Key competitive advantages and challenges

Competition and the pace of technological change are the most critical issues currently facing
Apple Computer. Its strategic moves into mobile communication devices and portable
entertainment downloading places the company in stiff competitive conditions from every angle.
New competitors, low-priced rivals, and potential substitute products all threaten to reduce the
perceived value of Apple products and the success of its strategy.
Presently Apple Computer has to cope with the most significant issues of rapid technological
changes and competition. The company is in rigid competitive conditions from every point of
view, its planned shift in to portable entertainment downloading forums and mobile
communication devices. Apples product value and success of its planning is declined because of
low-cost competitors, new rivals and potential substitute products.
Apple is also challenged to maintain its core competencies - mar!eting, innovation, relationship
building, and brand management - as it manages a broader range of products and navigates more
mar!ets. Its customer base is now more diverse, and new sets of competitors have a wider variety
of strengths and strategies. The technology and entertainment industries are constantly and
rapidly changing. It is uncertain whether Apple will be able to sustain its brand"s reputation for
innovative design, continually release technological brea!throughs, and launch new products that
will #hit the consumer mar!#. In addition, the company"s suite of products is no longer based on
its internally developed hardware and software, but depends upon the ability to secure media
content, which has its own competitive forces, dimensions of entertainment value, and
proprietary issues.
$ar!eting, association building, improvement, and brand management are the main
competencies of Apple% it is challenge to maintain these, because it runs a wide variety of
products and services and scrolls e&tra in the mar!ets. Now its customer base is e&tra varied and
new rivals have a broader range of strategies and power. There is a 'uic! and continued change
in entertainment and technological industries. Apple is not sure that whether it is able to maintain
its brands reputation for the fre'uently release technological advances, innovative design, and
launching new products that will stri!e the customer score. Adding more the companys product
group is not depends on its inside developed software and hardware, but it is based on the
capability to safe the media contented that has its personal competitive strengths, proprietorship
issues and measurements of entertainment worth.
Stakeholders demands and expectations
(ith Apple"s success and growth, balancing sta!eholder demands has become increasingly
difficult. $anaging the sometimes-conflicting e&pectations of customers, investors, suppliers,
partners, legal)governmental entities, and other sta!eholders puts an increasing amount of
pressure on Apple"s management team. And the company"s dependence on *obs" charisma,
vision, and public communication and relationship-building s!ills puts Apple at ris! without a
reliable succession plan and a pool of e'ually-talented brand champions.
Apple"s continued success lies in careful and thoughtful strategic management of these comple&
issues and challenges.
To match up with the sta!eholders demand, with the Apples achievement and growth has
become very hard. Apple management has a rising amount of pressure in sustaining the clashing
anticipation of investors, partners, legal and government bodies, customers and other
sta!eholders. And Apple is at ris! due to the companys dependency on vision, +ob chance, open
communication and association constructing abilities, without the trustworthy succession
planning and a team of e'ually talented champs of the brand. Apple Companys sustained
growth is based on the considerate and vigilant strategic management of these difficult
challenges and matters.
Success Factors of Apple
A balanced use of financial and strategic controls will help ensure that Apple Computer both
benefits from feedbac! on past performance and communicates the important drivers of future
performance. The following criteria provide a set of measures to effectively determine the
company"s success.
,ne of the most important stages of the strategic management process is the situation analysis,
which involves an in-depth assessment of forces in the e&ternal and internal environments that
can impact the success of the company"s strategy over time.
Internally, an analysis of the firm environment focuses on the resources and capabilities within
the company which strategies can be based upon. An internal assessment identifies core
competencies which will support the implementation of chosen strategies and company
shortcomings which might interfere with strategic plans. Apple"s core competencies include
mar!eting -including the ability to develop appealing designs., innovation -enabled by research
and development., alliance building -based on e&pansive relationships built by *obs throughout
the e&ternal environment., and brand management. /ignificant strengths and wea!nesses
uncovered by the internal environmental analysis are summari0ed below.
Weaknesses of Apples Strategy
1ependence on /teve *obs for his personality, vision, negotiating prowess, and relationship s!ills
Need to build management team and conduct succession planning
2&ternal to the company, Apple"s most pressing challenges emanate from the industry and
competitor environments. A multitude of e&isting and new competitors is poised to battle for
mar!et share and re'uires continuous attention from the company"s leaders.
