duction: Apple Inc. was founded by Steven Jobs, Ronald Wayne and Stephen Wozniak in 1976. For the past 40 years, Apple has been the leader in technology through designing and developing devices and software. Known for attention to detail and precise design, Apple creates arguably the best user experience. Apple is headquartered in the tech capital of the United States- Silicon Valley. Apple is the world's largest market capitalization of $609 billion as of April 2016 with success built upon innovation and simplicity. In 2014 and 2015, Apple delivered strong yearly earnings reports largely due to record iPhone and Mac sales. 2014 ended up 40% due to these strong sales numbers, although increasing its revenue in 2015, Apple ended the year down 3%. Analysts are projecting Apple's earnings per share (EPS) to decrease during the 2016 year over their 2015 EPS. CEO Tim Cook took office after the late Steve Jobs in August 2011. That same year, Cook was named one of Forbes magazine's \"World's Most Powerful People\". According to a 2012 New York Times article Cook was the highest-paid CEO among publicly traded companies. He received his B.S. in Industrial Engineering from Auburn University in 1982 and later received his M.B.A. from Duke University in 1988. Cook began his Apple career in 1998 and served as COO prior to becoming CEO. Although Apple is a fierce competitor intent on maintaining its top position the competition is increasing in personal computers, smart phones, mobile payments, and applications. From Microsoft to Google to Samsung, the competition is stepping up and proving to be a challenge. According to a February 2016 survey, 45% of iPhone users believe Android phones are more advanced than iPhones, with 31% disagreeing and 24% unsure. These results are surprising considering the iPhone popularity and its recent sales of 75 million iPhones during the first quarter of 2016- the most it has ever sold in a quarter. The iPhone is also ranked as the No.1 gadget on Facebook. At the same time, 74% of consumers associate the Apple brand with \"expensive\" but suggest that the iPhone might always remain popular because of its status as an aspirational gadget. Our team is facing the scenario of Tim Cook resigning as the CEO of Apple due to intense competition from related technology. We will develop a management strategy to secure Apple's position as the leader of the competition in every product area. Our team will detail the advantages and disadvantages of each considered strategy before selecting the best approach. This strategic plan will include consideration of all leading economic indicators. SWOT Analysis To gain further perspective on the appropriate choice of strategic direction for the company a SWOT analysis is appropriate. Strengths: Apple has cultivated and maintained strong brand awareness, particularly domestically. It is one of the world's leading brands with a reputation for innovation, style and quality. The company has high profit margins on the sale of its key products and it has a substantial war chest of cash to devote to any strategy it chooses to pursue. It also has a reasonably extensive proprietary distribution system that allows it to control the customer experience to a great extent. Weaknesses: Apple has a much smaller distribution network than competing firms because of its efforts to control the customer experience and a policy that limits the number of authorized sales agents. And, while high profit margins may be an advantage, the high sales prices that Apple charges for its products are a disincentive for many customers, who prefer lower priced competitor products. In addition, Apple's reputation for product leadership and innovation has slipped as competitors are, in many cases, coming forward with more feature-rich and stylish devices. As a result, many customers no longer perceive Apple's products as standouts. Opportunities: Since the company has a limited distribution network, they have more room for expansion than companies that may have already saturated the market. The demand for computer devices, especially smartphones and tablets continues to rise and technology continues to advance raising the potential for the development of significant new product features. Threats: The information technology industry is competitive and that competition is particularly heated in the areas in which Apple is prominent: computers, tablets and smartphones. Also, input costs, especially labor, are rising in countries in which Apple does much of its manufacturing. Competitive Environment To better understand the competitive environment in which Apple operates it is helpful to consider Porter's five forces. The five forces provide a useful model for understanding the nature and extent of competition in a marketplace. Porter's five forces include three from 'horizontal' sources, namely threats from new entrants, from substitute products or services and from new rivals. In addition, there are two from 'vertical' sources, threats from the bargaining power of suppliers and customers respectively. Threat of New Entrants: Substantial resources are required to compete in the product areas that are important to Apple. Relevant technology must be obtained or developed and a heavy investment in branding and distribution is necessary. These demands limit the number of potential new competitors. They are not insurmountable barriers, however. Technology can be acquired from external providers such as Google, which offers its Android operating system for smart phones and tablets. And deep-pocketed companies, especially those with related consumer electronics brands and already existing product distribution networks, could feature smart phones, tablets or even computers as extensions to an already existing product line up. Samsung has been able to very quickly establish itself as a major brand and various Asian companies have emerged to take large portions of that market. As a result the threat from new entrants must be taken seriously, even though it could not be characterized as a strong force. Threat of Substitute Products: There are readily available substitutes for Apple products. Simple mobile phones or landlines may be used for voice communication. Cameras, GPS devices, watches, calendars, flashlights etc. are all effective substitutes. However, these substitutes lack the convenience of one simple device that performs not only the individual task for which they are