Apple's strategic positioning and competitive advantage analysis

Strategic Research Project: Apple

Strategic Research of Apple Computer

Apple (NASDAQ: AAPL) is today one of the world's most valuable companies with a market capitalization rate of $625B as of August, 2012, fueled by an over

100% increase in iPad (173% yr.-over-yr.) and 152% yr.-over-yr. growth of iPhone sales (Apple, Investor Relations, 2012). Apple continues to set revenue and profit records on a consistent basis due to the company's ability to coordinate its supply chain, production, marketing, stores, services and enterprise business. The company's value chain is one of the most efficient in high technology today, due to the close coordination with suppliers and focus on rapid innovation. Using the Porter five forces model to analyze Apple provides insights into why they have been so successful in the past and how they are well-positioned for the future (Apple, Investor Relations, 2012). The Five Forces Model as defined by Dr. Michael Porter provides valuable insights into hwo the dynamics of an industry directly affect overall profitability and performance (Porter, 2008). It is used as the foundation of research for this strategic research project. The intent of this analysis of Apple is to first evaluate their vision and mission statement, and provide evidence of how closely Apple aligns to these values. Next, an assessment of the external environment Apple faces is provided using Porter Fives Forces Model. Next, the market penetration, market development, and product development are discussed in addition to a SWOT analysis of the company. This analysis concludes with a recommendation of corporate strategy for Apple for the next five years.

Analysis of Apple's Vision and Mission Statement

Steve Jobs is credited with writing the most compelling vision statement Apple has had in its history by stating early in the company's history by writing "Man is the creator of change in this world. As such he should be above systems and structures, and not subordinate to them" (Apple Investor Relations, 2012). Apple's vision statement is the galvanizing force in its ability to create highly innovative products and pushing suppliers to a level of performance that they have never seen before (Cole, Matsumiya, 2007). Steve Job's influence on the culture of Apple continues to do this day as his passion for excellence and product design defined many of the core processes of the company (Apple Investor Relations, 2012). As the process-based excellence of the company shows, this vision is very much a galvanizing force in making the company successful.

The mission statement as stated in their annual report is as follows: "Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings" (Apple Investor Relations, 2012). It is understandable this mission statement begins with students, as Apple's history began with the building of PCs for the educational market. The initial successes with software vendors was also in the educational market, an area of software evangelism that Guy Kawasaki has detailed extensively in his book on this period of Apple's history (Kawasaki, 1990). Apple has also gone through intensive periods of creating entire systems and applications that enable a much greater level of individual creativity than the prevailing platforms from IBM and its many compatible systems provided (Holt, 2003). In conclusion, Apple continues to live by its vision and mission statements, creating exceptionally high value products for its core base of customers. This consistency and fidelity to its vision and mission statements have also led to the company having the most loyal customer base in high technology today, with the lifetime customer value at well over $2,000 per capita, an astounding figure in an industry where the norm is $545 and sales per square foot in their retail stores is second only to high-end retailer Tiffany's Jewelry Stores (Apple Investor Relations, 2012).

Appling the Porter Five Forces Model to Apple

Dr. Michael Porter's Five Forces Model adeptly captures the key factors that are critical for staying competitive over the long-term in any industry. By taking into account the five areas of Substitute Products, Bargaining Power of Suppliers, Bargaining Power of Buyers, New Market Entrants and Competitive Rivalry, the Five Forces Model successfully captures the competitive dynamics of markets and industries (Porter, 2008). Figure 1, Apple Five Forces Analysis graphically illustrates hwo these five forces are being influenced by and also influencing the performance of Apple today. Apple's greatest strengths are its supply chain management expertise, ability to coordinate suppliers with their new product development and introduction (NPDI) process, and speed of innovation (Holt, 2003). In addition to these strengths, Apple has successfully been able to also create the most profitable retail channel of any high tech manufacturer globally (Apple Investor Relations, 2012). Unifying all of these factors is the focus on the customer experience, which is consistent across all devices and touch points throughout the company, from the website to iPad and iPhone-based applications (Cole, Matsumiya, 2007). Apple has been able to mitigate competitive risks by also concentrating on making the bargaining power of suppliers, providing market forecasts that deliver advance notice of new components and assemblies needed well before the actual product launch (Apple Investor Relations, 2012). Apple keeps these suppliers closely managed in secrecy to protect their next-generation product designs as well.

Figure 1: Apple Five Forces Analysis

Apple SWOT Analysis

The following is an assessment of the strengths, weaknesses, opportunities and threats facing Apple today. Apple's strengths include one of the most valuable brands globally today, an exceptional new product development process and ability to continually innovate, and strong vertical integration expertise throughout their supply chains (Apple Investor Relations, 2012). The Porter Five Forces Model has also shown these strengths and their ability to provide the company with resilience in the face of significant competitive threats. Weaknesses include too much fo a dependence on the iPhone and iPad products, a lack of products at the low-end of the market, and a lack of control of the gray market in China for their products (Apple Investor Relations, 2012). The opportunities for Apple are very significant and include selling more iPads and comparable products into the enterprise, greater market penetration into emerging markets including Brazil, Russia and China, in addition to the advances being made with Apple TV. Threats include extreme price competition at the low-end of the market; lack fo control in gray markets over their products, and their high dependence on key suppliers for advanced components for their future products (Apple Investor Relations, 2012).

Recommendations for Future Strategies and Conclusion

The future direction fo Apple is going to be defined for the most part by their focus on digital content, specifically in the area of digital video. Apple will need to re-architecture iTunes to allow for greater agility and flexibility of downloading digital content, as purchases of movies over this application today can take well over an hour to download., There will need to be more of a streamlined approach to selling digital content in the future for the company to succeed. Second, Apple will need to move into the low-end of the market with an iPad-comparable device for the more mainstream enterprise user. The enterprise market will be difficult for Apple to penetrate, yet could be the most profitable of all market segments over the long-term (Apple Investor Relations, 2012). Finally Apple must continue to push the boundaries of system design and continually move in the direction of high-end graphics systems as this is their core market, and their operating system technologies are ideally suited for it.