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Apple: Strategic Obstacles And Changes

Q1) Evaluate Apple's strategies and how they have maintained their strategic issues and proper changes in this. In your evaluation you'll need to consider the main element factors of success with regards to the different tactical teams within the industry. Support your analysis with relevant theory and educational models.

Apple is a vertically integrated company, manufacturing and providing all hardware and software as well as its own operating systems. Apple chose this plan so they could hold on to earnings and ensure profit is not lost by financing other company's profit margins. The practice behind this theory is to closely finance research and development and have had the required means of creation to cover all areas of the business enterprise. Advertising are also an essential component in Apple strategy to have a better market position.

Founded in 1976, Apple built its early on reputation on progressive personal computers which were particularly possible for customers to work with and consequently were priced higher than those of rivals. The inspiration because of this strategy originated from a visit by the founders of the company- Steven Jobs and Steven Wozniack- to the Palo Alto research laboratories of the Xerox company in 1979. They observed that Xerox had developed an early on version of your computer interface display screen with the drop-down menus that are widely used today on all computers. Careers and Wozniack required the concept back again to apple and developed their own computer- the Apple Macintosh (Mac pc) which used this consumer friendly interface. The Macintosh premiered in 1984 but Apple did not sell or share the program to rival companies. Over another few years, this non-co-operation strategy ended up being a significant weakness for Apple.

Although the Apple pc had preliminary success, its software was threatened by the launch of glass windows 1. 0 from the rival company Microsoft, whose chief executive was the well-known Costs Gates. Microsoft's strategy was to make this software accessible to other computer manufacturers for a permit price- quite unlike Apple. A legal dispute arose between Apple and Microsoft because home windows possessed many on-screen similarities to the Apple product. Eventually, Microsoft signed an arrangement with Apple expressing that it would not use Apple pc technology in glass windows 1. 0

Unlike Microsoft using its focus on software strategy, Apple remained a full-line computer supplier from that point, supplying both the hardware and software. Apple continuing to develop various innovative personal computers and related products. Early on successes included the Macintosh2 and PowerBooks combined with the world's first desktop posting programme- PageMaker. This second option remains today the primary programme of its kind. It really is widely used across the world in publishing and fashion properties. It remains exclusive to Apple and means that the business has a specialist market where it has real competitive benefits and can charge higher prices. Not all Apple's services were successful- the Newton personal digital assistant did not sell well. Apple's high price plan for its products and issues in manufacturing also supposed that ground breaking products like the iBook got trouble rivalling in the personal computer market place.

In the year 2000, Apple discovered a new corporate and business strategy to exploit the growing worldwide market in personal electronic digital devices- Compact disk players, MP3 players, digital camera models etc. It would launch its own Apple version of the products to add high-value, user-friendly software. Resulting products included iMovie for digital cameras and iDVD for Dvd and blu-ray players.

The iPod was launched in 2001 and was accompanied by the iTunes Music store in 2003 in USA and 2004 in Europe. The merchandise has proven unbelievably successful; over 100 million devices have been sold in the six years since its release. In 2003, Apple's iTunes Store was launched, offering online music downloading in integration with the ipod touch. The service quickly became the marketplace innovator in online music services, with over 3 billion downloads by August 2007. Steve Jobs announced that iTunes acquired come to 4 billion downloads during his keynote address at the 2008 Macworld Discussion & Expo.

The iTunes was essentially an agreement with the world's 5 leading record companies to permit legal downloaded of music paths utilising the web for 99 cents each. This is a significant success for Apple- it acquired persuaded the record companies to look at a different method of the problem of music piracy. At that time, this revolutionary agreement was unique to Apple and was because of the negotiating skills of Steve Careers, the Apple leader, and his network of connections on the market.

By 2005, Apple's music player- the iPod- was the top quality listed, stylish market innovator with around 60% of the world sales. Its iTunes download software had been redeveloped to permit it to utilize all windows appropriate pcs (about 90% of most PC's) and it possessed around 70% of the world music download market, the marketplace being worth around US$330 million per annum. However, by 2005, all the major companies like Sony, Philips and Panasonic were catching up fast with new launches that were just as stylish, cheaper and with more capacity. Apple's opponents were even getting agreements with the record companies to provide legal downloading of music from websites.

Another Example of the likely competition came from the mobile telephone market leader, Nokia, and the dominating software company Microsoft. In Feb 2005, they jointly released that all new Nokia cell phones would come with Microsoft's Windows multimedia 10, allowing downloading of music from PC's onto mobile phones- just one more danger to apple. However Apple was the market leader and could demonstrate major rises in sales and profits from the development of ipod touch and iTunes by early on 2005.

