APPLE / IPHONE Final Project Group name: Apple GROUP MEMBERS 1. Methawee Keawlamoon (May)
4914218
2. Yu Mao (Mike)
5135617
3. Nuttagridta Paisansatan (Eye)
5214665
4. Vo Thi Quynh Thy (Tea)
5238360
5. Yonglin Huang (Ong)
5238369
Section 408 Submit to
A. Pornchanoke Tipgomut Academic year 1/2012 Date: 07/09/2012
Group profile May Name:
Methawee Keawlamoon
ID:
4914218
Email:
[email protected]
Major:
Marketing
Mobile no. : 086-352-2288 GPA
Minor:
2.51 -
Mike Name:
Yu Mao
ID:
5135617
Email:
[email protected]
Major:
Marketing
Mobile no. : 081-489-3457 GPA Minor:
2.4 MGT
Eye Name:
Nuttagridta Paisansatan
ID:
5214665
Email:
[email protected]
Major:
Marketing
Mobile no. : 086-388-4213 GPA:
Minor:
2.8
HTM
i
Tea Name:
Vo Thi Quynh Thy
ID:
5238360
Email:
[email protected]
Major:
Marketing
Mobile no. : 083-545-3848 GPA: Minor:
3.6
BIS
Ong Name:
Yonglin Huang
ID:
5238369
Email:
[email protected]
Major:
Marketing
Mobile no. : 090-661-8773 GPA: Minor:
3.27
-
ii
Martin de Tours School of Management Department of Marketing Plagiarism Acknowledgement Form Subject: MKT4725 Competitive Analysis and Strategy Group Name:
Apple
Company/ Brand:
Section: 408 Apple / IPhone
Academic Honesty The University expects that the work students submit for course assessment or in examination is a result of their own ideas, creative thinking, and research, unless the other sources of the work submitted are acknowledged. All forms of plagiarism and unauthorized replication are regarded as serious offense by the University and could result in academic jeopardy or course failure. If you are in doubt as to the legitimacy of the report, it is recommended to immediately consult with the lecturer in charge. Declaration
By signing below, you hereby confirm that this report is your own work, has been written in your own words, and has not been previously submitted to other course. Please confirm by checking each box below:
I have read and declare that this report complies with the Academic Honesty clause. Its contents are original, and have not been submitted previously in other courses.
Student I.D.
Group Members’ Names
Signature
Date
1. 4914218
Methawee Keawlamoon
07/09/2012
2. 5135617
Yu Mao
07/09/2012
3.5214665
Nuttagridta Paisansatan
07/09/2012
4. 5238360
Vo Thi Quynh Thy
07/09/2012
5. 5238369
Yongling Huang
07/09/2012 iii
Table of content GROUP PROFILE ...................................................................................................... I PLAGIARISM ACKNOWLEDGEMENT FORM ........................................................ III TABLE OF CONTENT ............................................................................................. IV LIST OF FIGURES AND TABLES ........................................................................... VI EXECUTIVE SUMMARY ........................................................................................... 1 SECTION I: AN ANALYSIS OF THE INDUSTRY 1. INDUSTRY ANALYSIS ......................................................................................... 2-3 2. ADVANTAGE MATRIX ............................................................................................ 4 3. ENVIRONMENTAL SCANNING .............................................................................. 5-6 a. PESTEL Analysis .................................................................................................. 5 b. Micro – environment Analysis ................................................................................ 6 4. FIVE FORCES ANALYSIS .................................................................................. 7-10 5. EFE MATRIX................................................................................................. 11-12 SECTION II: AN ANALYSIS OF COMPANY/BRAND 1. COMPANY BACKGROUND ............................................................................... 13-14 a. Vision .................................................................................................................. 13 b. Mission ................................................................................................................ 14 2. PRODUCT BACKGROUND .................................................................................... 14 3. BCG MATRIX ..................................................................................................... 15 4. STRATEGIC FOCUS – GENERIC STRATEGY ..................................................... 16-18 a. Strategic Focus ................................................................................................... 16 b. Generic Strategy.................................................................................................. 18 5. SIX FUNCTIONAL ACTIVITIES .......................................................................... 18-19 6. SPACE ANALYSIS ............................................................................................. 20 7. IFE MATRIX .................................................................................................. 21-22 SECTION III: COMPETITIVE ANALYSIS 1. COMPETITORS ANALYSIS .................................................................................... 23 2. MAP OF STRATEGIC GROUPS ............................................................................. 24 3. COMPETITIVE GRID ....................................................................................... 25-26 Samsung ................................................................................................................. 25 HTC ......................................................................................................................... 26
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4. COMPETITIVE PROFILE MATRIX – COMPETITIVE STRATEGIC POSTURE .................. 27 5. PRODUCT AND CUSTOMER MATRIX ..................................................................... 28 6. POSITION STATEMENT – POSITION MAP ......................................................... 29-30 Positioning Statement.............................................................................................. 29 Positioning Map .................................................................................................. 29-30 SECTION IV: FINAL ANALYSIS AND STRATEGIC DECISION RECOMMENDATION 1. GENERIC ROUTES TO COMPETITIVE ADVANTAGE CREATION ................................. 31 2. IE MATRIX ......................................................................................................... 32 3. TOWS MATRIX ............................................................................................. 33-36 4. STRATEGY CANVAS............................................................................................ 36 5. ERRC GRID ................................................................................................. 37-38 6. RECOMMENDATIONS ..................................................................................... 39-40 REFERENCES ................................................................................................... 41-42 APPENDIX APPENDIX 1: MARKET SHARE OF SMARTPHONE INDUSTRY IN Q4, 2011 AND FY 2011 43 APPENDIX 2: FIVE FORCES ANALYSIS SCORE ..................................................... 43-44 APPENDIX 3: SBU CALCULATION TABLE .................................................................. 45 APPENDIX 4: SPACE ANALYSIS TABLE............................................................... 45-46 APPENDIX 5: CPM SCORE ANALYSIS ....................................................................... 47 APPENDIX 7: POWERPOINT SLIDES AND CD ............................................................ 47
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List of Figures and Tables Section I – An Analysis of Industry Figure 1-1 Smartphone Market share ........................................................................ 3 Figure 1-2 Advantage Matrix ..................................................................................... 4 Figure 1-3 Threats of Segment Rivalry ...................................................................... 8 Figure 1-4 Threats of New Entrants ........................................................................... 8 Figure 1-5 Threats of Substitute Products ................................................................. 9 Figure 1-6 Threats of Supplier’s Power.................................................................... 10 Figure 1-7 Threats of Buyers’ Power ....................................................................... 10 Figure 1-8 Five Competitive Force........................................................................... 11 Table 1-1 EFE Analysis ...................................................................................... 11-12 Section II – An Analysis of Company / Brand Table 2-1 Products Line .......................................................................................... 14 Figure 2-1 BCG Matrix ............................................................................................. 15 Figure 2-2 Strategic Focus ...................................................................................... 17 Figure 2-3 SPACE Analysis ..................................................................................... 20 Table 2-2 IFE Analysis ............................................................................................ 21 Section III – Competitive Analysis Figure 3-1 Competitors Map ..................................................................... 23 Figure 3-2 Map of Strategic Group ............................................................ 24 Figure 3-3 Competitive Strategic Posture Map .......................................... 27 Figure 3-4 Product – Customer Matrix ...................................................... 28 Figure 3-5 Positioning Maps ..................................................................... 29 Section IV – Final analysis Figure 4-1 Generic routes ........................................................................ 31 Figure 4-2 IF Matrix ................................................................................. 32 Table 4-1 IE Analysis Table ..................................................................... 32 Figure 4-3 Strategic Canvas ..................................................................... 36 Table 4-2 ERRC Grid ............................................................................... 37 Figure 4-4 Grand Strategy ........................................................................ 40
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Executive summary In this report, we choose the smartphone industry to analyze. Our brand name is IPhone which is belonged to Apple. We analyze the market in four big sections. The first section is about the industry analysis. In this section, we introduce the brief situation of smartphones industry, the environmental scanning of our company, the five forces model that influence Apple and also the Opportunities - Threats analysis of Apple. The second section is about our own company analysis. We briefly introduce about our company – Apple, about its product lines, six functional activities, and BCG matrix. Moreover, we have the strategic focus and generic strategy analysis of Apple. In this section, we also have the SPACE analysis and Strengths – Weaknesses analysis for the company. Third is the analysis of our direct competitors. It has the brief introduction of our main direct competitors such as Samsung and HTC. We also show the position map as well as map of strategic groups. In addition, we also calculate for CPM (company profile matrix) to clarify about our company’s position. Lastly, section IV is about the final analysis and strategic decision recommendation. We made recommendation toward Apple base on IE Matrix, TOWS Matrix, Strategic Canvas and ERRC that we analyzed.
