Apple Inc. Strategic Analysis

Apple Incorporated is a technology company that is involved in the design, manufacture, distribution and sale of personal computers, mobile and media communication devices, music players and a variety of software. Some of its products include the iPod, iMac, iOS and Apple TV. One of its most recent and most successful products is the iPhone smartphone, which sets itself apart as a unique smartphone solution. The company has a wide global outreach, with manufacturing outlets and stores world over.

Being a key player in the information technology market, it faces competition from numerous other corporations, some of which specialize exclusively in the production of either software or hardware components. In fact, until recently, Apple was among the only firms involved in the production of both hardware and software components. This paper is a financial analysis of Apple Inc. It begins by identifying the business level strategies employed by Apple. Then, the corporate level strategies are addressed. Finally, Apple is compared with one of its most significant competitors, Microsoft.

For any organization, there are a number of business level strategies that it can adopt. These business strategies are used by the corporation to carry out its various functions as a business. The level of departmentalization within an organization will determine the number of business strategies that a firm uses, with larger businesses using more strategies. This can be attributed to the different functions being performed by each department. Business level strategies act as an important guide for managers and other employees in the organization (Hill & Jones, 2012).

The first strategy that companies can employ is to co-ordinate unit activities. This involves coordinating all activities that the organization is involved in. Under this strategy; a manager is tasked with the responsibility of to coordinate the various departments or sections of departments. The manager focuses employees on achieving certain goals. Another strategy for companies is to utilize human resources effectively, by ensuring adequate numbers of employees at all levels (Hill & Jones, 2012). Not only do the employees need to be of the right number, they must also be of the right type. Apple has a thorough recruitment process that ensures the firm hires the most suitable individuals.

Businesses also endeavor to identify market niches. The niche strategy involves identifying an unsatisfied need, or one whose supply falls short of demand (Hill & Jones, 2012). Niche strategies also involve targeting a specific category of customers. This can allow the company to charge higher prices, since there are no alternative products. Another strategy that companies employ is to develop distinctive advantages. This is where a company exclusively engages in an activity that enables it to have a competitive advantage over its competitors. For example, the organization may have a highly efficient production process.

For Apple, its strongest strategy is its niche strategy. According to the company, it is committed to bringing the best user experience to its customers through its innovative hardware, software and services. The Company’s 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 design. (Apple Inc, 2013, p. 2).

Apple Inc. focuses on product differentiation in both the personal computer and the portable music player industries. Both the iPod and the Macintosh line of products have a unique style and creative features that distinguish them from their competitors. This makes customers insensitive to the premium prices of Apple’s products because they cannot find similar products from another seller. This has made niche formation one of the most powerful strategies that Apple has implemented.

Apple Inc. has successfully created a sustainable competitive advantage by differentiating its portable digital music players and personal computers. The company upholds research and development as key to developing new products. In addition, the company believes that investment in marketing and advertising of its products are critical to the sale of its innovative products and technologies.

Apart from these business level strategies, companies also involve themselves in corporate level strategies. Furrer contends that corporate level strategies are “the multi-market or multi-business activities of a firm” (Furrer, 2011, p. 4). These strategies attempt to answer the question of “what business should the firm be engaged in?” (Furrer, 2011, p. 1). According to Hill and Jones, (2012) the questions answered are “What business should we be in to maximize the long-run profitability and profit growth of the organization, and how should we enter and increase our presence in this business to gain a competitive advantage?” (p. 20). In line with these concepts about a corporate level strategy, one can derive Apple’s corporate strategy to be the manufacturer of innovative and unique technological products which satisfy the needs of its consumers.

Apple recognizes that it faces a lot of competition both on the front of PC machines and mobile devices. In order to deal with this competition, the company aims to expand market opportunities for its personal computers, and its mobile communication and media devices. The role of new product development is further emphasised in the financial report which outlines that “The Company’s future financial condition and operating results depend on the Company’s ability to continue to develop and offer new innovative products and services in each of the markets in which it competes” (Apple Inc, 2013, p. 6). This emphasizes the concrete corporate strategy developed by Apple Inc, which endeavors to ensure that it retains a substantial amount of the market share. This market share must be held within each of the markets in which it operates.

