Apple’s strategic challenges for the next five years

The term “strategic challenges” refers to those pressures that exert a decisive influence on the probability of future success of an organization. These challenges are frequently driven by an organization’s future competitive position relative to other providers of similar products. Although not exclusively, strategic challenges are generally externally driven.

When Apple CEO Steven Jobs launched the Apple iPod in 2001 and the iPhone in 2007, he made a significant shift in the company’s strategy from the relatively safe market for premium-priced, innovative computers to highly competitive markets. of consumer electronics. By 2007, Apple’s music player, the iPod, was the premium-priced, stylish market leader with about 60 percent of worldwide sales and the largest single contributor to Apple’s revenue. Its iTunes download software had been re-developed to allow it to work with all Windows-compatible computers (about 90% of all PCs) and had about 75% of the world market for music downloads, with a market value about $1 billion a year-and it was growing fast. In 2007, Apple’s mobile phone, the iPhone, had just been released. The sales goal was to sell 10 million phones in the first year: Apple sold 6.1 million units in the next five quarters.

The world market leader responded by launching its own touchscreen phones. Here was the strategic risk for Apple. Aside from the sleek, iconic styles of the iPod and iPhone, there’s nothing rivals can’t match over time. In 2007, all the major consumer electronics companies like Sony, Philips and Panasonic, and mobile phone manufacturers like Nokia, Samsung and Motorola were quickly catching up with new releases that were just as stylish, cheaper and with more capacity. Additionally, Apple’s competitors were making deals with record companies to provide legal music downloads. Throughout this period, Apple’s strategic difficulty was that other powerful companies had also recognized the importance of innovation and flexibility in responding to new markets that Apple itself had developed.

Apple’s competitive advantage is based primarily on the Apple brand and a user-friendly interface (cheap manufacturing contracts with China are no longer as long-term an advantage as they used to be). As competitors catch up, it will be more difficult to maintain those advantages in the long term. run: We already see stronger branding for companies like HTC or Samsung and the ease-of-use advantage is almost gone as Android and iOS are now very similar to operate. Which means Apple will have to come up with more innovative solutions and essentially rely on employee talent — a risky strategy.

Apple manufactures most of its products in China (85% of all iPhone 5s are assembled in China), as China continues to grow much faster than the US – which will decrease Apple’s high profit margin -~20% at this time.