Apple Inc.'s Competitive Advantage and Differentiation Strategy

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Apple’s product line extends from iPhone to iPod, from softwares to customer aid programs, and all are directed to seek the maximum customer value for maximum competitive advantage. This report focuses on the case study of Apple Inc. evaluating the importance of competitive advantage, the means of achieving them, the generic strategy used by Apple and the implementation, advantages and limitations of these strategies. In the end, we have also elaborated the recommendations to these limitations.

Apple Inc. is the name of a multinational company, that makes personal computers, consumer electronics, computer software, servers and is a vast distributor of media content.

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Apple has gone far from being just a company. It has become a company that specializes in almost all computer products all the way from 1976 (Dpnick330. wikidot. com, 2008). Apple found its existence in the year 1976 when Steve Jobs and Steve Woznaik released the Apple I in California (Nostoptechnology. com, 2014). Since then apple has been flourishing and providing its market with the products of innovation.

The creation of the iPhone gave a competitive edge to the company, released in 2001. The very first computer with GUI (Graphical User Interface) was Apple Lisa which was launched by Apple in 1984 (Bellis, 2013). The company with the help of its founder Steve Jobs realized the key to success was to excel in softwares and provide innovation by all means. Jobs, with the help of Wozniak, wanted to create a friendly desktop which would enable the users to use computers not as a hobby, at its very start (Lu? sted, 2012).

Apple has been extending its chain of products and now offers longer, broader and bigger Book of Apple Hacks with tactics and tricks to get the most out of iPod, iPhone and Apple Tv (Seibold, 2008). As Jobs took care of the finances, Wozniak was taking care of improving the functionality of the company’s products from the very start. (Linzmayer and Linzmayer, 2004) Objectives: Objectives are the expected outcomes, the report will accomplish. They should be SMART (specific, measurable, attainable, realistic and timely), corporate, functional, systematic, operational, hierarchical, quantitative, realistic and consistent.

The report will encompass the following objectives:

The competitive strategy used by Apple Inc.
The measures taken to implement this strategy.
Examples of using these strategies for giving a competitive edge.
Advantages of this strategy by evaluation.
Limitations of this strategy by evaluation.
Recommendations to improve and enhance the competitive position of Apple Inc.

Main Findings: Competitive Advantage: Competitive advantage is the means by which a company can perform better than its competitors and gain higher profits.

The ability to create more economic value than competitors is a company’s competitive advantage. Competitive advantage for any company is accomplished when the company creates superior value for its customers in comparison to its customers (Porter, 1998). One of the hottest trends in the business today is analyzing the best methods of companies to enhance their performance (Boxwell, 1994). When enhancing the company’s performance, innovation must be a main feature and the company should introduce new means of attracting the customers. When the customers are attracted, profit is gained which attracts customers and limits competitors.

Competitive advantage is always temporary because the competitors often offer something new/better or imitate the offering. When the firm’s offering is average, customers don’t prefer it. This limits the cost advantage of the company. Sometimes the competitive advantage doesn’t come in handy especially when the offerings made by the firms are not preferable, are outdated, costly or have a negative image in the market. There are two measures to evaluate competitive advantage: the first is accounting measures which include advantage, parity and disadvantage ; the other is economic measures including above normal, normal and below normal.

In order to achieve sustainable competitive advantage the firm should make offerings which cannot be imitated, should be focusing on customer benefits, and should be sustainable against time, competition and environmental changes. Business Level Strategy: The ability of a company to evaluate systematic environmental changes and its competitors impact of change for enhancing the performance of a company is known as the business or corporate level strategy of that company (Furrer, 2011). Business Level options focus on firms operating as individuals.

Corporate Level options concentrate on options available where a firm diversification and different markets, each with its own strategy, business team and profit centre. A corporate level adds up the corporate more and is more than the sum of its parts (Business Community, 2012). Strategic Clock: Business level strategy uses a strategic clock which aims at gaining the maximum competitive advantage on the basis of perception of money from prices.

