BMG872 Assignment:Global Strategy, Development and Implementation

1. Introduction

Apple leads technology innovation. Apple, established in Cupertino, California, is recognised for its innovation and technology. Where computers and consumer electronics meet, its inventions have transformed the world. Apple earned $365 billion in 2022, a record. This incredible achievement demonstrated Apple’s global domination and unrivalled ability to acquire markets and consumers.

Apple has amazing 170 countries. The company’s worldwide growth reflects its commitment to all cultures. From Tokyo’s hectic streets to New Zealand’s tranquil countryside, Apple’s effect is global. Apple employed 147,000 foreigners. Apple’s meteoric climb from garage to global power displays its commitment to innovation and customer service. With its global expansion, Apple has had a greater effect on our everyday lives and technology. This online giant is only beginning to expand globally and add new services

1.1 Porter’s Five Forces

Porter (1979) explains Porter’s Five Dynamics approach analyses sector dynamics strategically. This article examines the smartphone industry, concentrating on Apple Inc. The smartphone business is competitive due to fast-changing technology and customer tastes. We’ll examine the competitive environment after examining all five criteria.

1.2 Threat of New Entrants

1.2.1Assessment:

High and extremely difficult for upstart companies to break into.

1.2.2 Economies of Scale:

Apple’s enormous manufacturing volume allows them to take advantage of economies of scale. It would be tough for competitors to Apple’s price edge.

1.2.3Capital Requirement:

The initial expenditure needed to compete in the laptop and smartphone markets is high.

1.2.4Brand Identity:

Apple has a strong brand identity that new entrants would find difficult to match.

1.2.5Access to Distribution Channels:

Competing with Apple is difficult because of the company’s extensive distribution network, which includes its own retail outlets.

1.2.6Proprietary Technology:

Apple’s patents and exclusive technology prevent competitors from easily replicating their work.

1.3Bargaining Power of Buyers

1.3.1 Differentiation:

Apple’s products reduce buyers’ bargaining power.

1.3.2 Switching Costs:

Once customers invest in Apple, switching platforms may be costly and inconvenient.

1.3.3 Volume of Buyers:

Apple has many dedicated customers.

1.3.4 Price Sensitivity:

Due of Apple’s value promise, certain customers are less price-sensitive.

1.3.5 Backward Integration:

Buyers seldom incorporate backward into smartphone or computer manufacture.

1.3.6 Assessment:

Moderate to Low bargaining power of buyers

1.4 Bargaining Power of Suppliers

1.4.1 Number of Suppliers:

For certain parts, Apple must rely on only a few of vendors.

1.4.2 Unique Services:

The bespoke chips used in the iPhone are one example of a part that is both special and difficult to replicate.

1.4.3 Switching Costs:

If Apple were to swap suppliers, it would pay enormous expenditures.

1.4.4 Importance of Volume:

Apple’s massive purchases are highly sought after by vendors.

1.4.5 Threat of Forward Integration:

Foxconn, one of Apple’s suppliers, is primarily a manufacturer and has no plans or resources to become vertically integrated with Apple’s operations.

1.4.6 Assessment:

Moderate to High bargaining power of suppliers, depending on the specific component.

1.5 Threat of Substitute Products

1.5.1 Functionality:

Tablets and smartphones might be useful alternatives since they do comparable tasks.

1.5.2 Price:

Some markets might be enticed by cheaper cellphones or computers.

1.5.3 Consumer’s Propensity to Substitute:

Brand loyalty to Apple has the potential to slow the pace at which its customers look for alternatives.

1.5.4 Technological Changes:

New alternatives may emerge in response to the rapid pace at which technology is developing.

1.5.5 Availability:

Alternatives may be found easily in stores.

1.5.6 Assessment:

Moderate threat of substitutes

1.6 Rivalry among Existing Competitors

1.6.1 Number of Competitors

Apple’s rivals in the smartphone sector include Samsung, Google, and Huawei.

1.6.2 Industry Growth Rate

Competition in the smartphone sector may heat up as growth slows.

1.6.3 Product Differentiation

Apple’s goods stand out from the crowd, but so do those of its rivals.

