Introduction

Apple is one of the fast rising companies around the globe in the consumer electronics industry. The company operated in three market segment, namely the personal computer segment, the personal media player segment and the smart phones segment. The company is famous for its ability to deliver creative, innovative and cutting edge consumer electronics products to the mass market at a premium price. The company is also respected as the leader in the industry it serve, primarily leaded by remarkable powerful and insightful leader Steve Jobs, Apple has been introducing a series of high-tech products that take consumers and the competitors by surprises. Strategically speaking, the key stakeholders of Apple include the employees, the investors, the competitors, suppliers, the consumers, and the governments. In fact, almost anyone are affected by Apple, due to the revolutionary products and trends it created through successful products such as iPods, iPhones and the online stores such as iTunes.

External Analysis

PESTLE

PESTLE Analysis will be performed in Table 1 below:

Table 1: PESTLE Analysis for Apple

Source: Adapted from David (2009)

Porter Five Forces

To understand the industry structure of each of the following market segment, Porter Five Forces Framework is applied. The analysis is shown in Table 2.

Table 2: Porter Five Forces for Apple

Source: Adapted from Fleisher & Bensoussan (2003)

Internal Analysis

Value Chain Analysis

In order to understand the internal capabilities and business flows in Apple, value chain analysis will be performed in Table 3 below.

Table 3: Value Chain Analysis for Apple

Adapted from Fleisher & Bensoussan (2003).

Overall, it is found that Apple is thriving and enjoying great success because it concentrate what is the more profitable activities in the value chain, and by doing great jobs on it, Apple able to derive fat profit margin, at the least amount of effort.

BCG Growth Matrix

To understand the nature of the various businesses that Apple has, BCG Growth Matrix is applied. It is presented in Table 4 below.

Table 4: BCG Growth Matrix for Apple

Adapted from Fleisher & Bensoussan (2003).

SWOT Analysis

In this section, SWOT analysis will be performed. The threats and opportunities in the external environment facing Apple will be analyzed in the ‘external analysis’ section, while the strengths and weaknesses of Apple will be discussed in the ‘internal analysis’ section.

In the industry landscape where Apple is operating in, various threats can be identified. First of all, economic outlook in US and Europe are gloomy. Economic recession in the United States and other developed countries is affecting the consumer technology sector negatively. In 2009, the economic outlook remains sluggish, volatile and hardly predictable, and this could means challenging years ahead for Apple. The industry in which Apple is operating in is also competitive. For example, the PC industry was relatively consolidated, highly competitive and oligopoly in nature, whereby it is dominated by several big players (i.e., in this market segment, the US market, and to a large extent, the world markets are controlled by the big five computer manufacturers), including Dell, Hewlett-Packard, Acer, Apple, Toshiba and others. From another perspective, the competition in the personal media player industry looks not promising as well. Apple, as well as the competitors in the personal media player industry (e.g., Creative, iRiver, Microsoft and San Disk) is fighting for market shares seriously. Such a segment is also under-attacked by the Smart Phone products. Despite that, the industry outlook for the Smart Phones market segment is expected to be challenging as well. The competition in the Smart Phone industry is getting more intense. Competitors such as Nokia, Research in Motion, Samsung, and LG are strong, established and are fast to introduce new models to fight back market shares taken by Apple in the recent years. In this industry, it is also noted that product innovation (as pioneered and developed by Apple) is relatively fast to be copied by competitors. In other words, competitors such as Nokia, Research in Motion, HTC, LG and Samsung are copying the iPhone features, to be incorporated into the new design of their smart phones, which are priced at a cheaper rate compared to Apple’s iPhone.

On the other hand, there are many opportunities found in the macro environment for Apple. First of all, the market is fast to accept the products offered by Apple, and using Apple products can be seen as trendy and sophisticated. For this, Apple’s has a bright opportunity to grow from the halo effect of iPod and iPhone, whereby consumers may purchase Apple computers after they get familiar with iPhone of iPod. For example, it is found that the applications (offered in App Store, that is specially designed for iPhone users) for iPhone is booming, a hallmark that the devices is gaining acceptance and popularity in the market. Not only is that, the changes of consumer preferences also favor the growth of Apple in the future. For example, it is found that in the personal media player industry, a large sum of consumers are willing to pay a premium for higher quality, such as more sophisticated technologies, ease of use, touch screen, Bluetooth technologies, and etc. Apple is capable of providing this, and is the market leader in the industry. Apart from that, some of the competitors of Apple are suffering. For example, Creative is bleeding financially, and if that persist, Apple can take the opportunity to take over the market shares served by Creative (and any others) in the future.

