Table of Contents
Strategic management is highly effective when applied correctly and in the appropriate organizational operations. Steve Jobs seems to have realized this when he assumed the office of presidency at Apple company. He managed to revive a dying company and brought it back to life through increased profitability. This report presents a strategic review of Apple Company with relation to Jobs leadership. Moreover, the report will strive to analyze the competitive forces as well as strategic issues that have been evident in the company since 2011. Internal auditing will also be done with a closer look at PR crises that have faced the company since 2008. Finally, the report will offer a detailed summary with possible recommendations to the company at hand.
Competitive forces and strategic issues shaping the Smartphone & Tablet industry
From 2011onwards, there was advancement of technology in Apple Company under the leadership and involvement of Steve Jobs. Although he had delegated the day-to-day operations to Tim Cook, he was still involved in the company’s major decision making (Ganesan, 2003). The company unveiled iCloud, which was an online storage facility for photos, music and files. iPhone 4S was introduced later on October 2011, which had 1080p video recording camera, an A4 dual chip with high capability, cloud sourced data and an intelligent software assistance. On the same month, the company purchased C3 technologies, which was the third mapping company that Apple had purchased. By January, 2012 Apple invented iBooks for iOS in New York and this marked a major achievement following the death of Jobs. On March the same year, the company announced the 3rd generation iPad that included a new CPU, a Retina display, 1080p video recording and a 5 megapixel camera (Hellmann, 2000). This summarizes the Apple’s progressive in the Smartphone & Tablet industry.
However, the company had been working in an environment with fierce competitive forces and compelling strategic issues. The industry is characterized by technological innovations, which many practitioners endeavour to compete in. Therefore, competition is common and logical as various industries try to improve their image in the market (Economides, 1999). It should not be forgotten that the customer is the main target and centre of interest for many companies. This means that competition is not based on how much profit a company makes, but how pleasing and convenient their product is to the customer. Competitive forces are in existence as far as Smartphone & Tablet industry is concerned. These forces can be better explained with the help of relevant strategic models, which will put the industry under analytic perspective.
One of the models is the industry (ILF) theory, which has it that the timing of entry and exit as well as output levels is a crucial issue not only for business practitioners, but also for government institutions. Entrepreneurs face a hard task of determining when to enter, exit and how much to produce as far as effective operations are concerned. Companies in the Smartphone & Tablet industry have been faced with a hard task of determining when to penetrate a given market, when to exit from it and how much they need to produce to fully satisfy their customers. To secure maximum profitability, companies are supposed to enter a monopolistic market and establish a network of consumers (Economides, 1999). As the competitors enter the market, product development is done to retain a competitive advantage and when it becomes fierce, an option of leaving the market is valid. This model presents some logics as to why companies such as Apple endeavour to generate new products with improved features. They seem to understand that every product has a life-cycle that must be adhered to in order to retain high profitability.
Another model that is effective in explaining the competitive forces related to Smartphone & Tablet industry is the Porter’s five forces. This is an industry analysis framework that derives five forces capable of shaping the competitive nature of markets, thereby determining their attractiveness. One of the forces is the suppliers’ bargaining power, which impacts on the company’s costs and differentiation (Linzmayer, 2004). Any shift in prices of raw materials results to increased or decreased cost of production, which in turn impacts greatly on the retail prices of products. Companies in the Smartphone & Tablet industry have been faced with a hard task of stabilizing the power of suppliers. This it because companies using the same raw materials have been on increase and this means that suppliers have alternative markets for their raw materials. Therefore, adjusting prices is not a hard task since they have nothing to lose. Companies forming the market for these suppliers include Apple, Broadcom, Intel, Marvell Technology Group, Qualcomm, Mobile, Samsung, ST-Ericsson, Shanghai Jade Tech, Microsoft and VIA Technologies among others.
