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Apple Inc., the selected Company for this analysis, is a U.S.-based tech firm that produces digital devices, computers, and smartphones. The Company has penetrated the global computing market by continuously offering high-quality products and services to customers. Apple employs a unique business strategy that requires managers and employees to create products and services while maintaining customer relationship management. It uses three models: business-to-business (B2B) approach to selling computers to other organizations, business-to-customer (B2C) to sell smartphones and other mobile devices and services to customers. Thus, Apple serves many segments that shape its production, marketing, distribution, and selling strategies. This paper analyzes Apple’s general environment to identify internal and external factors that drive its business strategy for competitiveness.
General Environment
Demographic Segment
The demographic segmentation is critical for Apple since it determines the products and services developed. It entails assessing consumer demographic characteristics and offering products or services that meet their needs. Marketers collect and analyze users’ data to create their demographic profiles, categorizing them based on product or service preferences. According to Hitt et al. (2020), demographic profiles allow marketers to develop a marketing plan and strategy that targets specific groups. Thus, customers’ can be grouped based on their race, age, income level, sex, ethnicity, and education level.
Psychographic Segment
The psychographic segmentation addresses lifestyle and risk orientations that influence their purchase decisions. The Company concentrates on aspirers who want to explore new devices but cannot ignore risk-takers who can pay any amount for a high-quality product or service. Apple targets individuals with medium-to-high income since income is synonymous with lifestyle, forcing it to target young people who embrace change. Feng et al. (2019) termed this segment conscious progressives since they are easily attracted to entertaining and amusing content. Besides that, they focus on product packages and functionality. Apple cannot ignore this segment since it consists of people who frequently use the internet and become hardcore loyalists.
Five Forces of Competition
Bargaining Power of Suppliers
Apple faces a low bargaining power of suppliers, but the emphasis is considered in some cases. According to Kibeyi (2018), the low bargaining power of suppliers implies that they have a low influence on Apple and its competitors. Apple has many suppliers who make parts available and compete to supply the best features, weakening their power over the Company. Besides, there is a high company concentration to supplier concentration ratio. Processor and computer memory suppliers like IBM, Intel, and Motorola have considerable power, but others have low power over Apple. Thus, the Company has many alternatives to choose from, giving it a stronger position than suppliers (Razak et al., 2020). Apple has established itself as a significant client for most suppliers, with low switching costs. The Company maintains this low power by conducting supplier audit checks based on its corporate social responsibility strategy.
Competitive Rivalry
Competitive rivalry determines the power of market rivals and their influence on each other. Apple’s primary competitors are Google, Dell, Amazon, and Samsung, implying that competitive rivalry is high. These firms have substantial capital to invest in product or service innovation like Apple, intensifying competition. Low switching costs and similar products enable customers to switch brands, indicating aggressive competition among top brands. For example, Apple and Android products have the same features and functionalities, allowing customers to switch from Apple to a competitor’s product. But Apple counters competition pressure by innovating consistently and developing unique products for its loyal clients.
Future Improvements
Apple might pursue product differentiation to distinguish itself from competitors. Apple has developed resilient brand equity, but further differentiation might set it apart from competitors. The Company should focus more on providing the best quality products and services, giving its clients unique experiences with various products or services. Today’s customers seek the best brand experience, including customer support, shopping in stores, and product packages (Barley et al., 2020). Players in industries with intense competitive rivalry have the same products but can distinguish themselves by providing the best experience to their customers. Apple should continue its innovation efforts to create new products different from competitors’ products, encouraging customers to wait for them and pay premium prices. Another improvement initiative that Apple might implement is product diversification. Product diversification would mean building a close relationship with component suppliers. The P.C. segment may be saturated, but other consumer electronic areas continue to grow. Suppliers can help Apple invade these areas and attract new customers and keep loyal ones.
Greatest External Threat
Apple’s most significant threat is increased competition from Google and Microsoft. This threat might limit its future growth, considering the financial pressure on Apple (Razak et al., 2020). For instance, Google’s Android has become the most widely used operating system globally, followed by Microsoft Windows. However, Apple’s pricing strategy remains the most potent weapon against competitive pressure. The Company charges premium prices; it can recover costs attributed to declining iPhone sales. But Apple smartphones are a competitive tool against Samsung, Nokia, and HTC, implying that customers continue buying Apple.
Greatest Opportunity
Apple’s most incredible opportunity is global expansion, especially in emerging markets like India and China. Although some U.S.-based tech firms have faced regulatory challenges in these markets, they present significant growth opportunities. Sectors such as government, education, and entertainment remain viable in these markets. For example, innovative products segment like smartphone continues to grow in India. People are becoming more inclined towards innovative technologies, which Apple can invest in to boost its revenue. Hence, Apple should adjust its smartphones to regulatory requirements and customer preferences in emerging markets.
