APPLE SWOT and Strategy Recommendations Synopsis

The following is a traditional SWOT analysis of Apple, Inc, an examination of significant internal strengths and weaknesses, and external opportunities and threats, currently facing the company today. The analysis indicates that although Apple has entered the consumer electronics industry in the last decade, they are still following the strategy dictated by their history as a niche market pc hardware and software manufacturer. This has proved immeasurably successful for them in recent years as they have revolutionized the industry through dynamic technological innovations. Technology consumers, however, easily switch from one product to another and it remains to be seen if Apple will be able to compete with the next major technological innovation or even if they will be able to hold onto their current status as the powerhouse in the industry considering the customer service problems they currently have and the price point for their products. Additionally, following the SWOT analysis are strategy recommendations for a competitor that are based upon the vulnerabilities as determined by this analysis.

INTRODUCTION

In the past decade Apple, Inc. has gone from being a minor player in the pc industry to a major player in the consumer electronics industry. Through fearless innovation they have developed products that have revolutionized the consumer electronics industry. As a result their brand recognition has increased exponentially and they have added significantly to their legion of devoted followers. Apple is about design, their electronic products are stylish, their advertising is stylish, their hardware and software are stylish, and like all things stylish there is a significant price tag. However also like all things stylish, consumers are fickle and their tastes frequently change with the next big technology improvement. Additionally, Apple still maintains control over every aspect of their product lines, this in the past proved to be a mistake that relegated them to a niche market in the pc industry. Following is a SWOT analysis of significant strengths and weaknesses as well as significant opportunities and threats.
1. Apple SWOT
a. Strengths:
Factor i. Brand
1. Millward Brown Optimor rated Apple the 3rd most valuable global brand in their 2010 top 100 list of most valuable global brands and estimates their brand value to be worth $83.2 billion, (2010). Apple’s brand loyalty, often referred to as the “Cult of Apple”, is probably Apple’s greatest asset and due to their intense loyalty their customer base tends to be very forgiving of product problems, (Bulik). Brands aspire to gain this type kind of a loyalty from their customers, as such, this is an obvious strength.
Factor ii. Demand
1. With over 160 million registered users secured by credit cards at Apple’s iTunes store, (McGuire & Baker, 2010), Apple has an overwhelming share of the downloadable digital music and video market. One cannot ignore the “i” vernacular, iPhones, iPods, iPads, and their effect on consumers as “must have” devices. The popularity of innovative Apple entertainment and media products over the last decade and their apparent influence on American culture is another obvious strength.
Factor iii. Design & Innovation
1. Steve Jobs concentration on the importance of aesthetic values and user friendliness has allowed them to maintain a loyal following of consumers that have so far overlooked premium pricing and interoperability issues, (Hoovers). One of the primary motivations for Apple’s design teams is to make intuitive products that allow users to be up and running without having to read instruction books, due to this standard they set the benchmark for design led hardware and software products, (Harris, 2009). This is a strength because through hardware and software design and innovation Apple has revolutionized both the pc and the media industry and their customers have become reliant upon their products.
Factor iv. Marketing
1. Advertising Age recently awarded Apple the title of Marketer of the Decade, the first time it has ever awarded any firm this title, in deference to the way that they have influenced advertising, media, their influence on popular culture, and their marketing strategies and also in recognition of the fact that they have consistently been a marketing powerhouse over the last decade, (Bulik).
Factor v. Retail
