Strategy Audit Essay: Analyzing Apple’s Business Strategy And Performance.

Using the tools and framework learned in class and throughout the program, prepare a  strategy audit of your company with a companion presentation. The strategy audit is a comprehensive analysis of the company’s business strategy and operating performance, and culminates in a series of recommendations for improving your company’s performance based on the findings and conclusions of your analysis.

A strategy audit involves assessing the actual direction of a business and comparing that course to the direction required to succeed in a changing environment. A company's actual direction is the sum of what it does and does not do, how well the organization is internally aligned to support the strategy, and how viable the strategy is when compared to the external market, competitors, and financial realities. These two categories, the internal assessment and the external or environmental assessment, make up the major elements of a strategy audit.

In your strategy audit:

• Provide a high-level analysis of the company’s business strategy and operating performance. Be sure to complete the following:
  • Analysis of the company value proposition, market position, and competitive advantage
  • External environmental scan/five forces analysis
  • Internal environmental scan/organizational assessment
  • SWOT Analysis
  • Balanced scorecard/strategy scorecard
• Recommend specific tactics for improving your company’s strategic alignment and operating performance.
  • Recommendations can include but are not limited to tactics in marketing, branding, alliances, mergers/acquisitions, integration, product development, diversification or divestiture and globalization (if you recommend your company go global, you must include a supply chain analysis and an analysis of your firm’s global capabilities).
  • Explain how the recommendations will help the company achieve its strategy and vision.

You are to write this report as though you are a consultant to your company, and are addressing the executive officers of this company. You will collect and analyze a large amount of data in producing your report, but your final product will be condensed and focus on presenting your analysis findings and conclusions.

Strategic issue and recommendations

The extensive analysis of the business external environment, business internal environment, business positioning, analysis is done in this report. That analysis has provided some important insight to the current report. From those insights some important issue for the Apple Inc is identified in this current report (Ghemawat et al., 2010). Those issues are analysed in details in the following section of this report to provide some important recommendations for the company. Later part of this report would try to identify the risk-benefit aspect of the new strategy, key approach of measurement of those strategies and the action plan of those strategies.

The strategic issues for Apple are as follows.

• Smart phone market saturation
• Over dependency on iphone market
• Low Market penetration
• Barrier for disruptive or radical innovation
• Beyond iphone improbable growth
• Service business lack the scale and volume of business
• Apple losing its talent base

These strategic issues of Apple Inc are identified from the earlier market environment and business analysis. A details analysis of these issues is provided below to understand the possible way out for these issues.

Smart phone market saturation

The market of the smart phone is now saturated state. The customers are no longer having any excitement from the new release of iphone. The improvement and the increment in the technological innovation are gradual and slow. There is no marked different in the new releases of the smart phones. The growth in the global smart phone sale indicates the saturated growth figure from the 2015 onwards though future project is looking to be somewhat better (statista, 2018).

[Source: statista, 2018]

The trend is flowing for the sale of the Apple products. The price of the products over the year has been increased by Apple to address the financial or the profitability question of the business (Verbeke, 2013). Better margin and better profit level were able to satisfy the shareholders but the unit sale of the product has seen a year on year basis drop from the 2012 onward as shown in the figure below (Sherman, 2018). This is a strong strategic problem for the business as the high days of customer enthusiasm are not visible in the market.

[Source Sherman, 2018]

The figure above shows that Apple has higher dependency on the iphone market. Apple before the iphone and after its high popularity has tried to introduce several products into the market for example ipod or iwatch. But none of those product has been able to deliver the result that iphone have provided to apple. Therefore the lack of diversity in the product portfolio is going to be huge strategic problem for the business as the smart phone market losing its shine (White & Bruton, 2010). 

Strategic issue

Another important thing is that the technology curve. The current top product line especially the PC and iphone products have probably reached the mature technology level in their technology growth curve (White & Bruton, 2010). Therefore deriving further value from this product portfolio may not be an appropriate strategic move for the company; rather here Apple must invest the potential section in the technology market strategically.  On the other hand iphone is the largest revenue generator for the Apple, as of 2018’s 3^rd quarter Apple is having close to 57% of its revenue from this source (statista, 2018). Therefore under this context of slowdown in innovation and dependency on this product, Apple has to think beyond iphone.

[Source: macro-ops, 2018] 

The command over the market is going to be another strategic issue for the Apple. Apple products are high differentiation focused strategy based products. Because of this reason the products are high premium priced (Ghemawat et al., 2010). This aspect makes Apple the most profitable business internationally but the lack of market penetration is the main cause of concern for the business. The first figure below that Samsung has the large market share whereas Apple and Huawai is trailing being. In recent time Huawai has occupied the second spot in the market by moving Apple from that space (Choudhury, 2018). But the market penetration of iphone can be understood from the market share of the smart phone operating system (OS) market share. The next figure of OS market share shows that more than 85% of the OS market share in the world is under Android whereas iOS just hold around 15% market share (Richter, 2017). Therefore in the overall market of smart phone in the world iphone has limited market presence. Under the slowing down of smart phone market this low market penetration would be an important problem for the organisation strategically.

