Key Activities of Apple Inc
Apple Inc is previously known as “Apple Computer Inc” is a global information technology company with a range of products and technological software to its name (Yie et al., 2021). The company started in 1976 and was established by three founders which are Steve Wozniac, Steve Jobs, and Ronald Wayne (Johnson et al., 2012; Yie et al., 2021). At the present, the company has about 517 retail stores globally, the iCloud, Apple Podcast, and App store are present in 175 countries with Apple Music present in 167 countries and 154 000 employ44 in 2021. The strategic aim of the company within this period was as always “to bring the best user’s experience to its customers through innovative products and services.” The company operates in consumer electronics, online services, and software industries. They were initially in the consumer electronics and software industries where they made computer hardware as well as the IOS software operating system on which it ran (Johnson et al., 2012; Yie et al., 2021). Until 2007, when the company went into the phone business and the name of the company changed from “Apple Computer” to “Apple” (Johnson et al., 2012; Yie et al., 2021). Apple’s mission statements had been changed several times to meet the demands of the market but the dominant message that had served the market had been “bringing the best user’s experience to its customers through its innovative hardware, software and services.” The vision was the belief that Apple is on the face of the earth to make great products and that’s not changing. One of the important ways that Apple Inc employs to bring value to the customers is through its App store which contained applications that are useful for many digital needs (Johnson et al., 2012; Yie et al., 2021).
The key activities of Apple Inc are mainly the design, manufacturing, and development of information technology products (Yie et al., 2021). Apple’s products included personal computer (MacBook), iPhone, cloud storage, Apple Watch, Apple TV, iPod, iPad, App Store, iTunes Store, online payment application (Apple Pay), Safari and IOS software etc. (Rowland, 2020; Yie et al., 2021). The target market of Apple Inc included users who are educated millennials, scientists, business professionals, engineers, students, and educators especially people with disposable income and active social life (Johnson et al., 2012).
It was also reported that the market capitalization of Apple Inc had reached a whopping sum of $1.4 trillion since the 27th of May 2020 and the shares were traded at $318 per share (McClay, 2020). The market share of Apple has changed over time and in 2019, Apple’s US market share in the first quarter (Q1) was 39% while in the Q1 of 2020 and Q3 of 2021, it was 46% and 47% respectively (Counterpoint Team, 2021). The global market shares of smartphones showed that Apple’s market share was 17% in Q1 of 2018 while it was 14% in the Q3 of 2021 (Counterpoint Team, 2021).
Depending on which product Apple Inc has different competitors, in general, however, Samsung, Huawei, Lenovo, Microsoft, Dell, and so on are the biggest competitors to Apple Inc. The key stakeholders in Apple are customers, developers (app store), investors, employees and distributors and partners in the TV and music industries (Counterpoint Team, 2021)
Apple’s Market Share and Competitors
Apple Company is one of the company that has invested in information technology industry. According to the Yip (1992), the drivers of globalization of industries have been reported which are government, market, competition, and cost (Yip, 1994). These drivers of global opportunities in industries are very important and have huge implications on the global strategy on how companies can position themselves to take advantage of the market as well as adapt to changes (Yip, 1994). However, it has also been reported that the variation in industries influences the strength of these drivers in different industries (Whitla et al., 2005) Technology has evolved over time to be potent enough to drive the global market and this has caused some studies to include technology as one of the drivers of globalization of industries and thus will be added to the drivers of information technology industry.Global Industry
The cost as a driving force in an organization is the capacity to utilize the organization’s resources in the best way to provide the products or services to the customer at the lowest possible price (Yip and Coundouriotis, 1991). Cost of production has a direct and indirect impact on the globalization effort as well as a global strategy. The recognition of opportunities available in other countries regarding raw materials and skilled labor in production is very essential. It has been reported that in order to position itself well in the global market, the IT industry’ players position themselves near the sources of raw materials and in countries where they can get cheaper labor both at relatively lower costs (Blodget, 2012). There are several advantages accrued to that strategy apart from reduction of cost in IT industry. This kind of industry require a lot of technology and skills hence the companies investing in it must look to areas where they are availability of skilled and experienced labor and at relatively lower cost. For instance, it is reported that Apple corporation invested in because China has a vast number of engineers who are skilled at a cheaper price than in the US (Blodget, 2012).
