Unit 7 Business Strategy Assignment - Apple Inc.

Programme	Diploma in Business
Unit Number and Title	Unit 7 Business Strategy
QFC Level	Level 5
Case Study	Apple Inc. - Business Strategy

Introduction – Apple Inc.

Apple Inc. is an USA based multinational company which deals in electronic products like laptops, mobile phones, smartphones, tablets, music players, etc. The company also builds its own software which provide users with unique and user friendly interface such as Mac OS, iTunes, Face time, etc. In terms of revenue, Apple is the second largest information technology company after Samsung. The company operates in around 14 countries with more than 420 retail stores at present (Dunne, 2013). The report analyses the current business strategy of Apple and suggest new strategy and the resources and timeline require to implement it.

TASK 1

Explain strategic contexts and terminology – missions, visions, objectives, goals, core competencies

Mission – A mission statement states the purpose of the organization. It tells the people the main reason for the existence of the company.
Vision – A vision statement states the future aspirations of the company. Vision is something which drives the company to achieve its goals. A vision may be hypothetical in nature and may not have a realistic base but it should motivate the employees to work towards it.
Objectives – Objectives of a company are long term for example 5 to 10 years of goals tangible or non-tangible, which the company would like to achieve.
Goals- Goals are tangible objectives which are set up for short period may be half year or annual goals based on which the performance of the company and individual is measured. An organization evaluates the performance based on the goals that were set for the employees, teams and organization in the previous cycle or year.
Core competencies – Core competencies are values which an organization set up which differentiate it from its other competitors doing the same business.
Business Strategy: Business strategy can be defined as the long term business planning done by an organization in order to meet its objectives. Strategies can be competitive in nature which organization make in order to hold competitive advantage over its competitors or it can be in relation to CSR activities to strengthen relation with stakeholders in order to increase reputation and brand value so as to achieve long term sustainability.

1.2 Review the issues involved in strategic planning

Strategic planning: Strategic planning refers to the planning which an organization makes to formulate and implement new plans which will drive their business further. Strategic planning can be profitable or non-profitable in nature. Non-profitable planning refers to the various Corporate Social Responsibilities the organization participates into so as to make its stakeholder happy. This is done so as to maintain good relation with its stakeholders for long term sustainability.
Some of the key issues with Apple strategic planning are:
Business environment: The business environment keeps on changing and hence it becomes difficult to plan a particular strategy. It is always better to be flexible in approach and adapt to the situation and review and revise the planning from time to time in order to meet the objectives set before the start of business strategy.
Economic Fluctuations: The economy is the most dynamic aspect which keeps on changing from time to time. The events like economic crisis and recession are something which cannot be predicted. Thus, business planning gets adversely affected because of these situations as most of the companies are not prepared for it.
Technological advancement: The companies like Apple which is working in the field of technology faces serious issues because of the highly dynamic nature of technology especially in recent years. A new technology becomes obsolete in few years, sometimes in few months; hence a long term planning makes no sense in such a competitive and changing environment. It is always better to make short goals and be innovative in nature to cope up with this dynamic nature of technological changes.
Political Factors: Being a global player, companies faces tough challenges because of the laws and legal factors which are different in different countries. The government keeps adding new clause and modify the existing laws keeping in mind the welfare of the people which can affect companies’ objective negatively. The profit margin of the company can be affected because of legal formalities which binds the company while operating in different countries. Hence, political factors play a big role in hindering business planning.
Competitors: A company strategy is based on the action the company will take considering the fact that other things remain constant. However, the change of strategy by competitors can affect companies’ strategy to considerable affect. It is always better to plan a strategy keeping in mind the behavior of competitors in the market and revise the strategy from time to time.

