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Case Study With Discussion: Options for Growth in a Competitive Ecosystem—Apple

Observers often consider the competitive ecosystem of the smartphone and mobile electronics industry to be a “red ocean” industry. Many rivals engage in direct competition with each other, with increasingly less room to differentiate one product from the others. In such industries, consumers often have the power to drive prices down as rival firms have few other ways to compete. Increased competition leads to thinner profit margins as rivals drop prices further and further.

Yet, even in these conditions, some innovative companies find a strategy to exploit opportunities for growth that rivals cannot easily imitate. For example, in the airline industry, Southwest Airlines and Virgin Airlines have found room to grow, even in the fiercely competitive “red ocean” ecosystem of the airlines industry. This week, you examine a case study of Apple, Inc. (attached), which both established a “blue ocean” space in the smartphone industry, and has found room to grow in what is becoming an increasingly global and competitive space.

The essence of the five-force, competitive analysis is to examine whether one might find it attractive or not to compete in a given industry, and where, specifically, there might be “dominant positions” within an industry, and to identify the forces that shape the potential to make money in an industry, given a particular “competitive position.” That is, how will you win? (How will you create unique value?)

Write a polished, researched, and well documented response to the following prompts:

  • Provide a thorough and detailed assessment of the critical competitive forces, including their underlying dynamics, in the smartphone industry that may threaten Apple, and bases response on relevant five-forces analysis and other concepts from MBA program, drawing from at least one resource from MBA Capstone Bibliography.

  • Provide a thorough and detailed explanation with criteria for and a rationale for why he/she focused on the critical forces he/she identified, and uses evidence or examples to support or illustrate the points made.

  • Provide a thorough and detailed assessment of the potential for new entry and/or effective substitute competition, based on a relevant blue ocean strategy (attached HBR about ocean strategy) analysis and other concept from MBA program, drawing from at least one new resource from the relevant resource from the MBA Program Capstone Bibliography.

  • Provide a thorough and detailed explanation providing criteria and rationale for how and why he/she focused on a particular new entry or substitute threats to Apple.

  • Provide a thorough and detailed analysis of the strategic implications of the competitive forces he/she identified above, examining the opportunities and threats to Apple’s position that it must factor into its strategy for the future, including assessing why these opportunities and threats are critical to Apple’s strategy using the case, the week’s readings, and prior MBA course concepts.

Evaluation of Critical Competitive Forces

Competitive strategies developed by Apple Inc are deemed to be relied on the requirement to deal with the external environment forces as such forces can affect its shares and revenues (Al-Arafati, 2016). The competitive forces along with the underlying dynamics within the Smartphone industry that might threaten Apple Inc are explained below:

  • Competitive Rivalry (Strong Force):Apple Inc faces strong force of competition. The five forces analysis indicates the intensity of the impact competitors have on one another. In the company’s case impact is relied on the external factors such as increased aggressiveness of companies and low switching cost (Chiang, 2016). Competitor firms including Samsung, Blackberry, LG ad few more are observed to give tough competition to Apple Inc. This type of aggressiveness is evidenced in rapid innovation, aggressive advertising along with imitation. Moreover, low switching cost indicates that it is simple for its consumers to shift from Apple Inc to other brands that indicate tough competition. This indicates this force make a significant contribution to strategic formulation of Apple Inc.
  • Bargaining Power of Buyers (Strong Force): This force is deemed to impact Apple Inc’s business as it indicates the way buyers’ impact its business (Fitzpatrick, Nguyen & Cayan, 2015). In the company’s case, strong power of buyers is relied on factors such as low switching cost and small size of individual buyers. It is easy for the buyers to shift brands that make them powerful in compelling Apple Inc to maintain high consumer satisfaction. Moreover, purchasing power of individual buyers is strong compared to the company’s overall revenues. Such situation makes its consumers weak at individual level. Conversely, as it is simple to shift from Apple to other brands, buyers are observed to attain higher force (Grant, 2016).
  • Bargaining Power of Suppliers (Weak Force): Apple Inc observes weak force inthis factor as porters five forces model indicates the impact of suppliers in imposing their demands. In the company’s case suppliers’ weak power is relied in certain external factors such as high overall supply and increased number of suppliers. Even if Apple has less than 200 component suppliers for its products, it has several options as there are numerous suppliers worldwide (Revon, 2016). Such situation makes individual suppliers weak in imposing demands on Apple Inc. Moreover, there is high supply level for most of the Apple Inc product components. This indicates the company does not require giving much importance to this force in developing strategies for industry leadership and innovation.
  • Threat of Substitutes (Weak Force): This is a weak force that can impact Apple Inc’s business as the porters five forces model indicates the strength of substitute goods in attracting consumers (Khan, Alam & Alam, 2015). Substitutes impose a weak force on Apple Inc relied on factors such as high availability of substitutes and low performance of substitutes. Substitutes of Apple Inc products are available in the market. For instance, individuals can easily employ digital cameras rather than iphone to click pictures. They might also employ landline telephones to make calls. In addition, these substitutes have low performance as they have limited features. Several consumers might rather employ Apple Inc products due to its innovative features (Kim & Mauborgne, 2004). Substitution has weak force in impacting the company’s business and this threat is not important to be focused by the company in developing strategies like marketing and product design and development.
  • Threat of New Entrants (Moderate Force): Apple Inc experiences moderate force on this factor as this indicates the impact and possibility of new competitors to enter into the market. New entrants might have a moderate force relied on the external factors such as increased capital requirements, high brand development costs and capability of likely new entrants (Kim & Mauborgne, 2014). Initiating business to compete with Apple Inc needs increased capitalization. Moreover, it is also costly to develop a strong brand for competing against strong companies like Apple Inc and these factors makes new entrants weak. However, there are some renowned companies that have financial ability to enter market and pose a threat to Apple Inc. For instance, Google has implemented such strategy through offering products line Nexus Smart phones (Kim & Mauborgne, 2015).

