Apple Inc

One of the most renowned and renowned technological companies in the world, Apple Inc. focuses on creating distinctive consumer goods, including phones, computers, and other devices. Additionally, the business creates and sells computer software. Apple Inc. is the biggest technical corporation in the world and one of the top-ranked blue chip companies in the United States. Since 2005, Apple Inc. has consistently reported rising net income, with only the years 2013 and 2016 seeing a relatively small decline. The company registered tremendous growth as its income in 2005 was $1.33 billion compared to $46.69 billion in 2016. In 2015, Apple Inc recorded the highest revenue as it achieved $53.35 billion as net revenue (Castro, 2016).

Apple Inc tremendous growth has been as a result of a series of business level strategies that has seen them not only go way ahead of their competitors but also cement loyalty among its customer. The business level strategies utilized by Apple Inc seem to be quite effective as they have resulted in high growth rate when compared to its competitors. According to Johnson, Li, Phan, Singer & Trinh (2012), Apple Inc has not only been able to maintain its client base but has been able to expand in the process gaining loyalty as the clients readily embrace its products hence the continuity in the growth of their annual income over the years. Apple Inc has been able to use differentiation, focused cost leadership and focused differentiation for its value proposition, strategies that continue to bear fruits as they continue to dominate the electronics market as a result of having a competitive advantage (Heracleous, 2013).

Product differentiation

Product differentiation is defined by Hannagan (2001) as a strategy used by a business to convince their clients to pay a premium price for the unique features of the product or services that they are selling. Apple Inc business model has largely been based on product differentiation. According to Johnson, Li, Phan, Singer & Trinh (2012), Apple Inc’s core business has been electronic devices that range from phones, computers, watches and portable music systems. The electronic product offered by Apple Inc are highly competitive as other big businesses offer the same product. The product offered by Apple Inc are relatively expensive in terms of pricing when compared to the one’s offered by its competitors both within the United States and globally. The competitors including Nokia, Samsung, Sony, and Motorola have been largely outwitted by Apple Inc in the past years.

Apple Inc provides unique and desirable features on their electronic brands. The customers highly approve of the unique features and products that Apple Inc offer hence the are willing to pay premium price for the products. According to a study conducted by Khan, Alam & Alam (2015) customers observed that Apple Inc products are not only unique but are of high quality when compared to those offered by competitors hence willing to give the premium price.

Apple Inc has been able to favorably compete through differentiation by continuously improving on the features of their products, by regularly releasing improved version of their products. According to Johnson, Li, Phan, Singer & Trinh (2012), this as enabled the company not only to shade off competition but also to maintain and grow its customer base.

Focused cost leadership strategy by Apple Inc

Focused cost leadership is defined by Hannagan (2001) as the process of competing based on price to target a narrow market. Apple Inc does not utilize this strategy rather focuses on a market that can afford its highly priced products. According to Johnson, Li, Phan, Singer & Trinh (2012), Apple Inc mostly targets high end electronic customers especially the middle and upper social class as critical consumers of its products. Though Apple Inc practices some aspects related to focused cost leadership such as large units production thus economies of scale and other cost minimization approaches, the cost reduction benefits have never been known as being transferred to the client.

Focused differentiation strategy by Apple Inc

Apple Inc key target clients are the middle and upper class individuals. The features of its products are designed to cater for the needs of this client base. As Hannagan (2001) observes in focused differentiation strategy, a business focuses on its narrow market to fulfill its demands. Firms majorly focus on the uniqueness of its product as the critical selling point. Apple Inc as Castro (2016), observes has perfected on focused, differentiated strategy whereby it focuses on features of its products to reach its target clients.

Focused differentiation strategy adopted by Apple Inc has been key to the success of different of its products some growing into worldwide brands. The iPhone which is its mobile phone brand is one of its key product. Since the introduction of the first iPhone, Apple Inc has continuously developed on it releasing subsequent versions with better features, a strategy that has enabled the firm to establish a client base which is always in anticipation of the release of new product. The strategy has further enabled Apple Inc to focus on enhancing the features of its product so as to meet the growing expectations of their customers (Khan, Alam & Alam, 2015). Apple Inc continues to apply differentiation and focus differentiation strategies successfully on creating value preposition for its product hence its success.

Learning Activity #2

In addition to organization design, there are several other factors that can cause a good strategy to fail: management, operations, marketing, finance, R&D and MIS issues. Review your response to Learning Activity #1 and determine which ONE of these additional factors could cause that specific strategy to fail. Clearly, identify the factor, explain why it could cause the strategy to fail – fully support your response.

Apple Inc application of differentiation strategy and focused differentiation strategy is currently a great success as it has enabled it to solidify its market base. Through differentiation, Apple Inc has been able to continuously offer its market with appropriate technological products with special features and quality that is reflective of the premium price the customer pay. These strategies are being innovatively applied by Apple Inc, as they ensure that they continuously invest in future research in that they have to regularly provide products with better features than their rate at which their competitors are unable to keep up. The strategy has been successful in helping not only to create customer loyalty but also in broadening the market base. Despite, the seemingly open success that the utilization of differentiation and focused differentiation strategy by Apple Inc, there lies a risk that can easily result in the failure of this strategy, impacting negatively on its market hence a reduction in the net income.

Differentiation and focused differentiation strategy success demands for effective management. According to Heracleous (2013), success in the utilization of differentiation strategy by Apple Inc has been boosted by the strong leadership the firm has. Management is defined by Hill, Jones & Schilling (2014) as the process of planning, coordinating and facilitating activities for a specific objective to be met. For the differentiation strategy to be successful, a proactive management of Apple Inc has ensured that critical elements of their strategies remain secretive, so as to keep their competitor guessing on what their next step will be.

The management of Apple Inc can easily lead to the failure of the differentiation strategy especially if they either become predictive on the features about their new products release or stay with a product too long in the market before releasing another one. This is because Apple Inc’s competitors are more likely to either imitate the product or offer relatively lower products or in the case, the product features become quite predictive, the competitors will release better features hence eating into their market base. As Hannagan (2001) observes, product imitation is the greatest threat to the success of differentiation and focused differentiation, as competitors are able to imitate a product feature and offer it at a relatively lower pricing. It not only calls for high level of a firm’s management but also the ability of the management to look into the future to help protect the small aspects that guarantee success to their firms.

A firm’s management is a crucial factor that has the capability of leading to the failure of a successful strategy like the differentiation and focused differentiation strategy; that has led to the success of Apple Inc into a global technological leader. The need to ensure that the key elements of the differentiation strategy remain a secret is a critical management role which has to be sustained for the continuous success of the firm.

References

Hannagan, T. (2001).Mastering strategic management. Palgrave Macmillan.

Heracleous, L. (2013). Quantum strategy at Apple Inc.Organizational Dynamics,42(2), 92-99.

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014).Strategic management: theory: an integrated approach. Cengage Learning.Castro, R. B. (2016). Apple Inc.–A Marketing Success Story. John Wiley & Sons.

Johnson, K., Li, Y., Phan, H., Singer, J., & Trinh, H. (2012). The Innovative Success that is Apple, Inc.

Khan, U. A., Alam, M. N., & Alam, S. (2015). A Critical Analysis of Internal and External Environment of Apple Inc.International Journal of Economics, Commerce and Management,3(6), 955-961.