Free Analyzing Apple Inc.’s Strategic Issues Practices Critical Thinking Sample
Apple Inc. is an American company with headquarters in Cupertino, California. The company designs, develops, and vends computer software, electronics, personal computers, and other online services, among others. Among its more popular products is the Mac line of computers that guarantee virus-free experience for the user, the iPod media player, the iPhone Smartphone series, and the iPad tablets. When it comes to online services, Apple offers the popular iTunes Store, App Store, and the iCloud. In terms of consumer software products, Apple makes the OS X and iOS operating systems, the Safari web browser, iTunes media browser, and various other productivity suites. Founded by Steve Jobs, Ronald Wayne, and Steve Wozniak in 1976, Apple initially concentrated on developing and selling personal computers until it shifted its marketing focus towards consumer electronics. Being the second largest information technology company in the world, Apple is also considered as the third largest manufacturer of mobile phones worldwide. Because of its wide reach in terms of customer-base, Apple employs almost 73,000 employees, all fulltime, and more than 430 retail stores scattered in 15 countries. It also operates the online Apple Store and iTunes Store. To maintain its place both in the virtual and actual markets, Apple remains faithful to its commitment of continuously diversifying its consumer electronic products and developing close relationships with its suppliers and customers. Apple Inc.’s strategy for maintaining market lead includes pricing their products to customer segments, continuous innovation and a differentiation strategy that separates it from competition, and offering loyal customers with great customer service and in-store experiences.
Tactical Issues and Actions
Industry analysts acknowledge that Apple is very successful especially the company’s dominance in non-PC devices considering that many realizes that Apple lost the PC wars to Microsoft. When Apple began developing the iPod followed by the iPhone, the company changed its course and soon found its niche in the market. With superb customer service and stores, Apple sets the bar high when it comes to selling and supporting technology gadgets. While the exact reasons for success remain to be a mystery, many assumptions crop up from Steve Jobs’ role in the company to Apple’s business models to Apple’s internal management strategies. Following are three key principles that make competition against Apple tough for its competitors.
Pricing products according to customer segments. Every time Apple launches a new product, the company makes understated changes to its marketing strategy. For instance, launching a new iPhone model means huge reductions to the price of the previous model version. In fact, Apple can afford to reduce its product prices to up to $100 upon the release of a more advanced or higher product model. The implication of this move is that it “allows Apple to capture high margins with early adopters and drive penetration among a broader, more price conscious audience at a later date” (Stark & Stewart, 2012). Simply put, Apple is able to penetrate various spectrums of the market and still maintain its market lead and price competitiveness. Offering the latest products at a higher price, those who prefer to be one of the few owners of the newest and latest models of the iPhone or the iPad become proud possessors who belong to the elite circle of early adopters. On the other hand, those who want to avail of the same product models only have to wait for the next higher model’s product launch to avail of the current product model but at a lower, more reasonable price. By re-pricing their products, Apple is able to reach and attend to the needs of a different market segment.
While it is true that there are companies offering smart phones or tablets similar to those offered by Apple, Apple’s CEO, Tim Cook, is far from being bothered by competition. For instance, China is one of the leading innovators and makers of cheap smart phones and tablets that offer free operating system from Google and at a very small amount. Even if these handsets and tablets reach the American shores, Apple is not afraid of the competition and instead, welcomes it. Cook believes that “the mobile industry doesn’t race to the bottom, it splits” (Grobart, 2013). While consumers at the lower end of the spectrum are driven by price, meaning, the lower the price of the product, the better for the consumer, still, Cook believes that those in the upper end of the spectrum are the ones that Apple is after. These are the consumers who buy a product not for the price, but for what the product can do for them. And that is where Apple wants to compete – the end where consumers are after the quality of the product. Cook further says that Apple will never go towards the direction of the lower spectrum because it is simply not what Apple is about. In addition, both markets are so large that there is always room for competition. With regard to customers, many of them care about the quality of the product and prefer smart phones or tablets that offer customers great user experience and this is where Apple can confidently compete in the market (Grobart, 2013).
Continuous innovation and differentiation strategy. Selling low-end products were never Apple’s objective. Instead, Apple’s thrust “is to sell a great phone and provide a great experience” (Nair, 2014), which Apple was able to do at a lower cost. Apple’s strategy was based on four key principles: offer a limited number of products, concentrate on the higher end of the market, prioritize profits over market share, and create a halo effect to make customers crave for more Apple products (Nair, 2014). Each time Apple would launch new and innovative products, the anticipation is always an all-time high. The expectation is that the new products would surpass the previous models considering that with advances in technology, upgrades can be extensive.
Apple is a company that believes innovation is the key to keep its customers happy. As an example, sale of the iPad experienced a 111% increase during Apple’s fiscal first quarter in 2012. Despite competitors such as Blackberry, Samsung, and Amazon releasing their own tablets which they believed were more feature-laden than the Apple tablets, Apple still maintained 74% market share in tablets, beating all other competitors head on. This is all because of Apple’s commitment to innovation and full concentration in providing customers what they need and want in order to stay ahead of the competition (Stark & Stewart, 2012).
