Strategic Management Case Study: Apple

Strategic Management Case Study: Apple 1.0 introduction Strategic management is the art and science of formulating, implementing, and evaluating cross-functional decisions that will enable an organization to achieve its objectives. Strategic management includes a systematic recognition of specifying the firm’s objectives, nurturing policies and strategies to achieve these objectives, and acquiring and making available these resources to implement the policies and strategies to achieve the firm’s objectives. Strategic management, therefore, integrates the activities of the various functional sectors of a business, such as marketing, sales, production etc., to achieve organizational goals. (Lamb, 1984) 1.1 Company background Apple Inc. is an American corporation that designs and manufactures computer hardware, software and other consumer electronics. The company is best known for their Macintosh personal computer line, Mac OS X, extremely loyal user-base, iTunes media application and the iPod personal music player. The company headquarters is in Cupertino, California, CEO and co-founder is Steve Jobs and the company boasts 284 retail locations spanning 10 different countries. Apple was established on April 1st, 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne to sell the Apple I personal computer kit. Steve Jobs was said to own 45% of the company, Steve Wozniak with 45% and Wayne with the remaining 10%. While Jobs and Wozniak were young with little to no assets, Ronald Wayne was older with personal assets and was scared to put these at risk. Apple products have been able to achieve the highest rate of sales compared to its competitors in the world, and the company was able to significantly control the electronics market in the world throughout their products. 2.0 strategic analyses Strategic analysis is the process developing a strategy for a business, throughout researching about the business and the environment in which it operate. Strategic analysis involves two scenarios internal to organization and external to the organization. It is important to also remain focused on the destiny or goal and then make relevant analysis internally as well as externally, as the strategic analysis is something which is very wide in nature. (MiHyang, 2010, NCVO newsletter, 2009). The strategic analysis tools gives magical solutions for the company’s head office, so that they can analyze the current internal and external business scenario for advanced planning. The tools that Apple can use are as shown below. 2.1 General environment General environment are the factors and circumstances such as economic, legal, political and social. That affects everyone in the industry generally or the market more or less similarly. Although a business cannot control what takes place in the general environment, evaluating the general environment can allow businesses the opportunity to predict changes and identify future opportunities during a manager’s analysis of the general environment. General environment includes two theory branches. The SWOT analysis which detects the strength, weakness, opportunities, and threats an organization may face in the future or is facing in the present. The other theory is the PEST which may affect the general environment of the company. 2.2 PEST analysis As well as the internal factors that can affect an organization’s performance, there are also a number of external factors that affect the organization success in the business world. Many organizations use the PEST analysis in determining the impact of these factors on the organization. Pest analysis consists of four factors political, economical, social, and technological. To achieve the highest benefit from this analysis, organizations must understand the role of each factor. As a company apple Inc. concentrates a lot on PEST analysis and Porter’s five forces. Actually these two theories are considered very important for any successful company. As a company apple cannot control its relationships with other countries such as, china, and Korea. Any political conflicts between United States of America and any of these countries will cause horrible effects on Apple Inc. Since is producing many of its products outside America in Chinese and Korean factories. Any economical crisis will highly have an impact on Apple Company. Although inflation rates will also affect the company, as well as the U.S.D value in international market will also affect the company. Socially the world has changed a lot in the last 5 years with the help of Apple’s advanced technology. Apple contributed in this social change. Apple is required to improve and develop their technologies more and more, so that they can get the highest benefit from the social changes that occur in the world. Apple is a prestige for any high class person, so they should always stay like that. Nowadays technology is improving quicker than before. Apple is considered one of the innovative companies in the world right now, so they always should utilize any development in the technology to innovate and introduce more products to the world. 2.3 Competitive environment The competitive environment is the dynamic system in which your business competes. The status of the whole system controls and sometimes limits the amount of flexibility in your business due to the world economic status. Economical crisis, shortage, and unexpected disasters affect the competitive environment. There are two types of competitive environments direct and indirect competitors. Direct competitors are competitors who produce the same products as yours. They compete with you directly in order to achieve higher revenue than your company. The other type of competitive environment is the indirect competitors. Most of the organizations face competition from suppliers of different products or services. 2.3 Value creating Activities Value creating activities is the set of actions that increase the value of the product, or the service. In order to gain a competitive advantage, throughout this process the product or the service of an organization will achieve a marginal value. If these set of activities are applied properly the organization will gain a competitive advantage on their product or service. 2.3.1 Value chain analysis According to Michael porter a value chain is the set of actions that build up worth at every stage in producing the product. The cost of the product settled by the company is the total of all the expenses paid throughout all stages of producing this product. Value chain analysis is a tool applied by organization, so that they can figure out how to create a great worth for their consumers. 