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Apple’s Competitive Positioning

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Apple’s Competitive Positioning
Table of Contents
  1. Introduction
  2. Apple’s Current Competitive Positioning
  3. Possible Position Changes for the Future
  4. Reference

Introduction

Apple is currently positioned at the top end of the technological market. Due to the release of its latest model, the iPhone X, it managed to corner roughly 50% of the world’s smartphone market in the last quarter of 2019 (Mahajan 2020). In between producing flagship models, the company holds firmly unto at least a third of the entire market. With a strong brand name, loyal consumer base, massive yearly revenues, and significant investments in the R&D department, the company managed to remain strong throughout the 2010s, successfully showing the capacity to carry out the legacy of Steve Jobs (Birkinbine, Gomez & Wasko 2016). Nevertheless, the technological market remains highly competitive, as all businesses, from mega-corporations to small startups are seeking to steal away Apple’s competitive advantage. The purpose of this paper is to critically evaluate the company’s existing competitive positioning as well as potential venues as to how it may evolve.

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Apple’s Current Competitive Positioning

Competitive positioning stands for the ability of the company to carve up one’s own piece of the market by differentiating itself from others and providing value that nobody else could. Apple’s competitive positioning at the moment is comprised out of internal and external factors. The company’s external positioning and environment can be evaluated through Porter’s Five Forces (Douglass, Ford & Essam 2015):

  • Competitive rivalry: Strong force. The company faces aggressive competition from various companies, such as Samsung, Sony, Huawei, Xiaomi, Meizu, and others (Birkinbine et al. 2015). The reason why this force is labeled as strong is due to the fact Apple has a relatively low differentiation of products – it focuses on high-end models meant for premium markets, thus leaving lower price tags to be claimed by their competition. In addition, due to similar functionality between different brands, the costs of switching are not very high, which adds to the aggressiveness of advertising and constant comparisons between Apple and other phones (Birkinbine et al. 2015). Although Apple maintains its presentation as a premium model, Samsung and Huawei have models similar in price and functionality, while quickly gaining prestige.
  • Bargaining power of buyers and consumers: Strong force. Although the number of products purchased by individual customers is relatively small, usually constituting only a phone plus some accessories, the customers have plenty of opportunities to switch to a competitor phone (Birkinbine et al. 2015). Costs of switching are typically not high, especially when going for a model in the economic segment. Finally, customers in the electronics market are especially well-informed, capable of comparing models using the Internet and understanding the differences between multiple features. Any significant flaws in the model are quickly exposed, leading to a poor reputation and decreased sales. Byers is capable of forming online communities and placing pressure on the company (Birkinbine et al. 2015).
  • Bargaining power of suppliers: Weak force. Suppliers traditionally have a submissive position in the high-tech industry due to the wide availability of standard components and parts as well as contractual obligations (Birkinbine et al. 2015). Apple’s conditions towards its suppliers prevent them from selling parts that could be used to create or repair iPhones and other products to 3rd-party producers, effectively tying them to the company. On the other hand, working for Apple can effectively support 100% of the supplier output, effectively making certain suppliers Apple-exclusive (Birkinbine et al. 2015).
  • The threat of substitution: Weak force. While separate phones, cameras, and computers exist, it is unlikely for customers to purchase three of these items in order to replace the functionality of 1 smartphone (O’Rourke 2018). In addition, the performance of the iPhone surpasses the performance of standard digital cameras and cellular phones, making it even less likely for individuals to substitute their devices for analogue services (O’Rourke 2018).
  • The threat of new entrants to the market: Moderate force. The availability of basic components and parts enables companies to design and produce services and products that are similar in nature to those of Apple (O’Rourke 2018). The development of the global economy and the availability of cheap Asian workforce allows for the creation of new tech companies that would seek to compete with Apple for market share. Nevertheless, the majority of new entrants will take time to make their brands known (O’Rourke 2018).

As it is possible to see, currently Apple is positioned favorably in the external marketing environment. However, the competition is seeking to supplant these positions in the long-term (Heraclios & Papachoni 2015). Samsung, which is considered Apple’s main competitor, does not only produce a broader range of equipment but also tends to sport higher functionality for the same price. Apple’s main selling point, besides the brand name, is its propensity towards innovation. Samsung and Chinese companies, in particular, have a tendency to copy or create analogous functionality in a very short time in order to minimize Apple’s competitive advantage. In addition, the Android platform is more wide-spread and inclusive when compared to Apple’s iOS and closed-off systems (Heraclios & Papachoni 2015).

In order to maintain a strong brand image and create a loyal customer base, Apple has been actively engaging in relationship marketing (Jannesson, Nilsson & Rapp 2017). It features a multitude of benefits to its members, ranging from the closed-off (and inherently more secure as a result) operational system, the ease of data backup, recovery, and transfer, as well as various boons for subscribing to their technology. Based on the Ladder of Loyalty ratings, the majority of Apple’s customers have become their advocates, encouraging others to buy their products as well as coming up with excuses and apologetics for any blunders the company had throughout the last decade (Janesson 2017). Almost every Apple product, despite the benefits, also came out featuring significant design flaws, be that the capacity to bend from prolonged carrying in the pocket, the long-standing cooling issues in MacBook Pro, or the poor chip soldering in MacBook Aero (O’Rourke 2018). Although the company was eventually forced to address these flaws, what could have been a major disaster instead left a fleeting impression due to high levels of trust between Apple and its consumers.