1
SECTION I: AN ANALYSIS OF THE INDUSTRY 1. Industry Analysis1 For this report, our group chooses smartphone industry to analyze. Since it is quite difficult to find the information about sales or market share of this industry in Thailand particularly, the data we show below about sales or market share is coming from worldwide data. First of all, as we all know, smartphone is not an old industry. Nowadays, it is in the Growth evolution. In 2007, Apple introduced the first version of IPhone and it is seemed to be the start of smartphone industry. Compare with feature phone, smartphone is still a small segment; however, the growth rate of it is amazing. In 2011, feature phone segment growth rate is just 10%, but with 20 times more than that, smartphone segment achieved the growth rate of 200%, according to IDC analysis (this growth rate is belonging to Thailand mobile phone market). With this potential of growing, smartphone segment is on its way to gain more segment share compare with feature phone. However, in 2011, because of smartphone is a high price product, its segment share is just nearly one-fourth of the whole mobile market. Secondly, we will analyze the smartphone market share by brands in 2011. 2 As shown in Figure 1-1 below, in Q4 2011, Apple took the leader position with 23.5% market share; Samsung is the second with 22.8%. It is due to the introduction of IPhone 4S made a big move in gaining market share for Apple. Also in this quarter, we can see the Blackberry’s market share is quite low with 8.2%. HTC is also gain the small share in total; however, HTC has big potential to become the main competitors of Apple. Please see the data details in Appendix 1 in page 43
1 2
http://www.idc.com/getdoc.jsp?containerId=prTH23393612 http://www.idc.com/getdoc.jsp?containerId=prUS23299912
2
Smartphone marketshare
Apple
23.5%
26.6%
Samsung Nokia Blackberry
6.5% 22.8%
HTC
8.2% Others
12.4%
Figure 1-1. Smartphone Market share worldwide by brand, in Q4 2011
In conclusion, even though the market share of smartphone segment still low, it has a huge opportunities in winning the market share from feature phone. The main reason is the convenient that a smartphone can give to the customer. Moreover, the number of competitor is increasing sharply; it will shift down the price in order to compete with each other. Lastly, the standard of living of people not only in Thailand but also around the world is increase. Therefore, owning a smartphone is easy. Smartphone is becoming the trend of people in modern world, especially generation Y. For Apple, smartphone industry is a competitive industry when there are many big competitors such as Samsung or HTC. Therefore, in order to compete and confirm its position, Apple must try to defense themselves and their position in customers’ mind.
3
2. Advantage Matrix
Figure 1-2. Advantage Matrix Smartphone industry completes in “specialized quadrant” because Smartphone businesses gain benefits from both economies of scale and differentiation .First of all, Smartphone industry gains economic of scale by increasing sales volumes. If the smartphone companies get more market share, the return on assets will increase. Moreover, smartphone industry can reduce production cost to achieve economic of scale. For example, smartphone industries move their factories to the low labor cost countries Such as China, India. Another is differentiation which smartphone industry can provide many kinds of product to different from others. Some smartphone companies provide more application than other. For example, Apple Company launches it IPhone that has a lot of applications and utilities. It provides more entertainment to customers, not only make a phone call. So, many smartphone companies try to come up with a new high tech phone.
4
3. Environmental Scanning a. PESTEL Analysis Political: Trading policy, free trade policy and open trade policy in Thailand help the smartphone industry which includes Apple to trade their products, especially IPhone. However Apple is facing with the unstable political in Thailand, importantly the protest in Bangkok, that affects the employees decrement. In additional, it also affects the consumption spending of Thai people as well. Economic: After the flooding situation, the economics of Thailand went down in fourth quarter of 2011. It also plunged 9% year-on-year3.This problem affects the domestic consumption decreased. Thai Government keep encouraging consumption spending to stimulus or boost up the economic, same as import and export goods and services. Interest rate is 3.25% in January, 2010 and exchange rate is 31.24. (Dated 11/06/2012) Social: As the changing of lifestyle of Thai young people, Apple has a great opportunity to increase its sales. Because of, young people in Thailand prefer smartphones such as IPhone, Sony, Samsung, HTC or Blackberry. Moreover, the increasing of income will increase the standard of living of Thai people. Then smartphones are now becoming the necessary devices for a modern lifestyle from the point of people view. Technological: Nowadays, the new generation of cellular telephony or 3G, as known globally has been uniquely designed to carry packet data. As mainly, speech is simply treated as a particular data application. Moreover, 3G systems will allow the end users more flexibility dealing with the traffic channel, delivering multiple services easily. Furthermore, ICloud is the newest and easiest way to manage customers stuff. Hence, end users can easily get their data automatically with the effortless and seamless.
3
http:///www.bangkokpost.com/business/news/280733/94-2011-golp-down-q
5
Environmental: As the trend of the green word today, the commitment to environmental friendly becomes the most important awareness to any firms and every industry. Insulting in all products is strictly followed same rules or regulation of environmental such as toxic substance removal and design greener products. Moreover, all the firms need to present that they use recycle materials whenever, possible in order to save the environment of us. b. Micro – environment Analysis
Marketing Intermediaries o
iStudio is an Authorizes reseller for Apple Company in Thailand.
o
Physical distribution: Apple Company paid 30% that is just a little higher than the costs of physical distribution for newspapers or the percentage that magazine publishers pay to get physical products to readers
o
Marketing service agency
o
Financial Intermediaries: Apple Company has used the banks as financial assistance to borrow the money for investment.
Suppliers o
Microsoft and Intel produced microprocessor and operating system for Apple Company.
o
Sony Co., Ltd is supplier of Apple Company for producing battery of Ipad.
o
Pegatron Co., they are a major supplier to produce iPhone.
o
FoxConn Co., they are a major supplier to produce iPad that they have a plan to expand and develop capacity in China.
Marketers need to monitor trends in prices of inputs and raw materials. If the price of inputs is increase, it will affect to selling price of products higher and sale will be decrease as well.
Competitors Analysis o
Apple Company has to respond need of customers or gain competitive advantage so that marketers need to analyze and do a research the competitors in same industry. The competitors of Apple Company are the smartphone line of Samsung, Nokia, LG, and HTC. Nowadays, Samsung become a major competitor of Apple Company, they have closely rate market share in smartphone market because Apple may has a weakness about their software that operating 6
system is close---users have to download through iTunes program. Almost applications of Apple Company are not for free but android system that is used for download applications of Samsung Company almost for free and easier to use.