2.3.2 Application to Company The value chain analysis will help in determining the rate of development in Apple Inc and will also detect how Apple uses their resources. This value chain component tends to prove apple’s abilities in the technological branch. Apple was the first company to introduce a digital lifestyle hub. The history of apple is full of technological achievements. Apple operating system is considered more safe and stable than windows. Apple tends to be the best and the first in the technological products achievements. Since Apple rejected to license its operating system to other organizations, the bundled packages of the company developed hardware and software that became the basis of Apple’s production process. Apple considers productivity as an important branch of the designing process. When apple achieved a good market share growth and had a base of loyal consumers who are waiting for apple to introduce a new product, so that they can replace their old product with the new one. Apple saw that it is time for expensive P.C to enter the market. Apple concentrated on achieving more growth than before, so that they can produce a better ‘mousetrap’ all the way through its history. Customer service is one of the main things that make Apple Inc. special in the market. Actually they tend to satisfy the consumer even after buying the product by giving the consumer after sale services and warranty. Apple’s efficient customer service is one of the reasons why loyal consumers never change to another companies selling the same technology. Legally in a changeable innovative market, it is well-known for apple company that it is important to protect their copyrights and maintaining the patent, so that no one of their competitors can use any of the inventions that apple have record it under their name. In the year 2012 Samsung company was fined about 1 billion$ in favor of Apple Inc. because they used two of the invention that apple have record them as a patent. This proves that apple as a company is able to protect their rights from the competitors’ utilization. 2.4 Resource based view RVB is a tool that is used to evaluate the value of organization strategic assets. The resource based view tool is based on the idea that the efficient use of all resources that an organization collects helps in determining its competitive advantage. 2.4.1 Resources Organization resources are all the resources that allow and help a firm to apply and perform its activities. All resources that a firm has may not be strategically related. There are specific resources that are capable to put a firm in position of competitive advantage. There are four components that an organization should have in order to achieve a competitive advantage. These four components form the VRN characteristics. 2.4.2 Core Competencies (Prahald Hamel) Core competencies are a group of supplementary information, abilities, attitudes, and resources in a firm which makes performing a critical process better than other process. 2.4.3 Distinctive capabilities According to john kay distinctive capabilities are a related aspect of organization resources. Organizations with distinctive capabilities have features which other cannot imitate. To achieve a competitive advantage a company must have three distinctive capabilities architecture, reputation, and innovation. 2.4.4 Application to company Apple main resources are its brand name and marketing strategies. Apple has a good reputation in the market, although their high quality products in the market results in having a big base of loyal customer. Apple software also is one of the most resources that the company has. In a nutshell apple as a company have both tangible and intangible resources, but the intangible resources is the main reason for the company success. Apple Core Competencies analysis Adapting a viral marketing strategy from social networking websites was a great step which achieved success in making apple closer to the consumers. Customer loyalty is one of the most important competencies in Apple Company. The company was able to manage keeping their customers loyal to them by attracting them through creating such innovative products, so that customers will always wait for the new products. What makes apple so special is their high ability in protecting their new product details, although there is no any information can be leaked about apple products before introducing them. This proves that apple employees are so loyal to their company by maintaining secrecy about any information regarding new products. 2.5 Organizational performance Organizational performance is tool used to analyze an organization’s performance compared to its goals and objectives. Organizational performance consists of three essential outcomes financial performance, market performance, and shareholder value performance. 2.5.1 Measuring Coo-prate Performance Measuring corporate performance tool is used to evaluate the accomplishments of settled goals in an organization. It also detects any failure in achieving a specific goal. This tool also predicts the future performance. 2.5.2 Meeting the Needs of Stakeholders Achieving success in applying a certain strategy is evaluated through the amount of satisfaction of stakeholders and whether there needs are met or not. To satisfy stakeholders there is a short term and long term success of any business. 2.5.3 Application to company (appendix) Throughout balance sheet a company can measure its coo-prate performance, so that they can get know whether they are gaining profit or not. 3.0 strategy formulation Strategy formulation is the course of action that indicates actions that should be taken by an organization in order to achieve a specific goal. There are some certain steps that should be applied in a chronological order. These steps are as following: value assessment, vision and mission formulation, strategy design, performance audit analysis, gap analysis, action plan development, contingency planning, and implementation. Using these steps in the chronological order shall help an organization in achieving their goals. 