Apple Global Strategy

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Since its founding in 1976 Apple Inc. (NASDAQ: AAPL; NYSE: AAPL) has grown to become one of the planet’s most successful companies; in 2010 Apple Inc. reported revenue of $14 billion (Apple Inc.,2010). In April of 2011, the computer giant reported revenue of $24.67-billion U.S. In 2011 profit rocketed 95 per cent to $5.99-billion, or $6.40 per share, to end the quarter as of March 26.

During the same time frame in 2010, profit stood at $3.07-billion, or $3.33 per share (El Akkad, 2011: p. 4). Analysts had anticipated earnings per share to sit at $5.37 on revenue of $23.3-billion; however these predictions underestimated Apple considerably.

In the first quarter of 2011 Apple shipped 4.69 million iPad tablets – this fell far short of the 6 million expected by analysts (El Akkad, 2011: p. 4). Apple has found itself challenged to meet consumer demand for the iPad 2; nearly all Apple stores sold out of the iPad2 in April 2011, and the company now finds itself “heavily backlogged” (El Akkad, 2011: p. 4).

Apple consistently witnesses a “halo effect” from the stampeding sales of its mobile devices; every day more consumers convert their hardware, desktop computers, and laptops to the brand. Apple’s computer sales soar 28 per cent from one year to the next; sales of its most popular product – the iPhone – continue to soar, and in 2011 shipments jumped more than 50 per cent than doubled (El Akkad, 2011: p. 4).

According to El Akkad (2011) iPods represent the only Apple product in decline, however “that’s in part because many consumers are moving from Apple’s lower-end MP3 players to more powerful – and expensive – Apple gadgets” (p. 4). Colin Gillis, an analyst with BCG Financial says of Apple’s golden touch: “Apple is the company that is best capturing revenue and profits from the mobile revolution, in our opinion…

No other company in the space can approach the platform and ecosystem that Apple has built to generate such revenue and profits. While there are others with meaningful market share, they significantly lag in generating revenue, and none deliver equivalent profits, in our view” (El Akkad, 2011: p. 4).

Apple’s global strategy continues to evolve; since its inception the company has always valued innovation and thinking out of the box, and the company’s corporate culture remains one of its core strategic achievements.

Apple Inc. also continues to push into the business sector with its iPad technology and its perennially evolving iPhone – once considered a toy for consumers, now fast becoming a staple of business and challenging the domination one of Apple Inc.’s main competitors Research in Motion.

Apple Inc. also employs an important global retail strategy by positioning stores in high-traffic locations in urban environments. This strategy gives Apple Inc. the ability to control and oversee the consumer experience and market it brand effectively.

According to Strategy Analytics senior analyst Alex Spektor, global handset shipments increased by 13 percent in the third quarter of 2010 to 327 million units, and Apple ranked in the top five handset retailers (The Mobile Internet, 2010: p. 12).

Apple secured “a record 4 percent market share, overtook RIM and Sony Ericsson and closed the gap on LG” (The Mobile Internet, 2010: p. 12). Apple Inc. embraces the globalization of its customer base, and actively markets its brand not only as a purveyor of technology, but of a way of living that affects not only consumer behavior but frequently sets the bar for the development of technology and the pace that it grows.

One of Apple Inc.’s most successful global strategies pertains to its corporate culture. Apple Inc. actively pursues a culture that seeks talent on the global stage and rewards it once it has been brought into the fold. In Ungson and Wong’s (2008) Global Strategic Management uses the example of the iPod to describe the effectiveness of this strategy (p. 343).

At the launch of the iPad, Apple Inc., “backed by its competency in computer technology, was able to challenge Sony with a digital music player that offered multiple functions beyond simply playing music,” which essentially nullified any counteroffensive Sony could mount (Ungson and Wong, 2008: p. 343).

The force behind the iPad came from a “newly revitalized culture at Apple, led by Steve Jobs, [and] since then Apple has assumed market leadership of this sector, leaving Sony in a rebuilding mode” (Ungson and Wong, 2008: p. 343).

Apple Inc.’s corporate culture inculcates a “systemic corporate culture of innovation incorporates an ingrained belief in relentless and continuous improvement, notably out of the box thinking” (Ungson and Wong, 2008: p. 343).

The natural extension of this corporate culture is the management of innovation; Apple Inc.’s global strategy follows the adage that in “managing innovation…nothing stays constant” (Ungson and Wong, 2008: p. 343).

