Apple's Business Strategy for iPhones

This assignment examines Apple's business strategy for selling iPhones, focusing on its effectiveness in delivering sustainable competitive advantages. It analyzes the company's strategies of innovation and technological advancements as key drivers of success against competitors like Samsung, Motorola, and Nokia. The analysis also considers Apple's market penetration efforts in Asia and their contribution to overall value creation.

Running head: APPLE CASE STUDY
Apple Case Study
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1.
Industry analysis of smart-phone industry
The smart-phone industry is one of the budding industries in the modern world. The
advent of smart phones replaced the laptops as well as the computers and brought technology on
the palm top of the people, at an affordable price. The smart phone industry is a highly
competitive one. This is because, with the increase in the use of the smart phones, thousands of
companies all around the world started developing smart phones (Boone & Kurtz, 2013). The
competition in the quality, along with the company providing the lowest price of the smart
phones flooded the markets all over the world. Apple is one of the key players in the smart phone
industry. The smart phones of Apple use the Mac operating system (Apple, 2017). They have
joined the revolution of the smart phone industry with their exclusive features and launched the
iPhone (Pitelis & Teece, 2015). Most of the smart phones that have flooded the industry include
the use of Android as the operating system (Danaher, Sajtos & Danaher, 2016). However, some
of the phones use Windows by Microsoft as the operating system. Apple created a revolution
with the use of the Macintosh Operating system in the smart phones that they launched.
IBM , launched the first smart phone in 1995, named the IBM Simon. In the year 1996,
Nokia launched Nokia 9000. This was the first attempt of Nokia to launch the smart phones. In
the year 2000, Ericsson released their first smart phone (Danaher, Sajtos & Danaher, 2016).
After these first attempts, the smart phone industry started flooding with the smart phones of
various companies. In 2007, Apple launched the iPhone with iOS, which marked the introduction
of an iPhone (Apple, 2017). Thus, the smart phone industry is an ever-growing industry and is a
strong platform for business (Boone & Kurtz, 2013).

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Effectiveness of the neutralization of the threats
With the increase in the number of competitors in the smart phone industry, the iPhones
and well as Apple faced various threats from the other smart phone companies. After various
threats faced by Apple from the PC industry, in 2007, the attempt of regaining the leadership,
position was by the launch of iPhones. Apple and it’s the then CEO Steve Jobs expected that the
launch of the iPhone would be a successful attempt to ensure a secure position in the business of
smart phones, as well as technology (Boone & Kurtz, 2013). The company and its employees
had invested two and a half years, under high secrecy to develop the iPhone. The estimated
development cost was around $150 million (Apple, 2017). Apple’s entry in the smart phone
industry was welcomed with major threats and high competition from the various players namely
Nokia, Samsung and Motorola (Danaher, Sajtos & Danaher, 2016). These three companies had
been holding 60% of the market share. Moreover, the products of Apple had short product life
cycle, with the use of sophisticated technology. However, Apple had very little experience in the
use of such technologies (Pitelis & Teece, 2015). Moreover, the smart phones of Apple also
faced strong resistance from the cellular carriers. Thus, the entrance of Apple in the smart phone
industry was not welcomed warmly.
However, Apple has been able to neutralize the threats as well as the capitalization on the
opportunities that were posed by the various forces of the smart-phone industry. However,
iPhone changed the rules of the industry. A revolution was brought it, with the introduction of
the smart phone by Apple (Boone & Kurtz, 2013). The phone could be operated using
commands and typing was done without physical keyboards. The entire iPhone operated on a
specially adapted version of the OS of Apple, known as the iOS (Apple, 2017). The company
initially gave the iPhone to only one network named AT&T (Danaher, Sajtos & Danaher, 2016).

