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Week 8 Assignment 3

Tamika Brown

BUS499 Business Administration Capstone

Joseph Keller

27 May 2020

Week 8 Assignment 3

Strategies that are adopted business entity play a crucial role in enhancing the success of the organization. Globalization has and continues to increase competition among the business’s entities. Considering the increasing level of the competition, businesses are leveraging on the use of the business and corporate lever strategies to build capabilities and competencies that give them a competitive advantage. In this paper, will address business and corporate-level strategies applied Apple Inc., its competitive environment and how it would change in slow and fast-cycle markets.

Business-Level Strategies

Business –level strategies refer to the activities which are pursued by the business entity in the market which it operates so that it can be able to create core competencies that will that give such entities upper hand compared to its rivals [1]. In the current business environment which is globalized, businesses are experiencing intense competition and if they have to survive, they must be tactical in developing business-level strategies that will make them better and attractive in the eyes of the customers compared to its competitors. There are five examples of the business-level strategies that business can pursue depending on the sectors and industries in which they operate, the aggressiveness of the competitors, products, and services which they are offered. These strategies include cost leadership, differentiation, focused cost leadership, focused differentiation and finally, integrated cost leadership/ differentiation strategy [1].

Apple Inc. operates in a very highly competitive industry that is a consumer electronic and information telecommunication which is the epicentre of new technological development. Companies in this industry are big such as IBM, Microsoft, Samsung, Google, Huawei, Dell, HP, and many others which are well developed and with greater technologies which are all competing for the same market. This means for Apple Inc. to survive; it must be able to develop a business level strategy that will make it stand out and beat off its competitors. Over the years, Apple Inc. has been performing extremely well and even if it has recorded a decline in sales in some years, it has been profitable. For example, it recorded a 16% increase in sales in 2018 and a decrease of 2% in 2019 [2]. The secret behind this kind of performance can best be described by the type of business-level strategy that Apple. Inc. has been using over the years.

Differentiation is the type of business-level strategy that Apple Inc. has been used. It is a type of strategy that Apple Inc. has used to position itself in the market and continually keep recording increasing its market share. Differentiation in the Apple Inc. can be viewed from four main dimensions that strongly have kept Apple brand to remain vibrant and famous in the entire world and even in the midst of the intense competition increase market share and sales along some of the business lines.

First, Apple has differentiated itself based on its quality. From its inception, quality has been an area of the focus. Back in the year 1997 when Steve Jobs returned to the Apple when it was almost getting bankrupt, he cancelled all the Apple product and remained with only four products, a conscious decision to promote quality [3]. It is noted that clearly that Steve Jobs was ousted in from the Apple in 1985 when emphasized that quality should be valued more than profitability. Marketing and operations manager in the period 1985 and to 1993 argued that profit should be given higher consideration than quality and in this particular period, Apple recorded sharp decline nearly to point of the collapse which created the necessity for the restoration of the Steve Jobs [3]. After coming back in 1997, Steve Jobs capitalized on the quality which he believed was one of the ways of making the Apple brand different and unique from other types of brands in the market. This created value in Apple and it was back to profitability. Since then, Apple has been capitalizing in the quality as one of the ways of making its brands unique, creating value and difference in the manner in which its product is perceived by the customers which has one of the selling points for its products and services.

Second, superior design is used as the basis of the creating difference in Apple compared to its competitors. Apple uses a superior design that makes its product to have superior features and functionalities compared to its competitors [4]. For example, product design of iPhone, superior features and ease of the use make Apple record high level of the penetration for the iPhone due to increased demand regardless roll out of other smartphones in the market. Similarly, product design, features and functionalities in the iPhone gives Apple a better chance to sell its product at a premium price compared to its competitors and still make a high level of the sales [4]. Another example of the superior can be traced to WatchOS which contain health features which make devices capable for tracking of the menstruation and fertility and Apple Pay and credit cards with best privacy controls in the industry [5]. Superior designed in the wearable and accessories could be the reason for the increase in sales by 41% [2]. Therefore, it can be noted that superior design is one of the areas that is used by Apple to create core competencies and create value for its products.

