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Apple Inc.

Maintaining the Music Business While Introducing


iPhone and Apple TV

By:

Name

Student ID
Major

:
:

Class

Submission Date

09.53.01.1082

Management
:

Module name :
Strategy
Lecturer

TISIA PRISKILA

BA X- 42

International Marketing
Mr. Arifin Assaly
:

14th November 2011

PROFESSIONAL MANAGEMENT COLLEGE INDONESIA


Intake 2009

Executive Summary
In today's business environment, it is common to expand into international markets
because it has given businesses a perfect opportunity for reaching to the previously
unreachable markets. To expand and survive in international market, Apple have to analysis
in-depth of forces in the internal and external environments that can impact the success of the
companys strategy over time. Internally, analysis of the firm environment focuses on the
resources such as: human resources, financial resources, physical resources; and capabilities
(5M) within the company which strategies can be based upon. Externally, analysis of the
environment focuses on macro-environmental factors (analysis through Politic Economic
Social Technological Analysis) and micro-environment factors (analysis through Porters
Five Force Analysis).
High intensity of industry rivalry and potential new entrants can be significant threats
to Apple Inc., but Apple always smart to steal the attention of the market with its admirable
marketing strategies. Some of Apples strategies are: innovative design of products, Apple
retail store, good combination of iPod and iTunes and perfectly launching timing, strategic
partnership, and global market. And the most important strategy of Apple is Keep the world
and media surprised to generate many attentions. All of its strategies make Apple can stand
up against the competitive rivalry.
To enhance the effectiveness of Apples strategies approach for better result, I have
come out with some recommendations that can be found in this paper. I hope my
recommendations can help Apple Inc. to survive, develop, and be a market leader in the
future.

Table of Contents
COVER PAGE
EXECUTIVE SUMMARY...........................................................................................ii
TABLE OF CONTENTS..............................................................................................iii
CHAPTER I

INTRODUCTION
1.1 The Objective and scope of the report..........................................4
1.2 The Important of Management Change and Development...........4

CHAPTER II

CONTENTS
2.1 The Brief History of Apple Inc....................................................5
2.2 The Organizational Environment Factors....................................5
2.2.1 Internal Environment Factors.............................................5
2.2.2 External Environment Factors............................................7
A. Macro-environmental Factors.......................................7
B. Micro-environmental Factors........................................8
2.3 Apples Strategy Stand up Against Rivalry................................10

CHAPTER III

CONCLUSIONS AND RECOMMENDATIONS


3.1 Conclusions.................................................................................12
3.2 Recommendations.......................................................................13

APPENDICES.............................................................................................................14
REFERENCES

16

CHAPTER I
INTRODUCTION
1.1 The Objective and Scope of the Report
The main objective of this report is to find out the importance of international marketing
strategy in Apple inc. to survive long in international market and stand up against the
industry competitors.
The scope of this report is focused on the critical internal and external environment factors
have strategic implications for Apples future and strategy of Apple stand up against industry
rivalry.
1.2 The Importance of International Marketing Strategy
For some businesses, survival depends on the expansion of international markets because it
has given businesses a perfect opportunity for reaching to the previously unreachable
markets. International Marketing has great significance for both the economic development
of countries and the profitability of individual business firm. It helps in the innovation of new
products that are in line with the upcoming market trends, expanding existing market,
accumulate more capital, helps in balancing international payments, increase profits and
extend production facilities. Therefore, learning International Marketing Strategy can help
companies to analysis the environment that influence international marketing and to develop
strategies so that the companies can survive long in the international market and can stand up
against industry rivalry.

CHAPTER II
CONTENTS
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2.1 The Brief History of Apple Inc.


Started by Steve Jobs and Steve Wozniak in 1976, Apple is in the technology sector and has
expanded from the computer industry to peripherals and the digital entertainment industry
because of the wide scope of its products and services. Apple officially changing their name
from Apple Computer,Inc. to Apple Inc. in January 2007.
Apple Inc. is a company that designs, manufactures, and then sells desktop and notebook
computers (Mac), portable digital music players (iPod), internet video televisions (Apple
TV) and cell phones (iPhone). It also creates software like the OS X operating system, iLife,
iTunes, or QuickTime, and peripherals such as printers or storage devices that go with these
products.
2.2 The Organizational Environment Factors
Organizational environment refers to the forces that can make an impact. This analysis
involves an in-depth assessment of forces in the internal and external environments that can
impact the success of the companys strategy over time.
2.2.1 Internal Environment Factors
Internally, an analysis of the firm environment focuses on the resources and
capabilities (5M) within the company which strategies can be based upon.
a) Resources
Human resources, financial resources, and physical resources are valuable tangible
resources for Apple.
-