3.1 business level strategy Business level strategy concentrates on the position of the firm in the market in compare to its competitors. It also explains the steps and actions taken by the firm in order to value their customers in order to gain a competitive advantage by utilizing essential efficiencies they have in specific products or services markets. There are four main important strategies that are used by organizations in order to gain competitive advantage over competitors. The four generic strategies are as follows: cost leadership, differentiation, focused low cost, focused differentiation. Business strategy level gives a great opportunity for an organization to gain a competitive advantage on its competitors if applied correctly. 3.1.1 Generic competitive strategy In the year 1980 Michael porter developed three generic strategies that are used by an organization in order to gain competitive advantage. These three generic strategies are: cost leadership, differentiation, and focus. 3.1.2 Corporate strategy Corporate strategy is the actions a firm takes in order to achieve business success in the future. It also concentrates on the company adaptations and anticipations toward changes in the business environment. In order to apply corporate strategy it requires concentration on the firm’s activities and the nature of the business it is doing. As well as its position in the market and how wild the competition is with its competitors. 3.1.3 Growth strategy Mostly organizations always have plans for expansion in their business in order to increase revenue. Although there are specific techniques a firm must use in order to apply their growth strategy. The technique an organization use in order to apply growth strategy mostly depends on their financial status, how strong is competition between their competitors, and the rules and regulations of the government in this country. The most common growth strategies are market expansion, market penetration, diversification and acquisition, and product expansion. 3.2.2 Application to Company Apple growth strategy depends on increasing its market demand on its products through product differentiation, through producing unique and attractive products to customers. The company was able to achieve success through this strategy by keeping its brand loyalty in its highest levels. Apple concentrates on certain level of customers. Customers who wish to pay more, so that they can receive high quality products. Through product differentiation apple was able to achieve success and become one of the leading organizations in the world’s market. 4.0 Strategy Implementation Strategy implementation is considered the toughest stage in the strategic management process. Strategy implementation requires managers to apply these strategies and convert it to actions that will achieve success and high performance. 4.1 International Strategy (Organizational and environmental factors) International strategy is a strategy in which an organization introduces and sells their product in other foreign markets. The main reason for applying this strategy is because of the new opportunities an international market introduces to an organization. 4.1.1 Globalization Framework MNC’ stands for Multi National Corporation. MNC’ are organizations that have assets in other countries within its original home land. These organizations may have factories and departments in other countries, although they have a specific main head office in which they manage the organization. MNC’ organizations main goal is to maximize the wealth of shareholders. 4.1.2 Entry mode Strategies Entry mode is a strategy that allows and helps in adjusting the proper time for an organization to introduce their product in another foreign country. Applying this decision is one of the hardest processes in an organization. It may affect the company either negatively nor positively in many ways. 4.1.3 Diamond of National Advantage Porter’s diamond national advantage strategy states that the national the national advantage of a country depends on certain factors. Porter used a diamond shaped diagram to explain and state his theory. He explains the role of the national field that governments create for their business advantage. 4.1.4 Application to company Apple expanded their business through opening many retail stores around the world, having partnerships with other telecommunication companies all over the world. One of the reasons apple expanded in the last years was because of their innovative products which met the customer’s needs Although the company was able to manage their product’s cost through concentrating on certain level of customers specifically high level customers. 4.2 Corporate Governance Corporate governance is rules and policies settled in which an organization is controlled and directed. It also draws structure for an organization to achieve its goals. Actually it includes all the branches of management from planning and controlling to performance evaluation and company disclosure. 4.2.1 Board of Directors Board of directors is a committee chosen by elections in which its main role is to take the responsibility for managing a nonprofit organization. This committee is responsible for holding the funds and assets and any other property that belong to others. Board of Trustees oversees management and counseling issues facing the organization. 4.2.2 Executive Compensation Actually compensation for executive manager is not the same as compensations for normal employees. This happens in mostly all organizations. The executive compensation includes the CEO, CFO, the vice president, and the upper- level managers. These employees are treated in a quite different way from other employees. Their salary and compensation are negotiable and are stated and recorded in the contract. The contract records their salary, compensation, and bonuses. 4.3 Application to company Apple’s board of directors main mission is to assure that the shareholder’s interests are being served. They set standards to ensure the company’s success through maintaining high standards of responsibility and ethics. 5.0 Conclusion Strategic management gives an organization a creative ability in shaping and drawing its future in the market. It gives an organization the ability to launch and create a plan rather than responding to actions, so that they control their destiny. Nowadays any manager or a business owner controlling an organization has recognized the importance of strategic management and the benefits gained from it. Organizations that apply strategic management in their company plans will have high performance levels than companies that aren’t applying this strategy.