Bcg Matrixapple Inc.

23-04-2021 admin

Executive Summary

BCG Matrix Boston Consulting Group is renowned as a thought leader in the management consulting world. One of the firm’s most famous analytical frameworks includes the BCG Matrix, also known as the BCG Growth Share matrix. The tool was first introduced in the 1970s by Bruce Henderson, the founder of BCG.
BCG Matrix – Apple Inc. Today we are going to analyse the Boston Consulting Group Matrix on an example such as Apple Inc. Apple was founded in 1976 in California and counts today as a multinational corporation that designs, develops, and sells consumer electronics, computer software, online services, and personal computers.

Is included among the leading manufacturer of electronic devices that has market share in the global industry. The BCG matrix can provide useful insight into the market share and growth prospects of the different products of Apple Inc. The following discussion uses BCG Matrix to evaluate the case of Apple Inc. BCG Matrix Name: Institution: Course: Date: Apple Inc. Apple is one of the leading electronic devices companies in the industry with a global presence. The company has risen through the ranks in the industry, with innovative products (Vincent, 2017). Using the BCG matrix, it is possible to gain insightful information on the company.

Apple Inc. is one of the most valuable companies in the world with internet sales to 39 countries and over 450 Apple retail stores across the globe (Farfan, 2016). Being near the top of the information technology and communications sector, Apple has created a prestige brand selling to high-end customers. Apple has attained success through continuous innovation, but recently Apple has seen some key areas of worry in the international market. Competition from rival Samsung, as well as smaller smartphone producers in areas like India and China, have directly affected sales of the iconic iPhone. The failure of the “cheaper” iPhone 5c to penetrate emerging markets is also of concern. Even after being valued at well over 700 billion dollars, Apple faces issues as a multinational corporation.

This report focuses on current Apple global strategy, strengths and weaknesses, and ultimately recommendations for heading forward. To remain relevant, Apple must embrace some of its core ideas like standardization of products and distribution, while continuing to push further into the global market through FDI and localization. All of this must be driven by innovation because as Apple’s reputation falls it must provide new and revised quality products to consumers that have come to expect the best. This is not as easy on the global market where political, economic, and cultural differences with the addition to limited resources tend to limit Apple’s growth abroad.

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Apple - Political, Economic, and Cultural Systems

Apple carries out its operations on almost all of the continents except the Antarctica! Apple has offices, design studios, manufacturing centers, development centers, sales, and marketing offices in countries like the US, UK, France, Brazil, India, China, Singapore, Australia, Germany, Sweden and much more. Apple’s international business is extremely complicated as compared to the US operations (World HQ). The countries mentioned above in which Apple carries out operations have significant variations in their level of economic advancement and future economic growth trajectory. Several countries have diverse political, economic and legal systems. For example, the below Venn diagram shows the tension for Apple, Inc. In the US, the economic circle is a strong market-based economy, and the culture is individualistic as compared to China, where the economic circle is still growing and has a collectivist culture. The US has been built on democracy whereas communist totalitarian political views are rooted in China. However, still, Apple has invested billions of dollars for cost effective production facilities with Foxconn in China. In 2016, Apple launched a development office in Hyderabad, India (growing market based and mixed economy, democracy, a combination of individualism and collectivism) for the Apple Maps division. (Apple.com, 2017) Nevertheless, even after having democratic political systems, the cultural differences are stark.

In an interview with a Lead Engineer at Apple HQ said that even if the working culture at HQ and the India office are extremely demanding with tremendous pressure, the working style is quite different. She mentioned that Indian employees at their development center in Hyderabad do not like confrontation when certain deadlines are not met. Employees at the Indian office will never say no to their counterparts in the US office, but if they are not able to cope up with the timelines, they will always have an excuse. She also added that it is different over here (US), if an employee thinks something cannot be achieved in the given period, s(he) would say no or ask for more resources. Another twist to the political-economic-culture trio came into sight when Foxconn (Apple’s biggest OEM) decided to invest and build a manufacturing plant near Mumbai, India. Foxconn after looking for multiple locations and political influences decided upon the current proposed strategic location. Thus, now Apple has to deal with manufacturing plants in addition to their Maps development center that will change the overall dynamics (Aulakh, 2016). As economies of different countries become stronger, GDP and per capita income increases that helps to improve buying power. As of now Apple targets only high-end customers and for at least foreseeable future the buying pattern of customers from developed nations will remain same, but the pattern may shift towards developing nations soon. Thus, depending on which country the Apple HQ is interacting, the influence of the political, economic, and cultural systems circles may change, but all are equally important.

