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Running head: PRELIMINARY STRATEGY AUDIT
Preliminary Strategy Audit
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PRELIMINARY STRATEGY AUDIT
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Table of Contents
Executive Summary ...................................................................................................................... 3
Introduction to Company ............................................................................................................. 4
Value Proposition ........................................................................................................................ 4
Market Position ........................................................................................................................... 4
Competitive Advantage ............................................................................................................... 4
External Environmental Scan...................................................................................................... 5
Current Situation ......................................................................................................................... 5
Assessment of External Factors Applying Five Forces .............................................................. 5
Strategic Issues .............................................................................................................................. 7
Expanding Market Share ............................................................................................................. 7
Adapting to New Regulations ..................................................................................................... 7
Competition ................................................................................................................................. 8
Technology Integration ............................................................................................................... 8
Shifting Consumer Attitudes ....................................................................................................... 9
Summary/Key Findings and Recommendations ........................................................................ 9
References .................................................................................................................................... 11
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Executive Summary
Apple’s iPad business unit continues to dominate the tablet market in terms of market
share and sales. This is because of various reasons such as a unique value proposition, strong
market position and core competencies such as technology leadership that provide the unit with a
competitive advantage. Nonetheless, an external evaluation scan reveals that the business unit
faces various issues that may jeopardize its operations. Apart from facing stiff competition, the
iPad business unit has also been losing its market share at an alarming rate. Economic, societal,
regulatory and technological factors have played a huge role in shaping the industry dynamics.
The most pertinent strategic issues confronting the iPad business unit are adapting to new
regulations, market expansion, shifting consumer attitudes, technology integration and tackling
competition. Addressing these issues should be a priority to the company. Some practical
recommendations that can aid the unit to sustain its competitiveness include initiating vibrant
advertisement and promotional campaigns, considering market development, engaging in CSR
initiatives and strengthening of existing competencies such as technology leadership and
emphasis on innovation. This report provides an overview of the businesses’ value proposition
strategy, market position and competitive advantage. It also outlines the results from an
extensive external environmental scan and offers some recommendations that can aid the iPad
business unit to remain competitive.
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Introduction to Company
Value Proposition
The iPad business unit relies upon its unique value proposition to entice consumers into
buying and using the products manufactured by the company. Apple adds value to the iPad
through integrating easy to use functionalities with a sleek design. Moreover, as Khan & Alam
(2015) assert, the iPad has distinguished itself as a superior quality product, an attribute that
Apple uses to justify its premium pricing strategy. These sources of value have helped to make
the iPad appealing and unique to the target customers. Since the iPad is a luxurious brand, it has
also created value through status meaning, as associating it with a particular class evokes
positive emotions and feelings among target consumers.
Market Position
Currently, Apple’s iPad continues to dominate in the tablet market in terms of both
market share and sales. The top three tablet brands are Apple, Amazon and Samsung, with Apple
commanding a market share of 26.4%, followed by Amazon at 13% and Samsung at 11% (Khan
& Alam, 2015). Through commanding a huge market share, the iPad business unit is able to
target more consumers as compared to industry competitors. In terms of revenue and sales, the
iPad also continues to outperform its rivals. For instance, the product in 2015 generated a total of
$21.7 billion in sales while its closest competitor, Kindle Fire HDX from Amazon, generated
$9.13 billion during the same duration.
Competitive Advantage
The iPad business unit enjoys some competitive advantages that help it to operate
sustainable and keep abreast of industry competitors. A core advantage stems from the solid
financial standing of the parent company, Apple Inc. Godfrey (2015) acknowledges that with the
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strong financial position, the company can be able to invest into other areas such as advertising,
R&D and product development, all of which lead to production of superior products. Apple’s
iPad also enjoys strong customer loyalty particularly from high-end consumers who perceive the
product as superior to others manufactured by the competitors. Noteworthy, a strong corporate
culture, integration of new technologies and strong leadership at the parent organization have
also endowed the iPad business unit with competitive advantages (Godfrey, 2015).
