Apple is one of the most innovative and cutting-edge companies of modern day. The history of its development is very tumultuous; it had its ups and downs, success and failure, but for all people it is first and foremost a story of a dream that has come true. Steve Jobs, Apple’s co-founder and a person responsible for putting the company at the forefront of other technological businesses, was the one who made it not only a recognizable brand but a product which started being associated with a certain lifestyle. The current paper will analyze the competitive advantages of Apple and sustainability of its competitive position in smartphones. It will also provide an overview and investigation on computer industry in general and explain why Apple struggled historically in PCs. The paper will also describe Tim Cook’s strategy for Apple watch and analyze the approach he used as well as possible corrections that may have been favorable in that case.
Originally, the goal of Steve Jobs was not only to produce computers as a cutting-edge tool for progressive people, but also to make them easy to use and beautiful in design. When IBM entered the market with its own PCs it became clear that the approaches towards computers used by these two companies were rather different. Both companies had their own unique competitive advantage. Apple’s leverage in the technological business had been changing and evolving over the years. Firstly, it must be said that from its onset the company used both horizontal and vertical integration, but slowly turned to the latter one which later became one of its key characteristics. What is meant by this is that Apple uses its own hardware and software as well as additional services. The owner of Apple device knows that every little detail of the gadget or technology has been masterfully created and carefully manufactured by the company. Undoubtedly, it is associated with a disadvantage that Apple may not easily implement innovations that penetrate the market, but this fact only forces company to work harder to keep up with the competitors (Yoffie & Baldwin, 2015). Secondly, Apple products are known for their simplicity of both outer design and software. The company’s revolutionary device, the iPhone, was the first simple communication device while the iTunes made music downloading much easier. The introduction of the iPad was also significant in terms of its simplicity since previous devices of this category were rather inconvenient and massive. One more feature that stands out as Apple’s competitive advantage is its lock-in system. It is one of the cleverest marketing strategies since it makes users stick to its products because of iTunes and App Store purchases (Yoffie & Baldwin, 2015). Moreover, Apple not only has a lock-in system as additional software, but also manufactures devices that run on the same operation system, iOS. To stay in the so called digital ecosystem, the customers must be loyal to Apple. Finally, there is one more competitive advantage to be mentioned. Apple’s clever marketing principles made it a luxury brand and turned its customers into the elite of the society. The brand was created gradually by means of using catchy slogans like “Think different” and attractive advertising (Yoffie & Baldwin, 2015). Additionally, Apple was promoted as an eco-friendly business that uses recyclable materials. And, most importantly, its appeal to the youth as a powerful cultural force cannot be denied.
In 1978, Apple introduced Mac to the world bringing about a revolution. But just in three years, in 1981 IBM presented its own operation system which was an open one and therefore had a clear advantage over Apple’s product (Yoffie & Baldwin, 2015). This was one of the first obstacles Apple encountered on its way. Steve Jobs wanted to preserve the closeness of the system and therefore suffered immense financial losses. Another problem was related to the slow speed of the processor which made Macintosh models of the 80s much less competitive. Between 1985 and 1993, Apple was on its winning streak because it manufactured all hardware, software and peripherals on its own. Due to the design and uniqueness of every element, it was often said in those times that while IBM’s users just tolerated their machines, Mac users adored their computers. In 1990, Apple was a leader in desktop market with its Alduse, but in 1995, the situation changed dramatically with the rise of Windows’ popularity (Yoffie & Baldwin, 2015). The problem that often resurfaced was that Apple computer product was much more expensive than IBM’s computers (Yoffie & Baldwin, 2015). Apple was on the verge of bankruptcy, but was eventually saved by Steve Jobs. It was done by limiting the quantity of core products from fifteen to just four. As a result, Apple had only Macintoshes for general consumers and professionals in the form of desktop and portable computers. Steve Jobs not only believed that focusing on certain key issues would bring success to the company, but he was also obsessed with secrecy around his innovations. No leak was possible under his supervision (Yoffie & Baldwin, 2015).
