriendly manufacturing processes followed by Apple Inc. The toxicity of the manufacturing wastes in Apple manufacturing units is increasingly higher than the industrial average. So, there is a need to implement a green production strategy to satisfy every customer and to safeguard the environment.

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2.3 Market segmentation The main strategy followed by Apple in defining the market segmentation is “multiple  products and multiple market segments”. The variables that are defined for Apple are geographic, demographic, socioeconomic and psychographic factors. Geographic: Developed economies, cities, population density etc. are considered by Apple. Demographic: Professionals, business people, age, IT developers and companies. Socioeconomic: Different income groups, education, people culture etc. Psychographic:  Lifestyle, personal needs, ethics and values.

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(Figure 1: Market segmentation: product differentiation) Every product which has been described in figure 1 is unique and there exists few competitors to these products. All these products are enjoying the monopoly in their respective segments and this has been achieved by Apple because of its product differentiation strategy.

2.4 SWOT analysis Based on the above factors, the threats and opportunities for Apple Inc. are identified as follows:

2.4.1 Opportunities The growth of the business is essential and expansion plans have to be implemented to enter the emerging markets like India, Brazil etc. Encouraging new manufacturers will be useful to Apple to meet the global demand and develop strong relations with the customers. There is a need to introduce the developed versions of the old products to overcome the competition from the competitors. Because of the growing market in terms of “green energy efficient”  products, Apple can make use of these manufacturing techniques to attract many customers. Enhanced cloud services like iCloud to reach more customers and encourage them to buy online music to reduce piracy.

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2.4.2 Threats Too much diversification of the products is a threat to Apple and success is not countable in many of the products like MacBook Air, iPod shuffle etc. Incompatibility of Apple products on other technical platforms and difficulties in operating the same are contributing as a serious threat to the business. The extraordinary performance of Microsoft and Samsung may outrage the market of Apple in the next few years.

3.  Apple’s internal analysis The company is successful in identifying right market segmentation which is based on the following factors: Apple targeted mainly the developed economies and provided extended support to the customers in the cities and densely populated second grade cities. The business people,  professionals and families, people aged between 18 and 45 are highly targeted so as to sell the products. Though the cost of the products is higher every income group has been targeted  by Apple but this strategy did not give better results for the company. The products have been  placed according to the lifestyle of the customers. IPod is targeted at eve ry potential customer and different variations have been introduced so as to attract different customer segments. IPad is introduced to target the business people and IPhone has been introduced for every customer. However the contract deals, with the help of the mobile network partners, and the flexible finance options also added up to the sales of Apple. Apple follows generic strategy and always targets broad market scope so as to gain the  benefits of product differentiation and cost leadership. This strategy has been followed by Apple because of the differentiation of the products, effective segmentation of the customers and cost leadership achieved because of the low cost manufacturing techniques. However the company is operating at low profit margins on every hardware product that is sold to the customers. But the software products like Macintosh, iTunes, Apple app store etc. have large margins because of the low operating costs and interacti ve cloud technologies. Apple’s physical resources include the manufacturing units and machinery, customer care and sales service locations, stock points and storage units, software management centres to host the hosting servers and energy resource locations (wind energy and solar energy). Apple’s core competencies are the innovative and elegant design, technology, product

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lifecycle management (PLM), marketing mix which includes the product, price, promotion and place, holistic operations and high end intuitive hardware design.

3.1 Boston matrix

The star business of Apple lays in the strong brand image the company because of which it has become the market leader in technology and mobile technology. Apple invests heavily in the innovation technology to develop the products like the iPod, iPhone, iPad etc. The less developed and highly competitive area (cash cows) of Apple includes the Mac operating system and iOS which needs to be provided to the normal PC users. Right now, Apple Mac can be used only on the Apple computers and iOS can be used only on the Apple mobile devices, which are contrast to Microsoft’s windows OS and Google’ Android OS. The software applications like Office, email clients, web servers, iOS technologies etc. are not widely distributed to different countries, though it is well established in United States (dogs –   low development and low share of the region). The cost of the product is the main hurdle for the growth of the business to different parts of the world. The high development and low share of the region (question marks) include the Apple computers which are actually not distributed to different countries. The cost of the product and the difficulty in using Apple computers are the main reasons for the low penetration into the global markets.

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3.2 Ansoff matrix The ansoff matrix can be illustrated in the following figure.

Almost every product of Apple is introduced in the existing markets and particularly in the developed economies. The marketing development and diversification strategies of Apple should include the low pricing or optimized pricing strategies to gain access to the new markets with both the existing and new products. Marketing mix will play a major role in developing a marketing strategy for Apple.

4. Strategic Options The most important strategic option that can be applied for Apple is to lower the cost of the  products. When compared to the competitors, Apple’s products cost higher and thus the competitive edge to conquer new customers is being lost by Apple. The competitors are  posing a challenge to the existing market of Apple and thus an optimized cost strategy needs to be implemented by Apple. Joint venturing and partnership are very important for Apple to increase the market share and to reach the unexplored countries. Apple’s presence is limited in African and Asian countries  but there is a huge demand for Apple’s products in some of those countries. Hence, it is very 9

important for Apple to consider and expansion strategy which is aimed at expanding the  business to the Asian and African countries. Though Apple is following a unique strategy by providing Apple’s only operating systems, this will not alone fetch good business to Apple. So, Apple needs to support out of bound  products like personal computers, other mobile phones through which the Apple’s operating system market can be enhanced. The knowledge management and customer service management have to be handled even effectively so as to train the employees according to the customers’ needs. The physical resources available to Apple are limited in terms of sales locations and service stations and it is recommended for Apple to expand the number of retail stores to overcome the shortage of the space and to increase the customer interactions. Mainly the supply chain of Apple is not competitive and hence just-in-time approach can be applied to Apple to develop and market the products.

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Elgan, Mike (2007). Is Apple the New Microsoft?. PC World, accessed on March, 12, 2012, from http://www.pcworld.com/article/136949/is_apple_the_new_microsoft.html

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