Customers Analysis o
Customer needs and Expectations
Marketers need to focus on users that are the biggest customer group. Marketers have to understand customers want and need, for example nowadays users want a convenience to buy an application from iPhone and iPad because consumers have many choices in the market so the consumers have a chance to purchase other brands of smart phone and tablet. Thus, Apple Company needs to develop system to respond need of consumers for gaining more market shares. Designs are also important for a decision making of customers so that the company has to create new design to meet customers’ expectation such as adding more color than black and white. o
Customers Behavior
Cultural and social factors have influence to purchasing decision of customers such as income, education, and social status. Apple Company is the producer that is produces and provides advance and new technology products in the market so the customers of Apple will be the innovators and high income. Marketers have to up-to-date and understand customers in today well enough and also in the future to gain profit maximization. Age and occupation also have influence to customers decision making such as business man always use new technology products more than older people. o
Change in Customer Trends
Customers want to change their preference such as Thai teenagers want to use Blackberry more than iPhone because of chatting is important application for them and Blackberry can respond their need and easier to chat more than iPhone. However, Apple is always in the trend and Apple Company has to check the trends for improving and developing products to gain competitive advantage.
4. Five Forces Analysis “Five Forces” Model can tell whether the industry is attractive or not based on five factors which are degree of rivalry, threats of new entrants, threats of substitute product, threats of supplier’s power and threats of buyer’s power.
7
Please see the Five Force Analysis table in Appendix 2 page 43-44
Threat of Segment Rivals
Threat of Segment Rivalry No. of competitor 5 4 Exit Barriers
3
Competitor size
2 1 0 Fixed cost
Industry sale growth
Differentiation
Ability to expand
Figure 1-3. Threat of Segment Rivalry
Analysis: Industry of rivalries is high threat at 3.57. It shows that Apple Company has high competitiveness in its industry. Even though this industry requires a high degree of differentiation and ability to expand, the number of competitors, the growth rate of sales and the barriers is low. So, it makes a lot of compete in the industry.
Threat of New Entrants
Threat of New Entrants
Government regulation
Economies of scale 5 4 3 2 1 0
Access to distribution channels
Product differentiation
Capital requirements
Cost of switching costs
Figure 1-4. Threat of New Entrants 8
Analysis: The threat of new entrants is the average score at 2.5. It means that Apple Company has moderately threat of new entrants. The new entrants cannot enter to the market easily because the cost of switching costs and capital requirement is high, also the product differentiation is high as well. However, the government regulation channel is easy for new comer.
Threat of Substitute Products
Substitute products No. of actual and potential substitute 5
4 3 2 1 0
Switching cost
Technology in sustitute industry
Figure 1-5 Threat of Substitute Products
Analysis: Intensity of substitute product is moderate at 3.67. It means that mostly high number of actual and potential substitutes which make high threat to iPhone because customers can find other substitutes product then likely high rate of technology in substitute industries, it’s also threat. Anyway, the product switching cost is low so it makes customers can change their mind to buy others substitute. So, iPhone should concentrate on the differentiation of the product.
9
Threat of Supplier’s Power
Threat of Supplier's Power No. of suppliers 5 4 No. of substitute of suppliers
3
Forward Integration
2 1 0
Importance of supplier's quality
Switching costs
Differentiation of supplier's product
Figure 1-6 Threats of Supplier’s Power Analysis: The average score is moderately threat at 3.5. It means that the power of suppliers is middle. In cell phone industry has many suppliers and substitute of suppliers is few. For importance of supplier product is less. Moreover, switching cost is low. Differentiation of supplier’s product is low. In summary, the supplier’s power is average. Suppliers have some threat to affect cell phone industry. Cell phone industry should maintain good relationship with suppliers.
Threat of Buyer’s Power
Threat of Buyer's Power
Backward Integration
Price sensitivity
Switching costs for buyers
Buyers' size 5 4 3 2 1 0
Volumes of purchase
Product purchases
Products' quality to buyers
Figure 1-7 Threats of Buyers’ Power
10
Analysis: The average score is low threat at 1.71 which means that power of buyers is low with average score. On the other hand, it shows that the buyer’s size has larger number of phone. The volumes of purchase are slightly lower than average. However, the product purchase, switching cost, and buyer ability are slightly lower than average. Five Competitive Forces
Five Competitive Forces Degree of Rivalries 5 4 3 Buyers' Power
2
New Entrants
1 0
Suppliers' Power
Substitute Products
Figure 1-8 Five Competitive Forces Analysis: Overall smartphone industry is quite attractive. The main reason is because of the development of living standard. A cell phone is becoming a necessary thing for everyone. However, to access this industry, it is quite hard because the requirement for the differentiation and the high of switching costs for end users.
5. EFE Matrix EFE matrix
weight
rating
score
1. Technological development
0.06
4
0.24
2. Market for smartphone is expanding
0.08
2
0.16
3. Changing in life style of Thai people
0.09
3
0.27
4. Development and spread of 3G technology
0.05
3
0.15
5. More mobile applications are available
0.03
2
0.06
6. Many new suppliers in the market
0.04
4
0.16
Opportunities
11
7. Living standard of Thais people increase.
0.06
3
0.18
8. Open trade policy in Thailand
0.05
3
0.15
0.06
4
0.24
0.03
2
0.06
0.09
2
0.18
2. Threat from cheaper substitute products
0.07
1
0.07
3. Price war from other mobile brand
0.05
2
0.1
0.04
4
0.16
5. Increasing bargaining power of buyers
0.04
3
0.12
6. Unstable political situation in Thailand
0.03
2
0.06
7. External changes in government policies
0.03
3
0.09
8. Increasing bargaining power of suppliers
0.06
3
0.18
9. European market criticism for iTunes
0.02
3
0.06
10. Environmental friendly commitment
0.02
4
0.08
9. High switching costs of customer can decrease the ability to change brand name 10. Mobile phone is a necessary products nowadays Threats 1. Many competitors in Thailand smartphone market
4. Economic crisis will reduce demand for iPhone
2.77
Total Table 1-1 EFE Analysis
Analysis: Apple’s IPhone has the average ability to respond to external factors that affect to its products. In order to increase its ability, Apple should be concerned more about: - Threat 1 (Weight: 0.09, Rating: 2): The competitors in the market like Samsung or HTC. Samsung has big potential to be the leader of the industry. Apple should have more defensive and offensive strategy to protect their products. - Opportunities 3 (Weight: 0.09, Rating: 3): Pay more attention to improve the performance in order to satisfy the changing in lifestyle of Thais people - Opportunities 2 (Weight: 0.08, Rating: 2): Try to expand the market share to gain more profit and take the advantage of potential market expanding. - Threat 2 (Weight: 0.07, Rating: 1): Can reduce the price or increase the quality to gain more customer’s attractiveness in order to fight with cheaper substitute products. 12
SECTION II: AN ANALYSIS OF COMPANY/BRAND 1. Company Background4 Apple started in 1976 as a computer company. In the last decade, however, Apple has expanded into a very intricate company that specializes in much more than just computers. In 2001, Apple broke the barrier with the iPod, eventually becoming the dominant market leader in music players. As well, Apple joined the phone industry in 2007 with the IPhone, which has also been widely successful. Apple sells its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and resellers. In addition, the Company sells a range of third-party IPhone, iPad, Mac and iPod compatible products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals, through its online and retail stores. The Company sells to consumers, small and mid-sized businesses (SMB), and education, enterprise and government customers. The Company has designed a range of products, services and programs to address the needs of education customers. It also supports
mobile
learning
and
real-time
distribution
and
accessibility of education related materials through iTunes U, a platform that allows students and teachers to share and distribute educational media online. It sells its products to the education market through its direct sales force, select third-party resellers and its online and retail stores. It also sells its hardware and software products to enterprise and government customers. a. Vision5 “We believe that we are on the face of the earth to make great products and that’s not changing. We are constantly focusing on innovating. We believe in the simple not the complex. We believe that we need to own and control the primary technologies behind the products that we make, and participate only in markets where we can make a significant contribution. We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and
4
http://www.fundinguniverse.com/company-histories/apple-computer-inc-history/ http://www.brighthub.com/computing/mac-platform/articles/65346.aspx 5 http://www.anthonycilella.com/2011/10/11/apples-mission-vision-business-description/
13
meaningful to us. We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot. And frankly, we don’t settle for anything less than excellence in every group in the company, and we have the self-honesty to admit when we’re wrong and the courage to change. And I think regardless of who is in what job those values are so embedded in this company that Apple will do extremely well.” b. Mission Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.