 

[Source: gs.statcounter, 2018]

[Source: Richter, 2017] 

The disruptive innovation provides the new technological breakthrough for the existing market whereas the radical innovation provides the new technology to cater to a new market. Apple in their past operation was able to contribute to their growth through both type of innovation process (Gunday et al., 2011). But recently the innovation process in apple made only the incremental type of innovation. Some market analysis has stated in recent time that the innovation plan undertaken by the new leadership in the organisation, are taking lot more time and that is slowing down the pace of innovation (firstpost, 2018). Some of them also pointed out that the vision is lacking in this important strategic part of the Apple’s business (firstpost, 2018).

Smart phone market saturation

 

[Source: LOPEZ , 2015]

Apple in recent time has recognised the iphone’s strategic issue. Considering this the company is trying to grow in other section of the market. In recent time the services sector of the Apple’s business has shown the strong potential. For example in the last quarter of 2017 this segment has been able to grow by impressive 24% year on year basis but the business volume is just $6.3bn (Green, 2017). In comparison to iphone market this revenue is too little to find any comfort for the company. The volume of sales and the scale of this income source are not still proven. The hardware sales of the business is in the declining mode and replacing that with this uncertain emerging source would provide some strategic issue for the business. This approach would impact the current positioning of the company in the overall market. the high margin hardware business would prove to be very difficult to be replaced by the new services based business model (Green, 2017). 

This is the recent problem that emerged in the Apple. In recent time Apple has lost substantial number of talented employees from the operation. This problem is also linked with the strategic problem that the business has. Apple’s loss of talent is still at a lower level but the probability of the future large loss of talent is quite high for the organisation (YAROW, 2013). The people working for the iphone and its current OS are losing their interest as they think that it would never be the same as the first iphone (YAROW, 2013). Therefore they are moving towards the other opportunity in the industry.

[Source: Jurevicius, 2018]

The above diagram shows the product and service portfolio of Apple. The hardware and the software section of the business is not growing fast but the services and the application software is growing fast in the business. The estimation is the by 2021 the services section would only contribute close to $50bn to the total revenue (Gurman, 2018). Considering this aspect and the above analysis the following suggestion is provided.

• Managing the current vision of the company for business diversification
• Innovation strategy change and continuation of its radical or disruptive innovation culture to develop new product
• Repositioning the business in the market

The strategies are derived from the current business internal and external situation. This new direction for the organisation is selected on the basis of different consideration and those are explained in the section below.

Managing the current vision of the company for business diversification

The above detailed analysis of the strategic issue of Apple has put forwarded the business current vision as one of the important issue for the strategic direction. The current strategic vision developed by the current leadership focuses on the innovation, uncompromising persuasion of excellence, much focused activity on the new technology development, following open innovation culture, existing to deliver the great product to the customer (Rowland, 2018).  The current vision is in line with the organisational culture of the organisation and the current market position of the business (Czinkota & Ronkainen, 2010). Apple has the long tradition of innovation, technology leadership and current market leader position. But the future challenges for the business is serious and need appropriate approach to counter. Therefore the current vision would need some modification to be effective. The current vision needs an approach of urgency and strong direction. The innovation efforts are not currently able to deliver some strong result and it is also slow. Therefore the sense of urgency would be able to fasten the activity which would help Apple to broaden the innovation and technological gap with its competitors. The current vision states that the great product delivery is the reason for Apple’s existence. If this current vision adds the ‘great solution delivery’ part in that, the approach would be holistic (Hoyer et al., 2010). This approach would add the outward thinking along with the internal approach in the new product or service development. On the other hand direction would help the employees to focus on the next big thing in the market and not only focus on the current product development approach.

Over dependency on iphone market and growing beyond iphone

Some of the innovation requirements are in the field of future energy use, mobility, artificial intelligence and robotics, space technology and so no. The current vision of Apple is focused based on the Steve Job’s technology push strategy of innovation where the organisation does innovation and then makes a product to market that (Finkle & Mallin, 2010). For a vision leader like Steve Job that approach helped Apple. This is the technology push strategy of innovation. But the current strategy for innovation needs to change into market pull strategy where the innovation development would base on the market needs. This approach would help the organisation broaden the approach and contribute through the radical or disruptive innovations. This direction would create new enthusiasm among the employees of the organisation and inn addition to the new vision this would help in retaining the talent base of the organisation. To comply with the above diversification strategy and alternative big revenue source development apart from iphone, this strategic approach would be highly important (Hoyer et al., 2010).