Among the identified vital critical forces, major focus is deemed to be considered on two forces that includes competitive rivalry and bargaining power of buyers as there are observed to have strong impact on Apple Inc. Considering the analysis of five forces, it has been analyzed that the company must develop effective competitive strategies based on competitive rivalry and bargaining power of buyers (Kim & Mauborgne, 2014). Such evaluation supports the company’s current position of regular innovation. Apple Inc is evidenced to effectively deal with these two major forces within the external environment. This can facilitate the company in strengthening its strategic position among competitors that can further attract consumers to Apple products. Competitive rivalry can pose a threat to the company’s performance as certain well established rivals such as Google and Samsung can draw attention of Apple Inc’s consumers (Moutinho & Phillips, 2018). For instance, Google has implemented such strategy through offering products line Nexus Smart phones. Samsung android smart phones were highly accepted by consumers. Therefore, large companies have potential to directly compete with Apple Inc and pose a threat to its business sustainability.  Bargaining power of buyers is high as it is easy for the buyers to shift brands that make them powerful in compelling Apple Inc to maintain high consumer satisfaction. For instance, consumers prefer smart phones from Samsung and Redmi as they are attaining identical features at affordable prices (Porter, 1975).

Evaluation of potential new entry or competition based on effective substitutes can be explained through evaluation of Apple Inc’s blue ocean strategy. Blue ocean strategy framework is employed by Apple Inc in order to explain the strategy canvas and four actions framework (Purkayastha & Sharma, 2016). This can further explain value innovation that focuses on the elements of service or product offering on which companies in the industry compete.

From analyzing the four actions framework and strategy canvas of Apple Inc it is gathered that the company generated future growth and profits by not exposing the existing demand but by reconstructing industry boundary. This is for generating new market space and unlocking talent demand (Rawson, Duncan & Jones, 2013). Blue ocean strategy analysis of the company indicated that certain disruptive innovations such as iTunes, iPod, iPhone and iCloud has not just attracted consumer attention but has also made them an essential part of individuals’ lives. Profitability and revenue growth of the company can be attributed to its blue ocean strategy. This is for the reason that brand has regularly redefined industry boundaries, generated uncontested market space and its products always centered on delighting its consumers (Rawson, Duncan & Jones, 2013). Products developed by Apple Inc decreases issues, increases functionalities along with generating need for consumers that makes them use the company’s products over long duration.

Explanation Regarding the Selection of Critical Forces

The four actions framework for Apple Inc can be explained in case of iPod based on consumer experience. The company focuses on eliminating the issue of difficulty in text messaging through use of keyboard and developing mouse. The company has keyboard configuration screens that have advanced options such as touch screen (Rothaermel, 2016). Apple Inc focused on eliminating its product malfunction that was recognized in the chip that facilitates in managing operation status of its devices. Such design deficiency was easily repaired in its future models of iPhone through replacing its operations chip.

Apple Inc has also focused on reducing the difficulty of its consumers in carrying different products such as MP3, PDA and phone for addressing their different needs. The consumers also face with the difficulty of user interface-make touch screen (Rothaermel, 2014). Considering such issues, Apple Inc has launched iPhone 3G in reducing such concerns that has facilitated the brand in attaining competitive advantages.

iPhone developed by Apple Inc has focused on raising the competitive advantages through advancing its product features of improved navigation and user interface, application games along with wireless internet use strategy (Kim & Mauborgne, 2014). The brand developed Macs that is best personal mobile phones in the world with all in one features with app store and iPhone features. In raining the competitive benefits for its consumers, Apple Inc have combines the features of their different products like iPod photo view and music playback within the iPhone.

To attain competitive advantages, Apple Inc has considered developing devices that facilitates its consumers in downloading music directly along with having simple interface with sleek design (Kim & Mauborgne, 2014). IPhones from Apple Inc has been re-developed that has data storage, internet along with computer dissemination abilities along with features of PDA that is compact and has quick access.

