International Business Environment
Apple Inc. is a multinational enterprise that deals with manufacturing and marketing of a wide range of personal computers, devices for media and mobile communication, digital music players, sells a variety of peripherals, services and related software, networking solutions, third-party digital content and applications (Apple Incorporated 2013). The products and services, which are provided by the company, include iPhone, iPod, iPad, Macintosh computers, Apple TV, Xserve, iOS operating systems, the Mac OS X and others. The products are sold worldwide through the company’s online and retail stores, retailers, wholesalers, value-added resellers and in a variety of other ways (Apple Inc. Stock Report 2013).
Apple has always been different in terms of questioning the norms and exploring new possibilities, being a rebel, troublemaker and individualist, as well. Since 1976, the company has evolved from a small tech company into a prominent empire (The History of Apple Inc. n.d.). It has not only created several innovative and revolutionary products, but also an immense army of passionate and devoted customers and has become a true trend-setter of the decade. The Apple’s rapid growth and performance over the past decade has been incredible (The downside of Apple’s growth 2012).
Apple has become an icon of the reinvention and innovation with a winning culture.
Since the start of a new millennium start, Apple has become one of the most valued enterprises, the largest music distributor in the world, a major global retailer and the largest maker of mobile devices. The growth rate of the company over the last decade has been exceptionally strong. The company’s success story began, when the first iPod came to the market. The statistics shows a rapid increase in the net income since 2005 (Apple Reports Record Results 2013). The growth chart will help to better understand the Apple’s successful growth (Fig. 1).
At the end of the fiscal year of 2011, Apple owned 357 stores, whereas at the end of the fiscal 2012, the number of stores increased to 390 and earned an average of $51.5 million per store, $8.2 million more than last year (Golson 2012). The company has already announced financial results of the first quarter of the fiscal 2013, declaring a record quarterly net profit of $13.1 billion and quarterly revenue of $54.5 billion. The results are higher, when compared with the revenues of the previous years. It has been stated that international sales constituted 61 percent of the quarter’s revenue. Average weekly revenue reached $4.2 billion in the quarter, which is $0.9 billion more than a year ago.
However, even in all ups and downs, one thing that remained constant was the loyalty of its fans, devoted and evangelistic as ever. Its consumer market share may have fluctuated, but it continued to hold a strong position in the consumer mind share, as always (Analyzing Apple’s market position 2003). Apple has its first mover advantage in the market of mobile applications that is based on the demand of such mobile devices as iPad, iPhone, and its App store (Apple to See Sales Growth of 50% by 2012 2011). The success of the Apple’s service products and software is best viewed through the sales of support devices. 90% of the revenue has been derived from device sales, 70% – from iPad and iPhone. Large financial resources allow the company to spend large amounts of money on the aggressive advertising and marketing, as well as campaigns focusing on its growth strategy.
The major aspects of the company’s success within the international business environment are the product development, human approach to high technology and extensive marketing. The key factors, which impact the development and performance of Apple, have been built over the years. They are closely intertwined with operational set up and the way of working. Being in the process of a constant development and growth, the company has a strong competitive advantage in the market. It is a result of the management style, organisational choice and embedded practices. The factors, which influence the performance, growth and development, are as follows:
1) “no” is more preferable than “yes”. The product line of Apple is remarkably slim. In spite of this fact, the company rejects numerous appealing volume opportunities to multiply the product offering, in case it cannot create a seamless consumer experience or make a difference in a given category.
2) The organisation that is quite different from other companies. Apple is organised as one company (not in Business Units) and manages products instead of categories. In spite of a substantial turnover, the company has only one R&D base and looks at one P&L. It makes Apple products to be fully compatible. Most consumers enjoy a great experience of the brand and have incredible trust.
3) The company prices its products at the right price in order to generate the support of competitive advertising and solid profitability. Apple usually builds launch plans and gives time for a new concept to establish itself in the minds of consumers.
4) The company’s idea of victory is closely related to the consumer response. It does not take part in industry fairs, but it organises special events, where the company shows new concepts that will be available almost immediately.
5) Value of the whole consumer experience. Main attention is focused on the user interfaces, ease of use and the excitement.
