BUS7001 Managing within a Competitive Environment - Assessment Answer

Introduction

The organization that is taken into consideration is Apple Inc, for the sake of this study. The strategic decision that is concentrated upon in this study is the introduction of Apple Watch in 2015. The following study revolves around illustrating the gravity of strategic initiatives undertaken by the organization in that context. On top of that, intricate analysis of manners through which financial as well as other relevant data are inculcated by the organization's decision making, in terms of formulating strategies to get ahead of the competitive curve is also carried out meticulously in this scholarly endeavor. Throughout the course of the study, special emphasis has been imposed upon the competitive position of the firm, aside from the financial facets incorporated by the organization, pertinent with external environment management of the company, enhancing the reliability as well as mitigating risk factors associated with inculcating new strategies. Besides meticulously analyzing the strategic model used for decision making, the study also includes the manner in which this approach can be enhanced furthermore.

Financial Position of the firm

For the sake of analyzing Apple Inc.'s financial position during the time leading up to the launch of the Apple Watch in 2015, it is imperative to intricately examine the rudimentary financial figures, derived from the company's annual reports and financial statements, with focal point upon Apple's revenue, profitability, cash reserves, and other relevant financial metrics.

Revenue Growth

In fiscal year 2015, the total reported net sales of Apple were around $233.7 billion, which incremented from the previous year's $182.8 billion (Abubakar et al. 2019). This robust revenue growth demonstrated Apple's strong financial performance and market presence.

Profit Margins

On a similar note, the profitability of the firm remained high, which is revealed from the reported gross margin of around 39.9% in 2015, which posits Apple’s ability to maintain healthy profit margins in a competitive industry (Brandenburger & Nalebuff 2021). This margin later permitted Apple to allocate resources for research and development (R&D) for Watches innovation.

Cash Reserves:

Apple had substantial cash reserves at its disposal by the end of 2015, which was approximately $202.8 billion in cash and marketable securities. This cash position acted as a cushion for Apple to substantiate with the financial flexibility required to fund the Watches development, marketing, and launch of new products.

Research and Development (R&D) Expenditure:

In 2015, Apple's R&D spending amounted to approximately $8.1 billion, compared to $6.0 billion in the previous year, which reflects that the form war gearing up to creating cutting-edge products (Calabrese et al. 2019).

Profitability Ratios:

The operating profit margin in 2015 was approximately 30.3%, while the net profit margin was around 21.6% (Calabrese et al. 2019). These ratios demonstrated Apple's ability to convert a significant portion of its revenue into profits.

Debt Levels and Market Capitalization:

Apple inculcated a combination of cash reserves as well as debt issuance to fund its operations of launching Watches, which is revealed from the fact that in 2015, long-term debt stood at approximately $53.5 billion. In a similar vein, Apple’s market capitalization in 2015 exceeded $650 billion, making Apple one of the most valuable companies globally (Calabrese et al. 2019).

All in all, it can be stated that the financial position of Apple Inc. in the lead-up to the Apple Watch launch was attributed by exemplary revenue growth, strong profitability, substantial cash reserves, and a healthy balance sheet. All of these cumulatively paved the way for Apple to invest in research and development, marketing, and supply chain operations for the successful launch of the Apple Watch.

External environment analysis

Value Chain Analysis

Fig 1: Value Chain Analysis of Apple Inc

Inbound Logistics

The nexus of Apple’s supply chain, under the leadership of Tim Cook, is a boasting aspect of the firm, which assisted the organization to reduce inventory turnover of Apple Watch from one month to just 2-5 days (Crane 2019). This has been feasible for the firm by fostering strategic relationships with reputed suppliers, which wielded substantial bargaining power to Apple. Moreover, the relevant cost advantages and the seamless transition of incorporating economies of scale in procuring resources and swift production of Apple Watches, is a direct resultant of the company's supply chain, which involves more than 3 million people across 52 countries, with purchase commitments extending up to 150 days (Freeman 2020).