If we apply the 6 Markets Model to Apple, it would be easy to discover that the company has a strong position in 5 out of 6 markets, with the exception being made to the referral market (Laszlo & Zhexembayeva 2017). This comes from the fact that while Apple produces valuable and noteworthy products, they are not essential to any specific industry sectors. While Apple is making venues into the medical field by producing specialized software dedicated to surgery, scanning, and other applications, these specialized goods constitute a very small representation in the overall medical market (O’Rourke 2018). Apple is a luxury brand company, not a specialized equipment vendor.

Possible Position Changes for the Future

Apple’s brand sustainability currently resides on three major advantages: the social component (loyal userbase), the brand image (propensity towards high-tech), and the beautiful software design (secure, free of bloatware) (Birkinbine et al. 2016). However, should Apple lose even one of these advantages, its competitive position would be denigrated from amazing to average. In the future, there is great potential for it to happen. Primary competitors, at this stage, have much more accessible systems that are more prone to bloatware. It is likely for them to evolve and become leaner, matching both the functionality and security of iOS (Birkinbine et al. 2016). Google’s Pixel phone already does that, running on its own operating system. The moment the landscape of mobile phone operating systems changes to a higher standard, matching that in the PC industry, Apple’s iPhones are going to lose one of their core advantages. It is already visible in laptops and personal computers – Windows users have no incentives to switch to Mac, while Mac’s audience is retained only through familiarity rather than functionality (Mahajan 2020).

Beautiful technological packaging has always been Apple’s strong suit – iPhones, thin MacBooks, and other products created by the company are aesthetically pleasing (O’Rourke 2018). However, that has since become a standard for most companies, even those producing phones in the economy sector. Apple’s capacity to innovate, despite the growing expenses in the R&D, has been called into question, as there have been no revolutionary changes to their products beyond cosmetic changes (Mahajan 2020). Without innovation, their competitors would be able to match Apple’s hardware and already do.

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Finally, the existence of cross-platformer programs threatens Apple’s relationship marketing strategies. Integration with Android-based services and platforms reduces the incentives for customers to purchase Apple and stay loyal to the brand, as they could get Apple’s functionality from these cross-platformers (O’Rourke 2018; Mahajan 2020). Examples of such include Apple Music, which is available to both iPhone and Android users. While this may seem like an attempt to grab at Android markets, it may have an opposite effect. Therefore, all three major competitive advantages of Apple are under threat in the near future.

The company could prepare for the inevitable changes by either strengthening their three pillars or building additional ones. It must be admitted that revolutionary innovation is a stroke of genius that cannot be generated at a constant basis each year. The competition will inevitably catch on and take away some of Apple’s core markets. This could be counteracted by expanding Apple’s product line to include the economy sector, which offers a wide untapped potential for expanding. In addition to claiming many new customers, the company would be able to cultivate brand loyalty among them, turning them from suspects into advocates. Second, Apple could make its iOS systems more exclusive and more usable at the same time (De Chernatony et al. 2000). In combination with the first proposition, it will allow the company to make its client-base more widespread and more tied into the company’s own servers. Cross-platformers should be rejected, as they would only benefit the competitor’s Android platform.

Lastly, Apple should focus on improving the excellency of its hardware. The company built its reputation on building reliable tech. However, the blunders of the past decade, while not affecting the opinion of Apple among the majority of its old userbase, will disappoint the newcomers. Demographic changes indicate that younger generations are more enlightened and demanding towards their hardware, and not afraid to broadcast their outrage regarding poor performance on the Internet (David & David 2016). In order to maintain a healthy relationship marketing with these new customers, the company will have to improve its quality, possibly at the cost of overall profits they derive from manufacturing goods in China, and selling them off incredibly expensively in the West.

Reference

Birkinbine, B. J., Gómez, R. & Wasko, J. (2016) Global media giants. New York: Routledge.

Douglass, W., Ford, J. & Essam, I. (2015) Strategic marketing: creating competitive advantage. 3rd edn., Oxford: Oxford University Press.

Heracleous, L., & Papachroni, A. (2016). Strategic leadership and innovation at Apple Inc. New York, NY: Sage.

Jannesson, E., Nilsson, F. & Rapp, B. (2016) Strategy, control and competitive advantage. Berlin: Springer.

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Laszlo, C. & Zhexembayeva, N. (2017) Embedded sustainability: The next big competitive advantage. New York: Routledge.

David, F. & David, F. R. (2016) Strategic management: A competitive advantage approach, concepts and cases. New York: Pearson.

De Chernatony, L., Harris, F. and Dall ‘Olmo Riley, F. (2000) ‘Added value: its nature, roles and sustainability’, European Journal of Marketing, Vol. 34, No.1/2, pp. 39-56.

Mahajan, S. (2020). Mobile tracking software market size & share analysis report, 2019-2026. Web.

O’Rourke, A. D. (2018) The world apple market. New York: Routledge.

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