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The importance of innovation in the success of Apple

Question:

Discuss about the Human Resource Management International Digest.

This paper analyzes the strategic challenge of maintaining and improving innovation and unique technologies in Apple. Innovation has been the driver of Apples continuous and fast rise and success since the company was started by Steve Jobs more than 30 years ago. The culture of the company has been built upon the idea of uniqueness and innovation. The company has however been facing challenges in the market due to increased competition in the market from different companies such as Microsoft, Samsung and Google. These companies have come up with very innovative products that rival Apple in the market. It is therefore very vital for Apple to design a strategy that will help it to remain competitive and maintain its position in the market as the leading premium consumer electronic company (Dormehl 2012). ,Some of the products developed by the company include; Iphone, Ipad tablet, mac personal computer, Apple TV, Ipod media player as well as the Apple Smartphone. The software designed by the company include OS, Mac OS, Itines media player, iTunes safari browser and the iLife and iWork software(Appannaiah et al. 2009). The strategic challenge of increasing innovations and increased product differentiation will help the company to become more competitive in the market. The major issues in this strategic challenge is identifying customer needs in order to produce and design products that customers need rather than just what the company wants to sell.

Creativity and innovation have been at the core of the growth of Apple company. The strategy of innovation is one of the core values of the organization and it has played a very significant role in the development of Apple. Innovation is very important especially in this industry. The consumer electronic industry is very progressive in terms of technological advancement. In the recent years, the competition has become stiffer with the entry of companies like Microsoft in the Smartphone market which is the main rival of Apples` iPhone. Companies like Samsung have also taken up a huge chunk of the mobile telephones market share. Innovation and product differentiation has helped the company challenging the market position of Apple as the premium mobile phone company with its Samsung s series. Another reason why innovation is a strategic challenged for Apple is because of the desire of the company to maintain its market position and improve its market share. 

Period

Samsung

Apple

Huawei

OPPO

vivo

Others

2015Q4

20.4%

18.7%

8.2%

3.6%

3.0%

46.2%

2016Q1

23.7%

15.4%

8.4%

5.9%

4.4%

42.2%

2016Q2

22.8%

11.7%

9.3%

6.6%

4.8%

44.9%

2016Q3

21%

12.5%

9.3%

7.1%

5.9%

44.2%

Apple has been successful mainly due to innovation. The main reason why Apple has lasted for so long in the market, while still growing and improving its market share is because of its high level of innovation and product development. The company has produced new and unique products in design, hardware and software that have set the company apart from its competitors.

Product differentiation is also one of the strengths of Apple. The company has a wide variety of products ranging from Smartphone, PC, software and music download services (Ansoff 2014). Having a large product portfolio the company to increase its revenue streams hence increasing profitability. Product differentiation also helps in spreading risk (Dormehl 2012)

Challenges faced by Apple in the market due to increased competition

The focus on consumer needs has helped the company grow to a very great extent. Apple develops its entire product after it has conducted a thorough market research to identify gaps in the market and the needs of the consumers.

Product positioning has been very crucial to the success of Apple. The company portrays itself as selling premium quality products that are long lasting and easy to use.  The company only produces products that are very unique of high quality and high prices and therefore becoming the market leader among consumers with high levels of income.("Apple surpasses Microsoft as world's most valuable tech company" 2010)

Another major reason why Apple triumphed in the market is that its products are easy to use compared to those of competitors. The founder and former CEO of the company Steve Jobs always emphasized the need to simplicity. Simplicity in user interface is the guide to both software and hardware engineers and therefore, the company has been able to produce products that are user friendly and therefore encouraging more consumers to buy the products.

Despite the many strengths that the company has, there are also several weaknesses that exist in the company has. One of the major weaknesses of the company is inability to match the expectations of customers. Since the company holds a significant market share and customers pay a premium to buy its products, the customers expect so much from the company in terms of quality and uniqueness. Sometimes, the expectations are overwhelming for the company and it fails to meet the expectations of customers. This results to unhappy customers and this becomes a problem for the company since one of its core values is maximization of consumer needs.