An example of this global strategy in practice in recent years exists in the creation and marketing of Apple Inc.’s iPad, which PC Magazine (2011) recognized has come “a long way from being called a toy [and is quickly] being respected as a computing tool.

A lot of this is due to the slew of new productivity apps – from medical to calendars – that started coming out last fall” (n.p.). Analyst Tim Bajaran follows Apple Inc. and he “interpreted Steve Jobs’ position during his iPad 2 keynote as a sign that Apple was getting serious about enterprise. Supporting this, in recent months Apple has paid more attention to many of its enterprise offerings” (PC Magazine, 2011: n.p.).

The company has updated the iOS 4.3.1, smoothed out problems in its enterprise Web support and launched a “specialized support plan for small businesses, called Joint Venture” (PC Magazine, 2011: n.p.).

Also, Apple Inc. joined forces with Unisys to sell the iPad to business and government markets. As a testament to the viability of the iPad global strategy, “companies from JP Morgan to Mercedes-Benz began testing first-generation iPads in the office last year” (PC Magazine, 2011: n.p.).

The global sales of the Apple handset reached 14.1 million, an increase of 91 per cent increase in only 12 months (PC Magazine, 2011: n.p.).

Strategy Analytics stated that “Apple had overtaken the BlackBerry maker Research in Motion and Sony Ericsson to become the world’s fourth-largest phone maker…only three years after launching its first model. It sold 8.4 million iPhones in the second quarter and 8.8 million in the first” (PC Magazine, 2011: n.p.).

According to Apple’s 2010 annual report, global business strategy leverages “its unique ability to design and develop its own operating systems, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative industrial design” (Apple Inc.,2010; p. 1).

Apple’s global strategy also includes recurrent “investment in research and development” (Apple Inc., 2010; p. 1). Apple understands that research and development is integral to its success, and deems it “critical to the development and enhancement of innovative products and technologies” (Apple Inc., 2010; p. 1).

As a global brand, Apple’s strategy includes the creation and maintenance of a “robust platform for the discovery and delivery of third-party digital content and applications through the iTunes Store” (Apple Inc.,2010; p. 1). Apple Inc. also supports the creation of “third-party software and hardware products and digital content that complement the Company’s offerings” (Apple Inc.,2010; p. 1).

Apple Inc.’s strategy is predicated on consumer loyalty and positive association with the brand, thus the company “expands…its distribution to effectively reach more customers and provide them with a high-quality sales and post-sales support experience.

The Company is therefore uniquely positioned to offer superior and well-integrated digital lifestyle and productivity solutions” (Robin, 1997: p. 33; Apple Inc., 2010; p. 1; Thompson & Marton, 2010: p. 668).

Apple Inc. successfully transformed itself into a global player “by creating a worldwide brand image and custom-tailoring products for local cultures in different countries” (Thompson & Marton, 2010: p. 668; Doler, 1990: p. 117).

As of September 2010, Apple Inc. “had opened a total of 317 retail stores, including 233 stores in the U.S. and 84 stores internationally. The Company has typically located its stores at high-traffic locations in quality shopping malls and urban shopping districts.

By operating its own stores and locating them in desirable high traffic locations, the Company is better positioned to control the customer buying experience and attract new customers” (Apple Inc., 2010; p. 2; Lasserre, 2007; Mintzberg, 2003; Morgenstern, 1996).

Another important global strategy that Apple employs is to maintain the stronghold of its design in its home base of the United States while recruiting inexpensive talented workers from all over the world (Linden et al, 2009: p. 144).

Apple as a rule is a master operator within the globalized forum of international business, and the company has learned how to manipulate the global nature of business effectively to serve its own growth and need for talent.

Innovative companies such as Apple take strategic risks and through a combination of sharp business acumen, luck, effective relationships with international suppliers, and fearlessness, the company continues to generate value for its investors based in the United States, not to mention high paying, highly sought after jobs for knowledge workers the world over, so that its talent pool remains continually invigorated with new blood and know how (Linden et al, 2009: p. 144).

According to Linden et al (2009) “if the iPod were assembled in the U.S., most of the corresponding $150 bilateral (US-China) trade deficit would disappear, but the overall U.S. trade deficit associated with each unit would only fall by a few dollars. The rest would simply shift to the countries where the components are made, as those would have to be imported to the U.S. for final assembly.