A close loo! at Apple"s competition reveals that the company is confronted by aggressive
opposition in all areas of its business. The mar!ets for consumer electronics, personal computers,
related software and peripheral products, digital music devices and related services, and mobile
communication devices are intensely competitive. They are characteri0ed by rapid technological
advancements, which have substantially increased the capabilities and use of PC"s, digital
electronics, and mobile communication devices. As a result, a variety of new products with
competitive price, feature, and performance characteristics are being introduced into the
mar!etplace. And over the past several years, price competition in Apple"s main product mar!ets
has been particularly 0ealous.
Competitive Advantage in Computers Industry
It is common for competitors selling personal computers based on other operating systems to
aggressively cut prices and accept lower product margins to gain or maintain mar!et share. This
puts continuous downward pressure on Apple"s margins. ,ther than price, !ey competitive
factors in the computing mar!et include product features, relative price)performance, product
'uality and reliability, design innovation, availability of software and peripherals, mar!eting and
distribution capability, service and support, and corporate reputation. As the industry and its
customers become more reliant on Internet connectivity, alternative -even substitute. devices are
becoming increasingly smaller, simpler, and less e&pensive than traditional PCs.
In order to gain or sustain mar!et share, it is fre'uent for the rivals selling personal computers
depending on other operating systems to insistently low the prices and believe in lower products
edge, this creates permanent descending pressure on Apples edge. The !ey competitive elements
in the calculating mar!ets other than price are relative price)performance, product 'uality and
reliability, design moderni0ation, availability of software and peripherals, mar!eting and
distribution capability, service and support, and company standing. 1ue to the dependency of
customers and the industry on internet technology, other substitute devices are progressively
more simpler, smaller and less e&pensive than conventional PCs.
iTunes competes along the following dimensions3 media compatibility, price -monthly
subscription or per song)album., selection -content agreements., search and preview functions,
content sources, encoding format)technology, 'uality, availability of downloadable materials,
and other online features. iPod specifications include high resolution 'uality, software inclusion,
and technological brea!throughs. Apple currently dominates this mar!et, retaining a competitive
advantage based on superior innovation and solution integration of hardware -personal computer
and iPod., software -iTunes., and content distribution -iTunes /tore and iTunes (i-4i $usic
/tore.. 5owever, the competitive rivalry in this arena is e&pected to intensify as competitors
imitate Apple"s approach and tightly integrate their own offerings to appeal to consumers.
Probably most threatening to the company"s position is potential collaborations between
competitors and content providers to offer integrated solutions that produce more value or
e&clude Apple from access to content.
The ris! of new entrants is also high in both the player and music service businesses, particularly
from large, established consumer electronics companies, such as Casio, /ony and Toshiba -for
players. or from on-line companies li!e 6ahoo and $icrosoft or retailers li!e 7irgin $usic -for
downloads.. 8iven the attractiveness of these mar!ets, new competitors are li!ely to enter
because of low barriers to entry. The primary barrier is capital, and even that is not high enough
to discourage organi0ations with available resources. And the speed with which information
about new technology spreads enables start-ups to gain legitimacy in the industry very 'uic!ly.
The ris! of new comers is very huge for the music service business and players. $ainly for
player big well !nown electronic appliances companies li!e /ony, Toshiba and Casio and for
downloads 6ahoo and $icrosoft online companies or retailers, such as 7irgin $usic. 9ecause
of less entry barriers and pleasant appearance of these mar!ets, the new rivals are pro+ected to
enter in the mar!et. Investment is the main entry barriers, yet it is not huge enough in
disheartening the companies with the e&isting resources. The speedy spread of the information
about the new introduced technologies changes facilitates the startups to have increased authority
in the industry very rapidly.
The company"s entrance into the mobile communications field with the introduction of its iPhone
has placed Apple in another highly competitive industry, where several large, well-funded, and
e&perienced competitors operate. Price sensitivity on the part of consumers is very strong, and
rivalry is especially fierce in this mar!et. -$otorola has been the undisputed leader for years.. To
gain an edge, competitor behavior is characteri0ed by aggressive pricing practices, fre'uent
product introductions, evolving design approaches and technologies, and rapid adoption of
technological and product advancements by competitors.
