Strategic Analysis of Apple's Innovation and Competitive Advantage

This report provides a comprehensive analysis of Apple's innovation strategy, focusing on its external and internal environments, competitive advantages, and recommendations for future development. The introduction defines strategy and innovation, emphasizing the importance of continuous change and creativity for sustained competitive advantage in the market, particularly in the context of Apple's technological advancements. The report examines the firm's external environment, including political, economic, social, technological, environmental, and legal factors. It then delves into Apple's internal environment, utilizing SWOT analysis to identify strengths, weaknesses, opportunities, and threats. The core of the report addresses how innovation can be better used as a competitive advantage, detailing Apple's current approach to innovation, vision, objectives, and core competencies. The analysis includes Porter's Five Forces model and RBV analysis. The report concludes with recommendations for adjusting or developing new strategies to leverage innovation opportunities and summarizes the implications for stakeholders. The report aims to provide insights into how Apple can maintain its competitive edge through strategic innovation.

Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
1.Firm's external environment................................................................................................1
2. Internal environment of the firm........................................................................................4
INNOVATION CAN BE BETTER USED AS A COMPETITIVE ADVANTAGE.....................5
3. Business currently addresses innovation strategy..............................................................8
Porter five force model.........................................................................................................10
RBV analysis........................................................................................................................10
Vision.............................................................................................................................................11
Objectives......................................................................................................................................11
Core competencies................................................................................................................11
Current approach to innovation ...........................................................................................11
4. Recommendation that would allow firm to adjust or invent or develop a new strategy that
takes advantage of innovation opportunities........................................................................11
5. Summary on the implications for stakeholders based on analysis and recommendations13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

Illustration Index
Illustration 1: Apple's supply chain management............................................................................7

INTRODUCTION
Strategy is termed as the plan or action designed in regard to attain long term or overall
objectives. However, it is the art of planning and directing the overall operations so that success
can be attained within firm. Formulating and implementing strategy involves assessing the
environment or situation and make diagnosis so that strategic thinking can be attained in order to
achieve the goals (Business strategy. 2014). Moreover, it is significant for firm to properly
formulate a set of action that helps in determining the dimensions of tactics. However, it is
essential that business need to focus upon attaining the future possible results and thus determine
the structure of strategy.
Report focuses upon identifying innovative advantage that helps in bringing continuous
change so that creativity can be introduced in market. Innovation is considered as the better
source of sustained competitive advantage in market (Faulkner, 2002). However, new
technologies and new ways accomplishing things helps firm to produce the products or services
effectively. Present study focuses upon providing information regarding developing the strategy
and different factors in relation to improve the performance in market and gain competitive edge
over rivals in reference to Apple. Thus, management of firm focuses upon implementation better
plans and strategies for sustaining in the market that is useful for Apple as it is one of the fastest
growing technological firm.
1.Firm's external environment
As per Ferrell and Hartline (2012), business that does not innovate inevitably declines or
affects its business operations. Thus, in such period of rapid development it is essential for
businesses to adopt innovation so that they can take close look at the values of firm and thus
become competitive and committed towards business functions. However, in such a competitive
environment, businesses are trying to stay one step forward and anticipate the market
requirements that needs even before they emerge. Innovation is such a process that requires
crucial input and commitment from the firm (Ferrell and Hartline, 2012). It helps in translating
that starts off as a creative idea and help people to use the innovation in order to improve their
standard of living. Research and Development team of the firm needs to work harder and thus
develops a innovation strategy in order to identify continuous improvement within firm. It can
also be assessed that firm needs to assess their market situation while designing a strategy and
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implement it in their concerned area so that best products can be produced effectively and
efficiently. It has been assessed that managerial level of firm is highly focused upon creating a
strategy and thus implementing it within firm in order to improve innovation and attain
competitive advantage. In regard to attain objectives, it is essential for firm to identify the list of
external factors and its impact upon business so that proper action plan can be formulated
(Fisher, 2009).
