Apple Inc. is an American transnational enterprise, which headquartered in Cupertino, designed in California; consumer electronics , computer software, and personal computers are the primary service of this company. Its best-known products include the iPod , the iPhone (now available for sale in over 90 countries), and the iPad.( CrunchBase,2012)
The Competitive Environment of Apple Inc.
In this report, a Porter Five Force will be analysis in details of threat of new competition threat of substitute products or services, bargaining power of customers, bargaining power of suppliers intensity of competitive rivalry, as shown in Figure 1:
Threat of new entrant
High Fixed Costs
According to Apple Inc.’s 2012 annual report, there was an increase in spending on the field of research and development, the number of employees has also increased by about 12,000 people, advertising expenditures of $1 billion. (2012) That is why Apple’s products are highly priced while made significant market share. Not just any emerging or smaller enterprises have the ability to invest so much money in product development, sales and advertising.
The biggest reason behind the success of Apple products, perhaps, is the Apple commercial ecological system of the construction effort. For example, some of the fashion brands, including Louis Vuitton, Gucci, Swarovsky, and Chanel, already have cooperation with Apple Inc. for iPod case and accessories. Apple Inc. locate the parts production in Asia, due to Asian high population and low labor, so to a large extent reduce the cost of products.
Marketer Marc Gobe.,, author of Emotional Branding and principal of d/g worldwide , said Apple’s brand is the key to its survival.(Kahney,2012) Apple has always projected a human touch — from the charisma of Steve Jobs to the notion that its products are sold for a love of technology. In terms of product design and advertising, Apple Inc. has shown a unique visual and verbal vocabulary.
Bargaining Powers of Suppliers
The 1st category like, memory, disks, drivers and chips, these kinds of products have to be standard, so the quality is essential for Apple. As there are many companies such as Samsung and Intel, that bargaining powers is low. In the other hand, the 2nd category like microprocessors and the operating systems are few like Intel and Microsoft, these products providing by the companies are standardized and had no substitute, for the suppliers it is profitable, to Apple, the bargaining powers is high.(Apple,2010)
Bargaining Powers of Buyers
The Mac and iPhone are unique-designed, also definite brand are very commerciogenic to consumers. Otherwise many suppliers like HP, Dell, Sony and HTC could provide the similar functioning product with lower price, consumers are able to choose different products according to their own purchasing power.( Huzefa,2009)
In terms of operating system platform, Microsoft would be the biggest competitor of Apple Inc. For personal computers, the existing rivalry in the market would be Dell, HP, IBM, Sony, and other computer manufacturers.(Nicole,2010) Iphone is one of the most successful products produced for Apple Inc, iPhone 4 created a sales miracle in Smartphone history in 2010(Apple Inc. Annual report,2010) However in the autumn of 2012, Samsung Galaxy S3 surpassed a version of iPhone5 in global sales(CBC News, Nov 8, 2012); the Samsung, which similarly producing large screen and excellent operating systems become the biggest enemy of Apple Inc. in the Smartphone market.
Key Resources and Capabilities
The CEO of Apple Inc, Steve Jobs, could be the Apple’s most important resources. The Apple’s designers, programmers, and engineers leverage their unique ability to design and develop its own operating system, hardware, and application software, which are the key capabilities for Apple. (Masi,2009)
Steve Jobs was a precious resource for Apple Inc. His unique thought patterns and approach to business established Apple as an industry leader in the past a dozen years; Under his guidance¼Œ Apple became the world’s most valuable company with a market value of $350 billion.(The Wall Street Journal,6 Oct 2011)
Apple’s innovative design teams leading by Jonathan Ive, senior vice president of industrial design, functioned of extraordinary industrial design capability. This combination makes Apple outstanding among competitors and hard to imitate. Apple’s most important capability is those unique software which runs on their owned developed hardware. A combination of the design teams, software development teams, and hardware engineers employed by Apple determine this capability. (Masi,2009)
There are two main types of competitive advantage. Cost advantage and differentiation advantage. Apple pursues a differentiation advantage strategy. Apple has always been a very innovative computer manufacturer. Its total control of software and hardware, marketing, digital asset management, retail strategy and product differentiation consist its competitive advantages. (Anti Essays,2012) Apple is organised as one company and manages products, not categories. Apple has one R&D base that is common across most products, and looks at one P&L. All Apple products and accessories are compatible with each other, which bring consumers a brand new experience.( Ragnetti,2011)
A recent article(Mootee,2011) states that “Apple has built a truly sustainable competitive advantage and is definitely worth the current valuation premium.” Apple’s R & D achievements in apps, OS and devices, are hard to beat. Apple has a very strong defense force in the field of product/services/experiences integrated supporting, it is difficult to break it. Apple truly sustainable competitive advantage is built on the basis of the horizontal & vertical integration strategy, horizontal integration strategy across devices and channels, while vertical integration strategy Including software and hardware retail.