2. Product Background6 IPhone Classic 2007
IPhone 3G
IPhone 3GS
IPhone 4
IPhone 4S
2008
2009
2010
2011
-Camera 3MP -Display 480 – by – 320 resolution - Has new white model
-Camera 5MP -Display 960 – by – 640 resolution
-Camera 8MP -Display 960 – by – 640 resolution -Having Siri. -Retina Screen
Table 2-1 Product Line
6
http://www.apple.com/iphone/compare-iphones/
14
3. BCG Matrix Please read the BCG Table Analysis in Appendix 3 page 45
Figure 2-1 BCG Matrix
1- IPhone
2- Ipad
3- IPod
4 – Mac
5- Software and Hardware
Analysis: For question mark box, Apple has “software and hardware” and “Mac” segments. It is the segments that content all the software and hardware products such as iTunes, Mac OXS etc. For this type, the suggested strategy should be where build it to be stronger or harvest. The reason is the segment still make profit, however, the market share is low. For Mac segment, it is still in this box because Mac has many strong competitors in the laptop industry. Apple should try to build it to become a strong segment in that industry. For star box, Apple has IPhone and IPad. These two segments nowadays are the most important segments of Apple. Even though the fact that these two segments are just introduced in market, they are strong since these two are the innovation products. Apple creates the wonderful devices that never have before. 15
These two segments gain the highest market share in the industry (IPhone 23.5% and IPad 58.2%) and also the growth rate of industry is really high (smartphone is more than 200% growth rate in 2011). Therefore, the appropriate strategy for this two is to build. By gaining more profit and more market share, Apple can be able to make these two become sources of fund for other activities. Lastly, for cash cow, Apple has IPod. From the beginning of introducing iPod, Apple created a big move in music player industry. Since then, Walkman or CD players lost the market share into Apple’s hand. However, nowadays, with the development of Internet and also smartphone, a music player is not attractive that much. Customers want a multi-function products rather than a single function. Therefore, IPod segment become the “cash cow”, they become the source of funds for Apple. Apple should use Hold strategy in order to gain the maximum profit of this segment since its market share now nearly three-fourth of the whole industry. In conclusion, this is not a healthy BCG portfolio. The main reason is that it is not balance between cash cow and star segment. Therefore, it will not have enough financial supporting in order to build the “star” segment as well as question mark segment. However, it is still have a good side when Apple doesn’t have any segment in dog, horse and dodo box. It shows that Apple doesn’t have negative growth in all SBUs.
4. Strategic Focus – Generic Strategy a. Strategic Focus Our company’s strategic focus is improving profitability.
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Figure 2-2. Strategic focus Objectives
Analyze and give specific example of activities your company has done
Add value
Apple company has a good brand image and they focus on products differentiation such as iPhone easier to use and good designed: Siri which has Thai language.
Change
Apple company develops iPhone products such as iPhone 4s
product mix
faster than iPhone 4 and they launch other products that are iPod, I pad to meet need of variety of users’ need.
Capital costs
Capital cost is low because they have manufacture in China. They produced their products from China so cost of land is low.
Fixed costs
They have low fixed cost because they hired employees in China where has low labor cost or outsourcing methods to reduce costs.
Variable cost
Cost of raw materials that they used is low because they deal with the LG company to produce their LCD monitor that can be help to reduce cost. If they produce LCD monitors by themselves, the cost will be high.
Increase price
IPhone’s price always higher than other so they can gain a lot of profit margin.
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b. Generic Strategy Our company’s generic strategy is Differentiation Analysis: our company used the generic strategy is differentiation, which served mass target market and differential cost advantage. Firstly, their products are for everyone. Their target customers are boarded. However, they use cost differentiation. The main reason is based on their ease-of-use. For example, IPhone is really easy use. Moreover, they are the innovations in smartphones industry and also tablet industry; therefore they can differ themselves from others. Lastly, Apple gains the good image in customers with a different way. They affirm themselves as a premium brand among its competitor.
5. Six Functional Activities7
Marketing activities o
Positioning
-
Using product differentiation, positioning the iPhone as the versatile, convenient, value-added device for personal and professional use.
-
Focus on the convenience of having one device for communication, but also music, pictures, and video, and full Internet access
o
Targeting
-
Primary customer targets are the middle-upper income professional to coordinate their busy schedules and communicate with colleagues, friends and family.
-
Secondary consumer targets are high school, college and graduated students who need one portable multifunction device.
Management activities o
How their employees work together and control in the organization
-
To plan our strategy we will meet monthly with the board of Apple, present our information, and make a proposal for continued marketing efforts. Before each meeting our team will meet in private, with each person presenting their own proposal based on the information they have learned. After the initial proposals, we will vote on the best one or come to a compromise. The final proposal sent before Apple is the result of that meeting.
7
http://marketingmixx.com/marketing-plan-2/203-marketing-plan-of-apple.html http://www.vertygoteam.com/apple_marketing_strategy.php http://blog.openviewpartners.com/apples-marketing-strategy-history-repeats-itself/
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Financing and Accounting -
Workers $5 incentive pays for every non reject phone they produce.
-
$10 per phone six sigma quality program.
-
Each worker $5000 each year for best practice training.
-
Our break-even analysis assumes wholesale revenue of $500 per unit variable cost of $250 per unit and est. fixed cost of $50 million. Based on these assumptions the break-even calculation is $50 million divided by $500 minus $250 equals 200,000 units sold.
Production and Operation -
Full year warranty along with an optional three-year Apple Care warranty.
Research and Development -
High research and development to enhance newest technology for customers.
-
This research will be done through surveys (via email campaign through portals such as, iTunes and other on-line application developed for the iPhone) and interviews (in Apple stores) with the same age groups listed before.
-
Apple Company outsources to produce their products in China with low production costs.
Information system -
To use control measures to closely monitor quality and customer service satisfaction consumers can contact the main headquarters about any possible technical problems by using Apple Customer Service Bar and a customer service phone number stored in the phone book.
19
6. SPACE Analysis Please read the SPACE Analysis score in Appendix 4 page 45 - 46
Figure 2-3 SPACE Analysis Analysis: Quadrant: AGGRESSIVE (+) It’s good in a strongly high Financial Strength at 5, slightly increase in Industry Strength at 4.8, and an increasing in Competitive Advantage at (-2). But it’s quite moderate in Environmental Stability at (-4). According to the result of SPACE Matrix, there are 2 strategies suggested: 1. Product development: because of Apple has the strong in term of financial, smartphone industry so Apple can invest in establish or innovate some new models of IPhone with more different features, in order to gain more competitive advantage. 2. Concentric diversification: according to there is quite moderate in environmental stability, so Apple should establish some new unrelated products, such as Apple Television. Even it is in different industry, Apple still can use some old related technology, which they used to support their products.
