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Strategic Management: Apple Inc

Paper Type: Free Essay Subject: Marketing
Wordcount: 3366 words Published: 16th May 2017

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Apple is engaged in design, development and marketing of personal computers (PCs), servers, communication devices, network solutions, portable digital music players, and related accessories, software and services. The company’s portfolio of offerings comprises of Mac computing systems, iPods line of portable digital music and video players, iPhone handsets, iPad portable multimedia and computing devices and servers. The company’s software applications include Mac OS, iLife, iWork and internet applications such as Safari and QuickTime among others. The company also offers a variety of related software, services, peripherals and networking solutions. The company provides third-party music, audio books, music videos, short films, and television shows. The company sells its products worldwide through its online stores, retail stores, direct sales force, and third party wholesalers and resellers.

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The company manages its business primarily on the basis of geographic segments. It operates through five operating segments: the Americas, Europe, Japan, retail and other segments. Apple’s retail segment includes activities of Apple-owned and operated retail stores in the US and in international markets. At the end of FY2009, the company operated 273 stores in the US and internationally. In each reportable geographic operating segment, Apple provides the same kind of hardware and software products and services. ()

Apple’s products can be grouped under different product lines which are as follows: iPhone and related products and services; portables; iPod; desktops; other music related products and services; software, service and others; and peripherals and other hardware. () (O’ Grady 2009, pp. 1-17)

Question 1 – External Analysis

Apple’s external environment analysis by using Porter’s Five Forces Model:


Threat of New Entrants

Bargaining power of suppliers

Existing rivalry in the industry



Bargaining power of buyers

Substitute products & services


(Stahl & Grigsby 1997)

Existing competition

Apple’s existing rivalry includes Microsoft Windows OS and media player for playing music and video, Competition with Mac OS X (Linux), Alternative sources of computer hardware from companies like Dell, HP, and Lenovo. Latest MP3 players i.e. Creative, Samsung, Philips and so on, Online music stores parallel to iTunes stores – Napster (Prasad 2009, pp. 39-41)

Potential entrants

In current market environment Apple facing threat from potential market entrants in segment of Audio & Video streaming with v-cast (Verizon), online services provider on demand similar to iTunes, New players with advanced technology for example The “next google”

Suppliers and bargaining power

Apple’s operations mostly affected by suppliers and their bargaining power, for example Suppliers of computers and memory i.e. Motorola, IBM, and Intel, strategic partner/supplier of Mac (Microsoft), suppliers of TV and Movies like Disney, ABX, Fox, Sony etc., different Sources of music like BMG, Sony, Warner, Universal.()

Buyers and bargaining power

This most crucial part of Apple’s external environment where buyers are king and they are not paying for music as they share music using peer-to-peer networks (Ares, LimeWire), force from retailers for low prices or good conditions (Distributors) and buyers/business/consumers may decrease expenses on computers if they fear economic slowdown.

Substitute products and services

In highly competitive and imitate market Apple always affected by substitutes available in market likes satellite radio for music (XM, Sirius), music and media, entertainment media (XBOX, PS2), different ways to get music (Music CDs, DVDs), alternative video sources like Cable, Broadcast, Theatres. () ()

So from above analysis we can say that Apple is working in high risk industry where chances of imitation and substitutes are very high to compete with and that is why computer equipment and distribution of entertainment is a high threat industry. Apple should carry on applying product differentiation (i.e. the look and simplicity of iPod) and economies of scope (i.e. offering ABC television shows on iTunes) to maintain their Sustainable Competitive Advantage in this business. (Platt 2010, p. 49-55)

Question 2 – Internal Analysis

Apple’s core resources and competencies:

2.1 Core resources and competencies:

Resources acquired as real options can be especially for firms competing in highly uncertain environment. Commonly, capabilities are part of organizational functions such as marketing, manufacturing, finance, and so forth. Apple Inc. is thought to have capability in research and development function. People, work teams, equipment and financial resources are some of the resources that Apple integrates to complete various research and development task. (Ireland, Hoskisson & Hitt 2009, pp. 68-72)

Product innovation is a core competence and appears to be distinctive competence for Apple. It has been the leader of the Consumer Electronics industry and has retained different image in PC manufacturing and Music too. The Core competencies accountable behind the achievement are mostly the “Distinctive resources” and “Differentiation strategy”. (Ireland, Hoskisson & Hitt 2009, pp. 70-75) Apple has earned a strong reputation for beauty, simplicity and quality over the years, all part of its mission. From award-winning design to meticulously crafted hardware, Apple focuses on entire user experience and is rewarded with strong sales and fierce loyalty as a result. (O’Grady 2009, p. 42)

Apples underlying philosophy is to design products that are easy-to-use and beautifully designed. Simplicity is a mantra. Most of Apple’s products are intuitively designed so that you don’t need to read a user manual to figure them out. Apple has a punch line of “Think Different” inspiration and it believes in “Value Creation”. Apple’s core resources and competences are: (Afuah 2009, pp. 78-99)

Beautiful design

User interface

Customer support

Brand image


Apple has been able to rule a top in market and gain beyond average returns due to its innovation and differentiation of technically advanced products. ()

2.2 Value Chain Analysis

The value chain is a basic tool for diagnosing competitive advantage and finding ways to create and sustain it. (Ireland, Hoskisson & Hitt 2009)

Technology development

Technological development is the real foundation of Apple’s competence. The information and novelty in technology in Apple’s products made them to influence its expertise in iPod, iPhone, iTunes and iWorks suite of products.