Freiling and et.al., (2008), stated that different factors that enables firm in addressing the
market requirements, present resources, innovation and techniques etc. so that it helps in
developing strategies to attain innovation. Similarly, it can be assessed that Apple is also
required to formulate a specific and clear strategy that helps in providing benefits so that desired
results can be attained in the form of success (Freiling and et.al., 2008). Management of Apple
focuses upon adopting innovative techniques which results in attaining technological
advancement of products or services that involves Iphones, laptops, personal computer, smart
watches and other electronic gadgets. Also, it is crucial for firm to deliver better, creative and
developed innovations within their products or services. Thus, Research and Development
department of Apple needs to focus upon identifying the number of external factors that are
responsible to influence the market and other features of firm (Omar and Sawy, 2013). In regard
to this, following are the factors that are present in the market and it is as follows- Political factors- Apple is one of the highest US technological firm that has earned huge
amount of profits and possess higher corporate taxation in US to make the political issue
of inequality in income. However, political situation in China obstructs the
manufacturing cost and thus it affects the Chinese imports in US to boost the
manufacturing of products in China (Rossi, 2010). Apple faces the most crucial political
external factors which improves the free trade policies and stable and consistent politics
in the developed countries. Additionally, free trade policies can enhance the distribution
of its products in different countries around the globe. It helps political opportunities to
assists firm to improve its working capacity and enhance the performance in the market
(Baldwin and Scott, 2013). Economic factors- It can be stated that there is consistent enhance in the labour costs in
China that has reduced the cost advantage upon the Apple products. However, there is
increase in the income of the middle class people and thus it reduced the potential market
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to get high class customers who purchase the Apple products. Apart from this, company
getting the benefits on the import of the products which is the big economic factor and
quick growth within the advanced countries to attain opportunity (Chiware, 2010). As
developed countries possess stable economy, Apple tends to introduce their latest
products and gain high profits. It is essential for firm to focus upon high economic
growth rate of different Asian countries that helps them to enhance revenue through sales
in the foreign market. Hence, cited firm needs to pay attention upon the effectiveness of
firm and thus develop their products in order to compete within international market (De
Giovanni, 2012). Social factors- It assesses that there are great social effects in firm and thus they need to
assess the consumer behaviours and expectations. It is essential for people to know that
the social or social cultural factors possess great importance in the firm. Management of
Apple attracts upon increasing the number of clients who uses innovative gadgets or
mobile phones (Hagel and Brown, 2005). Hence, firm uses such opportunity in order to
introduce Ipad, Iphone and thus usage of such devices is increasing so that it does not
affect the environment. Technological factors- It is another factor that provides opportunities to utilise the latest
technological advancements. In the current era, of technological advancement changes
can affect the conditions of firm. Apple uses effective technological factors such as cloud
computing trend, integration of new technology and growing applications market.
However, with the growing popularity of cloud computing and thus it provides
opportunity to firm in order to improve the performance of firm in market (Haley and
Haley, 2006). Environmental factors- Apple undertakes different ecological and environmental factors
that helps in providing opportunities to show the ecological concern and thus impacts the
performance of firm. The environmental factors are considered as crucial that tends to
produce efficient product in market (Hansen and Smith, 2006). For instance, Apple has
started using recycling process in order to create sustainability in the business and attain
opportunity to achieve results. Using recyclable materials helps Apple to improve the
perception of customers through their products and thus improve the practice of
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employment with the help of supply chain so that best results can be attained
(Massingham, 2004).
 Legal factors- It provides threat to the firm and thus impacts of the firm by adopting
different laws and regulations. One of the main legal factors are involved in relation to
enhance privacy regulation because of telecommunication. However, Apple faces certain
privacy issues in relation to digital technology and more privacy legislation affects the
business purposes (Nieuwenhuizen and Koch, 2007). It assesses that business creates new
challenges for the development of products and thus enhance the characteristics of
products in order to protect the privacy of individual. Different government regulations
are taking serious step in order to impose strict telecommunication regulation that limits
the usability of Apple products as it focuses upon protecting the privacy of customers
(Pehrsson, 2007).
2. Internal environment of the firm
In the present era of globalisation, firm faces indirect impact upon internal factors.
Therefore, it is essential for firm to identify the factors so that they can lead to generate high
profits. It helps firm to generate high amount of profits and thus implement the strategy in order
to obtain desired objectives. Roumboutsos and Chiara (2010), stated that internal factors helps
firm to follow appropriate techniques such as SWO, Value Chain and Stakeholder analysis etc. It
can be assessed that such factors are beneficial for business in order to assess the ability to
compel with firm that offers similar products. In regard to this, Apple needs to carry out SWOT
analysis that is suitable to identify the strengths, weaknesses, opportunities and threats of firm.
