Apple analysis - Lecture notes 1-7 PDF

Preview

Summary

Сanvas analysis...

Description

See discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/340378318

Business Analysis of Apple Company Research · February 2020 DOI: 10.13140/RG.2.2.19161.06246

CITATIONS

READS

0

3,109

1 author: Negar Gazerani Fachhochschule Joanneum 1 PUBLICATION0 CITATIONS SEE PROFILE

All content following this page was uploaded by Negar Gazerani on 02 April 2020. The user has requested enhancement of the downloaded file.

2020

STRATEGY PAPER

ANALYSIS OF APPLE SUBMITTED BY: NEGAR GAZERANI SUPERVISORS: MAG. CHRISTIAN FRIEDL, MSC LÍGIA FRANCO PASQUALIN, MA, MBA FH JOANNEUM | Business in Emerging Markets (Master)

Page 1

Table of Contents 1. Introduction ............................................................................................................................... 2 2. Macro Environment ................................................................................................................... 3 3. Industry and Competitors .......................................................................................................... 5 4. Business Model .......................................................................................................................... 7 5. Resources and Capabilities ...................................................................................................... 10 6. Corporate culture ..................................................................................................................... 11 7. Growth Strategy ………………………………………………………………………………………………………………… 12 8. Summary………………………………………………………………………………………………………………………………14 9. References………………………………………………………………………………………………………………………………..15

Table of Figures 1. Figure 1: Porter’s Five Forces framework of Apple…………………………………………………………………..5 2. Figure 2: Apple’s Average selling Price…………………………………………………………………………………….6 3. Figure 3: CANVAS model designed for Apple…………………………………………………………………………..8 4. Figure 4: VRIO analysis designed for Apple……………………………………………………………………………11 5. Figure 5: Apple’s stakeholder map ……………………………………………………………………………………… 12 6. Figure6: Apple Ansoff Matrix ………………………………………………………………………………………………13

NEGAR GAZERANI

FEBRUARY 2020

Page 2

In Introd trod troduc uc ucti ti tion on Since being founded in 1976, Apple has been considered a leading designer and integrator of computer hardware and software. In 1976, Steve Jobs and Steve Wozniak founded a garage startup together and produced Apple Computer. This newborn company revolutionized the computer industry in 1978 by launching the personal-computer with the first all-purpose desktop PC, the Apple II. But this success was short-lived and Jobs left the company in 1985 for launching Pixar Animation Studios. However, a decade later he returned and revitalized the company in the 1990s. Under the leadership of Steve Jobs, the company developed numerous innovative devices. Through sleek products, innovative stores, and new business models, Apple had fundamentally transformed the computer, music, mobile telephone, and retail industries. Nevertheless, its innovations also came with persistence. Anyone who used the Apple II in 1978 and then picked up an iPhone three decades later would find a familiar device. This factor can be regarded as a key factor resulting in customer loyalty (Stefan Thomke,2012).

After Steve Jobs’s death in 2011, some people inside the company were eager to prove that Apple could remain as innovative as it had been under Jobs while some were afraid of the immense challenge ahead of the company regarding its complex market. Given the success that Tim Cook has had leading Apple after Steve Jobs's death, it can be said that Steve Jobs left Apple in very good hands to carry on his legacy of the Apple Way (Yukari Iwatani Kane, 2015).

Needless to say, Apple's success roots in business strategies that have been followed by this company. To uncover the details behind different layers of this successful business, this paper will study the macro-environment, industry and competitors, business model, resources and capabilities, corporate culture, and growth strategy used by Apple. In the last part of this paper, a summary is presented in which the results of these analyses are covered and some recommendations are presented.