The current business growth direction for the Apple is the services part of the product portfolio. Therefore the current vision as well as the business market positioning also need a change (Hooley, Piercy & Nicoulaud, 2012). Currently Apple’s mission statement recognises industry defining approach of Apple in computing and mobile devices and also digital music industry like services sector redefining approach. Therefore the positioning of the company is done as an exceptional experience based innovative, creative and market redefining brand in the specific sector. There was time when Steve Jobs stated Apple as the “mobile device company”. But under the new paradigm of the business internal, external needs and situation, the brand positioning must the similar focus but a wider inclusion of sectors (Czinkota & Ronkainen, 2010). The market pull innovation strategy would be well supported by the positioning approach like a innovative, creative and market redefining brand that deliver highest user experience for a variety of market need.

Strategy	Impact	Risk factor	Benefit
Managing the current vision of the company for business diversification	Product portfolio Structure Value chain activity Performance measure	The wider consideration and redirection in the company discussed earlier would change the current portfolio and may include may other solution oriented products or services. This may increase chance of failure of different products or service because of the lack of focus.  On the other hand a successful implementation means a change in the current value chain of the company (Fleisher and Bensoussan, 2015). This new investment would have certain risk. On the other hand the culture or the organisation may remain same but the structure would have a change. This restructuring would have certain risk attracted. The sense of urgency may miss the current strict performance measures.	Diversification of business and product and service portfolio. Reduction in business risk. Growth in revenue and profitability. Opening of new source of revenue (Rosenbusch, Brinckmann,  & Bausch, 2011).   Faster delivery of new innovations. Developing better competitive advantage.
Innovation strategy change and continuation of its radical or disruptive innovation culture to develop new product	Structure Performance measure Organisational culture	This new market pull innovation strategy would ask for a change in the culture and structure of the organisation. This major restructuring would be highly risky. The parameters of performance measures and the capabilities of the operation would be changed. This could mean decision making risk.	Diversification of business and product and service portfolio. Greater acceptability of new solutions because of market needs considerations. Effective identification and investing time on the next big thing for the technology industry (Fleisher and Bensoussan, 2015).  Great enthusiasm of the employees to relevantly contribute and pursue greater societal and market needs.
Repositioning the business in the market	Structure Product portfolio Value chain activity	This strategic repositioning would be having a position of delivering great technology solution to future market needs (Rosenbusch, Brinckmann,  & Bausch, 2011).  This would be in relative misalignment with the current product portfolio, structure of organisation, value chain of the business.	The benefits would be changing the perception of the customer. For example the services portfolio of Apple would have a better brand perception among the customer. This would bring wider acceptability to the customers.

The current strategy would be based on this following balance scorecard of the business.

	Objectives	Measures	Targets	Initiative
Financial	Increase source of revenue and total revenue	Increase total sale revenue.	Increase revenue by 50% within 2022	Add new source of revenue and growth them fast. Maintain the growth rate of the current product portfolio (Smith, 2010).
Customer	Having high customer satisfied experience based creative and innovative solutions.	Improving new customer number by 15% yearly.	Contributing 15% additional income from these new customers of new product or services lines.	Develop different product and service mix. Entering new product or service segments by providing innovative and high customer experience based solutions (Niven, 2011).
Internal process of business	Developing different sector and product based team to deliver radical or disruptive innovation based solutions with urgency (Smith, 2010).	Allocating 30% of total resource of the company for the new products and services development.	Developing 10 new product or services in the overall portfolio with each having capacity to 5% contribution in the total revenue.	The internal innovation team restructuring process, developing culture of market pull innovation strategy.
Growth and learning	New capability development, new functional team development, new branding approach (Niven, 2011).	Recruit new talent and train. Relocate 30% of current talent with relevant background to these new projects with greater support.	Achieving excellence in each new capability.	Plan for staffing, resource allocation, KPI development, goals and objective development, new marketing planning.

The action plan would be developed on the basis of the following ‘Wh’ questions.

What is the change or action?

The current strategic change would bring diversified approach of business, faster and efficient new product development and changing current brand positioning (Teece, 2010).

Who would be responsible?

The current plan would be directed from the top leadership of the company. Then HRM and finance function would be responsible for the staffing and resource allocation purpose by following their functional and organisational goals (Teece, 2010). The marketing team would plan for the repositioning strategy development. The innovation teams would be reorganised and restructured under the operation function. The changes in the business value and supply chain would be managed by the operation and logistic head.

Low Market penetration

When would the plan be implemented?

From the financial year of 2019 the strategic change would be implemented and the current targets are set to be achieved by 2022.

What kind of resource is needed?

The required resources are the financial resource, human resource (Meskendahl, 2010).

Who are to be communicated?

In this change process proper communication is needed for different stakeholders. Top management would have detailed business report along with business presentation. The suppliers and distributors would be communicated through due transactional procedure. The internal staffs would be communicated through formal written and face to face communication. A detailed change plan would be shared with the internal staffs (Meskendahl, 2010). Finally the reapportioning communication would be done with the customer through the proper form of integrated marketing communications. The most important communication would be done with the shareholder of the business. A proper briefing and business presentation would be done at the shareholder meeting.

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