Bargaining Power of Buyers. For Apple, this margin is 37.9%. The company’s strong branding, and the interrelationships between its products, encourage customers who buy one Apple product to try another. For the distribution system, Apple launched a website for direct sales for the first time. His articles on marketing, technology and distance running have appeared in magazines such as “Marketing” and “Runner's World.” Linton has also authored more than 20 published books and is a copywriter for global companies. Chapter 2 in the textbook deals with firm performance and competitive advantage. Apple is a perfect example of a company sustaining its competitive advantage, as they have done through ever-evolving innovation and product differentiation, even in an increasingly competitive market.Â. Companies obtain a competitive when it is able to create more economic value than rival firms through greater perceived consumer benefits and product performance. For the quarter ending June 30, 2019, Apple revenue was $53.809B, a 1.02% increase year-over-year. Apple’s innovative strategy of developing products that complement each other strengthens customer loyalty and helps build a barrier to competition, according to the website Innovation Excellence. At the 2019 WWDC, Apple announced a few key wins for consumer privacy. As a consumer products company, its prolonged growth spurt is even more amazing because it has continued through economic times when consumers are reluctant to spend what little they have. Michael Porter defines a competitive advantage as sustainable if it lasts for more than one economic cycle (about 10 years). Apple devices and software sync easily and work well with each other. These figures demonstrate Apple’s ability to meet short term obligations. This article discusses the generic strategies it has used to build a competitive advantage and the intensive strategies utilized to grow market share. Apple’s reported plans to cut iPhone production by 10 percent in the first quarter of 2019 make increasingly clear that the company’s base of loyal users isn’t … Reviewed by: Michelle Seidel, B.Sc., LL.B., MBA. They were introduced in 1971 by a mutual friend who later became one of Apple's earliest employees Bill Fernandez (Macworld, 2017). It must also be considered that Apple operates in different markets across the technology industry, not solely in the computer or mobile phone market. Dell. Both men shared a passion for technology and … For example, elegant design and user-friendliness ofproducts, combined with high-end branding, effectively differentiate the technologybusiness. The element of low switching cost referred to above strengthens the … The company has been benefiting from its vertical integration immensely. Apple is one of the most reliable company when it comes to personalized advanced computers and smart technology devices. Acceptable liquidity ratios are commonly considered to be between 1.5 and 3 percent. Market Realist: Must-know -- An Investor's Essential Guide to Apple. This generic strateg… Brand equity – Apple has repeatedly taken the top spot for its brand equity and has a cult following since ages. Apple realised this fact early in its life and made it its guiding principle (Apples slogan: Think Different). Specifically, an important source of Apple competitive advantage relates to its ecosystem, which is enabled by such integration. Additionally, the company is a source of high-paying jobs in the US. Apple has a long-established reputation for innovation and a commitment to developing new products. However, EPS for the twelve months ending June 30, 2019 was $11.77, a 6.61% increase year-over-year. The company aims to offer customers a high-quality product with unique features and uses high prices to reinforce the perception of added value and maintain profitability. A Magic Mouse from Apple. R&D – A major competitive advantage of Apple is the amount it spends on R&D keeping its eyes on the future rather than on the present. The iPod. One major source of competitive advantage for Apple is brand equity. While users can purchase computers, tablets and mobile phones from nearly any electronics outlet, Apple differentiates itself by providing limited quantities to big box retailers and focusing its retail efforts on its Apple Stores. Apple has developed a branding strategy that allows them to benefit from all of these factors. Apple was the world’s leading brand in 2017, ahead of Google, Coca-Cola and IBM, according to annual rankings published by brand consultancy firm Interbrand. In many respects Apple’s ability to innovate is at the forefront of its competitive advantage … A key competitive advantage for the company is its ability to develop innovative products that share the same operating system, software and applications. It is crucial to understand the limitations of mathematical calculations along with the importance of considering intangible assets. Measuring a company’s competitive advantage can be difficult given that the benefits of a firm’s products or services are a matter of customer perception, which is difficult to measure. Of the available measures for competitive advantage and overall success, perhaps the most commonly considered is revenue. Indeed, from the Apple II in the year 1978, trough the Macintosh in the year 1984 area and till the introduction of iPod and iTunes in the 21st century, the firm has been developing its competitive advantage on … Apple is still determined to build and craft better, more proficient … Its high-level popularity is a sign of a strong brand image and the reliability of its technology and technological products. Per the textbook, "Competitive advantages occur when firms are… Innovation has the ability to breathe new life into stagnant markets and allows companies to reap profits from otherwise barren markets. Measuring competitive advantage can be accomplished through the implementation of simple accounting measures of performance that often rely on a ratio analysis of liquidity, profitability, activity, and leverage and communicate a great deal of information about