APPLE INC.

Apple Inc. (Apple), was incorporated on January 3, 1977, as a design, manufacture

and market mobile communication and media device, personal computers, and
portable digital music player. The company also sells a variety of related software,
services, peripherals, networking solutions, and third-party digital content and
applications. Apple is famous for its iconic cellular products. Some of these
products and services include iPhone, iPad, Mac, iPod, and Apple TV. It also
produces a portfolio of consumer and professional software applications, the iOS
and OS X operating systems, iCloud, and a variety of accessory, service and
support offerings.

The company sells its products worldwide through retail stores, online stores,
direct sales force, third party wholesalers and resellers. Apple has also taken up
conventional way of selling and it delivers digital content and applications through
its iTunes Store, App Store, iBook store, and Mac App Store.

Famous Apple Products:

Apple laptops, Apple accessories, Apple softwares etc.

INDUSTRY: TECHNOLOGY

A brief look into Apple’s History:

Apple Computers, Inc. was founded on April 1, 1976, by college dropouts Steve
Jobs and Steve Wozniak, who brought to the new company a vision of changing
the way people viewed computers. Jobs and Wozniak wanted to make computers
small enough for people to have them in their homes or offices. Simply put, they
wanted a computer that was user-friendly.

Jobs and Wozniak started out building the Apple I in Jobs' garage and sold them
without a monitor, keyboard, or casing (which they decided to add on in 1977).
The Apple II revolutionized the computer industry with the introduction of the
first-ever colour graphics.1 Sales jumped from $7.8 million in 1978 to $117
million in 1980, the year Apple went public.
Wozniak left Apple in 1983 due to a diminishing interest in the day-to-day running
of Apple Computers. Jobs then hired PepsiCo's John Sculley to be president.
However, this move backfired and after much controversy with Sculley, Jobs left
in 1985 and went on to new and bigger things. He founded his own company
NeXT Software and he also bought Pixar from George Lucas, which would later
become a huge success in computer animation of such movies as Toy Story, A
Bug's Life, Monsters, Inc., and Finding Nemo.

Through the rest of the 1980s, Apple was still doing well and in 1990 it posted its
highest profits yet. This was, however, mostly due to the plans that Jobs had
already set in motion before he left, most notably his deal with a tiny company by
the name of Adobe, creator of the Adobe Portable Document Format (PDF).
Together the two companies created the phenomenon known as desktop
publishing.

Back in 1985 Sculley turned down an appeal from Microsoft founder Bill Gates to
license its software. This decision would later come back to haunt him because
Microsoft, whose Windows operating system (OS) featured a graphical interface
similar to Apple's, became their toughest competition in the late 1980s and
throughout the 1990s.

Over the course of a few years, Apple's market share suffered slowly after its peak
in 1990 and by 1996, experts believed the company to be doomed. It was not until
1997, when Apple was desperately in need of an operating system, that it bought
out NeXT Software (Jobs' company) and the board of directors decided to ask for
some help from an old friend: Steve Jobs. Jobs became an interim CEO, or iCEO
as he called himself (Jobs was not officially the CEO until 2000). Jobs decided to
make some changes around Apple. He forged an alliance with Microsoft to create a
Mac version of its popular office software. Not long after this decision was the
turning point for the company. Jobs revamped the computers and introduced the
iBook (a personal laptop) followed by iPod, an mp3 player, which became market
leader.

The iPhone, a touch screen cellular phone, introduced in 2007 was one of the
world's most successful products and the company has released several new
versions since. Other popular products include iPad tablet and Apple Watch. Most
recently Apple has expanded its services segments with its credit card (Apple
Card), Apple News for news, Apple Arcade for games and the Apple TV+ for
streaming original content produced by Apple.5 Steve Jobs died October 5, 2011,
but Apple continues on with his legacy with Tim Cook at the helm as the CEO.
The popularity of iPhones made Apple the first company valued at one trillion
dollars in 2018 and two years later it doubled that figure

INDUSTRY ANALYSIS:

The computers and peripherals industry includes PC equipment, handheld devices,

complex information technology systems and network equipment. Technological
factors such as interoperability of hardware products and compatibility with the
web have brought about industry consolidation. Also, intense competition and the
importance of intellectual property rights have been instrumental to growth of the
industry.

The computers and peripherals industry in the USA is considered to be one of the
largest global markets. It includes giants like Apple (AAPL), EMC (EMC), Canon
(CAJ), Western Digital (WDC), and HP (HPQ). The computers industry is highly
dependent on technology thus it is very capital-intensive and has high degree of
automated operations compared to other industries. Within this space, giants such
as Apple take advantage of economies of scale and are profitable due to mass
production and large share of customer purchasing power. Another advantage
which Apple holds is it’s customer loyalty, an ecosystem which they have
successfully created which forces the customer to buy an apple accessories. On the
other hand, smaller firms look for niche and produce specialty product with
superior technology.

