Table of Contents
- Introduction
- Apple Corporate Strategy: Business Level
- Competition Environment
- Competition in Fast-Cycle and Slow- Cycle Markets
- Conclusion
- References
Introduction
In the current business environment, competition continues to increase as firms become more global in their operations. Basically, firms use both business-level and corporate-level strategies in order to gain a competitive advantage over their rivals.
Business-level strategies refer to activities that business enterprises undertake to gain a competitive advantage in the market, which in most cases involves exploiting core competencies that add value to customers. This may be in the form of being unique in operations of providing different products from those of competitors.
Basically, there are five business-level strategies that a firm can work on to gain a competitive advantage, including “cost leadership, differentiation, integrated cost leadership/differentiation, focused cost leadership, and focused differentiation” (Ireland, Hoskisson & Hitt, 2010, p. 100).
In this paper, the focus is directed to the Apple corporate strategy and the company’s business-level strategies. The organization operates in the Information and Communication Technology (ICT) industry.
Apple Corporate Strategy: Business Level
Apple Corporate-Level Strategy
For a long time, Apple has been a dominant force in the technology industry, and this has been enhanced by the subsequent introduction of better technologies in the iPhone, iPad, and MacBook. One area in which Apple beats its rivals is the differentiation of its products, where it has dominated in computers, mobile phones, digital music players, and online music stores (Harrison & John, 2009).
Here, Apple’s strategy is to engage a single company to provide operating systems and hardware for its products (Hill & Jones, 2012). This allows the company to concentrate on design quality. Moreover, the company has positioned itself in the high-end market because it has a reputation for creating products that customers highly value.
Another differentiation strategy that Apple has adopted relates to the distribution of its products, where it has established retail stores around the world. Moreover, the company’s service delivery is unique and superior, as it boasts of a state-of-the-art bar for technical support, continuous and dedicated customer service, and allows customers to first sample their products before buying them.
These strategies have made the company maximize profitability by offering products that stand out in terms of high quality and design, advanced innovation, and user-friendliness.
Cost Leadership Strategy
The company has invested heavily in the innovation of its products through a vibrant R&D department (Ireland et al., 2010). The cost leadership strategy normally involves providing valuable and acceptable products to customers at a relatively low and competitive price. Normally, firms strive to maximize profits through efficient production and delivery of products that enhance cost savings.
This is done by establishing efficient scale facilities, minimizing manufacturing and overhead costs, minimizing costs related to sales, research, development, and service delivery, and installing updated and efficient manufacturing facilities (Ireland et al., 2010).
All in all, cost leadership is the most widely used strategy to gain a competitive advantage in the market while at the same time operating profitably.
Apple has adopted this strategy by producing cost-effective, high-quality products using affordable and economically viable raw materials, which is enhanced by the presence of a powerful, innovative management team and staff in the production, marketing, and delivery of products.
Another cost leadership strategy that Apple has applied is forming business alliances with other successful companies, allowing the company to concentrate on innovation and market intelligence.
For example, Apple offers iTunes service that enables other firms to distribute music, videos, and games digitally at a low cost, thus eliminating the need for physical disks and tapes. In addition, this strategy becomes more successful by eliminating middlemen and selling its products directly through its website.
Apple’s Corporate-Level Strategies
Apple’s corporate-level strategies include the close-related diversification of its products at moderate and high levels, including home computers, personal computers, mobile phones, music stores, and software.
Moreover, the company has a blend of personal computing and entertainment with a high level of integration, allowing it to be more efficient in producing and delivering products at relatively competitive prices while remaining profitable.
One advantage of this diversification strategy is that customers can get their preferred product of a high quality and design standard since all these products are highly integrated and run on the same operating system.
Another corporate strategy involves forming strategic alliances in order to benefit from economies of scale, tap knowledge from competitors, and share risks and costs. Among the alliances that Apple has entered, one may present AT&T for the production of the iPhone, Microsoft for software to be used in Mac computers, and Intel for processors.
Internationalization of production is another corporate strategy adopted by Apple, whereby the company has established its production base in China to take advantage of low labor costs, access to raw materials, a high potential market, and a favorable economic environment due to the stability of China’s economy.
Here, Apple beats the competition by producing standardized products in the global market, as engineering design and manufacturing are closely controlled and centralized. It, therefore, becomes easy to identify Apple’s products, the only customization being the power source due to differences in voltage in various countries (Ireland et al., 2010).
Competition Environment
The technology industry is very competitive, given the presence of many players operating in it. Apple faces stiff competition at all levels and in all lines of its business. In the computing segment, the company observes great competition from Microsoft, IBM, HP, and Acer; in the mobile and smartphones business, Samsung is considered a direct competitor; and in portable music devices, Apple’s main competitor is Microsoft.
