Comprehensive Strategy Audit Report: Apple's Challenges and Growth

This strategy audit report identifies several critical strategic issues facing Apple Inc., including smartphone market saturation, over-reliance on the iPhone, low market penetration, barriers to disruptive innovation, improbable growth beyond the iPhone, a service business lacking scale, and talent attrition. To address these challenges, the report recommends managing the company's vision for business diversification, repositioning the business in the market, and fostering a culture of radical innovation to discover the next big thing. These strategic shifts may cause misalignments with the current product portfolio, structure, value chain, performance measures, and organizational culture. However, they promise benefits such as product and service diversification, revenue and profit growth, risk reduction, new revenue streams, enhanced competitive advantage, and faster innovation delivery. The report includes a table of contents, detailed analysis of strategic issues and recommendations, risk and benefit assessments, key measurement approaches, and action plans, all aimed at guiding Apple toward sustainable growth and market leadership. Desklib provides this solved assignment and many other resources to aid students in their studies.

Strategy Audit Report

Executive summery
In the current different strategic issues have been defied based on the previous business
internal and external analysis. those issues are Smart phone market saturation, Over
dependency on iphone market, low Market penetration, Barrier for disruptive or radical
innovation, Beyond iphone improbable growth, Service business lack the scale and volume of
business, Apple losing its talent base. Considering these issues some solutions has been
developed and those are managing the current vision of the company, repositioning the
business in the market, finding the next big thing to invest and continue its radical innovation
culture. These strategic changes are possible misalignment with respect to current product
portfolio, Structure, current Value chain activity, Performance measure and current
organisational culture and behaviour. But those strategic changes would bring diversified of
product and service portfolio along business diversification, growth in revenue and
profitability, reduction is business risk, opening of new source of revenue, developing better
competitive advantage, faster delivery of new innovations.

Table of Contents
Executive summery....................................................................................................................2
Strategic issue and recommendations........................................................................................4
Strategic issue.........................................................................................................................4
Recommendations................................................................................................................11
Risk and benefit....................................................................................................................13
Key measurement.................................................................................................................15
Action...................................................................................................................................16
Reference..................................................................................................................................18
Appendices...............................................................................................................................24

Strategic issue and recommendations
The extensive analysis of the business external environment, business internal environment,
business positioning, strategic scorecard analysis is done in the appendices section of this
report. That analysis has provided some important insight to the current report. From those
insights some important issue for the Apple Inc is identified in this current report (Ghemawat
et al., 2010). Those issues are analysed in details in the following section of this report to
provide some important recommendations for the company. Later part of this report would
try to identify the risk-benefit aspect of the new strategy, key approach of measurement of
those strategies and the action plan of those strategies.
Strategic issue
The strategic issues for Apple are as follows.
 Smart phone market saturation
 Over dependency on iphone market
 Low Market penetration
 Barrier for disruptive or radical innovation
 Beyond iphone improbable growth
 Service business lack the scale and volume of business
 Apple losing its talent base
These strategic issues of Apple Inc are identified from the earlier market environment and
business analysis provided in the appendices section. A details analysis of these issues is
provided below to understand the possible way out for these issues.
Smart phone market saturation
The market of the smart phone is now saturated state. The customers are no longer having
any excitement from the new release of iphone. The improvement and the increment in the
technological innovation are gradual and slow. There is no marked different in the new
releases of the smart phones. The growth in the global smart phone sale indicates the
saturated growth figure from the 2015 onwards though future project is looking to be
somewhat better (statista, 2018).

[Source: statista, 2018]
The trend is flowing for the sale of the Apple products. The price of the products over the
year has been increased by Apple to address the financial or the profitability question of the
business (Verbeke, 2013). Better margin and better profit level were able to satisfy the
shareholders but the unit sale of the product has seen a year on year basis drop from the 2012
onward as shown in the figure below (Sherman, 2018). This is a strong strategic problem for
the business as the high days of customer enthusiasm are not visible in the market.

[Source Sherman, 2018]
Over dependency on iphone market and growing beyond iphone
The figure above shows that Apple has higher dependency on the iphone market. Apple
before the iphone and after its high popularity has tried to introduce several products into the
market for example ipod or iwatch. But none of those product has been able to deliver the
result that iphone have provided to apple. Therefore the lack of diversity in the product
portfolio is going to be huge strategic problem for the business as the smart phone market
losing its shine (White & Bruton, 2010).
Another important thing is that the technology curve. The current top product line especially
the PC and iphone products have probably reached the mature technology level in their
technology growth curve (White & Bruton, 2010). Therefore deriving further value from this
product portfolio may not be an appropriate strategic move for the company; rather here
Apple must invest the potential section in the technology market strategically. On the other
hand iphone is the largest revenue generator for the Apple, as of 2018’s 3rd quarter Apple is
having close to 57% of its revenue from this source (statista, 2018). Therefore under this

