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MGT4209: INTERNATIONAL MANAGEMENT GROUP ASSIGNMENT MAY 2011 SESSION
APPLE INC: INTERNATIONAL CORPORATE STRATEGY & INTERNATIONAL MARKETING STRATEGY
GROUP MEMBERS: 1. YAU SOON KIT 2. TAN KAY PAU 3. LEE JIA TIAN 4. LIM CHIA CHING I08000181 I09003909 I09004376 I07006102
LECTURER: MR HOR YEW KHEONG [FOBA] SECTION: 5I1 PROGRAMME: BACHELOR OF INTERNATIONAL BUSINESS (HONS) SUBMISSION DATE: 06TH JULY 2011, WEDNESDAY
M AY 2 0 1 1
2|P age M AY 2 0 1 1 . Canada. and China just to name a few. Australia. Apple iPhone and the Apple iPod. United States. & multimedia players. Italy. mobile phones. Its world. Apple iPad. its products are sold online via their website while multimedia content and mobile applications are sold online through iTunes and the mobile apps store respectively. Apple iMac. United Kingdom.MGT4209: INTERNATIONAL MANAGEMENT GROUP ASSIGNMENT Introduction Apple Inc is an American multinational company specializing in consumer electronics with products such as desktop and notebook computers.famous products are the Apple Macbook. Additionally. The company is based in California and has retail stores in Japan.
legal. Apple’s strategy allows Apple Inc to distribute their products and services successfully by forming a strategic alliance with HP (the provision of multimedia content via iTunes for a multimedia player by HP). tariffs and anti-dumping laws of these regions.Cingular Wireless to create the new iPhone in the year 2008 with a deal worth US$150 million. political and economic factors in different countries as well as the uniqueness of each country’s consumers (Eliev et al. Furthermore. In our opinion.MGT4209: INTERNATIONAL MANAGEMENT GROUP ASSIGNMENT INTERNATIONAL CORPORATE STRATEGY Apple’s Transnational Strategy Apple Inc has a significant pressure to reduce costs of production and local responsiveness and has therefore gone for a transnational strategy. Apple Inc has been forming strategic alliances with various companies to distribute its products. Taiwan and China. adapt their products to certain markets. Zi Corporation (helped to create a Chinese language product) and Starbucks. The first reason is the increased competition in terms of costs. and acquire support for software development. The most notable strategic alliance is the alliance between Apple and AT& T Mobility. South Korea. Taiwan. We believe that the strategy is quite well conceived as pressures to reduce costs is extremely vital to boost profits while the method of local responsiveness is required by Apple to acknowledge differences in marketing strategies. Their strategic alliance with Akamai and Navarre provided technological support to support Apple’s need to stream multimedia content online and to supply third party software for Apple’s retail stores and website. Apple decided to establish special sales and marketing units in Germany. Apple’s Strategic Alliances Since 1997. The second most notable strategic alliance is the strategic alliance with Motorola and IBM to develop microprocessors. United Kingdom and Japan to circumvent various barriers such as the fluctuation of foreign exchange rates. 2004). China. AT & T Cingular Wireless. all strategic alliances by Apple are extremely successful as their partners often brings unique and valuable strengths to 3|P age M AY 2 0 1 1 . economic and legal factors. In order to increase local responsiveness which is caused by political. Apple has built up their skill of intercultural communications by adapting some of their marketing efforts to adapt to local uniqueness in certain markets. Netherlands and the Czech Republic while final assembly of Apple’s products often takes place in Japan. Apple reduced its costs of production by sourcing for the most cost efficient suppliers and locating production facilities in low cost manufacturing facilities for the components of their products in Ireland.
