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Executive Summary
This paper dwells upon strategic development of Apple and contains certain recommendation on implementation of the most appropriate strategy. The company is famous for its innovative approach and high quality of products and services provided.
However, the corporation holds quite a small market share and some researchers note that the company should expand. Researchers refer to growth of such markets as South America and Asia. It is stressed that Apple could benefit from producing products for millions of potential customers at lower prices to make Apple products more available.
Nonetheless, this approach is unlikely to be effective as it may lead to loss of the market share Apple has now. Appearance of Apple in the market of low-priced consumer electronics will make it develop new strategies to remain competitive in the market where Asian (Chinese and Indian) companies produce very cheap products. Therefore, the company has to focus on innovations.
The present evaluation is based on secondary research. Works on Apples strategic development are analyzed and certain recommendations on how to improve the strategy used are provided. The present research may lack for data on the companys expenditures but available information on Apples revenues illustrates effectiveness of the strategy employed..
Recommendations provided include the following. The new strategy should be comprehensive and involve research, innovation, quality and social responsibility. The company has to produce really innovative products which would shape and redefine the market. The use of green technology and contributing to development of communities will enable the company maintain its favorable image among its customers.
Introduction
Apple is one of the most successful companies and it is famous for its effective strategic development. The corporation managed to remain one of the leading producers of consumer electronics and software even after the recession and financial crisis of 2008. It is necessary to note that the company has to operate in one of the most competitive markets, the market of consumer electronics.
This industry is booming and companies all over the world are trying to enter it and occupy certain niche. It is noteworthy that Apple is facing hard competition on the part of Asian companies that produce cheaper devices with similar options. At present, Apple again has to choose an appropriate strategy.
However, before going into detail on the strategic development, it is important to mention major peculiarities of the company, its history and market. Apple announced that its revenue for second quarter of 2014 (ended in March) was $45.6 billion (Apple reports, 2014). The company is growing and its profits are increasing accordingly.
Apple is famous for its impressive products: iPad, iPod nano, iPhone, Apple TV, iPod touch, MacBook, MacMini and so on (Hitt, Ireland & Hoskisson, 2012, p. 16). The company started in 1976 as a computer business and has provided innovative products, which is regarded as one of its strategies and advantages.
In 2003, Steve Jobs, a charismatic leader, introduced one of Apples products iTunes Online Music Store as a turning point for the music industry and landmark stuff which could not be overestimated (Hitt et al., 2012, p. 16). Jobs was right as it was a great success.
It is noteworthy that the company had an inspiring leader who set the major strategic path for the business. After Jobs, Apple still has really effective leaders: Tim Cook, Craig Federighi and Jony Ive. These executives share Jobs vision and keep focusing on their high end share of the market.
Apple is a globally operating company with over 50,000 employees and it has a vertical structure (Daft, 2014). Admittedly, it is difficult to have a horizontal structure for a global business.
It is also important to note that the market of consumer electronics is very competitive. Thus, Apples iPhone has to compete with products of such companies as Samsung Electronics, Motorola, Nokia. As far as computing and software is concerned, the company has such competitions as Google, Microsoft, Micromax (India) and Xiaomi (China) (Grobart, 2013).
It is necessary to add that the market of smartphones is quite saturated with cheap products produced in Asia. Worstall (2013) stresses that a phone at $700 is unlikely to compete with a smartphone sold for $200 and $300 especially in such markets as China, India, Brazil and Russia. Therefore, researchers see two major strategies applicable for Apple.
Strategic Issues
These strategies are concerned with the choice of the market share for the company. At present, Apply occupies quite a small share of the market. Apples products are seen as luxury and exclusive devices and services.
The use of these products suggests that the user pertains to a specific group of privileges consumers (or simply lives in a developed country with strong economy). As Cook puts it, There is always a large junk part of the market (as cited in Grobart, 2013). Leaders of Apple tend to remain in their niche and do not think about expanding to larger markets.
Nonetheless, some researchers see another option. They stress that Asian, South American and Russian markets are becoming a target for many companies. For instance, Worstall (2013) stresses that the potential of consumer electronics BRIC region (which includes Brazil, Russia, India and China) is increasing and people are more willing to by app-capable devices.
Admittedly, people living in the area will not pay $700 for a phone as they have numerous cheaper alternatives produced in China and India. Notably, Apple is capable of reducing some costs and providing cheaper products.
Nonetheless, Apple can lose its status of a company providing exclusive products and services. At that, researchers emphasizes that even though the company can introduce cheaper products they will be still unable to compete with $100-200 devices.
Brief Literature Review
Innovation
There are numerous ideas on strategic development and each company can choose the best option in accordance with its goals and values. Jaruzelski and Dehoff (2010) claim that Apple has always used a strategy of innovation.
The researchers stress that Steve Jobs did not try to make the companys products cheaper or more available to consumers as he wanted to make innovative things that could change the market and the world.
This strategy made the company one of the leaders in the global market and many companies are trying to keep up with standards set by Apple. Jaruzelski and Dehoff (2010) consider experience of successful companies operating in different markets and infer that the strategy of innovation is winning in the contemporary business world.
