Apple Inc. case study analysis

Company history, growth and development

Initially founded as Apple Computer Company in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne, Apple Inc. has evolved to be considered one of the world’s top four technology companies globally (Ritholtz, 2017). The name change featured the change in the product specialization from computers to consumer electronics as well. The Company expanded its production line to involve smartwatches, wireless earbuds (AirPods), the HomePod smart speaker as well as software like iTunes media player, Shazam, The Safari web, and creativity and productivity suites like iLife and iWork among others. Apple Inc. is now 43 years old, with its headquarters located in Cupertino, California, with a total of over 500 retail stores all over the world, with a total of over 130,000 full-time employees.

For many years, Apple Inc. is identified and associated with its co-founder, the late Steve Jobs. A lot of the Company’s growth and structure for the longest time was built and influenced by his style and personality. Known for his volatile, perfectionist personality, his passion for developing new products, Job’s philosophies on minimalism, and customer satisfaction still impact the Company, infused in the product design and functionality. It is these specific principles upon which the company operations are based enabling it to penetrate and stay on top of the technology industry even after the demise of its iconic leader in 2011.

As a company, Apple Inc. thrives on sustained innovation and seamless integration of creativity with technology. Mostly sourcing and fully producing their products in house, the Company has carefully invested in its technical skill by hiring experienced personnel as well as the acquisition of small companies. Over the years with the expansion of their services, the Company has also had to do collaborations and strike deals with other companies and content makers such as in the making of iTunes and producing content for the Apple TV. Their main product is the iPhone which accounts for a total of 54.7% of the total revenues. The mac products account for 8.2% of the total revenues and 9.4% of the revenue income is distributed between the wearables and home accessories. In addition to the computer hardware products and consumer electronics, the Company also provides customer services that generate up to 17.8% revenue (Kham, Alam & Alam, 2015. Pp.  956- 960

SWOT analysis of the Company’s internal strategic factors

Strengths.

Apple Inc.’s biggest strength is in the product ecosystem that the Company has developed. The Company is recognized for its quality, innovative and unique products, and services. They come with the advantage of being tailored to integrate seamlessly across various devices, giving the Company a competitive advantage over their competitors. Other technology companies have attempted to imitate and implement Apple’s efficient ecosystem in vain. Apple’s strongest competitor is Samsung Electronics and it lacks a comprehensive operating system and has fewer apps and services for its customers and the second, Google, has made attempts to imitate their hardware products in vain.

Secondly, the Company has a strong brand image which is supported by strong advertising and marketing capabilities. As per Forbes and Interbrand rankings, Apple Inc. is the world’s most valued and well-recognized Company globally (Badenhausen, 2019). With their two well-known marketing campaigns like 1984 and Think Different, the Company, complemented by the production of innovative, well-designed products with great customer care services, the Company was able to create itself an iconic brand in the market.

The third strength lies in the careful selection of the employees for the Company. Due to the lack of semi-autonomous divisions in the Company and the simultaneous collaboration required across the various departments in the design of their products, it becomes essential that careful selection of employees is done. An employee is not interviewed for the suitability of only the department he or she will be expected to join, rather the interview is conducted in the presence of all the top leaders who get to decide if he or she is the best fit for the Company. This selection is complemented with in-house training of the new employees at Apple University where the Apple style decision making culture is embedded in them.. The careful selection of employees helps ensure the Company can keep up with offering high quality and innovative products to their clients, and in house, promotes working harmony.

Weaknesses

The weaknesses of the Company arise from its exclusivity policy and premium pricing strategy. The Company has strong control over its product distribution through carefully selected distributors and authorized sellers. This creates a limit in their distribution product and combined with the high- pricing of their products, the Company is only able to serve the middle and high-income market while limiting ease of purchase by customers from the low-income brackets. This is considered an internal company weakness because the target market represents only a minority of the global market.

Company External environment (Porter’s Five Forces Analysis)

High rivalry among competing sellers

Despite the diversified portfolio of tech-based products, Apple Inc. still faces high competition. The impacts of the competition are evidenced in the declined sales of their products especially the mac and the iPhones. For example, in the first quarter of 2019, there was a decrease of 5.11% in the total revenues despite a 6.72% increase observed among its rivalries and a 16.36% decline in the net income versus a 1.86% rise in their competitor’s (Cismarket, 2019).

Potential entry of new competitors (Moderate force)

Based on a high capital requirement and cost of development (both weak forces), the possibility of new competitors entering the market against Apple is low.  However, large and financially capable companies can decide to venture into the market, for example, Google has through the Nexus phones hence being potential direct competitors of Apple. For this reason, the overall threat for new entry becomes moderate.

The threat of substitution (High- moderate force)

Despite having its own operating system and app store, the competitive product substitution pressure is still high. For example, the iPod is challenged by Sony and Samsung MP3 players and the iPad, Samsung tab. The iPhone’s substitute pressure is from various high-end android phones such as Sony Erickson, and the Samsung Galaxy and Note series.

