Current Strategy: Profitable but Risky
Maintaining competitive edge is one of the key objectives of any business operating in a competitive industry. For Apple, the electronics industry requires intensive action to remain relevant to the market needs. The electronics industry is highly dynamic and any company that desires to maintain competitive edge must be ready to adapt to the changing demands of the consumers. Apple has achieved this mainly using an integrated strategy in its operations. According to Zekiri and Nedelea (2011), businesses can use different differentiation models to maintain sustainable competitive advantage. The first is using an adaptive model while the second is by the use of an entrepreneurial model. In each case, the organization aims at providing better products and creating a better image to the customers. It can be said that Apple has effectively used both the adaptive and the entrepreneurial differentiation strategies in their business. This is most explicitly seen in their capacity to learn from others such as Microsoft and Xerox and to be able to create new products that match the market needs.
Furthermore, the model is based on the Ansoff strategies as discussed by Lynch (2006). These strategies encompass innovation towards product development, market penetration and development as well as product diversification. Apple has managed to create its niche within the electronics market through provision of different products such as the online music download platforms, smartphones and the iPods among others. Through the years, the company has mainly focused its competitive advantage in creating new markets through new products that address the challenges experienced in the use of an older product. At the same time, all the products marketed by Apple have been distinctively classified based on their high quality and high prices. Shin (2001) posits that the application of innovation as a differentiation strategy such as that employed by Apple in the development of new products can help to counteract various forces described in the Porter’s five forces model. For instance, the threat of new entrants and the threat of substitute products are countered through the development of new products that diverge from the expectations of the competitors yet satisfy the consumer needs. Porter (1985) also mentions how expanding into new product lines the way Apple does from the electronics to the consumer electronic products such as mp3s can advance the capacity for transfer of skills and for knowledge sharing.
Hsu (2012) also lauds the innovative differentiation model based on its observed success among Taiwan computer products industry. According to Hsu, provision of excellent quality, diversifying functions and improving appearance have all been beneficial to the companies that deal in such products in Taiwan. This could also be said about Apple since its main focus, as reported by Lynch (2012) is on innovation and differentiation. Hsu further explores the different dimensions of differentiation that can be adopted by any given company intending to maintain sustainable competitive advantage. According to Hsu, technical innovation and product innovation are some of the methods through which organizations can maintain their competitive edge. Technical innovation in this regard includes the ability to introduce new technologies and effectively manage intelligent properties. Apple in its operations has managed to achieve this through technological innovations such as the touch screen phone model and the iPods. Intellectual property management has also been observed through Apple’s interactions with other organizations and with its company innovations. Through sharing the technical knowledge with other companies such as Nokia at a fee, it can be said that Apple continues to be a unique company. Furthermore, product development in terms of redesign and release of new products into the market are also key concerns in the industry. Apple continues to churn out new products into the market, and to improve the existing ones as observed in the development of the iphone.
The technical innovation applied by Apple in its business model focuses on functional innovation as well as modifications in other operational features such as the texture, the methods of use and the product machining operations. Through its differentiation strategy, Apple manages to enhance the perception of the customers about the brand using price and quality as the key distinguishing characteristics. Product prices at Apple have been maintained at high values indicative of luxury while also giving equal value in terms of quality. Technical cooperation among various factions in the industry is also cited as one of the potential impacts of the kind of innovation employed by Apple. The entire process began with the design of a friendly user interface, a practice that Apple has maintained to date. According to Hsu (2012), this also acts as a strategy to keep the consumers satisfied with every product launch. Unique functionality in Apple’s products from the phones, computers to the iDVDs and iPods has enabled the organization to grow tremendously in the past. Hsu claims that such positions held by the company in the market can be effective for enhancing differentiation.
The combination of differentiation and innovation as strategies to business success can be said to be very effective in the organizational setting. Hana (2013), reports that competitive advantage can be achieved through innovation. This is, however, dependent on factors such as design and product quality, reduction of the production time and individualization of all the products, development of new products and the market reception of the products (Hana 2013). For Apple, this has been the rationale behind their growth. The use of unique design, provision of persistently high product qualities and maintenance of individualized product features have all enabled Apple to grow persistently since it learned from interactions with other organizations. On the other hand, the strategy employed by Apple can still be said to be risky. While differentiation and innovation are good drivers of competitive advantage, Apple focuses its innovative and differentiation outcomes on aspects that can easily be replicated by other companies. For instance, Lynch (2012) reports that apart from the iphones and the iPods, none of the other products cannot be replicated. Furthermore, the organization does not practice flexibility with regards to innovative practices.
Part Two: Strategy Improvements
The key limitations of Apple’s strategy as used in the contemporary times include lack of flexibility and limited product ranges. Wang, Lin and Chu (2011) purported technological differentiation should effectively be used to gain a competitive edge through constant innovation. However, this innovation may be limited by certain factors hence evaluation of the constraints needs to come before the actual innovative practices. Moses (2010) further posits that that effective differentiation should result in inimitable reliability, durability, innovativeness and reputation. Apple has successfully maintained a positive reputation through the years. However, other aspects of its innovations including durability and innovativeness can be replicated by others. Apple, therefore, needs to practice flexibility in product and intellectual property management to ensure that the changes made are sustainable as well as inimitable. The key challenge facing Apple now is how to do this since the competitors such as Nokia easily replicate the technologies modeled by Apple and still give their products at a cheaper price. The outcome is the inevitable growth of such conceivably small innovators at the expense of the larger innovators.
Hamel and Green (2007) also explain that in addition to the innovation observed during present days, businesses operations are increasingly based on information and knowledge sharing as this is the only way to achieve sustainable operations. Prajogo (2007) also says that the product quality depends on the type of differentiation strategy used. In the operations of Apple, it is possible for the company to pursue both models of differentiation. From Hamel and Green’s perspective, Apple can engage in talent development to enhance knowledge sharing among the employees as well as to trigger brainstorming for better innovations. Furthermore, the company could adopt product differentiation which targets the product itself rather than the competition and the market. In product differentiation, Dirisu et al (2013) define product innovation, design, quality and uniqueness as the key features of differentiation. Apple already engages in the first three. Uniqueness is still difficult to achieve as many of the innovations developed are replicable within a short duration. Alternatively, the uniqueness could be observed in terms of market positioning. The blue ocean strategy as discussed by Shin (2001) could also offer a good opportunity for growth at Apple. Based on the need to eliminate, and decrease the unproductive features of products while enhancing the extent innovations and creating new ones can be beneficial to the company’s sustainability.
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