Another weakness for Apple is incompatibility. Most of the products manufactured by the company are incompatible with software and accessories from other manufactures. This becomes a problem for users at times since they may need to install a program in their device but since the product is not compatible, it may end up inconveniencing them. Apple has a very limited product portfolio. The product range of Apple consists of approximately eight products. When this is compared with the product range of its competitors like Google and Microsoft, it looks like Apple has a lot of catching up to do.

Just like there are strengths and weaknesses that are in the company, there are also various opportunity available for the company that can be exploited. Exploitation of these opportunities results to better financial and economic performance of the organization (O'Grady 2009). The following are the opportunities available in the market and tin the industry for Apple. Since Apple is a leading company in technology, it has become increasingly important for the company to diversify. Apple has an opportunity to venture into the motor vehicle industry where the technology of self driven cars is applied. This technology should be put into commercial tests by the year 2020. 5Technological advancement - this is always an opportunity for companies in the consumer electronics industry. Apple should therefore stay on its toes and always ensure that it is continuously rolling out products that are exciting for consumers. Staying for long without offering consumers new products eventually erodes the sales volumes of products and the revenues for the company reduces.

The strategic challenge of increasing innovation and product differentiation


iwatch and Apple TV. The iWatch and Apple TV are products that are focused at the future and should be fully developed and ready for the market with the advancement of digital technology.

Another opportunity that should be utilized by Apple is that of growing and expanding market. The current market of Apple for both the iPhone and the Macbook are underutilized. There lies a lot of demand for the company’s products especially in the developing countries. This is informed by the fact that the level of income for people in these countries has been on the rise and therefore an increase in demand of luxurious goods.

Threats in this case refer to factors that pose a challenge to the operations or products of Apple in the market. There are very few internal factors that pose a threat to Apple. Most of the threat for the companies` products results from outside forces such as competition. The following are the threats for Apple:

Market penetration in the Smartphone market. The Android technology which is used in most Smart phones has posed a major competition for Apple. This has eaten into the market share of the company with the Android having a 47.5% market share and Apple having 42% market share. This therefore means that since the Android technology is used by most or all Smartphone manufacturers and therefore competition can only increase in the future.

Another threat for Apple that the laptop brand Macbook is facing is increased competition and the fact that its sales are dwindling. This competition is mostly from brands such as Dell, Sony and Lenovo. Therefore the company has to re-position the product in order to help it gain increased brand value in the market. Continuous marketing of the product is also required.

The company has a lot of cash in banks estimated to be around $34.8 billion and this has generated to political heat with people calling for higher taxation.

The company is also highly dependent on low cost manufacturing in China and therefore in case of political or social unrest in China, the company can suffer huge losses.

The companies investment in music could lead to calls for the company to split up and be treated like two different businesses.

Increased labor cost in China will affect the companies` competitive advantage in terms of cost.

The incomes of middle level income earners is reducing and this may affect Apple sales.

Shifting demand for Apples product with consumer spending expected to be highest in Africa in some few years time.

There are ethical issues concerning the company manufacturing in China especially in the US market. This may affect the Apple brand position in the country.

The competitors of Apple have successfully duplicated apples Products, services and business model and therefore putting a lot of pressure on Apple. The uniqueness of Apple`s products is taken away.

The increasing demand for tablets and Smartphones has led to decrease in popularity of Apple. This means that the companies market share may reduce in future.

Product differentiation and its impact on Apple's profitability


Apple`s operating system limits the decision making by consumers since it is incompatible with most common applications. This inconveniences customers and they may opt to buy other brands. Concern for Apple is disposing off used electronic devices. Most of this devices have lithium batteries which are hazardous to the environment.

The manufacturing activities of the company in China are raising concern due to the pollution that comes from the factories.

The efforts of China to reduce greenhouse gases could lead to increase in cost of energy and this will increase the cost of the company.