The clock represents different positions referring to the different customer requirements. It helps companies understand the changing trends of the market and competitors strategies to enhance the performance. There are four strategies under this subject and they are:

No Frills Strategy: low priced offering low benefits includingcommodity markets, Price-sensitive customers, High power, low switching costs among buyers and Opportunity to avoid major competitors.
Low-Price Strategy: offering lower prices than competitors. This includes, Margin reductions and Inability to reinvest.
Hybrid Strategy: seeks at achieving differentiation and low price strategies together.
Differentiation Strategy: Seeks at providing the maximum quality with no cost considerations and maximum focus on the value. Apple Inc. uses this strategy to gain the maximum competitive advantage. Other strategies are failures, strategies that include increasing price without the product benefits, reduction in product benefits either by increasing prices or maintaining price-loss market share. Generic Strategies: What exactly is a strategy? Strategy is the direction implemented by the company in order to achieve its long term objectives and gain competitive advantage (Johnson and Scholes et al.

There is a direct relationship with strategy is with objectives and tactics. Objectives are the points a company needs to achieve and tactics are the methods of how they will be achieved with the aid of strategies. Strategic choices depend on basis of strategies, strategic directions and finally methods of implementing them. A competitive strategy is the systematic search of competitive advantage of the company through its strategic means (Eldring, 2009). Thinking critically, a competitor is the only action a company has as a way to success (Kossowski, 2007).

In the 1980s, Professor Michael Porter argued that there were only four fundamental strategic options the companies usually use and are called as Porter’s Generic Strategy Options. He identified four primary principles as:

Cost leadership.
Differentiation.
Focus cost leadership.
Focus differentiation.

Apple’s Mission statement: A mission statement of a firm is the goals and objectives confined in a statement which a firm expects to accomplish in a long period of time and thus a broader way.

Apple’s mission statement, according to the year 2013, is focused on making the best computers in the world along with their other products which included MAC, OS X, iLife, iWork and professional softwares (Strategic Management Insight, 2013). Apple leads the digital revolution for giving a new innovative idea to the phones of today along with the music industry through iTunes and iPods. Apple’s Strategy: Apple uses differentiation strategy rather than cost leadership strategy because for apple, it is not about making the most out of its products, but it’s about making the best out of its products (Riley, 2013).

Apple’s differentiation strategy is a part of Porter’s generic strategy. This kind of strategy offers something that is innovative and new in the market and can be both service and the product itself. Innovations from competitors are striving to defect Apple’s ecosystem, but Apple is giving them a tough competition (Canada, 2012). It is differentiated when it makes and offers more benefits than the core products as an augmented product in a form of customer service, customer support, etc. This strategy offers premium money and focuses on increasing the quality of the product or a service.

Generic differentiation occurs when the quality of the products offered by the company are above the expectations of the customers. Such strategies imply to focus on increasing the price of the products compared to the competitors thereby increasing the competitive advantage. Apple uses its differentiation strategy through the following ways.

Service: Service must become an efficient means of achieving as a competitive weapon and should not become a damage control function in order to enhance performance with customers (Frei and Morriss, 2012).

Apple exceeds the quality of its services by providing customer support through their outlets and on the web. Employees at Apple are told not to sell, but to help customers solve their problems. That is the reason the number of visits to apple sites and outlets are more than that of Walt Disney (Hanselman, 2011). It made a new benchmark for providing ‘unmatched services’ which has made its own customers. The Apple company has scored the highest in PC makers’ customer service survey (Secrets of Apple’s customer success, 2014).

Brand: Brand is a type of a product manufactured under a product name (Ibsen, 2007). Apple finds itself at the peaks of the most valuable brands as its competition in the world (Cole, 2013). The brand has extensively increased the bar by introducing innovation again and again in the extension of its product line over the decades (Badenhausen, 2013). As stated in Apple's Most Important Branding Lesson For Marketers (Mourdoukoutas, 2013) Out of all the lessons marketers can learn from apple one has an ultimate significance that is branding begins on the demand side.