1. In addition to their online iTunes store Apple has opened an additional online store called the App Store. These online stores are a strength in that they allow Apple to maintain a continual stream of revenue rather than to having to wait solely upon new product development. In addition to their online stores, Apple recently opened 200 retail locations throughout the US and 50 retail stores in other countries, these locations currently account for 20% of their total sales, (Hoovers). Apples brick and mortar presence represent another strength in that Apple provides free hardware and software workshops to users through them, which in turn increases customer loyalty, and allows them to achieve a nearly unprecedented sales ratio of $4,000.00/ square foot, (Srivastava, R.K. & Thomas, 2010).
b. Weaknesses:
Factor i. Delays
1. iPads featuring different connectivity were released at separate times, several months apart; consumers were wait-listed to received these and there were significant delays in shipping the products and ultimately the tablets were shipped with significant problems. Consistently Apple makes its customers sign onto waiting lists to order their products where they are often besieged by further delays. The iPhone 4G has been available since June of 2010, but is still only available in black. Remarkably and for no apparent reason, Apple’s trademark color, white, is still unavailable to consumers legally at this time. While Apple relies upon this strategy to generate hype over their products, these kind of significant delays along with problematic products being shipped is a weakness that can only lead to consumer dissatisfaction and infringement issues.
Factor ii. Denials
1. Although the iPhone 4G was the highest scoring smart phone they ever tested Consumer Reports does not recommend it due to its problems with its antenna and until Apple corrects it they advise their readers to stick with the 3G, (Smart phones, 2010). At first Apple blamed the way their clients were handling the phone and only later they sent a free rubber “bumper” that corrected the problem. Apple’s reluctance to acknowledge or deal with this and other product defects are a real weakness as they appear to rely upon their customers to overlook these issues.
Factor iii. Compatibility
1. As a reaction to a perceived threat from Google, Apple recently loosened overly stringent restrictions for developers that sought to develop applications for the iPhone and now allows them to use a wider variety of computer languages with Apple’s operating system iOS, (Driver & Valdes, 2010). As Apple makes 30% off of every application sold, their overly protective nature regarding compatibility issues, and their failure to respond to concerns in a timely enough fashion, are a weakness that have caused them to lose business partnerships and revenue in this and countless other instances.
Factor iv. Service
1. According to Forrester Research, of four PC manufacturers surveyed, Apple, Gateway, HP, and Dell, Apple rated the lowest, (-13) compared with Dell‘s rating of (+38), in customer service, (Manning et al, 2007). Recent customer experiences with the iPhone 4G, including downloading and connection problems, indicate a weakness as Apple is still not reacting to customer complaints and delivering the superior service that should be expected.
Factor v. In-sourcing
1. Apple recently purchased a processor company and a microchip company so that they can begin designing their own CPUs and microchips, as such fewer external sources will be involved in the development of their products, (Hoovers). Designing their own chips will allow them to obtain better microchips for their products and share fewer details with external manufactures, (David, 2011). Additionally, there may be tax and labor advantages to in-sourcing, however, the weakness in this approach lies that this behavior could lead to missed opportunities for improvements that their competitors will be sure to take advantage of.
c. Opportunities:
Factor i. Partnerships
1. Currently the only telecommunications carrier that Apple partners with in the US is ATT, while many competitor phones can be used with multiple carriers. Customers unwilling to switch to ATT from their current carrier are likely to forego owning an iPhone. Partnering with additional carriers could increase sales of the iPhone’s which would in turn encourage consumers to try additional Apple products.
Factor ii. International sales
1. Currently the US accounts for more than half of Apple’s sales, (Hoover). Increased expansion possibilities into foreign markets remains an opportunity that Apple has yet to take full advantage of.
Factor iii. Emerging products – AppleTV, iPad, Ping
