Apple with Porter’s Model and Core Capabilities Essay
Apple Inc was founded in 1976 by Steve Jobs and Steve Wozniak with another 20 employees, the company started in Steve’s garage. Apple inc and its subsidiaries or collectively Apple is a manufactures, design and owner of variety of high technology included media player, portable music player, personal computer, smart phone, tablet as well as selling the related digital products like software, network services, third party digital content and application for Apple’s products. Apple first announced new innovated laptops called the Mac book and the most important step for further success is the accessing the MP3 player with their own iPod in 2001.
Moreover, they even entered the recently mobile phone industry with the Smartphone- Iphone in 2008. Apple has been changing the entire of the market with the position of the world’s largest producer of PC’s main marketshare holder. The featured products of Apple in the recent years include Iphone, Ipad, mac, Ipod high reted platform and its application for consumers in the iOs and Mac Os. From being Pc producer at the beginning of 80’s, with controlling a small share of industry, after several circumstances it changed to be the success organisation due to its Mac computers and other products are profitable. But there is only temporary issues for Apple to claim its market lead position in the PC industry.
Apple success analysis with Porter’s strategies and Core Capabilities Goal and structure of this report
In this report, a review of the current situation of personal computer industry and Apple’s PC Business and discuss: Review the of Apple by giving a brief introduction of the organisation and history of the products that are developed by Apple. Critically evaluate Porter’s five forces model and Porter’s generic strategies and discuss the extent to which these ideas by giving our strategic advice to aid the company in attaining sustainable for competitive advantage within the PC industry. Critically discuss the concept of core competencies and explain how the Apple could build on its core capabilities to enhance their further strategy. We end this report with our recomendation and our conclusion on the subject.
Apple several times confirmed to bring the best user experience to their consumers thourgh their innovative products. Besides, Apple’s strategy creates a unique power to develop its own unique platform with superior quality with the simplest design and easy to approach. Apple continues to invest in research and development and marketing to maintain their products’s positions in markets. As a part of plan, Apple has been expanding its platform to delivery of third party digital content and applications via the itune which allows customers to download applications, books, music through either iOs’s products namely iPhone, iPad or Mactonish as well as Windows computers. Apple also has been supporting the information technology community in the world for the development of third party software and hardware products. Apple’s strategies in plan include both expanding its sale market to close reach more consumers and serve a superior before and after purchases support experience.
Porter’s Five forces
Competitive Force 1: Rivalry among Existing Firms
Apple mainly get involve two field in the hardware industry are the personal computer and portable devices markets. According to the Credit Suisse First Boston, it is estimated that personal computer growth in 2005 will be approximately 8%, which is 3% lower than 2004. And concentration in this market which is controlled by a few very large competitors who have a great deal of capital invested in the firms, namely, Dell, HP Compaq, Gateway, and Apple. In 2005, Dell and Apple are speculated to have the most potential to increase market share in the PC market due to lack of new product introductions by other firms and the anticipation of Microsoft Longhorn in 2006.
If Apple is able to increase its market share by a few percentage points, its profits and ability to spend on marketing, and research and development (R&D) could allow them to become a much more serious player. Currently, Apple dominates the portable music industry music market with an estimated 90% for hard disk based players, and 65% of the total portable music market. In both the personal computer and portable music markets, component costs are large part of the total hardware costs, but through Apple’s product differentiation and higher pricing they are able to counteract the price wars that usually ensue under such conditions. Finally, there are little to no exit barriers in either market, which could be advantageous in ousting some of Apple’s competition in the future.
Competitive Force 2: Threat of New Entrants
There are no many large companies that take the huge shares in market, who these are Dell, Hp, Compaq. There are large economies of scale in PC market, and it limits the new threat of entrants. The threat of entry, therefore, puts a cap on the profi t potential of an industry (Porter 2008 p 4). A new entrant have to create advantages to compare the old strong ones in computer market. And that is not the only one barrie which limits new entrant, patents of forms are legal barriers where late rival can not be competitive giant. The more patents on personal computer designs, the more competitive the leaders can get, which is not an easy for new entrant and get over with out huge amount of start-up capital in the modern market.
