Achieving Global Competitive Advantage: Apple
Apples incredible success has implemented them as leaders of the technology market on a global
scale and are now seen as one of the world’s most valuable brands. Which such releases as the
iPhone, the Mac and the iPad Apple has built an innovative brand culture which has led them to
record sales and revenue to the point where the competition is struggling to compete. Since of the
release of the iPhone in 2007 Apples revenue has grown from $5 million to over $32 billion, all in the
space of 8 years (Statista, 2015). These figures establish Apples triumph and shows the vast customer
demand for their products world-wide. In this essay I will examine how Apple uses this remarkable
competitive advantage globally to create a competitive advantage. I’ll be using Spulber’s (2007) star
analysis framework to showcase theories and data about Apple’s international dominance.
Home Country
I will use Porter’s Diamond (1990) to show how Apple use national competitive advantage. Porter’s
Diamond is split up into four factors which must abide by each other to achieve competitive
advantage. Porter argues that favourable demand conditions will not result in competitive advantage
unless the state of rivalry is sufficient to respond to them (Hill, 2010).
American founded Apple now have 268 stores in the US (Apple, 2015) and serve 1 million customers
daily (Gunther, 2013). The pie chart below shoes the revenue of Apple products by region. It shows
the strength in which Apple have used their home nations but also shows the true global dominance
they hold with high percentages coming
from different regions over the world.
The reason for this is America’s luxury
spending habits and high level of
technology. ‘The United States will
account for one quarter of the world’s
spending growth through 2020’ (BenShabat et al). This shows that despite
China’s growth between 2011 and 2012
Apple will continue to dominate United
States for years to come. This means
there is a strong demand condition in the
United States for Apples products due to the immense spending on luxury products in the country.
The socioeconomic factors Apple appear to in target in America is the income level and occupation.
When companies develop pricing strategies for their brands and products, they consider the income
levels of their target markets (Brookins M, n.d). In 2014 the USA had the 8 th highest GDP per capita in
the world, this shows that America is one of the wealthiest xcountries therefore desirable for Apple
to continue to distribute and design from their home country.
Apple have managed to directly and indirectly create work for Americans since their global
expansion. In fact, Apple generated 598,500 US-held jobs in 2012 through direct employees, their
own iOS app community and other industry jobs that are dependent on Apple. Apple is supporting
industries by creating employment in the technology sector while they also build a technological
empire for themselves.
Competition in the market increases competitiveness (Porter, 2007). As far as competition goes
Apples closest domestic rivals are Samsung and IBM. ‘This 21 st century market is huge and lucrative.
With so much at stake and competition so fierce manufacturers are pressed to cut costs and drive
hard bargains’ (Agar, 2013). Apple’s main strategy is premium pricing to their customers using new
products, they also have a strong brand reputation with attracts repeat customer service.
Partner Country Features
To embolden their success Apple have set up global collaborations and partnerships, also known as
strategic alliances. A strategic alliance is a cooperative arrangement between two or more
organisations designed to achieve a shared strategic goal (Singh and Gulati, 1998). In 2007 Apple
made arguably its biggest alliance to date, AT&T (Marketline, 2007). Both AT&T and Apple gained
access and reaped the benefits of using each other’s assets in particular for apple as this alliance was
a key part of the release of the iPhone. Strategic alliances benefit innovative brands like Apple due to
the ability to share costs and risks of innovating and the capability of reaching new markets quicker
and in a more cost efficient way. Strategic alliances can be seen as a risk with possible transaction
costs, a diffusion of strategic assets and an effect on competitiveness and innovation. Hill (2010) tells
us the success of an alliance seems to be a function of three main factors: partner selection, alliance
structure and the manner in which the alliance is managed. Apple’s business model is acclaimed by
scholars and practitioners in the strategic management field for its value creation potential (Ozcan &
Eisenhardt, 2009).
A joint venture with both Microsoft and Intel (Hiner, 2010) followed as Apple started alliances with
larger corporations. A joint venture is a relationship in which two or more persons or business
entities combine their efforts or their property for a single transaction or project or a related series
of transactions or projects (Jentz et al). By participating in this joint venture Apple will have had to
learn from Microsoft and Intel while keeping their own strategies and information to themselves to
gain competitive advantage.
