ContentsIntroduction.........................................................3

Competitive Advantage Strategy Model:................................5

Strategic Group Mapping:.............................................6

PESTLE Framework:....................................................8

Political:........................................................8

Economical:.......................................................9

Social:..........................................................11

Technological:...................................................11

Legal:...........................................................13

Environmental:...................................................13

INDUSTRY ANALYSIS...................................................14

Threat of new entrants:..........................................14

Bargaining Power of the Buyers:..................................15

Bargaining Power of the Suppliers:...............................16

Threat of substitutes:...........................................16

Rivalry among competitors:.......................................17

RESOURCE/COMPETENCY FRAMEWORK.......................................18

Resources:.......................................................18

Competences:.....................................................19

VALUE CHAIN ANALYSIS................................................20

Secondary Activities................................................20

Infrastructure:..................................................20

Human Resource Management:.......................................20

Procurement:.....................................................21

Primary Activities:.................................................21

Technological Development:.......................................21

Inbound Logistics:...............................................21

Outbound Logistics:..............................................22

Marketing and Sales:.............................................22

Operations:......................................................22

Conclusion..........................................................23

Introduction

Apple Inc. is a multinational that produces electronic and

software equipment for consumers and business professionals.

Currently, Apple has 380 showrooms and display centers in more

than 15 countries world-wide (Apple.com, 2012). Apple is now not

only considered to be a pioneer of massive technological

advancements, but its products are also regarded as fashion

statements the world over. From the iPhone and the iPad to the

iMac, Apple devices and software deliver unparalleled processing

power and graphic properties to its users.

Perhaps the greatest and the most definitive indication of

Apple’s success is its market penetration rates for its devices

such as the iPod, iPhone and the iPad. According to a reliable

source, Apple devices that run on Apple’s proprietary operating

system, the iOS, have an astounding market share of 62.5% while

competitors such as the Android operating system have a falling

market share as compared to last year (Chloe, 2012). Apple

started off in 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne

as Apple Computers (Carlton, 1998). By 2006 Apple Computers had

changed its name to Apple Inc. as its focus shifted from

computers to other consumer electronics including the iPad, iPod

and the iPhone which played the most vital roles in Apple’s

success and helped it in becoming a multinational giant (O’Grady,

2009).

Since its entry in to the tablet market with the iPad, Apple’s

sales have soared exponentially over the years and it has created

strong brand loyalties among the consumers. With other nifty

well-placed value added services, Apple’s products are considered

to be among the best both functionally and aesthetically

(BBC.co.uk, 2010).

In this report, we will be using the competitive advantage, group

framework, PESTLE analysis, industry analysis,

resource/competence framework and the value chain strategy models

to analyze Apple iPad’s business strategy.

Competitive Advantage Strategy Model:

The competitive advantage strategy model makes use of Bowman’s

Strategy Clock which is based on Porter’s Generic Map which

defines how a company could turn its pricing to its advantage and

make it strength. According to Porter’s Generic Map a company’s

pricing could be on one of the three options; cost leadership,

differentiation or focused differentiation (Hill & Jones, 2012).

iPad is a highly priced marvel of technology with competitive

advantages as the Retina display, Facetime and the best

aesthetically pleasing tablet currently available in the market.

If we look closely at the iPad, we can come to the conclusion

that Apple has strongly been following the focused

differentiation strategy for the iPad. The reasons for this

conclusion include the fact that the iPad runs on the proprietary

operating system known as the iOS which is not compatible with

any other version of any other operating system in the market

which means that applications built for an Apple device can only

be run on an Apple device running iOS. Apple has been delivering

very hi-end, highly aesthetically appealing iPads from the first

generation iPad and it has justified its pricing by giving

exceptional customer support, and value added services such as

the option of getting the name of a loved one or an inscription

engraved into the back of its iPad device. iPad was also the

first tablet to come out with the option of inserting and using a

regular mobile phone SIM to use 3G and non-3G data networks

(Smith & Collins, 2002). Another reason for concluding that

Apple uses the focused differentiation technique for its iPad

range is the fact that before the introduction of the iPad,

tablets were never considered to be the most essential accessory

or technological piece of equipment for the fashion-savvy

individuals, or the professionals that demand instant attention.

iPad has carved its own way into the market and has created its

own demand without any pre-existing demand for such technology

(Okonkwo, 2007).

Apple offers unique and innovative products such as the iPad at a

higher price than its competitors but it also gives the option of

getting the iPad on a contract with O2, 3, T-mobile, Vodafone and

Virgin Mobile to the consumers in UK (Richmond, 2011) which makes

it affordable and this has helped in building unshakable brand

loyalty among the consumers.