1.3 Explain different planning techniques that organizations can use.

The different planning techniques which Apple INC can use can be well understood with the help of BCG growth matrix. These four areas of BCG matrix growth rate in terms of Apple INC are explained below (Schneiders, 2010):
Stars: Stars are those business units which shows high growth rate and also has high market share value attach to it. It is always beneficial for an organization to invest in such units. The iPhones and iPad are the two products which Apple should concentrate on making.
Question Mark: Question marks are those business units who has high growth rate but low market share value. Apple TV is one such product which has not been able to establish on global platform. Though it has huge potential and thus growth rate is high, but because Apple faces issues with ecosystem, they are not able to occupy TV space.
Dogs: Dogs are those business units which neither have high growth rate nor do their value of market share is high. An organization should stop investing in such business unit. Apple Mac based desktop and hard drive based iPods lie in this category. Apple desktops are no longer in demand iPods have also lost its appeal due to high competition and technology enhancements.
Cash Cows: Cash cows are those business units which have been in the market for longer period and hence their growth rate is slow but because of brand value, the market share have high value. Currently, Apple Mac based laptops lie in this section.

Figure 1: BCG growth matrix analysis on Apple Inc.

The second planning technique is Strategic Planning and Action Evaluation matrix (SPACE matrix) which helps in identifying what type of strategy should be adopted by a company out of the four viz. Aggressive, conservative, defensive or competitive based on four areas of analysis also known as strategic dimensions explained below (Graham, 2008):

Internal Dimension:

Financial Strength:  Apple is one of the most reliable companies in the world whose market share has grown four times when compared from 2008 to 2012. The company is known for its quality and has also shown a consistent growth in terms of revenue generated.

Competitive Positioning: Apple focuses on producing variety of products and ensure good quality. However, the market share of the company is less because of less penetration of the company especially in the developing nations. The company has an efficient network of suppliers and the customers are loyal to the company as most of the Apple product buyers prefer apple products over others.

External Dimensions:

Environmental Stability: Since the dynamic nature of the technology followed by high competition at global market, Apple faces key issues to its stability. The company is known for its innovation, however, its high prices makes its demand inelastic in nature.

Industry Strength: Since, Apple is a company which is not in debt, the company is financial stable. Moreover, the company can expect huge growth rate as it still needs to penetrate in Asian market which offers great opportunities for Apple to expand.

Figure 2: SPACE matrix analysis of Apple Inc.

In SPACE matrix, the competitive positioning and Industry Strength are drawn on X axis while, financial strength and Environmental Stability are drawn on Y axis. It is clear, that based on the analysis, Apple lies in 1^st quadrant which means the company needs to follow Aggressive business strategy to increase its profit margins and ensure long term sustainability.

TASK 2

2.1 Produce an internal organizational audit of Apple evaluating their strengths and weaknesses

An internal audit of an organization can be well understood by doing a SWOT analysis over the organization. SWOT analysis on Apple INC. is described below (Wonglimpiyarat, 2012):

Strength:

1. Marketing capabilities of Apple: In 2012, Apple was awarded the CMO Survey Award for Marketing Excellence. Apple makes sure that the customer are provided with a product which they wanted the most. The key focus is to judge what people want and to present the product in most creative manner which depicts the qualities of the product in the best possible manner to increase its appeal.
2. Strong hold and high distribution network in USA: Apple has good relationship with the largest ISPs of USA which help them to strengthen their hold and increase distribution network. Apart from that, Apple is also opening Data Centres at a rapid speed.
3. Reputation and Brand Name: With delivering high quality product and offering the right product by being highly innovative in nature, Apple is one of the biggest brands in the world. With 118 billion dollar brand value, Apple has been the best branded company in the world according to 2014 Best Global Brand Report.
4. Vertical Integration: From making its own operating system to the softwares and smartphones along with innovative apps, Apple has been able to control the whole supply chain. This has given Apple the freedom to be flexible in backward as well as forward integration.