Heracleous (2013) calls the strategy used by Apple the Quantum Strategy. According to the researcher, it implies the ability to balance intense efficiency in operations& with outstanding serial innovation and addictive product design
which command premium pricing and redefine markets (Heracleous, 2013, p. 92). The researcher evaluates the strategy used and concludes that it is effective as the company remains the leader and has its small (but profitable) market share.
Importantly, the researcher stresses that this strategy enables Apple (as well as other companies using the same strategy) are able to set trends and standards and, as a result, they are one step forward. Davis and Olson (2008) also emphasize effectiveness of such way of development and notes that most successful companies employ the strategy of innovation.
The researchers also add that it can be difficult to utilize this strategy as it needs significant funds especially when it comes to R&D department. Nonetheless, the innovative approach helps companies achieve high results as well.
Other Components of Success
It is noteworthy that apart from innovation, researchers acknowledge that operational excellence is also central to the companys success. Sharma (2012) argues that Jobs inspiring vision and focus on innovations could not ensure Apples success which was achieved by a combination of innovative approaches and operational excellence.
According to the researcher, the company is successful as high quality and precision are major values shared by employees. Loads of companies choose this strategy and focus on quality and its image. They are valued for these characteristics and customers eagerly buy their products.
Clearly, this approach is appropriate for many industries but consumer electronics is not one of these spheres. This industry is evolving rapidly and a company which fails to introduce new products often loses its customers.
Jaruzelski, Loehr and Holman (2011) also mention the importance of an effective culture. Apple is famous for its culture based on principles of innovation attention to details, excellence and responsibility. The authors note that culture is a key to successful implementation of innovative strategies.
The researchers stress that culture is a set of principles all employees follow. Employees of Apple share companys values and the corporation manages to come up with new products periodically.
Analysis of the Strategic Issue
Winning a Larger Market Share
As has been mentioned above Apple is facing a strategic issue. The company is growing and entering new markets as expansion is one of the most effective ways any successful company chooses (Thompson, Peteraf, Gamble & Strickland, 2012). It is possible to expan in a number of ways. For such global corporation as Apple entering new markets is beneficial.
Apple is already operating in developing countries but still occupies rather small market share. To ensure profitability and growing revenue, the company may choose to introduce cheap devices and occupy a larger market share.
As has been mentioned above, many companies choose this approach in order to obtain millions of new customers in such regions as South America, Asia and Russia where vast majority of people cannot afford expensive products.
The choice of this strategy will lead to sub-issues such as reducing costs and marketing new products. Thus, Apple will have to invest into development of cheaper models of existing devices or new cheap devices. Thus, R&D costs will increase but there are chances that it will be impossible to reduce the price of existing products or new products to $100-200.
More so, products at such prices will hardly differ from those provided by other companies (in China or India). Furthermore, development of cheaper products may extrude attempts to produce innovative products and services.
There are chances that Apple will lose its status of a producers of innovative and luxury electronics and will lose its value. It will inevitably become one of many companies producing affordable products and will have to compete with a variety of other producers.
The companys marketing managers will have to come up with a wide advertising campaign and a marketing strategy to introduce new cheaper products. The company will have to make people know that Apple products have become more affordable.
The use of this strategy will also require the change in the companys corporate culture. The company has focused on innovation and exclusiveness. These values are inappropriate for a company that aims to get a larger market share and sell more affordable devices. Admittedly, all these changes need additional investment.
All in all, this strategy is associated with too many risks and doubtful benefits. A larger market share will enable the corporation to increase its revenue due to sales volumes. Nonetheless, low prices of products and services will not lead to significant increase in profits.
More so, the company risks entering a market with significant competition and, at the same time, lose its advantageous competitiveness. Therefore, this strategy is unlikely to be successful and should not be implemented.
Holding the Same Market Share
Another option is to stick to old strategies. Thus, Apple may hold its market share and remain a global producer of innovative and exclusive products. This strategy was already checked twice during severe crises within the company (Sharma, 2012). Adherence to the old strategy will involve significant investment into R&D as the corporation will focus on producing new innovative products.
However, this investment will lead to increase in revenue as Apples customers are eager to buy from the company as they get something more than a device. They get a sense of being a part of a community of people who value innovation and quality (and those who can afford it).
Marketing of new products will also need additional investment. People should know about novelties. However, this advertising is likely to be successful as customers will learn about a new innovative product which they will want to purchase. It is noteworthy that the companys culture will not be changed and such values as quality, innovation and responsibility will be promoted. Admittedly, effective culture often translates into success.
Discussion
Methods Used
The present assessment is based on the secondary research. Works on strategic development of Apple and its performance as well as data available on the official website are analyzed. Evaluation of the strategy used is based on analysis of its effectiveness. It is possible to note that the use of this methodology can be associated with certain limitations.
Hence, such research may lack for data on the companys expenditures (especially when it comes to R&D) as the works used contain information on revenues rather than losses. Nonetheless, the corporations revenues suggest that the strategy which is being used is effective and there is no need to choose another path. Though, it is possible to highlight some spheres in Apples strategic development which may need improvement.