The customers bargaining power is another force that presents a competitive pressure on companies in this industry. Customers are more interested on the brand identity with much preference on the emergent ones. They tend to be loyal to price elasticity and hence companies are left to compete in cutting costs. Obviously, consumers will go for products with low prices and therefore companies such as Apple would not risk being expensive. The more expensive a company’s products are the less the number of buyers received (Ganesan, 2003). Immediately a substitute enters the market, everything to do with the existing products becomes competitive. Consumers are left to make considerate choices between the product and its substitutes. The Smartphone & Tablet industry is characterized by emergent of various brands within short ranges of time. These brands become substitutes and affect the pricing strategy adversely. This is a force that Apple and the other companies have to deal with as far as their survival in the market is concerned.
A barrier to entry is another competitive force that Apple and other companies endure. The possibilities of entering a particular market are limited by factors such as technology, time and cost advantage, economies of scale and knowledge. If a certain market is characterized by a certain level of technology, companies must meet the requirements of that technology in order to fit in it. This applies to other factors such as cost of production. Only companies that feel philanthropic should dare enter in a given market. Competitive rivalry is the last force provided by Porter. The companies in the Smartphone & Tablet industry compete in differentiation, diversification, quality, switching costs, etc. this cause pressure on a company and might affect its profitability.
There are various strategic issues that face the industry. One of the strategic issues is competitive advantage (Linzmayer, 2004). This is what many companies in the industry endeavour to get and therefore, strive to improve their products and services. The efforts are destined to attract more customers thereby shaping the industries as a competitive one. Another strategic issue is innovation and creativity. Companies have adopted innovative strategies as a way of acquiring market sustainability and dominance. This makes the industry an innovative one and a sector full of advancing features. Lastly, loss of value is a strategic issue that affects most products in this industry. New brands are modifications of the existing ones. This means that emergence of a new brand results to decline of a particular existing brand. This makes Smartphone & Tablet industry to be characterized by products with short and unpredictable life span.
Internal strategic audit
Steve job was a competent leader as shown by the consequences of his management at Apple (Freedman and Vohr, 1998). After assuming the leadership of Apple Company, profitability went up to maximum. Innovation and product development was evident as he started with iCloud and advanced to 3rd generation iPad. This technological innovation placed Apple at a profitable state thereby securing a competitive advantage. The advancement was gradual, but progressive and this helped keep consumers intact. When customers are retained, there is a ready market for products generated by the company. This means that profitability is guaranteed and competitors are watched closely. Apple managed to hit its greatest financial heights with $108 billion in 2011 fiscal year. This was an exorbitant increase from 2010’s financial totals of $65 billion and other $82 billion in the company’s cash reserves (Linzmayer, 2004). However, it achieved this profitability with a loss in market share in various product categories. The company has conducted a resource appraisal in its assets and profits. It found an availability of resources in its shares and planned to sell them at $2.65 per dividend during the fourth quarter of the year 2012.
Value chain linkages are explained by the Porter’s model as the activities performed by a given organization that provides links to its competitive position. It analyzes the activities within and outside the organization. These activities are then related to the organization’s competitive strength. Therefore, value chain analysis strives to evaluate the values added by each activity to an organization. Apple seems to have understood this phenomenon as their value chain is properly linked. The activities undertaken by the company such as product development, innovation and adoption of new technology, helps to upgraded products that add value to the consumer perception. This triggers increased sales and hence profitability. Generally, Apple’s value chain linkages are strategic and effective for organizational development.
The company is headed by chief executive officer who leads a senior management team. This management team comprises of experienced individuals who have held offices related to the current one elsewhere. This means that they are skilled, experienced and knowledgeable and have required industrial background. They work competently thus ensuring success as far as performance is concerned (Gupta, 2002). The company have applied the provisions of functional leadership model, which views leadership in three folds, i.e. task, team and individual. Leaders focus on a given task, then think of the appropriate team before applying their individual experience. Apple’s employees are compensated and given incentives as a form of motivation. Moreover, the company has upheld transparency at highest levels. This comes from the fact that it has a department of financial editors who monitor each single cent. In addition, the company allows employees to experiment their technological ideas thus allowing them to develop.
