Question

• You have to write a strategic proposal on the importance of Strategic Management for a successful business expansion based on an actual business that

has gone from brick-and-mortar only, to offer its products and/or services in an online environment and/or in an international environment.

• You are free to choose the company you want to.

• The strategy document must have two parts:

o Audit:Analyzethebusinessofyourchoice,itspastandpresent,andhowisitcurrentlyperforming.

o Proposal:ProposeyourownStrategyforthebusiness,bearinginmindthatyou’relookingforinternationalexpansionwiththeaidofdigitalmeans.

• You may serve from the different authors, models and theories reviewed in class.

• This is an academic report, so make sure to quote relevant publications, such as academic journals and books, to support your arguments

Answer 1

Apple, based in Cupertino, CA, is one of the most valuable companies in the world. It produces popular digital gadgets, including Macs, iPods, iPhones, and iPads.

The company was founded in 1976 by two young hackers, Steve Jobs and Steve Wozniak. Its second product, the Apple II, was the first personal computer to achieve mass-market success. The Macintosh, released in 1984, introduced the modern graphical user interface to the mainstream.

Apple began to struggle after its board ousted Steve Jobs from the company in 1985. When Jobs returned to Apple in 1997, it was close to bankruptcy. Then Jobs led a spectacular recovery, introducing the iPod in 2001, the iPhone in 2007, and the iPad in 2010. The result: Apple earned almost $40 billion in profits in its 2014 fiscal year.

Jobs died of pancreatic cancer in 2011. Since then, the company has been led by Tim Cook, Jobs's longtime deputy.

Apple has been a Silicon Valley trend-setter for almost four decades. The Apple II, Macintosh, iPod, iPhone, and iPad have all been widely emulated — if not outright copied — by Apple's competitors.

Apple's success is due in large part to its obsessive focus on the user experience. Apple is a designer-centric company that likes to build all parts of a product — hardware, software, and online services — itself. That approach has allowed Apple to build some of the most elegant and user-friendly products ever created.

Apples Business Strategy

Apple Business Strategy: a brief overview

Apple business strategy can be classified as product differentiation. Specifically, the multinational technology company differentiates its products and services on the basis of simple, yet attractive design and advanced functionality.

Apple business strategy consists of the following three elements:

1. Focus on design and functionality of products. According to its business strategy, Apple has adapted advanced features and capabilities of its products and services as bases of its competitive advantage. The list of innovations introduced by Apple include, but not limited to the introduction of iPad, the first device of its kind that stored thousands of songs with a simple shuffle capabilities through songs, development Macintosh, the first computer to use a graphical user interface and the launch of iMac that “ripped up the computer design rule book, doing away with dull beige boxes and instead replacing them with fun, translucent machines in shades such as “Bondi Blue” that hinted at the aesthetic Apple would become so well-known for.

First mover advantage is another element of Apple competitive advantage. It has to be stated that Apple competitive advantage may be challenging to be sustained for long-term perspective. Specifically, the management may fail in terms of ensuring the addition of innovative features and capabilities in new versions of its products, thus compromising its competitive advantage.

2. Strengthening Apple ecosystem. Apple business strategy can be characterised as vertical integration in a way that the company has advanced expertise in software, hardware, and services at the same time. Apple’s vertical integration is one of the major factors that set it apart from the competition. The company has been benefiting from its vertical integration immensely. Specifically, an important source of Apple competitive advantage relates to its ecosystem, which is enabled by such integration.

Apple devices and software sync easily and work well with each other. Applications work on multiple Apple devices at the same time and there is no much difference in user interfaces; however the same items do not pair with products of other companies, thus creating the likes of a closed ecosystem. Apple’s ecosystem creates switching costs for its customers to the competition. The ecosystem also provides the opportunities to leverage relationships with existing customers to offer other products and services.