a firm’s operations. Apple’s vertical integration is one of the major factors that set it apart from the competition. Apple sets premium prices for its products and minimizes discounts to wholesalers to keep prices consistent across the market. Return on Equity (ROE) measures the amount of net income returned as a percentage of shareholders’ equity, or the amount of profit derived from money invested by shareholders. Apple’s competitive advantage are its control of software, Hardware, retail strategy, product differentiation and most important one is Steve Job’s strategically decision making. Wakabayashi (2015) reveals that the expected shipping date is 2019. Other benefits include loyalty as a sustainable competitive advantage, as mentioned earlier, and increases in positive word of mouth and referral business. This gives Apple control over the entire process of product development, manufacturing and marketing – an advantage that competitors find difficult to match. In such a market, Apple has been offering unique differentiation. The essential complement to the pathbreaking Competitive Strategy, Michael E. Porter's Competitive Advantage explores the underpinnings of competitive advantage in the individual firm. When thinking about Apple, people often think about how much of a competitive advantage they have in the marketplace over other competitors. The study said that Apple’s innovation helped the company become a highly competitive and profitable firm. Historical data can assist in assessing financial health; however, it is no guarantee of future success. ... 2019. Figure 1 below illustrates the essence of apple value chain analysis. It also has a community of more than 6 million independent software developers creating applications for Apple products. It is an American multinational computer company that deals in … Samsung’s eagerness to be everything to everyone all of the time means it has one clear advantage over Apple, its near total lack of commitment to a design decision. Innovation is the way through which companies can gain advantage in very competitive markets. Of the available measures for competitive advantage and overall success, perhaps the most commonly considered is revenue. Apple’s profitability as measured by its Return on Assets (ROA), measuring the efficiency at generating profits from shareholders’ equity plus its liabilities, has been relatively stable over the past six years, showing how well the company uses its resources to generate earnings. The technology industry is full of undifferentiated products. Alternatively, annual earnings per share (EPS), depicting net earnings or losses attributable to common shareholders, for the quarter ending June 30, 2019 was $2.18, a 6.84% decline year-over-year. For Apple, the gross revenue statistic has been increasing consistently over the past 10 years. Apple Inc. is an American multinational technology giant, founded in 1976 by Steve Jobs, Steve, Wozniak, and Ronald Wayne. The investment analyst firm Market Realist identified brand strength, innovation, supply chain management and premium pricing strategy as key factors in the company’s competitive advantage. For apple, there exists a strong unique differentiation. All of the financial performance ratios depict Apple as a company performing well above what is considered the bottom line for success. At the end of the second quarter 2019 ROA for Apple, was 15.87%. Competitive advantage and economic value are two significant terms in this chapter. Deals with leading music and entertainment companies provide a vast source of media for all the company’s products. Gross profit margin shows the percentage of revenue retained after expenses are paid. These strategies are called the generic strategies and can be used to build competitive advantage. Through thebroad differentiation genericstrategy, Applestands out in the market. Apple is one of the leading PC and smart phone brands of the world. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. Apple has not experienced a decline in annual revenue since 2015. As of October 2019, Apple is the second largest smartphone company in the world with 22.09% global market share. The company holds the share of 78 % in the overall media player market. Let’s have a look at how this has played out as far as the different products launched by Apple since the return of Steve Jobs in 1997 are concerned. Explore Apple's competitive position in the many industries in which it operates, and learn about the different products and services it offers. Following Tim Cook’s assignment as the CEO of Apple, the company could have experienced a downfall that was unrecoverable. Apple's Competitive Advantage Apple Inc. Silvia Jimenez Jacob Paiz Nadine Anson INF220 Professor Juliana Zimmerman August 5, 2019 The History of Apple Inc. The company developed the graphical user interface, first used in its own computers, and, more recently, pioneered the iPod music player and introduced new levels of performance for smartphones. A key competitive advantage for the company is its ability to develop innovative products that share the same operating system, software and applications. This generic strategy focuses on key features that differentiate thecompany and its information technology products from competitors. It has millions of loyal customers with steady increment. At the end of the second quarter 2019 ROE for Apple, was 52.13%. The problem for me is Apple… Widely known for being an American technology company that designs, develops, and sells consumer electronics, computer software, and online services. An ecosystem of suppliers, developers and business partners provides Apple with a strong competitive advantage. Adjusted accounting measures, such as Return on Invested Capital (ROIC), economic profit, and Tobin’s q, can also be used to provide a clear picture of a firm’s true economic performance. 