Different type of trade theories in information and technology industry

Apple belongs to the information technology and communications industry blended with music, healthcare, mobile payments, and accessories industry. Over the course, Apple has used different trade theories depending on the situation and the competition. Historically, Apple used the theory of absolute advantage by designing and developing products in the US. A firm uses absolute advantage when a country produces a product in the most efficient way than any other country. (Hill, 2013) In the earlier days of Apple, due to the limited technical know-how and best available resources in the Silicon Valley, Apple used absolute advantage to design and develop the products. Over the time, Apple implemented comparative advantage as it made sense for a country to concentrate on the production of the goods that it produces most efficiently and to buy the ones that it produces less efficiently from other nations. The theory of comparative advantage suggests that trade is a positive-sum game in which all countries that participate realize economic gains. As Chinese companies became experts in manufacturing products, Apple started investing in those regions to get their best quality products manufactured efficiently. The Heckscher-Ohlin theory is based on factor endowments; the extent to which countries are endowed with resources like land, labor, and capital. In this theory, countries export those goods that make intensive use of factors that are locally copious, while importing goods that make intensive use of factors that are locally scarce. After understanding the potential of Indian market that has abundant well educated IT engineers, Apple invested in a development center in India to leverage relatively cheap labor for quality work. Also, Apple increased FDI in Chinese companies to improve the manufacturing processes and make use of teeming human capital. Apple also applied the product life-cycle theory. Due to wealth and size, the US market gave firms a strong incentive to develop new consumer products. Also, the high cost of US labor gave firms an urge to develop cost saving process innovations. A new product became standardized as the US and other advanced markets matured, prices turned into a competitive threat. Thus, the locus of global production initially switched from the US to other advanced nations and then from those nations to developing countries like India, Singapore, and Brazil. New trade theory suggests economies of scale reduce unit costs for large scale production. Apple started applying new trade theory to spread fixed costs over large volumes and found the ability of large volume productions through specialized labor and machines in China. Apple’s new trade theory helped to achieve economies of scale, increase the variety of goods available to consumers and decrease average cost.

Foreign Direct Investment and Apple

The eclectic paradigm is the theory that resembles the most in the information technology and communications industry. Dunning’s eclectic paradigm accepts the argument of internationalization theory that it is challenging for a firm to license its unique capabilities and know-how. (Hill, 2013) Therefore, combining location-specific assets or resource endowments with the company’s unique capabilities often requires FDI. Apple has a very secretive culture and demands the highest level of control for high-quality products. Due to above reasons, Apple never licenses its products for sales through foreign entities. Instead, Apple uses the intellectual talent to design and develop its products in the Silicon Valley. Due to abundant high-quality engineers available in this region, it makes sense for Apple to use the knowledge and technical know-how of the community and innovate the design and development process. To achieve economies of scale, Apple cannot manufacture products from the US due to high labor cost, and exporting it makes them costlier. Thus, Apple sought for locations that are cheap and specialized in high volume manufacturing. As Apple started making FDI in Chinese region for economies of scale, so did Samsung replied by making FDI in similar regions. Apple and Samsung (one of the biggest rival) have been having an oligopoly in the recent years, and thus it follows another feature of FDI; firms in an industry invest at a similar time in the similar region. As the Apple’s products value to weight is high, it was easily affordable for Apple/manufacturers to transport the products across the globe and thus both were in a win-win situation due to increased trade. Thus, Apple established production facilities in Chinese region and rather now shifting to India where Apple will be able to tap potential furthermore.

International trade and FDI - substitutes or complements?