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The network provider agreed to an unprecedented revenue sharing with Apple, thus giving Apple
the sole control over the distribution and pricing (Pearlson, Saunders & Galletta, 2016).
The first generation of the iPhone itself created a revolution, and it sold over 6 million
units over five quarters (Danaher, Sajtos & Danaher, 2016). This established Apple as the leaders
in the smart phone industry. with this success, the company upgraded their systems to be thinner,
faster as well as incorporating new features, to make it even better. In the next few years, Apple
upgraded and released iPhone every 12 to 15 months, thus expanding gradually (Apple, 2017).
The release of iPhone 6 and 6 plus had the screen of 4.7 inches and 5.5 inches respectively and
gave a tough competition to the best selling android smart phones in the market (Boone & Kurtz,
2013). Thus, the threat is neutralized and Apple overcomes the capitalization of the opportunities
successfully.
2.
Business strategy pursued by Apple
One of the key drivers behind the success of the iPhone is the launch of the Apple App
Store. The strategy that Apple took in order to enhance its iPhone business includes the extensive
use of innovation, incorporation of the latest technology, along with ensuring a closed ecology
being maintained for production and distribution of the products of Apple (Danaher, Sajtos &
Danaher, 2016).
Innovation
One of the most essential business strategies that are taken up by Apple to ensure the
success in the iPhone market includes the extensive use of innovation (Boone & Kurtz, 2013).

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The iPhones created a revolution in the smart phone market, and unlike the Android based smart
phones, iPhone developed its own OS, software and hardware on their own (Apple, 2017). The
use of iOS, for the iPhones itself was an innovation, and different from that of the conventional
smart phones.
Use of latest technology
The technological advancements in the iPhones on every release, along with the wide use
of the smart and fast processors gave the customers the exact combination of technology and
speed, as they wanted (Apple, 2017). Moreover, the technological quotient of Apple is high and
ensures the satisfaction of the users. The technology platform that is offered by Apple is unique
and unlike Android is not used by all smart phone companies (Danaher, Sajtos & Danaher,
2016). The iOS has been developed solely for the use in the smart phones and hence is much
more efficient.
Figure 1: Use of the various platforms of Smart phones

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(Source: Danaher, Sajtos & Danaher, 2016 )
Figure 2: Loyalty of the Smart phone users
(Source: Heracleous, 2013)
Restriction in production and distribution
Apple ensures that only licensed distributors are selected for the distribution of the
products. Moreover, the operating system platform that is used, along with the software and the
hardware are al manufactured by Apple and its authorised companies (Heracleous, 2013). Thus,
in the closed ecosystem, the confidentiality of the innovation and use of technology is
maintained.
Brand appeal

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The iPhone owners have been seen to be loyal customers, unlike that of the other brands.
Thus, the brand appeal of iPhones attracts the customers and ensures their retention. Thus, the
brand appeal is a major factor that attracts thousands of customers and retains them, thus
ensuring customer retention. Owing an iPhone is often considered as a privileged for the
customers, and thus once an iPhone users, tends to remain one. Thus, the brand appeal has a key
role to play in the business of Apple.
Scope of the pursued business strategy
The business strategy of Apple that they pursued for their iPhone, has a wide scope.
Since the business strategy was based on innovation and extensive use of technology, hence the
scope increases with the increase in innovation and increase in the use of technology
(Heracleous, 2013). With further research and development, the company is able to enhance its
scope of innovation. With every release, Apple enhanced the features of iPhone, thus increasing
the scope of business enhancement (Apple, 2017). Moreover, the business strategy of ensuring a
closed ecosystem also facilitates the copyright protection and prevents forgery (Khan, Alam &
Alam, 2015). The use of pirated software in the iPhones is restricted since all supporting
software for iPhones are made by Apple itself. Thus, Apple, ensuring that it will provide all
supporting software, easily retains the iPhone users.
Value chain activities to achieve competitive advantages
The value chain activities identify the business activities that need to be taken up by any
company, in order to create value and help the company to gain competitive advantages.

