Industrial Organizational Model of Above-Average Returns“Apple’s focus on innovation has helped it maintain a competitive advantage and marketing ability over other industry players that have historically been much stronger than Apple. However, Apple must continue to beat the competition on a number of levels.” (Hitt, Strategic Management 10e, page 16). Apple uses the strategy of differentiation meaning that their products or services are different from others on offer which allows you to charge a premium price.
Apple Inc uses this strategy with their persistent pursuit of new technologies. Cost leadership strategy has been highly adopted by Apple Inc. as well. By strategizing on cost efficiency, the success and sustainability of the company is improved. By lowering the cost of production and management, Apple Inc has been given golden opportunities on determining prices of its products
Resource-Based Model Of Above-Average Returns
Resource-Based Model of Above-Average Returns
Five Forces Of Competition ModelThreat of New Entrants: Apple’s sales volume, customer loyalty, customer satisfaction ratings, and operational effectiveness are incredible. This has left entrants struggling to compete with Apple’s iPhone and iPad. Bargaining Power of Supplies: Apple has the obvious win. Its balance sheet carries over $110 billion in cash, cash equivalents, and marketable securities. Suppliers are so small in comparison that, in many cases, Apple makes up over 25% of its suppliers’ business. Bargaining Power of Buyers:
Apple’s buying power is evident in intangible switching costs and Apple’s enormous sales volume. Most Apple customers are more than a buyer of one, usually the own multiple products. Apple also offers carriers and retail stores the promise of a huge volume of sales and fanatic customers. Treat of Substitutes Products: Apple offers much more than its competitors. When customers buy an iPhone they are getting beautiful hardware seamlessly integrated with an OS that is built specifically for Apple products.
Apple This synergy locks customers in and prompts them to buy more Apple products to add to their synergy. No competitor has a synergy that can compare. Rivalry among Competing Firms: It’s not easy to compete with Apple. While Apple’s Gross profit soars as it takes advantage of a willing market ready to adopt smart phones and tablets, many competitors stand by losing profit and market share. Competitor Analysis
Core CompetenciesViral marketing: Apple-oriented blogs such as Apple Insider, The Unofficial Apple Web-log can help to discuss about the product. This viral marketing technique which Apple has adopted using social networking sites and the web as a whole has be a successful attempt in bringing the world closer to Apple. Product differentiation: Apple products include the iPod’s, iPads, iTouch, iTV and iPhone along with a number of computer attractive apps and software’s. Apple is called as a refuge of consumer electronics.
Superior brand and product placement: With competitors like Microsoft offering their software’s for almost a majority of personal computers, the founders of Apple decided to go the niche marketing way, thus pricing their products at a superior level than the others. Customer loyalty: This is the most essential element deciding the popularity of your product and Apple certainly managed to do it the right way. By establishing sole Apple selling product stores all over the globe, the sellers are well equipped with the knowledge they require to sell the product.
The consumers can personally check out all the features in this store and have a real life experience of using the Mac. Maintaining Secrecy: The employees at Apple truly believe in creating a call of curiosity in the markets. All the details of their products are highly protected and in no way can be leaked out to the people. This is another major reason why Apple has been successful in beating its competitors and enjoying a larger market share.
Competitive AdvantagesApple is set apart from its competition by its combination of hardware and software, by the content gate keeper strategy personified in iTunes, and by their successful retail strategy. I found many other reasons of the success of Apple in the company’s history but I will mention the most dominant ones. Apple’s Hardware and Software: Apple is more of a software company than a hardware company. We all know that Apple makes extremely good hardware as well , but that is simply because they believe they are the only ones who can make hardware worthy to run their software.
One of their software is iLife, which is a suite of software application for Mac for organizing, editing, and publishing photos, movies, and music. It is one of the best the good part is that the latest version ships with every new Mac. iTunes & Digital Asset Management: iTunes is one of the most strategic elements of the Apple pie. Apple and for that Apple has become digital asset management company. On September 9th 2009 Apple announced that they have the credit card account information of more then 100 million consumers through iTunes. Making them one of the biggest digital retailers, in the world.
Once a consumer trusts a brand enough to set up an account and give credit card information on the assumption of future purchases , the consumer will consider that retail outlet first in making purchases. This means that as they continually add to the devices that consumers own, those consumers will continue to shop in Apple’s store. Apple’s Retail Strategy: Location plays a significant role in this. The fact that they are in malls helps because consumers are already in shopping mode. The fact that consumers can go in and get support or repairs for their products and then get some other shopping.
SWOT AnalysisStrengthsCustomer loyalty combined with expanding closed ecosystem Apple is a leading innovator in mobile device technology Strong financial performance ($10,000,000,000 cash, gross profit margin 43.9% and no debt) Brand reputation
Retail storesStrong marketing and advertising teamsWeaknesses High priceIncompatibility with different OSDecreasing market sharePatent infringementsFurther changes in managementDefects of new productsLong-term gross margin declineOpportunities High demand of iPad mini and iPhone 5iTV launchEmergence of the new provider of application processorsGrowth of tablet and smart phone marketsObtaining patents through acquisitionsDamages from patent infringementsStrong growth of mobile advertising marketIncreasing demand for cloud based servicesThreats Rapid technological change2013 tax increasesBreached IP rightsPrice pressure from Samsung over key componentsStrong dollarAndroid OS growthCompetitors moves in online music market
Analysis of company overall performance
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