1. Apple’s iPad is driving demand for tablet computers; projections for tables for 2010 are 19.5 million units and by 2014 sales are expected to reach 208 million units. (McGuire & Baker, 2010). Apple has eliminated the hard drive on its AppleTV making it a fully streaming media box capable of interconnecting with the iPad, iPhone, and the iPod, (McGuire & Baker, 2010). Ping is software for iTunes that enables social networking by allowing users to share their music with one another, with links to the iTunes store so that users can purchase the music.
Factor iv. Apple Stores
1. Customers are generally happy with the service experience in Apple’s brick and mortar stores. Apple’s customer satisfaction score in this environment is an 84, while their closest competitor Dell, scored only a 74, (Srivastava & Thomas, 2010). Additional national and international locations could increase customer satisfaction with Apple products as generally customers that visit the Apple stores have a significantly better experience than those who deal with Apple online.
Factor v. Acquisitions
1. Apple’s corporate culture seems unlikely to consider a merger, however it has recently acquired other companies, and as they are relatively new to the consumer electronics industry and media, to further their success they might consider acquiring a company that has long term success in this environment. Although they have revolutionized this industry, they could still potentially benefit from the intellectual capital gained by such an acquisition.
d. Threats:
Factor i. Competitors
1. Despite market share gains in recent years Apple sales are still far behind competitors in the PC market like Dell and HP, (Hoovers). Additionally other smart phones which work with multiple carriers pose a significant threat as the only carrier approved by Apple for the iPhone is ATT, which Consumer Reports rates as the lowest scoring carrier for customer satisfaction, (Smart Phone, 2010). For one of Apple’s flagship products, the iPhone, to remain associated solely with a partner that consumers have expressed so much dissatisfaction with can threaten Apple’s marketing strategy of interoperability among their products as the iPhone serves as a major inroad for consumers to purchase these other products.
Factor ii. Pricing
1. Although Apple increased sales in 2009 this was due to portable computers and the iPhone with its related applications, in actuality sales of Apple desktop computers and iPods were down, (Hoovers). According to Forrester Research the percentage of customers who believe that better pricing outweighs brand loyalty has been steadily increasing, (Manning et al, 2007). Additionally, the recent economic crisis has accelerated this phenomenon. Apple needs to redesign some of its products to allow purchases of their pcs at a lower price point or there is a very real threat that they will continue to lose market share in this industry.
Factor iii. Counterfeiting
1. The New York Observer recently reported a news story on a 17 year old who made $130,000.00 manufacturing white iPhones using parts he purchase from Apple suppliers abroad, (Popper, 2010). In addition to this instance Apple has been besieged by bootleggers abroad. Continued delays in production capabilities and pricing will inevitably cause this behavior to continue and this threat will continue to erode Apple’s market share.
Factor iv. Advances
1. As technology is constantly changing and as Apple becomes more and more cloistered it is likely to miss out on technological advances from which it might have otherwise benefitted. For years Apple trailed Microsoft, it is on top now only because it changed its focus in the last decade from the pc market to the consumer electronics market, and now Microsoft is struggling to keep up with them in this industry. Inevitably there will be another great shift in technology and a real threat to Apple is that they are likely to lose out on it if they shelter themselves too much from other companies in the technology sector.
Factor v. Style
1. Apple white is the new black in consumer electronics. Although Apple’s products are extremely stylish right now, they are only available in white, black, or a stainless metallic finish, which to some extent prevents consumers from expressing their individuality even at this point in time. In the past Apple has shown that they can experiment with color with boldly colored laptops. While competitors are offering a myriad of bold colors in every market that Apple competes in, only Apple’s smallest products, the iPod Nano and the iPod Shuffle are available with any color choice and even then the selection is very limited. The threat to limiting consumer choices is that it could backfire if this strategy persists too long and Apple could potentially box itself into a corner if they change strategy too late to suit
consumers.