software. Australia. Germany and Spain. The vertical integration strategy also allows for the reduction in Apple Inc’s dependence on too many suppliers of various inputs such as hardware. 2011). product design and technologies. videos. Canada. Switzerland. software. All these is evident through the development of the iPad 2 and iPhone 4 which has increasingly been designed and conceived through Apple’s own technological and product design prowess. Apple Inc has set up special Apple stores since 2001 to distribute their products in a retail environment to its customers in Japan. the online Apple Store also allows consumers in various regions of the world to purchase Apple’s products (Eliev et al. Firstly. designing specific components of its internal hardware such as its A5 processor computer chips. this could cause Apple Inc’s to increase overhead and capital expenditures to develop their own hardware. Apple’s Vertical and Horizontal Integration Apple Inc has increased the utilization of the concept of backward vertical integration by becoming their own upstream supplier by developing the design. Next. utilizing their self-developed operating systems (iOS). This also means that Apple’s partners are highly compatible and they trust their partners to achieve their short term objectives (R. the availability of a variety of mobile applications and multimedia contents via Apple Inc. We believe that the vertical integration strategy allows Apple Inc to protect their product design & features and proprietary technologies from being appropriated by competitors while the distribution rights of the products would not be easily tarnished by unscrupulous middlemen as Apple Inc wants its customers to enjoy the Apple service experience through its retail stores and the online platform. in certain selected countries. Besides that. Apple Inc practices forward vertical integration by rapidly integrating back into the distribution of its products to its customers. United Kingdom. patent and features of their new products. However. Additionally. Narang. Furthermore. United States. China. and technologies. an increase in administrative costs is also expected as their activities would become increasingly complex as coordination between research and development and production would have to be flawless to ensure all the components are 4|P age M AY 2 0 1 1 . and TV shows.MGT4209: INTERNATIONAL MANAGEMENT GROUP ASSIGNMENT complement Apple Inc’s intended product development and distribution needs and to fulfil Apple’s needs for valuable technologies to support their operations and production. France.’s iTunes store and mobile apps store have allowed customers to purchase a variety of applications as well as contents such as music. and also developing their own set of new technologies. Italy. 2011).
Apple Inc could also yield a larger market power by having some control over some of its suppliers which could provide tangible and intangible inputs for Apple. knowledge and skills to its own current business portfolio. provides significant technologies. Apple Inc is involved in horizontal integration through a series of recent mergers and acquisitions of companies in 2010 such as the Quattro Wireless Merger. 2011). the pitfalls associated with this strategy is due to the fact that the benefits mergers and acquisitions might not materialize as intended due to a clash in corporate and business culture with the employees of the acquired or merged companies unable to adapt to the imposition of Apple Inc’s culture of innovation and creativity. (Refer to Appendix C) We believe that the benefit of Apple’s mergers and acquisitions is the ability to acquire companies which allows Apple Inc to leverage the skills. This increases Apple Inc’s ability to share resources to create “synergies” by leveraging on each of the company’s technologies. Furthermore. Apple Inc must ensure that the company it acquires or merges with fulfils their current operating needs. hardware and software that is right for Apple Inc’s current and future product development. Besides that. assembly and logistics as its contract manufacturers and outsourcing companies can perform several valuecreating functions at a lower cost in various low-cost locations around the world. and industry knowledge. The distribution of their products through special Apple retail stores would also increase costs of distributing the products to its customers. best management styles. the Siri Merger and the Intrinsity Acquisition have shown that Apple Inc intends to add various expertise. Apple produces most of its products such as iPods and iPhones in China to ensure lower production cost and to increase US market attractiveness (Scribd. and expertise. most of the companies acquired by Apple Inc are relatively small and not extremely powerful in their industry and this might mean the inability to achieve economies of scope and economies of scale. and has a corporate culture that is compatible with Apple Inc. However.MGT4209: INTERNATIONAL MANAGEMENT GROUP ASSIGNMENT accurately fitted into the product.The most important reason for outsourcing production to China is that the manufacturing costs are 5|P age M AY 2 0 1 1 . knowledge and expertise of the acquired company or the merged companies. Apple’s Strategic Outsourcing Apple has outsourced various functions in terms of its manufacturing. the acquired / merged companies might not have the right technologies.
Apple has also entered the content distribution business. and a mobile phone. opportunities to differentiate its products. Later. iMac accounted for nearly half of the Macs sold (Jade. Application developers. The outsourced applications that are highly popular around the world are generally social media apps. and marketing. Apple’s diversification strategy becomes obvious. By taking a look at Apple’s foray into the music player market with the iPod. gaming apps. Apple could transfer its distinctive competencies in the computer industry to the music player industry and create an innovative. Apple can benefit from a lower cost structure. iMac was introduced and it was a huge success. tablet PCs. playable across many of its most popular devices. In 2000. and entertainment apps. business apps. Apple started off with the Macintosh software introduction. 2011). Beginning as a company which produced full-sized desktop computers Apple now offers a line of desktops. capabilities and 6|P age M AY 2 0 1 1 . These application developers make better applications and provide suggestions and modifications to the existing modules. creativity. As Apples’ focus lies in the design of its products and its strength can be seen in the fields of innovation. mobile multimedia players. a digital music player device. the other was the iPod. Therefore. Apple’s Diversification Strategy Product diversification was one of the key contributors to Apple’s success and Apple has continued to broaden its scope of products until today. 2011). who build different apps for different platforms have made a wide range of apps available to Apple customers and it also makes it possible to reach a greater number of users. (Apple Articles. iMac was one of the products that saved Apple. selling music and applications for its devices as well as renting digital video. notebook computers. and increased focus on its distinctive competencies. Apple’s foray into the digital music player business is distinctively different from its traditional personal computer business and this can be regarded as one of its diversification activity. Apple bears risks with regard to delays due to overdependence on it outsourcing partners and the loss of control and information.MGT4209: INTERNATIONAL MANAGEMENT GROUP ASSIGNMENT lower than the cost to assemble in the United States or Europe. Nevertheless. highperformance device which attracted many customers due to its design. One of the success reasons of Apple products is the outsourcing of application development. it makes sense that Apple focuses on these value creation functions and outsources its manufacturing activity to contract manufacturers.