There is likely to be increased regulations for Apple since it entered the financial services industry. This will mean that the company will be under increased scrutiny from financial regulators.

Apple is planning on entering the automobile industry with the manufacture of self driven cars which means that the legal restrictions of the company will be more stringent.

The core strategic value in the strategic challenge of innovation and product differentiation is that it is at the core of the companies` future growth. The Apple company past growth has been centered on development of unique and high level technology. The technology has been in form of both software products as well as hardware products. Apple company is vertically integrated which means that it produces raw materials and the final products. Vertical integration of the company ensures that the company has a complete value chain where it produces raw material, depends on its own software and also manufactures the final product. This has helped the company to maximize value for its products. The company has been able to integrate forward and backward through the emphasis on innovation and technological development. A good example is the IOS software that is used as the operating system in the iPhone (McGee 2014). This technology is unique and is only used in the manufacture of iPhones only. The future plans and strategies of Apple are also based on leveraging on technological advancement through research and innovation. Research and innovation will help Apple to develop new versions of iPhone such as iPhone 8, the Apple TV, Apple car, Apple jets. The company will also be able to develop software for both mobile phones and the Macbook brand which will help the company to become more competitive in the market. Developing of new computer operating system that is different from the one used in macbook will help the company to compete with Microsoft and Google effectively (Kaliannan & Ponnusamy 2014). This will broaden the income streams of the company and therefore raise the revenues of the company. Through innovation, a company is able to increase its product portfolio. Increasing the range of products under the Apple brand is in line with the company’s future growth plan and objectives. To achieve this, a lot needs to be done in mentoring and motivating employees to develop new products and technologies. These products should not be limited to the industry or the consumer electronics industry. By increasing the product range, Apple will be able to spread its risk among many markets and products and therefore failure in one product will have minimal effect on the company. This will also help the company to utilize its popular brand name since, its almost guaranteed that Apples` customers trust all the products originating from the company and will pay a premium to acquire such products. The strategy of innovation will also help to boast the image of the company further. Research indicates that a progressive and technologically advanced company is viewed more favorably by consumers compared a conservative organization. This is because, most customers like being in the first line when it comes to technology. This therefore means that if Apple keeps the high pace of technological advancement and improvement, its brand value will continue growing and becoming more popular: ("Inside Apple: how America's most admired--and secretive--company really works" 2012). It will be able to surpass Google which has become a major technological global force which has put companies such as Apple in a very risky position.

The focus on consumer needs and product research

It is important to analyze the competitive environment in which Apple operates. This is very crucial in designing strategies for the company. Strategy formulation and implementation for an organization requires an in depth understanding of the environment in which an organization is operating so as to understand the strategies used by competitors. This section will analyze the strengths and weaknesses of Apple`s major competitors. The major competitors of Apple include Microsoft and Google.

Wide range of product. The company has more than 11 products consider its brand which generates revenue in excess of $1 billion per year. This helps the company to be diverse and have different sources of income. The windows phone has been successful in the market and this has helped the company to claim a share in the hardware mobile phone business.

Another strength of Microsoft is that its windows product for PC has been very successful and dominated the pc software market (Scott 2008). The windows pc enjoys around 80% market share and this has been very important for the company.

High level of innovation in the company has resulted to the company designing and producing very competitive products for the company.

The search product for the company called Bing has not been able to compete well in the market. This has been mainly due to market dominance of Google. Bing features are also inferior compared to competitors and the search by Bing is very slow.

Another significant weakness is the internet explorer .This product once held more than 80% of the market share of the internet access software(Rotha?rmel 2017).The company has however lost the market share to competitors over the years due to lack of product development which made it unappealing to customers.

The products of Google are highly diversified and differentiated. The company has more than 20 products in the market ranging from internet search engines to mobile software and operating system (White 2014). This helps to diversify and expand the revenue streams of the company.

Another strength of Google is its dominance in the internet business. This has helped the company to gain a lot of revenue from advertisement which has helped the company to grow from strength to strength.

