Introduction

Apple Inc. is an American multinational technology company that specializes in consumer

electronics, computer software, and online services. Apple is the world's largest technology
company by revenue (totaling $274.5 billion in 2020) and, since January 2021, the world's most
valuable company. As of 2021, Apple is the world's fourth-largest PC vendor by unit sales, and
fourth-largest smartphone manufacturer.It is one of the Big Five American information
technology companies, along with Amazon, Google, Microsoft, and Facebook. Apple was
founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in 1976 to develop and sell
Wozniak's Apple I personal computer. It was incorporated by Jobs and Wozniak as Apple
Computer, Inc. in 1977, and sales of its computers, including the Apple II, grew quickly. It went
public in 1980 to instant financial success. Over the next few years, Apple shipped new
computers featuring innovative graphical user interfaces, such as the original Macintosh,
announced with the critically acclaimed advertisement "1984". However, the high price of its
products and limited application library caused problems, as did power struggles between
executives. In 1985, Wozniak departed Apple amicably, while Jobs resigned to found NeXT,
taking some Apple co-workers with him.
As the market for personal computers expanded and evolved through the 1990s, Apple lost
considerable market share to the lower-priced duopoly of Microsoft Windows on Intel PC clones.
The board recruited CEO Gil Amelio, who prepared the struggling company for eventual
success with extensive reforms, product focus and layoffs in his 500-day tenure. In 1997,
Amelio bought NeXT, to resolve Apple's unsuccessful operating system strategy and bring back
Steve Jobs, who replaced Amelio as CEO later that year. Apple returned to profitability under
the revitalizing "Think different" campaign, launching the iMac and iPod, opening a retail chain
of Apple Stores in 2001, and acquiring numerous companies to broaden their software portfolio.
In 2007, the company launched the iPhone to critical acclaim and financial success. In 2011,
Jobs resigned as CEO due to health complications, and died two months later. He was
succeeded by Tim Cook. In August 2018, Apple became the first publicly traded U.S. company
to be valued at over $1 trillion and the first valued over $2 trillion two years later. It has a high
level of brand loyalty and is ranked as the world's most valuable brand; as of January 2021,
there are 1.65 billion Apple products in use worldwide. However, the company receives
significant criticism regarding the labor practices of its contractors, its environmental practices,
and business ethics, including anti-competitive behavior and materials sourcing.

Competitive Analysis

I will be using the porter's 5 forces analysis to conduct Apple’s Inc. Competitive analysis. To give
you a transparent image of Apple's competitive position in the market, here is some information
on their global presence and profit margins. Apple is a truly global brand which is evident in the
popularity that it enjoys in most parts of the world. As it notes in its Annual report “The
Company’s reportable segments consist of the Americas, Europe, Greater China, Japan and
Rest of Asia Pacific.Americas includes both North and South America.Europe includes
European countries, as well as India, the Middle East and Africa. Greater China includes China,
Hong Kong and Taiwan. Rest of Asia Pacific includes Australia and those Asian countries not
included in the Company’s other reportable segments.” While the product portfolio is roughly the
same across all the segments, each of the segments is managed separately which is for better
alignment with customer demand and distribution partners as well as to cater to the unique
market dynamics of each of the geographic regions.
Apple enjoys very high profit margins on its products which can even be higher than 60%. Large
profit margins means higher profits earned per unit. In 2017 Apple sold 216 million iPhones. As
per an article by Time Money, the iPhone that sold for $649 cost Apple only $225 for production.
In this way the MRP of a product is around three times its production costs. This is quite a huge
margin and any brand enjoying such high profit margins as well as high level of sales is bound
to be rich.

PORTER'S Forces Analysis

Bargaining power of suppliers:

The bargaining power of Apple suppliers is low. While some of them are big bands and yet they
are not sufficiently big to have any bargaining power against Apple. Moreover, these suppliers
are scattered globally. Apple has got rules and regulations for its suppliers to follow and apart
from high quality raw materials, there are outré performance standards that these suppliers
must fulfil in order to remain a supplier.

Bargaining power of buyers:

The bargaining power of the buyers has increased considerably in the 21st century. It is
because the new generation is a tech savvy generation and has all the information accessible
that it needs to evaluate its products. Moreover increased competition has added to the
bargaining power of customers. From premium to affordable, every segment is full of competing
brands and products and each brand is quite aggressive about marketing and market share.
Additional bargaining power for the customers comes from the legal structure favouring the
customers. Overall the bargaining power of the Apple customers is moderately high. The factors
that moderate the bargaining power of buyers are brand image and equity, marketing efforts,
customer experience and quality of products.

Threat of substitutes:
The threat of substitutes for Apple is moderate and mainly arises from the products by
competing brands like HP, Lenovo, Dell and Microsoft. While there are several substitutes in
each category, still Apple enjoys a very high level of consumer loyalty and that acts to moderate
the threat from competing brands to some extent. Apart from that brand image and equity also
moderate the threat. Apple products are highly differentiated from products based on quality,
design and consumer experience. However, when it comes to prices, the maker is full of
substitutes in each category.

Threat of new entrants:

The threat of new entrants is low because to become competing or smartphone brand requires
a very large level of financial investment. Even starting at a local and very small level would
require significantly large investment. Apart from technology and production as well as supply
chain capabilities, there are other investments too related to marketing and HR. Legal and
regulatory barriers also keep new brands from entering the market. Only the well established
brands in technology industry can extend the ambit of their products or services easily as
Google did by introducing a smartphone Pixel. However, due to these very large barriers to
entry, new brands hardly dare enter the laptop or smartphone industry.