Apple has made its brand image by delivering quality products and receiving customer loyalty in exchange. Apple has raised the bar for its brand, using innovation as a key. For examples the use of Walkmans and music players were terminated when a small and confined iPod was introduced in the market by Apple. Similarly the use of computers was more comforting when technologies like laptops, Macbooks, notebooks etc. replaced desktops. Apple also provided its customers with great technologies in phones and softwares like Microsoft.

In short, Apple provides more than the needs and demands of the customers by giving them value and satisfaction and always raising their own standards.

Marketing techniques: As stated in Apple’s iPhone Marketing Strategy Exposed, (Mckormack, 2013), Apple has no marketing budget and doesn’t advertise its products anywhere, but uses exclusivity technique. Apple used this technique by not only offering special offers on its products, but also made the whole product line exclusive. For example, iPhone product range is made exclusively.

Limiting the availability of the products attracts most of the apple customers. This conformed to the unique nature of the products of Apple, which made its accessibility and demand more. Apple marketing strategy comes under the famous tag line ‘Sell on value, not price’ as the company aims at seeking the customer value as a priority. Apple turns something ordinary into innovative, justify its prices, ignores its critics, extends the experience, easy understanding with the customers, builds the tribe and makes a name.

In January 1997 Apple incorporated a three point marketing philosophy which was based upon customer loyalty (Moorman, 2012). Apple has been following this philosophy since thirty five years and this is the reason because it was voted overall winner of the 2012 of CMO Survey Award for Marketing Excellence (Cmosurvey. org, 2014).

Online Business: Apple also deals in making e business with its customers. It sells, assists and aware its customers through online websites. Customers from different locations and areas can access the sites for any related problems or information on the products and services of apple.

It makes free shipping orders using FOB methods. The App store did $10 billion sales and $1 billion sales in December out of which 65% came from the online business yet alone (Yarow, 2013). Advantages of differentiation strategy: Following are the benefits of the strategy. •Customer Loyalty: Apple has the most customer loyalty compared to its competitors. An iPhone customer is hard to debate with an android customer. Apple customers forever stay with its brand and never turn to its customers because of the value it provides to its customers.

The extensive customer loyalty of Apple lies in its simplicity to use and reliability concerns (Rogowsky, 2013). •An increasing competitive advantage: Being unique and giving extraordinary services makes Apple a leading brand with an increasing competitive advantage. The prices of Apple products are always high, but the quality and the value justify them all. Apple focuses on the value not the price or revenue. Putting every factor together Apple has a differential advantage that is challenging to put forth for any of its competitors (Magee, 2011).

Limitations of the differentiation Strategy: Following are the limitations of Apple’s strategy:

Difficulty in managing the strategy: It is comparatively hard and difficult to maintain the differentiation strategy as many factors need to be considered in evaluating the value.
Higher costs: Apple’s products are always of high costs due to which many of its customers are drifting away. Some of the loyal Apple shareholders believe that Apple is making a huge mistake by blindly focusing on short term profits in the mobile industry and denying the current realities (Blodget, 2013a).

Apple is being defeated by Samsung, because of its high prices, which is the leading smart phone company in the market (Kovach, 2014). Recommendations: Following are the recommendations for apple.

Introduce reasonable costs and focus b and c type markets.
Introduce more innovation in the differentiation strategy.
Maintain its strong brand by also providing the advertisements.
Keep awareness about its competitors and other external factors.

Conclusion: The report envisaged the ways and the importance of competitive advantage prevailing in Apple Inc. It also elaborated and evaluated the generic strategy used by the company that is Differentiation strategy. This report elaborated the means and the implemented of the strategy under focus along with its advantages and limitations. Furthermore, it contributed in explaining the recommendations.