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7. IFE Matrix IFE matrix
weight
rating
score
0.1
4
0.4
2. Growing sales fast
0.07
4
0.28
3. Low debt
0.06
3
0.18
4. Wide range of innovative products
0.05
4
0.2
5. Large number of retails store
0.03
3
0.09
6. Market share large and global expansion
0.09
4
0.36
7. Ease-of-use
0.04
4
0.16
0.1
4
0.4
9. Massive number of application
0.05
4
0.2
10. Retina display, good quality screen
0.03
3
0.09
1. Legal proceedings
0.02
2
0.04
2. No immediate revenue reflection from IPhone
0.03
2
0.06
0.05
1
0.05
0.02
2
0.04
0.05
1
0.05
0.02
2
0.04
7. Battery lifespan is short
0.03
2
0.06
8. Easy to copy
0.05
2
0.1
0.04
2
0.08
0.07
2
0.14
Strengths 1. Brand name – Brand name of Apple is recognized and has good image in customer’s mind
8. Low cost – Apple placed its manufacture in China in order to lower the labor and manufacturing costs
Weaknesses
3. Incompatible software – IPhone cannot be used without iTunes. It is hard to install the music, videos. 4. Unstable leadership - Changing top management in high frequency, it comes with the change in revolution and strategy regularly 5. Limitation in design of products 6. Use interface - long term use will be uncomfortable
9. Apple is facing the strong criticism for environmental friendly. 10. IPhone less attractive to business enterprise Total
3.02 Table 2-2 IFE Matrix 21
Analysis: Total score is 3.02 (>2.5), it means that Apple has high strengths. In order to maintain its high strengths, Apple has to maintain its major strengths such as brand name or its easy-to-use feature. It will help Apple to keep its position and improve customers’ loyalty. Apple also can increase it strength of massive apple store. Moreover, to overcome the weaknesses, Apple should pay attention in major weakness such as design, improve integration with Microsoft office, and try to reduce the cost to be able to compete with others competitors.
22
SECTION III: COMPETITIVE ANALYSIS 1. Competitors Analysis
Figure 3-1: Competitors map Analysis: Samsung and HTC are the main direct competitors of Apple Company because they are in the mobile phone industry same as Apple Company and they used the same strategies such as all of them are smart phones and setting high price. ARMA, WELCOM, NEC, and T-Mobile are indirect competitors because they are in the mobile phone industry same as Apple Company. However, they have difference strategies when compare with Apple Company by using lower price strategy. For the case of Blackberry, since it emphasize on business phone and also keypad - phone, it becomes the indirect competitor of IPhone as well. For competitors from different industry that people can use this way substitute mobile phone such as E-Mail, MSN chatting, Skype, Public telephone, Home phone, Letters, and VoIP. These methods of communication may reduce and effect to sale of smart phones. 23
2. Map of Strategic Groups
Figure 3-2. Map of strategic group Analysis: According, to the map above shown that, Samsung and HTC are main competitors of Apple (IPhone). Moreover, for touchscreen features, Sony Ericsson and Nokia seem to be the second largest competitors of IPhone. They are on their way to catch up with the trend of consumers. If IPhone won’t change much, Nokia and Ericsson can become bigger competitors of IPhone. Furthermore, WELCOM, TMobile and NEC are just the indirect competitors, since they are not smartphones or high technology like IPhone, Samsung, or HTC. Lastly, even though Blackberry product is smartphone, but the strategy is much different comparing to Apple (IPhone), so it is also become a minor competitor that IPhone has to concern.
24
3. Competitive Grid Samsung Samsung is one of the famous electrician products from Korean. Over the long history, nowadays, Samsung become one of the leaders in digital appliances and media, semiconductors, memory and system8. Even though Samsung just entered the smartphones industry for not a long time, they had a big jump in this industry. Their smartphones like Galaxy note, Galaxy Y, Galaxy SIII are now becoming the good choices for consumer. We can tell that Samsung smartphone is the biggest competitor with IPhone and the leader in using Android OS. Like Apple, Samsung also use the skimming pricing strategy. The significant benefit is that they can gain the profits quickly. Moreover, it can be used to target “early adopters” of products or service. However, this strategy can just be employed for limited period. As the Market Challenger, Samsung is using many offensive strategies in order to be the market leader. They are using Flank attack, which is fighting with the weakness point of Apple. Samsung use lower price than Apple to attract customers who think that Apple’s price is quite high, they can still get the smartphone with similar feature and lower price. Moreover, Samsung also use encirclement attack. They attack Apple in many aspects together when they continuously launch new products together with many PR campaigns and advertisements as well as promotion. Samsung has a lot of potential in long run competition with Apple. At the current stage, Samsung gain a lot more market share from Apple since they introduced many model of smartphones and tablets. Samsung products are variety in design, in application and the price as well. Customers do not need to have high financial status to afford one smartphone. Moreover, if customer does not need all the features that offer, they can choose the lower version. It helps them to both save costs and be more satisfaction.
8
http://www.samsung.com/sg/aboutsamsung/corporateprofile/history.html
25
HTC Different from the two competitors above, HTC is the company that mainly concentrates on mobile phone. Founded in 1997, HTC focus on customize customers’ experience and provide to the customer the best phone they want. HTC’s smartphones and tablets are developed under Android OS like Samsung and Windows Phone Operating system. HTC is also the innovators in many aspects such as 4G smartphones in US, large 2.8” TFT touch – screen LCD display, etc. HTC is using value-based pricing strategy. HTC defended that they do not selling a “cheap” smartphone even there are many competitors in the market. They set the price based on the perceive value of customer rather than the exactly costs of the product. This strategy can help them meet the requirement and perception of customer about buying a smartphone. Recently, HTC announced that they had a new partnership with Beats – the world high-class headphone. By doing this, HTC wanted to increase their market share by targeting the teenage market. Moreover, it also attracts to the users who are music loving. Those customers can be satisfied with this strategy most. Lastly, HTC users might not care about the fashionable design like Samsung users; however, they are more interesting in the technological aspect and prefer to the strong hardware of the smartphone. HTC has its own strengths and potentials to become the big competitor of Apple. They have strong partners (such as Microsoft), therefore, they have ability to build a strong mobile phone. Secondly, they have good hardware design that will provide high quality products with high technology. In addition, HTC has strong setup of R&D so they can invest in many good potential projects. Like Samsung, HTC is a Market Challenger. By using its strength of strong hardware, HTC can attack Apple by using Flank Attack. The weakness of Apple about attractiveness for business enterprise will be solved by HTC. HTC can win the customers who try to find a good smartphone that can help them in business field. HTC smartphone also use many strategies in order to attract customer by many promotion campaign as well.
26
4. Competitive Profile Matrix – Competitive Strategic Posture Please read the CPM Score Analysis in Appendix 5 page 47
Competitive Strategic Posture Map Management experience
Market Share 0.6 0.5
Financial Position
0.4 0.3 Global expansion
0.2
Product Quality
0.1 0 Consumer service
Consumer Loyalty
Sales Distribution
E-commerce Organization structure
Blackberry HTC Samsung Apple
Figure 3-3 . Competitive strategic posture map Please see the CPM analysis Table in Appendix 4 Page…. Analysis: -Compare with other competitors, Apple has the highest competitiveness with the score of 3.51. -In the second place is Samsung .Samsung has the score of 3.04 which is quite high and they are the biggest competitor of Apple right now. -Blackberry is one of Apple’s competitors. However, because of its poor performance last few years, its score of competitiveness still far away from Apple with 2.10 -Lastly, HTC competitiveness score not to high but its opportunity of raising its score is high so it is also one of strongest competitor of Apple. According to this analysis, Apple does not have major weakness compare with other brands. They should use defensive strategy which is position defense in order to maintain the current position. Apple can use product innovation by creating 27
new features for smartphone, or improving services in order to fulfill customers’ needs and wants. Moreover, Apple can also use flanking defense. The weak point of Apple is the high price product. By using improving service or add value to the products, Apple can create in customers’ mind that high price products are coming with high quality products and post purchase services.