Strategic Group Mapping

The strategic group mapping is a tool that helps businesses

decide where they want to enter in the current market. This tool

also helps to identify the advantages that the competitors have

over the products of the company and where the company can

capitalize with its product offerings. Companies can also

estimate the saturation within a particular market using the

strategic group mapping tool (Porter, 1980).

The price and differentiation comparison for the top five tablets

available in the market as of 2012 is shown above in the

strategic group map. Sony Tablet S offers high quality, style

options and appearance customizability whereas the Samsung Galaxy

Tab 10.1 has the advantage of only the largest screen size

currently available for a tablet computer. The Asus Epad

Transformer has brought something unique to the table by giving

Apple

SamsungGalaxy tab

Sony Tab

ASUS Dell Di

ffer

enti

atio

n

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5Price

the consumers the option of attaching a keyboard with the tablet

and turning it into a full-fledged touchscreen laptop. The Dell

Streak 7 has got the lowest ratings as it is laggy, isn’t as good

looking as the others and is priced very highly for its features

giving almost no addition to its real value. Finally, iPad is at

the top of the ladder thanks to its ultra-bright Retina display

technology, strong consumer base, designing supremacy, quality

finish and brand loyalty (PCMag, 2012).

PESTLE Framework:

Political

Economical Social Technological

Legal Environmental

Favorable export policies.

iPad’s manufacturing cost.

Resentments because of outsourcing among public.

Mobile networks.

Child labor laws.

Environmentprotection laws.

Faster processors for mobile devices.

Rising costs of oil, silverand aluminium.

Newer inventions in 3D technology.

Jail-breaking

Political:

1. Favorable export policies:

The Information Systems Technical Advisory Committee (ISTAC)

advises the Bureau of Industry and Security, the key body

behind the export regulations in the US (McDaniel, 1993), on

the export procedures and policies of high performance

computing devices and other devices that are on the high-end

of the technological curve. The ISTAC has kept a favorable

stance towards the exports of high end devices, such as the

iPad, as these devices contribute almost 20% of the US’s

gross exports. This, once again, is a positive sign for

Apple’s exports of iPads to other countries. The office of

the United States Trade Representative (USTR) also makes

sure that there are favorable trade treaties in place for

businesses in the US (Destler, 2005).

Economical:

1. iPad’s manufacturing costs:

iPad’s manufacturing costs are low and due to the high

demand in the market, its selling price is good.

2. Rising cost of oil, silver and aluminum:

As iPad uses stainless steel, aluminum and silver in its

circuitry, body, and other components this price increase

would mean that the control price of iPad will have to be

increased. Apple will have to offer more value-added service

to the consumers to justify the rise in the per piece price.

Social:

1. Public resentment because of outsourcing:

The public always resents the outsourcing process of a

company as it means that jobs would be cut and it gives a

negative impression of the company. It tells people that the

company is more interested about saving money rather than

giving back to the society.

Technological:

1. Mobile Networks:

The short time difference between the introductions of

better networks point towards the fact that new technology

is just around the corner. Apple should be ready for these

advancements in technology with compatible hardware in its

new iPads.

2. Faster processors for mobile devices:

Currently the iPad uses the A5X core chip as its main

powerhouse but as the competitors such as Samsung and HTC

are moving towards integrating quad-core chips by Qualcomm

and other vendors in their devices, iPad might find itself

out-sped by these new generation chips

3. Newer innovations in 3D display:

Currently, Apple iPad is equipped with the best display

available, which they call the Retina display. But this

might be obsolete pretty soon as competitors such as LG and

HTC have come up with integrated 3D cameras in their devices

and pretty soon HTC has announced to implement 3D display

technology like the one used in Nintendo DS 3D in its

tablets.

Legal:

1. Child labor laws:

As Apple is outsourcing most of its production process, it

is essential that it keeps a close watch on the ages of the

employees that the outsourced company uses to stop any

possible negative advertisement just as the one that Nike

had to go through (Ferrell, 2011).

2. Jailbreaking:

Recently a court in the United States legalized the process

of jail-breaking through which a user could use simple

software available on the internet to modify the internal

programming of the iPad to get access to administrator level

commands. This allows the user to install pirated software

which ultimately affects the sales and revenue generation

that Apple made through the App Store.

Environmental:

1. Environment protection laws:

The US Environmental Protection Agency (EPA) have come up

with more effective, stringent laws for the companies where

hazardous waste disposal and nature preservation is

concerned. These laws keep getting tighter and tighter

because of the looming global heating phenomenon and the

efforts been made to stop such an event taking place. Apple

has to make more effort to ensure that all the waste is been

disposed off properly and well within the predefined laws.