3. Decreasing dependence of the business on the sales of iPhones. Apple business strategy is transitioning from relying on iPhone sales to prioritizing its services business and other divisions. John Giannandrea has been promoted to a machine learning and AI role, retail chief Angela Ahrendts recently left the company and Bill Stasior has been removed as a head of Siri.[2] These high-profile changes that took place within the timeframe of less than three months are clear indication of company’s focus on services and other business divisions in order decrease dependence of the business on the sales of iPhones.

It is important to note that these and other efforts are showing positive results. Specifically, Apple’s services business division generated record revenues of USD 10,9 billion in the first fiscal quarter of 2019, which is 19% increase year-on-year.

Apple’s Generic Strategy (Porter’s Model) & Objectives

Apple Inc.’s generic strategy is broad differentiation. This generic strategy focuses on key features that differentiate the company and its information technology products from competitors. Through the broad differentiation generic strategy, Apple stands out in the market. For example, elegant design and user-friendliness of products, combined with high-end branding, effectively differentiate the technology business. This generic strategy means that Apple always aims to set itself apart from competitors not by price but by competitive advantages based on product design that attracts customers. Such design includes seamless connectivity among devices and cutting-edge aesthetics. Even though this generic strategy makes Apple different, the company still broadly reaches various segments of the market. The firm’s products are designed for everyone, thereby supporting a broad market reach. For example, Apple targets individuals and business organizations through the MacBook product line. In this way, the generic strategy of broad differentiation supports the company in maintaining its competitive advantage, leadership, and position as a high-end and high-value technology business.

The broad differentiation generic strategy has significant implications on Apple’s strategic objectives. For example, to apply this strategy, the company must continue emphasizing innovation through research and development. Apple must keep developing innovative products so that the business maintains its competitive advantage. Competitors eventually catch up with new technologies and new products, so the broad differentiation generic strategy compels the company to continuously innovate to keep itself always ahead of the competition. Thus, continuous innovation is one of Apple’s strategic objectives based on the broad differentiation generic competitive strategy. In addition, to maintain business growth, the company must keep growing its market reach, such as in the global consumer electronics market. In its generic strategy for competitive advantage, Apple does not focus on any specific market segment. Instead, the company competes by selling various goods and services that suit the various segments of the consumer electronics and information technology services industries. Thus, another of Apple’s strategic objectives based on its generic strategy is to penetrate markets to ensure a broad reach. Such expansion and business growth are achieved through intensive strategies for growth.

Apple’s Intensive Growth Strategies (Ansoff Matrix)

Product Development. Apple uses product development as its main intensive strategy for growth. Product development requires that the company develop attractive and profitable technology products to grow its market share and business performance. Apple implements this intensive growth strategy through innovation in its research and development processes. Through product development, the company uses innovation as a critical success factor and competitive advantage. For example, the business continues to innovate products like the iPhone, iPad, and Apple Watch. In this intensive growth strategy, the company grows because new products allow the business to generate more revenues, such as through the sale of new iPhone models. The company’s generic strategy agrees with this intensive growth strategy by focusing on technological innovation to increase competitive advantage and profits. Apple Inc.’s organizational structure supports this growth strategy. The structure’s product-based divisions enable strategic management specific to product development. Also, Apple Inc.’s organizational culture emphasizes innovation that supports product development.

Market Penetration. Apple Inc. uses market penetration as its second most significant intensive strategy for growth. Market penetration involves gaining a larger share of the current market by selling more of the company’s current products. For example, Apple applies this growth strategy by selling more iPhones and iPads to its current markets in North America. Also, the company achieves more sales by adding more authorized sellers to boost competitive advantages in its current markets. This approach penetrates markets where Apple has not yet achieved a significant position. In relation, under the market penetration intensive growth strategy, the company uses promotion through various websites and media outlets. Advertisements encourage more people to buy Apple products. This intensive growth strategy agrees with the company’s broad differentiation generic strategy by addressing the need to broadly capture the market through the sale of more technological products to more customers. Apple Inc.’s marketing mix or 4P influences the effectiveness of the organization’s competitive advantage and this intensive growth strategy.