The management of Apple Company was headed by Jobs who was the CEO. There were no power wrangles in the company and when time came, Jobs stepped down and allowed Tim Cook to assume leadership (The Boston Consulting Group, 2003). Similarly, many people were wondering why Jobs had never entered politics. They argued that his achievements and ideas in the market can still be transformed to political ideas. Perhaps the sustaining factor in this company was the compensation scheme, which ensured that everybody got compensation according to his/her functional contributions. Since compensation was on merit, chances of wrangles were limited.
Decision making at Apple is usually done by the top management. The company has a competent and experienced top management; therefore decisions are made out of detailed analysis of previous encounters. This has kept the company away from collapsing or going out of business. To install confidence that their decisions are credible, the company innovates products that finds competitors on a surprise. Inventions of various products and their penetration to various niche markets ensure its profitability and market dominance (Gupta, 2002). It is hard to tell the model of decision making used by Apple’s top management. However, judging from the outcome of their decisions, it is quite obvious that they make use of rational model of decision making. Consistent sound decision cannot be achieved by bureaucracy or rule of thumb. This is because human is to error and is bound to commit mistakes. Detailed and keen analysis of a particular decision is critical as it ensures proper thinking and judgement. Taking time helps in identifying possible errors that might have occurred during the strategy formulation or the decision process. Apple Company is one of its kinds as far as management and decision making is concerned. There have been no wrangles or instances of poor decision making in the recent years.
Business ethics are also held with high priority at Apple Company. Their fundamental principle is to always use proper judgment. It has been aware of its responsibilities to communities, shareholders and customers in adhering to ethical/legal provisions as well as complying with established laws. Their standard of business includes high level of business conduct, ethical awareness, honesty, conflict of interest awareness, confidentiality and community benefits provision (Göran & Wood, 2008). Consequently, the company expects all its employees, suppliers and all business partners to comply with such standards and policies. Apple recognizes the responsibility it owes to itself such as creativity, cultural diversity, and collaborative work environment. Therefore, it fails to tolerate discrimination, any form of threat and harassment. The company has implemented measures of protecting information due to the logic that it depends mostly on technologically innovated of products. It has specific policies that govern the communication between Apple and press (Dedrick, 2002). To avoid instances of conflicting interests, the company has formulated possible avoidance strategies. Lastly, the company has a key ethical responsibility of ensuring quality record by adhering to established policies, laws, procedures, and regulations. To achieve this, Apple has managed to put its customers first while respecting its relationship with other stakeholders. Strict follow up of adherence to rules and regulations is done to ensure that everything is on course.
Apple endeavours to portray the best human resource practices ever. This is clearly presented through its programme of training and development provided to staff. The company seems to understand that their staffs require skills more than their job demands. This facilitates effective performance of operations. As it is evident in the world of business, trained and developed members of staff work with motivation. This increased organizational production and hence improved profitability. Therefore, Apple aims at increasing its productivity through staff motivation. To make the company’s training effective; it has been divided into four categories. The first category aims at improving staffs efficiency with no departmental recognition. This mostly occurs in the training of Microsoft packages. The second category endeavours to install skills and knowledge required to improve the operations of the company. This mostly covers topics like e-commerce. Thirdly, personal development category deals with assertiveness training. The last category seeks to increase employees’ business awareness. Once all these trainings are done, the members of staff are found competent, efficient and highly productive.
Staff appraisals and welfare programs are also provided by the company. This is still a form of development and motivation aimed at increasing productivity. Apple has managed to retain a high number of fixed employees and has rare cases of employee turnover. This shows that its employees are satisfied with their job sections and therefore, do not wish to leave. Retained staffs are motivated and self-driven hence effectiveness and efficiency in operations is guaranteed. The company is among world companies that have employed the highest number of staff. Generally, Apple has an effective management and operations run smoothly. It has managed to diversify its market as its products are found everywhere across the globe. Truly, Apple is a good fruit adored by many.