Apple deals in the manufacture of both hardware and software components related to technology. The field of technology devices is characterized by fierce competition, a fact which Apple Inc recognizes. According to the annual report, it is confronted by aggressive competitors from every side of its business operation. It identifies some of the strategies by its competitors as price cuts and lowered product margins which are aimed at assisting them to gain a market share (Apple Inc, 2013). Some of these competitors include Samsung, Google and Microsoft. For the purposes of this paper, Microsoft is chosen, due to its high involvement in the software development market, and its recent attempts to venture into hardware production.

Microsoft is a technology development corporation, which is involved in the manufacture of hardware and software components for a host of technological devices. Their business strategy is “to enable people and businesses throughout the world to realize their full potential by creating technology that transforms the way people work, play, and communicate” (Microsoft Corporation, 2013, p. 3). In this light, the corporation aims to maintain a market lead through continual development and innovation. It prides itself as a manufacturer of transformative technology. This is in contrast to Apple’s strategy, which involves providing their users with the best technology. This represents a significant difference in strategy, since it would appear that Apple goes that extra mile to ensure that they are not only satisfying a customer need, but that they are doing so by providing the best technology. Furthermore, Apple’s niche strategy has seen it emerge as a unique technology provider that is able to provide a variety of devices across the board. This again reinforces Apple’s dominance over Microsoft.

When it comes to the corporate level strategies, Microsoft involves itself in a wide variety of user, as well as business products. Apart from its vintage operating systems platform, Microsoft offers other goods and services such as desktop and server management tools, server applications and video games. It also provides cloud computing and more recently, has ventured into the handheld devices market with the introduction of its very own Surface devices (Microsoft Corporation, 2013). Microsoft’s corporate strategy appears to offer it a competitive advantage over Apple Inc. This is because it offers an expansive set of assorted tools, some of which Apple Inc does not offer. Additionally, by venturing into the handheld devices market, Microsoft manages to slice off part of Apple’s advantage.

Another important point to note is that while Apple operates entirely autonomously, Microsoft works together with other stakeholder’s in other fields. Microsoft acknowledges that these other manufacturers are both partners and competitors (Microsoft Corporation, 2013). On its part, Apple notes that the prospects of collaboration between hardware and software manufacturers exist, and that such prospects can lead to the development of more competitive solutions (Apple Inc, 2013). Apple is however confident that it can be able to ward off this competition and retain its market share of customers.

In slow cycle markets, it is easier to maintain a competitive advantage by maintaining the same product. It is unlikely that a slow cycle market would have any effect on the dominance of Apple’s business strategy. This is because its niche strategy is based on the uniqueness of its product. This is also the case for Microsoft which would retain its advantage due to the wide variety of products it offers.

In a fast cycle market, Apple is likely to lose its advantage. This is because its competitors will develop similar products. However, given Apple’s commitment to new product development, this is unlikely to happen. The same applies to Microsoft, unless collaboration with its partners breaks down. In addition, Microsoft also has a safeguard against such a scenario. The company is doing this by introducing the manufacturing of hardware components.

Conclusion

Apple incorporated is a technology systems giant involved in the manufacture and sale of personal computers, mobile devices and a host of software. Despite massive competition in the technology industry, Apple Inc has managed to maintain a competitive position in the market by employing a niche strategy at the business level. This niche strategy has enabled it to charge higher prices for its products, since they are unique. Furthermore, its sound human resource policies have enabled it to attract and retain a good number of suitably qualified employees. At the corporate level, Apple thrives to develop innovative and unique technologies and products, and this again emphasizes its market differentiation. One of its biggest competitors is Microsoft. When evaluated along a business level, Apple’s strategies emerge superior. However, at a corporate level, Microsoft is superior, since it is able to collaborate with other players in the market. Each of these corporations is not likely to be affected by market cycles.

References

Apple Inc. (2013, September). Apple Inc. Annual Report - Form 10-K . Retrieved from Apple Inc http://investor.Apple.com/secfiling.cfm?filingID=1193125-13-416534&CIK=320193

Furrer, O. (2011). Corporate level strategy: Theory and applications. London: Routledge.

Hill, C. W., & Jones., G. R. (2012). Strategic management theory: An integrated approach. Boston, Mass: Cengage Learning.

Microsoft Corporation. (2013, June). Microsoft Corporation Annual Report Form 10-K. Retrieved from Microsoft Corporation: http://view.officeapps.live.com/op/view.aspx?src=http://www.microsoft.com/investor/reports/ar13/docs/MSFT_FY13Q4_10K.docx