Weaknesses

1. Incompatible with other OS: One of the biggest weakness of Apple is that its smartphones and other products like laptops and iPad work only on iOS which is the operating system designed by Apple, hence the scope of usage becomes limited. Windows on the other hand being more users friendly and flexible has been able to be a big success because of its high compatibility with products of different companies.
2. Price of product is high: Being a highly reputed company delivering quality product, Apple has never compromises on quality. As a result, its products have been costlier compared to other companies, which has been difficult for people of all segment to purchase its product.
3. Low distribution network in Asian countries: Since the company have recently started its business in Asian countries, it has yet to establish itself in these countries. The company has a low distribution network because of low data centres and service centres which makes it less demanding in these regions.
4. Lack of Innovation: The most important aspect of Apple has been its highly innovative products. However, because of highly dynamic technological development in recent past, the company has failed to be innovative, which can clearly be seen in its latest iPhones which does not have much differences compared to previous versions.

2.2 Identifying opportunities and threats present in external environment

Figure 3: Porter’s five force model

Porter five force model analyses on Apple Inc. is explained below (Porter, 2008):

Threat of New Entrant – Since Apple invest high on research and development and also on advertisement and setting up of brand value, it is difficult for new companies to pose threat to the company.
Competitors – Apple has always been the first company to come up with new ideas like the introduction of touch screen (iPhone) and iPad. However, the rival companies follows the same trend and introduces the same kind of features at much cheaper price which created a tough competition for Apple and pushes them to come up with new ideas to keep their product differentiated from others.
Threat of Substitute product: Consumer does have options to choose from. In computing world, consumer can always go for Windows operating system which is compatible in 90% of the computers. Similarly, Samsung and Sony MP3 players are alternatives for Apple’s iPod, iPad much cheaper substitute is Samsung Tab while Nokia, HTC and Samsung smart phones provide similar features like iPhone at much cheaper prices.
Supplier – The unique material supplied by the supplier to enhance the quality of Apple product have been a differentiator all these years. It helped Apple to launch unique products compared to other rival companies.
Buyer Power – Apple has been able to gain customers in American and European countries however, Asian countries still choses other products because of high price of Apple product.
Identifying Opportunities and Threats from Porter’s five force analysis on Apple Inc

Opportunities:

• The high growth and demand for smartphones and tablet is one of the best opportunities available for Apple. Asian countries offer huge scope for growth with little compromise on the quality and additional features which will help Apple to lower its cost of products while selling them in these markets.
• The integration of iCloud technology is a big innovation which lies in front of Apple in order to have competitive advantage over its competitors.
• The appeal for Apple products against its other substitutes offer Apple with huge opportunities to make good use of its reputation and brand value while operating in European and American countries.
• Acquisition of small companies will not only help Apple avoid new entrant to the market, but will also help it to grow its network and reach out to people where awareness for Apple products and its reputation is less.

Threats:

• As it can be seen that rival companies in the business of smartphones and tablets like Nokia and Samsung are much cheaper and cover major market of Asian and African countries.
• Rapid changes in technology resulting in minimizing the competitive advantage which Apple holds with its high innovative methods has been another threat for the company going forward.
• Android OS has grown immensely over Mac OS because of being an open source with more user friendly and free apps compared to Apple, which has hampered Apple’s market and continues to pose big threat.
• Competitors have also moved into online music store similar to Apple which has also hampered its business in providing online music stores to its customers and become a threat to Apple.

PEST analysis for environmental audit of Apple Inc. (Hasan, 2013)

Political Factors – Since Apple has more sales in countries outside USA, its sales are affected with those countries which do not share good relations with USA. Moreover, Apple manufacture its products in many countries like China, Czech Republic, Ireland, Korea, etc. and thus any conflict of USA with these countries affects Apple sales to great extent.
Economic Factors – The high inflation rate and low purchasing power of consumer’s results in low Sales of Apple products which are still considered to be luxury products. Strong dollar value also results in low profit margin for Apple in other countries.
Social and Cultural Factors – The demand for smartphones have been a boost in the sales of iPhones. Developed countries where people have high standard of living looks for quality product and brand value. However, developing nations like Asian nations still prefer cheaper products offer by rival companies.
Technological Factors – Technology has been highly dynamic in nature and hence and being a market giant in technology, Apple has to be consistent in terms of new innovations to be ahead in the market. The 4G internet network and cloud computing are some of the current technology which will be in demand so Apple has to make sure that they offer these products ahead of its competitors with better features.