PR crises that have impacted Apple since 2008
The public perception of a company is very important because it reflects how much value the public attach to the company. When the public perception of a company is positive, then the company’s products have a high chance of being purchased. Moreover, customers with positive perception about a given company are likely to build their loyalty around the company’s products. Consequently, profits for such companies may shoot up, enabling the company to expand its market and business volume. On the other hand, when the company’s image in the eyes of its external stakeholders is negative, it may experience low sales, profits and less customer loyalty. Since the aim of any corporate is to make profits sustainably, through creating profitable relationships with their customers, proper public relations is crucial.
Many of Apple’s external stakeholders are customers and shareholders. These two groups have a direct interest in the performance of the company. Customers purchase products from the company and are, therefore concerned with the quality of the products, sensitivity of the company to the environment and corporate social responsibility of the company. Shareholders are concerned with the value of the company’s stocks as they benefit from the increase in the value of shares. Apple, like many companies operate in an environment with diverse stakeholders and where many external factors tom the company may impact the company either positively or negatively. It is therefore important for companies to constantly assess the impacts of any PR crises with the aim of rectifying the pitfalls. Apple has faced many PR crises since 2008. These crises are identified, discussed below, and an assessment done on their impact on the performance of the company.
On October 2011, apple announced the introduction of a new product to the market- iphone 4S. The electronic industry was growing very fast and old gadgets were being constantly changed with the emergence of new technology. Because of the good reputation of the company, customers around the world eagerly waited for this product. They had high expectations about the performance of the product; bearing in mind the company producing it was very reputable in the market. When the iphone was introduce to the market, early adopters rushed to purchase it, less concerned about its price. This is because they expected that its performance would give them value for their money. However, their expectations turned into frustration when the iphone started dropping bars when held in a certain way. The dropping parts caused many inconveniences to the iphone users who spread the bad publicity about the company. In this case, the company’s PR, led by its CEO reacted swiftly by accepting the fault and compensating the angry customers. Each customer who had bought the iphone within this period was offered a free case or a refund if they were unsatisfied with it within 30 days. This bad publicity for Apple has a serious negative impact on its stock. The stocks had significantly fallen during the scandalous days. However, the stock price stabilizes within a day from $2480.41 to $254 per share, due to the quick response and assurance given by the Company’s CEO to the stakeholders.
Another crisis that the company f aced involved its price reduction for iphone 8GB and eradication of iphone 4GB in two months after their introduction to the market. The crisis was precipitated by the fact that customers who had bought these iphone initially perceived their move as a loss and was angry for the move made by Apple. This, under normal circumstance was not meant to be a crisis as such, but the existence of social media blew the situation out of proportion. As customers socialized, they continued to express their discount with Apple’s move to reduce the price for the iphone so fast. Again the CEO moved in to save the situation by first expressing sincere apologies for the discomfort experienced by its customers. He then promised all those who had bought the iphone with the initial prices to get a credit of $100 each that would enable them to purchase any products of their choice in Apple’s stores. This moved was consistent with Rawl’s theory of ethical behaviour that stipulates that freedom should be balanced with equality. Apple had the freedom to change the prices of its products, but had to consider the effects of inequality that was felt by those who bought the iphone at a higher price.
Environmental related crises rocked apple in 2008 when Greenpeace movement criticized Apple for not doing enough to eliminate from its products, substances that were toxic to the environment during disposal. This was bad publicity for apple and its PR team had to respond swiftly to repair the reputation. Because it had no immediate solution to the problem in question, the PR team gave a press release, which promised that the company would eliminate the poisonous substances by the end of that year. This press release appeared ineffective in deterring the topic off the media but at least the company showed concern to its stakeholders and promised to do something about situation. As a corporate citizen, Apple has a responsibility of ensuring that its products have little negative consequences to the environment. This concern, together with the promise to eradicate the contended materials from its products creates a good public image for the company, both internally and externally. To stakeholders, this was a gesture of genuine concern and no negative consequent resulted from the crisis. In all these cases, the company has responded swiftly to the crisis, ensuring that event the dented part of the company’s brand equity is reinstated.