With the global market continuing to expand, competition is increasing due to the globalization of trade. Primarily, Apple’s iPhone and iPad are compared with the Samsung smartphones (most notably the Galaxy family).
Indeed, according to Guglielmo (2013), the competition in the smartphone business is very tough. However, the greatest competition for Apple is in the tablet business, where rival brands have taken about 28% of the Apple tablet’s market share in the second quarter of 2013.
Despite this competition, Apple’s business-level strategies have enabled it to continue controlling the market due to a high differentiation strategy that revolves around the company’s ability to design and develop its own software and hardware, continued innovation, and vibrant research and development team.
In a broad competitive scope, the company goes on developing innovative products, most notably iPads, iPhones, and the iTunes store. Moreover, the company has released a new iPad Air, which follows the recently created MacBook Air notebook and Mac Pro desktop (Guglielmo, 2013). Indeed, this differentiation has allowed the company to price the products at a premium while still retaining its loyal customers.
At the corporate level, Apple’s main competitor is Samsung, which is known for its smartphone business line, with the most recent Galaxy S4 putting the iPhone behind in terms of features and technology.
This rivalry is more aggressive considering that Samsung has invested heavily in competitor intelligence (where it studies what competitors are doing and then releases more sophisticated products – call it imitation or fast follower to some extent) and elaborate supply chain and distribution channels. It is for this reason that Samsung’s revenues keep on rising.
However, to counter this challenge, Apple has ensured that all its products share a common design technique platform. In addition, Apple has established retail stores and online stores, providing a convenient way for customers to purchase and allowing the company to operate at low costs. Moreover, its iTunes store and App stores make the company a leader in the accessibility of digital music, video, and apps.
More importantly, the company has identified the strength of strategic alliances, corporate diversification, internationalization, and vertical integration in beating off competition. Given that competition is adversely affecting the market share of Apple in this industry, the company needs to be more forceful in its business and corporate-level strategies.
However, one thing can be stated for sure: Samsung poses the greatest threat in the phone market to Apple, taking into consideration the recently concluded court suit pitying the two firms on accusations of patent and imitation (Hill & Jones, 2012).
Indeed, Samsung seems to be a dominant force in the future, given its strategic approach to innovation, research and development, penetration, and promotion. In fact, the company has invested heavily in advertising.
Competition in Fast-Cycle and Slow- Cycle Markets
The technology industry lies more in the fast-cycle market. However, there are some products that have moved to the slow-cycle market (such as PCs) while others remain in the fast-cycle market. Smartphones and tablets have seen the fastest growth ever witnessed before, with new gadgets hitting the market and being replaced almost immediately, even before customers have been fully oriented to them.
The two main rivals, Apple and Samsung, seem to be pushing very hard to outdo each other in the smartphone market. For example, Samsung introduced the Galaxy S4 smartphone, which immediately hit the market with aplomb, but even before it had sunk into the minds of consumers, Apple hit back with a more sophisticated iPhone, the 5S.
With this trend, there will be a big battle in the future for both companies, and neither can be sure of being the dominant firm in the market and still remain profitable. In the slow-cycle market, Apple seems to have a brighter future than Samsung.
Conclusion
The technology industry is very competitive and requires firms operating in it to be very intense in their strategies in order to not only gain a competitive advantage but also operate profitably. Companies can adopt business-level strategies and corporate-level strategies, which will make them more attractive to customers.
Apple Inc. has initiated business-level strategies focusing on cost leadership and differentiation, which have made the firm a dominant force in almost all its lines of business, with products like Mac computers, iPhones, iPads, iTunes, and App stores taking a big market share. Its strategy of universal engineering design and retail stores, where personalized services are offered, works well for the company.
Moreover, the company’s corporate strategies of diversification, strategic alliances, and internationalization have been very positive. However, in this fast-cycle market, stiff competition exists among such big companies as Samsung.
References
Guglielmo, C. (2013). Apple’s Pricey iPads Protect Premium Brand, Profit Margins, Leaving Low-End to Android Tablets. Web.
Harrison, J., & John, C.St. (2009). Foundations of Strategic Management. Belmont, CA: Cengage Learning.
Hill, C., & Jones, G. (2012). Strategic Management Theory: An Integrated Approach. Belmont, CA: Cengage Learning.
Ireland R.D., Hoskisson, R.E., & Hitt, A. (2010). Understanding Business Strategy Concepts Plus. Belmont, CA: Cengage Learning.
