Assignment 2: Intrapreneurship Plan

Business Analysis: Apple Inc.

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Contemporary Business BUS 508

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Date

Apple Inc. is an American multi-national company that has specialized in the production of computer hardware, software, digital accessories among other technology and Internet based products (Lashinsky, 2012). Its global presence is manifested through global shops and partnerships with suppliers from other continents. As a market leader, Apple is able to sustain its productivity as a result of its strong brand image that has ensured high levels of customer loyalty. The brand loyalty aspect is aided by the fact that Apple’s diverse products share the same operating system, thus customers enjoy high levels of interconnectivity. Apple’s high profit margins enable the company to sustain quality development and workplace innovations that provide superior products and services in the market. The innovative process is based on efficiency and a strong employee management system that attempts to strike a balance between extrinsic and intrinsic motivation. However, the employee management system has its challenges when it comes to extension to Apple’s suppliers or agents across the globe. Some of the suppliers/ agents include Taiwanese based electronic manufacturers Pegatron, and China’s leading technology manufacturers Foxconn (Lashinsky, 2012). Currently, Apple Inc. is pursuing extensive global expansion and product/service diversity initiatives with an aim of maintaining its competitive advantage over business rivals.

Factors Effecting Organizational Performance

Apple Inc. has three major weaknesses, high pricing, limited product/service distribution network and, restricted sales to high-end market/consumers (Lashinsky, 2012). Apple is known for its exclusivity. Apple is careful in the selection of suppliers and agents, this has slowed down its market penetration unlike the dealership options enjoyed by its competitors. Furthermore, Apple products are only compatible with services and other products within the Apple ecosystem. Therefore, incompatibility with other electronic products from different suppliers discourages consumers with multi-supplier products and services. The higher price of Apple products as compared to competition raises equal concerns based on the exclusivity factor. Exclusivity elements can only be managed by the middle and high-income earners. However, the global market is defined through low-income earners that define the majority (Neves, Castro, & Consoli, 2010). Despite recording high revenues over the years, Apple is missing out in penetrating the low-income market segment.

The performance of Apple is hindered through its rise in labor costs, influx of imitation products and, aggressive competition from business rivals. A rise in labor costs in recent years resulted in incidences that were brought to light since the year 2006 where Apple’s suppliers were found to engage in employee labor malpractices (Nova & Shapiro, 2013). Whistle blowing and protests from the east about poor working conditions and below minimum wage remuneration rates forced close scrutiny of Apple and its agents. There were reported cases of employee suicide incidences and health problems arising from substandard work environments. Therefore, the costs of observing safe working environment regulations and proper employee remuneration according to global/ regionally acceptable standards have been passed on to Apple. Additionally, multiple lawsuits by former employees have been successfully filed against Apple and its agents. Therefore, suppliers/ agents are demanding higher payment due to increased operation costs arising from employee related incidences and demands.

Increased competition from business rivals such as Samsung has intensified the fight for the global market share. Competitors have flexible innovation systems that ensure a free supply of products through free agents (Duhaime, Stimpert, & Chesley, 2012). Apple holds onto exclusivity of its suppliers through a strict vetting process that denies speed of market penetration enjoyed by competitors. The competitors’ products and services are highly compatible with different electronic appliances by other producers. This allows them to attract a market of consumers who already possess a variety of products from multiple suppliers. Apple products demand compatibility by “Apple Only” devices. This is a deterrent factor for people who cannot afford the various Apple products at once.

Imitations due to minor industry players’ ability to develop product clones that are affordable to the majority of low-income earners have affected Apple’s profitability. This is especially rampant in the third world countries and low income earning communities. The product imitation thrives on consumer ignorance as well as tough economic times (Neves, Castro, & Consoli, 2010). The high rate of technological advancement in recent terms has minimized the life cycle of electronic products. Low-income earners cannot afford to purchase high value products that become obsolete in a maximum of two years or less. A clone’s ability to maintain usefulness enjoys the same life span as an original Apple product before an introduction of superior substitutes in the market.

Overcoming Factors to Improve Performance

The two important aspects for Apple to consider for immediate impact in productivity is the fight against imitations and counter-competition initiatives. The rising labor costs is a common factor across the industry; thus Apple needs to stay within legal boundaries when dealing with employees to avoid unnecessary costs such as legal and out-of-court compensations (Nova & Shapiro, 2013). In order to successfully fight imitations, Apple must pursue strong patent portfolios that will closely monitor products distributed within the consumer market. This must be complemented with constant innovations that distinguish Apple products from competition. This will effectively deter business rivals. However, this solves only half of the imitation equation. Tackling the consumers craving for cheaper products, Apple should establish a collection system that encourages product recycling. Once consumers can trade back broken/ obsolete products at lower prices or use them for part-exchange with new products, the costs of manufacturing materials should drop. Therefore, Apple can repair or upgrade the returned products at minimum costs thus sell at lower prices as compared to original. This is the strategy to penetrate low-income markets that would prefer products that can be serviced for longer periods than their useful life.

Fighting aggressive competition calls for development of compatibility accessories that should allow non-Apple consumers to enjoy Apple products and services at a nominal fee. This will allow non-Apple consumers to test and enjoy the Apple products before making a final purchase decision. Apple must also reduce the exclusivity nature of supplier/ agents to encourage rapid expansion of its supply chain. However, slackening the suppliers’ conditions must be complemented through increasing the number of Apple’s regional representatives who will enhance quality control measures (Duhaime, Stimpert, & Chesley, 2012).

References

Duhaime, I., Stimpert, L. & Chesley, J. (2012). Strategic Thinking: Today’s Business Imperative. London: Routledge.

Lashinsky, A. (2012). Inside Apple: How America's Most Admired--and Secretive Company Really Works. New York: Grand Central Publishing.

Neves, M., Castro, L. & Consoli, M. (2010). Marketing Methods to Improve Company Strategy: Applied Tools and Frameworks to Improve a Company’s Competitiveness Using a Network Approach. London: Routledge.

Nova S. & Shapiro, I. (2013). Apple’s self-reporting on suppliers’ labor practices shows violations remain common. Retrieved from: http://www.epi.org/publication/apples-reporting-suppliers-labor-practices/