One thing that is established is the fact that Apple produces a few editions of one great computer and then offers new software that easily combines with the other software. Well, Apple has a whole lot of software that only in the last 4 or so years started to incorporate with PC things as well as hardware. Because of this Apple has only been able to gain resources from a restricted group of suppliers, giving Apple in a vulnerable position. However, one of Apples competencies is a great designing section. They produce fun looking machines and professional looking machines. The other important thing is the scale and the colour of the machine.


Apple has many varieties of distribution using their company own retail store, to business to business advertising, to their web store. First there will be the Apple shops; the majority of these will be within major cities over the US and the united kingdom. From these or the web site anything can be offered to customers and the merchandise can be even more customized than they already are.

Their most significant deals are most likely with education. For years they have been offering their computers to schools for years and have produced a large following just from the kids that are familiar with Apple and comfortable with Apple interface. This also allows Apple to watch market styles since their market is also people between 20 and 30 years old. The young children will be the future so Apple simply watches what they want in.

Their final little bit of distribution originates from other warehouse companies or help office companies that need the Apple parts and products to fix peoples' computers. There are also alternative party stores that may display the product amongst other laptop options.

Their main production, development, designing products can be found in California and in Ireland. These two points must serve as umbrellas under which warehouses and retail shops would order or acquire from them.

Marketing stratergy

I think Apples main stratergy will there be appeal to their customers. What you find on the whole with a lot of their products more btter looking than the competitions. One thing we can easily see is Apple building on the attractiveness of the ipod device. It attracts the Mass market. Now appeal less as some type of computer company and more of a consumer electronics company and seem more user-friendly.

Apple have a differentiation stratergy. Apple products are known to have a distinctive appeal, with its smooth designs a userbility. Due to this it gets a whole lot of attention from consumers and the press. Without much advertising or marketing on their part. They give something new and unique to talk about which everyone gets pulled in to.

With the ipod touch there not only providing a music player, there offering a cultural chic. Everybody has one and everybody wishes one.

Target Market

  • Apple Ipod concentrated specifically at those between your get older of 12-25, consistent with the advertising. Bright colours and a guy dancing.
  • It will charm to both men and females
  • People who have a love or curiosity about music and/or literature
  • Technology enthusiasts

The iPod appeals to the mass market, many people are a potential customer. Young or old. They have music, literature and podcasts all avaiable for the iPod owners. The convenience and luxurious design is exactly what attracts people. Even though the latest ones (the touch) are expensive, and may be aimed at higher and elderly earners.

Word count up 1371

Appropriate models, such as environmental analysis, industry evaluation, lifecycle, analysis, learning resource analysis, swot and pest examination, Porters 5 makes etc (these do NOT form area of the word count up).


Economical aspects:

  • Inflation presently has increased in UK and the united states and may have an impact on current sales of ipods that have already slowed.
  • Global overall economy in a down turn
  • The exchange rate will also influence Apple as they are importing or exporting goods within the international market.
  • Socio-cultural aspects:
  • Again Anti-American plan may cause prospective customers to but from another company.
  • A generally increasing age British society, so many may be put off by the technology
  • As much as it is a iPod culture, it can disappear completely as quickly as it emerged. People could find another thing which is better and more affordability.

Technical aspects:

The wide range of fast changing high-tech/high-quality download possibilities, stimulates consumers to download but it addittionally puts more pressure on competing firms, as they have to stay up-to-date with the hottest technologies. Considerable advancements in the mobile phone market (3G handsets becoming fact and broadened features available to the customer) will force the media download market into new spheres and will start great opportunities for Apple.

Many substitutes available from iRiver, Samsung and Sony. Competition leaving copy security on songs, Such as for example Amazon.

Peer-to-peer file sharing applications like Lime cable and Kazaa are still extremely popular. Although this is issues with the music industry on a whole. This still however impacts iTunes.

Legal aspects:

Issues of copyrights and illegitimate downloads greatly impact the music download industry and are a problem for dynamic legal providers. A previous lack of legislation in this area has urged consumers away from commercial downloading services as a response to the, new systems have been launched that protect the copyright of owners preventing customers to download and talk about documents illegaly. Digital Privileges Managment (DRM) was created to control the amount of copies that can be created from a download and even though for the music industry there are extensive strengths to DRM, there are surely as many negative for the consumer. Therefore, some companies have already planned to open big portals on DRM-Free tracks that will legally enable the consumer to download data without being limited to a certain volume of computers, portable digital devices and Compact disk burns for an acceptable price.