2.3 Explain the significance/importance of stakeholder analysis

Stakeholders – Stakeholders are people who are affected by business activities directly or indirectly. Those people who have invested in the organization to purchase the shares of the company are known as the shareholders. It is important for a company to make sure that most of its stakeholders are happy so as to maintain good relations with them and increase long term sustainability of the company.
Importance of Stakeholder Analysis: Stakeholders are the driving force of any organization. To ensure long term sustainability, it is important for any organization to maintain good relations with its stakeholders. The reputation and brand image of the company improves with healthy relations with the stakeholders. Sometimes, the company also need to formulate non-profitable business strategy to make sure that all the stakeholders are satisfied and happy with current operations of the company. Hence, stakeholder analysis plays an important role for any organization while formulating new business strategies (Brugha, 2000).
Stakeholder analysis for Apple Inc. is done below (Carroll, 2014):
Investors – Since, Apple do invest a lot in research and development and advertisement to sell its product, it is important for them to maintain a good profitable ratio in order to persuade the banks and other investors to invest in their company.
Suppliers – Since, most of the raw material is purchased on credit basis by Apple, it becomes essential for them to share the sales, inventory turnover ratio, etc. with the suppliers.
Customer - Apple should take regular feedback from its customers about its product and price and also should ask them what new feature they are looking for so that the same can be applied while coming up with new business strategies.
Employees- Employees in Apple are provided with good working conditions. The employees are paid high and are offered all type of facilities at office to keep them relaxed and motivated at the same time. The employees are not pressurized by the company which helps them to deliver better results
Government and Local Communities – The government plays an important role in any organization including Apple. The government looks into the Annual Reports of the company so as to understand the profit margins of the company and the tax paid by the company to ensure legal and ethical functioning of the company. Local communities also make sure that the company focuses on other aspects of business like environment friendly ways of working to make sure that nature is not affected by the business. Apple also offer many job opportunities in various parts of the world to ensure satisfaction to all its stakeholders.

TASK 3

3.1 Analyse the possible alternative future strategies of Apple relating to substantive, limited growth and retrenchment.

The four type of growth strategy as part of limited growth which Apple can adopt can be understood with help of Ansoff matrix (King, 2012):

Limited growth strategies

Market penetration – Market penetration is the approach adopted by a company to sell its existing products in the existing market. In case of Apple, the sale of iPhone by consistently upgrading the features and models is the strategy which they have adopted for market penetration.
Market Development: Market development is selling of existing product to a different market. It is important for Apple to understand that the average age of people is increasing and hence the people which Apple use to target i.e. people between 15 years to 35 years might reduce with passage of time and hence it is important to offer these products with added functionality to different class of people of different age.
Product Development: Product development refers to selling of new product in existing market. It is important for Apple to come up with new ideas related to 4G network and cloud based computing which is compatible in all its devices and can support most of the application which is the demand in current market.
Substantive Growth: Substantive growth strategy means to implement a strategy which can result in exponential outputs to boost the profit margin and become a global player.
Horizontal Integration: Horizontal integration means to merge or acquire a competitor or company which is functioning in the same value chain. Apple shows horizontal integration in the late 1990s when the company started using cheap manual labour of other countries to produce the raw material for electronic products produced by them.
Vertical integration: Vertical integration is of two type, backward integration and forward integration. Backward integration is when a company start to control the supply chain from very beginning in order to reduce the cost of the product. Obviously, producing something on its own will cost less compared to outsourcing it from other companies. Apple has been successful in vertical integration because of the software and mobile applications that are configured in Apple products. Apple Store, Mac iOS Store, iBook, iCloud, etc. are few of the examples which show the various software and online services provided by Apple (Quinn, 2013).
Diversification:  Diversification is the most risky strategy out of the four as it involves selling of new product to new market. Thus, vertical integration is beneficial for the company and can have great results if the company can launch the new product at cheap prices to attract consumers in Asian countries (Schoemaker, 2012).
Unrelated Diversification: Unrelated Diversification is to establish in an industry which is completely different from what the company is currently doing in a completely different market. Apple has not yet looked for unrelated diversification. The main focus area for the company has been electronics and computing devices. The Company, however, can make use of unrelated diversification and can set its foot in completely different fields like retail, banking, oil and petroleum, etc. to gain maximum advantage.

