Environmental scan methodology and applications

Environment Scan

The three companies chosen are Apple, Google and Starbucks. Apple has several strengths, including its design capabilities, high brand loyalty, vertical integration, distribution channels, brand recognition/reputation and a massive cash pile. There are few weaknesses for the company, although arguably stock market pressure to distribute its cash, which might harm the innovation it needs to thrive. There remain great opportunities for Apple to expand into new markets, to develop new products, both of which can drive earnings higher. There are threats, however, not the least of which is competition given that Android is by far and away the dominant mobile operating system, pushing Apple's market share down almost to single digits (IDC, 2013).

Google has several strengths. It has $50 billion in cash, so ample resources, and it has been named as the best place to work, attracting top talent (CNN, 2013). The company has a great brand, a suite of market-leading products and strong leadership. If Google has a weakness, it is that it is dependent on online advertising revenues, as it makes very little money on other products. This makes it vulnerable to innovation and competitors, which are both threats that could reduce Google's revenue. There are always market expansion opportunities for Google -- China is a good one -- and the company could benefit from earning more money on some of its other dominant products like Android and Chrome, neither of which have been monetized to any serious degree.

Starbucks has a lot of strengths as well from a great brand and successful formula to good geographic diversification. The company is well-run and is building a portfolio of other brands. There are weaknesses, however. Any time the company has tried to deviate from its formula, it has been unsuccessful, meaning that it has still only proven to do one thing well. The company has also never really succeeded without Howard Schultz in charge. The formula for the company does not work so well in countries with strong pre-existing coffee culture. It scaled back significantly in Australia and has not even bothered to enter Italy. There remains a lot of opportunities for Starbucks. The company is looking at other products like tea and juice, but it is also aiming to capture strong growth in key overseas markets like India and China. Starbucks faces strong competition, as there are almost always good local players, and the company is also dependent on a healthy economy for success.

Competitive Advantages

Each of these companies has distinctive competitive advantages. All three have the advantage of size and scale at this point. Google and Starbucks are market leaders, and Apple might not have #1 market share but it is the only firm in mobile that is genuinely earning a profit (Reed, 2013). All three have exceptional brands. But each trades on specific advantages that are distinct as well.

Apple has competitive advantages in design capability, retail channels and brand loyalty, all three of which are the best in its industry. This allows the company to carve out a niche at the premium end of the market, where the company is positioned as an innovator. The combination of premium positioning and brand loyalty equate to a lack of price sensitivity in the customer base, which in turn leads to sustainable high profits.

Google has technological advantage. It is probably the most innovative company in the world. Its advertising business is driven by technological advantage and has been since day one. The company has fostered high visibility and has huge brand loyalty. Though it does not make money on Android, that product's success highlights Google's capabilities to reshape an industry. For its part, Starbucks succeeds with its branding and formula, as operational excellence differentiates it from competitors. Furthermore, Starbucks cultivates a better brand than those competitors and it has operational experience in many emerging markets to drive it forward.

Value and Sustaining Advantage

Apple creates value through design and vertical integration. It also creates value through its retail channels, where the company does a better job of marketing than its competitors with its stores, online store and other channels. The brand itself drives a lot of the value and Apple sustains this value with ongoing innovation and expensive marketing campaigns. Google sustains value through human resources. Technical advantage is how Google stays ahead, but this only works because the company attracts the best talent. Starbucks also uses strategic HRM to get the most out of its employees, positioning itself about its peers as the quick service employer of choice Beyond that, Starbucks creates value with marketing, branding and operational excellence. All three companies have very strong public images that allow them to charge premiums for their products, through arguably in the case of Google and Apple those premiums are justified by product quality.

Measurements

Apple and Google can go to the vault and count the giant stacks of money. They have more cash on their balance sheets than most countries do, so that is probably all the measure they need. Actually, though, Google in particular is famous for relying on measures, and is secretive about the measures they use. They are an analytics specialist, and use data to make almost all of the decisions about strategy, and they measure effectiveness obsessively.