6) Relationship with retails is healthy and distant. Apple dictates how the products should be positioned in a store and establishes the pricing policy.
7) The company values people and rewards them for their contribution. This allows Apple to recruit talented people in the whole world, maintain the leadership spirit in the organisation and make people feel at ease in the strong leadership environment (Ragnetti 2013).
8) Advertising. Multifaceted advertising campaign adds to the company’s success and popularity of its products worldwide.
9) Brand coherence. The company follows the goal to stand at the intersection of the humanities and technology. Apple brand coherence is explained by the fact that everything works and is simple.
10) Product line strategy. Contrary to the majority of companies, which produce different products with respective specification differences, Apple invests all the company’s efforts into the good product development making a single device and preventing customers from reading numerous documentation about the differences between devices of the same product line.
11) Research intensive office environment. Apple is constantly launching products, which are trendy and stylish. It helps Apple to be one of the most outstanding world innovators in the portable music and computer industries. The company is considered to be the first in the introduction of new ad creative ideas.
12) Analysis of Competitive Strategy.A highly competitive industry, where the brand image and superior quality are key factors of success; it is essential for computer companies to become leaders in the cast area or offer unique products.
13) Understanding and meeting user preferences. The company focuses on the services and entertainment applications, rather than business applications.
14) Culture. Apple tries to find and exploit cultural niches, which vary by country. These cultural niches are filled through the services provided and applications (Laugesen & Yuan 2010, p. 96).
By the end of the fiscal 2012, the company is going to pass the $100 billion mark in sales (Ragnetti 2013). Apple’s strategies and key factors, which influence the company’s growth and development, make it plan to open 30-35 new stores this year, with 75% of those to be located outside the US (Golson 2012). It is quite possible that the company will continue to grow and develop in the double digits. There is an idea that it can even revolutionize the television market in the near future. It has been predicted that a continuous growth of the company gets the chance to reach $1 trillion market capitalization (The downside of Apple’s growth 2012).
A strong growth of the company is predicted to be driven by the boom of mobile applications. It is expected that worldwide downloads in the stores of mobile applications will be over 21.6 billion in 2013 (compared to 4.5 billion in 2010). The worldwide download revenue of mobile application stores is expected to grow to $29.5 billion by the end of the fiscal 2013. Fig. 3 shows Apple plans for the fiscal 2013.
Apple takes almost the unbeatable competitive position in the market. It is explained by the company’s mission to launch an easy way to use computer, technical elegance and industrial design. Apple refuses to license its hardware to third parties and relies only on its own proprietary designs. Another competitive advantage is that the company offers its consumers a complete desktop solution, renovation of new products every year, seamless technology integration, financial and operational management, scale economies, strategies of international market expansion. Marketing is where the company really stands out. Apple understands what makes people admire the product.
One of the most valuable features that help Apple in being unbeatable is a strong brand name that together with the marketing strategy and high quality products results in a high brand loyalty.
Apple covers different areas of computer electronics, including smartphones, tablets, music players and computers. The success of iPad attracted many first-buyers. The service and product integration is considered to be another competency of Apple. One of the key success factors of the company is the capability of strategic foresight in combination with the innovation ability. A user centered design helps to meet all needs and wants of customers. Thus, the above-mentioned factors retain Apple on the high level of competitiveness scale.
The Report on Opportunities for Market Entry (ROME) helps in identifying the import opportunities for Apple. This report includes characteristics of new market opportunities of the company. The Market Intelligence Report (MIR) will help in terms of analysing market entry opportunities. It has been stated that Apple has taken a traditional market entry approach. The company focuses on a shared human motivation, which results in the desire to express the individuality.
Apple remains the dominant vendor of tablets, which has been vulnerable on the market low end. The company intends to compete there with iPad mini. The partnership with Vodafone provides more entry opportunities for the company as the organisation is one of the leading telecommunication companies in the world and guarantees a stable customer connectivity. Thus, the Market Intelligence Report provides insights into consumer trends, together with the segmentation of the market. Consumers are most interested in colour and quality of gadgets, as well as their texture, price and bruises (Fig. 4).