Based on the blue ocean strategy frameworks explained in the above section Apple Inc is deemed to focus on a particular new entry or substitute threats that can impact the sustainable position of the company drastically. It is gathered that the company might deal with threat of new entrants and substitutes on the area of its Smartphone innovation from Microsoft and Sony as they come up with surprisingly better technology and product (Fitzpatrick, Nguyen & Cayan, 2015). For attaining competitive advantages, Apple Inc must focus on “Create” factor of its four actions framework through its continuous focus on research and development. Product innovation aspects poses a threat for Apple Inc as its competitors like Blackberry, Samsung, Google and Microsoft comes with similar smart phones offered by Apple Inc at a low price and with modified features. Even though phone of Apple Inc has a design of utilizing a lot of features in just one gadget, its business rivals are still capable to combine the vital features of phone in adorable prices to increase their sales. For instance, Galaxy Note 7 attained competitive advantages over iPhone 7 because of its OLED sharp display technology and LTE capable smart watch ticker in lower prices posing threat to sales of iPhone.

Assessment of Blue Ocean Strategy

Strategic implications of the competitive forces identified above will be focused on in explaining the threats and opportunities to the Apple Inc’s position through developing an effective strategy. Apple Inc must focus on employing its strategic ability and efficiency in designing and developing in own hardware and application software in order to attain exceptional and different competitive advantages (Fitzpatrick, Nguyen & Cayan, 2015). Strategies must be developed by Apple Inc in consideration to the identified competitive forces such as bargaining power of buyers and competitive rivalry. To attain a competitive edge of its identified major competitors, Apple Inc must generate new categories of its products through focusing its unique capability of designing Apple products with its ordinal design manufactures that drives innovation. Such unique and non-imitable capability of using its own software to design products and cross-branding through developing Apple Watch or Nike Plus can facilitate the company in attaining competitive edge.

Through dealing with the threat of buyers bargaining power, Apple Inc must focus on recent consumer preferences. To decease switching to different brands all the demands of the consumers must be addressed by Apple Inc gadgets. Certain innovations based on recent consumer demands might include tablet with USB port (Purkayastha & Sharma, 2016). Addressing product based issues through maintaining operating stability, enhancing hardware quality along with increasing availability of applications and software programs are necessary. This can facilitate Apple Inc to maintain its sustainable market reputation. Another strategy for dealing with switching costs is through making its devices compatible with just software developed by them. For instance, Apple software and media can only work on Apple devices. The company can make available a number of purchasing plans for its iPhones.

References

Al-Arafati, A. (2016). Customer Relationship Management and Five Forces Analysis in Nonprofit Organization in Oman. International Journal of Scientific and Research Publications, 6(1), 436-440.

Apple. (2018). Apple. Retrieved 31 March 2018, from https://www.apple.com/in/ 

Chiang, C. H. (2016). Securing healthcare's quantified-self data: a comparative analysis versus personal financial account aggregators based on Porter's Five Forces Framework for competitive forces (Doctoral dissertation, Monterey, California: Naval Postgraduate School).

Fitzpatrick, B. D., Nguyen, Q. Q. A., & Cayan, Z. (2015). An Upgrade To Competitive Corporate Analysis: Creation Of A" Personal Finance Platform" To Strengthen Porter's Five Competitive Forces Model In Utilizing. Journal of Business & Economics Research (Online), 13(1), 54.

Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Revon, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Khan, U. A., Alam, M. N., & Alam, S. (2015). A critical analysis of internal and external environment of Apple Inc. International Journal of Economics, Commerce and Management, 3(6), 955-961.

Kim, W. C., & Mauborgne, R. (2004). Blue ocean strategy. If you read nothing else on strategy, read thesebest-selling articles., 71.

Kim, W. C., & Mauborgne, R. (2015). Blue ocean strategy: How to create uncontested market space and make the competition irrelevant (Expanded edition). Harvard Business School.

Kim, W. C., & Mauborgne, R. A. (2014). Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard business review Press.

Moutinho, L., & Phillips, P. (2018). Strategic analysis. In Contemporary Issues in Strategic Management (pp. 46-79). Routledge.

Porter, M. E. (1975). Note on the structural analysis of industries (pp. 9-376). Harvard Business School Case Services.

Purkayastha, A., & Sharma, S. (2016). Gaining competitive advantage through the right business model: analysis based on case studies. Journal of Strategy and Management, 9(2), 138-155.

Rawson, A., Duncan, E., & Jones, C. (2013). The truth about customer experience. Harvard Business Review, 91(9), 90-98.

Rothaermel, F. T. (2016). Competitive advantage in technology intensive industries. In Technological innovation: Generating economic results (pp. 233-256). Emerald Group Publishing Limited.

Rothaermel, G. (2014). Apple in 2013 how to sustain a competitive advantage.

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