Operations

Apple's strategy regarding Watches is to outsource its manufacturing to China, thereby mitigating any notion of core competencies. However, this approach has exposed the company to labour-related challenges at supplier facilities, thereby deteriorating the brand equity extensively. Since then, Apple started to broaden its business horizon to the Rest of Asia Pacific, especially India, thereby showcasing its global presence and adaptability.

Outbound Logistics

Initially, Apple focused on inventory depreciation by maintaining minimal warehouse inventories, since the product being new to the market. Its outbound logistics revolved around distributing products to high-traffic Apple Stores, retailers, and wholesalers. Simultaneously, the company double down on e-commerce to reduce costs and seamlessly broaden its outreach.

Marketing and Sales

Apple employed a plethora of sales channels, with a growing emphasis on direct sales. This approach increasingly targets enterprise sales and heavily relied on channel partners to bolster its market presence, which has proven to be quite effective (Freeman 2023). In view of the fact that as per a survey conducted by Deloitte, Apple Watches became the second most sought after tech gadgets amidst all demographics.

Service

Apple is renowned for its exceptional customer service at all stages. If there was any issue regarding pre-purchase experiences, post-purchase support, and repair services of the Apple Watches, its Stores serve as hubs for customers, which consolidated the brand loyalty and customer satisfaction regarding the product.

PESTLE Analysis of Apple Inc

Fig 2: PESTLE Analysis of Apple Inc

• Political: China-US trade war acted as impediment due to tariffs on Apple Watches and other products in China, which affected its demand. Political instability during 2015 heavily disrupted sales and supply chain of Apple Watches (Ingram et al. 2019). Favorable Indian government policies later on boosted its success; however, the costs of relocating manufacturing from China slightly increased product prices.
• Economic: Labor cost increased in manufacturing countries in late 2015, thereby posing as new hindrances towards Apple’s Watches, which affected product costs. Strong U.S. dollar at that time, challenged international business. Premium pricing strategy is also not a promising avenue for Apple since it limits penetration in Asian markets.
• Social: Besides, tensions between the U.S. and China which already impacted Apple's brand image, increasing smartphone popularity offers opportunities to search for affordable phones, which enhanced the challenge of Apple. However, urbanization trends in India and other Southeast Asian Nations favored Apple to growing eventually.
• Technological: Competition offering advanced technology at lower prices affected Apple's brand image and finances extensively in late 2016. To adapt to this competitive environment, Apple should strategically leverage the opportunities presented by cloud computing and the growing apps market. These initiatives allowed Apple to maintain its market presence and competitiveness (Ingram et al. 2019).
• Legal: Telecommunication regulations posed a threat to Apple, ever since Apple Watches were introduced. Apple has faced legal scrutiny and regulatory challenges related to data privacy and security, particularly concerning user information and encryption. These legal considerations have influenced Apple's product design and business practices.
• Environmental: Manufacturing in China raised concerns about pollution and environmental impacts, which prompted Apple to focus on energy-efficient products and recycling. However, this move affected the supply chain nexus along with increased electricity costs at Data centers.

Competitive Landscape Analysis:

Fig 3: Porters Five Forces

Porter's Five Forces analysis for Apple Watches

• Threat of New Entrants (Moderate): While barriers to entry are relatively low in the smartwatch market, the strong brand equity of Apple coupled with its firm customer loyalty, act as an impediment for new entrants.
• Supplier Bargaining Power (Low): The massive supplier network and production scale give Apple leverage to enabling cost-effective manufacturing (Jorgenson et al. 2023).
• Buyer Bargaining Power (Low to Moderate): Customer choices are influenced by the Apple’s brand reputation, and unique features of Apple Watches, which apparently reduces individual bargaining power, but allow collective influence on product evolution.
• Threat of Substitution (Low): As far as substitutes are concerned, Apple Watches have limited direct substitutes due to their advanced ecosystem integration, health features, and unique design, thereby mitigating the threat of alternatives.
• Industry Competition (High): Potential rivals such as Samsung and Fitbit are challenging Apple on a continual basis, which requires constant innovation and differentiation to maintain market leadership.