Supplier Country Features
Porter’s value chain (1985) is analysed to recognise how Apple benefits from their supplier countries.
Porter explains the value chain as a general framework for thinking strategically about the activities
involved in any business and assessing their relative cost and role in differentiation (Porter, 2008).
Simister (2011) tells us how the value chain can be used to diagnose and create competitive
advantages on both cost and differentiation. Apple have a significant high supply chain effectiveness
due to the demand of their products and the low costs they can develop the products for. Apples
ability to maintain such a high level of innovation in the technology sector, the constant ability to
decide what the next gadget will be and the pure volume of products and technology manufactured
remains the reason they have such a worthy supply chain.
I have researched the success Apple has made in its home country but now it’s time to look at how
Apple work on a global scale to make their products so desirable, profitable and affordable to many.
The graph above (2007) shows the minimum wage for the USA and that of Asian countries. The graph
shows the severe difference in minimum wage in America compared to Asian countries. When we
compare the United States figures to that of Lao, Bangladesh and even China which is 20% less of
that of America’s a picture is already painted on why America use these countries for low labour
costs. Although measures have been taken to improve these minimum wages this data was taken
from the period of the iPhone’s first launch. Apple outsources the iPhone to different parts of the
world for the cheapest labour and cheapest materials. An iPhone contains hunderds of parts, about
90 percent of which are manufactured in countries outside the United States. Apple sources
semiconductors from Germany, memory chips from Korea, display channels from Taiwan and rare
metals from Africa (Cavuisgil et al, 2014). Apple’s ability to obtain comparative advantages such as
labour, land and resources from specific countries has given the company a distinctive advantage in
technology, profits and market share. Apple’s endeavour of comparative advantage has come with
criticism over the work conditions in foreign countries due to the work conditions. The news broke
out in 2010 about suicide deaths in Apple workshops and by 2012 there had been 14 deaths and
over 150 threatening to commit suicide (Telegraph, 2012).
Customer Country Features
Since breaking into the competitive global market Apple have used different international strategies
to not only maintain their success but to expand and continue to innovate and explore the
technology market. Heracleous (2013) talks about quantum strategy which is the ability to balance
strategic features that are considered contradictory or distant. Apple’s quantum strategy is praised by
Heracleous ‘outstanding, serial innovation and addictive product design, both of which command
premium pricing and redefine markets’. We can back up Heracleous’ statements with figures which
display where and on what scale Apple’s global markets are expanding.
The graph above which is taken from Apple’s website is the most recent data on Apple’s global
revenue. The graph demonstrates the sheer explosion of the Apple market in China and the Asian
pacific. So why have Apple been so successful in China and Asian countries? This is all part of Apple’s
international strategies and is no way a lucky stroke. Andexer (2008) tells us that an international
marketing perspective has already become the state-of-the-art managerial thinking with the purpose
of being able to penetrate new emerging or old evolving markets with – at times – enormous
potentials, such as the markets in the Asia-pacific region.
Below shows Apple’s smartphone unit sales in South East Asia in the space of a year. This has led to
Apple confirming they will open their first Southeast Asia Apple store as well as recently opening one
in China (Techcrunch, 2015) due to the regions fast growing smartphone market.
There are many ways the mode of entry into a foreign market could go wrong. Kumar and
Subramaniam (1997) tells us that mode of entry is a very unstable decision because there is a lot of
uncertainty and unpredictability in the host country environment which the decision maker may not
have information about. This demonstrates Apples success in the market which means they now
possess brand loyalty and a barrier to entry to competitors looking to enter international markets.
Brand loyalty in particular is how Apple retain their customers who are impressed by the sheer
innovation they possess and upgrades on previous technology.
Conclusion
Expanding out of America and not only entering new markets but penetrating them has given Apple
astounding global competitive advantage. The amount of control they have over their value chain,
the quality strategic alliances that have assisted them and their mode of entry into foreign markets
have led them to be the most profitable company in the world (Fortune.com, 2015).
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