1.6.4 Exit Barriers

 Competition may develop if exiting the market is difficult or expensive.

1.6.5 Diversity of Competitors:

Different competitors have different strengths and weaknesses and access to different tools.

1.6.6 Assessment:

High rivalry among existing competitors

1.7 Deeper Analysis of Selected Forces

1.7.1 Threat of New Entrants

1.7.2 Economies of Scale and Production Volume

Apple’s huge manufacturing allows economies of scale. Company’s massive production and dispersion of fixed expenses across several goods lower unit cost. To compete on cost efficiency, new entrants must match production levels, which is difficult. (Barney & Hesterly,2012).

1.7.2 Barriers to Entry and Proprietary Technology

Apple’s patents and proprietary technologies give it a commercial advantage. Its in-house A-series transistors power the iPhone and iPad and are famously difficult to produce. Due to these technological difficulties, future rivals will struggle to compete with Apple. (Apple Inc, 2021).

1.7.3 Capital Requirement and Brand Identity

To enter the smartphone and computer sectors, R&D, marketing, and distribution need large investments. New rivals have an even bigger uphill climb to break through Apple’s brand awareness and win over its loyal customers. (Apple Inc, 2021).

1.7.4 Access to Distribution Channels and Retail Network

Apple has several authorized resellers in addition to its own stores and websites. New entrants may not reach as many customers as established companies due to distribution methods.. (Apple Inc, 2021).

1.7.5 Assessment

Due to Apple’s strong brand name, high capital needs, economies of scale, and patented technologies, the company faces a High risk of new competitors. (Barney & Hesterly,2012).

1.8 Bargaining Power of Suppliers

1.8.1 Dependency on Key Suppliers

Foxconn is an essential part of Apple’s supply chain since it handles production and sources vital components like screens and memory chips. Because of Apple’s reliance on them, Apple’s suppliers have more leverage in negotiations.(Dyer & Singh, 1998)

1.8.2 Switching Costs and Custom Components

Switching suppliers is expensive and may require production line retooling and quality control issues. The iPhone’s bespoke semiconductors show how difficult vendor switching is without compromising quality or product differentiation.

1.8.3 Supplier Concentration and Volume

Apple’s suppliers like its orders. Apple has a strong negotiating position owing to mutual dependency. If they have other customers or cash, suppliers may become less dependent on Apple.(Apple Inc, 2021).

1.8.4 Assessment

Apple’s suppliers usually negotiate. Apple may negotiate with suppliers because of its size and reputation. Apple’s dependence on a few manufacturers and unique components reduces its advantage. (Apple Inc, 2021).

1.9 Attractiveness of Apple’s Key Market

Apple’s position in the smartphone industry is attractive due to several reasons:

1.9.1 Innovation and Branding

Apple’s consistent innovation and reputable brand image serve as a major competitive advantage. Because of this, the corporation is able to charge higher prices while maintaining consumer loyalty. (Apple Inc, 2021).

1.9.2 Ecosystem

Customers are more engaged and loyal because to Apple’s ecosystem, which includes hardware, software, and services. Users’ commitment to an ecosystem makes it more difficult for them to defect to a rival. (Apple Inc, 2021).

1.9.3 Strong Supplier Relationships

Apple’s size and power allow them to build strategic agreements with suppliers, guaranteeing a continuous supply of key components. This makes operations more dependable and less prone to supply chain interruptions. (Apple Inc, 2021).

1.9.4 Entry Barriers

Potential rivals are discouraged from entering the market because of the expensive startup costs, complex technology, and established market leadership. This consistency protects Apple from potentially dangerous new competitors. (Apple Inc, 2021).

2.0 Core Competences

Its “core competencies.” distinguish it. Hardware, software, and service integration are Apple’s strengths. Apple’s strict product development approach prioritizes practicality and aesthetics, which made the iPhone and iPad successful. Apple’s ecosystem creates brand loyalty, unlike Samsung’s hardware and tech. Apple’s stores, iTunes, iCloud, and App Store enhance shopping. Statistics (2021).

2.1 Competitive Advantage

 According to Grant (1991), competitive advantage is what keeps a corporation ahead of its competitors. The VRIO framework can break down Apple’s competitive edge into multiple elements. This strategy considers value, scarcity, imitability, and organizational support.