have successfully tapped into the people’s innate desire to share their passion for Apple’s products and helped to create the irresistible force of millions of their customers who are indirectly selling Apple’s products to millions of other customers worldwide with their overwhelming support. Moreover. The iPad’s introduction has rejuvenated Apple’s image. Between 2001 and 2010 Apples’ annual sales increased from US$5 billion to US$65million (Apple Annual Report. commercialization. In addition. which performs many of the most desired functions. Apple continued to diversify its product base by introducing the iPhone. Apple has further diversified its product by introducing the iPad. Apple has already entered the market with the highly popular iPhone. music software to mobile phones. the latest innovation in mobile computing. The iPad is another success with current users (product extension) and is starting to draw in new users (market extension). this is an example for related diversification as there are obvious links to Apple’s core business which are highlighted by iTunes music software that connects the iPod with the iMac thus creating the link between these industries. The world of consumer electronics technologies is converging on a point of highly portable. have developed a comprehensive marketing mix that is well conceived and is carefully engineered to garner a positive response from its customers and this has made their products international bestsellers while they have also become the market leader in their industry. 7|P age M AY 2 0 1 1 . After the iPod and iTunes. & Internet connected devices. The iPhone has also revolutionized the entire mobile phone industry with the introduction of touch-screen technology. and implementation and the company’s R&D activities. INTERNATIONAL MARKETING STRATEGY Apple Inc. Thus. 2010). Apple Inc. Apple has further diversified its product from operating systems. The products reflects how Apple’s state-of-the-art technology affects the way people use technology in their daily lives and it can be proven through the rush of competitors to offer similar devices. rich media. digital music players.MGT4209: INTERNATIONAL MANAGEMENT GROUP ASSIGNMENT quality. the launch of the iPod shows that Apple uses internal new venturing as its preferred entry strategy because it possesses a valuable set of distinctive competencies that can be leveraged and Apple’s new product didn’t fail because there were no problems in terms of scale of entry. computers. After the huge success of iPhone introduction.
this strategy only allows Apple to penetrate one market at a time. Inc. if court cases such as Motorola Mobility. Inc. logistics. (2010) are not in favour of Apple. Promotion Adaptation’ Strategy 8|P age M AY 2 0 1 1 . iPod. Apple has never really invented any new products such as the PC. However. the umbrella branding strategy is an excellent branding exercise for Apple Inc. the iPod not only makes the music sound better. Umbrella Branding Strategy Umbrella brands occur when Apple’s branding supports several of its products. This is a pure Apple marketing trick designed to make the visible part of their product a status symbol (Apple Business Conduct. in order to respond to the rapid growth of pocket music players.MGT4209: INTERNATIONAL MANAGEMENT GROUP ASSIGNMENT ‘Sell What People Actually Buy’ Strategy The Sell What People Actually Buy (SWAB) strategy is conceived by Mesdag (1985) as a differentiated method by a company. downloadable music. Conclusively. ‘Product Extension. production and financial resources (Doole and Lowe. For example. iPad and iPhone are all successful because they were late to market and Apple worked tirelessly to improve the existing designs and functionality of these products. and it allows Apple to be more cost efficient in its promotional efforts worldwide. it does make extensive demands on the firm’s growth. but it’s also transforming the consumers into avid fans of Apple and its products (Durman. According to Doyle (2000). vs Apple. but inviting them to experience the Apple lifestyle and to fit in as avid Apple fans. However. iTunes. MP3 player. 2008). Product such as the Mac. In contrast with the conservative wisdom saying that Apple is a leader in creating new categories. Apple isn’t selling their customer the product. the negative impact on the brand image of Apple will affect the sales and brand images of its other products internationally. Apple projected an aspirational brand image in the minds of Apple's fans about the types of people who purchase Apple's products and conveys the standards and values that the brand is associated with. 2007). Consumers in the United States will be able to experience the new products firsthand compared to the other global regions such as Asia even though the main assembly plants of Apple devices are often located in parts of Asia. While it's responsive to market needs. and undoubtedly not the mobile phones. (2010) and Nokia Corporation vs Apple Inc. Today. Apple took the existing MP3 player designs and applied their experience and technology to make these complex devices user friendly and elegant. 2010).