Bargaining power of suppliers (Low- moderate)

Due to the readily available global supply chain available for Apple Inc. with a high firm concentration to supplier concentration ratio, their suppliers have a low bargaining power hence this is a minor issue in the Company’s strategies for supply chain management.

Bargaining power of customers (strong)

Whereas a single individual’s purchase is small compared to the total company sales, the ease of customers to change brand preference makes customer’s bargaining power a strong force. This is also keeping in mind the limited target market for the Company (the middle and high income) and thus this factor is considered a significant strategic variable for the Company.

SWOT analysis (opportunities and threats).

Opportunities

With the current significant increase in the dependency on technology, the market for smart and portable devices is growing. The Company has an opportunity to maximize the production and supply of not only their smartphones and the MacBook’s but it can also explore the market for smart gadgets and accessories and given its innovative background, focus on producing new products. This way, the Company will be able to both expand their market and distribution market and drive higher sales volumes from the development of new product lines.

Threats

The two most significant threats of Apple Inc. are competition and the challenge of imitations. While it is still ahead of its competitors like Samsung, Google, and Huawei, the Company is amidst tough competition due to the aggressiveness of these firms. This is especially given that the android software on which these other firms operate their phones is dominating the market by about 51% as of 2011 compared to Apple’s OS at 23%. Besides, the Company is under the threat of imitation which gives it an unfair disadvantage in the competitive market. These two factors could result in the Company suffering large profit margins and also affect the brand image and hence a drop in their clientele.

Corporate level strategy

The Company’s mission is “to bringing the best user experience to its customers through its innovative hardware, software, and services.” As such, their core competencies are technology and innovative designs. Its corporate-level strategies include the use of close-related diversification of products, forming of strategic partnerships to share risks and production costs and tap competitor knowledge and internalization of products. To achieve this the Company participates in platform expansion through partnerships, subsidiaries, and acquisitions, allowing them to still be accessible to a wider market despite competition. The Company also supports third party soft and hardware products as well as digital content and ensures great customer satisfaction by hiring the right technical personnel to develop their products as well as knowledgeable sales and customer care persons.  This is a good corporate strategy given the current market competition for consumer electronics. Not only does the strategy allow them to keep ahead of their competitors but diversify the range of their products and services.

Business level strategy

Apple Inc. uses the differentiation strategy to remain on top of the game and deal efficiently with its market threats. The strategy is implemented through the exclusivity and high pricing of their products. With a well-defined target market, the Company took time to understand their needs and deliver unique, high-quality design and innovative products hence maximizing the profits gained from this community due to their high purchasing power. The exclusivity in terms of controlled distribution and use of authorized sellers only has allowed the Company to gain and maintain customer loyalty since it limits the risks of product imitation guarantying the client’s quality service.

Structure and control systems

The Company follows a hierarchical organization structure with weak functional matrix and product based divisions. Though with Cook’s leadership the organizational structure of Apple Inc. is less rigid compared to when it was under the late Job’s, it is still a spoke-and-wheel hierarchy where the CEO is at the center of it. There are senior vice presidents who report directly to Cook and together with the vice presidents, they preside over different product lines. This way, the Company is able to effectively manage the specific products they offer their customers effectively. The weak functional matrix allows for the different teams to work together to allow for rapid and effective innovation processes.

Generally, the Company has a strong corporate structure control and thus effective business control is achieved through decisions made by Cooks and the other top executives. Nonetheless, the limited organizational flexibility limits the Company’s response to current market trends since directives for change have to be issued from the top executive. Tim cook is, however, working on making amends in increasing collaboration in the various divisions of the Company so as to improve the flexibility.

Recommendations

While Apple products are popular and highly purchased, there has been public concern over the Company’s policies forbidding the repair of devices at local repair shops. A campaign was launched in 2019 to challenge this restriction. The Company should, therefore, reconsider and lift this restriction as it negatively impacts the client’s satisfaction and use of their products.

From the SWOT analysis, the Company has various opportunities it can explore and among them is the gap in their market. The Company should consider developing new or cheaper products to serve the middle and lower class populations to tap into its population bracket market.

Lastly, the Company should also create more third party distribution channels to increase its sales hence allowing larger profit margins. This is because currently, Apple does the distribution of products itself.

Works cited

Ritholtz, Barry (2017). “The Big Four of Technology”.  Bloomberg.

Khan U. A., Alam M. N., Alam S., (2015). ‘A critical analysis of internal and external environment of Apple Inc’. International Journal of Economics, Commerce and Management. PP. 956-960

Cismarket (2019)‘Apple Inc.’ https://csimarket.com/stocks/compet_glance.php?code=AAPL

Badenhause, Kurt (2019). The World’s Most Valuable Brands 2019: Apple On Top At $206 Billion.