International trade and FDI tend to complement each other. A trade would be considered exports out of the host country and to other nations around the world, that import these goods. Although by opting to invest through FDI export sales are being replaced by local sales in the country where the investments are occurring, investing abroad can drive greater competition in foreign markets (Fontagné, 1999). Higher competition would also, in turn, benefit exports from that same country that also invested abroad. In manufacturing, such as technology manufacturing industry, investing abroad “may lead to increased manufactured exports.” (Fontagné, 1999) Additionally, there has been evidence of positive correlation between US investments in foreign markets and increased US exports (Fontagné, 1999). Also, FDI from one company can lead to greater exports and trade from other businesses in the industry, which would enhance and complement international trade for that industry. A 1999 study of 14 countries conducted by Lionel Fontagné found that every dollar of outward FDI results around two dollars of additional exports (Fontagné, 1999).

Evidence of SMST

Simultaneous Multiple Strategic Thrusts (SMST) are moves made by a company that simultaneously target multiple strategic stakeholders, which are suppliers, customers, and competitors through global coordination and efficiency, national responsiveness and flexibility, and worldwide innovation and learning. There is evidence of SMST at Apple, specifically through differentiation, cost, innovation, and alliances. Apple’s biggest competitive advantage is the control of both the hardware and the software of their products, meaning all Apple products run on the same operating system and run the same software. This competitive advantage differentiates Apple from competitors like Samsung, that cannot make products to run on Apple’s systems and must rely on other suppliers. It also allows Apple to drive innovation by continually introducing new products that only run on its systems, blocking out initial competition. Apple has been able to keep costs relatively low by having standardized products, which is one of its globalization strategies requiring global coordination through its suppliers. Apple products are precisely standardized throughout international markets and suppliers across the world, which reduces costs and overhead – there is little differentiation or customization outside of changing power sources per country guidelines. However, Apple’s profit margins began to decline in 2016 at 39.1% of net trade sales, down vs. 40.1% a year before. The company attests this drop to unfavorable leverage of fixed costs as sales decline. Apple is in the process of attempting to reduce manufacturing costs by partnering with other, cheaper suppliers overseas, which could allow for better margins driven by lower costs. Lowering costs could give Apple to an ability to compete on price with their competitors overseas, where they have lost market share while maintaining the same or better margins. According to Anshul Gupta, a research director at Gartner, the drivers for share and sales decline could be “low-cost smartphones in emerging markets, strong demand for premium smartphones, and aggressive pricing from local and Chinese brands in the midrange and entry-level segments of emerging markets led to consumers upgrading more quickly to affordable smartphones.” (Jones, 2016). One way Apple is attacking this is through FDI in India, where regulations could become more lenient (Gadgets Now, 2016) and setting up an R&D center in China that can provide greater access to a variety of suppliers.

Apple and major motivation for alliances

There are many motivations for alliances in the electronic manufacturing and technology industries. Apple has done several things to drive revenue in the services segment, which had the largest year over year growth in 2016 at 22% (Exhibit C). Some of these alliances include a partnership with credit card companies for the Apple Pay product, which allows customers to use their credit cards by phone. Additionally, Apple has partnered with the movie and TV show industry to drive revenue through the iTunes store. Apple has also partnered with wireless carriers to become third party sellers of its equipment. Finally, Apple partnered with application developers through membership in its developer program which provides developers with access to beta software and advanced app capabilities. This close association allows developers to produce applications specifically for Apple’s operating system, which only Apple products can run on. The above alliances help Apple drive their strength in differentiating products by using delivering innovation that can only run on their operating system such a large amount of applications and Apple Pay. Other alliances focus on costs. Apple will be opening a second R&D center in Shenzhen, China, which is home to many technology manufacturers that could supply Apple’s parts at lower costs, with whom they will be able to partner with as they invest directly in that country. Apple was quoted as saying “The Shenzhen center, along with the Beijing Center, is also aimed at strengthening relationships with local partners and universities as we work to support talent development across the country.” (Jones, 2016)