THREE POTENTIAL CRITICAL ISSUES OF THE IT INDUSTRY

1. Redoubling digital transformation efforts

Facing new pressures and constraints, companies are working
to improve their agility and flexibility, increase automation,
and move to more real-time operations. Accelerating digital
transformation efforts will likely take a rededication to
improving cloud infrastructure, data and analytics capabilities,
and cybersecurity. It will also likely require a renewed focus on
business model transformation and ecosystem development.
2. Reorienting and reskilling the workforce
Workforces have been beset with multiple recent shifts and
challenges, redefining how people interact and how work
gets done. Tech companies have been increasingly leveraging
remote work capabilities and enabling other companies to do
the same. In the name of improving efficiency, more and more
companies are also harnessing AI technologies and RPA, both
to streamline tasks and augment capabilities. The implication
for workers is that they will likely need more support and
development opportunities.

3. Reexamining where and how manufacturing happens

The disruption caused by the COVID-19 pandemic has laid bare
vulnerabilities in many technology companies’ supply networks.
Some have had difficulty meeting increased demand due to
an inability to secure critical components, while others have
struggled to gain visibility into their networks, preventing them
from becoming more agile. Tech companies should continue to
explore potentially relocating and diversifying their production
facilities. They should also look to improve transparency,
flexibility, and resiliency while reducing environmental impact.

COMPETIONS IN THE INDUSTRY

Major players in the sector, including apple, tend to obtain a great chunk of their
revenues from foreign markets adding geographic diversity to their product sales
base. previously, a weaker US dollar made American products more competitive
and gave them a pricing edge over other international players. In such competitive
environment companies do not have any margin for error or for any inefficiencies
that may deem their products uncompetitive.
Oligopolistic structure:

As discussed above, Apple Inc. operates in multiple market segment. In desktop

computing Apple’s competitors are Microsoft, Dell, Asus, Hewlett-Packard and
Acer. In smart phone market, major players include Samsung, google, Nokia,
Lenovo and other small fragmented players. In the iOS market Apple competes
with Google Android and Apple’s in-house services such as Apple Pay competes
with PayPal and Google (Dudovskiy, 2016).

Thus, in my opinion the markets in which Apple operates are more However, the
markets appear to have an oligopolistic structure, with few dominant players that
derive the market quantity and work together to protect profitability.

Some key features of the industry are:

• Being an oligopoly the market has high barriers to entry, with respect to
patents, control over raw material, along with brand loyalty adds up to
strong barriers to entry.
• Companies have joint control over the price and therefore it is in their
interest to collude or have a mutual interdependence. As consumers
are price conscious an increase in price leads to fall in demand and thus fall
in profitability.

FIVE FORCES INDUSTRY ANALYSIS :

1] Threat of New Entrants

The markets in which Apple competes in are highly competitive and threat of new
entrants is also high. This can be gauged from the number of new companies
entering in the market from China. Some big names include Lenovo, Huawei,
Xiaomi. These new entrants have managed to acquire decent amount of market
share despite their relatively small size facing intense business competition (Chen,
Chen & Wu, 2011; Einhorn, 2013; Larson & Stone, 2014).

Although Apple has carved a niche for itself through brand loyalty. It has side-
lined itself from cheaper markets where price is the main criterion. Apple products
never go on sale! Despite this, I believe that new entrants pose significant threats to
big players due to cost advantages. Xiaomi was able to take over a sizeable market
shares of Samsung over a very short period of time, implies that threats of new
entrants can be very high.

2] BARGAINING POWER OF SUPPLIERS

In the markets in which Apple operates is very large and broad in scope & scale.
While supplier power is relatively Low, it is imperative to mention that the
industry is characterized by short product cycle and constant innovation. Some
suppliers who hold patents have advantage over smaller suppliers but overall
suppliers are fragmented and companies such as Apple and Samsung have in-house
expertise as well.

3] BARGAINING POWER OF BUYERS

Given the plethora of options available to buyers in both, laptop and Smartphone
industries as well as iOS services market, the buyers have many choices and thus
the power of buyers is high. Although Apple and Samsung invest heavily in brand
equity in order to ensure customer loyalty, however, such consumers constitute a
small pool compared to the broader market. This is especially true for emerging
market economies where consumers want good value for money. They tend to
choose electronic devices which are of good quality at cheaper prices. Thus,
through branding and product differentiation companies such as Apple & Samsung
compete to build customer loyalty towards their brands. Hence, companies like
Apple are taking many steps to try and reduce the bargaining power of buyers.

4] THREAT OF SUBSTITUTE

The constant evolution and development in the Technology industry has led to the
uncertainty in the competitive position of the current major companies in the
respective industry.