context of slowdown in innovation and dependency on this product, Apple has to think
beyond iphone.
[Source: macro-ops, 2018]
Low Market penetration
The command over the market is going to be another strategic issue for the Apple. Apple
products are high differentiation focused strategy based products. Because of this reason the
products are high premium priced (Ghemawat et al., 2010). This aspect makes Apple the
most profitable business internationally but the lack of market penetration is the main cause
of concern for the business. The first figure below that Samsung has the large market share
whereas Apple and Huawai is trailing being. In recent time Huawai has occupied the second
spot in the market by moving Apple from that space (Choudhury, 2018). But the market
penetration of iphone can be understood from the market share of the smart phone operating
system (OS) market share. The next figure of OS market share shows that more than 85% of
the OS market share in the world is under Android whereas iOS just hold around 15% market
share (Richter, 2017). Therefore in the overall market of smart phone in the world iphone has

limited market presence. Under the slowing down of smart phone market this low market
penetration would be an important problem for the organisation strategically.
[Source: gs.statcounter, 2018]

[Source: Richter, 2017]
Barrier for disruptive or radical innovation
The disruptive innovation provides the new technological breakthrough for the existing
market whereas the radical innovation provides the new technology to cater to a new market.
Apple in their past operation was able to contribute to their growth through both type of
innovation process (Gunday et al., 2011). But recently the innovation process in apple made
only the incremental type of innovation. Some market analysis has stated in recent time that
the innovation plan undertaken by the new leadership in the organisation, are taking lot more
time and that is slowing down the pace of innovation (firstpost, 2018). Some of them also
pointed out that the vision is lacking in this important strategic part of the Apple’s business
(firstpost, 2018).

[Source: LOPEZ , 2015]
Service business lack the scale and volume of business
Apple in recent time has recognised the iphone’s strategic issue. Considering this the
company is trying to grow in other section of the market. In recent time the services sector of
the Apple’s business has shown the strong potential. For example in the last quarter of 2017
this segment has been able to grow by impressive 24% year on year basis but the business
volume is just $6.3bn (Green, 2017). In comparison to iphone market this revenue is too little
to find any comfort for the company. The volume of sales and the scale of this income source
are not still proven. The hardware sales of the business is in the declining mode and replacing
that with this uncertain emerging source would provide some strategic issue for the business.
This approach would impact the current positioning of the company in the overall market. the
high margin hardware business would prove to be very difficult to be replaced by the new
services based business model (Green, 2017).
Apple losing its talent base

This is the recent problem that emerged in the Apple. In recent time Apple has lost
substantial number of talented employees from the operation. This problem is also linked
with the strategic problem that the business has. Apple’s loss of talent is still at a lower level
but the probability of the future large loss of talent is quite high for the organisation
(YAROW, 2013). The people working for the iphone and its current OS are losing their
interest as they think that it would never be the same as the first iphone (YAROW,
2013). Therefore they are moving towards the other opportunity in the industry.
Recommendations
[Source: Jurevicius, 2018]
The above diagram shows the product and service portfolio of Apple. The hardware and the
software section of the business is not growing fast but the services and the application
software is growing fast in the business. The estimation is the by 2021 the services section
would only contribute close to $50bn to the total revenue (Gurman, 2018). Considering this
aspect and the above analysis the following suggestion is provided.
 Managing the current vision of the company for business diversification
 Innovation strategy change and continuation of its radical or disruptive innovation
culture to develop new product
 Repositioning the business in the market

The strategies are derived from the current business internal and external situation. This new
direction for the organisation is selected on the basis of different consideration and those are
explained in the section below.
Managing the current vision of the company for business diversification
The above detailed analysis of the strategic issue of Apple has put forwarded the business
current vision as one of the important issue for the strategic direction. The current strategic
vision developed by the current leadership focuses on the innovation, uncompromising
persuasion of excellence, much focused activity on the new technology development,
following open innovation culture, existing to deliver the great product to the customer
(Rowland, 2018). The current vision is in line with the organisational culture of the
organisation and the current market position of the business (Czinkota & Ronkainen,
2010). Apple has the long tradition of innovation, technology leadership and current market
leader position. But the future challenges for the business is serious and need appropriate
approach to counter. Therefore the current vision would need some modification to be
effective. The current vision needs an approach of urgency and strong direction. The
innovation efforts are not currently able to deliver some strong result and it is also slow.
Therefore the sense of urgency would be able to fasten the activity which would help Apple
to broaden the innovation and technological gap with its competitors. The current vision
states that the great product delivery is the reason for Apple’s existence. If this current vision
adds the ‘great solution delivery’ part in that, the approach would be holistic (Hoyer et al.,
2010). This approach would add the outward thinking along with the internal approach in the
new product or service development. On the other hand direction would help the employees
to focus on the next big thing in the market and not only focus on the current product
development approach.
Innovation strategy change and continuation of its radical or disruptive innovation
culture to develop new product
Some of the innovation requirements are in the field of future energy use, mobility, artificial
intelligence and robotics, space technology and so no. The current vision of Apple is focused
based on the Steve Job’s technology push strategy of innovation where the organisation does
innovation and then makes a product to market that (Finkle & Mallin, 2010). For a vision