designed, but a vast and almost limitless array of functions. As a result the threat from substitute products is low so this force is weak. Competitive Rivalry: Apple has several very well-resourced competitors with strong brand names and powerful distribution platforms: Samsung, LG, Microsoft, Huawei, Lenovo, Xiaomi and the list goes on. The financial cost of switching between brands is low and the competitors are aggressive in innovating. This is a serious threat for Apple and of all the horizontal forces is the strongest and most concerning. Supplier Bargaining Power: Apple has many suppliers of components and there are numerous alternative suppliers around the world, making it difficult for its suppliers to bargain for better terms. Apple, then, has little risk of disruption to its product supply or cost structure from this force. It is a weak one. Customer Bargaining Power: Apple has a vast customer base. The purchases of each individual customer are small in relation to Apple's overall sales revenue, so no one customer has the potential to adversely impact Apple by withdrawing or threatening to withdraw its business. From this point of view, the threat from customer bargaining power is low. However, because there are powerful competitors offering similar products and the cost for any individual customer of switching to a competitor product is low, Apple must be very cognizant of the needs and wants of its customers. In effect, then, looked at as a group, the bargaining power of Apple's customers is considerable. This is a strong force. Strategic Group Mapping Framework for Competitive Analysis Key Success Factors Management Strategy Options Let us consider the various management strategies that Apple could employ to regain leadership in the product categories in which it competes. Overall low cost strategy: One approach would be to focus on being the overall low cost provider, appealing to a broad range of customers. Consumers would choose its products over those of rivals primarily on the basis of its prices being lower. This is a strategy that requires relentless focus on wringing costs out of the system, all the way from product design, through manufacturing, marketing and distribution. Every dimension of its business would have to be studied to determine how to create more efficient processes and eliminate unnecessary costs. Compromises are likely to be required in product features and also in the overall customer experience. Advantages: This strategy would provide customers with a clear and compelling reason to prefer Apple's products to those of its competitors. It has the virtue that it recognizes the reality of today's Apple being a very big company with a massive and diverse customer base, and, unlike some of the other possible strategies outlined below, it would not require Apple to refocus on narrower market segments. Preserving and enhancing this large customer base has great value because it motivates developers to create the kind of software applications that consumers want and this in turn helps make the product more attractive or at the very least retain its relevance. The fact that the company has an enormous cash hoard would give it a potential advantage over others in pursuing this strategy should it decide to do so. Disadvantages: An overall low cost strategy is difficult to execute and maintain (Thompson). Substantial expertise is required to eliminate costs while delivering effectively on all components of operations. This has not so far been Apple's strong suit. Its products have always enjoyed premium pricing. A major cultural shift would be needed to transform it into an aggressive costcutting machine with employees dedicated to finding ways to save money. Moreover, Apple competes in an area in which quality is very important. Consumers tend to spend a large portion of their budget on technology items (McDonald). And to a great extent Apple has built its business on its reputation for delivering excellent products. Given a certain quality, customers will spend as much as they are able to when purchasing technological equipment such as a desktop computer, laptop computer or a phone. These two items, in particular, are often seen as durable goods and customers are also often able to write off the costs as a business expense (Smith). There is a very real risk that an overall low cost strategy would ultimately fail because of necessary compromises in product quality, which would discourage the acquisition of new customers, while frustrating and eventually alienating existing customers. Best Cost Provider strategy: Instead of attempting to be the overall low cost provider, Apple could pursue a best-cost strategy. On this strategy it would provide customers not with the lowest prices, but with more value for the money they expend. The products would be designed to possess the crucial quality and service elements that customers prefer, while being offered at a price that is lower than their expectations for a product of comparable quality, even if it is not the lowest price in the overall product category. In short, strong product quality would be balanced with low pricing in a way that gives the customer the best blend of the two. Advantages: Apple's current high prices are a deterrent for some buyers, who select other options in order to save money. This best cost strategy would address that. The perception of superior product quality has sustained Apple over the years in spite of this negative. However, this perception is no longer as universal as it once was, as some rivals are now viewed as having equivalent or superior product features. Some moderation in Apple's pricing to ensure that the cost of an Apple product represents exceptional value versus its peers could have a big impact on Apple sales. This strategy has the virtue that it does not require the same single-minded focus on cost cutting as that of being an overall low cost provider and it does not necessitate the radical change in Apple's culture that the low cost approach would. Moreover, Apple has the cash resources to support this approach. It could simply elect to shrink margins, trading off lower profit per unit to achieve potentially greater overall sales and profitability. Disadvantages: A best-cost strategy is difficult to execute because creating a product with compelling features and communicating its benefits can be expensive and may leave little room for truly attractive