5. Product and Customer Matrix
Age Segments (market)
Kids (< 10 years old)
Teenagers (10 - 20 years old)
Adult ( 20 – 60 years old)
Elders ( > 60 years old)
Product/product line (Industry offer)
Communication
Music Player
Camera
Internet using
Mobile game
Figure 3-4. Product – Customer Matrix
28
Analysis: Strategy: Market Specialization Apple creates a smartphone that can satisfy the needs of one specific market segment which is adult (people from 20 to 60 years old). As we can see that, using IPhone, customer can do everything, not only communication (which is the basic function of a mobile phone), they can use IPhone as a music player, an 8MP – camera (IPhone 4S), can access to the Internet through Wi-Fi or 3G, and can also play games. To use such a multi-function mobile phone like IPhone, customer should be someone who has need of all the functions that are provided. Therefore, the main target customers of IPhone are people who are from 20 to 60 years old. He or she is a person who is a nearly graduate student or an employee; so he/she has his/her own need to use a smartphone like this.
6. Position Statement – Position Map Positioning Statement To technophile who love high technology product, Apple is a smartphone producer that provides the wonderful smartphone which is the innovation in design and in technology. Moreover, IPhone is an easy-to-use smartphone that can satisfy customers’ needs and wants. Positioning Map
Figure 3-5. Positioning map 29
Analysis: As showing in the position map above, we can see that Apple’s position is touch screen smartphone with the main purpose of entertainment. Apple’s IPhone is not suitable for business because of the duration of battery, the small screen size and also it is not supporting Word file which is really important for business objective. Samsung is lying between entertainment and business since they have many models to satisfy customer needs of both entertainment and business. Other brands such as Motorola, Nokia, Blackberry has different strategy and also different design with Apple. Most of their models emphasize on key pad mobile phone; therefore they could be the indirect competitors of Apple.
30
SECTION IV: FINAL ANALYSIS AND STRATEGIC DECISION RECOMMENDATION 1. Generic Routes to Competitive Advantage Creation Customer Valued Uniqueness Uniqueness Drivers
Product Differentiation Promotional Differentiation Brand Differentiation Distribution Differentiation Pricing Differentiation Total
Weight
Rating (1-10)
Value
0.3
8
2.4
0.15
7
1.05
0.25
10
2.5
0.1
6
0.6
0.1
9
1.8
1
8.35
Cost Relative To Competitor Cost Drivers
Economies of Scales Experience Degree of Integration Policy Choices Location Total
Weight
Rating (1-10)
Value
0.2
2
0.4
0.15
4
0.6
0.3
1
0.3
0.1
3
0.3
0.25
2
0.5
1
2.1
Figure 4-1 Generic Routes
31
Analysis: Market and Financial Advantage Apple is in the box Market and Financial advantage with score 8.35 in customer valued uniqueness, and score 2.1 in cost relative to competitors. It is the best position since Apple has competitive advantage of both customer valued uniqueness attribute and cost relative to competitors. Apple should increase more product differentiation. Moreover, concern about the price differentiation. In cost relative to competitors, Apple should pay more attention to different of location. Lastly, try to gain more economical of scales.
2. IE Matrix9
Figure 4-2. IE Matrix Division
Sales
1. IPhone 2. IPad 3. Mac 4. IPod 5. Software, hardware
$47,057 $20,358 $21,783 $13,767 $5,284
108,249
9
Percentage Sales 43.47% 18.81% 20.12% 12.72% 4.88%
Profits $7,480 $5,372 $5,121 $4,783 $3,166
Percentage Profits 28.86% 20.72% 19.76% 18.45% 12.21%
EFE score 2.77 3.36 2.66 1.92 2.02
IFE score 3.02 3.12 2.35 3.21 2.04
100% $25,922 100% Table 4-1 IE Analysis Table
http://www.sec.gov/Archives/edgar/data/320193/000119312511282113/d220209d10k.htm
32
Analysis According to the matrix above, Apple has 5 divisions in the company which are IPhone, Ipad, Mac (laptop and PC), IPod and software, hardware. IPhone leads the sales revenue of Apple in 2011 with 43.47%. It is due to the introduction of IPhone 4S make the huge increase in revenue. IPhone also contributes 28.86% of profit for Apple. With the EFE score of 2.77 and IFE score of 3.02, Apple should use build strategy for this segments in order to maximum its ability to generate the profit for the company. Similarly, IPhone also can use build strategy for IPad since it has high potential in growing sales and profit. For other 3 SBUs, Apple can use hold strategy in order to maintain the profit that is generated from this three segments. Especially in software and hardware segment, even though its own net sales is not that high portion in total sales, but it contribute the profits a lot because it does not require much cost like other segments
3. TOWS Matrix As we have analyzed the environmental threats and opportunities with the company’s weaknesses and strengths in IFE and EFE, some important factors in IFE and EFE will be matched and used in TOWS Matrix in order to develop strategies as follows: S-O Strategies are developed to maximize both strengths and opportunities: S6 – Market share large and global expansion O2 – Market for smartphone is expanding S - O Strategy 1: Market development – Apple should try to grab the opportunity of market high growth rate of smartphone and Apple high market share gain more share S7 – Ease-of-use O3 – Changing in life style of Thai people S – O Strategy 2: Market Penetration - Apple should use the strength of easy to use to attract more Thais people. The opportunity of changing lifestyle of Thais people will make Apple easier in catching the attention of Thais people 33
S1 – Brand name – Brand name of Apple is recognized and has good image in customer’s mind O9 – High switching costs of customer can decrease the ability to change brand name S – O Strategy 3 – Market Penetration – Apple can increase its brand image and catch the opportunity that nowadays, switching cost of a smartphone is high The more customer loyalty Apple can make, the more opportunity to expand.
S-T Strategies are developed to maximize own strengths while minimize threats. S8 – Low cost – Apple placed its manufacture in China in order to lower the labor and manufacturing costs T8 – Increasing bargaining power of suppliers S – T Strategy 1: Backward Integration – By doing backward integration, Apple can overcome the threats of suppliers’ bargaining power. Moreover, it can reduce the cost more. S1 – Brand name – Brand name of Apple is recognized and has good image in customer’s mind T9 – European market criticism for iTunes S – T Strategy 2: Market Penetration: Apple can use its reputation to reduce the criticism from European. Many people around the world is addicted to Apple brand name, it can be used to prove for European and change their mind. S3 –Low debt S8 – Low cost – Apple placed its manufacture in China in order to lower the labor and manufacturing costs T4 – Economic crisis will reduce demand for iPhone S –T Strategy 3: Backward or forward Integration: Apple can base on its strength of low cost of producing and low debt and try to imply backward or forward integration in order to minimize the cost and overcome the Economic crisis
34
W-O Strategies are developed to minimize own weaknesses while maximize opportunities. W3 – Incompatible software – IPhone cannot be used without iTunes. It is hard to install the music, videos. O1 – Technological development W – T Strategy 1: Joining the partnership – this one will help Apple to get more benefit from applying new technology and be able to compatible with other software; so that will make customer easier in set up. W2 – No immediate revenue reflection from IPhone O8 – Open trade policy in Thailand W – O Strategy 2: Market penetration: Gain more benefit from free trading policy from Thailand will help Apple to gain more revenue. Apple can try to do more promotion to increase revenue.
W-T Strategies are developed to minimize both weaknesses and threats. W9 –Apple is facing the strong criticism for environmental friendly W7 – Battery lifespan is short T10 – Environmental friendly commitment W – T Strategy 1: Use solar energy battery in order to reduce both weaknesses and threats that come from environmental friendly commitment. W8 – Easy to copy T2 – Threat from cheaper substitute products W – T Strategy 2: Apple should pay more concern in getting the legalization documents such as copy right, in order to reduce the threats of substitute products and copycat products.