Competitive rivalry in the industry:

The level of competitive rivalry in both the laptop and computing as well as smartphone industry
is very high. There are a large number of brands battling for market share in the laptop and
smartphone market. From HP to Dell and Lenovo, the market is full of brands offering a
diversified product portfolio in both premium and affordable range. In the smartphone market too
from Samsung to Sony and LG, there are several brands competing for market share. All these
brands are highly aggressive in terms of marketing and R&D which adds to the intensity of
competitive rivalry in the industry.

Strategic Issues

The problems of Apple stemmed in the period 1985-1997 when Steve Jobs was not part of the
company. Apple had a small market share of PCs; its gross profits were decreasing; the
Company’s CEO turnover was high; its share price was low (around USD 3); it was making
losses and was on the verge of bankruptcy (Linzmayer 2004). Moreover, its
work environment had become increasingly relaxed and it was losing its values of creativity and
innovation. Moreover, its competitors were receiving great response for their products such as
the Windows 95 and the IBM compatible PC'S.

There was also a lack of direction with regards the products the company would offer. For
example, the company experimented with various items such as digital cameras, portable CD
audio players, speakers, video consoles, and TV appliances. None of these items was a
success and we hardly find them on store shelves today. Finally, enormous resources were
spent on the product known as the Newton which was going to be Apple’s foray into the PDA
market. Read also Challenges Facing By Ikea

Also, there seemed to be less consumer focus as the Performa line was sold in configurations
that confused customers. The company obviously lacked marketing leadership. Thus we find
that the issues faced by the company were mainly related to lax management attitudes, lack of
top leadership, and an unfocused product line with little link with the market. Alternative
solutions to Apple’s problems: A number of strategic solutions to Apple’s problems could be
proposed. The company was of course facing great troubles financially.

Its stock price was low and it was making losses on the income statement. What it could do
was sell itself to another company. That way, it could tap on to the resources of that company
which could then be used to fuel development of Apple’s products. However, a merger with
another company would mean that any of the innovative culture that might have been left at
Apple would be diffused into the other company. Also, the brand name of Apple might get lost or
just become a side-brand in the new company.

Strategic Planning

Apple is highly dependent upon computer chips for all its devices, from the Mac to the iPhone.
Originally the company was built on microprocessors from Motorola. But that changed years
ago as the company adopted chips from IBM. Now Apple is using chips from Intel. In its phone
products, Apple once used IBM chips but now licenses its chips designs from ARM holdings and
modifies them for its own use. And recently Apple hired the former IBM chip head to a new
position managing device hardware engineering.

Apple looks to be all over the board. Some accuse Apple of being a lousy partner with is chip
suppliers. Or accuse CEO Jobs of being a control freak who is trying to get into the chip
business. But think again:
Apple is highly dependent on chips. If they guess wrong on the chips, and over-commit, they
could end up suddenly behind competitors and in big trouble.How is Apple to know if its vendors
will remain on top of the technology curve? If the partner slips, Apple could slip with
it.Competitors are all around Apple with new products, including Google with its new phone and
Motorola with its new commitment to the same software Google is using. They are trying
different technology solutions with the hope of eclipsing Apple.
What we see is Apple looking forward, and seeing a range of potential scenarios. Any of these
vendors could be dominant, or could be a flop. Additionally, Apple itself has some ideas about
what could create market leading product that might eclipse the vendors. What we see is a
company that is keeping its options open. Apple is using scenario planning to identify a range
of potential outcomes, and it is trying its best to keep itself positioned to win regardless of which
outcome occurs. It is obsessing about competitors, and keeping itself flexible to move quickly
with market shifts should a competitor take an action which could jump it into the lead.
Making big bets is not the job of management. That’s a fool’s folly. Good leaders use scenario
planning to identify a wide range of options, and work hard to keep their options open to win
regardless of which scenario develops. You have to marvel at how clever CEO Steve Jobs is
to position Apple for future success, and how good it is for investors that he would add someone
to his top staff who can help keep all options open. This is a very good sign for Apple investors,
employees and customers that Apple will remain a strong, viable competitor into the future even
as the shifts of technology threaten to whipsaw the market.

Major Strategic Issue

Competitive Rivalry in the Industry:

This is by far Apple's Major Strategic Issue. Apple Inc is facing strong competition in the
industry. This factor of the Five forces model identifies the intensity of influences on the
company by the competitors. In Apple’s situation, competitors influence on some external
factors like; high aggressiveness of companies, low switching-cost, and low level of product
differentiation. Apple is facing tough competition from LG and Samsung, because of
aggressiveness in rapid innovation, imitation, and aggressive advertising imposes a strong force
in the market. In addition to this, product differentiation is low, because available items in
markets are the same and fulfil specific purposes. Low switching cost also creates a problem,
because many people prefers to switch to Android because of the iOS cost, functions, network
externalities and other concerns

References

https://www.google.com/amp/s/www.porteranalysis.com/porter-five-force-analysis-of-apple/amp/

https://phdessay.com/apple-inc-strategic-issues/

https://notesmatic.com/strategic-analysis-of-apple/

http://panmore.com/apple-inc-generic-strategy-intensive-growth-strategies

https://adamhartung.com/scenario-planning-at-apple/