Strengths, Opportunities, and Recommendations

While Apple is an industry leader with proven strengths, it also has weaknesses particularly concerning their global strategy and how it will address future growth. Standardization is one of Apple’s greatest strengths. By the end of 2016, 78.4 million nearly identical iPhone 7 and 7 Plus units were sold across the world. (Tibken, 2017) Whether Apple has found a “sweet spot, where there is common ground in diverse cultures” or an “underlying common-ness of all humans so that no need for product customization” makes no difference, Apple is still an industry leader in smartphone sales (Hovivian, 2016). This standardized design of all products allows Apple to quickly roll out new versions of its devices across the globe and further increases the likelihood of success by carefully selecting the countries it enters. Apple’s reputation and global brand recognition are added strengths of the company. Even with the recent Global RepTrak rankings of worldwide reputation having shown a dip for Apple in the last few years, dropping from the number one spot in 2011 to number twenty this year, it remains well ahead of rival Samsung which ended up at number seventy in 2017 (Global Rep Trak, 2017). Apple is known as a prestigious brand across the globe and continues to protect itself by vertically integrating distribution channels and dealerships that only allowing selling its own products at their unique stores or through highly vetted authorized dealers.

Innovation has always been at the top of Apple’s agenda since Steve Jobs started the company back in the 1970’s and is still one of their strengths. While in recent years critics have noted the lack of additions to the Apple product line and few substantial upgrades to current offerings, innovation is still a major focus. In recent years Apple has purchased between 15 to 30 start-up sized companies all in an attempt to bolster innovation. Acquired companies in 2016 included Flyby Media which focuses on augmented reality and Lean Sprout, an education tech company (Roberts, 2016). On the other hand, one of Apple’s greatest weaknesses is the high cost of their products. The price limits its customer base to only those that can afford an iPhone, iPad or Apple Watch, all priced well out of reach of much of the world. While Apple has tried to produce some lower priced items in the past, like the iPhone 5c which had a plastic backing instead of the usual metal, most current customers felt the finished product was made cheaply, and it did not draw the lower socioeconomic audiences as expected (Heisler, 2014). Another weakness for Apple is its small percentage of the global marketplace, particularly in emerging markets and those at the bottom of the pyramid. Apple has tremendous value but 81.7 percent of smartphones purchased in the fourth quarter of 2016 used the Android operating system compared to 17.7 percent that used Apple iOS (Vincent, 2017). The same statistic holds true for tablets as well. Considering that in India and other emerging markets a quality Android smartphone can cost as little as $150, Apple may not find a niche in this profitable sector soon (Sui, 2016). Thus, Apple will need more efforts in frugal innovation to reduce its costs and attract the bottom of the pyramid.

Listed and described below are three strategic recommendations for Apple. These are derived not only from the company’s strengths and weaknesses but also from previously referenced information about their FDI, cultural awareness, innovative practices, and current general global strategy.

Continue International Expansion: Apple must not only look to smaller domestic acquisitions, but also to companies abroad where possibly they could find the “frugal innovations” it needs to enter emerging markets properly. In 2014, Apple purchased Beats for 4 billion dollars which was their largest acquisition in history, but small compared to other tech companies like Facebook that spent 22 billion dollars for WhatsApp, an app that has international appeal and recognition. (Webb & Sherman, 2017) Apple’s recent announcement of a $45 million dollar R&D center in Beijing and continued openings of Apple stores in locations like India show a real sign of commitment to the process. (Kharpal, 2016)

Begin to Localize Global Marketing: Apple needs to recognize that while their products may be standardized, its marketing should focus on localized markets. One way to better reach diverse international markets is to directly market to them instead of simply translating large ad campaigns. Apple seems to have already begun this process as can be seen in recent changes at their outside ad agency and a string of 15 second YouTube ads titled “One Night” that display different cities across the world through an iPhone cameras. (YouTube, n.d.)

Develop New Products with the World in Mind: While Apple may never reach out to all emerging markets, they have substantial reason to focus on the broader international market. Next in the Apple innovation line-up is the Apple Car. Considering the failures of previous attempts to create a “world car”, Apple must learn lessons from current cultural situations like the one mentioned earlier in India. Possibly they can find the right balance through standardized products as they have done before, but they must be aware of their own slip-ups like the iPhone 5S when matching products to countries. Apple’s FDI approach must continue, opening more culturally distinct Apple stores worldwide.

These recommendations all stem from knowing that Apple continues to use common strategies like standardized products and innovative thinking with impressive results. These recommendations allow them to move forward on a global level and also to adapt to the cultural, economic and political roadblocks they will face.

