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Apple: Recent Success in the Consumer Electronics Industry

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Apple: Recent Success in the Consumer Electronics Industry

Introduction

The Apple Inc. logo is ubiquitous on the company laptops, macs, and iPhones and iPads. The company is at the top of the consumer electronic industry, as one of the most recognized brands. There are numerous metrics available to evaluate its success and sustainability. This paper will be using the most common ones like the SWOT analysis to evaluate the company strategy, external and internal environments, and positioning. One critical factor for evaluating success at Apple is to check for the company’s ability to scale change beyond itself. Studies show that companies that build a culture of sustainability are the ones that eventually outperform their industries in the long-term. Those that miss the implementation of sustainability programs are the ones that lose out to the most formidable competitors.

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Today, many companies are turning to sustainability as the grid to use to safeguard their businesses against volatility. It is also a strategy that allows the companies to continuously move products to the market to feed the demand of the middle-income consumers around the world, especially in developed and in the emerging markets like Brazil, India, and China (The Economist 2012). Apple has grown its stock from an average of less than 10 dollars at the start of the 2000s decade. Today, fourteen years later, its stock is trading at above 500 dollars and it is expected to increase further (Mootee 2011). The company has a value that is more than one trillion dollars. The growth is because of its relentless strategy to be the best in more than just one criteria of performance (Adair 2007). An impressive fete for Apple is that as a company with a global presence, it attracts a lot of scrutiny from stakeholders. Therefore, addressing the problems caused by its supply chain and responding to accusations of unfair business practices can derail the company from pursuing its competitive strategies that are responsible for its current success (Gross 2014; Altringer 2013).

Innovation

Apple uses a start-up structure of organization. Each of its major and minor divisions operates as start-ups, where the challenge is to defeat the present business environment and come up with innovative solutions that scale quickly into income generating options for the company (Busco et al. 2013). Apple has put a lot of emphasis on communication and ensuring that different teams are on the same page in terms of knowledge of each other’s project status (Chmielewski 2014). Regular meetings help to achieve the information-sharing goal, given the so many activities going on at the Apple headquarters. In addition, there is so much to do in terms of decision making about features to implement or discard in the company’s consumer goods’ production (Ellis 2010). Other than divisional meetings, there are representatives of each team that also meet (Carew, Florkowski & Smith 2006). In addition, the top 100 most influential employees meet for intensive strategy sessions in secret (The Economist 2012).

Secretiveness is a value that Apple cherishes. It allows the company to maintain the lead against competitors who can jeopardize the performance of its innovations in the market. Despite the various meetings and collaborative attempts, there are many aspects of production and operations management within Apple that are only privy to a few selected employees (Busco et al. 2013). Even in the cases where there is comprehensive collaboration, employees have to remain quiet and only open up to authorized personnel about the details of what they are presently working on (Chmielewski 2014).

Culture is another contributor to innovation. It is an aspect that is hard to replicate in other firms, thereby giving Apple one of its distinctive competitive capabilities. There is intensity of work, with emphasis on creativity and perfectionism. At the same time, there is an inherent need to rebel from conventional systems and standards to come up with unique things (Thompson & Martin 2010). Therefore, it appears that all the ingredients of innovation are available at Apple. There is creativity, in addition to sharing ideas on a massive scale, but at the same time the implementation of secrecy protocols to ensure that marketable ideas remain under wraps, until they are mature (von Stamm 2008).

Sustainability policies

In addition to minding supplier relations and working conditions for Apple employees, Apple also considers environmental issues, as an avenue that can provide room for growth. The company has a large part of its services business built for cloud computing. As the company concentrates on providing services through data centres, it also faces an increase in its energy demand. The demands put it at loggerheads with environmentalists, who are against the use of energy sources that are non-renewable. Apple on its part has taken the challenge to innovate. It is expanding its reliance on solar power, instead of continuing with the reliance on main grid electricity. The company built a 20-megawatt solar power facility to increase its self-sufficiency in the data centre business for internal and commercial usage (Krosinsky 2012).