Defensive strategies

Retrenchment: Retrenchment is the business strategy to stop investing in those business units and sell its assets which are not incurring profits or making losses. As mentioned, Apple should immediately stop producing those business units which are not incurring any profits and should channelize the funds into faster growing and demanding products.

3.2 Select an appropriate strategy Apple can pursue for its future growth.

Future Strategy of Apple: To expand its business in Asian countries and increase its distribution network in these regions in order to achieve substantial growth by following the approach of Diversification.
Diversification as future strategy for Apple: It is important that Apple introduce cheaper smartphones with comparatively lesser quality and introduce them into the developing nations where standard of living of people is relatively low and the demand for smartphone is very high. However, in order to achieve these following points need to be covered to ensure appropriateness in the strategy:
Suitability: Apple needs to ensure that it can negotiate on its quality for some of its product and launch cheaper devices into the Asian market. The people in Asian countries prefer price over quality as it has been seen. Asian countries are mostly developing and hence the purchasing power of people is less. High priced handsets and iPads do attract a certain segment of people but to make the products suitable and available to all the segments, Apple has to look into more diversified products starting from lower range with reduced quality or features to high end products (Schoemaker, 2012).
Feasibility: The Company need to make sure that more brick and mortar offices, data centres, and service centres are opened so that they can reach out to maximum number of people in these countries. One major drawback is that people are not able to find proper service centres to get their smartphones repaired or serviced. Hence, it is always essential to be available in maximum locations possible in order to make sure that expansion in Asian countries is more feasible.
Acceptability: Apple is a known brand and hold high reputation. However, it is amazing to note that many people are ignorant about the quality of Apple in Asian countries. This is because of less distribution network of Apple. Therefore, Apple needs to have good relationship with the ISPs and network providers and also with its competitors in order to increase its marketing and promotions. With more awareness, people will accept Apple more and will know the quality and service of the company for which Apple is best known for.

TASK 4

4.1 Compare the roles and responsibilities of different level of strategy in implementing the strategy adopted in 3.2.

Roles and Responsibilities of implementing new strategy of increasing their stores in Asian countries:
Corporate Level: The senior management which includes the Board of Directors and the CEO of the company are the ones which take the first decision in relation to implementation of any new business strategy. The senior management looks into the financial performance of the company as well as non-financial aspect of satisfying various stakeholders. Hence, at top level, the senior management should look into all the data collected from marketing researchers and plan a 2-3 years long strategy of expanding its business to Asian countries. They should make sure that their plan of operation is acceptable by most of the stakeholders and action is taken after convincing each of them.
Business Level: At business level, the corporate manager job is to convert the strategic direction given at corporate level into concrete strategy and objective. To expand business in Asian countries, it is the responsibility of Corporate Managers to identify the most promising market area and segment to touch so as to reach out to maximum people with least resource invested. It is their job to find location for construction of new offices which can reach out to maximum people, which distributor to contact and connect with to increase the distribution network, etc.
Functional Level: The final execution takes place at Functional level where the regional managers or functional managers come into picture whose job is to give proper execution to the plan. Their job is to make sure that the strategy is implemented properly with least effort within the stipulated time or not. In case of Apple’ strategy to expand its business, it is the job of regional managers to make sure that construction of brick and mortar offices is done properly. The Human Resource Management team will look into the recruitment process and training and development to make sure that human resource is ready to take in charge once construction is completed. The sales and marketing manager needs to make sure that proper marketing and promotional activities are completed before the launch of new stores and data centres.

