Competition is an important influence factor in the economy, and companies must carefully choose their strategies to maintain competitiveness. The current paper analyzes Apple’s business-level and corporate-level strategies to achieve its long-term success. The report also compares the company and its strategies with one of the key competitors – Samsung, and reveals some features of the market cycles in which Apple operates. Despite the severe competition, Apple successfully chose its strategies, which contributed to its success.
Business-Level Strategies
Companies need to be ahead of or close to competitors to support their success. The business-level strategy defines responsibilities and actions involving the application of critical competencies that an organization undertakes to achieve a competitive advantage in a particular market (Hitt, 1). The choice of a business-level strategy depends on the scale of the target market and the value to customers the company provides. Apple’s main activity is focused on consumer electronics – it has a broad target market, and at the same time, its value is in the products’ distinctiveness. Such features are characteristic of the differentiation strategy, which the organization uses for long-term success.
Electronics and information technology (IT) are significant markets in the global economy. Today, the technology industry is experiencing rapid development, attracting many buyers, and being highly competitive (Tien, 2). Potential customers for Apple products are adults, schools, and college students (Yie, 3). The company strives to provide products that can solve its customers’ problems. For example, when developing Mac, attention is paid to its weight and size since users need to carry the gadget (Yie, 3). Moreover, Apple’s marketing companies promoted the brand’s association with status and prestige. Given the company’s popularity and distinctiveness among competitors, the chosen business-level strategy is suitable.
The choice of differentiation strategy has significant advantages for Apple. Its essence is to create value for consumers through products that have distinctive features from those similar in the market – unusual characteristics, status, unique service, design, or other differences. For example, Apple products are characterized by convenience, unique design, prestige, and performance (Yie, 3). A differentiation strategy allows the company to retain dedicated users by offering them exceptional value, and commitment protects Apple against new entrants. It can also set high prices and reduce suppliers’ bargaining power, allowing flexibility in payment for resources. At the same time, it is essential to consider the risks – Apple users may decide that the distinctiveness of the products is not worth the cost or counterfeiting will appear on the market. Nevertheless, the company is one of the most prominent on the market (Tien, 2). Therefore, differentiation has its advantages and disadvantages but is a good option for Apple.
In implementing the business-level strategy, it is necessary to use the core competencies that the company possesses. Apple’s competence is innovation, which allows them to develop unique products that meet the needs of consumers. The company invests many resources in research and development (R&D) (Hsiao, 4). Such a choice of competence and the main direction of activity are practical, and Apple was among the most innovative companies (Hsiao, 4). The organization constantly develops new products to meet the needs of consumers, improves old models, and creates products that complement each other. For example, new iPhones and iPads regularly appear, complemented by AirPods and smartwatches from the company. Another competence is the high level of customer service in stores and online – the company pays much attention to training its staff (Hitt, 1). Thus, Apple follows a differentiation strategy at the business level, applying innovation as a core competence, and through its choice, has achieved success as an innovative and prominent company.
Corporate-Level Strategies
Companies also need to expand their activities and appear in new markets to maintain operations. They use corporate-level strategies to diversify their operations to other industries or countries (Hitt, 1). Apple wins through a related constrained diversification strategy, which corresponds to a moderate level of diversification. This type assumes that the company receives less than 70% of revenue from the dominant business and that all products within the company are related to each other (Hitt, 1). Apple diversifies its activities by expanding the product line, modernization, and creating software.
All products in Apple are closely interconnected – they sell gadgets, provide services for their maintenance, and develop software and applications. As the company’s revenue report demonstrates, sales of the iPhone bring them the primary revenue, but it accounts for less than 70% (Apple Inc., 5). Their stores also offer Macs, iPads, and various accessories and services. The development and offering of new products to its consumers demonstrates that Apple intends to move away from the focus on the iPhone and find other sources of income. Such a measure is reasonable since companies choosing a low level of diversification are vulnerable, emphasizing only one business or product.
Given that Apple’s core competency is innovation, and the value to customers is prestige and uniqueness, the company has chosen the best corporate-level strategy – they provide demanded products within one industry. The advantages of this strategy are that affiliated products allow the division of resources, specifically knowledge, within the company (Hitt, 1). Moreover, one may suggest that related products in the case of customer loyalty to the brand may increase sales. The complementarity and interconnection of products create the conditions for economies of scope. Such features also indicate the company’s involvement in vertical integration, allowing Apple to control its supply chain better and set trends in the industry. Consequently, the company uses the critical advantages of the strategy.