SWOT is an acronym for Strengths, Weaknesses, Opportunities, Threats. Using SWOT analysis could provide a good framework for reviewing Apple’s strategy, position and direction.
iTunes is a diversified source of revenue, it has both its own brand player-iPod; also isaccessible in other major operating systems (such as windows).
Apple is particularly good at produce straight software(e.g.Mac OS) for their hardware(e.g. iPhone and Mac)
Apple products are rich in friendly humanistic design design, simple and practical.
Apple provides original services and products, so people are always interested in Apple.
Microsoft is Apple’s biggest competitor in the operating system market, Microsoft can be run on other mainstream brand PC, while Apple system usage is much lower than Microsoft.
Apple product life cycle is extremely short, which means that it must maintain the production and development of new products and services at all times.
In recent years, almost every new generation of Apple products have flaws (e.g. iPhone 4 signal problem iPhone 5 map issues)
The laptop market is highly growing, therefore producing more types to meet the increasing demand
Increasing bonds and partnerships with other companies
Growing population leads more and more potential users of Apple products.
In the electronic market, Apple is in the very high level competition
Apple products are higher than the average price of the products with similar function in the market.
Window’s 7 developed by Microsoft, gaining more and more market this content share.
iPod users download pirated music from the music website, reducing revenue of iTunes
The PEST can analyze the status quo of Apple Inc., identifying potential influences of the political, economic, social and technological sectors; and helps to predict the future trends of the Apple.
Apple now has 372 stores, 123 outside the U.S.(Lunden,2012), The war and the instability of international relations have a negative impact on the international business; these events are all force majeure, the company is difficult to predict and control. Apple lower operating costs by outsourced its product manufacturing. Many of these third-party manufactures are located in China,(Chan, JAN 22, 2012) the multiple political events could interrupt these manufacturing or logistics in China. For consumers and retailers, this event is detrimental to the company’s good credit and image.
The world general economic situation was beyond optimism, The rising grain and oil prices lead to inflation, so that the decline in the purchasing power of consumers. People suffer from economic pressure, as a result they had to extend the use of their existing mobile phone and computer. This will affect Apple’s retail business.
In modern society, more and more companies will be more considering health safety and environmental protection when developing their business. Certain products involving defects may lead to health problems. According to reports, the improper use of iPod may result in injury to the hearing.( The Econommic Times,2011)
Technology plays an important role in the globalization, Apple has been in walking in the forefront of technology, because of its quality and design. In addition, over the last decade, iTunes developped by Apple have always been the biggest virtual media store in the music industry(Harris,2011); currently pirated music might be a great threat, fortunately this was related to the punishment of law and government. Overall, Apple is not just technology products, but also a modern individual’s lifestyle. From a social perspective, Apple produced a positive impact.
Mobile phones and computers accounted for a large share in the market of technological electronic products competition is fierce in these areas. Technology developing rapidly, while tproduct life cycles are getting shorter.In Research and Product Development, Apple is the market leader, regarding innovative products. Competitors always immediately following the footsteps of Apple, however, Apple is always ahead, because innovation is the core of the Apple brand.
Suggestions base on the SWOT and PEST analysis for Apple Inc.
iTunes Store eBook distribution: Apple should add eBook with reasonable price that can be used to any media player through iTunes store, compatible with all Apple devices.
Design innovation: Rational allocation of internal resources, and put more emphasis on the design of software and hardware, to create higher value. Jonathan Ive( senior vice president of industrial design at Apple Inc) believed that “consumer is not a penny-pinching moron nor a brute philistine.” (Waugh, 20 March,2011) Apple’s persuasive financials show that consumer is a perfectionist, and they are willing to pay much to buy the products that flatter by their pristine beauty and sparkly intelligence.
Quality checks in OEM factories: Despite working closely with OEM partners, Apple should focus maintain its enterprise image of producing high-quality products. Implementing random quality check sampling can identify problems in product defects at early stage, preventing the latter part of the product recall, to reduce losses. that Apple’s OEM partners stay honest with their own quality control processes. Apple should be optimized software under Windows system, improve their compatibility in ordinary PC environment; launch different priceing Mac models at the same time, add more different consumer groups.