The best example of a company which got substituted is KODAK. The failure of
the company to adapt to the changing dynamics of the market initiated its
downfall. The ignorance of the company towards digital industry made it one of
the very few corporate blunders of such a massive company.\
5] RIVALRY IN THE INDUSTRY

Rivalry among members in the industry is high. Previously, Apple was able to
ward off competitive pressure through patents & intellectual properties, top-of-the-
line capability in innovative technology and Apple’s visionary leadership under
Steve Jobs. However, with increasing competitive pressure within the industry has
led to legal battles (Apple & Samsung), shorter product cycle, increase marketing
to build brand equity and shorter time to commoditization.

Apple’s Competitors:

APPLE’S COMPETITORS IN TECH INDUSTRY

Many of Apple's primary competitors are primarily manufacturers of computers.

Dell Technologies (DVMT) is a manufacturer of both desktop and mobile
computing devices and one of Apple's primary competitors. The rivalry between
these two companies goes back many years, with Dell even attempting to corner
some of Apple's share of the mobile music player market with its Dell DJ, designed
as an early competitor to the iPod. Dell has participated in numerous acquisitions
and other partnerships in recent years, though it does not offer smartphones.
Lenovo Group is another computer manufacturer that competes with Apple. This
Chinese company offers consumer PCs as well as mobile phones and other
electronics. In this way, Lenovo competes with Apple on many different product
lines.

HP Inc. (HPQ) has a history dating back to 1939 as part of the original Hewlett-
Packard Co. Most recently, the company focuses on affordable consumer computer
products. One of HP's strengths is its broad, global presence, making it a
particularly strong Apple competitor outside the U.S.

Another major Apple competitor is Sony Corp. (SNE). Sony personal computers
are incredibly popular in many markets around the world. Sales of its computer
products have helped to launch Sony into the top ranks of electronics companies,
and the company now offers an array of electronics from personal consumer
products to video game consoles.

The Taiwanese company ASUSTeK Computer Inc. – better known under the brand
name Asus – has a long history of creating affordable PC components,
peripherals and, more recently, tablets and smartphones. Asus began as a
manufacturer of motherboards, and it has grown over nearly 30 years to become a
leader in the global IT market.

Smartphone Manufacturers

Among the most significant Apple products is the iPhone. As in the computer
space, though, Apple has not completely dominated the market. Samsung, a South
Korean company producing both personal computers and smartphones, is a major
competitor, particularly for the iPhone. The Samsung Galaxy and note series have
been responsible for reductions in iPhone sales for many years. Today, Samsung
has developed into one of the largest and most profitable companies, both in the
Asian region and in the world overall.

There are many additional competitors which seek to target a small portion of
Apple's services or products. Further, because the technology field is always
changing and growing, there are frequently new companies entering the fray as
well. With all of the competition, the consumer benefits from expanded innovation
and lowered prices.
APPLE’S ENVIRONMENT FRIENDLY PRODUCTS

Apple recently stopped giving Chargers in its phone boxes and called it as an
initiative to protect the environment and in my opinion, this was a well-planned
strategy to use environment as one of the many selling points. This gave Apple, a
competitive advantage.

CAPABILITIES

All-in-all, we can conclude that Apple has a clear competitive advantage with its
iPhone technology to take advantage of these key trends as global smartphone
penetration rates remains well below 50% of the total 5.98 billion mobile phone
subscriber base.

Elasticity:

Elasticity are a key matrix through which firms can gauge whether their products
can stand any shock through external pressures. More importantly it helps firms to
strategize.

Price elasticity of demand:

It is the measure of how sensitive the demand of a product or good is relative to

its price.

While Apple has many products, we focus on its flagship product the iPhone. The
reason is Apple iPhone encompass many of the market Apple is in: iOS,
smartphone, iPad and MacOS. The price elasticity of iPhone shows the resilience
of Apple products, compared to other phones.

As can be seen, the price inelasticity of iPhone is relatively inelastic as oppose to

other providers. This ties well with our own research above. We believe key
factors are responsible for this:

• Apple’s Ecosystem where incremental products of Apple adds more value to

customer
• Apple’s in-house operating system and various apps that run only on the OS
• State-of-the-art technology and innovative features

Income elasticity
The income elasticity measures the sensitivity of the product or good to change in
the income level. Apple appears to have a positive Income elasticity as consumers
are price sensitive in the smartphone industry. Apple has always positioned itself
as a premium product, being aware of its positive income elasticity Apple has also
introduced cheaper smartphone to cater to emerging market consumers in China
and India.

Source: Alessandro, Paper

Cross-price elasticity:

The Cross price elasticity is a measure of how change in good A has an impact on
a related good B.