Branding is one of the global strategy used in IT industry. The players in the industry endeavors to build their brand in the global arena through offering high quality products that meets consumer’s expectations. For instance, we have big names like Apple, Samsung, Dell, Microsoft, Huawei, Dell, etc. where the brand gives them competitive advantage over competitors (Johnson et al., 2012). Continuous improvement through consistent innovation is another competitive driver global strategy that has been used in IT industry. Any player in this industry that wishes to competitive favorably must invest in innovation to introduce new products and improve the existing one otherwise it will be eliminated in the industry for failure to keep up with change of customer’s preferences (Hill, 2013). The global strategy to remain relevant in the industry involves heavy investments into research and development to always produce innovative products (Hill, 2013). This has engendered customer loyalty to the brand even when they charge premium prices for their products and services, yet they maintain their customer base (Johnson et al., 2012). Another global strategy in IT industry is ownership of patent rights. Whenever, a player in the industry discover new product through advanced technology, they run to acquire the patent rights to restrict competitors from copying their innovation hence attain competitive advantage over them for a good period of time before they develop or acquire it (Johnson et al., 2012).
Yip’s Global Drivers for Information Technology Industry
The government holds the opportunities and threats to international business in terms of regulations, custom practices, legal mode of operation, policies, and processes (Yip and Coundouriotis, 1991). There are countries that provide avenues for foreign investment in order to drive the economy while some other countries close their borders in order to allow domestic production to grow through protecting local industries. However, in some cases the government are allowing foreign investment in IT industry under conditions like providing job opportunities to local people like the agreement between China and Apple Corporation where Beijing allowed this company to invest and use raw materials in her country while the latter offers jobs to locals (Hill, 2013). The governments are also concerned with the privacy and use of information by players in IT industry. These players must ensure they comply with privacy and fair use of user’s information policies (Hill, 2013). However, most of governments in developing countries are relaxing restrictions on foreign investment on IT industry by decreasing import duties on IT products and reduced direct investment restrictions to attract multinational companies in their countries (Haselton, 2017).
The framework to distribute the products and services to the targeted customers as a market driver is based on the interpretation and deep analysis of the characteristics, composition and dispositions of the customers (Yip and Coundouriotis, 1991). Standardization is a global strategy used in IT industry (Haselton, 2017). Although the customers are located in different parts of the world, the players in the industry recognize that there is similarity of demand of their products and services. Another global strategy is the issue of differentiation. Although there are many investors in the IT industry producing similar products, they ensure that they are not identical around the globe (Reddy & Reddy, 2014). For example, Apple and Dell produces similar personal computers but they are not identical. It has been proven that the IT industry is very responsive to customer needs and preference across the world. It is noted that there are products or services that are offered which are not identical to different parts of the world. The players tailor the products or service to meet the local preference. For example, Although Apple offer similar Mac Books all over the world, the Mac Book offered in US is not identical with offered in Africa(Peslak,2018). Moreover, the industry, especially the software development sector ensures software look alike regardless of where they are bought. They key issue here is that they are keen on the aspects that can be standardized without compromising the responsiveness to local needs (Earl, 2018).
Technology has shaped businesses in global arena particularly in the IT industry. The discovery of containerization has expanded the shipping of raw materials and finished products to their destination more than before. It has enabled multinational companies to locate depots and warehouses in different strategic areas in the world easier than before(Earl,2018). For example, Apple has manufacturing plant in China but its central warehouse is in US. The innovation of telecommunication and microprocessors in IT industry has reduced the cost of production and made easier the transportation of products to different locations across the world. In addition, the use of artificial intelligence in the IT industry has facilitated massive production of goods and reduction of defects which minimize the cost of production hence relatively lower prices of products in the international market (Peslak, 2018). Lastly, the invention of internet has boosted IT industry in great way. It is now possible for the players to advertise their products and services online. It has also facilitated e-commerce and introduction of new services like publishing music, movies and online payment services where people can access in any part of the world (Reddy & Reddy, 2014).
Cost as a Driving Force
A company can extend its business by entering a new market. “An institutional agreement that allows a firm to implement its product market strategy in a host country by carrying out only marketing operations via export modes, or both production and marketing operations on its own or in partnership with others like franchising, licensing, and joint ventures, according to the definition (Gerald et al., 2008).
There are various types of expansions; some focus on geographical issues, while others focus on product expansion. An extension of the business may occur when a firm wish to market a product that was previously unknown to that company since they had not worked with that type of product before (Gerald et al., 2008).