References:

This article was a part of group research. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any company/agency. Examples of analysis performed within this article are only examples. They should not be utilized in real-world analytic products as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of any entity.

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Introduction

In this project I am going to describe the Strategic and Marketing Plan of Apple Inc, Which is the biggest consumer electronics provider in the world. It provides wide range of consumer electronics in the market like MAC computers, IPOD, I Phone, LAPTOP, IPAD. It has about 49,400 employs and over 240 Retails Store all around the world wide out of it 218 are in US and 24 in UK rest in other countries.

I personally think that before studying the strategy of any organization we need to understand the basic of Strategic Management like What Strategic Management is?

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What is Strategic Management?

Strategic Management is nothing else but plans defined by the management of an organization to achieve a long term goals which are predefined and monitored towards reaching the organization’s goal. The steps that are taken till now are being monitored to make sure that they have been carried out in the most efficient manner possible to achieve organizational predefined goal as described in the mission statement which directs the strategic management process.

Definition:

“The on-going process of formulating, implementing and controlling broad plans guide the organizational in achieving the strategic goods given to its internal and external environment”

This is an ongoing process which keeps changing according to the circumstances and requirements of the internal and external environments but it keeps moving towards to achieve its predefined organizational goal.

Strategic Management is comprised of its three main processes which manager of an organization has been familiar with. These Processes are as given below.

Strategy Formulation
Strategy Implementation
Strategy Evaluation

Strategy Formulation:

Strategy formulation means a strategy formulate to execute the business activities. Strategy formulation Includes developing:-

Vision and Mission (The target of the business)
Strength and weakness (Strong points of business and also weaknesses)
Opportunities and threats (These are related with external environment or the business)

Strategy formulation is also concerned about setting long term goals and objectives, generating alternative strategies to achieve that long term goals and choosing particular strategy to pursue.

The considerations for the best strategy formulation should be as follows:

Allocation of resources
Business to enter or retain
Business to divest or liquidate
Joint ventures or mergers
Whether to expand or not
Moving into foreign markets
Trying to avoid take over

Strategy Implementation:

Strategy implementation requires a firm to establish annual objectives, devise policies, motivating employees and allocate resources so that formulated strategies can be executed. Strategy implementation includes developing strategy supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information system and linking employee compensation to organizational performance.

Strategy implementation is often called the action stage of strategic management. Implementing means mobilizing employees and managers in order to put formulated strategies into action. It is often considered to be most difficult stage of strategic management. It requires personal discipline, commitment and sacrifice. Strategy formulated but not implemented serve no useful purpose.

Strategy evaluation:

Strategy evaluation is the final stage in the strategic management process. Management desperately needs to know when particular strategies are not working well; strategy evaluation is the primary means for obtaining this information. All strategies are subject to future modification because external and internal forces are constantly changing.

History Apple Inc:

Apple Inc formerly known as Apple Computer Inc which provides corporate Server, MAC OS Systems and Operating System. Apples core product lines are the iPhone, iPod and Macintosh System. Steve Jobs and Steve Wozaniak, The founder of Apple has created the Apple Computer on 1st April 1976 and integrated in the company on 3rd January 1977, in Cupertino California. It has driven the Computer manufacturing market for more than two decades. Mr. Steve Jobs who was expelled in 1985 was return as CEO of the APPLE Inc in 1996 with new Ideas and corporate philosophy. With introduction of successful IPod Player in to 2001 Apple has again proved itself as a Market leader in consumer electronics. Latest era of extraordinary success of the company is in iOS based Apple products like I Phone, IPod slim, I Pad and now I Pad 2. Now a day’s Apple is a biggest technology corporation in the planet with the profits of more than $65 billion. It has about 49,400 employs all over the world. Fortune Magazine most Admired company in United State in 2008 and in the world in 2008, 2009 and 2010.

Apple has over 240 Store all over the world and the bifurcation of these store in different countries are as below.

Vision Statement of Apple:

“Man is the creator of change in this world. As such he should be above systems and structures, and not subordinate to them.”

