Describe the key strategic challenges facing Apple Computer
The iPhone basically provides its users with three features which include a mobile phone, an Internet device that can also be used for communication and an iPod that would allow its users to download and listen to music from the iTunes Music Store. The iPhone offers its users a different user interface that is entirely based on a multi-touch display. The phone does not make use of QWERTY keypads or the conventional keypads that are found in most phones.
The touch display therefore allows users to experience the many features offered by the iPhone improving user interactivity and allowing users to control the functions of the phone through their fingers. The additional talk time as well as the 24 hours allocated to audio playback will allow the phones users listen to iTunes without having to recharge the phone’s battery (Ireland et al, 2009).
The Apple TV was created to revolutionize the Internet video industry as the Apple iTunes Music Store revolutionized the music download industry over the Internet. The Apple TV offers users the ability to download movies, music videos and TV shows through the iTunes online service and also through YouTube. However, industry analysts have noted that the Apple TV will flop like the Power Mac Cube which was unable to download movies from the iTunes store directly to the television set.
Some of the cons that made the Apple III and the Power Mac Cube to be unpopular amongst consumers were that they required a high definition TV to download the movies but because the movies were of a lower screen resolution, the pictures ended up looking fuzzy and unclear (Ireland et al, 2009).
The Apple III and the Power Mac Cube also lacked DVD drives that made it difficult for consumers to view the downloaded movies through re-writable compact discs. The upgraded version of the Apple TV will offer consumers the opportunity to download or order movies through their television screens without necessarily having to download them from the personal computer. The Apple TV has also incorporated slide show features where users will be able to view a digital slide show of the photos they have uploaded to their television sets.
According to the developers of Apple TV, the price of renting a movie for the new releases will be $3.99 while the cost of renting a library title will be $2.99 dollars. These prices while relatively low are meant to ensure that users are able to download whichever movies they want at an affordable cost (Ireland et al, 2009).
While the iPhone and the Apple TV are viewed to be a major innovative milestone for the company, the new products present several challenges to the company’s strategy of maintaining a relative market share. One such strategic challenge is that the company’s rivals HP, IBM, Samsung, Sony and mobile providers Nokia, LG and Sony Eriksson have developed products with similar features to those of Apple’s Mac computers, the iPod, iPhone and the Apple TV (Ireland et al, 2009). Nokia and Sony Eriksson have been able to develop phones and Mp3 players that contain a similar service like that of Apple’s iTunes Music Store. Nokia have come up with the Ovi Store which allows users with Nokia mobile phones to download music, view videos through YouTube as well as shop online.
The iTunes service also faces stiff competition from online music and download services which offer music downloads at lower rates when compared to the iTunes service. Some of these websites such as 4shared music.com and Kohit.net allow users to download music free of charge. This presents a major challenge to the company’s strategy of expanding its iTunes music store where it allows its consumers to download music legally.
Another strategic challenge that the company faces is the introduction of cheaper and lower priced alternatives to the iPod, iPhone and the Apple TV such as the smart phones produced by mobile companies like Nokia, Samsung, Sony Erickson and LG. The smart phones offer products and services that are similar to those offered by the iPod and the iPhone. For example Nokia and Samsung have successfully launched smart phones that offer multi-touch user interfaces similar to those of the iPhone.
Smart phones offered by Nokia such as the X6, C7, N8 and the 5800 Express Music offer similar features to those that are found in the iPhone. These lower priced smart phones offer a cheaper alternative for most iPhone consumers who are unable to afford the high price charged for the Apple 3G and 4G (Ireland et al, 2009).
Another strategic challenge faced by Apple is maintaining a positive relationship with its media and phone service suppliers. The iTunes Music Store has agreements with all the major record label companies in the US such as Sony, Universal, BMG and MTV.
These agreements with suppliers allow iTunes to sell music owned by these music labels to consumers and Apple in return pays the music labels every time a song is downloaded. Such a deal is referred to as the reseller agreement which means that Apple is not licensing music or video content but it is buying songs on wholesale and then reselling them to consumers. The company is able to keep its share through the reseller agreement whereas the record labels have to divide the money between themselves, the artists and the producers who made the song (Ireland et al, 2009).
Describe the dimensions along which company success can be measured
The dimensions that are used to measure the success of a company include the effectiveness of the company’s products/services in meeting the needs and expectations of consumers, the usability of the company’s products, profit and sales margins, the user’s performance with the product and user/consumer opinions of the product. Usability of a company’s products refers to the extent to which potential customers of a product or service are able to achieve satisfaction in an effective, efficient and satisfactory way.