Third, excellent and exceptional service is another area of the competency that position Apple above its competitors. Apple is recognized for timely and responsive customer service both on its online stores and physical stores. The company builds a genuine relationship with the customers and creates an amazing experience end up in enhancing customer loyalty.

Finally, distribution channels that are used by Apple create the whole difference in the way deliveries are made to the customers. Apple has retail stores all over the world which places its products near to the customers where they can easily access them. The company embraces to main types of the distribution channels-direct and variety of indirect distribution channels such as retailers, wholesalers and even resellers. For example, in 2019, 69% of total sales were reached through the use of the indirect distribution channels while 31% of the sales were made through direct distribution channels [2]. Combination of two distribution channels reduces lead time, transportation cost and inventory cost streamlining its supply chain and therefore acting as a core competency to the company. Considering four dimensions of the differentiation at Apple; there is no doubt that differential is the best business-level strategy.

Corporate-Level Strategies

Corporate-level strategies refer to the strategic management plan of the activities that define the business model that is applied by the business entity and overall goals that are aligned towards achieving long-term success in the organization. This best tells the direction of the organization and internal processes of the organization which builds the philosophy of the organization that gives it a competitive advantage in the way the products and services are produced [1].

For the Apple, diversification of the product that is developed using classical innovative internal processes is the main corporate-level strategy for Apple. Diversification is important given the nature of the globalization where customers have no opportunity to choose from a variety of products available in the market. Diversification is advantageous to the organization because when the customers walk into the shop of the Apple, they have several of the options of the products that are readily available from which the customers they can choose.

In Apple, it has four lines of the products. iPhone is a smartphone segment, and, in this area, the company launched types of phones in 2019-iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max [2]. In the second, there is a Mac which is in the line of the personal. The company leverages innovation, research, and development to continually roll out new and better varieties of personal computers with superior features and functionalities compared to those of the competitors. In the year 2019, Apple launched two types of personal computers which are a new version of MacBook Air® and new Mac mini®. These series of the effort of the availing variety of computers could be the reason that saw the increase in the sales of the Mac by 2% in 2019[2]. IPad is another segment which entails tablets. Wearables, home, and accessories for the last segment of the product. In this segment, the company introduced AirPods Pro™ and Apple Watch Series 5. This is the business line that recorded the highest increase in sales in 2019 at 41% [2].

Other than products, Apple provides a wide range of services such as a digital content store, Apple Care, iCloud, and licensing and Apple Pay services. Statistics show that Apple Apps recorded the highest searches 95% compared to related applications in 2019 [6]. Additionally, it was established that mobile Apps for the Apple Inc. appeared first in the search results indicating widespread usage of the mobile applications for the Application which shows that they attract more customers giving the Apple milestone ahead of its competitors [6]. This basically shows that variety of the applications for Apple are preferred by customers in relation to other companies. Diversification of the product and services provide customers with wide choices from which the customers. It is on record that credit card and Apple Pay provide the best privacy control policies to the customers compared to other competitors in the industry [5].

Finally, diversification of the products that are designed using the innovate practices that internally capitalize on the use of the research and development in the designing of the products, provide the customer with a wide range of the products of high quality that meet the utility of the customers compared with those of the produced by the competitors. Production of high-quality products that are standardized in the global market enables Apple to beat its rivals. Diversification of the products is one of the best strategies because it enables Apple not only to produce a wide variety of products but quality, integrated and innovative that attract higher customer demand.

Competitive Environment

There is stiff competition in the electronics and telecommunication industry in which Apple operates. In this particular industry, there is the frequent introduction of the new technologies and upgrading of the existing of the technologies which create aggressive competition and each company has to keep with pace or otherwise be eliminated from the market [2]. It has become a norm that companies must introduce a new series of a particular brand in the market. Rate of the introduction of the new technologies and product is so quick such that consumers are not given enough time to orients themselves to the introduced technologies before other new technologies are launched. In the computing line of the business, main competitors to the Apple are IBM, Dell, and HP; to the smartphones are Samsung and Huawei and software and portable music devices are Microsoft.