Product innovation iPhone

Just like the death of the feature phone, the smartphone may be nearing its end. Apple executives have been asking themselves whether launching a new iPhone will end up selling more than an existing iPhone. The iPhone makes up more than half of product sales by Apple, and is by far the most successful consumer electronic product ever developed by the firm (Kamínek & Klimánek 2010). However, the success has been the basis for market entry attempts by many rival firms. The biggest threat today is the entry of Xiaomi, a Chinese manufacturer in the business of selling high end smartphones to high end middle class consumers keen to have the latest technologically advanced offering. At the same time, predominantly software companies are also finding it possible to come up with smartphones to complement their software services. This has been the story with Android, a smartphone platform and now a basis for hardware development by Google to cement the ecosystem of the company’s products (Gross 2014).

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The iPhone has been a top performer, despite the competition in the smartphone market. The biggest competitor to the iPhone is the Samsung Galaxy range of Android phones, but this year they did not perform well like in the previous years (Yin, Davis & Muzyrya n.d.). Interestingly, Apple’s sales of its latest iPhone, the iPhone 6, have been growing, while Samsung announced profit warnings because of slower smartphone sales (Ehmke 2005; Ferrell & Hartline 2011).

Product innovation iPad

Unlike the iPhone, the iPad is not enjoying rosy prospects in terms of sales. Analysts see the present poor performance of the iPad compared to previous years as an indication of the declining popularity of the device. Sales for the 2014 financial year have been slow, with the last quarter projections being 15 million, which was a slowdown from the previous quarter figure of 16.4 million (Chmielewski 2014). Despite performing dismally in sales, the iPad is increasingly becoming popular among its present owners, with a growing demand coming from the education market. Therefore, the device has succeeded in providing Apple with an alternative window to sell its services to consumers through its app stores and its cloud computing services that are still in their infancy (Grünig, Clark & Kühn 2011; Litwin 2008).

Even as actual device sales slowdown, the usage is increasing to correspond with the company’s strategy of increasing its revenue beyond physical product sales numbers (Pinnington 2010). Thus, in terms of sustainability, Apple may have exhausted the scalability of the iPad market, but it cannot just abandon the product. Instead, it must now more than ever look at the ways of ensuring that existing users find more ways to make their devices useful and use more of Apple’s services (Ismail 2012).

Strategic decision making Post Steve Jobs

Apple’s operations founded on uncompromising user experiences and quality were erroneously thought to be features driven by Steve Jobs. The former CEO may have initiated these cultural aspects to Apple, but they become ingrained in the company, such that his exit would unlikely affect them. In the beginning, Steve Job did all the executive approval of products and services by Apple. At the time, the products and features made by Apple were few, but there was a need to put systems in the processes and quality checking mechanisms, as well as innovation as the company grew.

As earlier reported the elements of innovation in the company are inherent and cannot be attributed to the CEO alone. Today, the questions are about what the former CEO would think. Thus, present executives, including Tim Cook, the successor of Steve Jobs, only have to ask themselves whether their decisions are in-line with Apple’s tradition. The question permeates every employee at all levels of the company. User design and experience are now part of the Apple ecosystem. They are the bases for the design of products and services.

Even those charged with the approval of new work will consider the end user and the values of the company before going ahead to approve or disapprove the products. With tens of thousands of employees and more than a dozen products, the company does not need an autocratic leader who has to approve all decisions; otherwise, it would be very inefficient. Instead, Apple has cultivated a religion, and just like other religions, its internal one is very powerful. Employees have to work hard at making beautiful and delightful products in whatever aspect they are dealing with. A ruthless advocacy for the user made Steve Jobs as special as the head of Apple, but his absence does not mean that the company is no longer pursuing his strategies. Apple is able to sustain the ideas that catapulted it to the leading position in consumer electronics business due to the effective ways of nurturing leadership and knowledge through its own university and the hiring of leading experts.