The greatest strategy for businesses to grow is to expand into new markets in other countries. It has been established, that organizations that have implemented a global strategy and became multinational have received competitive and financial advantages. If sensible judgments are made, this helps organizations to work with global markets and improve their growth while also becoming more successful (Gerald et al., 2008). Apple operates export mode, strategic partnership, and licensing.
Strategic agreements are the other ways that Apple Inc. uses to drive its global market (Montgomerie and Roscoe, 2013). Licensing and strategic partnership with the music industry in the different countries via the iTunes stores has made Apple the market leader of music retailers in the United States. Also, their partnership with the movie industry through Apple TV and had done some collaborations with Hollywood movie producers to produce their own content also (Castro, 2020). This enables the different music lovers in the respective countries to stream their favorites song from their application and in a way helps them to break into different international markets and Apple Inc. gets returns for delivering this service. The risk is reduced and there is shared cost. However, there is a need for integration of the two entities as well as an increase in the cost more than exporting (PlayBook, n. d; Montgomerie and Roscoe, 2013).
Apple Inc. does direct and indirect export business as well as reseller programs (Hill, 2013). The Company’s customers are primarily in the consumer, small and mid-sized business, education, enterprise, and government markets. The Company also employs a variety of indirect distribution channels, such as third-party cellular network carriers, wholesalers, retailers, and value-added resellers. During 2016, the Company’s net sales through its direct and indirect distribution channels accounted for 25% and 75%, respectively, of total net sales (Hill, 2013). For Apple, there is a fast entry and low risk associated with this type of entry. However, there are issues of tariffs as the case with China and other countries, less control, low knowledge of the customers in these regions, and environmental impact of transport (PlayBook, n. d).
Apple Inc. license some of its intangible product to organizations including international organizations. Some of these digital products licensed to other organizations by Apple Inc. are products that have patents thus without their license it is not possible to use the product (Hill, 2013). It is majorly the big companies and corporations that make use of these licensed software products (Hill, 2013). This mode of entry has low risk, low cost, and fast entry, however, there is low control and the licensee may be a rival competitor in the long term (PlayBook, n. d)
Competitive Driver of IT industry Global Strategy
Globalization is a concept that involves the coming together of different economies of different nations with the purpose of relationship in a way to remove or reduce barriers such as tariffs placed by different nations on trade across different nations and duties as related to import and export of goods and services across the different countries (Beck,2018)). This helps different participating nations to take advantage of the wealth, product and services, supply chains of production, labor preference, technological advancement, etc. (Sass, 2015). It promotes international relations, communication, and understanding of cultural differences (Hill, 2013). This encourages profitability and competitive advantage among the players in the industry.
Apple Inc. as a global player in the software development and information technology business has earned praise as well as criticism over its global marketing strategy (Gerald &. Edwin,2008)). This segment is to discuss the benefits and challenges of globalization of Apple Inc. global market (Hill, 2013).
The differentiation strategy employed by Apple Inc. in the marketing of their product has been one major influence to the perception of Apple products and services globally. The company invests a lot into research and development to manufacture products and services that improve customers’ experience which had both created an appeal and a brand value for the company’s products and services (Aljafari, 2016). Apple has good research mechanisms to identify the needs and preferences of customers across the world. The company goes deeper to identify what a specific market needs and then tailor its products to meet those needs. For example, Apple has identified that the consumer’s preference of Mac Book in America is different with the consumer’s preference of the same product hence it produces similar Mac Book for both markets but not identical. This strategy has helped the company to maintain its position in the global market (Johnson et al., 2012). However, this differentiation strategy has repercussion on the side one consumers across the Apple’s global market. It makes the prices of its products much higher than its competitors. The premium prices may scare some potential consumers in the global market particularly in the developing countries where poverty is high. For example, Apple has much struggled to enter into Indian market for years due to premium prices of its products and services (Aljafari, 2016). Nevertheless, this differentiation strategy has put Apple up against many different competitors like Samsung, Lenovo, Xiaomi, and Huawei who are actively competing with their brand in the global market (Shanklin, 2017).