The Business Environmental Analysis is considered to be relatively qualitative and presupposes the identification and analysis of environmental variables, which make an impact on the business. Some environmental analysis frameworks, such as SWOT and PESTEL analysis, have received much attention in the business world.
Apple operates on a geographic basis, including the USA, the European countries and Japan. The company does its best to comply with different types of regulations for their production and marketing in countries, where it operates and sells its products. Operations of the company and the stock price are heavily affected by the conditions of world economies. Apple manufactures products, which aim at certain targets such as educators, students, government agencies and businesses. The company is committed to producing the best mobile communication, personal computing video experience and portable digital music. This strategy implementation is caused by the specific product creation and solutions, which are made by the company.
SWOT (strength, weakness, opportunities and threats) analysis of the company shows that Apple is very strong in the image protection, but more research can be done in order to overcome weaknesses (Pivovarnik et al. n.d., pp. 17-18). PESTEL Analysis of Apple covers such areas as:
Political. Apple does not have any control over the stability, current and future policies of taxation. In order to cope with these issues, the company should change the VAT rate, which is going up 20% and may result in the product price rise.
Economical. Includes consumer spending strengths, inflation, interest rate and general economical situation. Under conditions of the unfavourable economical situation, consumers spend less, and it affects the Apple profit.
Social. Includes culture, lifestyle, religion, media views and the rate of population growth. The company should take into account the above mentioned things and do business to meet consumers’ needs.
Technological. It is represented by the current and future technology, technology change rate, as well as its research and development. Being an electronic organisation, Apple has to be aware of all new technologies.
Legal. The main focus is on the employment legislation, health and safety legislation, law changes, regulatory bodies and policies of trading. Apple should be aware of new legal laws.
Environmental. Includes the consideration of recycling and pollution that is created by the company’s products and services. Apple should consider recyclable packaging.
It is very important for the company to choose the correct strategy of the market entry as it impacts the company’s long-term success. In case a company introduces a new product or enters a new market with any existing product, it is essential to develop a coherent strategy of market entry. Hence, Apple should evaluate all entry barriers, including legal considerations, cost, existing competition and industry regulations. The company should also take into consideration the target market it aims at, as well as operations, human resources, projected sales and financial implications, marketing campaigns and entry modes, which constitute a Market Entry Strategy Analysis (MESA).
The increasing demand for low-cost and high-end cell phones results in the fact that India has become the world’s fastest growing telecommunication and mobile market. Nowadays, the country is seen as a promising target market for the company in the course of its plans concerning the global expansion. Apple has taken initiative to introduce its iPhone to the cellular market of India. In addition, Apple has made several strategic decisions with the aim of guiding the way to success in the new territory of sales. Cooperations with such telecommunication companies as Vodafone and Bharti Airtel, helped Apple in bringing its iPhones to the market and holding a market share of 40.3% in the telecommunication industry of India(Zeman n.d.). Thus, the company chooses out of the following ways to enter new markets:
- Foreign direct investment. Buying an existing firm that is based in a foreign country or building the operations of a local firm. This strategy of the market entry requires a substantial capital investments.
- 2. Exporting. Is quite rarely used by Apple as this strategy may lead to losing control over pricing, which is unacceptable for the company.
- Franchising. As Apple has a solid brand recognition in foreign markets, this strategy leads to the company’s success.
- Partnerships/joint ventures/ strategic alliances. This strategy has been successfully used by the company. Thus, the partnership with Vodafone provides better connectivity opportunities to its customers and represents an essential joint-venture for Apple.
- Licensing. It issuitable for companies that have a component of intellectual property of their product. Marketing rights of a product, manufacturing processes and technology may be licensed.
The target market of Apple is:
1) People with a middle / upper income, who pay more to have a better user experience.
2) People, who enjoy having fun with technology, shooting video or digital photos.
3) Media and design professionals.
4) Fans and music enthusiasts aged 12-35.
Thus, the target audience of Apple is the upper and middle class representatives, who are interested in electronic devices, taking pictures, recording videos, listening to music and who are ready to pay more to get a better gadget. In general, the target market of Apple includes professionals and students,who need computers and other digital gadgets in order to keep their records, personal or business information. This is the market that needs devices, which provide the entertainment even outside their homes, as well as devices, which are not time consuming.