2009). The consumers in various countries can easily repeat the message to their friends and colleagues in their own languages. the Mac was “the computer for the Rest of Us. As far as discounts go. Apple’s promotional methods are mass advertising and sales promotions. its financial situation and operating results could be adversely affected. They communicate a standardized message worldwide which is subsequently adapted to accommodate to different cultures and languages. they usually offer US$100 off certain products to US college students. For example. premium prices. The great experience of opening an Apple product creates enough buzz to become viral word of mouth worldwide. For example.”.000 Songs in Your Pocket. they do not have any discounts for students in the Asian market or lower discount rate for students in European countries (Jacinto. but it is what they do to help their first customers to reach the rest. Global markets for the Apple’s products and services are highly competitive and there is also a burgeoning technological revolution globally.MGT4209: INTERNATIONAL MANAGEMENT GROUP ASSIGNMENT Keegan (1989) highlighted this strategy as a combination of standardization and adaptation of Apple's product and promotional elements respectively. Pull International Communication Strategy In-line with Apple’s promotional objectives to maximize their cost effectiveness and to promote a global product with the adaptation promotional strategy. the iPod was “1. It is also a very effective strategy to alter the language of the standardized advertising message to coincide with the culture of another country. They help to deliver short and tight messages about the product worldwide. the promotional effort is being adapted to coincide with the cultures of the targeted individual countries (Hill. If Apple is unable to compete successfully in these markets. This strategy is not about what Apple does to reach their first customers. They also offer special bundles for the purchase of certain products during different periods of the year. 2010). It means communicating with the consumers to attract them to visit the authorized retailers or distributors of Apple's products to purchase its products. Apple starts with the enhanced customer experience by standardizing packaging worldwide. 9|P age M AY 2 0 1 1 . they have adopted the pull strategy. As the product stays the same. nevertheless. these messages which are memorable and descriptive of its products are translated into the local languages of the targeted countries.” and the iMac was “3 Steps to the Internet”. Apple is known for charging higher. however. Moreover. the iPhone box is finely crafted with velvet-lining similar to affine watch boxes while the iPhone rests in a tiny Lucite bed.
debit cards or cash coupons. for the retail price of its products. In terms of wholesale prices. Thus. 2011).MGT4209: INTERNATIONAL MANAGEMENT GROUP ASSIGNMENT Variable Pricing and Profit Margin Strategy Generally. In summary. they would need to establish many Apple stores worldwide and the huge capital expenditure required is not viable in the long run .The only flaw of this strategy is that the retailer might mark-up the price significantly as Apple does not have control over the price of Apple's products sold by its authorized retailers. The distance between the UK and the US is very far.00.00 in the United States but in the United Kingdom (U. US$224 + US$ 30 + US$45 =US$299) (Quora. the cost for them to deliver the products within the U. Thus. Apple is able to reach large groups of consumers at a quicker pace. As for the retail price it becomes much higher because the retailer needs to earn some profit and it costs them more money in order to distribute its products to all of its major retailers. Apple does not have any specific international pricing strategies as the prices of its products are affected by various factors such as transportation costs and taxation. they have to add the wholesale price. For example. 2011). International Distribution Channel Strategy Their first distribution channel is via Apple's website in which prospective international customers with access to country. Apple sets their product’s price by including the price of the inputs of production and a margin for the retailers and distributors in the United States and its international markets worldwide. the price for an Apple iPod Shuffle (2 GB) is US$49. is much lower as compared to the U.).K. Additionally. US$144 + US$ 80 =US$224). The Apple online store provides the image and specifications of the product as well as their recommended retail price. some countries often levy a higher tax on Apple’s product in order to protect their own local market (Quora.K. the price of the Apple's products consists of the costs of production and Apple’s gross profit margin (e. retailer's profit margin and the distribution margin (e. 2011). If Apple intends to sell their products in their own Apple stores. the product will be delivered to the registered address (Apple. After completing the payment transactions. it costs £40. it will bring them to another page that will show customers the functions and specifications of the product.specific Apple store sites could make secure purchases of Apple’s products with credit cards.g. by clicking on any product. consumers who are not conscious about this 10 | P a g e M AY 2 0 1 1 .S.g. By pursuing this method. Another strategy of product distribution is through the assistance of authorized Apple retailers worldwide.