External Environmental Scan
Current Situation
The iPad business unit currently continues to be the leader in the industry. Nevertheless,
the products manufactured by the business face stiff competition from other devices including
Amazon’s Kindle Fire HDX, Microsoft’s Surface 2, Samsung’s Galaxy Note, and Sony’s Xperia
Z4. There is a variety of factors shaping Apple’s current situation. One is economic forces,
which have diminished spending powers of consumers and resulted in lower sales for the iPad
(Kurtz & Boone, 2014). This is especially true considering that the business unit charges
premium prices as compared to its competitors. Technological innovations are also having a
direct impact on the tablet market. Unlike most of the competitors, Apple has managed to remain
ahead in technological leadership because of a strong research and development (R&D) team.
Moreover, the iPad business unit has motivated employees and strong management team that
have enabled the company to sustain its current dominant position in market share and sales.
Assessment of External Factors Applying Five Forces
Competition is one external factor affecting the iPad business unit. In the tablet market,
the competitive rivalry is relatively high. The industry has many competitors, with the most
fierce being Amazon, Microsoft, Samsung, Sony and Chinese manufacturers. According to Kurtz
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& Boone (2014), these competitors have been successful in pursuing low cost strategies, a factor
that has enabled them to win the appeal of price sensitive consumers in the tablet market. The
rivals are also investing heavily in R&D, new product developments and advertisement
campaigns in a bid to secure bigger market shares.
Nevertheless, although the competition is stiff, the threat of new entrants in the tablet
industry is low. The main reason for this is the high start-up costs required to set up a tablet
manufacturing plant. Furthermore, regulatory requirements such as those related to licensure and
patenting serve as a barrier to entry. As Khan & Alam (2015) point out, companies that aspire to
venture into this market also face challenges in capturing market share since industry bigwigs
such as Apple, Amazon, Samsung and Microsoft have already commanded a big share of the
market and customers. These big companies use leverage their massive economies of scale to
create more barriers to entry.
Availability of substitutes is yet another external factor affecting the business unit. The
harsh economic times have prompted consumers to rethink the products they purchase. Godfrey
(2015) observes that many consumers are turning to other alternatives such as smartphones and
laptops because these substitutes offer the same functionalities and are much cheaper as
compared to most of the tablets. Moreover, they provide other unique value, for example, the
convenience brought about by their portability. Low switching costs additionally make it easy for
consumers to opt for alternative products or substitutes (Kurtz & Boone, 2014).
The bargaining power of buyers is also high in the tablet market. A large proportion of
consumers in this market are price sensitive, implying that a slight rise in price affects their
purchasing decisions. The switching costs to other alternative products are also low, giving the
customers more leeway to influence the pricing decision of the tablet manufacturers (Godfrey,
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2015). For suppliers, their bargaining power is low to moderate. Factors that make the supplier
power low to moderate include the existence of numerous suppliers as well as increased
outsourcing to overseas manufactures such as those in China.
Strategic Issues
Expanding Market Share
Expanding market share is a major strategic issue for Apple’s iPad business unit. Even
though the business still commands the largest market share in the industry, the market share has
been declining. For instance, the market share has fallen from a high of 71.8% in 2010 to the
current 26.4%. Khan & Alam (2015) acknowledge that as a whole, the tablet market continues to
contract, but iPad’s share is falling at a much faster rate as compared to its competitors. The
declining market share is a strategic issue because it can have adverse effects on the operations
of the unit. Apple’s iPad unit has already felt the effects, as evidenced by declining sales and
revenues in the past few years (Duhigg & Barboza, 2012). The business unit therefore has to find
feasible ways of expanding market share in order to exploit the opportunities provided by
consumers in the newly targeted markets.
Adapting to New Regulations
Since Apple’s iPad business unit operates on a global scale, there is need for conforming
to changing regulations in order to remain operational. Major regulations pertain to
environmental and labor laws in countries such as China where it maintains some operations.
Over the recent past, the business unit has faced negative publicity stemming from allegations of
unethical conduct and violation of labor laws. For instance, the company came under stiff
criticism after investigations revealed that the company violated safety and labor laws at the
Foxconn iPad factory in China (Duhigg & Barboza, 2012). Employees at this subsidiary raised
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concerns about various issues including inadequate working conditions and poor pay. Indeed,
explosions in the factory due to negligence led to the death of some employees in the factory in
2011 and 2012. Failure to adapt to the regulations can attract legal litigations and adversely
affect the financial success of the business unit (Kurtz & Boone, 2014). It can also lead to bad
reputation and poor brand image.