Hence, it would help management of Apple to define the set abilities in order to accomplish the
desired targets. Moreover, it is essential for cited firm to effectively regulate and control the
analysis in order to obtain desired results (Roumboutsos and Chiara, 2010). Following is the
SWOT analysis that helps in impacting upon the business strategy so that firm can obtain high
market share-
Strengths
 Apple is the market leader in
technology and thus produces a range
of products or services.
 Company owns a strong brand image in
Weaknesses
 Apple products are generally costlier as
compared to rivals.
 Sometimes, Iphone carries technical
issues in relation to product
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market (Hooper and Greenall, 2005).
 High financial strengths among
competitors.
 High profit margin.
functionality (Langenberg, 2007).
 Incompatibility of Apple products and
services as compared to other goods.
 It has very narrow product range (Omar
and Sawy, 2013).
 It generally targets high end customers.
 There is no major enhancements in the
latest introduced product versions.
Opportunities
 Apple needs to invest huge amount in
research and development so that
complete new range of products can be
developed (Grant, 2015).
 Diversifying the product range.
 Forming strategic partnerships.
 Enhancing compatibility of products or
services (Slack, 2015).
Threats
 Company faces issues due to loss of its
CEO Steve Jobs.
 There is intense competition from
China and India (Haley and Haley,
2013).
 Issues arise within intellectual property
rights (Peng, Wang and Jiang, 2008).
 Apple reputation has been damaged
because of tax scandal.
 Also, enhancing in manufacturing costs
affects the firm's operations
(Montgomery, 2011).
INNOVATION CAN BE BETTER USED AS A COMPETITIVE
ADVANTAGE
Apple aims to bring innovation within firm by introducing effective technological
gadgets such as new smart phone device that attracts clients in order to enhance the market share.
It is the best way through which firm can gain competitive edge over rivals and enhance its brand
image in the market. Company also aims to introduce such new technology in market so that
they can enhance the sales and profitability of firm. Apple is able to overcome problems and
issues that helps firm in addressing innovative solutions in the form of strategy so that success
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can be attained. It also assists firm to develop stronger brand image in market. Apple also
possess the ability in order to balance the demands of innovation and maximize the shareholder
value so that high profits can be attained. It also improves the efficiency of firm and gain
opportunity so that innovation can be attained in order to sustain firm for long term in market.
Implementing different strategies helps firm to obtain competitive edge over rivals and thus
attain desired results. In regard to this, cited firm helps in maintaining their hold upon giving
similar types of services in future course of time.
 Novelty in product or service- It can be assessed that Apple offers such innovative
product or service which cannot be offered by any other competitor. Thus, it is essential
for firm to introduce unique products or services in market so that set targets can be
attained. Hence, Apple focuses upon product unique and original products in order to
enhance the customer base.
 Complexity- Apple offers products that are not produced by any other firm. It means that
firm has mastery in that and it is difficult for other businesses to copy the same product.
 Legal protection of intellectual property- Here, Apple management aims to own rights
and licenses of their products or applications so that it cannot be used by any other
competitor.
 Timing- Apple is required to develop its competitive edge in market by introducing
innovative products timely so that firm can enhance the market share as well as product
range.
In addition to this, Apple could also carry out Value Chain analysis in order to identify
the factors required for implementing the innovative strategy within firm. Such framework helps
in assessing the business operations and thus create value and competitive edge to the firm
(Eshun, 2009). In regard to this Apple needs to develop primary activities and link the same with
secondary activities which are productive and profitable for implementing the strategy-
 Inbound logistics- Apple operates with various number of suppliers around the world
and thus helps in maintaining a highly effective supply chain management. Business
purchases commitments that helps in typically covering the requirements for a range of
150 days. Top management of firm focuses upon creating strategy in order to get the
svantage just disuppliers accomplish their work and attain success (Richards, 2014).
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Illustration 1: Apple's supply chain management
(Source: Fisher, 2009)
 Operations- Apple carries out the operations of firm in different market segments i.e.
Americas, Europe, Greater China, Japan etc. Cited firm carries out its operations in
different countries and employ several numbers of employee. Further, majority of Apple's
hardware products are currently manufactured through outsourcing partners who are
located primarily in Asia. Firm focuses upon manufacturing and thus outsource different
partners to operate the business successfully (Faulkner, 2002).