Providing Products to Co.

Product Creation

New Product idea



It is really the great benefit for an organization to be independently producing from zero to complete product with application and peripherals. Apple develops all its product with innovative ideas and delivered best product to the end-user via suppliers. ()


The different combinations of Apple-made hardware and software became the root for its own invention process. Apple achieved unmatched results with stylish design, and redefined instinctive operation with most of the products. ()


Apple was using small outlets to deal with its customers. In 1997, Steve Job redesigns the distribution system by removing thousand of small outlets and doing National level expansion. By 2001, the online store contributed nearly 40% of Apple’s total sales. In 2001, Apple opened its first retail store in Virginia, and now company owns more than 273 stores worldwide. ()

Marketing and Advertising

Unique marketing campaigns have been a strategy of Apple to get customers and to increase the knowledge among them. Television commercials, Print advertisement, Publicity, Road posters have been thriving ways of making products available to market.

Customer Service

Providing excellent customer services is Apple’s philosophy; the customer faithfulness is a huge achievement for any organization. Such a great relationship with its customers goes to Apple’s customer service and the types of product portfolio which satisfies the need of today’s classy people.

Legal Service

Market climate is changing continuously due to innovation and it is anticipated that the drive to develop product and service offerings will subject Apple to patent and copyright infringement claims.

2.3 Internal analysis: Strengths & Weaknesses


Technical know-how

Financial strength

Brand loyalty


Product differentiation

Product integration

Stylish design

Retail stores

Online sales

Easy to use products (plug & play solutions)


Higher price

Low market share

Lacking compatibility


Product recall

Patent infringement

() ()

Question 3 – Strategic Choices

Apple’s Strategic Choices & its implications

3.1 Product Differentiation – Generic Choice

Innovation is Apple’s pride. When reviewing the history of Apple, it is clear that this attitude permeated the company during its peaks of success. Apple had an amazing impact on technology, society, and the world and it continues to innovate to this day. Using the personal computers as foundation, Apple has turned technology into as essential tool of our daily lives. Apple is an innovative specialist. From the Apple | and || to the mouse, GUI and LaserWriter, Apple has a pedigree of developing new technologies and adapting existing technologies for the masses. In late 1985 Apple released the Macintosh Office, featuring and the AppleTalk networking technology in an attempt to make the Mac more attractive to small business. (O’Grady 2009, p. 45) () (Prasad 2009, pp. 39-41)

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In 1991 Apple released its first serious notebook computer, the Power Book 100. Two other PowerBooks were launched simultaneously with the PB100. The PowerBook 140 and the 170 and both were entirely designed by Apple. In 1991 QuickTime was the beginning of video playback on computers and has become a standard feature on computers, Personal Digital Assistants (PDAs), and smart phones. Apple released QuickTime 1.0 in December 1991 for System Software 6. After that, The Newton MessagePad, announced in August 1993, was a completely new product for Apple and represented a brave step into the unfamiliar territory of PDAs. (O’Grady 2009, pp. 46-47) ()

Apple is revolutionary company in many ways, throughout the history; it always comes up with innovative ideas and product differentiation. The iMac and iBook allowed customers to get online within 15 minutes of opening the box and set a new standard for Internet access that is still the envy of the industry (). Introducing digital media management like iTunes, iPhoto and iMovie spearheaded the digital media revolution and made it easy to manage all of our digital content. Introduction of digital media playback like iPod, iTunes and iPhone set the standard for listening to music, watching television and movies, and making phone calls too. Apple single handedly rescued the music industry from the perils of peer-to-peer file sharing networks. Apple popularized technology, like FireWire for high-speed data access and Wi-Fi for wireless Internet access, making data move faster and without the clutter of wires. IPhone revolutionized mobile phones and iChat AV made it easy to videoconference with family and colleagues across the globe. (O’Grady 2009, pp. xii-xiii) () (Linzmayer 2004, pp. 289-295)