Thus, Apple chose a related constrained diversification strategy to achieve long-term success. Since there are many potential consumers, and the company’s core competence is innovation, they focused on diversification through product expansion. This choice has become a winning one, as Apple controls its production, gaining the opportunity to quickly improve products within one industry and gain a competitive advantage. Moreover, the relatedness of goods increases demand for them, especially among buyers loyal to the brand. Operating in various countries, Apple derived significant benefits from selected strategies, earned the loyalty of its users, and took an influential position in the industry.
Competitive Environment
The consumer electronics industry includes many influential players, and therefore Apple has several competitors. Depending on the products, competitors differ; for example, for smartphones, the primary rival is Samsung, for laptops – Lenovo, in software development – Microsoft (Li, 6). Every competitor influences the industry, has loyal customers and can threaten Apple’s position. Since iPhone remains the critical product of Apple, it is worth exploring the company’s competitors in this area. Apple has a market share of over 60% in the smartphone market, and Samsung has a little less than 30% (Li, 6). Samsung was founded later than Apple and focused on electronics (Tien, 2). The company maintained its activity due to the operation in the affordable segment selling mobile phones (Tien, 2). Accordingly, their business-level strategy, which should contribute to their long-term success, is cost leadership.
Samsung’s strategy is significantly different from Apple’s choice, including benefits and disadvantages. On the one hand, with cost leadership, the company can gain an advantage over competitors due to the attractiveness of the price, and counterfeiting is not such a threat. On the other hand, competitors’ innovation can be a significant risk, especially in the field of electronics. Moreover, low cost creates the possibility of lower quality of both products and services. Therefore, Samsung needs to choose the right corporate-level strategy to align activities for success.
Samsung’s output is more diverse than Apple’s and includes various products. The company operates many affiliated businesses, and in addition to mobile phones, it also offers multiple household appliances – televisions, refrigerators, washing machines, and other products (Tien, 2). Such activities correspond to a high level of diversification – related linked strategy, which involves a more robust division between areas of activity. At the same time, the company presents quality, design, and rapid development of new products as its advantages and core competencies (Tien, 2). Additional directions for Samsung’s activity support its existence and earnings.
Comparing the strategies of Apple and Samsung, one can assume that the companies chose successful combinations for their purposes. Apple’s differentiation and related constrained diversification strategies allow them to focus on creating more valuable and closely interrelated products for which consumers are willing to pay more, which boosts sales. Samsung’s cost leadership and related linked strategies do not focus on uniqueness but allow offering an affordable product and a wide selection. Such a choice increases audience reach and reduces risks if one of the areas is not so successful in profit. Thus, while companies are competitors, their strategies are quite different, and low market commonality for all their activities allows less tension in competition.
Market Cycles
Several companies offering goods or services in the same market compete and take various actions to get ahead. The activities and reactions of all firms in the industry represent competitive dynamics, which are different in speed. As a result, markets can be standard-cycle, fast-cycle, and slow-cycle in pace (Hitt, 1). The IT and electronics market has the signs of a fast-cycle type – in such conditions, competitors can quickly imitate the advantages of other companies, which makes their positions less stable. Although some companies like Apple or Samsung have been known in the industry for a long time, new players, such as Xiaomi or Huawei, also appear and challenge competitors. Firms in fast-cycle markets are under more pressure, and there is not enough protection, for example, through patents (Hitt, 1). Working with such a market, Apple constantly invests resources in R&D for innovation.
The conditions in the slow-cycle market are different, which sets other relationships between companies. With this type, competitors cannot simulate advantages quickly or profitably enough (Hitt, 1). Therefore, the key players in the market remain influential for a long time – their positions are more stable. If Apple and Samsung worked with such a market, their actions and the choice of strategy would be different. For example, with a durable competitive advantage unavailable to others and constantly in demand among buyers, Apple would invest fewer resources in innovation. Moreover, in this case, the company could have other key competitors.
Sources
Michael A. Hitt. 2020. Strategic Management: Concepts and Cases: Competitiveness and Globalization 13th ed. Cengage Learning.
Nguyen Hoang Tien. 2019. Product Policy in International Marketing Comparative Analysis between Samsung and Apple, p. 129-133.
Choo Eern Yie, 2021, A Critical Analysis of Internal and External Environment: Case Study of Apple Inc., p. 1-14.
Yung-Chang Hsiao. 2018. Firm-Specific Advantages-Product Innovation Capability Complementarities and Innovation Success: A Core Competency Approach. p 78-84.
Apple Inc. 2021. Condensed Consolidated Statements of Operations, p.1-3.
Yunan Li. 2021. Apple Inc. Analysis and Forecast Evaluation, p. 71-78.