Apple is a highly successful market player in the personal media player and smart phones market segment. In fact, Apple set the benchmarks on the Critical Success Factors of both the market segment, as the competitors are found to be copying and following the strategies, product innovations, and style adopted by Apple. Some of the critical success factors in the industry, revolutionarized by Apple, include: cutting edge technology, quality, trendy, portability, computing speed and power, and supported by software (e.g., iPhone supported by App Stores and iPod supported by iTunes).

Apple is a powerful company – it has various strengths leading to its position in the market currently. Perhaps the most critical strength of Apple is having an insightful, marketing savvy and highly experienced leader, namely Steve Jobs to take the key leader position in Apple. Secondly, the competitive advantages of Apple are hardly beaten by the competitors. The ability to introduce innovative and high quality consumer electronics products to the masses is unmatched by the competitors. The products offered by the company are also highly differentiated. For example, the popularity, comprehensiveness and one-stop solution of Apple iTunes Store and the related services provided by the company differentiate Apple from the other competitors. The outstanding looks of the products also establish themselves as distinctively quality products compared to those from other brands. Apart from that, Apple is also an upcoming leader in many of the market segment it is serving. For example, apple is already the market leader in personal media player industry. Although Apple is a relatively small player in the personal computer industry, it is expected to improve its position in the future (e.g., the new MacBook Air, targeted to consumers that value both portability and power, is nicely designed, easy to use and is helping Apple to gain ground on the computer industry). Not only is that, Apple is the emerging players in the Smart Phone industry (i.e., iPhone is taking away the market shares of Nokia very fast starting from the year 2007 to 2009, and such trend is expected to continue). Last but not least, Apple is famous for treating the consumers fairly. In event of products failure, or introduction of new products, the company is willing and proactively compensates the consumers with cheaper products, price protection, replacement and etc.

However, there are a few obvious weaknesses on Apple. Firstly, succession planning is definitely weak and insufficient. The company is overly dependent on Steve Jobs for its success. Not only that, the key leader, Steve Jobs might not be as effective as in the past, as he is still recovering from his surgery. Besides, many of the applications and standards used by Apple’s products are not compatible with the standards used by other industry players. Consumers may be reluctant to buy a Mac because the higher priced Apple’s computer, as they are required to take the time to learn the proprietary operating system used in Mac. Apart from that, the music format used by Apple is not compatible with others MP3 players. Some consumers used to such format may be reluctant to use Apple products. It is also a valid concern that iPhone may cannibalize the other products produced by Apple. For this, iPhone have more functions, and indeed overlapping functions with iPods, and can easily replace iPods as personal media players in the future easily.

Financial Analysis

A review of the financial position of Apple revealed that the company is growing fast. The profit margin is high, and the ROE and ROI for various products are high. It is noted that growth in other nations is faster than the growth in US. This means the company may need to focus more on expanding to overseas.

Diagnosis of Current Issues

From SWOT analysis, several problems haunting Apple can be identified. Firstly, it is about the issues of succession planning. Specifically, will there be a talented, insightful and well-respected and accepted new leader to take over Steve Jobs in the future? Besides, it is questionable that without Steve jobs leadership, the company can continue to introduce innovative, quality and widely popular products to the marketplace at such an accurate and timely manner as what Apple is performing now. Other issues found are the increasing competitive industry landscape in the personal computer, personal media players, and Smart Phone segment. Luckily, Apple is faring well in all of these market segments, and emerges as the growth players in the every challenging industry, under the leadership of Steve Jobs. Besides, it is also found that many of the applications and standards used by Apple’s products are different from the market standards or convention. This will definitely affect the growth of Apple in the near future, as people may not want to switch to use the applications that can only be applied in Apple’s products.

Possible Strategic Options

Bowman’s Strategy Clock

Strategy clock for Apple will be presented in Table 5 below. As discussed, Apple should fall into the ‘differentiation’ category.