The usability of a product basically encompasses the effectiveness, efficiency, accuracy and completeness of a product or service and how these aspects can be used to determine the success or failure ratio of the product or service (Vuolle et al, 2008). Usability can be measured by determining the number of tasks that have been completed and then deriving the percentage of these tasks.
Competence is calculated through the quantity of human, fiscal and monetary resources that have been exhausted in achieving a particular product level effectiveness. Efficiency is measured through the amount of time that has been taken to complete certain tasks and the estimations of subjective workloads. Satisfaction which is another measure of usability refers to the comfort that consumers have when using a certain product as well as the ability of a product/service to meet the needs and expectations of the consumer. Satisfaction can be measured through customer loyalty and the number of favorable or unfavorable responses that have been directed towards a company’s products or services (Vuolle et al, 2008).
The subjective opinions of users refer to the usability ratings that are collected through the use of questionnaires as well as interviews so as to properly determine whether consumers are satisfied with the products or services that are being offered by a company.
Questionnaires are tested based on their psychometric qualities which include the user interface satisfaction the customer derives from using the product, usability measurement and the measurement for the perceived usefulness of the product/ service. The measurement of subjective opinions is meant to help producers of commodities determine whether the product design is achieving its intended purpose and whether consumers enjoy using it (Vuolle et al, 2008).
Profit and sales margins are some of the most commonly used indicators to determine whether the products and services produced by a company are successful in the market. The profitability of a company such as Apple helps inform the managers, investors, employees and other important stakeholders of the company that the company’s products are performing well in the market (Hitt et al, 2011).
Profitability demonstrates that a company is able to breakeven after making its sales at the end of the year. Successful companies like Apple are able to record high profit margins where for example the company made a profit of $1 billion in 2007 and net sales amounting to $ 9 million in the same year from the sale of its desktops, portables, iPods, iPhones, operating systems and other related products/services (Ireland et al, 2009). These high profit margins have therefore been the marks of success for the company which continues to develop newer and better innovations to maintain its market share.
Describe the critical external and internal environmental factors that have strategic implications for Apple’s future
The introduction of the iPhone and Apple TV by Apple Computer in May 2007 was seen to be a major move by the company in terms of developing innovative products that would appeal to a large demographic market. The iPhone together with Apple TV demonstrated the focus on innovation that the company has been able to achieve over the years since it established itself as the number one manufacturer of Mac computers.
The recent innovations were meant to ensure that the company continued to have a competitive advantage over its rivals in the technological market such as HP, IBM, Samsung and Dell. The introduction of the iPhone into the technology market was meant to provide Apple’s consumers with more phone features that would allow them to have the smart phone experience while the Apple TV was meant to provide video-on-demand services to its users (Ireland et al, 2009).
The major critical external factor that has strategic implications for Apple’s future includes competitors such as HP, IBM, Toshiba and Dell who have been able to develop desktops and personal computers that possess similar features to those of Apple’s iMac, MacBook and Mac mini. HP, Toshiba, Samsung and Dell have been able to develop their own versions of the MacBook and the Mac mini, a clear indication that the company faces stiff competition from these rivals.
With regards to the iPhone, the company faces stiff competition from mobile companies such as Nokia, Samsung, Sony Eriksson and Palm all of which have been able to develop their own versions of the iPhone at a lower and pocket friendly cost. Palm has however been struggling to maintain its market share of smart phone consumers despite the successful sale of 689,000 units of the Treos during the first quarter of 2007.
This was noted to be a 21 percent increase of the sales experienced by the company from the previous year. The company continued to struggle throughout the second quarter of the year in terms of sales but the introduction of its Centro brand of smart phones was able to boost its profit and sales margins at the end of the year. While the Centro lacked all the features that the iPhone had, consumers who were cost conscious opted for this brand since it was more pocket friendly (retail price of $99). Competition for the Apple TV came mostly from companies such as Amazon whose Unbox service introduced in 2006 allowed users to download films, videos and TV shows from the Internet (Ireland et al, 2009).
Other competitors competing for the AppleTV market included CinemaNow which was the first of its kind to offer pay-per-view movies, download-to-own services and the first distributor of burn-to-DVD movies, Disney which introduced a movie download service in 2007 through an agreement with Microsoft, Hewlett-Packard which forged an agreement with Sony Pictures Home Entertainment (SPHE) to deliver movies to consumers on demand, Movielink and Netflix who were major distributors of video-on-demand movies, library titles and TV Shows, Sony which offered video-on-demand services especially through its PlayStation Portable device and Vudu which entered the video-on-demand market in April 2007.