Moreover, basically, there are two main operating systems for PC: windows and Mac OS X, and the second one is impossible to get license for new entrants. Apple is comfortable with enjoying the one of first starter in hardware manufactors of creating innovative products include Iphone, iPod while numerous portable devices in markets in last five years which are not different from others or the advantages are not enough to controll the market like Apple has been doing. The threat of a counter of consumers who eventually are being shy away from company’s dominace. The fact is the phenomenon when Microsoft is on the top of OS market and some of consumers are heading to another ocean and Mac oS and Linux are samples. Eventhough it is not an immediate threat, Apple could be aware of that.
Competitive Force 3: Threat of Substitute Products
On the side of PC, Apple’s market contains a huge number of products from above rivals. Especially, each of competitors possess a wide range of products in term of designs, prices, functions. It would seem as Apple PC can be replaced anytime in case of Apple’s products do not against the same level products. When the threat of substitutes is high, industry profitability suffers (Porter 2008 p7). In the last few year, Apple has reduced the concentration in PC and portable music player, it is not only because it do not create economical benefits or lack of competition. Apple recently focus on the smart phone side because it is now more competitive and provide more profit than others.
The new smart phones have annouced in every season with new design and function, in term of price and level, Iphone always stays on top luxury phone while Nokia, Samsung or HTC still take pole on the low price phone to get more customers. They could be out of perform of Apple in both speed and quality, the company has set apart from other by keeping core capilities and be unique in the market. Apple would have to stay on the old road to be innovative and price- quality in conscious of loyal users as well as leading the market as the strategy against rivals.
Competitive Force 4: Bargaining Power of Buyers
Apple since start-up moment, always concentrate on differentiation itself from rivals by keep inside of unique way. Apple’s product represent for the symbol of innovation, luxury and high technology, by the feature of innovation, Apple sets them apart from market. The buyers less concern in term of price when give decision to purchase a product from Apple’s stores. In market, Apple create their own position for their products as it is difficult to get the same products with similar functions as well as stylish look.
Moreover, customers of Apple have low relative bargaining power to consider buying a high volume of Apple’s products. Businessess are much more concern bargaining power when it end up purchasing PC or devices of Apple, in the other side, individual buyers are not literally controlling over Apple to their prices. Once Apple sells to end consumer, it has basically secured future purchases of the related products due to a lack of substitutes and third party replacement. It is more likely monopoly and give customers less relative bargaining power and substitutes to shop for better options or their demands of software and hardware upgrade.
Competitive Force 5: Bargaining Power of Suppliers
The company applied the strategy to take partner with various suppliers for manufacture Apple’s components for their products. In fact, Apple does not apple any limit for single supplier for process of assemble final products. This is an ace for Apple to deal with suppliers and give them less bargaining power concerning price. It is not rare in modern business, Apple used to be an alliance with Foxconn to assemble most of products, especially new Iphone and Ipad.
Besides, they uses both Nvidia and ATI for video cards in computers to avoid any negative bargain in price negotiation. According to Apple report, This is the same for its motherboards (ASUSTeK and Ambit Microsystems), Display units (Samsung, Toshiba, International Display Technology), storage devices (Hitachi Global Storage Technologies, Western Digital, Seagate), and CD/DVD drives (Samsung, Hitachi Global, and LG. Phillips Co.). Powerful suppliers capture more of the value for themselves by charging higher prices,limiting quality or services, or shifting costs to industry participants (Porter 2008 p5).
Cost Leadership Strategy
Cost Leadership corresponds to the “no frills” experience, like the low-cost airline carriers, who choose the cost leadership strategy to achieve competitive advantage.
Apple make differentiation by making products feel uniquely from those companies or more appealing to customer demand. It is count on your several impacts, like industry, market, consumer demand, and the nature of organisation and services. This is known as differentiation strategy (Grant 2005:241-242).The key success factor of the differentiation strategy is to make it either very difficult or high level of price for rivals to replicate Apple’s ones. To achieve that, the companies have to focus on:
* Research & Development;
* Production and delivery of high-quality and unique products or services; * Marketing and sales to create awareness and desire for it’s unique products.
