Porter set out to define a strategic model to which all companies conform. He maintained that failing to fit into one of his pre-defined categories “the firm stuck in the middle is almost guaranteed low profitability.” (Porter, 1980). The pre-defined categories are noted in appendix 1. Apple Inc. falls under a differentiation strategy, “Differentiation is the ability of the firm to provide unique and superior value to the buyer in terms of product quality, special features, or after-sale services” (Porter 1990, 1998). This encompasses the Apple philosophy, in an Apple Report they state that they are “committed to bringing the best user experience to its customers through its innovative hardware, software, peripherals, and services. The Company’s business strategy leverages its unique ability to design and develop its own operating systems, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative design. The Company believes continual investment in research and development and marketing and advertising is critical to the development and sale of innovative products and technologies” (Apple Inc. 10-K Annual Report). However circumstances One example of a cost leader strategy carried out in the computer industry is Dell Inc. where they rely on consumers who want inexpensive products, however they provide a “no frills” service on these basic computers. Where Apple Inc. and Dell Inc. differ is apple put emphasis on branding, design, service, quality and new product development, whereas Dell focus on scale efficiency, control of overheads and R&D, process innovation and outsourcing to overseas. Dell offer incentives linked to quantitative targets whereas apple offer incentives linked to qualitative targets (Grant R.M). None of Apples competitors have been able to replicate their unique product quality, and for this reason Apple are able to charge premium prices for their products. However, it is not enough to just differentiate. The key to successful differentiation is meeting the customers demand for the product. Apple Inc. has been successful because they understand their customers and their preferences; Porter said “In a differentiation strategy, a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers” (porter, 1985). The challenge to firms (such as Apple) is to provide meaningful benefit to consumers (Sharp), which is what they have effectively accomplished. The value chain, a concept propagated by Porter in 1985 is used ‘‘systematically examining all the activities a firm performs and how they interact’’ (Porter, 1985), evaluates an organisations competitive position and assesses which value each particular activity adds to the organisations products or services. Porter makes a distinction between support activities and primary activities (see appendix 2).
Apple’s core strategy is differentiation, “the key to successful differentiation is matching the firm’s capacity for creating differentiation to the attributes that customers value most. For this purpose, the value chain provides a particularly useful framework” (Grant R.M).
The Apple brand has nurtured creativity and uniqueness in not only its products but also its business culture. After the revival of Apple Inc. in 1998 and the return of Steve Jobs (Cnet), talented individuals have been flocking to the company. Apple has a selective hiring process with which they use to hire only the superlative/most talented individuals. They also offer an array of employee benefits to satisfy staff. The company recognises those employees which have made extraordinary technical or leadership contributions to personal computing whilst at the company (Apple, Inc. 2012).
As a differentiating strategy it is expected that Apple will have many unique product features, and fast new product development. This is emphasised by their huge...
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