INDUSTRY ANALYSIS

Anticipating new competitors which might be better than the

company, external factors that directly or indirectly affect he

buying power of the consumers and the sway in the price of the

suppliers, a product that might be considered as a better or

cheaper alternative to the company’s product and finally the

never ending rivalry between competitors, all of these things

make up Porter’s five forces. Using Porter’s model of these five

forces, we can identify how the overall industry is going to

react to new problems and what the current entry/exit barriers

are for that industry (Stonehouse& Campbell, 2004).

Threat of new entrants:

Apple’s iPad falls directly in the high entrance barrier and with

a low exit barrier, which means that in the computer tablet

industry new competitors can only enter with high investment and

technological achievements and can exit easily if their products

fail. The tablets are costly to make as they require special,

controlled climate, very highly skilled workforce to make the

components of the tablets or if these components are bought, they

must have high quality control checks. A new entrant has to

invest a lot money, time, capital, emotion and resources to enter

into such a market and compete directly with a giant figure such

as the Apple iPad. The threat of new competitors is virtually

non-existent as all the major technological players including

ASUS, HTC, LG, BlackBerry, Samsung and Sony are already in the

industry.

Bargaining Power of the Buyers:

Also known as the market of outputs, the bargaining power of the

buyers means the customers’ power to pressure the company for

better products. This also includes how the customers react to

change in price of the iPad and what features they are expecting

of the newer iPads. As the iPad already has the most differential

advantage out of all the tablets available in the market today,

Apple has currently nothing to fear. But as new generation

microprocessors are becoming readily available such as the ones

found in the HTC Quattro and Acer Iconia, iPad’s current A5X

processor that is only dual core looks very frail in comparison

to these devices. iPad’s customers will expect the next

generation of iPads to finally get a quad core processor with

more RAM and other features that the iPad lacks such as a

removable battery, better graphics performance, and the ability

to send and receive files over Bluetooth irrespective of the

operating system in other devices. All of these lacking features

make the customers stronger and justifies their claims that the

iPad might just not be good enough.

Bargaining Power of the Suppliers:

The bargaining power of the suppliers, also known as the market

of inputs, defines how much a supplier could manipulate the

company into bowing down to its terms. If the raw materials used

in the production of a product are unique with little or only one

or two suppliers, than the chances are that these suppliers could

charge whatever they want to for the raw material. The screens

that are used in iPad are manufactured by Sharp, the world leader

in LED display technology. Interestingly, Sharps primary supplier

for raw material is the same as Apples; Foxxconn (Forbes, 2012).

With the recent alliance between Foxxconn and Sharp, little is

left to the imagination that Apple was the moving force behind

this alliance and that Apple has kept both its suppliers happy by

bringing them a new deal. As Apple is a major role player and

buyer of Foxxconn’s supplies, Foxxconn has little or no

bargaining power as Foxxconn’s future indirectly depends on

Apple’s purchases for the iPad.

Threat of substitutes:

The best part about technological advancements, breakthroughs and

the products that these breakthroughs lead to is that the company

could get a patent which serves as a copyright for the designs of

this hardware. Apple has numerous patents that stop competitors

or new entrants to copy iPad’s designs, whether external or

internal, and make it impossible for a substitute to appear in

the market. As the iOS is proprietary to Apple Inc., no other

vendor or hardware manufacturer can equip their device with the

iOS. Overall, the threat of a substitute in the real sense is

almost nonexistent.

Rivalry among competitors:

As discussed before, the iPad already has a very big head start

due to its design superiority and the massively popular Retina

display. The rivalry among the tablet market competitors is

mainly in two things; first is the operating system which sets

the level of user friendliness and customizability of the device

and secondly the display of the device. All other things such as

battery life, camera pixel density and audio/video codec support

are secondary for most of the consumers. iPad is quite safe for

the time from this rivalry as iOS has already defeated operating

systems such as Android and BlackBerry OS.

RESOURCE/COMPETENCY FRAMEWORK

Easily Imitated Unique

Resources

Investments Retail Outlets

Retina Display

Other patented technology and components

Competences

Online shopping

Timely delivery

Quality of product

Reliability of product

Product design

Resources:

Apple has a huge resource for investment which it can use to

better the iPad in the future and come up with brilliant new

technology to increase the wow factor in the device. In 2011,

iPad’s total sale hit an astounding 40 million.Apple has more

than 380 retail stores worldwide meaning that it has the greatest

consumer reach of all the competitors in the tablet industry.

The Retina display technology used in the iPad means that the

device has the largest viewing angles of any device currently

available in the market. The consumer could watch a movie, browse

the web or look at pictures from greater angles than the

competing tablets. Finally, the iPad has a lot of patented

technology and that makes it impossible for any of the

competitors to use the same technology in their devices.