Apple is playing on niche markets. Companies pursuing Focus Strategies have a deep understanding of a particular market and the unique needs of it’s customers. They can therefore develop unique lower cost or differentiated products or services for that specific market. These companies usually have a very strong brand loyalty amongst their customers and tend to monopolize that segment (particularly in smaller markets), making it less attractive to competitors thus mitigating the risk of attack from other niche players, new entrants or broad market competitors looking to enlarge their customer base through product or service specialization.
Steve Jobs and Apple’s Core Capabilities
For one, Apple has a powerful footing in the personal computer market by being “different” with its innovative style and ease of use. Its operating system is developed in house, leaving it free from the tangles of the dominant like Microsoft operating systems.
Central to an approach to strategy is organisation core capabilities which explains how company creates values and achieves superior performance, it also is the proven strength that it is different from other organisations in the market because of tacit knowledge, historical investments over time, relationships, human capital, and its culture (Lynn Perry Wooten p 7).In most of cases, there are include customer service, brand value, quality of products, organisational culture, human resources, and financial strength.
Since the return of S. Jobs, Apple’s core capability approach the definition of innovation and easy to use for every end users, and digital products stick to lifestyle of consumers via functions and designs. Apple concentrate on development and sales of its core products include OS, software to hardware and portable devices.
Since Apple is already recognized as one of the main leaders in the portable music market they have the ability to further increase their company image and quality image reputation. This will allow Apple to maintain their already well established clientele as well as attract new customers. The closed system is sealing the core of Apple’s strategy since Mac Os or iOS will not give license , only accept music and video through iTunes and recently the only partner of Apple in the US is AT&T for sale of iPhones. The begin of Apple is starting dominating in the market, it creates a concious in typical consumers’s mind that the design of Apple’s one is technically symbols of art of simple and fashionable. Apple engineers and designers figure that the products shoul have to look like and designate its features, and they bring that to life, wrapped with a user-friendly interface.
Recommendation for the company to build based on core capabilities Use SWOT Analysis to determine your company’s strengths, weaknesses, opportunities and threats in each Generic Strategy scenario; Use Porter’s Five Forces to assess the balance of power and how it might affect your company; Use the Congruence Model or the McKinsey 7S Framework to determine what performance drivers your company would have in each scenario; Cross-analyze the results of each finding and work out which Generic Strategy provides the strongest set of options. Reduce cost across the value-chain by engaging with specialist suppliers; Make smart investments in specialized technology to increase production efficiency; Eliminate activities in the value-chain that are superfluous in you target segment;
Adopt JIT production;
* Limit production to specialized products for your target segment. In a Differentiation Focus Strategy companies can:
* Make its products or services increasingly specialized; * Increase differentiation through innovation and your specialized knowledge of your target customers’ needs.
From our analysis and research we can lead the following statement: eventhough with superior products, Apple still stay on top with a bewared threats from rivals in their sides of markets of high tech products and digital contents. This can be explained by their own success in last ten years with the counters from both consumers and competitors. Futhermore, the bigger the company is, the more innovative and responsible the structure of Apple needs to be maintain the values of culture in organisation as well as speed of growth in development of Apple in future. By being opposite the side of strength inside the company, competitors have been learning from them and concentrate on the weakness of the core capabilities of strategy which Apple stays on the unique nature beyond the market.
1. Building a Company the Steve Jobs’ Way: A Positive Deviance Approach to Strategy- Lynn Perry Wooten, PhD 2. Comprehensive Business Analysis
3. THE FIVE COMPETITIVE FORCES THATby Michael E. Porter SHAPE IN ESSENCE, the job of the strategist is to under-STRATEGY 4. http://www.forbes.com/sites/susanadams/2012/09/12/apples-new-foxconn-embarrassment/ 5. http://www.apple.com
6. http://www.forbes.com/markets/2005/01/21/0121automarketscan05.html 7. Porter’s Genetic strategy
Porter’s Generic Strategies
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