Data Collection for Apple Watches

Apple's data collection for the Apple Watch initiative encompassed extensive market research, consumer insights, and technological trends. Besides conducting surveys, apple also incorporated analysis from focus group in order to gain insights from existing user data within its ecosystem. Intricate market analysis which revolves around opponents regarding consumer preferences fitness trends and wearable technology gadgets my sister documentation to accumulate pertinent data regarding competitors' smartwatches and their financial performance, so that a perfect market niche can be determined for product differentiation (Lehtinen et al. 2019). Moreover, Apple scrutinized external factors such as regulatory environments, privacy concerns, and emerging health-related legislation. Thorough data collection helped Apple fine-tune the Apple Watch's features, design, and marketing strategy.

Risk Factors for Apple Watches

• The notion of technological challenges while developing cutting-edge health and fitness monitoring posed immense risks for Apple, which the organization addressed by ensuring preciseness as well as reliability of health data collection and interpretation.
• The equation of competition from potential rivals, such as Fitbit and Samsung are immense in the context of Apple’s market share. As a consequence of which, a constant risk of losing potential market ground is imminent, if adequate measures are not taken into consideration. In this context, it is imperative to ensure that regulatory compliances are adhered to stringently otherwise it could result in legal issues and reputational damage (Newell & Marabelli 2020).
• Disruption in supply chain due to movement of operational network from China posed a risk, thereby making the supply chain susceptible to disruptions, which would inherently affect product availability and launch timelines.
• Accumulating information about indent with health and managing this data raised privacy and security concerns, which Apple needs to address these concerns adequately to gain user trust.

Hence, Apple's thorough data collection and risk assessment for the Apple Watch initiative ensured that the company navigated potential challenges in a competitive market and delivered a product that met consumer needs and expectations.

Relevant Strategic Models used in Making the Decision

Figure 4: Decision making tree

Decision-Making Tree: Launching Apple Watch

• Initiation of the process of considering the launch of the Apple Watch.
• Selection of Decision-Making Models
• Apply Rational Model
• Acknowledgement of the possibility of evolving market dynamics and recognizing the risk of incomplete or outdated information.
• Allocation of Resources
• Implementation of SWOT Analysis Model
• Apple should examine External Factors: Besides scrutinizing threats in competition, regulatory changes, and economic trends, Apple should identify opportunities in the growing wearables market.
• Consideration of Stakeholder Influence: Evaluation of the alignment of stakeholder interests with Apple Watch success.
• Decision Point: Launch or Not: Based on the synthesized findings and risk assessment, Apple should decide on launching of the Apple Watch.
• Monitor and Adapt: Continuously monitoring the smartwatch market should be carried to determine prevalent consumer trends, and technological advancements.
• Incorporation of decision-making model in the context of analyzing market circumstances and competitive landscape is imperative for an organization, which is exactly why Apple decided to incorporate the Rational model as well as SWOT analysis model in the pretext of launching the Apple Watch:

Rational Model

• One of the rudimentary models in terms of defining the strategic edge, by analyzing the external relevant factors, which Apple can leverage in the course of decision making was Rational model. In view of the fact that Apple Watch, at that time, was an absolute novel concept. Hence, it requires systematic and logical analysis to interpret the market data and gain insight regarding consumer preferences, so that technological augmentation can be carried out accordingly (Pedrini & Ferri 2019). However, this model has its fair shares of uncertainties and risk associated with it which are mentioned in the following segment:
• Apparently, the core objective of inculcating Rational model is to illustrate a comprehensive analysis of the accumulated information. However, the potential of depicting incomplete information due to the complexity associated with smartwatch market inherently impedes the model to analyze the drastic changes in consumer preferences, which in certain instances resulted in suboptimal decisions.
• The notion of market uncertainty, at a minute scale is not feasible by the Rational model to incorporate in the course of decision making, which is a major drawback of this approach (Pedrini & Ferri 2019). In view of the fact that the technology industry is attributed with unpredictable trends, which can inherently either broaden the market outreach or limit the scope of reaching out to potential consumers, if adequate measures are not inculcated with due diligence in the form of decision making. This is exactly what occurred during the course of smartwatches roll out from Apple stores, since the organization failed to grasp the ground reality of market dynamics, which was evolving differently from their initial analysis.

