External Analysis on Apple Inc. Management Strategy

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Table of Contents

Specific International Events
Technology Change
Demographic Trends
Legal/political conditions
Economic Climate
Cultural Trends
Industry Analysis – Porters 5 Forces
Competitor Analysis and Dynamics
References

Apple Inc. is a multi product company based in California, USA. For 2008 year ending, it has revenues of 32.48 billion USD and has 35000 employees. Some of the most famous and iconic products and brands it manufactures and markets include the iPhone, iPod, Macintosh PCs, notebooks, servers, Mac OS X and Apple TV. It also offers a number of software products such as Quick Time, iTunes, Safari web browser, iMovie, iDVD, iWork and many others (Hoover, 2009). The external analysis with special reference to the smart phone is as given below (Barney, 2008) ((Shneyderman, 2008), (MVNO, 2009) (Spooner, 2005).

Specific International Events

iPhone 3G has sold more than 3 million units since it was launched in July 2008. There is a general trend for convergence in international markets of Europe, Asia and US. With high band width, reduction of tariffs and removal of regulatory barriers, smart phones such as iPhone, Google Phone, BlackBerry Storm and other products see increasing sales. There is also an increase in mergers and acquisitions and a good example is the sale of IBM’s PC division to Lenovo, a Chinese company.

Technology Change

There is a rapid technology change towards 3G and 4G networks and this change has allowed convergence of video, voice, data and streaming media. Telephone operators such as Verizone, T-Mobile, Vodafone, AT&T have shifted to high speed 3G networks and this encourages use of smart phones. iTunes and movies along with narrow cast of select events and low tariffs, high clarity and development of applications has encouraged smart phones.

Demographic Trends

It is estimated that almost 30% of the high volume mobile users are teens while 25% are young working singles who like to download songs, watch movies on their handheld devices, mobile phones and laptops. Corporate customers also increasingly use customised applications embedded on smart phones to access corporate Intranets so they can work at home or while travelling.

Legal/political conditions

Regulatory authorities have reduced the tariffs and control over mobile network operators. Roaming and other facilities are encouraged to boost trade and the economy.

Economic Climate

The current economy is in recession and there is a marked loss in revenues among cellular operators and smart phone manufacturers. Vodafone has reported 5 years continuous loss while T-Mobile, AT&T, Sprint and other operators have reported losses. As a result, people are buying lesser number of smart phones and they consider costs while downloading music.

Cultural Trends

Over the years, mobile phones have become a necessity and smart phones have become fashion statements. There is an increasing trend of downloading ring tones, music among teens.

Industry Analysis – Porters 5 Forces

The industry analysis with Porters Five Force Analysis is provided in this section. Special reference is given to smart phones (iPhone, 2009), (Direct Traffic, 2009).

Entry

Established smart phone manufacturers such as iPhone, Google Phone, BlackBerry, Motorola, Sony Erickson and others find it relatively easy to develop smart phones and also market it. These companies also make lower end models and thus cover all the market segments while iPhone covers only the premium segment. IBM, Microsoft are established names in software development and have IBM offers entry to high end servers that can run on MS, Linux, Unix and Mac OS. There are a number of free wares available for playing media files. Thus entry is relatively easy for new entrants.

Rivalry

There is intense rivalry among smart phone manufacturers and each company periodically launches new products with enhanced features and at competitive prices. Rivalry is intense and companies use advertisements to get customers. The same trend runs in the servers, portable music players and there are many sites that offer hacking tools to allow iPhone to play non Apple format music.

Substitutes

There is an increased threat from Chinese and Asian mobile phone manufacturers who make cheap and pirated versions of different phones. Piracy is a major issue for software and music products, movies and other entertainment products.

Suppliers

Suppliers are the small firms that make components such as casing, wiring, interfaces, printed circuit boards and other items used in smart phones, servers and other products. Well known brands such as Intel, AMD, Sata hard disks can set the prices they want. Other component manufacturers do not have much bargaining powers. Rates of electronic devices keep reducing.

Buyers

Buyers have a wide range of choices and they dictate the product innovation and switch to other manufacturers with lower rates and more features. Bargaining power of buyers is high.

Complementors

Vodafone, T-Mobile and other cellular operators offer bundled smart phones and mobile subscription. IBM and other servers offer Windows and Apple software along with Linux and other open source products. Potential partnerships with product manufacturers are high.

Competitor Analysis and Dynamics

The music and software industry sees intense pressures of increased competition, downward prices, slow and stagnating growth and the entry of low-end models. IPhone has competition from companies such as Sony Erricson, Motorola, Nokia and many other mobile phone manufacturers. There are many legal music download sites such as Google, Amazon and thousands of illegal sites that provide downloads in mp3 formats. Apple provides downloads only in the proprietary music format in the iTunes site. In the computers market, Apple has very tough competition from Compaq, Lenovo, Dell and assembled systems though assembled computers are not very high in the laptop and notebook market. The software industry is dominated by Microsoft and IBM and IBM creates workplace solutions using MS platform and also Unix and Linux. Apple runs only on the Mac OS and this has only a limited application hence sales are for niche markets only. It is estimated that the software, hardware and music industry will see a fall of 11 to 9% through 2010 before the industry climbs out of the recession (Hoover, 2009).

References

Barney, J.B. & Hesterly, W.S., 2008. Strategic Management and Competitive Advantage, 2nd Edition. Pearson, Prentice-Hall.

Direct Traffic, 2009. Vodafone Live launches cheaper mobile Internet portal in the UK. Web.

Hoover, 2009. Apple Competition and industry competition. Web.

iPhone, 2009. Considering an iPhone. Web.

MVNO, 2009. Are MVNOs the mobile operators saviors? Web.

Shneyderman. Alex., 2008. Fixed Mobile Convergence, 1 edition. McGraw-Hill Osborne Media.

Spooner. John. G., and Kanellos. Michael., 2004. IBM sells PC group to Lenovo. Web.

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