If Apple is able to open more and more Apple stores in the near future. the clever use of the umbrella branding strategy and the SWAB strategy had allowed consumers worldwide to identify strongly with Apple's high quality products. 2011). the United States. China. Conclusion Conclusively. THE END 11 | P a g e M AY 2 0 1 1 . they might not have to rely on other retailer anymore as customers can just walk into an Apple store and buy the products (Consultancy Marketing. In terms of the international marketing strategy. seeking for ingenious ways to circumvent political and economic barriers in certain countries and rapidly becoming the masters of their own production and distribution are all the strategies which have allowed Apple to succeed internationally. Italy and Canada just to name a few. Apple had managed to open over 300 stores worldwide up to the year 2011 and the Apple stores have allowed customers to test its products and enjoy the Apple service experience while also allowing the customers to purchase its products more comfortably. Lastly. the Apple lifestyle and the Apple brand. engaging in related diversifications. United Kingdom. Apple has an appropriate international corporate strategy as the strategy of lowering costs of production through strategic outsourcing. 2011). The two minor weaknesses of Apple are in terms of lack of control over pricing and distribution by Apple’s international retailers and distributors who are concerned about their own profit margins. Apple is also selling its product through wholly owned Apple stores located in Japan. Spain. forging strategic alliances with renowned companies. The viral marketing messages in Apple’s advertisements are able to transcend cultural boundaries with translations into a myriad of local languages and are then liberally shared through word of mouth amongst consumers.MGT4209: INTERNATIONAL MANAGEMENT GROUP ASSIGNMENT strategy might perceive that Apple’s product are very expensive and will lose the interest of owning an Apple product (Consultancy Marketing.
S.articlesapple. Doole. 5th edn. “International Marketing Strategy-Analysis. Graham. Development and Implementation”. (online).com eBook.net/downloads/strategicmgmtslindingeretal. and Lowe. (cited on 1st July 2011. (2011) “Apple Store (Malaysia)”. (2004) “ Apple Computer Inc. Strategy and Behavior” 7th edn. Eliev. China 4. (2010) “Marketing Apple.com/my 9. R.STRATEGIC ALLIANCES.com 6. EdgarOnline. L.com/doc/969788/Why-iPods-Are-Made-in-China 14. al.pdf 12. Available at URL: http://www. McGraw-Hill . United Kingdom. Jacinto. Available at URL: http://www.5 Secrets of the World’s Best Marketing Machine” A MarketingApple. McGraw-Hill Irwin. Cengage Learning.apple. (cited on 1st July 2011).quora.blogspot.com/2010/01/integrated-marketing-mix-4ps.co.scribd. (online) (cited on 1st July 2011) Available at URL: http://store. Doh. (2011). MERGERS &ACQUISITIONS”.edgar-online. Quora. (2007) “ International Marketing” . (2010) “Integrated Marketing Mix (4P’s)” (online) (cited on 16 June 2011) Available at URL: http://uwmktg301. I.Strategic Audit”. 13th edn.consultancymarketing. Apple. McGraw-Hill Irwin. (online) (cited on 25th June 2011). Available at URL: http://www.andreaslindinger.net/rishi2saint/apple-v12-1 13. (cited on 2nd July 2011). C. R.Culture. (2009) “ Global Business Today” . Scribd.com/outsource-iphone-application-development/ 12 | P a g e M AY 2 0 1 1 . California 8. Apple Articles. Consultancy Marketing (2011).uk/place. (2011). Hill. (online). (online).slideshare. (online).MGT4209: INTERNATIONAL MANAGEMENT GROUP ASSIGNMENT References 1. Narang (2011) “APPLE INC. “Outsource iPhone Application Development” (online) (cited on 25th June 2011) Available at URL: http://applications.com 2. 3. Available at URL: http://www. 6th edn.html 5. Available at URL: http://www. (2011) “How does Apple set the price for its products?”. Singapore 7. J. et. (2011) “Apple Annual Report” (2010). (online) (cited on 16 June 2011) Available at URL: http://www. (2009) “International Management. (online) (cited on 17 June 2011) Available at URL: http://www. (cited on 2nd July 2011). C. “Marketing Mix – Place”. Chazin.com/Apple-Inc-company/How-doesApple-set-the-price-for-its-products 10.marketingapple.htm 11. “Why iPods Are Made In China”. (2008).
MGT4209: INTERNATIONAL MANAGEMENT GROUP ASSIGNMENT 15. Jade. (online) (cited 27th June 2011). Available at URL: http://gigaom.com/apple/steve-jobs-and-thehistory-of-apple-product-development/ 13 | P a g e M AY 2 0 1 1 . “Steve Jobs and the History of Apple Product Development”. (2010). C.
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