Many of these companies offer features and services that are similar to those offered by Apple TV where customers can be able to connect their personal computers to television sets and the Internet so that they can be able to download their favorite movies, music videos and TV shows (Ireland et al, 2009).
An internal critical factor that will have strategic implications for the company is the marketing strategy for the company. While the company’s marketing plan has in the past been one of Apple’s major strengths, it presents a challenge for the company which is struggling to maintain its market share in the competitive technology world. Staying on top of its marketing game will be one of Apple’s major challenges as the company continues to develop a wide range of products to meet the ever changing needs of technologically savvy customers. The company also faces the internal challenge of balancing the demands of its shareholders and running a company that is successful.
The company launched into full marketing activities during the launch of the iPhone in 2007. The successful nature of the company made it possible for the product to be well received in the market which in turn increased investor and customer expectations thereby boosting the company’s stock price. The company had to maintain this balance to ensure that it remains successful in the ever changing competitive technological market (Ireland et al, 2009).
Describe how Apple’s strategy stands up against industry rivalry
Apple has adopted a different strategy from that used by most companies when designing and developing its products. While most companies concentrate on keeping the costs of producing a new product down, Apple concentrates on utilizing all of its resources to ensure that its products are unique and different from those of its competitors. This unique strategy has seen the company developing eye-catching products and services such as the iMac, iPod, iPhone and iTunes which have been well received by many international consumers around the world. This particular strategy made the company to be named the most innovative company for the year 2007 by Business Week.
The company has been able to adopt a strategy that ensures it continues to maintain a positive relationship with its customers, the media, its investors and shareholders. The company has employed cost pricing strategies such as the one incorporated when the iPhone was first launched into the market in 2007. Three months after the phone became available in most international stores; the company cut the price of the phone by one-third which was seen as a strategic move to increase the sales and profit margins for the iPhone (Hitt et al, 2011).
Another strategy incorporated by the company was the opening of over 200 retail stores in worldwide markets to deal with the increasing demand for Apple products such as the iPod, iPhone and the iMac computers. When the company opened its first retail store in 2001, analysts predicted that the company would record huge losses within the first two years of operation because few computer companies had successfully managed to run their own retail stores.
Apple’s retail stores were however able to contribute over $200 million to the company’s profit during the first two years of their operation. This success was mostly attributed to the company’s ability to utilize brand exposure where customers had the opportunity to use various Apple products within the retail stores. Brand exposure ensured that customers were able to view the various features of Apple products before they made a purchase decision (Ireland et al, 2008).
Apple’s ability to create a stream lined product line that has unique and innovative products has contributed greatly to its overall strategy of being the number one manufacturer of quality items. It has adopted a strategy of using memorable adverts which draw in the attention of the consumer to the product being advertised.
It has also adopted a strategy of making its customers feel valued where it has incorporated one-on-one training programs for customers who purchase Apple products in any of the worldwide retail centers. Customers can be able to ask Apple technicians and programmers questions with regards to how they can be able to operate their hardware. The retail centers also allow customers who want to purchase Apple equipment the opportunity to schedule an appointment with a shopping assistant to ensure they select the right equipment (Ireland et al, 2008).
Describe the recommendations you would make to enhance the effectiveness of the company’s strategy or to change its strategic approach for better results
To further enhance the effectiveness of the company’s strategy, the company can enter into partnerships with major cell phone countries in most of the countries in Europe, Asia and Northern America. This will ensure that services such as the iTunes Music Store are available to majority of consumers in the international market. The collaboration with major cell phone carriers such as Vodacom and Vodafone will also ensure that consumers of Apple products are able to receive iTunes services at an affordable rate.
Apart from forging strategic partnerships, Apple should also invest in product testimonial marketing where consumers of Apple products get to talk about their experiences. The only products marketed by the company that have received testimonial marketing include the iPod, iMac and iPhone. This approach should also be utilized to increase awareness for the other products and services offered by Apple.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2011). Strategic management: Competitiveness and globalization, concepts and cases. Mason, Ohio: South-Western Cengage Learning.
Ireland, R.D., Hoskisson, R.E., & Hitt, M.A., (2009). Understanding business strategy: concepts and cases, 2nd Edition. Mason, Ohio: South-Western Cengage Learning
Vuolle, M., Aula, A., Kulju, M., Vainjo, T., & Wigelius, H., (2008). Identifying usability and productivity dimensions for measuring the success of mobile business services. Advances in Human-Computer Interaction.