Being a large source of income, the target market of Apple involves almost all sectors of the society. A variety of marketing strategies allows the company to cater to the appeal and taste of such markets. The company takes care and makes sure that all branches and stores are located in easy to reach places and the most profitable places. Apple also ensures that it will have no heavy competitors in the location they want to put up a new branch (Marketing Strategy of Apple Computers Inc. 2011).
The company is known for building a closed ecosystem, where it controls nearly every piece of the supply chain. The volume and occasional ruthlessness help Apple in getting substantial discounts on parts, air freight, and manufacturing capacity.
In the past, Apple’s HR was looking for great ways to solve or enhance employees’ education, knowledge or management’s interaction with employees. They created a flatter kind of organisation with much fewer levels of management. After Steve Job’s leaving in 1980, Apple faced the reorganisation and became more vertical. Some additional traditional human resource function was introduced at that time. In 1906, when Jobs came back, the organisation was totally changed. Nowadays, human resources at the company is not the same as at most companies. However, it has lost its progressiveness and dynamism. Nonetheless, the greatest strength of the company today is the fact that everything works together. The products, like iPhone, iPad, iPod and Mac, operate together on the same system.
The company follows selective hiring practices, which are widely implemented to hire and recruit talented individuals. Apple also offers a variety of attractive benefits to its employees to complement direct wages. The system of benefits is used to retain and entice the industry-leading talents to benefit the company (Masi 2009, p. 11).
The entry strategy presupposes the decision to enter foreign markets, after taking in consideration the scale and entry mode choice. Apple has already entered foreign markets and offered its products to a selected niche. The modes, which are used to enter foreign markets, are vast. Among the most popular methods, which are implemented by the company, are licensing, exporting, establishing joint ventures, acquiring an established enterprise, setting up wholly owned subsidiaries. Among the key factors that determine the entry mode are the political risk, business risk, economic risk and the company’s strategy, as well.
With the help of the ads, Appleis capitalizing on the iPhone status, which is considered to be a symbol nowadays. It represents the connectivity and the fact that the company is the best. The devices Apple produces play effectively in terms of the tastes of their target audience. The Apple’s concept is rather simple and substantially effective and says that if a person has no product of the company, he or she is left far behind. It leaves consumers no other choice, but to buy an iPhone. Nowadays, the iPhone accounts for more than 50% of the company’s revenue (Ciaccia 2013). The Apple’s marketing campaign is considered to be brilliant. The company reels in its potential customers and downplays the competitors at the same time. The main focus is put in such advertising campaigns as ‘Why You’ll Love a Mac’ and ‘Get a Mac’. The last one was widely used in the middle of 2010 with the aim of promoting its Mac computers. Then, the company introduced a new campaign, which did not focus on comparing products of Apple with products of its competitors, for example, Microsoft. The main approach was just to give consumers more reasons why they should buy Apple’s computers. As Apple was as a leader in a number of electronic products, including tables, mobile phones and others, it wanted to leverage on its successes and improve its fortunes in the sphere of the personal computer business. The product comparison was done through two characters, which were represented as personifications of Apple’s Mac and Microsoft’s PC. The campaign was announced to be successful as it caused a significant increase in the Mac sales. It won a variety of awards and was positively criticized as the one, which projected the differences between Windows and Macs with a dignity and in a humorous way (Apple’s Marketing Campaigns: From ‘Get A Mac’ to ‘Why You’ll Love a Mac’ n.d.).The ‘Get a Mac’ campaign was a kind of response to the falling sales of the computers.
The company is characterized by running a retail store smooth operation. Each employee plays a distinct role, which he or she understands and does his or her part to deliver a high level of service, which people expect to get from the brand. It requires relevant business goals, serious brand alignment and people processes. A lot of people claim that Apple follows the monopolistic tendencies of its competitors, and that it is successful because of hype, rather than truly outstanding products. Nevertheless, one thing remains evident that Apple is one of the best and most successful companies in the market.
A sustainable competitive advantage of Apple is created due to its horizontal strategy of integration across channels and devices, as well as the integration strategy from a chip design to software and retail. The company is considered to be a brilliant example of the classic theory of the business strategy at work.