In this regard, Apple appears to have a positive cross-price elasticity. This is

because from our analysis above we know that, Apple has developed a strategic
network of interdependent companies. If a consumer is buying iPhone 5 it will also
buy a protect-ant cover to protect the iPhone from damages, it will also purchase
an insurance from damage, and/or it will also buy various apps/services such as a
good headphone or Bluetooth device or apple watch etc.

ORGANIZATIONAL FLOW AND STRUCTURE

APPLE’S BUSINESS STRATEGY

Apple Inc.’s generic strategy is broad differentiation. This generic strategy focuses
on key features that differentiate the company and its information technology
products from competitors. Through the broad differentiation generic strategy,
Apple stands out in the market. For example, elegant design and user-friendliness
of products, combined with high-end branding, effectively differentiate the
technology business. This generic strategy means that Apple always aims to set
itself apart from competitors not by price but by competitive advantages based on
product design that attracts customers. Such design includes seamless connectivity
among devices and cutting-edge aesthetics. Even though this generic strategy
makes Apple different, the company still broadly reaches various segments of the
market. The firm’s products are designed for everyone, thereby supporting a broad
market reach. For example, Apple targets individuals and business organizations
through the MacBook product line. In this way, the generic strategy of broad
differentiation supports the company in maintaining its competitive advantage,
leadership, and position as a high-end and high-value technology business.

The broad differentiation generic strategy has significant implications on Apple’s

strategic objectives. For example, to apply this strategy, the company must
continue emphasizing innovation through research and development. Apple must
keep developing innovative products so that the business maintains its competitive
advantage. Competitors eventually catch up with new technologies and new
products, so the broad differentiation generic strategy compels the company to
continuously innovate to keep itself always ahead of the competition. Thus,
continuous innovation is one of Apple’s strategic objectives based on the broad
differentiation generic competitive strategy. In addition, to maintain business
growth, the company must keep growing its market reach, such as in the global
consumer electronics market. In its generic strategy for competitive advantage,
Apple does not focus on any specific market segment. Instead, the company
competes by selling various goods and services that suit the various segments of
the consumer electronics and information technology services industries. Thus,
another of Apple’s strategic objectives based on its generic strategy is to penetrate
markets to ensure a broad reach. Such expansion and business growth are achieved
through intensive strategies for growth.
APPLE’S CAPABILITIES AND COMPETENCIES

Apple Inc. succeeds in the computer technology and consumer electronics market,
despite bouts of challenges in the changing global business environment. The
company uses its core competencies, which are identified in this VRIO analysis.
The VRIO analysis model evaluates the value, rarity, imitability, and organization
of the business. This internal analysis determines the core competencies and
competitive advantages of the company, based on the VRIO variables.

In this case, Apple Inc. exploits its core competencies to achieve long-term
competitive advantages against aggressive competitors. The firm’s strategic plans
and objectives focus on business development in areas where competitors are
weak. Using a VRIO analysis of Apple, managers can arrive at the best courses of
action to strengthen the business based on its core competencies or long-term
competitive advantages, which satisfy all of the four VRIO variables. Related
information may be obtained through a Four Corners Analysis of Apple Inc. (based
on Michael Porter’s framework). In addition, a McKinsey 7S analysis of Apple
Inc. can pinpoint factors that the business can use to harness its core competencies
shown in this VRIO analysis.

A VRIO Analysis of Apple Inc.

The following table presents the resources and capabilities of Apple Inc. Each of
the factors is evaluated based on the VRIO variables. The company’s long-term
competitive advantages or core competencies are the resources and capabilities that
have checkmarks for all of the four variables:

Apple’s Organizational Resources & Capabilities V R I O

NON-CORE COMPETENCIES:

Business process automation ✔

Competitive employee compensation packages ✔✔

Human resource capabilities for innovation ✔✔

Product mix diversity ✔✔✔

CORE COMPETENCIES OR SUSTAINED (LONG-TERM)
COMPETITIVE ADVANTAGES:

Globally popular premium brand ✔✔✔✔

Systems set up for rapid innovation ✔✔✔✔

Ecosystem of complementary products ✔✔✔✔

Access to user information ✔✔✔✔

Artificial intelligence capabilities ✔✔✔✔

Global distribution and sales network ✔✔✔✔

APPLE’S COMPETITIVE POSITION

Apple has an integrated competitive position in the Technology
industry. It has a differentiation competitive position with its
premium costly products and intensive brand loyalty. Another
competitive strategy inculcated by them is the ECOSYSTEM.
They have created a reliable & exclusive Apple ecosystem which
has led them to become 2 Trillion Dollars company.
BIBLIOGRAPHY
- http://panmore.com/apple-inc-generic-strategy-intensive-growth-strategies
- https://www.slideshare.net/mahiadel94/apple-inc-strategic-case-analysis
- https://notesmatic.com/strategic-analysis-of-apple/
- https://www.rancord.org/apple-inc-vrio-analysis-core-competencies-
competitive-advantages
-
-