2.2 Value Chain Analysis

The Value Chain model divides organizational operations into core and enabling activities to understand value generation and differentiation. Supplier partnerships, product development, production, distribution, sales, and customer service are Apple’s major businesses. Tech development, HR, infrastructure, and purchasing.

Apple controls the Value Chain. Design makes modern items more valued. Logistics and operations management accelerate product launches. Unique advertising and iconic stores boost sales and reputation. Apple’s dedication makes Genius Bar customers happy and loyal. (Apple Inc, 2021).

Michael Porter established the Value Chain in “Competitive Advantage: Creating and Sustaining Superior Performance” in 1985. It describes a company’s customer value creation, delivery, and improvement for competitive advantage and profit. All core and support Value Chain activities provide value.

The primary activities in the Value Chain model include:

2.2.1 Inbound Logistics

It is necessary to receive, store, and distribute the inputs required for production. It entails buying, storing, and maintaining tabs on inventory. Let’s look at how incoming logistics might benefit Apple:

2.2.2 Cost Efficiency

Efficient inbound logistics saves Apple money on shipping, storage, and restocking. Apple saves money by optimizing its supply chain, consolidating shipments, and using just-in-time inventories.

2.2.3 Timely Supply

Timely delivery of all necessary parts and supplies to Apple’s factories is essential to meeting production targets. In order to keep production on schedule, inbound logistics helps coordinate shipments and manage suppliers.

2.2.4 Quality Control

With the aid of inbound logistics, quality control may be done all along the supply chain. Apple may reduce waste and costs associated with rework and substandard parts by using quality control techniques to verify the integrity of the materials and parts it receives.

2.2.5 Supplier Relationships

Effective entering logistics requires supply chain cooperation. Open communication and trust mark Apple’s supplier relationships. Negotiating power, early access to cutting-edge technology, and innovation may be improved.

2.2.6 Risk Management

Apple may use inbound logistics to prevent supply chain disruptions from political and natural calamities. Diversifying suppliers and creating backup plans may reduce the effect of unexpected incidents.

2.2.7 Operations

Production and distribution methods are what this term describes. Manufacturing, assembly, and quality assurance are all rolled into one with this approach.

2.2.8 Outbound Logistics

Distribution is crucial once production is complete or after a service is completed. Processing orders, packing them, and delivering them are all part of this.

2.2.9 Efficient Distribution Network

Since Apple sells its products all around the globe, a reliable distribution network is essential for ensuring a rapid rollout to customers. Apple can reduce customer frustration and increase product availability by optimizing its supply chain.

2.2.10 Timely Delivery

Delivering Apple items on schedule may boost brand image and customer loyalty. This may include engaging with transportation professionals, buying cutting-edge monitoring technology, or planning for delays.

2.2.11 Product Integrity

Apple has earned its image as a manufacturer of superior products with cutting-edge design. Using good outbound logistics practices may reduce the possibility of damage or flaws during transit.

2.2.11 Customization and Personalization

Outbound logistics lets Apple customize items for each consumer. Engraving, alternative packaging, and software pre-configurations may improve the product purchasing experience.

2.2.11 Reverse Logistics

Fifth, managing product returns efficiently, or reverse logistics, is just as important as outbound logistics. If Apple wants to keep its customers happy and fulfil its recycling and disposal duties without harming the environment, it needs a mechanism in place for accepting returned goods for repair.

2.2.11 Marketing and Sales

This stage involves creating awareness about the products or services, generating demand, and persuading customers to make purchases.

2.2.11 Customer Service

After-sales support and customer service are crucial for maintaining customer satisfaction. This activity involves handling inquiries, addressing complaints, and providing assistance.

2.3 VRIO Analysis        

Several factors have likely contributed to Apple’s success by giving the business a competitive advantage. When seen through the lens of the VRIO design, Apple’s strengths become clear:

2.3.1 Valuable

Apple’s value stems from the fact that it is able to harness its core capabilities to develop goods and services that are highly sought after by customers. The following are examples of such skills:

2.3.2 Design Excellence

The inventive and stylish designs of Apple’s products are well-known. This high standard of design helps provide a greater user experience, which in turn increases the desirability of their goods.