Source: Corporate Stratergy finntrack. com

Porter's 5 Causes:

Substitute products:

A substitute product is not really a direct option to the product a business is selling. For example, the new Sony Walkman marketing player is not a substitute for the iPod Touch, this can be a competitor. However, an individual Disc player or MP3 player could be if certain aspects of the marketplace were to change, e. g. price and there was a high elasticity of demand. Regarding iTunes, with music there may be a wide range of options for buying music and therefore are many substitutes within the music industry, for example tapes, CDs, vinyl and DVDs. All of these are easily accessible and simply as convenient as downloading from the web. The power which iTunes has is that you do not have to buy whole albums; you can download sounds individually and at a fraction of the price of a single track on another format. Also you are able to buy movies, TV shows, audio catalogs and Podcasts, all available 24 hours per day, 7 days weekly. Reviews by Mintel have shown that sale price and the quantity of sales is slipping for non digital marketing, consequently consequently of internet downloading.

The Threat of new Entrants:

Already, there are a huge selection of media downloading it sites open to use on the internet. Some are legal plus some are not. It is more difficult to block and put obstacles up for illegitimate entrants in to the market because they're not abiding by regulations and therefore don't have patents, licences or the rights to distribute press, but nonetheless do. With legitimate set up companies, there are capital requirements, possible patents & licences to acquire and ultimately the chance of fighting with already well established and reputable companies such as iTunes. Mintel predicts that you will see an influx of new companies happy to invest in the web downloading industry. A big danger for Apple constitutes the entry of Amazon in to the market. The business announced the kick off of a fresh music download website that offers a variety of DRM-Free songs to a reasonable price. Since there a wide range of benefits to DRM-Free monitors, like the fact that users can legaly duplicate the files without having to be restricted to a certain variety of copies, consumers are likely to highly welcome the new download store. Apple should be aware of the actual fact, that it might lose both new and old customers by restricting them to Digital Privileges Management monitors that can only just be played out on Apple's iPod and not on any MP3 competent device, as it is the case with Amazon.

Bargaining Electricity Of Customers:

Due to the vast range of direct alternatives and substitutes, iTunes must price competitively as well as preserving reputation and range & supply. Consumers are easily swayed to alternative products, especially the easiness and free use of against the law downloading sites and therefore need to be used to using legal downloading sites like iTunes. Consumers have great electric power because of their ability to buy from any one competitor in the music industry and can therefore probably dictate prices by constantly buying from the least expensive company, thus forcing competition to reduce prices. Definitely one customer wouldn't normally change lives, but collectively customers are strong. As for the Iphone, it must be considered that network providers have great vitality over the business, as they could make a decision never to sell the iPhone or put strain on the company that pushes them to pay a degree of their earnings to the service provider. At the moment, Apple has constrained itself to one provider, O2, and therefore greatly is determined by them retailing the iPhone but this will surely change over time.

Bargaining Power of Suppliers:

Similarly to bargaining vitality of customers, you have the bargaining electricity of suppliers. iTunes have to submit to the requirements of the consumer market to compete, but on the other side be capable of bargain using their suppliers because of the size and trustworthiness of the business, thus they can be a company and a customer. Because of the volume of sales that iTunes have, it might be foolish for companies such as SonyBMG, Universal, Warner and EMI never to compromise on the costs and protection under the law to spread their music, as their success in the music download market highly depends on the successful circulation with their music, mainly through Apple. This truth clearly restricts the bargaining electric power of suppliers to a certain level, although Apple has to consider that without their music iTunes could not function as successfully as the marketplace demands. Therefore a bargain must occur that suits both companies, a possible arrangement could be first fees plus ratio of sales.

Intensity of Rivalry:

Although the quantity of companies functioning in the music download market is very high, Apple is the clear market leader. Still the multimedia download market is a market in its development phase with fast changing solutions and many new companies entering the market. At this time, it seems most unlikely a company could critically threaten Apple's market position however the company must be aware of the fact that there are other big multinational companies endeavoring to enter the marketplace with new technology and means of offering their services.



Apple is the clear market head in the music downloadand constant financial performance. Revenues have grown from $5, 742 million in 2002 to $19, 315 million in 2006 and the business's net profit has increased from $65 million in 2002 to $1, 989 million in 2006 (Datamonitor, 2007). Stable financial growth shows the nice financial point out of the business and builds the bottom for future development and expansion. Also, the business has an extremely strong branding and loves a high level of brand reputation and brand consciousness that allows the business to identify its offers and stimulate sales. Advantages of the business is identified by its successful distribution of the ipod device and its software iTunes. With every ipod touch sold, the buyer automatically installs iTunes on his pc, as it is merely possible to download music from Apple's original software with an iPod. Furthermore, Apple products' are being regarded as "hip", "stylish" and "fashionable" which is increasingly becoming very important to consumers. Furthermore, Apple devices and software attract customers for his or her convenience, their ease of use and then for always being up-to-date with the newest technology. Apple has also collaborated with large brand companies like Nike, Starbucks, Coca Cola and Google, which has got beneficial effects on both Apple and their lovers and has generated a new profile, e. g. linking sports activities and music culture.


