Strategic Management, Spring 2015
Apple Inc. is faced with the challenge of sustaining or growing their market share within the personal computer (PC) and mobile device industries (iPhones and iPads or tablets) from 4.2% to above within the market. Both industries are intensely competitive and Apple must make a decision as to what comes next for their company, known for its innovation and cult-like following based on products that, elegantly designed, meet consumer needs. My recommendations are that they simultaneously phase of the PC industry over the next 2 years and increase R&D spending to 15% of their profits per annum immediately into the mobile device industry. Decision criteria
In order to evaluate several possible solutions, I identified a number of decision criteria in my evaluation that I derived from the SWOT analysis (Appendix 1) and Porter’s Five Forces on the PC, iPhone, and iPad (Appendices 2, 3, and 4 respectively). They include: R&D investments of 15% of profits per annum grows 5% per annum in the next 3 years; grow the market share by at least 2% per annum in the next 3 years; forecasted unprofitable business lines are eliminated in the next 2 years; ensure that any R&D activities are bounded by the filters of sleekness, light weight; and maintain quick market entry/early mover status by innovating a product from cradle to market within 14 months. Strategic Alternatives
Based on a SWOT analysis and Porter’s Five Forces, Apple has several options to solve their challenge. 1 Phase out of the PC industry over the next 2 years. I have chosen to recommend this alternative for several reasons. This industry is intensely competitive, with the major suppliers have significant influence over the major companies like Apple. Apple has been losing market share in the PC and was not a first mover in the mainstream market, so has been trying to claw its way into this market more broadly. Given the leapfrogs in technology from PCs to smaller personal devices, it’s unclear what future the PC actually has. Thus, Apple would be wise to remove itself from this industry over the next 2 years and really instead focus on what it is uniquely good at. 2 Increase R&D spending to 15% of their profits per annum immediately into the mobile device industry. I also recommend this alternative because of the growth opportunities in the mobile device industry. While there is competition here, Apple has been a first mover and considered innovator with its products, often also having high margins. They can capitalize on the culture where innovation is already a core principle all the way from technology teams to marketing and is self-enforcing and self-sustaining, by promoting innovation teams with fast turnaround times and employee incentive plans appropriate to the context. It capitalizes on Apple’s strategic advantage. 3 Do nothing. I do not recommend this option, largely because the intense competition in both industries seems to be on a trajectory that will outpace and outperform Apple if it does nothing. 4 International expansion of iPhone and iPad. I do not recommend this alternative. While emerging markets present a promising opportunity to leapfrog from the PC to personal mobile devices, other countries are not likely to have ability to pay for high costs of Apple’s products; as well, navigating iTunes and AppStore in other countries may pose to be costly, especially as these are neither necessarily the most profitable of Apple’s product lines. Analysis
R&D spending is at least 15% of profits per annum grows 5% per annum in the next 3 years Market share grows by at least 2% per annum in the next 3 years R&D activities are bounded by core filters
Forecasted unprofitable business lines are eliminated in the next 2 years Product innovated from cradle to market within 14 months
Phase out of the PC industry over the next 2 years.
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