3.2 Strategic Alliances – Specific Choice

There are many reasons for Apple’s success. First, Apple’s premium price or product differentiation and innovation strategy as well as their retail strategy i.e. online stores and retail stores have demonstrated to be vital to Apple’s past and will continue to play a significant role in Apple’s future success. Most of the consumer electronics and entertainment companies in the market find Apple very innovative and has attracted the attention for successful strategic alliances with them. After Steve Jobs returned to Apple, an agreement was made with Microsoft, and was subsequently followed the appearance of MS Office on Mac PCs. In 2002 Apple, Ericsson and Sun Microsystems formed an alliance to create a standard format for delivering multimedia content to wireless devices, such as smart phones and PDAs. The alliance combined Apple’s QuickTime video creation software, Sun’s content distribution software and hardware, and Ericsson’s mobile infrastructure and services expertise. Apple has successfully worked with HP in 2004, to deliver digital music player and iTunes to HP customers, (). Later 2005 the company collaborated with Acura, Audi, Honda and Volkswagen to deliver iPod with their car stereos for 2006 model lines. In the same year, Ford, General Motors, and Mazda teamed up with Apple to integrate iPod across their brand and models. In 2006 Apple teamed up with Air France, Continental, Delta, Emirates, KLM and United Airlines to integrate iPod with in-flight entertainment systems. Apple also introduced mobile phone with iTunes in collaboration with Motorola and Cingular Wireless. Apart from this Apple also worked with AT & T, which gave an opportunity to Apple to improve their iPhone’s technology. Apple also has strategic ties up with You Tube and Google to provide their iPhone users’ latest technology “search, mapping and video features”. These strategic alliances allow Apple to further differentiate their products and add values to their users. (Ireland, Hoskisson & Hitt 2009, pp. 173-177) () (Thakur, Burton & Srivastava 2007, p. 95)

3.3 Implications for organization’s existing choices

Still there have been several implications as result of Apple’s choosing to use a product differentiation strategy. First, Apple’s confine market share because of Apple’s selection of premium price or product differentiation strategy. Some customer do not realize or understand the value that Apples’ attempts for create their clientele. Price conscious customers are uncertain to buy Apple’s products. Likewise, customers looking for highly customized computers may not prefer Apple.

Secondly, Apple is highly dependent on his CEO, Steve Jobs. Jobs have been a guiding force and excellent leader at Apple, acting as Apple’s rescuer when the company saw their worst financial figures in 2002. Steve Jobs were accountable for Apple’s expansion, growth, development and the launch of one of Apple’s most stylish and revenue generated products, the iPod. There is a doubt as if Apple could maintain to run as they do currently in the absence of Steve Jobs!!! (Thore 1995, pp. 20-22)

Question 4

Recommendations for Apple’s future strategy

Apple must continue a constant commitment to licensing, drive for economies of scope between media and computers, and become a learning group.

Apple should go for innovative way of strategic alliances. An equity strategic alliance may provide an opportunity to Apple to acquire extra competencies. The most effective way for a company like Apple to realize this would be in the form of a joint venture.

Apple should continue adding the new media-centric product lines. Same time Apple should concentrate on its computers too. In the future, Apple will require continuing innovation to raise the boundaries of both media and computers.

Steve Jobs is continual aspect of both competitive advantage and risk. He is pioneer behind Apple’s success and has a large equity interest in Apple and Disney. If he were to divest his leadership position, the response of both the market and consumers would be vague. Apple must find a way to learn as an organization.

Apple has having low market share at the moment and should consider expanding it in future. Though, with current Microsoft user base, it is going to be difficult. Apple should concentrate on its core competencies to be successful and try to find new emerging markets like India, China etc.

Steve Jobs will not be there always with Apple. He has done great stuff for the company; he has left Apple in uncertain situation. What will be Apple’s future when he leaves company? Apple should not dependable on Steve Jobs and should distribute the responsibilities among the individuals within the company.

Apple’s future strategies should be innovation, lower price and strategic alliance. The reasons behind these are:

Innovation (Product differentiation)

Apple leverages its brand image to differentiate its product offering and drive sales. Apple has a strong focus on research and development and continual investment in R&D is critical for the development and enhancement of innovative products and technologies. Apple leverages its unique ability to design and develop its own operating system, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative industrial design. As Apple known for its innovation and stylish products in market they should continue with this strategy of product differentiation and innovation to compete in this industry.

Lower Price

Consumer electronics and entertainment industry is nearly reaching a maturity stage in the market with strong rivalry but it is still growing. The reason for this extreme competition is that there are companies in market which are coming up with low cost strategies and low pricing to compete with the existing manufacturers. Companies like Acer and HP acquired Compaq are already competing with notebooks on the basis of cost. Also there are many websites which gives access to downloading and listening to music online, which becomes a high threat for product like iTunes. So Apple must do something to lower their pricing to beat their competitor.

Strategic Alliances

Apple is enjoying their strategic alliances with AT&T, You Tube, and Google, these partnerships allows Apple to differentiate their products and add value to their users. Apple must be proactive in their future strategic alliance and must get right companies to work together to be successful in changing world and time. (Thore 1995, pp. 20-22)

Retail Strategy

Apple is penetrating in different market via online store and retail stores. They must aggressively promote this to the potential customers, as it will save the cost of supply chain management, ultimately results in low cost products that will help Apple to reduce their prices further to compete in the market more efficiently. (http://www.nzherald.co.nz/technology/news/article.cfm?c_id=5&objectid=10694905)


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