Before leaving the company, Steve Jobs first stepped down and worked alongside the new CEO. This move aided in leadership transition. It ensured that new ideas and projects could be created alongside the existing ones to ensure that the company grew smoothly. Based on the arrangement, Apple can continue working and coming up with high profile projects that appear in the medium term. The projects will likely aim to create new market segments to extend the lead and to cement the Apple ecosystem. It is unlikely that the culture within Apple will change following leadership succession. Some projects may not perform well, but overall the company should be able to sustain its market lead based on its persistent internal environment.

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First mover and first mover advantage

Massive dominance has been a key driver of Apple’s success in the past decade. The company enjoyed the dominance, partly by being the first company to launch a music device with an easier way to purchase music and listen on the go. The iPod was very successful. It was also the first to come up with the iPhone, to create a new market segment in smartphones, and to go on and dominate the market. The company repeated the same first mover strategy with its tablets. Unlike the other two flagship products, the tablet has not enjoyed runaway success.

The iPad is a market leader, but it is quickly losing out its market dominance. A rival product, the Nexus 7 by Google, is eroding the iPad market share. Additionally, there is another product, the Galaxy Note line of smartphones by Samsung, is also giving Apple serious rivalry. Other companies also have rival products seeking to dethrone the iPad. The tablet market favours a multi-vendor environment. Therefore, one company cannot easily dominate the market. This is a reality that Apple has to accept and appreciate as it looks into the future.

Apple needs to control the market for it to enjoy a first mover advantage. It controlled the market with its initial versions of the iPad and the iPhone. However, it is quickly losing that dominance. Features of both products are quickly becoming standardized. Although the first strategies of ensuring that applications are tied to a unique app store, such as the Apple AppStore, worked, today there are no more restrictions for developers. Thus, developers easily move between platforms to provide the same app and allow users to decide what to use. The effect of this cross movement is that apps are no longer reasons to tie down users to specific Apple products, such as the iPad and the iPhone.

The entry of the Windows Phone and the resurfacing of Blackberry 10 are further eroding the dominance of the iOS and the Android platform in the app business. Apple can remain the top of the app segment with the most apps and the most users or sales, but it can no longer dominate the now-standardized market. Other lock-in features that Apple enjoyed are also being ripped off due to regulations or the penetration of innovations and consumer demand changes.

For the Apple TV market, Apple does not have a first mover advantage, thus it does not have dominance. Google is becoming dominant in the TV business, thanks to its ability to lock in users to a web world. In the business, the bigger threat is likely to come from other web companies like Facebook, and Apple here is missing out because of its lack of considerable investment and products to compliment the Apple TV (Netflix 2014). Even when it becomes a successful market venture, it will rely mostly on services provided by other companies. It may not work with an exclusive market design like the iTunes model for iPhones and iPads (Peter & Olson 2010).

Analysis

Whether Apple sustains its innovative culture or concentrates on gaining fast mover advantages, or appoints a new CEO will be irrelevant if it fails to grow its revenue base (King & Anderson 2002). The company has to sell more devices and services to maintain its growth momentum (Hogan & Coote 2014). It can do this by maintaining its market share, which would automatically ensure that it is selling enough devices and increasing the usage of its device-related services (Henry 2011; Kodama 2010).

SWOT analysis

Strengths

Apple has a good tradition of disruptive innovation, followed up by innovations that increase the values of the once disruptive innovation, as was the case with the iPod and iTunes later on, together with future iterations of the iPod, iPad and iPhone. Disruptive innovations bring consumers that would not have used the product at all (Lawson & Samson 2001; Krosinsky 2012). This grows the consumer base and the revenue for the company.

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Weaknesses

Apple has become too big. It is now a company with more than a dozen products in the market. All these products need support. The company cannot effectively compete with startup companies that only have one product (Liao et al. 2012; Liao & Yu 2013; Mintz 2011). The challenges of operations, research and development, human resources, and regulations of its business environment will begin to impact on the strategic decisions of the company. Rather than remain innovative, the company is now concentrating on safeguarding its existing advantages with new incremental innovations (Salter & Alexy 2013; Mootee 2011).