Strengths and Weaknesses
One of Apple’s greatest strengths is the world’s most valuable brand for the 8th consecutive year, with a $ 322 billion market cap. Apple was the first Company to introduce some of the most innovative products, including smartphone devices and advanced computers. According to Barley et al. (2020), Apple’s design DNA incorporates quality, sturdiness, cutting-edge technology, and luxury stirs a craving for its products. Another significant strength is Apple’s innovative culture. The Company strives for change, innovation, and creativity, a mindset that has helped it discover brilliant ideas and create strong internal brand culture. Another closely related strength is being a top technology brand. Apple’s growth rests on creativity and excellence, making it the first Company to introduce some of the most innovative products ever in the industry. A diverse product portfolio consisting of iPhone, Apple T.V., Apple Card, iPad, Mac laptops, wearables, and home accessories defines Apple. Besides, it offers various services including, Apple Music, iTunes, and Apple Arcade. Lastly, Apple has control over suppliers, maintaining its manufacturing footprint.
Apple’s premium pricing is one of its most significant weaknesses. The Company produces luxury products that target medium-and high-income earners, leaving low-income earners who are the largest customers for competitors. It means that Apple cannot penetrate emerging markets like India, where customers choose cheaper alternatives like Samsung or Nokia. Another significant weakness is Apple’s unfair business practices. The Company has faced tracking allegations on its phones and unfair business practices on the App Store. Apple faces investigations in the U.S. and E.U. for operating the platform and competing in it. Tracking users also violate data privacy and confidentiality regulation, reducing public trust in the corporation (Feeley, 2020). The last significant weakness is software incompatibility, as Apple’s products are incompatible with other technologies. Incompatibility drives away customers who want to use Apple’s products with other software since they do not want to be trapped in the Apple universe. But not all Apple’s customers are hardcore loyalists who exclusively buy its products.
Strategy or Tactic
One strategy to capitalize on high brand valuation is to continue investing in research and innovation. This strategy will help Apple develop unique products that create a repetitive appeal to users. New products and services should address streaming needs, personalization options, and video and image quality. Current usage trends indicate that smartphones will become an essential commodity, and Apple should offer them at competitive prices (Razak et al. (2020). Thus, Apple can address premium pricing by using a competitive pricing strategy. Besides, Apple should listen to regulators and address competition concerns with its app Store and phone tracking. This strategy will boost users’ confidence and promote fair competition. Lastly, Apple should make its software compatible with other technologies because customers want to use Apple products with other services. This tactic will attract customers who fear being trapped in the Apple universe.
Resources, Capabilities, and Core Competencies
Apple’s most excellent resource is its employees, engineers who work to create new products. But this poses a challenge – the Company incurs expenses in keeping a skilled workforce. Apple is considered one of the best employers, but wages consume about 70% of its budget. Apple’s core competency has been its innovative ideas and the technologies resulting from them. However, online auction services have faced replication challenges. Thus, the most significant competency is its brand image that drives traffic to its stores and website. Increased website traffic means a higher likelihood of products and services purchase (citation). Apple’s business model is vulnerable since other tech giants can invest in similar technologies, reducing the corporation’s capabilities.
References
Barley, B., Kitamura, A., Loar, T., Ramon-Samayoa, E., Yuzon, J., & Daim, T. U. (2020). An Investigation of the Motivations and Strategies behind Apple’s Product Design. In Innovation Management in the Intelligent World (pp. 3-27). Springer, Cham.
Feeley, E. (2020). Can David Really Beat Goliath? A Look into the Anti-Competitive Restrictions of Apple Inc. and Google, LLC. The University of Cincinnati Intellectual Property and Computer Law Journal, 5(1), 5.
Feng, L., Li, Y., Xu, F., & Deng, Q. (2019). Optimal pricing and trade-in policies in a dual-channel supply chain when considering market segmentation. International Journal of Production Research, 57(9), 2828-2846.
Hitt, Ireland, & Hoskisson. 2020. Strategic management: Concepts and Cases: Competitiveness and globalization (13th ed.). Mason, OH: South-Western Cengage Learning.
Kabeyi, M. J. B. (2018). Michael porter’s five competitive forces and generic strategies, market segmentation strategy, and case study of competition in the global smartphone manufacturing industry. IJAR, 4(10), 39-45.
Razak, M., Hidayat, M., Launtu, A., Putra, A. H. P. A. K., & Bahasoan, S. (2020). Antecedents and consequence of brand management: an empirical study of Apple’s brand product. Journal of Asia Business Studies.