It historically happened to be so that users of PCs could be divided into several categories. They may be roughly divided based on the purpose they use computers for such as middle business, corporate and personal purposes, government, education and home. Most of the PC users fall into the last category. According to the statistics of 2014, the market leaders in terms of PC manufacturing were Lenovo, Hewlett-Packard, and Dell. Apple’s struggle in PC manufacturing was connected to the fact that its founder, Steve Jobs, wanted his devices to be controlled by hardware and software of his own production (Yoffie & Baldwin, 2015). Another hurdle was related to the lengthy process of Apple’s shift to Intel chips. This was of immense importance for the company since it further allowed it to manufacture thinner and more powerful laptops of lighter weight. This resulted in the birth of Apple’s ultra-thin Mac Air (Yoffie & Baldwin, 2015). The struggle of Apple in the sector of PCs was related to the fact that it wanted to enter both areas of hardware and software and was not an open system unlike its competitors.
Apple’s competitive position in the sector of smartphones was obtained due to the three key factors. The first is its sleek and shiny design which immediately attracted users. The second feature that made Apple compatible in smartphones was user interface simplicity. The company has long been emphasizing on the feature of user-friendliness and now it is its most recognizable characteristics. The third aspect that made Apple’s smartphones compatible is its large storage which was made possible with the invention of iTunes (Yoffie & Baldwin, 2015). The iPhone’s popularity may be explained by its three main features: a breakthrough in communications, revolutionary cell phone and touch control (Yoffie & Baldwin, 2015). Additionally, it offered the user a large variety of applications downloadable for free or for certain amount of money. What Steve Jobs achieved by creating iPhone is largely reinvention of the phone as it used to be. Before the onset of iPhone manufacture, the largest segment of the market was occupied by Nokia, Motorola and Samsung (Yoffie & Baldwin, 2015). With the birth of the iPhone, the situation changed. Originally, Apple had an agreement with AT&T as an exclusive operator for the smartphone, but soon they understood that “unlocking” phones for other carriers at full price is a better strategy. Lower prices for previous versions of iPhones, subsidies on behalf of the carriers, and design improvement resulted in the fact that 60 percent of Apple’s profits in 2013 were generated from smartphone sector (Yoffie & Baldwin, 2015). Introduction of App Store which made it easier to access and download applications further contributed to the popularity of this communication device. Overall, its light weight, simplicity and sleek design as well as unique user experience made it ever more desirable for the potential customers.
It cannot be stated that Tim Cooks approach towards developing a line of smart watches was completely erroneous, but it had not a perfect timing. At the time, Samsung, Pebble, Google’s Android wear constituted strong rivals for the newly developed wearable technology of Apple (Yoffie & Baldwin, 2015). Apple has always been known as an innovator and after the untimely death of Steve Jobs it was expected of Tim Cook to take the baton passed to him. He was to revolutionize the company and bring something new. Even though Apple watch had fitness-tracking and timepiece functions, as well as a notification option and access to maps, directions, and music player, it was rather expensive (Yoffie & Baldwin, 2015). Prices ranged from 349 to 17 thousand dollars and competition was already severe (Yoffie & Baldwin, 2015). As a result, Apple’s wearable device did not bring furor as it was expected. There are several corrections that Tim Cook may be advised to include in his search for innovation. Firstly, it may be a good idea for him to invest more time and effort into cloud services sector. Currently they are on the peak of popularity and it may help Apple to develop in that direction. Secondly, Tim Cook may also consider focusing on the hub strategy. The idea of device controlling a smart house sounds revolutionary and this is just what Apple has always been looking for.
To sum up, Apple is one of the companies that had a fair share of success and failures, but in the end occupied its niche in the technological business. Some of its strongest competitive advantages include a brand it created out of its products, simplicity of design and software, lock-in system, and vertical integration. Although Apple struggled historically in PCs manufacturing, it eventually occupied its niche and it is considered a luxurious and innovative computer manufacturer. It has a rather competitive position in the sector of smartphones, the most successful version being iPhone 6 so far. The strategy CEO of Apple, Tim Cook applied regarding Apple watch was a rather successful one but the timing at which it entered the market and rivalry it faced on the part of Pebble, Google’s Android Wear and Samsung was not appropriate.