Explanation of Vision Statement:

Apple lives this vision through the technologies it develops for consumers and corporations. It strives to make its customers masters of the products they have bought. Apple doesn’t simply make a statement. It lives it by ensuring that its employees understand the vision and strive to reach it. It has put systems in place to enable smooth customer interaction. It has put objectives in place to continuously move forward; implemented strategies to fulfil these objectives; and ensured that the right marketing, financial and operational structures are in place to apply the strategies.

Mission Statement of Apple:

“Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.”

http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=aapl&script=1800&layout=7#corpinfo2

SWOT Analysis of Apple Inc:

Although participation in such activities may add value, they may not be a source of competitive advantage. Ultimately, the value, rarity, inimitability, and/or organization (VRIO) of an activity or resource determine its sustainability as a source of competitive advantage. Within this context, we can identify a firm’s strengths, weaknesses, opportunities, and threats (SWOT).

In SWOT analysis Strength and Weaknesses are depends on Internal factors and Opportunities and Threats Depends on External Factors of and Organization. SWOT analysis is useful in decision making about the organization going for any new or existing project.

Apple SWOT Analysis

Strength:
iTunes Music Store is a excellent source of revenue, especially with the iPod and the accessibility on Windows platform.
Apple Computer are expert in Developing own software and hardware.
Apple’s niche audience provides the company with some lagging from the direct price competition.
Giving a face-lift to desktop and notebook lines.
technology can be used to improve product awareness and sales.
Low debt—more maneuverable.
Apple Computers have good brand loyalty.
Partnership with Intel Computers in 2006 – Present.
Strong Research & Development Department.
Weaknesses:
Weak relationship with Intel and Microsoft.
Weak presence in business arena.
The product life cycle of Apple products are very small for that reasons revenues are more depend on launch of new products and services.
Weak presence in markets other than education and publishing.
Slow turn around on high demand products.
Apples market share is far behind from major competitor Microsoft.
In past the relationship between Steve jobs and employee were not good which result in reputation loss.
Opportunities:
Increase in worms and viruses on PCs so the antivirus solution can be developed by Apple
Large population (Gen X&Y) which are extremely individualistic and name brand conscious.
The ties of apple other companies are weak, Apple can develop good relationship for joint ventures
Downloadable music and MP3 players are highly marketable.
The online sales of computer are increasing with rapid speed.
The laptop market growth is high; Apple Computers should focus to develop new models to cater the need of customers.
Threats:
Companies not seeing Apple as compatible with their software.
Apple facing strong competition from Dell, HP, Sony and Toshiba in laptop segment.
Downloading free music from other online source without paying cost is common it may impact the iTunes sales.
Apple software, Cell phone and hardware are expensive as compared to other competitors such as Dell.
The long lasting recession may impact the sales of the company due to higher prices of the products and services
Microsoft launched Microsoft Vista, Windows 7 which is gaining market share.
The switching in technology is very fast

BCG Model:

Boston Cusnsulting Group (BCG) model is a technique developed by BRUCE HENDERSON of the Boston Cunsulting Group in early 1970’s. According to this technique businesses or products are classified as low or high performers depending upon their market growth rate and relative market share. It is very useful tool to identify the product line of an organization.

BCG model classified in four main.

1.) Star 2.) Cash Cow 3.) Question Mark 4.) Dog

RECOMMENDATIONS:

FOR COMPANY:

Lowering the cost of products and maintaining the same quality standards

Can form joint – ventures
Knowledge Management

Bcg Matrix Apple Inc Headquarters

More number of retail stores for easy access
Continuous innovation to expand

FOR OTHERS:

Does not compromise on price for quality

Choose the products based on individual needs

Be unique and different

CONCLUSION

I feel that Apple must focus on several key aspects to continue to grow and succeed. They must continue a stable commitment to licensing, push for economies of scope between media and computers, and become a learning organization.

Apple apparently made a commitment to licensing. Although it should continue, Apple may want to consider other forms of strategic alliances. An equity strategic alliance may offer Apple the opportunity to obtain additional competencies. An effective way for a company like Apple to accomplish this would be in the form of a joint venture.

Apple should continue pushing the new line of media-centric products. Meanwhile, Apple should not lose focus on its computers. Macintosh computers were 39% of Apple’s sales in 2005. (Burrows)This very innovative company exploits its second-mover position. In the future, they will need to continue innovating to expand the boundaries of both media and computers