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Figure 3: Value chain of Apple
(Source: Ford, 2016)
The inbound logistics of Apple ensures that the products are delivered on time. The
outbound logistics involve warehousing and the distribution of the assembled iPhones and iPads
(Heracleous, 2013). The operations of Apple include sourcing, manufacturing, warehousing,
distribution and return (Hagiu, 2014). The sourcing is done in places such as United States,
China, Europe and other Asian countries (Boone & Kurtz, 2013). All these are assembled in
China, and send to the Intermediate Warehouse. From the warehouse, the distribution of the
products are done to the online stores, retail stores, direct sales forces, as well as wholesalers,
retailers and network carriers (Ford, 2016).
Apple sells its products through Apple retail stores, online stores, direct sales forces,
authorised wholesalers, authorised retailers and value added resellers (Yoffie & Cusumano,
2015). The advertising budget of Apple has increased consistently, with the takeover of Tim

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Cook as the CEO in 2011 (Apple, 2017). The marketing budget reached a record of 1.8 billion
USD in 2015. Thus, the value chain adds competitive advantages to the company, and helps it to
be established as the leader in the market of smart phones (Laudon & Laudon, 2016). The value
chain is effective in ensuring the successful working of Apple, and helps in establishing a
leadership position in the market, among high competition.
Tailoring of the activities to deliver the competitive advantages
The value chain activities are tailored in order to deliver the competitive advantages.
116,000 full time employees, according to the record in 2016, conduct the inbound logistics of
Apple (Danaher, Sajtos & Danaher, 2016). The outsourcing of the manufacturing of the various
parts to various locations with low cost of the resources is the source of value for the operations
of Apple. This has been tailored in order to meet the requirements of Apple (Apple, 2017). Only
specific models, with high technology are manufactured in USA and Ireland. The majority of the
components of the products of Apple are outsourced to various locations of Asia, where the
company has their manufacturing units (Grant, 2016). The e-commerce sales of the company are
given high priority. This indeed adds value to the company and Apple has succeeded in
becoming the third largest retailer of the world after Amazon and Wal-Mart (Hagiu, 2014). The
attempts of market penetration in the Asian market, is also an additional source of adding value
to the company. All these activities ensure that Apple gains competitive advantages, over the
other competitors.
Effectiveness of the business strategy to deliver a sustainable competitive advantage
The business strategy that has been chosen by Apple in order to sell the iPhones and
ensure business in the smart phones is effective in delivering sustainable competitive advantages

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(Grant, 2016). The innovation and the wide use of technology are the two most important and
effective business strategies that are used by Apple in order to ensure that the company gains
sustainable competitive advantages, over the smart phone competitors such as Samsung,
Motorola and Nokia (Boone & Kurtz, 2013). The innovations of the products of Apple are way
behind that of Nokia and Samsung. Moreover, the extensive use of high technology is also
effective in attracting the customers, as well as ensuring that Apple achieves competitive
advantages (Danaher, Sajtos & Danaher, 2016). The effectiveness of the competitive advantage
and success lies in the success and leadership that the company has gained. Thus, the chosen
business strategies of Apple for the iPhones are effective and helpful in gaining competitive
advantages and ensure successful delivery of the business.

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References
Apple. (2017). Apple . Retrieved 16 September 2017, from https://www.apple.com
Boone, L. E., & Kurtz, D. L. (2013). Contemporary marketing. Cengage learning.
Danaher, P. J., Sajtos, L., & Danaher, T. S. (2016). Does the reward match the effort for loyalty
program members?. Journal of Retailing and Consumer Services, 32, 23-31.
Ford, R. (2016). Smart Grid Edge Technologies Case Studies of Early Adopters.
Grant, R. M. (2016). Contemporary Strategy Analysis Text Only. John Wiley & Sons.
Hagiu, A. (2014). Strategic decisions for multisided platforms. MIT Sloan Management
Review, 55(2), 71.
Heracleous, L. (2013). Quantum strategy at Apple Inc. Organizational Dynamics, 42(2), 92-99.
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.
Laudon, K. C., & Laudon, J. P. (2016). Management information system. Pearson Education
India.
Pearlson, K. E., Saunders, C. S., & Galletta, D. F. (2016). Managing and Using Information
Systems, Binder Ready Version: A Strategic Approach. John Wiley & Sons.
Pitelis, C. N., & Teece, D. (2015). Dynamic capabilities, the multinational corporation, and
(capturing co-created value from) innovation.

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Yoffie, D. B., & Cusumano, M. A. (2015). Strategy Rules: Five Timeless Lessons from Bill
Gates, Andy Grove, and Steve Jobs. HarperBusiness.