One of the benefits of globalization is the opportunity to utilize the opportunities in other countries or regions that are not present in the home country by default. Apple through its strategic relationship with Foxconn had utilized cheap labor that is present in China by default to assemble its products, especially the iPhone thereby reducing the cost of production and increasing the profitability of the business (Morgan and Nicole, 2021). Although, this is a smart move by Apple Inc. to tap into the Chinese market which both has most of its supply chain as well as its customers (Morgan and Nicole, 2021). It also provides employment to thousands of Chinese people. Apple Inc. benefits greatly from this partnership as they easily enter the Chinese market which had a large population (Morgan and Nicole, 2021). They also enjoy the benefit of access to most of their suppliers in the supply chain which means less cost of transportation and logistics (Morgan and Nicole, 2021). There is also the use of cheap labor in the manufacturing of the product which ensures a good profit margin when the products are sold (Morgan and Nicole, 2021). The outsourcing of labor has been to China has been a major criticism at home and the poor working conditions of the workers in the Chinese factories have created a bad reputation for the company as well as some fines (Guo et al., 2012; Heffernan, 2013). It has been reported that Apple through its partner, Foxconn, had infringed on human rights and labor laws. This whole issue and issues of child labor have amounted to a dent in Apple’s brand image of the public which may amount to much at the present but could be substantial in the future (Guo et al., 2012; Heffernan, 2013).
Governmental Driver of IT Industry Global Strategy
One of the ways in which Apple strategically positions its products for sales is the retail stores (Farfan, 2019). It has been reported that Apple has 510 retail stores in America, Asia, and Europe (Farfan, 2019). These centers are built and designed to persuade customers’ patronage through their experience at the centers (Lan, 2021). These are product experience centers that are focused on customer feelings and experience (Lan, 2021). The centers have a place for the display (digital experience area) of the Apple products such that customers are permitted to interact with the product such that they can have personal experience interacting with the products they are hoping to purchase in all of its store in the global market (Lan, 2021).The potential buyers do not need to move to company’s headquarters in US to have this experience ,rather they need only to identify the nearest Apple’s retail store in their country and visit them. This strategy increases the chances of the sale of Apple products around the world in addition to the online stores where orders can be made directly regardless of the buyer’s location.
Another good feature of the Apple’s experience centers in are their sales personnel are not just there to make sales promotion to the customers, they are to help the customer improve their experience by the provision of better product experience to the customer as there is also a place for user’s experience in the store (Lan, 2021). Customers can also take a class in order to learn how to use the applications and features of the Apple products maximally in all of its 518 retail store globally (Lan, 2021).
The operation of these experience stores may be too expensive to run, therefore, they are only located in some regions of the world and could only encourage more sales in these regions. One of the reasons Apple could not increase sales in the Indian market apart from the high price is the lack of retail stores (Cohan, 2018; Lan, 2021).
Licensing and strategic partnership with the music industry in the different countries via the iTunes stores has made Apple the market leader of music retailers in the United States. Also, their partnership with the movie industry through Apple TV and had done some collaborations with Hollywood movie producers to produce their own content also (Castro, 2020). This has sparked the rise of competition, especially in the music industry across the world (Apple.com, 2019). For instance, streaming services like Spotify, Boom, and many others with more effective business models have risen to take this business from Apple (Apple.com., 2019). Most of these services do not require the buying of a song by song on their platform before able to enjoy good music, unlike the Apple iTunes store, therefore reducing the chance of good profit from this platform (Apple.com, 2019). There is provision of free WIFI in and internet services around are many institutions like universities and colleges across the world. So many students who are target market for these services have low income and studying at a limited budget hence prefers the brands that offers these services for free or a very cheaper prices. Since Apple services like Apple iTunes Store are offered at premium prices, they end up losing this segment of global market.
Conclusion
Apple Inc. is one of multinational companies that have good reputation in information technology industry. The company has invested in software development, making of electronic, and offering online services. The cost drivers that affect IT industry include proximity to sources of raw materials and accessibility to cheaper skilled labor while competitive drivers include branding and consistent innovation. Government drivers on IT industry global strategy include regulations, polices, tarrifs and incentives while market drivers are differentiation strategy and standardization. Technological drivers this industry are such as containerization, internet, Aritifial Intelligence and innovation of microprocessors and telecommunications. The entry mode of Apple in the global market include strategic parternship, licensing, export. Some of the factors that that show globalization in Apple company include licensing and parternership, outsourcing labour, diffentiation of products and services, and opening of retail stores across the world. Some of the challenges faced by Apple include premium prices that make it lost a wider segment of target market, stiff competition from rival companies, and bad publicity as result of some method of production.
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