35
4. Strategy Canvas
Strategy Canvas 10 9
Offering Level
8 7
6 5 4 3 2 1 0
Competitive Factors Samsung
Blackberry
Apple (before ERRC)
Apple (after ERRC)
Figure 4-3. Strategic Canvas Analysis: As showing in the strategy canvas above, Samsung is represent for the direct competitor with IPhone since it is in the same industry and similar strategy with IPhone. Blackberry is indirect competitor because even it is in the same industry with IPhone but it uses different strategy comparing to IPhone. Compare with Samsung, Apple has many similar features such as the speed, the camera quality. Others features, IPhone and Samsung even not in the same level but it is still similar and have close gap in offering level. For Blackberry, because of different in strategy, the offering levels of these competitive factors also different. However, the difference is not big and Blackberry can be able to catch up. In conclusion, after analyzing those factors, Apple IPhone is in RED OCEAN. It is using similar strategy in order to fulfill the customers’ needs and 36
wants. It does not have any different feature in other to create the new market space. In the past few years, we can see that Apple is in Blue Ocean when Apple first introduced such a wonderful smartphone like IPhone. However, with the developing of technology, Samsung and HTC are on their way to catch up with Apple and turn the market in to RED OCEAN. Therefore, if Apple wants to become the innovator again, they have to think of something new in order to attract customer and meet the customers’ expectation.
5. ERRC Grid As mention above, Apple now is in RED OCEAN market. Therefore, in order to create innovation value and feature, we will use ERRC Grid. By using this tool, we can recommend to the company to follow this grid and they can jump again into BLUE OCEAN if it applicable.
REDUCE Price of application Battery lifespan
ELIMINATE Bluetooth EDGE feature
RAISE
Price Speed Camera quality Screen size CREATE Solar energy battery Water resistant Table 4-2. ERRC Grid
37
Analysis: As we know, in order to create a new generation of smartphone is not easy. The table above is showing our suggestion to Apple to create the BLUE OCEAN, to gain more profit as well as market share. First of all, Apple can eliminate some unimportant function. Bluetooth and EDGE features are not that necessary to people nowadays. With the development of 3G or 4G networks, these two functions seem to be useless. Therefore, eliminate these two functions will not effect on the whole product at all. Secondly, Apple should raise the speed, camera quality and screen size in order to satisfy customers’ needs and wants. Nowadays, these features are almost the same or even lower compare to other brands such as Samsung. Therefore, in order to add value for the new products, Apple should improve such kind quality. About the price, because we emphasize on create the new features as mention below; so, increasing the price in order to gain the profit is the only way to cover the costs of producing those function. Importantly, we suggest about the new features that would help Apple to jump into the new market space. There are two suggestions which are using solar energy battery and water-resistant features. For solar energy, nowadays, saving limited source of energy and using unlimited source is one of the most important strategies all around the word. By using solar energy for IPhone, Apple will catch the good image and also help to save the world. For water-resistant feature, it will attractive customer because when it is water resistant, it will make customer no worry about getting wet and broken down the IPhone if it get wet. These two features are not that hard to imply. Many other products in other industries such as camera (using water-resistant), calculation (use solar energy) already use these two features; therefore, customers know how it is, how it works. We believe that if these two features can be applied, it will be a huge step forward of Apple. By using solar energy battery, Apple can be able to reduce the fixed battery lifespan, make it become the alternative battery for IPhone, not the main one. Because at this current stage, the battery lifespan of Apple is not good compare with others and it is the point that makes customer unsatisfied with IPhone. Moreover, nowadays, most of the applications for Android are free. Therefore, in long run, to increase the attractive points and be able to compete with Android, Apple should reduce its price of applications as well. 38
6. Recommendations According to the analysis we have done in this report, we would like to make some recommendations based on the current situations of Apple In overall, Apple should implement Build strategy for IPhone segment as it contributes largest in company revenue and profit. Moreover, IPhone has a huge opportunity in growing sales because the market growth for smartphone is quite high. . As Apple cannot totally control the threats of new entrants or threats of rivalry, Apple should be more concern in defensive strategy with positioning defense or bypass attack since there are many big competitors in the market such as Samsung, HTC or Nokia. They can try to minimize the cost of manufacture or try to have as many as possible innovation products in order to attract customers and fulfill their expectations. The following are specific recommendations that focus on strategic focus, generic strategy and grand strategy: Strategic Focus: Apart from improving performance by improve profitability that we have mentioned above, we suggest that Apple can improve its performance by increase sales also. They can either launch a new product to attract more segments or create alliances in order to gain more share. By doing this strategy, Apple can maintain its position as a leader and the innovator of the industry. Generic Strategy: We still recommend that Apple should continue to use Differentiation strategy as their generic strategy. Apple could gain a huge success like current time mostly based on its differentiation. By affirm themselves as the premium brand among their competitors, Apple gain a lots of reputation and customer loyalty. Moreover, by doing some significantly difference in distribution channel such as open uStore in many universities, Apple move their products closer to the target segment of them. It gained a lot of success nowadays; so, using differentiation is the best choice for Apple. Grand Strategies: As the figure below, we analyze that Apple is in Quadrant I, which has strong competitive position and rapid market growth. This is the excellent strategic position, Apple should pay attention in the current markets and products; however, they can take risks when necessary in order to gain more return. The suggestion strategies for this quadrant are similar with 39
what we have recommended throughout this report. First, Apple can use Market Penetration in order to gain more customer loyalty to protect their position at current time. Next, by using Product Development, Apple can attract more customers because they can create toward what customers’ expectation. By doing this strategy, somehow Apple create a new Blue Ocean and become the first mover to a new market space. On the other hand, Apple can try some integration strategy so that they can minimize the cost and gain more profit by economies of scale and prevent the threats of new entrants as well.
Figure 4-4. Grand Strategy
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REFERENCES Kathy Nagamine. (Feb 06, 2012(Smartphone Market Hits All-Time Quarterly High Due To Seasonal Strength and Wider Variety of Offerings. IDC, [from] http://www.idc.com/getdoc.jsp?containerId=prUS23299912 (Mar 22, 2012) Thailand Mobile Phone Market Remained Resilient in 4Q 2011 despite the Disastrous Floods, says IDC. IDC, [from] http://www.idc.com/getdoc.jsp?containerId=prTH23393612 (Feb 20, 2012). Q4 2011 GPD down 9%. Bangkok post. [from] http:///www.bangkokpost.com/business/news/280733/94-2011-golp-down-q International Directory of Company Histories, Vol. 36. St. James Press, 2001,[from] http://www.fundinguniverse.com/company-histories/apple-computer-inc-history/ Michael Dougherty (May 25,2010). The History of Apple, Inc. Bright Hub, [from] http://www.brighthub.com/computing/mac-platform/articles/65346.aspx (Oct 11, 2011). Apple’s Mission, Vision, and Business Description. Anthony Cilella, [From] http://www.anthonycilella.com/2011/10/11/apples-mission-vision-businessdescription/ Compare IPhone models. Apple, [from] http://www.apple.com/iphone/compareiphones/ Odessa (June 16, 2012). Apple To Regain Tablet Market Share From Android In 2012. The Apples Bites. [from] http://theapplebites.com/apple-regain-tablet-marketshare-2012/ Framingham (Jan 11, 2012). PC Market Stumbles on HDD Shortage While U.S. Market Sees Worst Annual Growth Since 2001. IDC, [from] http://www.idc.com/getdoc.jsp?containerId=prUS23261412 (Oct 27, 2011). Annual Report. Apple Inc., [from] http://files.shareholder.com/downloads/AAPL/2042018267x0xS1193125-11282113/320193/filing.pdf
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The World’s Most Politically Stable Countries and Most Politically Unstable Countries. Expatinvesting. [from] http://www.expatinvesting.org/the-worlds-mostpolitically-stable-countries-and-most-politically-unstable-countries/ Inflation rates (Consumer Prices). The World Factbook. [from] https://www.cia.gov/library/publications/the-world-factbook/fields/2092.html Jack Loo. (May 15, 2012) Thailand to outspend Singapore in IT: IDC. MIS Asia. [from] http://www.mis-asia.com/tech/industries/thailand-to-outspend-singapore-in-itidc/ Kasi (Aug 23, 2012) Marketing Plan of Apple [from] http://marketingmixx.com/marketing-plan-2/203-marketing-plan-of-apple.html Apple Marketing Strategy [from] http://www.vertygoteam.com/apple_marketing_strategy.php Tien Anh Nguyen (June 14, 2011) Apple’s Marketing Strategy: History Repeat s Itself. Open view blog [from] http://blog.openviewpartners.com/apples-marketingstrategy-history-repeats-itself/ Samsung Corporate Profile. Samsung [from] http://www.samsung.com/sg/aboutsamsung/corporateprofile/history.html
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APPENDIX Appendix 1: Market share of smartphone industry in Q4, 2011 and FY 2011
Appendix 2: Five Forces Analysis Score Five Forces Analysis
Degree of Rivalries o
There are many number of competitors
(4)
o
Large competitor size
(5)
o
Rapid sale growth in industry
(2)
o
Easily to expand
(4)
o
A lot of differentiation
(2)
o
High fixed cost
(4)
o
High exit barriers
(4)
Intensity of rivalries is high with average score equal to 3.57 Recommend Strategy o
The company has to focus on quality and differentiation.