Competences:

An average number of 166 million visit Apple’s official website

daily! That means that Apple’s website has 166 million unique

visitors every day and that alone shows the reach that the iPad

has to current and perspective consumers alike. Apple also prouds

itself on the fact that all the orders are shipped within a day

and the iPads are delivered within a week to the consumers. iPads

can also be preordered, gift packed, or engraved with custom

inscriptions through the online store. The iPads are one of the

best made tablets currently available in the market; they are

thin, feel very nice to hold and can withstand some very high

level of mistreatment because of the Gorilla Glass and the fact

that they are made from one single sheet of aluminum. All of this

adds to reliability of the product, the overall design appeal and

the quality of the iPad.

VALUE CHAIN ANALYSIS

Strategic planning of any business is incomplete without an in-

depth value chain analysis. The value chain analysis comprises of

the entire process starting from the acquisition of raw materials

to the delivery of the product to the consumer. This process can

be divided into two distinct areas; primary activities and

secondary (or support) activities. The primary activities

directly affect the production and delivery of the product while

the secondary activities do not directly affect the production

capabilities but the affect the efficiency of the whole process.

Strengths and weaknesses of a company can easily be identified

from analyzing

Secondary Activities

Infrastructure:

Apple is based in Cupertino, California, but the assembly of all

of its products is outsourced to China. These products are then

shipped to more than 13 countries to Apple retail stores and

authorized resellers. The whole infrastructure is a large web of

interconnected routes, vendors.

Human Resource Management:

Managing a large company with more than 140,000 employees is a

big deal. For this Apple has a Human Resource department to

handle recruitments, payroll, firing and layoffs, employee

retention schemes and other human resource functions. Apple Inc.

has an astounding retention rate of 89% (PCMag, 2011) due to its

payouts and employee satisfaction levels.

Procurement:

Apple’s main supplier for components and raw material for its

motherboards is Hon Hai Precision Industry Co., Ltd. which is

also known as FoxxConn. It is based in Taiwan and it manufactures

electronic components which it exports from Mainland China. Not

only does iPad uses components from FoxxConn, other popular

devices such as iPod, iPhone and MacBook from Apple and

PlayStation 3 from Sony use components from them too.

Primary Activities:

Technological Development:

Apple strives continuously to come up with new technology as it

is basically a consumer electronics producer. Without new

technological development, Apple will have no new developments or

devices for its consumers. The term “technological breakthrough”

has become synonymous with Apple and the consumers expect high-

end devices such as the new iPad with the A5X processor. For

other industries technological development might be an option,

but for tablet and consumer electronic industries technological

development is definitely a primary activity.

Inbound Logistics:

The main source of all the raw material is FoxxConn and that is

based in China. As all the iPads are assembled in China, Apple

does not need to import them in to the US. They order the raw

materials from FoxxConn and get them delivered to the assembly

factories in China which hardly takes two days. This way Apple

always has the resources it needs in a matter of hours and it can

always procure more raw material on need basis.

Outbound Logistics:

Outbound logistics at Apple is a complex task as this requires

the products assembled in China to be delivered to 15 countries

world wide. These countries include all the four corners of the

map including United States, Canada, Australia, Brazil, Russia,

India, Pakistan, United Kingdom, Japan and the Middle East. For

online shoppers, some stock is designated to be shipped to the

central warehouse in Cupertino, California.

Marketing and Sales:

Apple cannot be expected to generate revenue without proper

marketing and sales of its products. In 1984, Apple launched the

most expensive advertisement of all time in the SuperBowl to

promote its new Macintosh personal computer. This TV

advertisement was directed by Ridley Scott and was based on the

Orwellian world. This advertisement is still regarded as the sole

reason for Apple’s huge success way back in the 1980’s and it is

still considered to be a masterpiece (Guinn, 2011). Apple’s

marketing has always been a strong point, specially the keynote

sessions delivered by Steve Jobs in his signature black high neck

and blue jeans. Apple has been actively involved in showcasing

its line of iPads in the Entertainment Expo’s in the USA and has

been actively keeping promotional discounts and offers at its

retail stores.

Operations:

The manufacturing processes that are involved are very much

standardized. However the distribution processes are not that

standardized and the company gets an edge because of its strong

presence in the various areas of the UK with its 55 retail

outlets.

Conclusion

Apple has been the ringleader for almost a decade now since the

launch of its first iPod second generation device. It has

constantly developed new technology for the consumers and they

have been complex and beautiful all at the same time. Although

Apple has a major stronghold in the tablet industry because of

the iPad, they should not take the lead for granted as the

competitors are constantly bringing out new and better tablets.

All it would take for the iPad to crumble is large scale consumer

acceptance of another device as a new fashion symbol.

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