First off all there exists to state that even though interconnection between the ipod touch/iPhone and iTunes is a main factor to Apple's success this restriction could become a problem in the foreseeable future, as increasingly more customers want for devices and online portals that permit them to download MP3s to any MP3 in a position device. Additionally, Apple has only a very limited offer of DRM-Free tracks on iTunes, which is often defined as a strong weakness since a growing quantity of customers extravagant DRM-Free downloads. Another weakness for Apple lies in its pricing, especially for its iPhone. A Mintel research about the mobile phone market in the UK described "pricing and costs to be the most crucial factor when it comes to purchasing a telephone (Mintel, 2007). Also, the iPhone currently doesn't permit the costumer to immediately download files to the mobile, which, compared to the new Nokia N-Series, is a gigantic weakness, since it might prevent customers to choose the Apple device and go for the Nokia handset instead. This could lead to a lack of Apple's market share to its rival Nokia. Also, officially, the iPhone isn't noiseless as effective as its competitor the Nokia N95, as it works on the slower mobile data service and comes only with a 2 Megapixel camera. Another weakness for Apple is, that they've only chosen one operator in each country where in fact the iPhone can be found and therefore has constrained the consumer's selection of network operators.


The comany's biggest risk probably constitutes the access of Nokia into the digital download market. By providing the chance to directly download data to a handset device, Nokia could gain some of Apple's market talk about in the digital download market, since customers are ever more fancying mobile downloads that don't restrict them to a bulky computer or laptop. The mobile download market is "one of the very most opportunity-rich markets the entire world has ever seen", as Nokia's Chief Executive Olli-Pekka Kallasvuo expresses (Halper, 2007), and if Apple doesn't get up fast on this opportunity it is running risk to loose its superiour market position to Nokia. Another menace for Apple constitutes the kick off of online portals that are specialised in marketing DRM-Free tracks. Increasingly more customers are looking for music it doesn't restrict these to a certain range of copies or to a special device as it is the circumstance with iTunes and the iPod. Although Apple is currently trying to improve its selection of DRM-Free songs, it still lacks the greater choice and lower price of companies such as Amazon that could lead to custmers switching over from Apple to prospects in terms of DRM more convinincing sites. Also the risk of illegal download sites would have an negative impact, due to the option of free digital content that can sway customers away from Apple's iTunes.


Although currently especially the youth customer segment is seen as the major concentrate on group for downloading, as these customers seem to be less restrictive towards new technologies, providing bigger and advanced products and services for aged and wealthier people could evidence very profitable for Apple. Along with the introduction of its iPhone Apple has recently done an important transfer to the cellular phone market that might permit the company to test its biggest risk Nokia on their home market. As increasingly more customers are becoming increasingly aware of ground breaking techologies and of the huge benefits arising out of Internet downloading Apple should now take advantage of the great opportunities arising from the fast growing mobile phone download market by causing its services directly downloadable to its iPhone as its rival Nokia has recently done. Also, the forthcoming change in the digital download industry towards ad-supported content could be an opportunity for Apple, if the business manages to attack advertising deals with companies that allow Apple to offer services free of charge to customers who agree to watching ads. This could bring a whole new bunch of customers to the business. Although these customers won't have to pay for the add-supported services, they will probably buy an iPod or an iPhone or another Apple hardware device.

Resource Evaluation:-

The sources of an company include its individual reference skills, the investment and the administrative centre in every area of the company. Apple has advantages in the creation and marketing of its new ipod touch very good music player and associated software that arranged the standards for the industry. It experienced also invested closely in branding its products and the Apple shops that sold its products. All these were part of its resources.

Apple takes supplies it will buy in- such as components, energy, skills and capital equipment and then uses its own resources and know-how to create a product from these products- like a computer or an iPod- which has a value which is greater than the mixed value of all supplies which have been used to make the product.

Environmental Analysis:-

Organisations need to develop corporate strategies that are suitable to their strengths and weaknesses in relation to the environment in which they operate. For example, Apple faces a highly competitive environment for its competitors with regards to the American companies such as Dell, Hewlett Packard. In addition, the company experienced to cope with changing levels of economic expansion in many marketplaces throughout the world, which affected the decisions of its customers to buy new pcs.

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