According to Apple, it has established main factors that form the ground of the competition. First, it is the price where some of the competitors sell their product at a lower price compared to Apple hence attracting many customers compared to Apple. This is a strategy that is used by companies such as Huawei in the phone market that has enabled it to penetrate and claim a substantial share of the market at an increasing rate. Distribution and design innovation, security features, service support systems and reputation of the companies are other sets of the factors which are leveraged by the companies in the industry to leverage competitive power [2]. However, Apple remains vibrant and current on factors that leverage competition to the companies. The company uses differentiation that enables to make an investment in the research and development and creates capacity of the organization in developing a quality, standardized product, superior design and product with exceptional functionalities and features that attract more customers and enable Apple beat its rivals. Similarly, banks on product diversification that enables it continually to produce new series of the products and services that are preferred more by the customers compared to the similar services and products produced by the competitors.

From the analysis, it appears that the main competitor to Apple is Samsung. This is illustrated by the information of the market share for the smartphone shipped in the last quarter of 2019. The report reveals that 19.9% of the market share was taken by Apple and the second position was taken by Samsung with a market share of 18.8% [7].

Samsung has been one of the greatest challenges to Apple. It is known in the smartphones segment for the production of Samsung Galaxy. The company has been producing the Galaxy S series where currently latest versions are Galaxy S20, Galaxy S20+ and Galaxy S20 ultra handsets that leverages on high technology, innovative design, and ease -to -use functionalities. Customers look forward to a new series of the Samsung brand. Similarly, Apple, on the other hand, it has been investing in the research and development has been releasing new iPhone embedded with new technology and superior designs. For example, in 2019, three phones-iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max. In 2020, new launches are expected for Apple which includes iPhone 12, a new iPad Pro and Apple Watch which will help in tracking sleep objects [8]. Therefore, even though Samsung is producing new versions of the smartphones with the latest technologies, Apple counters new release by introducing a superior version of the phones with great designs that provides a high level of the utility and exceptional customer experience.

In 2019, Apple recorded declined in sales for the iPhone by 14%. This could be necessitated by the increase in the level of the competition. However, Apple takes advantages of its corporate strategy to compensate for the decline in sales in one segment by an increase in sales in another segment. For example, Apple recorded a 41% increase in sales in Wearables and 16% increase in the sales in the iPad which both are capable of compensating for a 16% decrease in sales in iPhone. Considering the corporate strategy applied by the Apple and the focus of the firm in producing high-quality product leveraging current technologies, long-term of Apple is guaranteed in the midst of the intense competition from the Samsung.

Market Cycle

In the electronics and telecommunication industry, there is a lot of the technological development and advancement that takes place in the shortest time which is a clear demonstration of a fast circle market. Both Samsung and Apple continue making the introduction of the smartphones each year and thus is extremely to establish which firm will dominate each other in the fast circle market. However, in the slow market circle, Apple can take lead especially in the production of Personal computers.

Sources

1. Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2020). Strategic management: Concepts and cases: Competitiveness and globalization (13th ed.). Mason, OH: South-Western Cengage Learning

2. Apple Inc. (2019). Form 10-K (Annual Report).https://s2.q4cdn.com/470004039/files/doc_financials/2019/ar/_10-K-2019-(As-Filed).pdf

3. Isaacson, W. (2012). The real leadership lessons of Steve Jobs. Harvard business review, 90(4), 92-102. https://hbr.org/2012/04/the-real-leadership-lessons-of-steve-jobs

4. Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

5. Lopez, M. (2019, Sept 7). Evaluating Apple’s Services Strategy Ahead Of The Apple Watch 5 Release. https://www.forbes.com/sites/maribellopez/2019/09/07/evaluating-apples-services-strategy-ahead-of-the-apple-watch-5-release/#57ad112e1ba8

6. Mickle, T. (2019, July 23). Apple Dominates App Store Search Results, Thwarting Competitors. https://www.wsj.com/articles/apple-dominates-app-store-search-results-thwarting-competitors-11563897221

7. IDC. (2020, April 2). Smartphone Market Share. https://www.idc.com/promo/smartphone-market-share/vendor

8. Eadicicco, L. (2019). Here are all of the new products Apple is expected to launch next year (AAPL). https://www.pulse.com.gh/bi/tech/here-are-all-of-the-new-products-apple-is-expected-to-launch-next-year-aapl/mjfrkpd