Apple Companys entry in mobile communication field with the introduction of iPhone, it has
given Apple an additional greater place in high competitive mar!ets, where many huge, wee-
financed and e&perienced rivals function. Competition is particularly very violent in this mar!et
and consumers are very strengthening on the price sensitivity issues. 9y the destructive pricing
strategies, regular product introductions, technologies and developing design approaches,
product improvements by rivals and 'uic! technological implementation, the rivalry behavior is
differentiated and competitive edge can be gained.
New entrants also pose formidable opposition to Apple in the mobile phone mar!et. The notable
acceptance and gains made by :I$"s 9lac!berry demonstrate the potential of new entrants to
increase rivalry. 1ue to the success of the iPhone and the 9lac!berry, other producers will
undoubtedly attempt to imitate their appealing features and functional applications in order to
create customer value and compete effectively with their own smart phones. In addition, Apple"s
e&clusive use of Cingular)AT;T does not prevent the phone service provider from entering
potentially harmful agreements with the company"s competitors, such as its threatening
relationship with rival Palm.
In the mobile phone mar!et Apple has frightening resistance from the new comers of the mar!et.
Competition from new comers to boost rivalry is increased by the distinguished recognition and
e&pands prepared by :I$s 9lac!9erry. After the success of iPhone and 9lac!berry many other
producers will try to copy the remar!able features and functional applications of blac!berry and
iphone in their own smart mobile phones to fight efficiently and produce customer value. Adding
more apple companys special use of AT;T)Cingular, it does not stop the phone service
providers from going in the possibly in+urious agreements with the rivals of the company, li!e
intimidating connection of Apple with its competitor palm.
4inally, the mar!et that Apple T7 is entering -with mobile media, set-top bo&, and video
download industry segments. introduces even more management comple&ities and promises
greater competitive challenges than Apple Computer has e&perienced in the past. 4ilm
distribution has e&ceedingly more platforms for reaching the audience, and multiple competitive
segments have already emerged to offer access to content through mail, downloading, rental,
subscription, set-top bo& systems, and manufacturing-on-demand services.
Apple T7 is going in a mar!et with video download industry segments, mobile media and set-
top bo& that is bringing in higher challenges than the previous ones and e&tra management
difficulties. To get in touch with the audience more effectively film distribution is incredible in
having more podiums and numerous competitive divisions has appears in offering access to the
content by mail, set-top bo& systems, payment subscription, developed on-demand services and
downloading.
The company's ability to successfully apply its iPod/iTunes model to this competitive field is still
uncertain. But in all certainty, this industry is not structured as simply as the music industry, and
relationships with key content providers are absolutely essential to gaining a competitive edge.
There is still an ambiguity of companys capability to fruitfully offer its iTunes/iPod model to its
competitive pitch. The structure of this industry is not simple as the music industry, and it is
etremely pivotal for the company to have an association with the key content suppliers to
achieve the competitive advantage.
/T:AT286
Apple Computer"s business strategy leverages the company"s uni'ue ability to internally design
and develop operating systems, hardware, application software, and services to deliver superior
new products and solutions which are differentiated by their ease-of-use, seamless integration,
and innovative industrial design. $ar!eting begins with simple and aesthetic product design,
which generates viral customer interest in Apple products. In an industry of low profit margins
and cost cutting, Apple focuses on revealing radical concepts and appealing designs to ma!ing
its products different. Its differentiation increases brand loyalty and reduces price sensitivity.
(hile competitors see! to imitate Apple"s successful products and the innovative complementary
relationship between iPod and iTunes, Apple continues to introduce ground-brea!ing new
products timed perfectly to achieve first mover advantages. Product refinement and development
now aims at capitali0ing on the convergence of PCs, digital consumer electronics, and mobile
communications.
<sing the company"s core competencies in different product mar!ets -employing a mulitproduct
strategy. decreases Apple"s dependence on revenues from a single mar!et. :elated diversification
allows the company to share resources, activities, and technologies across product lines, and the
transfer of s!ills and intangible core competencies can build a competitive advantage that is
difficult for rivals to emulate.
Apple"s valued supply chain relationships, reseller agreements, wireless carrier contracts, and
innovative co-branding arrangements play a critical role in supporting the company"s
differentiation strategy, powerfully lin!ing the success of strategic partners together. The
company"s strategic alliances have provided an effective avenue for gaining si0eable mar!et
share. Also, affiliations with other strong brand names serve to increase Apple"s mar!eting
e&posure and build consumer confidence.