Opportunities

More markets are opening up as their populations of middle class earners increase. There is also a growing consumerism around the globe, which increases the turnover of electronic devices. This gives Apple a chance to increase its annual sales for the respective products and market segments (Tidd & Besant 2009). The ease of global migration and residence now allows Apple to look beyond traditional sources of talent and get talent from the entire globe (Okpara 2007).

Threats

The overall innovative culture at Apple is no longer a secret (Mintz 2011). Rival companies are not only taking up the cues and duplicating them, but they are also improving on the ideas. They have now started coming up with products that are worthy rivals to Apple products. For example, Material Design by Google is a new project that has changed the interface of Android to not only reflect on users, but also make it easier for developers to work on the platform without compromising compatibility and beauty. As a result, devices with the latest Android features have become key rivals to the iOS experience. In addition, companies providing Android devices, like Xiaomi, are also coming up with intuitive designs that are better than what the iPhone offers. For example, the flagship Nexus 6 phone has a far better resolution than the flagship iPhone 6 plus. In addition, it uses premium grade material for its build. Simply put, Apple is losing its consumer lock-in advantages on different levels and features of its product ecosystem (Mootee 2011; Govindarajan & Desai 2013).

Competitive Advantage Analysis with Resource Based View

VRIN characteristics of Apple

Value

Valuable resources at Apple include its employees, its patents, and its brand (Gross 2014). The employee culture of innovation and search for beauty and functionality has put the company ahead of its peers in product development (Han & Dongre 2014).

Rarity

Resources that Apple has, which are rare, include its culture, its leadership, and the materials used to manufacture products (Balogun & Hope Hailey 2008).

Imitability

Many of the once hard-to-copy features of Apple are now standard practices (Dumbach 2014). Rival companies like Facebook, Google, Amazon, Yahoo, Microsoft, Xiaomi, and Samsung are quickly replicating innovations by Apple because they are able to obtain information easily and have the necessary resources. Apple only has legal instruments to restrict duplication and to sustain a competitive advantage. Unfortunately, the company is still dependent, as it has to rely on joint partnerships to scale its manufacturing process (Dai, Ng & Tang 2013). The company has been acquiring technologies to reduce their availability to rivals, but that has yet to make a significant contribution as distinctive capabilities (Bensoussan & Fleisher 2013).

Apple is unable to restrict other companies from using its designs as inspirations for their devices (Guglielmo 2014). As a result, it is benefiting its rivals by coming up with novel designs because they do not have to invest in research and development as it does (Dolfsma, Duysters & Costa (eds.) 2009).

Non-substitutable

For Apple to sustain its success, it has to remain unique. Throughout this report, there is enough evidence to show that Apple is no longer unique (Franco, Ray & Ray 2011; Fu, Pietrobelli & Soete 2011). Although it is a market leader in many segments, competitors are quickly replicating its success in sales strategies, brandings, design, operations, and capital (Goffin & Mitchell 2010). As other companies gain its advantages, they are also increasing their competitive abilities on other features that Apple does not have (Finn 2011). Apple cannot afford to spend years in court as it did with Samsung, defending its designs and other patents from rivals from all over the world. Additionally, the other companies are tearing down the price ceilings created by Apple. Nexus and Xiaomi phones have similar technologies and capabilities as iPhones, yet they do not sell at very high prices as the Apple products (Guglielmo 2014).

Conclusion

Success at Apple is attributable to fast mover advantages and customer lock-in. However, all these advantages are quickly fading away. A natural process of information dissemination is the main reason. The second reason for the fading popularity is the runaway success that Apple enjoyed in the last few years, which has made it a target for copying. Rival companies are becoming competent and now have matching capabilities. Their efforts have made all unique features of Apple become standardized features, apart from the brand. Therefore, this report concludes that Apple will be able to sustain its success, but only for its existing products and for the medium term. Newer Apple products that are not disruptive innovations stand a very low chance of being significantly successful. Apple is now a mature company that concentrates more on a defensive strategy than on an attacking strategy.

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