 Outbound logistics- Cited firm net sales through its direct and indirect distribution
channel that is accounted for 28% and 72% of total net sales (Ferrell and Hartline, 2012).
Also, firm strives in order to minimize the inventory because of cost considerations.
Apple owns a $2.1 billion in the year 2014 which is increasing in coming years.
 Marketing sales- Business focuses upon selling its products through 4 different channels
such as advertising, public relations, events and direct selling. Company also spends
around USD 1.1 billion budget to adopt marketing communication mix and enhance the
customer base (Omar and Sawy, 2013).
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 Service- Firm aims to improve its exceptional quality of customer service during 3
different stages such as pre=purchase, purchase and post-purchase. Apple helps in
maintaining experience centres in different cities around the globe and thus convince
quality in order to improve the services and products (Rossi, 2010). Apple aims to
upgrade their phone to new models with innovative versions so that sales can be
improved.
3. Business currently addresses innovation strategy
Through carrying out internal and external analysis of Apple it helps in improving the
overall productivity of firm in market. With the help of such analysis, it can be assessed that
Apple is able to overcome problems and issues that helps firm in addressing innovative solutions
in the form of strategy so that success can be attained. It also assists firm to develop stronger
brand image in market (Baldwin and Scott, 2013). The analysis helps environment in
contributing that Apple faces threats from its competitors such as Samsung, HTC, LG, Nokia etc.
Hence, firm needs to offer the innovative products to consumers in order to launch new products
or services with upgraded version and thus attain competitive edge over other businesses.
Apart from this, Apple also possess the ability in order to balance the demands of
innovation and maximize the shareholder value so that high profits can be attained. It also
improves the efficiency of firm and gain opportunity so that innovation can be attained in order
to sustain firm for long term in market. Implementing different strategies helps firm to obtain
competitive edge over rivals and thus attain desired results. In regard to this, cited firm helps in
maintaining their hold upon giving similar types of services in future course of time (De
Giovanni, 2012). It can be assessed through evaluating following information which is as
follows-
 Apple possesses strong relationship with different governments in which they have
captured the market share. Hence, firm follows different rules and regulations that are
defined by the political parties and other regulatory authorities that are structured for
firms such as Apple (Chiware, 2010).
 Economic conditions of Apple is quite strong and thus offer budgeted price of electronic
gadgets so that large number of customers can be attracted. It also helps in rising the
standards of individual and thus promote the business to attain high revenues.
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 Apple operates in different market segments and possess wide range of suppliers,
manufacturers and assemblers who are from different countries (Hansen and Smith,
2006). Hence, it helps firm to develop a effective brand image in market so that overall
profits can be improved.
 It is essential for firm to possess strong brand image and enhance reputation in market so
that it helps management of Apple to become more competitive and overcome rivals. It
assists in supporting the firm and attract wide range of people and maintain the firm in
market for long term (Nieuwenhuizen and Koch, 2007).
 Furthermore, Apple fails to focus upon their efforts upon particular market segment that
influences the marketing approaches and draws attention of individual upon firms
products. It possesses positive image and thus attracts buyers from different countries as
it helps in satisfying the needs of individual (Roumboutsos and Chiara, 2010).
 In addition to this, Apple also generates products in different markets through bringing
innovation in their set of products and services that assists them to achieve high profits.
Firm also possess the capability of delivering high value of innovation in order to deliver
quality products or services to end users. Hence, Apple owns a high brand image and
thus maintain strong relation with customers to enhance sales and profitability (Hooper
and Greenall, 2005).
 Apple faces different external threats from competitors and thus it is essential for
business to identify such threats and thus needs to overcome it effectively in order to
enhance the brand image of firm in market and bring desired results.
 Cited firm also possess different opportunities in the market which needs to be analysed
by firm so that positive brand image can be created in order to improve the sales and
profitability of firm in market.
 Apple needs to focus upon implementing innovative advancements and helps in
improving their current range of products so that customer requirements can be fulfilled.
It assists business to improve the quality of technology and enhance the gadgets so that
satisfaction can be attained among consumers (Omar and Sawy, 2013).
 It is essential for Apple to be strong over their commitments and thus bring new
advancement in the product by introducing the latest versions and thus attract people to
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