Apple Inc. is a multinational technology company with its headquarters in California. The company’s main operations involve designing and manufacturing various technology products such as mobile phones, computers, networking solutions, watches, media devices, accessories, digital content, and related software. Apple Inc. commenced operations in 1976 with the manufacture of computers. Due to the use of new and innovative designs in its products, the company enjoyed high sales, which promoted its growth into a global technology company. Over the years, the company has diversified investments from the manufacture of computers to include various personal electronics and digital content. Apple Inc. enjoys a high brand loyalty and is currently ranked as a highly valued brand in the world. This paper is an analysis of Apple Inc.’s corporate strategy and a recommendation of ways to improve strategy.
There is stiff competition in the technology products market. It is worth noting that rapid technological advances and new product developments characterize the market (SEC, 2017). The dynamic nature of the market makes it difficult for companies to survive in the market. Frequent innovations and product improvements are the only way that companies may survive in such a dynamic market. This leads to higher costs of research and product development (SEC, 2017). Owing to the diversity of products, Apple Inc. faces stiff competition in various business segments. In computer manufacturing, the company faces still competition from Dell Technologies Inc. Other competitors in this segment include Lenovo Group, HP Inc., Sony Corporation, and others. In the smartphone segment, Samsung Group is the major competitor. Another strong competitor is Fitbit, Inc., which manufactures wearable devices. Other competitors are IBM, Huami Corporation, and Cray Inc.
Majority of the competitors in the computers and smartphone segments employ aggressive pricing strategies in order to take over the market. These competitors have low cost structures. In addition, majority of the competitors use a different operating system for their products (SEC, 2017). Apple Inc. uses Mac Operating system (macOS) in all its hardware products while most competitors use Microsoft Operating System. Apple Inc. has developed the iOS as the preferred operating system for its smartphones. Even with continuous innovation and product development, Apple Inc. will continue facing stiff competition in the market since it is easy for other technology companies to imitate its product features. The competitors have the financial capacity, technical skills, and experience to develop or improve on the existing products.
The industry faces various challenges that could significantly affect Apple’s performance. Global economic conditions may have a significant impact on the company’s performance. It is worth noting that the larger share of the company’s products ends up in the international market, accounting for about 63 percent of the total sales (SEC, 2017). Global financial conditions may pose a significant risk to the company’s profitability. For instance, currency exchange fluctuations, political turmoil in overseas markets, new government regulations, and other factors may considerably affect market performance. The global market for the various electronic devices is subject to high competitiveness and rapid product evolution. Various forces such as stiff price competition, reducing profitability margins, rapid product evolutions, technology changes, and other forces characterize the global market place. These factors contribute to significant risks in the industry.
Apple’s ability to remain relevant in the market largely depends on the ability to introduce new and innovative products. Apple Inc. must strive to remain ahead of the competition at all times. This means making high investments in research and development. Currently, the company holds numerous patents and copyrights resulting from research and development. Some of the competitors have introduced superior products in the market in terms of hardware and software. This has made the competition in the market even stiffer. Apple Inc. holds the largest market share in terms of unit shipments with 19.3 percent, followed closely by Samsung with 18.6 percent (Statista, 2017). More information can be found on fig. 1.1
Apple Inc. obtains components for manufacture of various devices from multiple vendors. The company faces direct competition with other manufacturing companies for various components in the market. As such, the components used in the manufacture of mobile communication devices, personal computers, and media devices are subject to market demand and supply forces. Fluctuations in demand and supply of the components may significantly affect the price of these components, and consequently the operations at the company. Additionally, Apple Inc. uses some unique components. For such components, there is the possibility of experiencing shortages since a few suppliers deal with such components.
Apple outsources the manufacturing of various hardware components. The outsourcing partners are located in Asia, Ireland, and a few in the U.S. The company outsources hardware for its Mac computers from Ireland. A few are also manufactured in the U.S. Some outsourcing partners act as the sole supplier or manufacturers of components and hardware. The company also sources some components from single locations. This increases the risk of experiencing shortages should an adverse event affect the normal operations of the outsourcing partners. The management has made efforts to maintain close ties with the outsourcing partners in order to ensure the smooth flow of components. Nonetheless, a significant risk of failure exists due to the few number of outsourcing partners and the uniqueness of the components. The essence of outsourcing was to reduce manufacturing costs (Finkle & Mallin, 2010).