NEGAR GAZERANI

FEBRUARY 2020

Page 3

Mac Macro-E ro-E ro-Envir nvir nviron on onmen men mentt The macro-environment remarkably affects every business. In this term, PESTEL is One of the best strategies to cover the potential opportunities and challenges that can face a company. This strategy covers political, economic, social, technological, environmental and legal factors and can be discussed for Apple as bellow: POLITICAL FACTORS

The dependency of Apple on lower-cost manufacturing in China is very high. It means, social and political tension between the United States and China can disturb manufacturing or cause more manufacturing costs for Apple. For instance, due to the aim of developing American manufacturing, there have been calls to reduce Chinese imports in the United States in recent years which can negatively affect the Apple market. Plus, one of the most recent used methods to achieve this goal was reported in 2018 when the US trade deficit with China in goods reached $420 billion. Meanwhile, the Trump administration imposed a punitive 25% tariff on $250 billion’s worth of Chinese imports to the USA. (Yuqing Xing,2019).

Besides, more than half of Apple productions are sold in countries other than America. This in return, increases the external impacts on their market-share and will extend the challenges faced by Apple in terms of Sales. For instance, the other foreign brands such as Samsung may achieve the support, protection, and special treatments from their domestic government, which could cause more aggressive competition for Apple in the foreign market. (Qian Zhang, 2017).

SOCIAL FACTORS

One of the most recent social challenges faced by Apple in recent years was the company’s reputation after Steve Jobs. The next CEO, Tim Cook, faced the challenge of being examined by current and former employees and executives, investors, the media and Apple's consumer for every decision he could have made. He would also have to contend with the sky-high expectations that Jobs had conditioned the public to have for Apple (Yukari Iwatani Kane, 2014). NEGAR GAZERANI

FEBRUARY 2020

Page 4

In addition, the mentioned close connection between China and Apple has the potential to create a reduction in market share in other areas, such as North America and Europe as tensions between these countries and China rise (John Dudovskiy,2019) Needless to say, Apple productions are considered among Luxury products. Meanwhile, a backlash against expensive products exists among some customers in the United States and Europe which can affect apple sales negatively. However, the company has evolved from its roots as a technology operation to more of a lifestyle-centric endeavor to overcome this challenge (The Fashion Law,2018). TECHNOLOGICAL FACTORS One of Apple’s strongest competitive advantages is high levels of security and safety. However, cybercriminals are increasing considerably and that puts Apple’s systems at more risk of insecurity as well. For instance, in 2014 February, the company released Mac and Mobile operating systems to fix critical security flaws problem. Some of the users of the product were exposed to hackers who made attempts at intercepting their internet communication. But Apple addressed this problem by releasing iOS for iPhone 4 as well as later models, iPad 2 and fifth-generation iPod touches (Best Essay Services, 2015). However, this company could not always tackle technical problems. MobileMe and Apple Maps are some of the services that never worked and Apple appears to be thinking internally about this. Regarding the fact that technology is evolving faster than ever, Apple needs to keep up with some of the major tech trends including Artificial Intelligence (AI) and 5G data networks (Bernard Marr,2019). ENVIRONMENTAL FACTORS Apple's commitment to the environment includes properly disposing of electronic equipment at the end of its useful life. Plus, the company has announced on its website in 2019 that it experienced a 35% reduction in carbon footprint over the last three years (64% reduction since 2011), aiming the goal of a mining-free future for making its products (Michael Potuck, 2019). Meanwhile, Apple’s high dependency on huge internet infrastructure and data centers can bring more electricity costs for this company in the foreseeable future (Umar Farooq, 2019). NEGAR GAZERANI

FEBRUARY 2020

Page 5

LEGAL FACTORS Privacy issues and security are great concerns for both technology users and Governments. Indeed, Apple has been asked by US Congress recently to protect its users' privacy more severely. This legal factor may extend the challenges facing the production of goods that deal with private information (Umar Farooq, 2019). Moreover, the income of Apple relies on different products like software and music that are covered by intellectual property laws. This issue exposes both piracy and litigation challenges to the company. It means, Apple must emphasize privacy protection and regulatory compliance in all of its products, and consider adjusting its policies to address current legal pressures on the business (Jessica Lombardo, 2019). According to the given data in the last five chapters, it can be stated that political factors are the most notable ones among the factors that affect the macro-environment of the company. The relation with China is emphasized not only as a political factor but also as an economic and environmental one which can impact the market share and production cost of Apple considerably. Therefore, Apple's reliance on the external production cycle requires more attention.