Competition
Competition is another strategic issue that confronts the iPad business unit. As mentioned
earlier, the competitive rivalry in the industry is becoming very intense. Competitors are devising
new technologies and investing in emergent technologies in order to outperform the iPad
business unit. The stiff competitors from other products such Kindle Fire HDX, Surface 2,
Galaxy Note, and Xperia Z4 tablets can further diminish the market share of the iPad (Godfrey,
2015). Moreover, the competitors target consumers from different part of the globe, which is not
the case with Apple’s iPad business unit that primary targets affluent consumers from the
developed countries. The firm therefore needs to address this strategic issue through
implementing innovative strategies such as forging partnerships whenever appropriate.
Technology Integration
Kurtz & Boone (2014) contend that technology plays a pivotal role in the tablet industry.
Hence, finding ways of integrating new technologies into the business processes to support that
attainment of organizational goals is of critical importance. Integrating emergent technologies
has the potential of aiding the company to develop superior hardware and software, which will
provide a competitive advantage and increase brand loyalty (Godfrey, 2015). The company
needs to find ways of integrating the technologies to support various processes and activities
such as manufacturing, distribution and sales.
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Shifting Consumer Attitudes
The shifting attitudes, preferences and values among consumers is the other strategic
issue that the iPad business unit needs to consider. These attitudes have a major effect on
consumer purchasing decisions. For Apple, a sizable number of consumers are looking for other
alternatives because of the high prices. This can have detrimental effects to the organization in
the long-term. Kurtz & Boone (2014) reiterates that it is paramount to implement responsive
strategies that meet the consumers’ shifting needs, attitudes and values if the organization is to
achieve its strategic objectives.
Summary/Key Findings and Recommendations
From the extensive strategy audit, it is apparent that even though the iPad business unit
continues to sustain its dominance in the tablet market, various factors can undermine its
sustainability in the long-term. Currently, the unit is performing relatively well because of a
strong value preposition, a big market share and competitive advantages derived from the brand
visibility and financial prowess of the parent company, Apple Inc. Nevertheless, other trends and
issues in the industry are threatening to undermine the sustainability of the business unit.
For instance, even though the tablet market is contacting as a whole, the effects have
been more adverse for the iPad business unit, which has lost a significant market share in recent
years (Khan & Alam, 2015). In addition, increased competition from other industry players, the
rapid technological changes, periods of economic uncertainties, tightening governmental
regulations and change in consumer tastes are other factors affecting business operations.
Therefore, the business unit has to initiate some ingenious strategies in order to beat the
competition and operate sustainably.
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One recommendation for Apple’s iPad business unit is embarking on extensive
advertising and promotional campaigns. Through these campaigns, the company can be able to
build awareness and create better brand visibility among the targeted consumers. To reach a wide
clientele base in a cost effective manner, the unit should consider utilizing social media
platforms for the advertisement campaigns. This is because a majority of the product’s target
customers, who comprise of individuals between the ages of 16 and 45, maintain a vibrant
presence in online networking sites (Kurtz & Boone, 2014).
Another recommendation that can help iPad business unit is pursuing a market
development strategy. Currently, the primary target customers for the product are high-end
consumers in some selected regions such as North America and Europe. The iPad business unit
should consider venturing into other markets such as those in emerging BRICS countries, as this
provides an opportunity for expanding market share and creating brand recognition. Kurtz &
Boone (2014) acknowledge that engaging in CSR (corporate social responsibility) initiatives can
aid in building brand image and winning the appeal of prospective customers. Meanwhile, the
firm should also continue building on its core competencies such as technological innovation,
R&D and strong corporate culture in order to sustain its competitiveness.
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References
Duhigg, C., & Barboza, D. (2012, January 25). In China, Human Costs Are Built Into an iPad.
New York Times , pp. http://www.nytimes.com/2012/01/26/business/ieconomy-applesipad-and-the-human-costs-for-workers-in-china.html?_r=0.
Godfrey, R. D. (2015). Strategic Management: A Critical Introduction (2 ed.). New York:
Routledge.
Khan, U. A., & Alam, M. N. (2015). A critical analysis of internal and external environment of
Apple Inc. International Journal of Economics, Commerce and Management , 3 (6), 955967.
Kurtz, D., & Boone, L. (2014). Contemporary Marketing. Boston, MA: Cengage Learning.