This is not to say that the U.S.-China trade imbalance is not a serious concern in a broader sense, but it shows that there is a need for better data to understand what that deficit really means for each country” (p. 144). This strategy keeps Apple’s “product design, software development, product management, marketing and other high value functions in the U.S.” (Linden et al, 2009: p. 144).

The company makes the iPod at its offshore operations, and employs a global cabal of suppliers; in this strategy, according to Linden et al (2009) “the greatest benefits from this innovation go to Apple, an American company, with predominantly American employees and stockholders who reap the benefits” (p. 144).

Apple’s global strategy remains consistent with other large American multinational corporations that anchor their operations in the United States.

According to Linden et al (2009), the company does not follow this strategy “because the U.S. work force has superior capabilities in all of these areas, but because Apple has developed very specialized knowledge and ways of doing things that reside within the company and would be difficult to transfer to external locations” (p. 144).

While companies of Apple’s size are fast becoming multinational initiatives, “most firms keep a substantial base of operations in their home countries…this home-country bias may be due to historical inertia, top management preferences to live in their home countries, or other factors.

In the case of the U.S. and other large economies, their importance as a leading market serves as another anchor for firms based there…however the home-country bias does not necessarily extend to supply relationships” (Linden et al, 2009: p. 144).

Apple’s global strategy also regularly encourages competition between suppliers, as evidenced by the recent loss of PortalPlayer’s manufacturing contract with Apple for the new waves of iPod models to its competitor Samsung (Linden et al, 2009: p. 144).

Apple values innovation above all, not only in its designers but in its suppliers, thus the “producers of high value, critical components capture a large share of the value of Apple’s innovative product” (Linden et al, 2009: p. 144).

As a rule therefore, Apple global strategy rewards the firms from other countries that offer the maximum value; Apple’s inputs of its most innovative products then go “to the countries whose firms provide critical, differentiated technologies” (Linden et al, 2009: p. 144).

Also, according to Linden et al (2009) high research and development sales ratios “are correlated with high gross margins, although not with overall firm performance or growth,” so the company tends to share more revenue with the suppliers in charge of the higher value technical components (p. 144).

An example is the 30GB Video iPod. Linden et al (2009) point out that the “highest value components are the hard drive and the display, both supplied by Japanese companies.

Thus Japan captures the next largest share of the value of the iPod, thanks to its companies’ strengths in those technologies. U.S. chip makers such as Broadcom and PortalPlayer provide less costly inputs, but earn high margins and thus bring additional value to the U.S.

By contrast, Inventec, which was actually responsible for assembly of this iPod – the activity that most people think of as making a product – earns a relatively modest share of its value” (Linden et al, 2009: p. 144).

Apple Inc.’s global strategy views the entire planet as a talent pool and pursues innovation continually and relentlessly. The company’s corporate culture of innovation successfully positions it as a trend setting giant in the technology market.

Reference List

Apple Inc. (2010) Annual Report. p. 1-114.

Doler, K. (1990) Apple’s strategy: the global view. PC Week, March 26, 1990 7.12. 117-119. Web.

El Akkad, O. (2011) Apple shines as profit nearly doubles. Globe and Mail, April 20, 2011. Web.

“How the iPad Is Emerging as a Business Tool.” PC Magazine Online 1 Apr. 2011. Web.

Lasserre, P., (2007), Global strategic management / Basingstoke : 2nd ed, Palgrave Macmillan.

Linden, G. et al. (2009) Who Captures Value in a Global Innovation Network? The Case of Apple’s iPod. Communications of the ACM, 52, 3. 140-144. Web.

Mintzberg H. (2003), The strategy process : concepts, contexts, cases /. 4th ed. Harlow: Pearson Education.

Morgenstern, D. (1996) Global Apple to market locally. MacWEEK 10, 37. 87. Web.

“Move over BlackBerry, the iPhone is cornering the market.” Times [London, England] 30 Oct. 2010, 67. Web.

Robin, J. (1997). Global business strategy. London, International Thomson Business Press.

Thompson, J. & Martin, F. (2010) Strategic Management: Awareness and Change, 6th Edition. New Jersey, Cengage Publishing.

The Mobile Internet. (2010) Strategy Analytics: Apple jumps into top 5 as global handset shipments reach 327 million units in Q3 2010. Oct 12. 10. 12-14. Web.

Ungson, G.R. & Wong, Y. (2008) Global strategic management. New York, M.E. Sharpe, Inc.

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Apple Global Strategy

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