Apple Inc. markets its products directly to consumers. The consumer groups include individual consumers, businesses, education market, and governments. The company sells a large share of the products directly to the consumers. This is through online stores, retail stores, and direct sales force. Apple Inc. also resells various products such as digital content through the online platforms. Indirect product distribution channels include wholesalers, network carriers, value-added resellers, and others such as retailers. Apple Inc. enhances customer buying experience by running own stores, which are strategically located to increase customer convenience. For instance, the company operates most of the stores in shopping malls where most customers frequent.
In the recent past, Apple Inc. has mainly focused on the young population for the sale of its products. As such, the company has established programs and products that aim at improving students’ learning experiences. According to the SEC (2017), the company has made efforts to boost learning by integrating technology products into the teaching-learning process. The aim is to improve student achievement and create awareness for its products. The company prices its products relatively higher compared with the competition. This could have an effect in the demand of its products due to affordability issues especially in developing nation markets.
Apple Inc. is subject to domestic as well as foreign laws and regulations. Governments across the world are likely to develop new laws and regulations that may have a significant adverse effect on the company’s operations. Government regulations may affect the company in many areas including labor, tax, billing, quality of products, import controls, e-commerce, data privacy regulations, environmental concerns, and in other aspects. Countries have different laws regulating mobile communication devices. For instance, some countries require all handsets to be capable of supporting more than one carrier network, while others may require that the devices support only a single carrier network. All this has significant impact to the financial position of the company. Apple Inc. has registered a number of worker rights violations especially in China. The high production targets and quality standards has led to outsourcing partners putting extreme pressure on workers with little regard of their basic rights (Chan, 2013). This has led to serious labor issues.
In the recent period, Apple Inc. has stepped up efforts in the corporate social responsibility segment. This comes after criticism of the lack of the company’s engagement in philanthropic activities. With the coming of the new CEO, Tim Cook, the company has established a number of corporate social responsibility programs in a bid to change the company’s image (Duvovskiy, 2018). One of the programs is the Global Volunteer Program, which enables employees to select projects in the local communities for support. The company has also established a program to empower and educate workers from different areas. Over 280,000 workers took the course in 2016 (Duvovskiy, 2018). Apple has made efforts to reduce the overall power consumption, including that by its devices. This is in an effort to conserve the environment by reducing the total power consumption by its gadgets.
Shareholders provide the much-needed financing to the company for a share of the profits in return. According to Khan & Alam (2015), Apple Inc. employs a low shareholder return policy, meaning that shareholders get relatively lower returns for each dollar invested. The low shareholder return policy has led to concerns among shareholders concerning the company’s ability to ensure balance between corporate interests and delivering shareholder value. Apple Inc. has in the past reported conflicts between shareholders and the management. Part of the conflict has been the emphasis on the short-term over the long-term goals. The shareholders accuse the management of sidelining the short-term goals of the company such as shareholder returns.
Board of Directors
The major role played by the Board of Directors is to check on the actions of the Chief Executive Officer (CEO) and others in corporate leadership. The Board of Directors ensures that the decisions made by the CEO and senior executives are ethical and made in the best interests of the shareholders (SEC, 2018). The Board of Directors also ensures that the company is committed to employing the highest standards possible to achieve business success. The Board of Directors has appointed various Board Committees that act on its behalf to monitor various activities in the company. Independent Chairs head the various board committees. There are three Board Committees, which are the Nominating Committee, Audit Committee, and the Compensation Committee (SEC, 2018). Each Board Committee is charged with a particular function. For instance, the mandate of the Audit Committee is to monitor the company’s financial statements for any discrepancies and ensure compliance with financial reporting standards.
The management plays a crucial role in improving the performance of any company. The company’s past performance has largely mirrored the top executives’ corporate strategies. Poor corporate strategies have led to the near downfall of the company in the past. Founded in 1976, the company became largely successful, eventually going public in 1980. By mid 1990s, the company experienced reduced demand for its products due to the proliferation of the consumer market with cheaper computers running on Microsoft Windows systems (Mallin & Finkle, 2011). Power struggles among the top executives worsened the decision-making at the company. This led to the exit of one of Apple’s co-founders, Steve Jobs. In 1997, Gil Amelio, the then CEO purchased NeXT, a start up by Steve Jobs (Mallin & Finkle, 2011). This led to the return of Steve Jobs to the company’s management as CEO.
Steve Jobs significantly improved the performance of the company through various efforts. For instance, he influenced the opening of Apple’s retail stores across the country for improved customer experience. Steve Jobs made changes to the hardware used on various products. Another significant change was in software development, where he promoted the development of important software through acquiring software companies. Through Job’s management strategies, the company significantly improved profitability and growth. From 1999, Apple’s stock has significantly improved from as low as 1.14 dollars to the current price of over $160 per share. Fig.1.2. shows Apple’s stock prices from 1980 to 2018. According to Chikhale & Mansouri (2015), Steve Jobs employed charismatic leadership style at the company, greatly improving motivation among customers, investors, and employees.