Human resources (Man)


Apple currently has a total of 34,300 full-time regular and 2,500 full-time
temporary employees. The whole strategy of Apple works because of the
innovative and creative labor with knowledge and the striking skills of them.
But, companys dependence on Jobs charisma, vision, public communication
and relationship puts Apple at risk. When he dies, the company will take a

severe blow.
Financial resources (Money)
Apple currently holds a very strong financial position. Over the last several
years they have experienced an increase in their growth, sales, net profit, and
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stock price. One of Apples top financial strengths is the fact that they do not
pay out any dividends (see appendix 1). This enables them to re-invest the
money into capital structures and spend a high amount of money on R&D;
-

allowing them access to the latest technology.


Physical resources (Machines and Materials)
Apple has good physical resources such as: good machinery to produce the
Apples products, own building, and high quality of materials. For instance, the
microprocessor chip of iPhone is supplied by the best suppliers like Samsung,
Philip, Texas Instrument, Linear Technology, etc.

b) Capabilities / Core Competencies (Method)


Capability is an organizations ability to innovate successfully, sustainable, and
appropriable. Apple itself has four core competencies:
1. Marketing competencies: reputation for brand development which gains
customers through well-planned and carefully executed marketing strategies
2. Design and Innovation: the products design is unique and different,
innovative, and simplicity eases for use.
3. Alliance building: extensive content access based on valuable partnerships in
the recording industry
4. Brand management: positive brand image that represents innovation,
development, trendsetting, quality creativity, and much more. Customer might
easily tend to prefer Apple products because of loyalty, preference, and well
reputation of Apple.
2.2.2

External Environment Factors


Apples success widely depends on a successful strategy, hence it is important to
consider the external environmental forces that influence Apple on it way.
a) Macro-environmental Factors
This includes all factors that can influence Apple, but that are out of its direct
control. I will examine the industry analysis through PEST analysis (see appendix
2).
1. Political and Legal
Apple faces political and legal segment issues both domestically and aboard.
Domestically, the Federal and State government continues to tighten up on the
environmental issues that constrain manufacturing and disposal the units.
Different countries impose varied restrictions and additional tariffs are also

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imposed on foreign competitors. High tariffs combined with government


regulations can affect Apples trading success. Therefore, it is important for
Apple to consider governmental regulations and restrictions of each country.
2. Economic
As we know, the general economical situation has been fluctuating in the past
years. Following the worldwide economic crisis in 2008, people became
cautious about what spending their money on. The continuing high
unemployment rates, fluctuating exchange rates, and renewed global
imbalances may also affect the customer and consequently Apple.
Governments need money to recover from the financial crisis and tend to raise
the taxes. It makes the price of Apples products have to be increased and
makes customers probably thinks twice about purchasing right way.

3. Socio/Cultural
Restriction of culture has effects on Apples profitability. Different language
also becomes the significant threat for Apple. Adapting to the differences in
culture is not very easy and Apple should try to build value into its company
name. This is being done in hopes that branding will eventually explain the
honesty, integrity, quality, and good services of Apple.
4. Technological
The technology and entertainment industries are constantly and rapidly
changing. It is uncertain whether Apple will be able to sustain its brand's
reputation

for

innovative

design,

continually

release

technological

breakthroughs, and launch new products that will "hit the consumer mark.
b) Micro-environmental Factors
This environment influences Apple directly. I will examine the industry analysis
through Porters Five Forces Analysis (see appendix 3).
1. The Threat of New Entrants
Many new entrants from backward, forward, and cross-industry integration can
threat the position of Apple. But, high barriers to entry especially the strong
strategies of Apple will make new entrants can not survive on the market
easily.
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2. The Threat of Substitute Products


Despite the popularity of digital music, Apple faces the threat of its substitutes
like CD player, cell phones with MP3 player capabilities, etc. This represents a
moderate threat. But, we know that consumer preferences can change
especially in high tech markets, for example: music cassette has been replaced
by the CD, and so can new product hit the online digital music from its blind
side and substituting them. Because of that, Apple has to be aware that the
external environment can change rapidly to the disfavor of Apple.
3. The Intensity of Competitive Rivalry
Apple clearly dominates the digital music market because of its combination of
iTunes with iPod, iPhone, and Apple TV. However, despite these achievements,
Apple faces high threats from large number of competing such as: Samsung,
Sony (iPods competitors); Napster (iTuness competitor); Samsung Android,
RIM

(i-Phones

competitors);