The gmail by Google has been a very successful product in the market. The product has been able to overtake traditional giants such as Yahoo and it is the market leader in providing email servers to customers globally (Kaliannan & Ponnusamy 2014).

Android by Google is the driver of the Smartphone technology. This product is one of the most successful products by Google and has generated a lot of revenue from licensing out to mobile phone manufacturers such as Samsung and Tecno.

One of the weaknesses of Google is that it is over reliant on software. Most of the companies` products are software and the company has not ventured in the hardware manufacturing and design of smart phones despite being the patent holder of Android which is used by all Smartphone manufactures. This is a weakness because, in case of loss of market share in the internet business, the company may find its revenues highly affected by this change.

Product positioning and portraying Apple as a premium quality brand

The strategic position of Apple is that of premium high quality goods and services which are highly differentiated. This strategy has helped the company to maintain a market leadership position in the mobile phone industry. The market position of Apple has been achieved to the ability of the company to innovate and develop unique products on a regular basis. The iPhone series of phones has been very successful with sales hitting billions of US dollars (Hitt et al. 2017).

. The company has been able to develop unique products like iTunes which is provides music download services. The companies` products are exceptionally high and this helps the consumers to view the product as being superior to others in the market. Apples products are mostly viewed by consumers as a luxury good and people who own it are seen as of high class in the society. The high prices by the company have a positive impact on the position of the company since the company has retained the appeal as being of premium quality and unique in design and product features.

Apple should take the following steps to improve on the strategic position of the company. The innovation and technological development in the company is quite remarkable but still a lot needs to be done to improve on the products line of the company so as to help in diversity and product differentiation.

Apple should invest more in talented and innovative staff. This will be done by proper training and instilling the right values in young and energetic staff that will help to generate new ideas and products for the company (Hitt et al. 2017).

The company should also increase its spending on research and development. Since Apple is one of the biggest companies that allocate very little proportion of its revenue to research and development of the company, it is important for the company to increase its allocation in order to develop more products for the company (Rotha?rmel 2017).

Conclusion

From the analysis of the strategic challenge of innovation and differentiation, it is quite clear how important this strategic challenge is to the organization. The report analyzes the how the strategic challenge affects the organization and how the strategic challenge can be used by the organization to help it grow and develop further. A SWOT analysis is done on the company to determine the strengths and weaknesses in the organization. Innovation is the most important core values of Apple as a company and it is therefore very crucial for the company to focus further on the coming up with more innovative products. An environmental analysis of the company is also conducted to assess the competitive environment in which the company is operating so that strategies can be designed to help the company remain competitive in the market.

References

Ansoff, H. (2014). Strategic management, 1st ed. [Place of publication not identified]: Palgrave Macmillan.

Apple surpasses Microsoft as world's most valuable tech company. (2010). Physics Today. DOI: 10.1063/pt.5.024368

Dormehl, L. (2012). Different thinking, 1st ed. London: Virgin.

Hitt, M., Ireland, R., & Hoskisson, R. (2017). Strategic management, 1st ed. Boston, MA: Cengage Learning.

Inside Apple: how America's most admired--and secretive--company really works. (2012). Choice Reviews Online, 49/11: 49-6372-49-6372. DOI: 10.5860/choice.49-6372

Kaliannan, M., & Ponnusamy, V. (2014). Apple was sweeter when Steve Jobs held sway. Human Resource Management International Digest, 22/4: 25-28. DOI: 10.1108/hrmid-07-2014-0084

McGee, J. (2014). Strategic management, 1st ed. Chichester: Wiley.

O'Grady, J. (2009). Apple Inc., 1st ed. Westport, Conn.: Greenwood Press.

Rotha?rmel, F. (2017). Strategic management, 1st ed. New York, NY: McGraw-Hill Education.

Scott, M. (2008). Apple, inc, 1st ed. Westport: Greenwood.

White, C. (2014). Strategic management, 1st ed. Basingstoke, Hampshire: Palgrave Macmillan.

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