2.3.3 User-Centric Approach

Apple’s interfaces are famous for their ease of use and sleek appearance. This focus on the user experience has resulted in increased consumer satisfaction and loyalty.

2.3.4 Rare

Apple’s fundamental talents are unique since few other organizations can match their depth and breadth.

2.3.5 Vertical Integration

From the hardware to the software, Apple has full creative and technical control. This level of compatibility across different IT systems is remarkable.

2.3.6 Ecosystem Lock-in

Apple ecosystem loyalists may struggle to switch platforms. Apple has established a tight environment where all its products and services operate nicely together.

2.3.7 Inimitable (Difficult to Imitate)

Competitors find it difficult to reproduce Apple’s fundamental strengths for a number of reasons:

2.3.8 Brand and Reputation

When people think of innovation, quality, and luxury, they immediately think of Apple. Only by persistently outdoing client expectations can such a brand and reputation be established and maintained.

2.3.9 Culture of Secrecy

Apple’s culture of secrecy in product development and design makes it hard for rivals to learn the company’s methods and implement them.

2.3.10 Organized (Exploited by the Organization)

Apple effectively organizes its core competencies to exploit their advantages:

2.3.11 Cross-Functional Teams

Apple promotes collaboration across its numerous divisions to create products that are both innovative and true to the company’s core principles.

2.3.12 Retail Strategy

Apple shops provide a unique experience every time. Customers enjoy a better corporate experience by engaging with goods, acquiring technical answers, and obtaining guidance.2.4Differentiation from Competitors

Apple has advantages over Samsung. Apple may charge more owing to R&D, product design, and ecosystem integration impacting consumer loyalty. Apple’s user-centric design, continual innovation, and regulated environment safeguard IP and improve user experience.

Samsung has a large product line. Market share grows, but premium brand reputation does not. Android provides Samsung less software control, which might cause problems with fragmentation.

Apple wins Value Chain, VRIO, innovation, design, and ecosystem integration from Samsung. Brand strength, ecosystem connectedness, and customer loyalty help Apple prosper. Samsung’s unique approach embraces diversity. Understanding how digital titans play to their strengths is key (Barney, 1991).

3.0 Implications of the Current External Environment for Apple Inc.

New innovations, greater competition, new laws, and changing consumer preferences are continuously altering Apple Inc.’s external environment. Analysis of Apple’s external environment and how it influences its strategic decisions and daily operations. (Grant, 1991).

3.1 Technological Advancements

The fast expansion of computer technology founded Apple. Apple can improve products with 5G, AR, and AI. Apple’s music and TV streaming services may increase iPhone sales with 5G. Leading these breakthroughs requires significant R&D investment, which may affect corporate profitability and resource allocation (Apple, 2021)

3.2 Competitive Pressures

Apple is challenged by Samsung and Chinese smartphone producers. Apple must distinguish in design, user experience, and ecosystem connectivity to maintain market dominance. Pricing methods are prioritized, which may reduce revenue. (Apple, 2021)

3.3 Regulatory Changes

Apple faces data privacy and antitrust laws. The GDPR and other regulations require Apple to safeguard user data. App Store policy cases claim antitrust monitoring hurts Apple’s ecosystem and revenue. Business operations and revenue may vary under these laws. (Apple, 2021)

3.4 Shifting Consumer Preferences

Customer preferences influence Apple product development. Sustainable and eco-conscious customers demand greener product ideas and production. As more people study or work online, specific gear is required. Apple’s success depends on its ability to anticipate and meet consumer needs. (Apple, 2021)

3.5 Global Economic Factors

Macroeconomic variables effect Apple’s high-end product demand and consumer buying power. People postpone luxury purchases like new gadgets when money is tight. Apple’s pricing and growth overseas may be affected by currency swings, which might hurt global sales.

3.6 Attitude towards FDI

International companies like Apple compete with FDI. Government policies on foreign direct investment influence Apple’s worldwide competitiveness. Here are several negative FDI perception concerns for Apple:

3.6.1 Regulatory Barriers and Investment Restrictions

Apple has struggled to grow in several regions owing to investment and legal limitations. Equity participation, ownership limits, and local business relationships are examples. Apple struggles to manage its China business because of onerous laws.