Ind Industry ustry and Com Compet pet petitor itor itorss After the macro-environment, Industry is the second layer of a business environment that requires attention. In this paper, we use Porter’s competitive five forces frame work to illustrate the general status of Apple in the technology industry as following figure: Bargaining power of suppliers: Low as Apple is among their main consumers

Bargaining Power of Customers: High but under control due to customer loyalty

Competitive Rivalry between the existing players: Very high in technology market Threat of New Entrants: Not very high due to the expensive and timeconsuming process Threat of Substitutes:

Intensifying competition from China and India

Figure 1: Porter’s Five Forces framework of Apple | Designed by: Negar Gazerani

High according to Apple’s increasing price in recent years

Page 6

The level of competition between the top players in the technological industry is very high. There are several competitors of Apple in the industry including Google, Amazon, Microsoft, Lenovo, HP, Samsung and others. All these brands are engaged in an intense competition where the loss of one can be the benefit of the other. Moreover, competition is a key factor affecting Apple’s performance and profits. It can be claimed that Apple's market share is not threatened considerably by a new entrant to this market as the cost of establishing a new company is extremely high in this field and also creating a brand name as recognized as Apple would be expensive and timeconsuming (J.B. Maverick, 2019). However, the risk of Substitutes is increasing for Apple due to its increasing price trend of iPhone as its most popular products.

Figure 2: Apple’s Average selling Price. Financial Times. Download from 26th of February 2020, retrieved from https://www.ft.com/content/62104788-952f-11e8-b67b-b8205561c3fe

Although results show that Apple users are more satisfied with their needs being fulfilled by Apple products comparing to Samsung users with Samsung products (Yi-Chia Wu,2016); the rising trend of pricing in Apple may decrease its market share in competition with its closest competitor in smartphone industry, Samsung, as quality and innovation in these two companies are getting closer and price plays a considerable roll in consumers’ decision-making process. In terms of Bargaining Power of Suppliers, Apple will not face serious challenges as for most of its suppliers, Apple is the main customer. Therefore, they would not risk the loss of Apple’s NEGAR GAZERANI

FEBRUARY 2020

Page 7

purchases (J.B. Maverick, 2019). On the other side of the market, individual bargaining power is also a powerful force according to the mentioned high level of competition and diverse products in the market. However, this force is reduced for Apple as it enjoys a high level of customer loyalty. A study published by investment bank Morgan Stanley showed that 92 percent of iPhone users were “somewhat or extremely likely” to upgrade within 12 months intend to buy Apple. Such a level of loyalty allows the world’s largest IT company by revenue to sell their products with highprofit margins. (Mikey Campbell, 2017). To analyze how Apple faces its competitors, Blue Ocean seems to be the strategy that this company pursues. They have not tried to beat competitors while they have gone beyond Competition by reaching into new unexplored markets. For instance, they have introduced a new device like the iPod and created a new demand for it in the market. Then, they made an application like iTunes to make the experience of using this software more absorbing. As time passed, they have developed and added new features to their innovations and ended up in today's success by competing themselves instead of other companies (John Nyarko, 2016). However, all these forces are somehow related to the relation with other countries. As a complement, we suggest the threat of intensifying competition from China and India for this American company as an extra force. Regarding the issues that we discussed in the business environment sector, the close relation with China in terms of production and selling can affect this company through various challenges including political, economic, and environmental ones. This in return, has the power to limit the industry of the company. It also can happen with other emerging markets like India as they are growing fast enough and can become the next competitor after China.

