Other report – Bachelor’s Degree Programme

Social Sciences, Business and Administration

INTERNATIONAL COMPETITIVENESS
Apple

AUTHOR/S Md Rifat
 2 (9)

CONTENTS

INTRODUCTION......................................................................................................................

1 CHALLENGES.....................................................................................................................

1.1 Marketing strategy....................................................................................................................

1.2 Pricing 4

1.3 Innovation competition.............................................................................................................

1.4 Legal issues.............................................................................................................................

1.5 Distribution channel..................................................................................................................

2 PORTER 5 FORCES.............................................................................................................

2.1 Market competition...................................................................................................................

2.2 Suppliers.................................................................................................................................

2.3 Buyers 7

2.4 Substitues................................................................................................................................

2.5 New entrants...........................................................................................................................

3 REFERENCES.....................................................................................................................
 3 (9)

INTRODUCTION

The report is about apple company. It is an analysis of Apple’s competitive environment and also
includes porter's five-force model, which outlines how an organization may maximize its potential for
competitiveness. The obstacles that the business faces in the context of the global market are the
main subject of the analysis.

Founded in the United States, Apple Inc. is a multinational technology corporation that creates,
manufactures, and distributes consumer electronics, software, and online services. As one of the top
five firms in the United States, the company is highly valued. One of the world's most recognizable
manufacturers of smart devices is Apple.
 4 (9)

1 CHALLENGES

1.1 Marketing strategy

Apple is a worldwide corporation that thrives in the hectic city life of today. The organization has
locations in 25 different countries, including, among many others, Brussels, Dubai, China, London,
New York, and San Francisco. Through its devices, Apple has made app stores accessible in 155
countries.

Apple’s marketing strategies are:

 Focus on a distinctive value proposition is one of Apple's marketing philosophies.

 Develop a devoted user base.
 Keep it basic.
 Recognize your values.
 Create an environment that draws people in.
 Use eye-catching images to encourage them to purchase your goods.
 Make an emotional appeal.
 Be an expert in your target market.
 Execute it differently.

("Marketing Strategy").

Apple uses commercials and adverts to market their products and set them apart from those of its
rivals. The yearly headline presentations play a significant role in their marketing plan. These key-
note discussions are now an essential element of Apple. These conversations keep their customers
interested while also informing them about the products ("4 Powerful Ps You Need to Know About
Apple's Marketing Mix").

1.2 Pricing

Differentiation is one method described in Porter's Generic Strategy (1980). The goal of differentia-
tion is to set one company apart from competitors by creating fresh, valuable items that customers
are willing to pay higher rates for. Since its establishment, Apple Inc. has used this strategy in an
effort to maintain its market-leading position in the smartphone and computer electronics sectors.
Making a product stand out from those of rival companies is the most crucial component for Apple
Inc. to increase its market share. iPhone, Mac, iPod, and other products are made by Apple. Be-
cause they are all premium goods, Apple Inc. charges premium pricing for them.

In order to differentiate its price from that of its rivals, Apple's pricing strategy also involves differ-
entiation. Apple took a wager that iPhone X, which represents a significant advancement in smart-
phone technology, would be accepted despite its price of up to $ 1,000, while many smartphone
makers are attempting to maintain the price. Apple Inc. has dominated the market for high-end
smartphones because to its pricing strategy, which increases the amount of money it can make from
 5 (9)

each client. Their pricing approach also emphasizes a differentiating factor that separates it from its
rivals. While concentrating on high-end smartphones and pricing them accordingly, the business also
unveiled a lesser vision of high-end smartphones. For instance, along with the release of the iPhone
XS Max, Apple Inc. also unveiled the iPhone XR, which costs only $700 and has some of the same
features as the iPhone XS Max. With the release of the iPhone 6 and iPhone 6S, iPhone 6 Plus, and
the iPhone 7 and iPhone 7s, there were high-end and somewhat low-end models available every
year. Because of this, Apple Inc. offers alternatives for customers to pick from, including for those
who want to buy a high-end smartphone but are unable to afford the high-end ones. This is in con-
trast to other firms who only produce one product for one generation (Apple challenges and pricing
strategy).