Research
It is necessary to note that the companys leaders emphasize their adherence to their old strategy of innovation. They do not intend to try to compete with low-priced products in emerging markets. The companys CEO argues, We are not in the junk business (as cited Grobart, 2013, n.p.). As has been mentioned above, this strategy has proved to be effective and, hence, it is no time to change it.
Admittedly, the company is growing and its revenues increase, but it is essential to continue developing and innovating (Thompson et al., 2012). Therefore, the strategy should be based on the principle of innovation and precision.
In the first place, the company should focus on development of a number of innovative products and services. It has been acknowledged that Steve Jobs always felt what would be successful among customers (Hitt et al., 2012). However, serious competition requires more specific data than senses or beliefs. Thus, the company needs to invest into marketing research.
It is essential to understand what customers expect and what exactly they need when they are buying this or that device. It can be beneficial to find out what customers value in Apple products and services. It is possible to implement an internal research but it is better to address a marketing research company which can provide information on the global market rather than a particular country.
R&D
Apples R&D department is very effective as it has come up with a variety of innovative devices. Nonetheless, it is possible to invest into further development of the department. The company employs more than 50,000 people worldwide and it can be a good strategy to launch a wide training campaign.
Employees from different countries have to participate in mutual projects. Employees from abroad can travel to the USA and work on major projects. This can facilitate development of the companys R&D.
The company has had certain criticism on development of different models which do not differ significantly from previous ones. Thus, Daft (2014) notes that it is difficult to come up with innovative products and companies often try to modify products which have already become hits.
However, extensive modification will lead to customers tiredness and dissatisfaction. It is important to introduce genuinely innovative products as well as services as this will attract new customers and will satisfy needs of loyal ones.
Quality
The strategic development of the company should also involve particular attention to the products quality. It is well-known that Steve Jobs routinely returned products to the laboratory and emphasized that Apple must build the best products, period (Hitt et al., 2012). This should be a motto for each employee and a part of the companys culture. Quality control of the company has to be strict and no flaws can be allowed in products sold. This is one of advantageous peculiarities of the company and it is essential to maintain this image.
Marketing
As has been mentioned above, this strategy does not require excessive advertising. However, each new product has to be advertised through the Internet, TV and print sources. The focus of each advertisement should be innovative nature of the product. Existing and potential customers have to associate the company with innovation and development.
Social Responsibility
Some companies focus on revenue or R&D and fail to be socially responsible. Apple should remain a responsible corporation which contributes into development of communities. Development of new products has to be implemented with specific attention to environmental or social projects.
The use of green technology also pertains to innovations and this is a beneficial direction for the company (Hitt et al., 20). Social responsibility of Apple is another advantage of the corporation and this should remain unchanged.
Conclusion
On balance, it is possible to state that Apple is now facing the need to choose whether the corporation tries to get a larger market share or remain in its niche and continues producing innovative products. Analysis of works on strategic development of the company suggests that Apple should adhere to its old strategy as it proved to be successful.
It is associated with fewer risks and it is likely to keep the company in its leading position. The strategy should be comprehensive as it cannot be confined to a vague concept of innovation. Thus, the corporation will have to invest into R&D and control departments to ensure that the products provided are innovative and high-quality.
Apple will also have to pay attention to proper marketing of new products and it is essential to focus on such concepts as quality, innovation, exclusiveness and social responsibility. Finally, the company has to be involved in a variety of social and environmental projects.
The use of green technologies and contributing to development of communities (especially in regions where the company operates) should also be a part of strategic development of Apple. The use of this strategy will enable the company to maintain its status of an innovative company which shapes peoples ideas on electronics, software and life.
Reference List
Apple reports second quarter results. (2014). Web.
Daft, R. (2014). The leadership experience. Stamford, CT: Cengage Learning.
Davis, A., & Olson, E.M. (2008). Critical competitive strategy issues every entrepreneur should consider before going into business. Business Horizons, 51(1), 211-221.
Grobart, S. (2013). Apple chiefs discuss strategy, market share and the new iPhones. Bloomberg Business week. Web.
Heracleous, L. (2013). Quantum strategy at Apple Inc. Organizational Dynamics, 42(1), 92-99.
Hitt, M., Ireland, R., & Hoskisson, R. (2012). Strategic management cases: Competitiveness and globalization. Mason, OH: Cengage Learning.
Jaruzelski, B., & Dehoff, K. (2010). How the top innovators keep winning. The Global Innovation 1000, 61(1), 1-16. Web.
Jaruzelski, B., Loehr, J., & Holman, R. (2011). Why culture is key. The Global Innovation 1000, 65(1), 1-16. Web.
Sharma, A. (2012). As Apples success attests, operational excellence isnt everything, but it is essential. Strategic Vision. Web.
Thompson, A. A., Peteraf, M. A., Gamble, J. E., & Strickland, A. J. (2012). Crafting and Executing Strategy. Boston, MA: McGraw Hill Publishers.
Worstall, T. (2013). Apples basic strategic problem: Market share or profit margin?Forbes. Web.
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