Strategic options summary and recommendations
From the analysis of the industry, apple faces fierce competition from other companies such as Microsoft and Dell. All its competitors are striving to edge it out of the competition. To remain competitive in this industry, the company needs some strategies that can drive it to the next level of technological leadership. The strategic options lie in the opportunities available to the company as well as from its internal strengths that competitors may not have. However, the achievement of strategic goals is marred by the fact that technology is evolving too fast to give products time to go through the whole of their lifecycle. This means that more cost is being incurred than is being gained from the sales of products. The strategic options to be adopted must try to reduce these negative impacts of technological evolution, and create new channels of recovering the lost funds.
The company has a very strong brand, which has undoubted loyalty from its customers. The company has an option of utilizing this strength by using less effort to market its products to them. Since the customers are already loyal, they require less marketing effort. Most of its resources can be channelled towards penetrating new market markets, which would be easier given its market reputation. Many countries in the world, especially the developing ones are embracing technology with enthusiasm (Economides, 1999). Apple should focus on such untapped markets to ensure that it has a global orientation. Moreover, some of its products such as iTunes generate considerable income from music download. Such products are highly profitable because they consume less labour and new costs. Penetrating new markets is challenging because a market research needs to be done to determine if these markets are viable or not. This process consumes a lot of money, which many companies lack. Moreover, product customization, to meet the special needs of consumers in new markets also consumes resources, which have become rare. The revenue generated from such ventures can, therefore, be channelled towards development of new markets.
The partnership formed between Intel computers and Apple is a source of strength (Dedrick, 2002). This can be used by the company to increase its production. This can be appropriate because the partnership offers both companies economies of scale. The coming together of the two companies has consolidated their resources together. These resources can be used to manufacture a variety of assorted products at a go with recommendable efficiency. Costs of production are reduced because the two companies can share a supply chain. This reduces inefficient use of space and transport and consequently increases profitability. Apple should, therefore consolidate all these saved costs and either enter new markets or diversify its products.
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The success achieved so far by Apple is based on good quality products. These products’ quality is derived from the quality of its research and development department. Since this department has high-tech expertise in developing electronics, the company can optimize its use through diversification to other products that would use the same technology as the current products. The increase in the number of viruses and worms infecting computers is a good source of diversification. Such a venture would ensure that the company remains in business, performing excellently even when competitors are fierce and crying foul. Apple can venture in protection software such as antivirus and firewalls. This strategic option can be very vital especially when the new products being manufactured have a longer lifecycle compared to the current short-lifecycle Apple products. Technology is undergoing innovation at a very high rate. Products are abandoned for new ones created through innovation. When such technological innovation happens, companies in this industry can experience tremendous loses because the products may not have brought in the money that was used to manufacture, leave alone making profits. This would help reduce the cost of production, thereby increasing profitability.
The success of Apple depends on the good image it has in the eyes of its publics. Maintaining this image at its best is a good strategic plan (Freedman and Vohr, 1998). Many consumers like to be associated with corporations that are consistent in their positive performance. To maintain this positive image, the company should adopt a very proactive approach crises management. Public relations team should constantly evaluate crises that are likely to come up in the future. After this, possible tentative solutions should be created, ready for use in case such crises occur. Adopting a proactive approach to crises management reduces chances of damaging the company’s reputation since the company will be having all solutions to any crises that come up.
Many consumers are very sensitive about the environment. Most of them attach importance to it so much that they cannot consume products from a company that is perceived as hostile to the environment. Because of this consumer trend, Apple should adopt the option of doing away with products considered harmful to the environment. The company will be able to attract more customers who are environmental sensitive and be able to maintain the existing ones. Moreover, the company should engage local communities in an act of charity in projects for helping the needy. These acts can go a long way in building a reputation for the company, not only to the customers, but also to the government and shareholders. Being on the good side of the government comes with several benefits such as ease of operation and less trade barriers.