1.3 Innovation competition

Apple's innovation strategy centers on the development and monopolization of waves of innovation
that are independent of scale, scope, network externality, and a large global ecosystem of suppliers.
The financial success of monopoly is demonstrated by Apple, which generated a gross profit margin
of more than 40% from skyrocketing sales. Apple's innovation strategy lies at the heart of the com-
pany's success in establishing and monopolizing the high-end high-tech sector. Apple's proactive
innovation approach is heavily supported by the disruptive innovation effect of products like the
Macintosh, iPod, and iPhone, among others. It includes innovation in business models, processes,
and products, with the product at its center. The unmet requirements that emerge through reinven-
tion and sustaining innovation are the core of Apple's disruptive innovation approach, which has a
dramatic impact. The flywheel effect has undoubtedly been a result of both incremental and archi-
tectural advancements. Apple's innovation approach, in contrast to emphasizing resource efficiency,
uses creative destruction to establish a new market and monopolize it (Apple’s Innovation Strategy).

1.4 Legal issues

Apple is dedicated to abiding by all relevant trade laws in every nation where we do business as a
global technology firm. This includes, but is not limited to, all export and sanctions laws. It is our
policy to consistently abide by these rules in all of our actions. Apple does not supple their product
to north korea and syria due to the rules of united states government.

1.5 Distribution channel

One of the top technological businesses in the world, Apple produces everything from earbuds to
laptops to smartphones. To integrate all of their goods and services, they have really developed a
whole ecosystem. Despite having 510 physical locations across the world, Apple also makes its
goods available through carriers and third-party retailers. Through international direct and indirect
distribution networks, Apple is able to produce enormous sums of sales. Apple designs its goods in
California, and the rest of the production is done in other countries. Since there are several intricate
components in each of Apple's products, it would be challenging for one manufacturer to create
them all, thus Apple must collaborate with other manufacturers throughout the world. To create the
finished product, Foxconn and Pegatron, two major assemblers in China, get components created by
experts in each part from all over the world. Due to the cheaper labor in China, this significantly
 6 (9)

lowers Apple's cost of goods. Then, through various distribution methods, the products are delivered
to customers all over the world.

Both Apple's physical shops and its online store are part of their direct distribution network. Apple's
physical stores provide them the ability to effectively manage both their brand's perception and how
their customers view them. Their stores are all pristine white and have a high employee to customer
ratio. As a result of seeing the same design everywhere, customers get a tremendously strong
brand image. To maximize visibility, they frequently open their stores in busy areas. Apple also does
direct sales on their website. Their website is accessible from anywhere in the world and provides a
wide variety of languages.

Nevertheless, despite all of Apple's efforts, a sizable portion of their sales and income come via
channels of indirect distribution. According to Apple's 2018 financial report, 71% of its net sales
came via indirect channels, while just 29% came from direct channels. Apple goods are available for
purchase via carriers and independent retailers. This includes discount- and convenience-oriented
retailers like BestBuy, Walmart, and Target. Apple distributes its products through independent
businesses and cultivates a positive brand image through its physical locations.
 7 (9)

2 PORTER 5 FORCES

2.1 Market competition

Apple's success is primarily related to its ability to develop and release distinctive goods that have
significantly increased brand loyalty.

Its plans for product development and marketing show that it is cognizant of the need to address
the key market dynamics that have the potential to affect Apple's market share and profitability. In
the technology industry, there is fierce competition amongst the big businesses that directly
compete with Apple. Apple competes directly with businesses like Google, Inc., Hewlett-Packard,
Samsung Electronics Co., Ltd., and Amazon, Inc. Like Apple, each of these businesses invests a
considerable amount of money in marketing and research and development (R&D). As a result, the
industry has considerable competition. The industry's comparatively cheap switching costs are one
factor contributing to its intense competition. A customer can go from an iPad to an Amazon Kindle
or other tablet computer without making a big financial commitment. Apple has prioritized producing
new, distinctive goods on a constant basis in order to enhance and grow its market share position in
order to address the danger of competition in the marketplace.