Market Development. Apple uses market development as a low-priority intensive strategy for growth. Using the company’s competitive advantages, market development involves selling existing products in new markets. For example, Apple Inc. applies this intensive growth strategy by authorizing new sellers in markets where the company does not have any presence yet. This growth strategy agrees with the generic strategy of broad differentiation by expanding the company’s market reach, such as by introducing its current consumer electronics to new overseas markets. This generic strategy for competitive advantage also requires offering products to different market segments, which Apple satisfies via market development. Through its various product models of consumer electronics and other goods and services, the company fulfills this strategic requirement. In relation, the business strengths discussed in the SWOT analysis of Apple Inc. facilitate the implementation of market development.

Strategic Analysis and Recommendations for Apple Inc.

Apple’s generic strategy of broad differentiation adds competitive advantage by making the business stand out. Differentiation in product function and design supports the firm’s goal of leading the market through technological innovation. Innovation is at the heart of Apple Inc.’s business. However, to improve its application of this generic strategy for competitive advantage, the company must aggressively penetrate markets. This recommendation is especially applicable in developing countries where the corporation has limited market reach for its information technology goods and services.

Apple Inc.’s main intensive growth strategy is product development. Market penetration and market development have lower priority in this technology enterprise. These intensive growth strategies agree with and support Apple’s generic strategy. The company is strong in product development through innovation. However, to improve performance, Apple needs to emphasize more on market penetration and market development. These two intensive growth strategies can improve the company’s resilience against aggressive competitors like Samsung. Also, Apple Inc.’s operations management can optimize the effectiveness of these growth strategies and the broad differentiation generic strategy for competitive advantage.

Apple Revenue 2006-2019

Apple annual/quarterly revenue history and growth rate from 2006 to 2019. Revenue can be defined as the amount of money a company receives from its customers in exchange for the sales of goods or services. Revenue is the top line item on an income statement from which all costs and expenses are subtracted to arrive at net income.

• Apple revenue for the quarter ending December 31, 2019 was $91.819B, a 8.91% increase year-over-year.
• Apple revenue for the twelve months ending December 31, 2019 was $267.683B, a 2.32% increase year-over-year.
• Apple annual revenue for 2019 was $260.174B, a 2.04% decline from 2018.
• Apple annual revenue for 2018 was $265.595B, a 15.86% increase from 2017.
• Apple annual revenue for 2017 was $229.234B, a 6.3% increase from 2016.

Despite the strong competition, sales of the iPhone 11 still did well in the first quarter of 2020 (which includes the holiday shopping season), likely due to the phones' seamless integration with other Apple products, the company's loyal consumer base, and widespread marketing. In a report by Consumer Intelligence Research Partners (CIRP), the iPhone 11 models made up 69% of all iPhones sold in the United States between October and December 2019.

Furthermore, Apple achieved double-digit growth for its fifth consecutive quarter in its services segment, which encompasses iCloud, Apple Music, and Apple Pay, and its wearables department, which includes AirPods and the Apple Watch. While Apple's services and wearables may not have been as groundbreaking as the iPhone, consistent growth in these sectors provides the company with multiple revenue channels (some with significant recurring revenue). As Apple continues to branch out into new segments, the company will need to rely less on its sales of iPhones to fuel its impressive revenue.

Why Apple won't slow down

Since Tim Cook took over as CEO in August 2011, the company's stock is up about 480%. And in 2018, Apple became the first publicly traded company to hit a market cap of $1 trillion. As thrilling as these numbers are, Apple seems to just be getting warmed up.

During the company's January earnings call, Apple reported record-breaking growth in quarterly revenue, net income, and earnings per share. Its products brought in a whopping $79.1 billion, which is up 8% compared to the same quarter in 2019. The tech company also boasted 17% growth in its services revenue for the quarter, which brought in an all-time record of $12.7 billion. And if that isn't saying enough, Apple's wearables, home and accessories set a record with $10 billion in revenue and witnessed a 37% revenue increase when compared to Q1 2019. Wearables, Home and Accessories established a new all-time record with revenue of $10 billion, up 37% year-over-year.