2019: $999: $699: $599: $449: In the second chart you can see how Apple in 2017 not only raised prices dramatically on its flagship models, but also on the mid-tier model relative to previous flagships. Why Apple Has a Strong Competitive Advantage Ben Bajarin on June 2, 2011 One of the primary things about being an effective technology industry analyst is that I have to clearly communicate our perspectives about the technology industry as a whole to my firms clients. Applications work … Competitive Advantages of Apple Inc. Apple’s Unique Differentiation. For Apple, this margin is 37.9%. It is headquartered in California, the USA. Traditional economic theory predicts that competitive advantages should be short-lived in highly competitive markets, however, they often last longer than this traditional theory suggests. Revenue over time – Apple has deep pockets due to its high margins. Apple's pricing strategy extends to its differentiation in the retail electronics marketplace. Brand strength gives companies like Apple great visibility in the marketplace and helps build consumer loyalty. To have a competitive advantage a company should have a right strategy, consequently to have distinctive competences and as a result to have good resources and capabilities, Inch bring high profitability to the company. The market analysis suggest that the Apple stands at 3rd position in the PC market with the market share of 10.6 % while in the mobile market, it stands at second position with 24.2 % of market share. Competitive Advantage introduces a whole new way of understanding what a firm does. It offered a new single sign-on service that allows consumers to sign in … Apple value chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the business. ... Johnson, L. at Macworld (2019). Products such as the iPhone, iPad and Mac share the same software and applications, and operate in a similar way, making Apple a natural choice when customers are considering another device. Apple’s liquidity, as measured by its current and quick ratios, as of the three months ending June 30, 2019 was 1.51 and 1.47, respectively. The company has built a very high level of trust in the market. The fact that competitors are unable to attain a first mover advantage themselves suggests that they do not possess the same strategically relevant resources and that Apple’s resources are therefore heterogeneously spread and imperfectly mobile, which in turn confirms their competitive advantage. Apple, Inc. is undoubtedly one of the most well known companies across the globe. Additionally, the ratios discussed may be less applicable across different industries, requiring more attention to detail during assessment. BCG matrix of Apple He holds a Bachelor of Arts in history and economics from Bristol University. The high-pricing strategy also sets a benchmark for competitors, which must offer equivalent features to match Apple’s perceived value without losing money. It identifies all the key strengths, weaknesses, opportunities and threats that affect the company the most. Apple Corp. manufactures and markets a variety of computers and consumer electronics products, including smartphones, tablets and music players. 3. For Apple, the gross revenue statistic has been increasing consistently over the past 10 years. Apple was the first to introduce some of the most innovative products that have changed the world (iPhones, iPads). AppleInc.’s generic strategyis broad differentiation. This past August Apple became the most valuable corporation in the world based on market capitalization, surpassing every firm in the technology industry and every other industry! Top Technology. The ease of use has been Apple’s first competitive advantage. Based in the United Kingdom, Ian Linton has been a professional writer since 1990. The founders of Apple were Steve Jobs and Steve Wozniak. For the quarter ending June 30, 2019, Apple revenue was $53.809B, a 1.02% increase year-over-year. Dell named after Michael Dell. Considering that Apple … However, these financial measures include valuations that are often contested and considered hard to measure numerically, such as brand loyalty or consumer value. Major core competencies are identifiable through a VRIO analysis of Apple Inc. This minimizes the risk, timescale and costs of product development, enabling the company to introduce a stream of new products and stay ahead of competitors. It is much cheaper to serve existing loyal customers than to acquire new customers. For the quarter that ended June 30, 2019, ROIC for Apple was 31.32%, showing that the company is consistently generating excess returns on the capital invested. Founded in 1976, Apple did not amass its current level of competitive advantage until a decline that led to a company restructuring and ultimate return to profitability in 1997. Apple … This minimizes the risk, timescale and costs of product development, enabling the company to introduce a stream of new products and stay ahead of competitors. Invested capital is the amount of money a firm has invested in the operations of its business. Tobin’s q measures a ratio of a firm’s market value to the replacement cost of its assets. The company owns chip manufacturers, controls manufacturing, follows extremely strict software standards and operates its own stores. For example, iOS was developed by Apple is a different and unique operating system. I sit on a lot of PC company advisory boards, and, while this may surprise you, I actually point out Apple's competitive advantages on a regular basis. Such competencies are clear competitive advantages for the company’s long-term profitability in the computer, consumer electronics, and online digital products industries and beyond. This Apple SWOT analysis reveals how one of the most successful world’s companies used its competitive advantages to become the dominant player in the tech industry. Competitive Advantage (Apple’s Competitive Advantage, 2004). Who are the main competitors of Apple in the smartphone market? Copyright 2020 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. Apple's financial success in this market, as well as in the other markets that it participates in, has been significantly influenced by the company's competitive advantages. It is known the most for its technology and great quality products.