2.2 Suppliers

Most businesses in the electronic equipment sector get their raw materials from a variety of sources.
The market margins that Apple Inc. may generate can be reduced by suppliers in a dominating
position. Strong consumer goods suppliers utilize their negotiation position to demand higher pricing
from the companies that manufacture electronic equipment. Higher supplier negotiating power
generally has the effect of reducing Electronic Equipment's overall profitability.

Apple Inc. Uses the foolowing ways to the tackle bargaining power of the suppliers:

 By creating a productive supply chain with a variety of vendors.

 By experimenting with multiple material combinations for product designs, allowing the firm
to switch to a different raw material if costs for its current one rise.
 Creating loyal suppliers whose operations are dependent on the company. One of the things
Apple Inc. can learn from Wal-Mart and Nike is how these corporations established third
party manufacturers whose businesses depend entirely on them, creating a situation where
these third party manufacturers have far less negotiating leverage than Wal-Mart and Nike.

2.3 Buyers

Low switching costs improve consumer bargaining power, which is a crucial factor that Apple should
take into account. The individual and collective negotiating power of the purchasers are essentially
the two areas of additional examination within this force. Individual negotiating leverage is limited
for Apple because each lost consumer only amounts to a little amount of money for the company.

However, consumers' aggregate market leverage and the potential for large-scale customer churn to
a rival are powerful forces.
 8 (9)

In order to continue creating innovative products like the Airpods and the Apple Watch, as well as
by fortifying its brand loyalty, Apple continues to invest a sizable amount of resources in R&D. With
a sizable client base that, in essence, would not contemplate switching from Apple's iPhones to
those of a rival smartphone manufacturer, Apple has been quite successful in this area of
competition.

2.4 Substitues

Due to the limited capabilities of those alternatives, the danger of substitutes for Apple goods is very
minimal. The iPhone 12 has an advantage over a DSLR camera since it does more than just capture
great photographs, which is an illustration of this. There isn't an alternative for smartphones
altogether in the current technological landscape.

Additionally, because there is no close equivalent for the Apple operating system (OS), Apple goods
enjoy a dominant position in the market. Consequently, Apple is weakly armed against the prospect
of substitute.

2.5 New entrants

A new competitor posing a substantial challenge to Apple's market dominance is unlikely to emerge.
The cost of starting a business in the sector is highly expensive, and building brand awareness
comes at an additional significant expense. These two variables account for this situation the most.

Before ever bringing its goods to market and starting to earn income, every new entry in the
personal computer or smartphone markets has to have an enormous amount of cash only to spend
on R&D and production to design and create its own product range. Such a newcomer would be up
against the already well-known fierce industry competition that exists between Apple and its main
rivals, all of whom are sizable, well-established companies.

The other problem is building brand awareness in a sector where there are already a number of
firms with extremely significant brand recognition, including Apple, Google, and Amazon.

Although it's possible that some new company could possibly one day threaten Apple's dominance of
the market, the chances of that happening in the near future are slim.

To put any prospective new competitors in the market at a greater competitive disadvantage, Apple
must continue to enhance its market position by creating new products and cultivating customer
loyalty.
 9 (9)

3 REFERENCES

1. Apple Inc., (2013). Form 10-K. Cupertino, CA, United States of America: Apple Inc. accessed
2.11.22
2. "Apple’s Innovation Strategy - creating and monopolizing - THE WAVES." 04 Mar. 2022,
https://www.the-waves.org/2022/03/04/apples-innovation-strategy-creating-and-
monopolizing/. Accessed 2.11.22
3. "Apple’s Global Distribution Channels." 03 May. 2021,
https://globalmarketingprofessor.com/apples-global-distribution-channels/. Accessed
2.11.22
4. "Apple Inc. Porter Five (5) Forces & Industry Analysis [Strategy]."
http://fernfortuniversity.com/term-papers/porter5/analysis/549-apple-inc-.php. Accessed
2.11.22
5. "Analyzing Porter's 5 Forces on Apple (AAPL) - Investopedia." 16 Jan. 2022,
https://www.investopedia.com/articles/investing/111015/analyzing-porters-five-forces-
apple.asp. Accessed 2.11.22