The Competitive Strategy of Apple Inc.

Apple Inc. is a designer, manufacturer and seller of media and mobile communication devices, mobile digital music players, and personal computers that operates globally. It also manufactures and sells third-party digital content, and applications along with networking solutions, accessories and software to work with its products. The company’s chief product is the iPhone. This is a line of smartphones that offers the services of an internet device, a music player, and a mobile phone. The iTunes Application and iTunes store work together to provide the users of Apple products access to music and other digital content at a fee. More recently, the company has launched Apple Pay, a mobile payment system for use by its consumers.

This research was guided by an interview with Angela Ahrendts. This s the company’s Senior President of Retail and online stores who joined the company in 2012. She has had experience in retail while working with Burberry, a company that deals in fashion and luxury goods. She currently reports to Tim Cook, Apple’s CEO and oversees the operations of the global chain of Apple’s stores.

Under the leadership of Angela Ahrendts, Apple has set the standards in retail through excellent customer experience. The company has been using a variety of ways to give its clients perfect services through the one-to-one personal training, personal setup, and the Genius Bar to help its consumers understand their devices better.

According to Ahrendts (Personal Communication, February 20, 2015), Apple’s competitive strategy is based on its ability to provide its customers with superior products. Apple has been on the market for over 40 years. However, it only got into the mobile devices industry at the end of the 20^th century. The company also provides its customers with a luxurious experience at every point through superior customer service. The major competitor of Apple Inc. is Samsung. Samsung also offers a broad range of products but started producing mobile devices at around the year 2000.

Superior Products

Apple has always ensured that the products it produces are way better than those of other companies. It has always ensured that it improves its products regularly through better software. By doing this, the company ensures that it can provide its customers with a superior experience that keeps them wanting more (Ahrendts, Personal Communication, February 20, 2015). The company launches an improvement of its principal products at least once every year. By doing this, the company ensures that its products are always offering services that differentiate it from those of other firms.

In the last launch of the iPhone, the company released the iPhone 6 product. The iPhone 6 is the largest iPhone that Apple has ever produced. By increasing its screen size, the company was budging to the quest for products with a bigger screen size. The product also has other services like better security through fingerprints. This is in an attempt to ensure that the products’ safety and privacy are harder to breach.

The company also launched Apple Pay for its customers to use for purchases. Mobile payment systems are slowly gaining popularity globally. In launching its own payment method, the company was seeking a way to create more customer loyalty among its customers while at the same time creating a chance for it to gain from the global trend of mobile payment. Based on its better security, the company is likely to gain well from its payment method.

Differentiation

The company develops a demand for its products through product differentiation. This is the creation of products that are attractive and unique to customers. Creating demand for its products gives the company a price advantage. The company has done this easily through various methods including creating hype around its product launching, superior innovation and ensuring brand loyalty (Ahrendts, Personal Communication, February 20, 2015). By doing this, the company has been able to remain at the forefront of the market.

Profits

In order to reap heavily from its market, the company has created products that are targeted at individuals who are based on the higher end of the market share. The company focuses on profits instead of focusing on acquiring a large market share. By targeting customers who can buy highly priced goods, it can make as much profit (or more) as its consumers. Moreover, the customer only has to serve a smaller market and hence be able to provide them with a superior shopping experience. This way, the few customers it has become loyal customers hence promoting profitability.

Vertical integration

The company provides a broad range of products to get access to its customers at various levels. My creating loyalty among its clients, it also ensures that the company gets access to its customers at every range of products. The company, for example, produces mobile phone devices, computers, and television sets. The company wants each of its loyal consumers to get access to the purchase from each of the categories. By doing this, the company is sure of profiting from each relationship.

Marketing strategy

The company also benefits heavily from its marketing strategy. Most of the Apple’s products are sold through the company’s chain of stores. The company has created stores in most countries globally to enhance its presence in the market. Through these shops, it also helps those customers who have issues with their devices. The company also sells its goods through third party marketers (Nielson, 2014). These primarily include mobile network carriers and retailers. To ensure that the company does not compete with these retailers, it uses the minimum advertised price (MAP) strategy to limit the selling prices of its dealers (Ahrendts, Personal Communication, February 20, 2015). The minimum advertised price strategy ensures that no dealer sells their products at a price below a certain point. This policy further provides that those who violate the policy are treated differently from others while those who don’t are given subsidies.

Companies like Best-Buy and Wal-Mart are only give a small profit margin to ensure that they are not able to provide the goods offered by Apple at very low prices. However, sometimes retailers may choose to give up their small margin and even offer their products at a discount with the intention of attracting more customers. However, Apple prevents this by providing incentives to those companies that comply to its suggested retail price.

Competition

As mentioned earlier, the company’s biggest competitor is Samsung. The competition from Samsung has been especially intense based on Samsung’s understanding of the company’s designs. Prior to 2014, Apple Inc. outsourced its processor from Samsung. As a consequence, the company would understand and even forecast the next product release (Jackson, 2014). This enabled Samsung to produce products that were very similar to those of Apple. As a consequence, the company also had a good following, and Samsung won some of the customers who previously belonged to Apple.

In 2014, however, the company has pulled out of the contract with Samsung. Instead, the company now contracts Taiwan SemicOnductor Manufacturing company.By doing this, the company does not divert its secrets to its competitors (Jubak, 2013). This is likely to improve the standing of the business on the market. Notably, a difference was noted in the products released in the market in 2014.

One advantage that Samsung has had over Apple is their adoption of the Android operating system. The Android operating system has acquired a good following from its customers. According to Lunden (2015), the Android OS has earned approximately 80 percent of the total market. With the support of Google which creates the OS, Samsung can obtain a significant part of the market share.

However, the superior quality offered by the company has come to its rescue. Lunden (2015) notes that the majority of the profits went to Apple. Apple’s profits for the last quarter of 2014 accounted for approximately 89 % of the company’s profits. On the other hand, Android devices only accounted for 11 % of the total profit share. The company, therefore, seems to have planned its strategies well.

In conclusion, Ahrendts is the Vice President of Retail at Apple Inc. She has been instrumental in promoting a superior shopping experience for Apple’s customers through diverse ways. She argues that the primary strategy Apple uses is through the creation of superior products. The company has also employed superior marketing strategies to enable customers to purchase and get access to the excellent quality of the enterprise’s products. By offering the goods at a high price, the company has created a demand for its goods. The company currently takes over 80 % of the profit share while only accounting for less than 20 % of the market share.

References

Ahrendts, A. (2015). Personal Interview. New York.

Jackson, E. (2014). Apple Isn’t A Hardware Or Software Company – It’s An Ecosystem Company.Forbes. Retrieved 28 February 2015, from http://www.forbes.com/sites/ericjackson/2014/06/03/apple-isnt-a-hardware-or-software-company-its-an-ecosystem-company/

Jubak, J. (2013). Can You See Apple’s Long-Term Competitive Advantage in Its New Product.MoneyShow.com. Retrieved 28 February 2015, from http://www.moneyshow.com/articles.asp?aid=Jubak_blog-40921

Lunden, I. (2015). Apple Took 89% Of Q4 Smartphone Profits With Android OEMs In A Race To The Bottom. TechCrunch. Retrieved 28 February 2015, from http://techcrunch.com/2015/02/26/apple-eating-all-the-profits/#qqx9WK:iUi

Nielson, S. (2014). Why innovation could be the key to Apple’s growth – Market Realist.Marketrealist.com. Retrieved 28 February 2015, from http://marketrealist.com/2014/01/apple/