Alongside innovation is brand reputation that Apple clearly enjoys. Its branding strategy that differentiates it from competition is how it focuses on the customers’ emotions. It provides a product experience like no other as it defines the users’ personality in terms of lifestyle, imagination, innovation, dreams, passion, and hopes, among others, through technology (“Apple’s Branding Strategy”). Apple products are also known for its simplicity of use. Steve Jobs’ belief was that while design of an Apple product is important, if it is difficult to use or navigate, then it is of no good for the customer. Apple’s driving force is that their products must be intuitive to use and easy to learn and understand. Considering that technological advancements are plenty, adding more and more features can make user experience a nightmare and designing a user friendly interface challenging. However, Apple’s software and hardware engineers and designers ensure that user interface is always easy to navigate. Among the various companies in the same industry, Apple is the only one that places a high value on ease-of-use rather than on the product itself (Bajarin, 2012).
Great customer service and in-store experiences. One of the things that attract Apple to customers is the customer service each Apple store accords the customer. Jobs was spot on when he identified that even if products are easy to use, the many reasons that people have for using technology makes up for the complexity of using a product. When Apple opened its first few retail stores, naysayers were one in saying it would be the end of the Apple Corporation. People touching and trying the various features of an Apple product could mean a make-or-break for the company especially when salespeople are not knowledgeable about the product. However, the cynics were proven wrong with the company’s retail strategy. Instead of asking prospective customers about what salespeople can do for them, the sales staff ask clients what they want to do, which is mainly a query on what the client wants to do with the available technology that interests the customer. This proves to be a positive experience for clients considering that the sales staff know and understand how to respond to the needs of the clients. Otherwise, if more hand holding is needed, the sales staff refers the client to other members who are experts when it comes to the Apple product. This could explain why at least 50% of the people who purchase Apple products are new Apple customers. The simplicity of the product and ease of navigation is full-packed with features that more than makes up for the quality of the product (Bajarin, 2012).
Another aspect of customer service is how the Apple Company ensures to “listen” to the voice of the consumers. Considering that social media and networking sites are abundant, customers are given more avenues to express their opinions when it comes to a particular Apple product. Blog sites, forums, directories, and social media are common grounds where Apple gets to reach the voice of the people when it comes to their products. For instance, the iPad is not much different from the iPad 2, but instead of overhauling the design of the unit, the new iPad addressed the concerns and issues customers raised back during the initial launch of the iPad in 2010. Even before this occurred, Apple’s thrust of “directing product development to the voice of the consumer” (Stark & Stewart, 2012) has proven to successfully maintain integrity and high market share for Apple.
Summary and Assessment of Effectiveness of Strategy and Tactics
Despite the simplicity of Apple’s product and marketing strategies, competitors are trying to imitate what Apple is doing. Google bought Motorola Mobility and designed Android handsets. Microsoft also bought Nokia’s device business. Cook can only surmise that there is a lot of copying happening in the industry. While Apple is not looking for substantiation that what they are doing or what they believe in is the best route in business, the dynamics occurring in the industry suggest that people recognize the validity of Apple’s approach (Grobart, 2013).
When Apple joined the mobile industry, Nokia was at the peak of business and dominated the industry for years. Industry analysts back then believed that it would be difficult to dislodge Nokia from its position as it was comfortably seated and had margins of 25 percent. However, everything has changed now and Apple is the one occupying the prime view. This is just a reminder that for companies to remain on top, innovation is the key lest the company slowly dies and gets eaten up by once smaller companies. The mantras “innovate or die” (Grobart, 2013) is not only Cook’s hymn, but of all those who believe in the company, including the loyal customers. While Apple does not invent new products and devices, it spends a lot in research and development by perfecting their current products and technology as well as creating markets for their products.
While the Android has become the top-selling smart phone operating system, it does not guarantee the success in competing against Apple. While Android phones may have increased its following, the real gauge of success is the profits where Apple is leading by as much as “70% of all the profits in smart phones and about 85% in tablets” (Bajarin, 2012). Even if all Android companies are asked which for them is more important, whether it is market share or profit, the answer will all boil down to profit, which is where Apple Inc. is firmly lodged.
While the three strategies of Apple defined above may seem too simple and easy, it cannot be discounted that Apple Inc. also took pains in ensuring the company offers great software, powerful merging of various applications and services, simple industrial design, and user friendly interface. Steve Jobs has successfully set the trend for Apple by becoming the leading innovator when it comes to mobile business. As long as Apple Inc. will faithfully follow these tenets, instead of deviating from its current practices, Apple will continue to enjoy the rewards of their hard work.
Apple has firmly set the pace for the mobile industry and when Apple launches a product that does not go with the quality of the products they produce, the world will surely consider it a huge disappointment. As a trendsetter, Apple is poised to continue to remain on top of competition. As competitors recognize and value the contribution of Apple to the industry, the more Apple should stick to what works, not reinvent the wheel, and continue to innovate as long as there are people willing to pay whatever price Apple sells their units.
Apple’s branding strategy (n.d.). Marketing Minds. Retrieved from http://www.marketingminds.com.au/apple_branding_strategy.html
Bajarin, T. (2012). 6 Reasons Apple is so successful. Time. Retrieved from http://techland.time.com/2012/05/07/six-reasons-why-apple-is-successful/
Grobart, S. (2013). Apple chiefs discuss strategy, market share – and the new iPhones. Bloomberg Business. Retrieved from http://www.bloomberg.com/bw/articles/2013-09-19/cook-ive-and-federighi-on-the-new-iphone-and-apples-once-and-future-strategy
Nair, S. (2014). Apple’s premium pricing strategy and product differentiation. Yahoo Finance. Retrieved from http://finance.yahoo.com/news/apple-premium-pricing-strategy-product-191247308.html
Stark, K., & Stewart, B. (2012). 3 Strategies to adopt from Apple. Inc. Retrieved from http://www.inc.com/karl-and-bill/3-strategies-to-adopt-from-apple.html