Table 5: Bowman’s Strategy Clock for Apple

Source: Adapted from Bowman & Faulkner (1996)

Results Generated from SWOT Analysis

In this section, the impacts and findings from the SWOT Analysis presented earlier can be used for brain-storming of possible strategic options for Apple. To deal with the every challenging business environment, Apple should continue to sharpen its competitive advantage, by delivering quality and cutting edge products that can take over the market and competitors by surprise. Apple should further enhance the competitive advantages, and to use it to beat the competitors down, while to build a stronger brand and benchmark to be used, followed and ultimately adopted by other industry players. Secondly, viable succession planning must be performed. The proper candidates to take over Steve Jobs position should be trained, selected, nurtured and developed. For this, Steve Jobs should step down, not to involve in dealing with daily operations, but to train the successors, preferably a few candidates and to build up strong Apple culture in the organization, so that the personal spirit of Steve Jobs can be transferred to the organization. The philosophies of Steve Jobs should be taught to the management team in Apple, and the performance of management should be supervised and investigated. Another critical issue to be handled is to develop applications that can use the format, standards and applications widely adopted by the market. For example, iPhone or iPod should be able to read MP3 file format. Apart from these strategies, it is also reasonable for Apple to continue securing market shares to reach the leadership position in the Smart Phone market segment. By capitalizing on the trend and the successes of its iPod and iPhone in the recent years, the company should utilize such opportunities to build several trends down the road in the future, to introduce new, trendy and cutting edge products in different market segment in the consumer electronics industry. Not only that, as it is expected that the economic outlook could be turbulent in the developed countries, it is necessary for Apple to venture into emerging markets such as the BRICs.

Evaluations of Strategic Options

Applications of Rumelt’s Criteria

To analyze the possible strategies, Rumelt’s Criteria will be used. It is shown in Table 6 below.

Table 6: Rumelt’s Criteria

Source: Adapted from David (2009)

Discussion

As stated above, several strategic options are identified, namely: (a) continue to sharpen Apple’s competitive advantages, (b) succession planning, (c) develop products compatible with the industry software standards, (d) capitalize on the trend to introduce Apple products to other market segment, and (e) expanding to emerging countries such as the BRICs. Each of these options has respective advantages, drawback and risks as will be discussed below.

To continue to sharpen competitive advantage is reasonable, as the core competencies of Apple is currently beating the competitors badly. Should such trend can persist, by further enhancing the competitive edge of Apple; many competitors will fall behind and suffer losses. Then it will be easy for Apple to dominate the various segments and revolutionarize the industry according to its benchmark and standards. However, such a strategy may not be viable, or simply not practical if Steve Jobs left the company for health reasons.

Succession planning is urgently required. Apple can still be a small company, or an already-bankrupt company without the leadership of Steve Jobs. Many of the successes of Apple are due to the insights, decisions and charismatic leaderships of Steve Jobs. Thus, Apple requires new blood that can act and perform like Steve Jobs in the future, to implement viable, sustainable and revolutionary strategies in the future.

To capitalize on the trends enjoyed by Apple to introduce Apple products is a viable strategy, as it is reasonable to expect that consumers may now love to purchase Apple computers and any other accessories as they perceive it is trendy in doing so. From a long term perspectives, that is a route for Apple to growth, to further achieve economies of scale. According to Ansoff’s Matrix, this is similar to the product development strategies. Similarly, to expand to the emerging markets are also viable options, as the economic growth in these countries will outperform those from the developed countries. However, the drawback and question is that if Apple chooses to pursue these strategies, the organization may lose up opportunities costs to train up new layers of leaders in the organization, which could be a more important and urgent tasks to be done.

Description of Selected Strategy

From the analysis, it is obvious that the development of succession planning is utmost critical and important. A few layers of new capable and talented managers and possible successors must be trained, identified, and empowered. Resources, time and focus should be channeled to ensure that the critical internal weakness of lacking viable successors must be immediately handled. Then, the Steve Jobs spirits and philosophies should be cultivated, and to be developed further to instilled as the Apple’s culture. Only when these are done, Apple should pursue other growth strategies, firstly to further enhanced the competitive edge of Apple (to beat down the competitors), and then to pursue subsequent product development and market development strategies for further growth and profitability of the organization in the long run.

Conclusion

The successes of Apple in the recent years send a spike in the consumer electronics segment. There should be little doubt that such a trend will continue if Steve Jobs is healthy, energetic and available to Apple in the future for long term. Much of the successes enjoyed by Apple are contributed by the decisions, advices and spirits of Steve Jobs. However, that had caused Apple to over relying on a single super hero for growth, profitability and competitive advantages. It is true that the competitive advantage enjoyed by Apple is largely non-imitable, as that skill is possessed by Steve Jobs; but from another viewpoint, it is highly possible that Apple could suffer badly in the competitive industry when Steve Jobs no longer lead the company. Succession planning is utmost important in Apple. The favorable situations and competitive advantages enjoyed by Apple will not be sustainable if capable leaders are not available to Apple in the future.

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