pricing. There is also a risk of being squeezed between low cost providers that draw cost conscious customers and higher end differentiators who attract customer with superior product features. Also, Windows/Galaxy appears to already be using a best-cost strategy, so Apple would be in direct competition with this rival if it adopted this strategy. Broad differentiation strategy: Apple's current strategy differs from both of the above in that it does not focus on price as much as it does on differentiating its product from its competitors in a way that appeals to a broad market. Under this approach its products must possess unique attributes that delight its customers. Ideally, these features should represent real value to customers and not be easily copied. Advantages: This strategy provides the potential for premium pricing and the creation of strong brand loyalty. Depending on the nature of the differentiation it may be challenging for rivals to copy so the competitive advantage can be more enduring than a cost-based strategy. Technology is also an area where customers are interested in new developments and features, and Apple has historically been very successful competing with this approach (Martin). The company is known for brilliant and revolutionary product design, a fact that is captured in its longstanding slogan 'Think Different,\" which promises customers something unique. The company also has the culture of innovation and the financial resources required to implement this strategy effectively. Opting to stay with this strategy would, then, have the advantage that no major change in direction would be required. Instead, the emphasis would be on infusing the company's product design engine with a renewed energy and focus, encouraging it to be bigger, bolder and less incremental in its approach. Disadvantages: Smart phones, personal computers and even the more recent tablet computers have not yet become generic, but already a high degree of similarity has begun to develop among the product offerings, as vendors have ascertained the elements that customers desire. This means that it is increasingly hard to differentiate in these product categories in a way that is meaningful to a broad range of customers. In addition, with eager rivals watching its every move any new product features Apple institutes are apt to be imitated in short order. This strategy is also expensive as it requires a significant investment in research and development and the cost of new devices possessing unique features will likely be higher than competitors' products. Focused differentiation strategy: Another form of differentiation that could be pursued would be to target a specific market segment, or perhaps several segments, and concentrate on offering products that do a superior job of satisfying their specific needs and tastes. This strategy is different from any of strategies discussed above in that it does not entail reaching for broad-based customer support. Advantages: The advantage of this approach is that market segments may possess identifiable needs and wants that are not being fully met by products designed for the wider market, and these segment may be open to differentiated products designed with them in mind. It may be possible to command premium pricing as a result. Also, the market advantage may be enduring since other industry players may view the opportunity as too small and the first-mover advantage as too great to justify launching competing niche products. Moreover, as greater experience and knowledge of the markets segments grows so does the ability to offer products that continue to satisfy their needs and wants. Disadvantages: This is a strategy that tends to work well for smaller companies that lack the resources to compete in the broader market. But for a company like Apple to narrow its focus to niche markets would likely entail a significant downsizing. Additionally, there is no guarantee that focused differentiation is sustainable as mass market products may develop to a level of sophistication and with a range of attributes that customers in the niche market may come to prefer them. Focused low cost strategy: One further strategic option is to focus on a narrow market segment or segments by offering customers in that segment the lowest price. Advantages: As discussed above, lowest price is a compelling market advantage. By focusing resources on narrow market segments a company can reduce the costs of reaching its customers and have the opportunity to underprice its rivals. Disadvantages: This strategy has the double disadvantage for Apple that it would entail a downsizing by shifting away from the broader market and would need a massive cultural shift toward cost cutting. Many Apple customers would be lost and its vaunted reputation for product quality would take a beating. This is the worst strategic choice for the company to make. Detail an execution strategy that supports your new management strategy. IDEAS FOR THIS SECTION: Get ideas from textbook about execution strategies (especially those that support Broad Differentiation) Look at some of the case studies we've done for ideas (i.e. Deloitte employee training practices and/or Whirlpool's use of Six Sigma alongside their culture of design innovation... don't need to references just 'benchmark' them for best practices) Add in some more key terms from the textbook Add in recommendations such as: make sure pricing is competitive, streamline processes (talk about six sigma strategies, etc. Which will work the best for apple who already has an extensive R&D department?) make sure they are absolutely and undeniably the best at innovating new products expand their distribution, especially internationally (easier access, consider doing more third party distribution, etc.) Talk about a marketing plan (the 4 phases) possibly... Determine ways that we can track/analyze how well each of these initiatives is working to bring apple back to being the best (look for ideas in the textbook/online). Add in a conclusion, summarize key point ...I will add more ideas later, but we should get on this as soon as possible because we still have to put together the presentation. Also, I am happy to do an edit to clean things up and make them cohesive, but I can only do that if a draft is finished by this Sunday at the latest- preferably by Friday so I can do an edit and then bring it into the IDEA center on Monday. Execution Strategies Since