Busi Business ness M Mod od odel el To investigate the reasons behind the success that a company like Apple has achieved, we have to go deep into its business model. To do so, a CANVAS analysis can be used to present key factors that are considered by the company in substructures of a business model. Apple's business model is based on innovation and consumer-centric devices and it targets mass-market consumers. Although Apple’s business model is mainly based on the sales of tech products, it cannot be NEGAR GAZERANI

FEBRUARY 2020

Page 8

understood from that standpoint alone as Apple is both software and hardware, which is also the reason that made it successful. (Mitsuru Kodama, 2017). A CANVAS analysis for Apple with regarding iPhone as the best representative of its products can be presented as below: KEY PARTNERS

Manufacturers of Electrical Components

KEY ACTIVITIES

VALUE PROPOSITIONS

CUSTOMER RELATIONSHIPS

CUSTOMER SEGMENTS

Software Development

iPhone

Loyal customers

open to change CHANNELS

KEY RESOURCES IP Companies

ecommerce

Computer Engineers

COST STRUCTURE

REVENUE STREAMS Fluctuating Production Cost

Products

Media and Licensing

Figure 3: CANVAS model designed for Apple| Designed by: Negar Gazerani

Manufacturers of electrical components who produce the basic components for Apple’s products and IP companies that collaborate with Apple in terms of IP development are the key partners of this firm. For instance, Analog Devices (ADI) which is based in Norwood, MA and provides the capacitive touchscreen controllers for the iPhones and the Apple watch (Shobhit Seth, 2019). Apple has always been a software company. Indeed, the first iPhone would be nothing if it had not its exclusive operating system. As one of its main activities in 2019, the company is reported for seeking out ways to bridge the gap between its iOS devices and its Macs along with its own 5G

NEGAR GAZERANI

FEBRUARY 2020

Page 9

modems. This project will require software engineering expertise as a crucial need (Jonny Evans,2019). However, Apple introduced the first iPhone in 2007 as the ultimate digital device with a value proposition that claimed an iPhone is “your life in your pocket”. At the time it did not offer much insight on how the iPhone will do just that, but 10 years later, the claim was proven to be correct by introducing iPhone X. The design and development of the iPhone has had a huge social impact, because they encourage innovation in the cell phone industry (N Riley,2011). As was mentioned in the last chapter, Apple’s customers are so loyal. That may be regarded as huge channel of communication between the firm and customers where long lines are created in the time of introducing a new product. But in fact, Apple has limited distribution channels, more than 400 stores and 10000 retail touch points worldwide. However, this company with the advent of e-commerce sites are judged by the customer group that apple target to. For instance, the company always release a video for introducing new features of upcoming iPhone before it comes to the market (Hitesh Bhasin, 2018). Although Apple has put mass-market as their target for selling their products such as iPhone, they claim that their designs are for those who “think different”. In other words, many people may get confused with innovative changes, and Apple's focus on innovation is its secret. Therefore, People who are open to changes may find Apple’s products, iPhone in particular, more appealing as it has been constantly improved (Mayesha Tasnim, 2018). According to estimates by IHS, the material costs of iPhone X (64GB), excluding other expenses such as R&D and marketing costs, amount to $370.25 while this number war reported for its predecessor, iPhone 8, $254.87 (Felix Richter,2017). This data along with the stated data regarding the increasing price of iPhone illustrates that Apple does not focus that much on its cost instruction but rather than its innovation. It means Apple prefer to produce a better quality of products even if it costs more. However, this company is a product company where the iPhone represented over 54% of Apple’s revenue in 2019, according to its website. Other fast-growing segments are services like digital-

NEGAR GAZERANI

FEBRUARY 2020

Page 10

content, cloud, and licensing and the wearables and accessories such as AirPods and Apple Watch which Apple’s income relies on them (Mitsuru Kodama, 2017).

Res Resour our ourcces and cap capabiliti abiliti abilities es To examine how far the resources and capabilities of Apple can extent, a VRIO analysis can be conducted to see how valuable, rare, inimitable and organized these resources are. It seems like Apple comes out with at least one significant new implementation of technology every year. Its long history with game-changing innovative products like iPhone is the first feature that comes to the mind. However, Apple and Samsung are in a worldwide corporate battle since 2010 when Samsung, released a very iPhone-like product through its Galaxy lineup. Regarding its target marketing, research ...