Question

Apple Inc. founded in 1977 is an American multinational technology company that specializes in consumer electronics, computer software, and online services. Today (August 6, 2021), Apple is the world's largest company measured in terms of the market value of $2.43 Trillion. Apple launched its first smartphone in 2007 and managed to increase its share of the global smartphone market from zero to about 20% in five years (Q4/2012). Today (Q2/2021), Apple is the third largest smartphone company in the world after Samsung and Xiaomi. For Apple, more than 1/3 of its sales (totaling $274.3 billion in 2020) are generated through its direct channels (own retail, online, and direct sales force), and nearly 2/3 through indirect distribution channels (third-party cellular network carriers, wholesalers, retailers, and resellers). The company claims the following in its most recent Annual Report: "The Company believes it is unique in that it designs and develops nearly the entire solution for its products, including the hardware, operating system, numerous software applications, and related services. Principal competitive factors important to the Company include price, product and service features (including security features), relative price and performance, product and service quality and reliability, design innovation, a strong third-party software and accessories ecosystem, marketing and distribution capability, service and support, and corporate reputation." Question: 1. How can you explain Apple's continued success in the smartphone market? In your analysis, make explicit references to any strategy models/framework that you consider appropriate. 2. You can make assumptions about Apple and its competitors or the market as you deem necessary for your analysis

Answer 1

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Another key factor in Apple's success is its pricing strategy. Apple products are generally priced at a premium compared to their competitors, which allows the company to generate higher profit margins. However, this strategy also requires Apple to maintain a certain level of quality in order to justify the higher price point. By emphasizing quality and innovation, Apple has been able to maintain its pricing power and avoid being cannibalized by cheaper competitors.

An additional factor is Apple's marketing and distribution capability. Apple is known for its effective marketing campaigns and strong brand identity, which helps to create a perception of quality and desirability for its products. In addition, Apple has a strong distribution network that includes its own retail stores, as well as partnerships with third-party retailers and cellular carriers.

Overall, Apple's success can be attributed to a combination of factors, including innovation, quality, pricing, marketing, and distribution. One strategy model/framework that may be applicable to Apple's success is the Resource-Based View (RBV), which emphasizes the importance of a firm's unique resources and capabilities in achieving sustained competitive advantage. Apple's focus on design, innovation, and high-quality hardware and software may represent key resources and capabilities that differentiate it from its competitors and give it a sustained competitive advantage.

2. One assumption that could be made is that Apple has been able to maintain its success in the smartphone market in part because of its focus on premium products and its control over its product ecosystem. However, this strategy is not without risks, as it can limit the company's ability to reach a broader customer base. In addition, competitors such as Samsung and Xiaomi have been able to gain market share in part by offering a wider range of products at different price points.

Another assumption is that Apple's focus on design and innovation may be difficult for competitors to replicate, as it requires a significant investment in research and development. This may give Apple a sustained advantage in the high-end smartphone market. However, there is also the risk that Apple may become too reliant on its existing product lines and fail to innovate or respond effectively to changing market trends.