the best way forward for Apple is to maintain its strategic emphasis on broad differentiation rather than to pivot to a new strategy, the goal must be to execute this strategy more effectively. With this in mind, there are essentially three things on which the company must focus: (i) securing the best, most unique range of products and product features, (ii) expanding distribution outlets, especially internationally, and (iii) moderating prices to be closer to the competitive universe. Unique Products and Product Features: Apple is known for being a leader in innovation going right back to its pioneering work in personal computing with the Apple 11. Armed with a keen grasp of how consumers would incorporate computer products into their lives it crafted innovative products that appealed to a mass market. It was then able to improve those products with new and improved features and capabilities to say ahead of its rivals. With no new hit product since the ipad in 2010, and with competitors effectively keeping pace or even getting ahead of Apple on features in existing product categories, Apple needs to accelerate its introduction of new products, while also enhancing existing products in ways that are more than incremental. Apple has immense reserves of cash it can invest in new product development. Already substantial resources are devoted to this activity. To ensure these funds generate the maximum value the innovation culture needs to be 'turbocharged' the way it was at Whirlpool (Norena). In a much more mature industry than the one in which Apple functions Whirlpool has been able to drive growth through innovation. There is still plenty of scope in Apple's business to innovate to success. The key is having 'deep consumer insight.' Steve Jobs may have been able to intuit these, but today Apple may not need to. It is blessed with a wealth of information based on the areas in which it operates. Like Whirlpool, each innovation should have the goal of accomplishing three things: create unique and compelling consumer solutions, create sustainable competitive advantage and create superior shareholder value (Norena). How can Apple better cultivate these innovative ideas? At Whirlpool innovation is considered to be everyone's job. This means that ideas can develop from anywhere inside the company. Apple, which grew accustomed to a more top down approach under Jobs, needs to more effectively harness the ideas of its workforce. As at Whirlpool, \"Innovation would not be left to engineers or business people randomly finding a 'eureka!' moment for the world's next great invented home appliance. Innovation would be organized, structured, planned...and to the extent possible - predictable,\" (Rapp). To achieve this, a major company wide commitment to data driven decision-making is required. It would surface ideas and facilitate testing them against their ability to achieve the three goals of innovation. Also, a structured process involving the following steps would be employed: 1. Idea generation 2. Business case 3. Competition to develop the idea 4. Testing and evaluation 5. Taking to market Apple should also heed Whirlpool's strategy of setting a goal of achieving a certain percentage of growth each year from non-core business. This is needed to counteract the tendency to just focus on core activities and make incremental product improvements (Rapp). The company needs to challenge itself to break through into new territory. Another way Apple can become innovative is by shifting and making a device that is focused towards an individual's health. Many consumers are interested in wearables such as the FitBit and utilizing health apps such as MyFitnessPal. Most Apple products have relied on third-party app developers to create this kind of value, but if Apple could lead and drive more of the innovation and health metric analysis, it would give the brand yet another competitive advantage over other wearable technologies (Tech Crunch). Apple has the opportunity to be the leader in applications that address real healthcare problems for its consumers. Expanding the Distribution Network: One challenge Apple faces is that its products are not as readily accessible to consumers as those of other brands. This is to a great extent the result of deliberate design. Apple has wanted to control the whole customer experience to ensure it achieves the quality that it wants customers to associate with its brand. This has, no doubt, been an element in the development of a very strong consumer brand with a reputation for quality and reliability. It means, however, that in many places Apple products are hard to obtain other than through internet purchase. Apple has done a good job in building out its own retail distribution network but there are still many places it does not have stores and in big cities the stores are not always as convenient as customers would like. Apple does have a wholesale network but it is modest in scale. By contrast, many competitor's products are ubiquitous. They have vast numbers of vendors selling their products, even making them available from airport kiosks. This is especially an issue outside the U.S. and helps explain why Apple has fallen behind many rivals internationally. A structured program of licensing retailers to sell Apple products to expand its distribution would go a long way to helping Apple penetrate international markets more effectively and would also increase it visibility and possibly market share across the U.S. Additionally, more Apple stores could be created in some of these markets. Moderating Prices: The current apple watch is a nice accessory considered to be sleek and smooth compared to other smartwatches, but it the watch itself could enhance the style up a notch. Fashion industry executives now at Apple, including those from brands such as Yves Saint Laurent and Burberry, have tried to establish Apple as a lifestyle brand by upping its sex appeal. The company is even partnering with fashion designer Herms (Tech Crunch). Although Apple has been successful in these ventures for the most part, the exclusive styles are still too expensive for buyers. Apple should consider partnering with companies like Target to increase customizability while decreasing the watch's price. By executing this strategy and lowering the cost for the watch, Apple would optimize its product by appealing to more of the masses. 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