Strategy Proposals

Strategy 1) Collaboration

Brief Description: In order to avoid Apple’s mistake of partnering with only one company, that might in fact be providing an inferior service, partner with several companies for product distribution and support.

Implementation: Identify companies where partnership opportunities are available by investigating current product partnerships and companies that might be suitable for our products distribution and support. Search initially for start-up companies that have strong financial backing and lack significant partnerships at present or that are maintaining multiple partnerships. Perform competitive analysis of and competitive intelligence research on selected company or companies. Approach companies and set up meetings to propose partnering for new product launch.

Ramification:

Pros:
Start ups may be eager to partner
Can assist with networking
Better ability to bargain our position
Can assist with training on our product
Increased loyalty from a young company
Defray risk and expense of product launch
Potential for tax advantages

Cons:
Start ups may lack fiscal stability
Start ups may experience high staff turnover
Lack of experience in distribution and support
Lack of network
Increased expenses for our company
Increased competition if relationship isn’t exclusive
Increased legal expenses
Increased liabilities


Evaluation: Gather available secondary research data on prospective companies utilizing newspapers, trade journals, filings, the Internet, etc. Gather primary research by interviewing suppliers, distributors, current and past customers, etc. Evaluate gathered company data and narrow selection to several best options that have significant product launch experience. Approach these selected companies letting them know you are interested and request references, marketing materials, ask specifically for description of successes. Approach companies to set up preliminary discussions and make further evaluations based upon these meetings. Select best candidates for product launch partnering and have contracts negotiated. Periodically review success of product partnership by reviewing sales figures, customer service, marketing strategies, and other pertinent factors.

Strategy 2) Markets
Brief Description: Concentrate on opening brick and mortar retail stores in foreign markets that Apple has so far neglected by surveying which countries Apple has not entered that are technologically conducive to our product adapting Apple’s retail customer service standards. Entry into these markets can provide eventual access to neighboring markets and direct competition with Apple’s products.
Implementation: Compare preliminary country demographics to determine suitability for marketing our product by researching the World Bank, UN trade and development documents, the State Department, and other sources in emerging markets that Apple has not yet entered. Select emerging markets with high-tech capabilities and a culture predisposed to utilizing our product. Investigate the trade and legal environments in the selected countries. Determine the advantages of a Greenfield initiative vs. an acquisition in each of the selected countries. Investigate financing alternatives and secure financing. Retain legal representation in selected countries. Contact realty agency in selected countries to assist in searching for retail space in high density population centers. Coordinate minor adaptations of product to suit market. Tailor marketing and advertising strategies based upon cultural influences. Lease property, begin marketing, develop retail space, hire and train workforce, schedule opening, and ship inventory.
Ramification:

Pros:
New product introduction in an emerging market
Limited competition initially
Currency exchanges
Increased global brand awareness

Cons:
Competition in a foreign market
Tax disadvantages
Legislative problems
Trade regulations


Evaluation: Periodically review sales figures for product lines. Implement customer service and product surveys.
CONCLUSION AND RECOMMENDATIONS
Athough Apple is a relative newcomer in the consumer electronics market through innovation and fearless experimentation they have completely revolutionized the field. They still appear to be somewhat entrenched in their older strategy as a pc hardware and software manufacturer and also appear to be somewhat reluctant to change their business practices, this could be a potential disadvantage. This strategy has so far been successful in the last decade as their consumer electronics have developed, but as technology continues changing they could easily be left behind by the next newest thing. Additionally they appear to be repeating the same mistakes with compatibility in that they are trying to be one company that does everything and they are reluctant to relinquish control.
Competitors should avoid their mistakes by being open to collaboration and by parterning with other hight tech companies.





REFERENCES
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David, Fred R. (2011). Strategic management: concepts and cases (13th ed). Upper Saddle River, NJ: Pearson Prentice-Hall.

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McGuire, M. & Baker, V. L. (2010, September 24). Apple's iPod and iTunes updates keep pressure on competitors. Gartner Industry Research Group. Retrieved from http://my.gartner.com/portal/server.pt?open=512&objID=260&mode=2&PageID=3460702&resId=1440061&ref=QuickSearch&sthkw=apple

Popper, B. (2010, November 16). Will white iPhone 4 send New York teen to college ... or to jail? The New York Observer, Daily Transom. Retrieved from http://www.observer.com/2010/daily-transom/white-iphone-four-sending-kid-college

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Srivastava, R.K. & Thomas, G.M. (2010, June). Managing brand performance: aligning positioning, execution and experience. Journal of Brand Management, 17(7), 465-471. Retrieved from EBSCOhost Business Source Complete.