3.6.2 Political Instability and Policy Changes

Apple’s capacity to make investments in certain nations is hampered by political instability and frequent regulatory changes. The company’s long-term investment strategy and its capacity to plan and execute business operations may be badly impacted by sudden changes in government laws, taxes, or ownership rules.

3.6.3 Nationalism and Protectionism

Nationalism and protectionism lead certain governments to favor domestic over foreign businesses. This approach might lead to laws that unfairly promote local businesses over Apple, reducing its competitive advantage.

3.6.4 Intellectual Property Concerns

Apple risks having its innovations and designs stolen by rivals in areas with weak intellectual property (IP) protection laws. This means the company’s competitive advantage and ability to protect its ideas may be weakened.

3.6.5 Labor and Employment Regulations

Different national labor regulations may effect Apple’s workforce management and employment costs. Foreign talent restrictions or high labor standards may impede the company’s capacity to utilize human resources to compete.

3.7 Infrastructure and Logistics Challenges

In certain places, poor infrastructure and logistical networks may slow Apple’s supply chain and delivery. Delays in product launches, greater operational costs, and market decline are conceivable.

3.7.1 Cultural and Communication Barriers

To flourish in foreign markets, study the local language, culture, and client behavior. These characteristics may damage Apple product positioning, marketing, and communication if you don’t recognize or modify.

3.7.2 Currency Fluctuations and Exchange Rate Risks

Apple does worldwide business in several currencies. Exchange rates may impact sales, profit margins, and financial performance. Currency changes may harm Apple’s pricing and profits.

3.7.3 Environmental and Social Regulations

Apple may require costly supply chain improvements or sustainability practices to comply with severe environmental and social laws in nations with strict laws. Ignoring these principles may cost credibility and market share.

3.7.4 Regional Economic Conditions

Consumers’ buying power and interest in Apple goods might be affected by regional economic situations. The company’s sales and profitability in various areas may be negatively impacted by economic downturns or volatility.

4.0 References

Porter, M. E. (1979). “How competitive forces constitute a strategy” Harvard Business Journal.

Grant, R.J. M. (2016). “Contemporary Strategic Analysis: Issuance of Texts and Cases.” Wiolia.

Cooler, T., Guidhart, M., Wessels, (2010). “Valuation: measuring and managing corporate value.” Wiolia.

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Organization for Economic Cooperation and Development. (2020). Addressing the fiscal challenges arising from the digitalization of the economy. OECD/G-20 project on base erosion and profit transformation.

The Gardner, T. (2020). The technical war between the United States and China: https://www.bbc.com/news/technolted-49145295

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Apple Inc. v. (2021). Annual report 2020. Extracts from https://www.apple.com/investor/subth-reports/

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EY. (2021). Antimonopoly and competition law in a changing world. Extracts from https://www.ey.com/en_gl/tax/anticontring-and-competition-law-in-a-wang-world

Statistics. (2021). Share of the global market for smartphones held by vendors from the fourth quarter of 2009 to the second quarter of 2021. Taken from https://www.statista.com/statistics/26636/global-market-share-share-cheed-by-smarterphone-vendors-seth-4th-super-2009/

Barney, J. B. (1991). Steady resources and sustainable competitive advantages. Journal of Management, 17 (1), 99-120.

Grant, R.J. M. (1991). Resource-based theory of competitive advantage: implications of strategy formulation. California Administration Review, 33 (3), 114-135.

Titichi, Dr. K. J., Pisano, J. Shawne, A. (1997). Dynamic capabilities and strategic management. Strategic Management, 18 (7), 509-533.

O’Reilile III, C. A., Toshman, M. L. (2008). (c) Sustainability as a dynamic capacity: a solution to the innovator ' s dilemma. Research in Regulatory Conduct, 28, 185-206.

Michael E. Porter, “How Competitive Forces Shape Strategy”, Harvard Business Review, May 1979 (Vol. 57, No. 2), pp. 137–145.