Apple Inc.“Maintaining the Music Business While Introducing

iPhone and Apple TV”

By:

Name : TISIA PRISKILA

Student ID : 09.53.01.1082

Major : Management

Class : BA X- 42

Module name : International Marketing Strategy

Lecturer : Mr. Arifin Assaly

Submission Date : 14th November 2011

PROFESSIONAL MANAGEMENT COLLEGE INDONESIA

Intake 2009

Executive SummaryIn 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

company’s 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 Porter’s

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 Apple’s 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 Apple’s 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.

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Table of ContentsCOVER 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 Apple’s Strategy Stand up Against Rivalry...............................10

CHAPTER III CONCLUSIONS AND RECOMMENDATIONS

3.1 Conclusions.................................................................................12

3.2 Recommendations.......................................................................13

APPENDICES.............................................................................................................14

REFERENCES............................................................................................................16

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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 Apple’s 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.

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CHAPTER II

CONTENTS

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 company’s 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.

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- 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, company’s dependence on Job’s 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

stock price. One of Apple’s 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

Apple’s 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 organization’s 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 product’s 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

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easily tend to prefer Apple products because of loyalty, preference, and well

reputation of Apple.

2.2.2 External Environment Factors

Apple’s 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

imposed on foreign competitors. High tariffs combined with government

regulations can affect Apple’s 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 Apple’s products have to be increased and

makes customers probably thinks twice about purchasing right way.

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3. Socio/Cultural

Restriction of culture has effects on Apple’s 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 Porter’s 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.

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.

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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 (iPod’s competitors); Napster (iTunes’s competitor);

Samsung Android, RIM (i-Phones competitors); MovieLink, CinemaNow

(Apple TV’s 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.

All of the internal and external environmental factor can be concluded become the strengths,

weaknesses, opportunities, and threats of Apple Inc. (see appendix 4).

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2.3 Apple’s 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 Inc’s business strategy leverages the company’s 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. Apple’s 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.

While competitors seek to imitate Apple's successful products and the innovative

complementary relationship between iPod and iTunes, Apple continues to introduce

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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

Apple’s 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.”

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CHAPTER III

CONCLUSIONS AND RECOMMENDATIONS

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 Apple’s strategies. But, unfortunately, the pricing of Apple’s

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.

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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 Apple’s 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

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.

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APPENDICES

Appendix 1: Apple’s Financial Ratios 2009

Industry Apple MicrosoftCurrent Ratio 1.91 1.88 1.82Quick Ratio 1.54 1.86 1.58

ROA (%) -48.69 10.59 18.71ROE (%) -415.91 20.49 36.83ROI (%) -370.59 20.49 33.64Net Profit (%) -50.25 15.61 24.93

Debt/Equity (%) -14.89 0 9.49Debt/Assets (%) 10.36 0 7.39

Dividend Pay/Share (%)

0 0 2.10

Dividend P Ratio (%) 0 0 31.71

Appendix 2: PEST Analysis

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MACRO-ENVIRONMENT INFLUENCES ON

INTERNATIONAL MARKETING

SOSIO / CULTURAL

TECHNOLOGICAL

ECONOMIC

POLITICAL

Appendix 3: Porter’s Five Forces Analysis

Threat of New Entrants

Bargaining Power of Bargaining Power of

Threat of Substitute Products or Services

Appendix 4: SWOT Analysis

STRENGTHS(Internal 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 materials4. 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)

OPPORTUNITIES(External Positive)

1. International Growth and Expansion2. Strategic Partnerships with other well-known

brands – cooperative marketing.3. Expand Retail Stores – brand exposure4. New product development

WEAKNESSES(Internal Negative)

1. Depends on Steve’s Jobs charisma, visions, public communications, and negotiating skills.

2. The pricing is a bit high for the average customers.

THREATS(External Negative)

1. Strong competitors for Apple’s products – with good reputations and extensive resources.

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.

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INDUSTRY COMPETITORS

RIVALRY AMONG EXISTING FIRMS

BUYERSSUPPLIERS

SUBSTITUTES

POTENTIAL ENTRANTS

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