4.2 Evaluate what resources will be required to implement Apple’s chosen strategy

Some of the important resources which Apple will require to implement their strategy are:
Physical: The Company needs to buy land and infrastructure to set up new brick and mortar stores in the Asian countries. Thus, investment will be made to produce these new stores. The company can also look for acquisition of existing store instead of building it from scratch which will save lot of time. Also, Apple required estimating the amount of material required, security systems and other equipment required to make their implementation feasible.
Human Resource: Apple will require new employees as the expansion will take place. The company will require new software developers and managers who could look after them. Also, the company will require new employees who will look after the stores. It is essential to recruit people with right skill and qualification. It is also essential to mix youth with experience in order to have diversified team which gives more efficiency and synergy. Training and development needs to be carried out to make new employees understand the value and core competencies of the company.
Equipment/Technology: Apple need to product new product which requires both time and money. Moreover, the Apple needs to implement latest technology at its new stores as part of store management. Apple needs to make sure that the software, apps; electronic devices are based on latest technology with features which are in trend and as per the liking of the people. Useful apps as per the preferences and taste of people encourage the customer to buy the product.
Intangible resource: The brand name and reputation of the company should be maintained and the marketing team should bring out the awareness among people about the quality of products and services of Apple.
Finance: It is essential that Apple estimate the cost required implementing their strategy. The company also need to hold certain stock which the company can sell to its new customers after its launch. The company needs to purchase new equipments, products and new technology.

4.3 Discuss the importance of targets and timescales to monitor the successful achievement of the adopted strategy for Apple.

Importance of timescales:

Measurement of performance: Timelines help a company understand the performance and efficiency of its resources. If a team or individual fails to do certain task in stipulated time period means the efficiency is low. The targets set by the company should be such which can be achievable within the time period and the employees should be focused to achieve their objectives within stipulated time.
Future Strategy: Time lines help a company to implement future strategy. Formulating and implementing strategy and deciding time lines are estimated based on previous implementations. Thus, these timelines help company understand how much time is required to carry out each task so that they can estimate proper time lines while formulating new business strategies.
Human Resource Development: Measuring the achievements based on timelines and rewarding high and efficient employees maintains competition level among all the employees which increases the efficiency as a whole. Time-scales also help the organization to reach out at each employee and look into his or her performance. Weak employees are trained hard while efficient employees are rewarded. Thus, the overall performance of efficiency of the company also increases.
Some important targets which the company should set up to monitor the success of its new strategy are:

• Firstly, the research and development team should analyse the market and come up with forecasted results so that Apple can understand how much resource is required. Analysing the market may take around 5-6 months’ time.
• Secondly, once the company has a good picture about the resources, recruitment and hiring process to hire new employees should take place. Recruitment process generally takes around 3-4 months’ time.
• Thirdly, the purchase of new land to construct building for setting up of new offices and stores or to acquire an existing building to set up offices require considerable amount of time. Thus, the company will require 5-6 months’ time.
• Fourthly, the company will also require new products to be manufactured and delivered in the newly constructed stores. This can take around 6-7 months as electronic products with added and updated features to suit the liking and preference of people in Asian countries will require considerable amount of time.
• Finally, the company needs to look for marketing and promotion through advertisements or collaborate with mobile connection or internet providers to increase their distribution network in these countries. This will take 2-3 months’ time.

Figure 4: Gantt chart for timelines that need to be set for implementing new strategy.

Thus, to implement the new strategy of expansion of business in Asian countries requires around two years’ time.

Conclusion

It can be concluded that being a product differentiator and unique has helped Apple to expand its business in the American and European countries. However, their policies of not collaborating with other companies and their software not compatible with other hardware have been a big weakness for the company. Moreover, high prices for Apple products have made it difficult for Apple to penetrate in market of developing nations, where consumer prefer low price over good quality and brand value. Hence, Apple needs to look to reduce its price while selling their product in developing nations like Asian countries.

References

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