MovieLink,

CinemaNow

(Apple

TVs

competitors). With good reputation and extensive resources, they can be a


significant threat to Apple.
4. The Bargaining Power of Buyers
The existence of huge illegal music download communities with file sharing
networks such as Kazaa is the immediate threat that can be seen as the high
bargaining power of the buyers. This situation becomes disadvantageous for
Apple and other suppliers of online music content as they are forced to keep
prices low resulting in low profit margins.
5. The Bargaining Power of Suppliers
Suppliers can influence the production costs (costs of buying the songs from
the music labels through contracts). Disadvantage for Apple in this field is the
presence of only a handful big and important music labels on the world.
Suppliers aware of this situation, try to exploit that by maximizing profits and
cut good deals from themselves. Fortunately, the illegal music download
business is working against the supplier, therefore limiting their power to a
certain extent. It forces music labels to change lower prices if they want to
sustain and still capture decent profits.
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All of the internal and external environmental factor can be concluded become the strengths,
weaknesses, opportunities, and threats of Apple Inc. (see appendix 4).

2.3 Apples Strategies Stand up Against Rivalry


Apple Inc always smart to steal the attention of the market with its admirable marketing
strategies. Every time Apple releases new product, customers always have an eye on Apple's
products. Apple has been so successful in these last years because of its imaginative way to
think and do its business: a winning combination of exceptional products, great style and
design, great strategy, innovative marketing and enticing communications.
1. Innovative design of products
Apple Incs business strategy leverages the companys unique ability to internally
design and develop operating system, hardware, application software, and service to
deliver superior new products and solutions which are differentiated by their ease-of-use
and innovative industrial design. While competitors are doing everything they can to
keep costs down, Apple focuses on revealing radical concepts and appealing designs to
making its product different. Its differentiation increases brand loyalty, reduced price
sensitivity, and makes Apple was named as Most Innovative Company by Business
Week.
2. Apples Retail Store
The existence of Apple Store is very important where the consumers can explore the
technologies offered by Apple. In addition, Apple stores provide free group workshop,
personal training, and personal assistance for customer. Customer can also consult with
Genius Bar for answers to technical questions and for problem troubleshooting and
can schedule an appointment with a shopping assistant who help ensure that the
customer select the right equipment for his/her needs. Until now, Apple has opened
more than 200 retail stores located worldwide.
3. Good combination and perfectly timing
Apple owes its overwhelming success because of the good combination of iPod and
iTunes, where iPod users can download and insert music through the iTunes program.
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While competitors seek to imitate Apple's successful products and the innovative
complementary relationship between iPod and iTunes, Apple continues to introduce
ground-breaking new products iPhone and Apple TV timed perfectly to achieve first
mover advantages.
4. Strategic Partnerships
Apple has garnered major success for their product by way of strategic partnership with
other well-known brands, such as: Volkswagen of America, Starbucks, Nike, Button
Snowboards. This was a strategy moves to increase demand, meet sales goals, increase
Apples marketing exposure and build consumer confidence.
5. Global Market
Apple's strategy also involves the pursuit of opportunities to create demand for its
products in the global market. In today's business environment, it is common to expand
into international markets when domestic markets mature and commodity pricing tactics
infiltrate the industry. Additionally, operating and selling beyond the home market can
enhance the company's ability to compete with major rivals and bring knowledge into
the organization to expand its pool of innovative ideas.
Beside of five major strategies, Apple also has the good public relations and promotional
aspect. It maintains the good relationship with media. The most important strategy of Apple
is: Keep the world and media surprised to generate many of attentions.

CHAPTER III
CONCLUSIONS AND RECOMMENDATIONS

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3.1 Conclusions
Apple Inc. is a company that designs, manufactures, and then sells desktop and
notebook computers, portable digital music players, and cell phones. At this time, Apple not
only become the world's largest technology manufacturers, but also became the company's
most profitable.
There are some environmental factors that can impact the success of Apple strategy
over time. Internally, Apple has innovative and creative human resources, strong financial
position, good machinery, high quality of materials, and core competencies which will
support the implementation of Apples strategies. But, unfortunately, the pricing of Apples
products is a bit high for average customers. Externally, Apple faces many threats from micro
and macro environmental factor. Not only from political, legal, economy, sosio/cultural, and
technological (indirectly) but also from potential new entrants, substitutes products,
bargaining of suppliers and buyers, and competitive rivalry (directly).
Innovative design of the products, Apple retail store, good combination of iPod and
iTunes, perfectly launching timing, strategic partnership with well-known brands, and global
market have been fundamental to Apple's success to stand up against its competitive rivalry. All of its
admirable marketing strategies make Apple always can steal the attention of the market.