Apple"s strategy also involves the pursuit of opportunities to create demand for its products in the
global mar!et. In today"s business environment, it is common to e&pand into international
mar!ets when domestic mar!ets mature and commodity pricing tactics infiltrate the industry.
The impact of downward pressure on prices can be minimi0ed when alternative mar!ets are
discovered. 4or high-tech products li!e the iPhone, immediate success can be found in many
different cultures and societies. Additionally, operating and selling beyond the home mar!et can
enhance the company"s ability to compete with ma+or rivals and bring !nowledge into the
organi0ation to e&pand its pool of innovative ideas.
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/ome suggestions for achieving this include3
= = Continually invest in research and development to stay ahead of and lead radical product and
technology discoveries. >The company"s future financial condition and operating results are
substantially dependent on its ability to continue to develop improvements to the $ac platform
and to Apple"s hardware, software, and services related to consumer electronic devices in each
product mar!et.
= 9ecause the personal computer, consumer electronics, and mobile communication industries
are characteri0ed by rapid technological advances, the company"s ability to compete successfully
is heavily dependent upon a continual and timely flow of competitive products, services, and
technologies to the mar!etplace. If Apple miscalculates or fails to produce commercially viable
innovations to enter the mar!et as a first-mover, the company should consider e&panding its
range of product offerings and intellectual property through licensing, ac'uisition of businesses
or technologies, or +oint development pro+ects -such as its 7isual 7oicemail pro+ect..
= 2nhancement of e&isting products in all areas -computer hardware and peripherals, consumer
electronics products, mobile communication devices, systems software, applications software,
networ!ing and communications software and solutions, and Internet services and solutions. will
ma&imi0e the value and the life of products. 5owever, Apple needs to !now when to engage in
planned obsolescence to ta!e advantage of the company"s mar!et leader status.
Apple also needs to define and reach the customer base more broadly and more deeply.
2nhancing security, 'uality, and image will increase Apple"s appeal to more consumer groups.
2&panding the company"s distribution networ! to effectively reach more of its targeted
customers and provide them with a high-'uality sales and post-sales support e&perience will
serve to increase mar!et penetration. 9uilding unbrea!able customer bonds -especially through
its one-on-one programs and retail #membership# culture. will secure long-term customer loyalty
and perpetuate its devoted base of customers. The success of Apple"s retail stores presents the
company with a uni'ue opportunity to #!now# its customers" needs and e&pectations and
provides a forum for floating ideas and generating attention.
4irms that partner with Apple and provide access to new groups of customers are very important
in the company"s 'uest to broaden its mar!et beyond the current installed user base. It is also
important to pay attention to the needs and ob+ectives of strategic allies, especially the interests
of content providers. /ee!ing ways that the power of Apple"s mar!et share and brand name can
benefit its partners and protect their business interests will demonstrate that relationship terms
can offer mutual value for all parties and benefit the industry as a whole. The company wants to
establish partners who are as motivated and engaged in Apple"s success as internal sta!eholders.
!onclusion
The Apple brand, the company"s innovative capabilities, the 'uality of its mar!eting strategy, and
continued success in building strategic partnerships are li!ely to determine the outcome of the
company"s forays into the music, mobile phone, and video-on-demand businesses. Apple"s
commitments and actions should be integrated and coordinated to e&ploit the company"s core
competencies, strengthen its competitive advantage, and ma&imi0e value. In terms of the global
sector, Apple has begun to establish itself as a worldwide player. As the company e&pands its
reach into different parts of the world beyond its current locations, ma+or efforts should be made
to study the preferences of customers in those regions to ma!e sure that service offerings and
mar!eting efforts are attuned to and targeted to address specific needs in those areas.
The analysis reveals that, to secure strategic success, it will remain important for Apple
Computer to be fanatically protective of the Apple brand image and ade'uately invest in the
company"s competitive advantages in innovation and mar!eting. In addition, Apple"s product line
can achieve significant benefits from uni'ue, complementary products and co-branding
opportunities, particularly if they can help overcome resistance to Apple"s proprietary technology
in the mainstream mar!et. 1evelop the top management team and a succession strategy to
reduce over-dependence on one individual to advance the interests of the company. (ith Apple"s
growth strategy, it is li!ely that *obs will soon be stretched too thinly, if he is not already.