Threats of New Entrants o
Moderate economies of scale
(3)
o
Many product differentiation
(2)
o
High capital requirements
(1)
o
High switching cost
(2)
o
Moderately to access to distribution channels
(3)
o
Low government regulation
(4)
Likelihood of new entrants is middle with average score equal to 2.5
43
Recommend Strategy o
The company should develop the better post-purchase planning to keep existing customers.
Substitute Products o
Many actual and potential substitutes products
(4)
o
More technology in substitute industries
(5)
o
High switching cost
(2)
Intensity of substitute products is middle with average score equal to 3.67 Recommend Strategy o
The company should concentrate on product differentiation.
Supplier Power o
Moderate of the number of supplier
(3)
o
No substitutes of Supplies
(5)
o
Supplier’s quality is very important
(4)
o
Supplier’s product is very differentiate
(4)
o
High switching cost
(4)
o
Low ability of suppliers for forward integration
(1)
Power of suppliers is middle with average score equal to 3.5 Recommend Strategy o
The company has to maintain a good relationship with the existing suppliers.
Buyer Power o
Large buyers’ size
(2)
o
Small volumes of purchase
(1)
o
Purchasing in differentiate product
(2)
o
The importance of products’ quality to buyer is high (1)
o
High switching cost for buyer
(2)
o
Moderate price sensitivity
(3)
o
Low buyer ability for backward integration
(1)
Power of buyers is low with average score equal to 1.71 Recommend Strategy o
The company has to reduce price while maintain good quality and product differentiation.
44
Appendix 3: SBU Calculation Table
SBU
SBU Sales &
Competitor’s SBU
Market Share
Sales &Market Share
Market RMS
Growth Rate
Mobile
Sale=
Competitor: Samsung
phones
MS=23.5%
Sale=
Tablet
Sale=
Competitor: Samsung
(Ipad)
MS=58.2%
Sale=
Music
Sale=
Competitor: Sony
1.03X
19%
1.50X
14.3%
3.18X
5%
0.47X
14.8%
0.08X
12%
MS=22.8%
(IPHONE)
MS=70%
player
Sale=
MS=38.8%
MS=22%
(iPod)
Laptop
Sale=
Competitor: Acer
(MacBook)
MS= 10.92%
Sale=
Software
Sale=
Competitor: Microsoft
and
MS=7%
Sale=
MS=23.02%
MS= 92%
harware
Appendix 4: SPACE Analysis table
Values
Identify Cause
Environmental Stability (ES) Political stability (low) not good for the industry Rate of inflation (low) good for the industry Entry barriers (high) prevent new entrants well Competitive pressures (high) high pressure => not stable Technological changes (high) => not stable
-5 -3 -2 -4 -6
Massive protest in 2009, changing government10 Inflation rate in 2010 is 3.3% 11 To enter smartphone industry require high technology and costly A lot of pressure from substitute industries Technology changing very quickly
10
http://www.expatinvesting.org/the-worlds-most-politically-stable-countries-and-mostpolitically-unstable-countries/ 11
https://www.cia.gov/library/publications/the-world-factbook/fields/2092.html
45
Environmental Stability is quite moderate with average score = -4 Industry Strength (IS) Growth potential (high) => good for the industry Profit potential (high) => good for industry Resource utilization (high) => lots of attention by Thais ppl
5 5 4
Market entry ability (low) => prevent new entrants
5
Productivity (high) => high ability to growth
5
Demand of smartphone is increasing More developing technology will increasing more gain EOS Thailand is the one of region’s rising smartphone stores12 Not easily to enter and compete with the strong competitors like Apple, Samsung, HTC and Sony Yearly updated of smartphone
Industry strength is slightly high with average score = 4.8 Financial Strength (FS) High return on invest
5
Low debt
6
High liquidity
4
High capital reserves High rate of cash flow
5 5
ROI(company) = 40.76, (industry) = 13.85 Debt to equity ratio (Apple) = 0.13, (industry) = 1.51 Current ratio(company) = 2.98, (industry) = 1.51 Apple has $97.7 billion in cash reserve Company = 13.8x
Financial strength is strongly high with average score = 5 Competitive Advantage (CA) Market share (high)
-1
Product quality (high)
-1
Customer loyalty (high)
-1
EOS (high)
-3
Technological breadth (high)
-2
Vertical integration (low)
-4
In May 2010, MS of Iphone is 40% Apple’s products gain good product quality Nowadays, many people addicted to Apple brand Apple’s economics of scale is high Apple’s products have many wonderful features with high technology Apple controls and has big impact on its retailers and wholesalers around the world
Competitive advantage is increasing high with average score = -2 Calculate the X and Y axis: Y= FS + ES = 5 -4 = 1 X = CA + IS = -2 + 4.8 = 2.8
12
http://www.mis-asia.com/tech/industries/thailand-to-outspend-singapore-in-it-idc/
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Appendix 5: CPM score analysis Critical
Wt’d
Success
Apple Ratig
Factors Market
Wt’d
Samsung Ratig
Score
Wt’d
HTC Ratig
Score
Wt’d
Blackberry Ratig
Score
Wt’d Score
0.15
4
0.6
3
0.45
2
0.3
2
0.3
0.08
3
0.24
3
0.24
3
0.24
2
0.16
0.17
3
0.51
3
0.51
2
0.34
2
0.34
0.12
3
0.36
3
0.36
2
0.24
2
0.24
0.10
4
0.4
3
0.3
2
0.2
3
0.3
0.06
3
0.18
2
0.12
2
0.12
2
0.12
0.06
4
0.24
3
0.18
3
0.18
2
0.12
0.10
4
0.4
3
0.3
3
0.3
2
0.2
0.10
4
0.4
4
0.4
4
0.4
2
0.2
0.06
3
0.18
3
0.18
2
0.12
2
0.12
Share Financial Position Product Quality Consumer Loyalty Sales Distribution Organizatio n structure Ecommerce Consumer service Global expansion MGT experience Total
1
3.51
3.04
2.44
2.1
Appendix 7: PowerPoint Slides and CD
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