3.2 Recommendations

After I analyze the internal and external environmental factors, I have come out with
recommendations for Apple Inc. to enhance the effectiveness of Apples strategy for better
result.
1. Develop close relationships with suppliers. Rather than searching for the supplier of
lowest cost, I think Apple should maintaining a collaborative and exclusive business
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relationships with handful big suppliers. It will help Apple to mitigate the power of
suppliers and help to lock in attractive component prices.
2. Expand the Apple store locations. Providing more points of direct contact with buyers
will enable Apple to provide better services to customers and bring Apple experience to
more people.
3. Apple have to alert with its cost management to maintaining its price flexibility and to
increasing its competitive position relative to low priced competitors.
4. Apple should continually invest in Research and Development to stay ahead of and lead
radical products and technology discoveries.
5. Continue to seek and create new innovations in accordance with developments in
technology that constantly changing, so that Apple is remained as the market leader in
industry innovator.

APPENDICES
Appendix 1: Apples Financial Ratios 2009
Current Ratio
Quick Ratio

Industry
1.91
1.54

Apple
1.88
1.86

Microsoft
1.82
1.58

ROA (%)
ROE (%)
ROI (%)
Net Profit (%)

-48.69
-415.91
-370.59
-50.25

10.59
20.49
20.49
15.61

18.71
36.83
33.64
24.93
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Debt/Equity (%)
Debt/Assets (%)

-14.89
10.36

0
0

9.49
7.39

2.10

31.71

Dividend Pay/Share
(%)
Dividend P Ratio (%)
Appendix 2: PEST Analysis

POLITICAL

SOSIO /
CULTURAL

MACROENVIRONMENT
INFLUENCES ON
INTERNATIONAL
MARKETING

ECONOMI
C

TECHNOLOGI
CAL

Appendix 3: Porters Five Forces Analysis


POTENTIAL
ENTRANTS

Bargaining Power of

INDUSTRY
COMPETITORS

Threat of New Entrants

Bargaining Power of

BUYERS
RIVALRY AMONG
EXISTING FIRMS
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Threat of
Substitute
Products or Services
Appendix 4: SWOT Analysis
STRENGTHS
(Internal Positive)

OPPORTUNITIES
(External Positive)

1. Innovative and creative human resources with


knowledge and skills.
2. Strong financial positions strong sales, net
profits, stock prices, and cash flows.
3. Good machinery and have high quality of
materials
4. Have core competencies marketing
competencies, design and innovations,
alliance building, and positive brand
management.
5. Internal hardware and software development
Research and Development (R&D)
WEAKNESSES
(Internal Negative)

1. International Growth and Expansion


2. Strategic Partnerships with other well-known
brands cooperative marketing.
3. Expand Retail Stores brand exposure
4. New product development

THREATS
(External Negative)

1. Depends on Steves Jobs charisma, visions, 1. Strong competitors for Apples products
public communications, and negotiating skills.
with good reputations and extensive
2. The pricing is a bit high for the average
resources.
customers.
2. Pricing pressures as product mature and
competition increases
3. New entrants from backward, forward, and
cross-industry integration
4. Technology is constantly and rapidly
changes.
5. Economic situation that have been fluctuating
in the past years.

REFERENCES
EUCD (2004) Copyright Laws in Digital Europe Retrieved October 15, 2011 from
Page | 14

http://www.euro-copyrights.org/
Neumayr, T. (2008). Itunes Store Top Music Retailer in the US. Retrieved October 15, 2011
from http://www.apple.com/pr/library/2008/04/03itunes.html
Slideshare (2008) Apple Brand Experience Retrieved October 15, 2011 from
http://www.slideshare.net/korhan/apple-brand-experience-presentation
Thompson, A.A.Jr., Strickland, A.J. III, Gamble, J.E. (2008). Crafting and Executing
Strategy: The quest for competitive advantage. New York: McGraw-Hill Irwin.
Daily News (2003). Apple Strategy Questioned. Daily News, 8 July 2003
Quittner J. & Winters R. (2002). Apples New Core. Time (South Pacific), 14 January 2002
Technies.com (2002). Employer Analysis: Apple Computer Inc. Technices.com, 2002
BusinessWeek (2004e). Three steps to a Stronger Apple. BusinessWeek, 5 January 2004
Cheng L and Devgon A. (2003). Apple Case Competition iStrategy Associates. Michigan
Business School, 2003
BusinessWeek (2003). Get ready for an Innovative New Year . BusinessWeek, 29 December
2003
Case Study of Apple. Maintaining the Music Business while Introducing iPhone and Apple TV.
pdf

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