Employees are also critical in the success of the company. The return of Steve Jobs into the company saw the dissolution of board members (Finkle & Mallin, 2010). Jobs dissolved the then board members and replaced them with new members whom he could trust. This was in an effort to bring change in the company. The company’s leadership has made significant efforts to promote employees’ job security and thus improve job motivation. During the 2008/2009 recession, the company managed to retain all employees amid the harsh market environment (Finkle & Mallin, 2010). Apple Inc. has one of the highest employee retention rates in the U.S. In a recent survey, employees rated Apple highly with regard to job satisfaction (Silverberg, 2016). Employees were more satisfied with work environment, collegiality, and benefits.
Apple inc swot analysis
A SWOT analysis is an evaluation of a company’s strengths, weaknesses, opportunities, and threats. A SWOT analysis is important since it helps in providing a clear picture of the competitive environment facing an organization. The following is the SWOT analysis for Apple Inc.
|Apple Inc. SWOT Analysis|
· The company has a strong brand image
· High profitability
· The company is a market leader in various products and services
· A good supply chain management that enhances customer experience
· High prices of its products
· Apple products incompatibility with other products in the market
· Weak distribution channels in most foreign countries
· High dependence on the iPhone as the key product
· The opportunity to expand operations in the service segment
· New patents and copyrights from research and development activities
· Diversification of products
· More product compatibility with those of competition
· Focusing on the low-end market
· Stiff competition in the market
· Frequent new products in the market
· Imitation of its products
· Global economic changes
Apple Inc. may improve its competitive position through various ways. First, there is need to ensure increased compatibility of its products with those of the rivals. Compatibility of products with those of rivals is a critical factor that consumers may consider while making a purchase decision. Apple Inc. has already made efforts to improve the compatibility of its Mac Computers with Microsoft products (Finkle & Mallin, 2010). For instance, the company has made Mac computers that are compatible with Windows operating system. Apple Inc. can improve competitive advantage by slightly lowering the price of its products, which target the high-end markets. Alternatively, Apple-Inc. may develop low-cost products specifically targeting the low-end markets. This would increase its market penetration especially in developing countries. Lastly, there is need to increase funding in research and development. Research and development plays a critical role in ensuring the success of any company through continuous product development and innovation.
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Chikhale, M. M., & Mansouri, M. (2015). An agile and collaborative framework for effective governance to enhance management in large-scale enterprise business systems: The case of Apple Inc. Global Journal of Flexible Systems Management, 16(3), 283-293. 10.1007/s40171-015-0098-9
Duvovskiy, J. (2018). Apple corporate social responsibility (CSR). Retrieved from https://research-methodology.net/apple-corporate-social-responsibility-csr/
Finkle, T. A., & Mallin, M. L. (2010). Steve jobs and Apple Inc. Journal of the International Academy for Case Studies, 16(7), 31.
Khan, U. A., & Alam, M. N. (2015). A critical analysis of internal and external environment of Apple Inc. International Journal of Economics, Commerce and Management, 6(3): 955- 967.
Mallin, M. L., & Finkle, T. A. (2011). Apple inc.: Product portfolio analysis. Journal of the International Academy for Case Studies, 17(8), 49.
Silverberg, D. (2016, June 8). Apple employees raise Tim Cook to 8th place in Glassdoor CEO rankings. Apple Insider. Retrieved from https://appleinsider.com/articles/16/06/08/apple- employees-raise-tim-cook-to-8th-place-in-glassdoor-ceo-rankings
Statista. (2017). Apple Raked in 51 Percent of Smartphone Revenues in Q4. Retrieved from https://www.statista.com/chart/12953/smartphone-market-share-based-on-revenue-and- unit-shipments/
United States Securities and Exchange Commission (SEC). (2017). Apple Inc.: Form 10-K for the Fiscal Year Ended September 30, 2017. Retrieved from http://files.shareholder.com/downloads/AAPL/5378826958x0x962680/D18FAEFF- 460A-4168-993D-A60CBA8ED209/_10-K_2017_As-Filed_.pdf
United States Securities and Exchange Commission (SEC). (2018). Apple Inc. Notice of 2018 Annual Meeting of Shareholders and Proxy Statement. Retrieved from https://www.sec.gov/Archives/edgar/data/320193/000119312517380130/d400278ddef14 a1.pdf
Fig.1.1. Smartphone Market Share in Terms of Unit Shipments
Fig.1.2. Apple Inc. Stock Price History