In terms of stakeholder influence, Apple is known for its insular approach to product development and decision-making. While the company considers customer feedback, it often relies on its internal vision and strategy. However, in the case of the Apple Watch, there was a notable influence of external stakeholders, particularly consumers and health regulators. The growing interest in health and fitness tracking, as well as the need to navigate regulatory requirements for health-related features, compelled Apple to be more receptive to external input (Sutton et al. 2020).

The Manner in which the Exercise might be Improved if Repeated

If Apple were given the opportunity to revisit the time of introducing Apple Watches, following recommendations could ameliorate the process of decision-making as well as the product's launch:

• Customer-Centric Approach: From an apparent vision it would seem that Apple has incorporated all the necessary measures to deliver a customer centric approach. However, in reality, certain aspects as indeed slipped from the company’s attention regarding consumer preferences. Hence, it is prudent for Apple to concentrate on conducting even more extensive market research and consumer surveys to garner cognizance of evolving customer preferences (Tien 2019). Precisely, understanding how the Apple Watch can better serve consumers in terms of health and fitness tracking, from their convenience would be crucial.
• Regulatory Expertise: Given the increasing significance of health-related features, Apple should concentrate on building in-house regulatory expertise to navigate the daunting landscape of health and privacy regulations across different nations. This would inherently assist Apple to steer clear from infringing predefined regulatory standards.
• Customization and Personalization: The feature of customization is completely missed by Apple, when it first launched the product. Hence, enhancing the customization and personalization options for the Apple Watch should be the focal point, thereby allowing users to tailor their watches as per their preferences.
• Diversified Pricing: When Apple first launched this product, pricing was not affordable by a lot of willing users. Hence, devising a more diversified pricing strategy to get in touch with a broader consumer mass, would fortify the brand value of the firm.
• Marketing and Education: Concentrating on marketing efforts and educational campaigns can help consumers understand the full potential of the Apple Watch (Tien et al. 2019). That is why, it is quintessential for Apple to lucidly communicate the benefits and features of the Watches to propel greater adoption amidst target niches.

By implementing the aforementioned recommendations, Apple can improve its strategic decision-making process for future product launches and enhance the Apple Watch's position in the market.

References

Abubakar, A.M., Elrehail, H., Alatailat, M.A. and Elçi, A., 2019. Knowledge management, decision-making style and organizational performance. Journal of Innovation & Knowledge, 4(2), pp.104-114.

Brandenburger, A. and Nalebuff, B., 2021. The rules of co-opetition. Harvard Business Review, 99(1), pp.48-57.

Calabrese, A., Costa, R., Levialdi, N. and Menichini, T., 2019. Integrating sustainability into strategic decision-making: A fuzzy AHP method for the selection of relevant sustainability issues. Technological Forecasting and Social Change, 139, pp.155-168.

Crane, D.A., 2019. Ecosystem competition and the antitrust laws. Neb. L. Rev., 98, p.412.

Freeman, R.E., 2020. The stakeholder approach revisited. Wirtschafts-und unternehmensethik, pp.657-671.

Freeman, R.E., 2023. Stakeholder management: framework and philosophy. In R. Edward Freeman’s Selected Works on Stakeholder Theory and Business Ethics (pp. 61-88). Cham: Springer International Publishing.

Ingram, T.N., LaForge, R.W., Avila, R.A., Schwepker Jr, C.H. and Williams, M.R., 2019. Sales management: Analysis and decision making. Routledge.

Jorgenson, D.W., Weitzman, M.L., ZXhang, Y.X., Haxo, Y.M. and Mat, Y.X., 2023. Apple Stock: Is It Time to Buy?. AC Investment Research Journal, 220(44).

Lehtinen, J., Aaltonen, K. and Rajala, R., 2019. Stakeholder management in complex product systems: Practices and rationales for engagement and disengagement. Industrial marketing management, 79, pp.58-70.

Newell, S. and Marabelli, M., 2020. Strategic opportunities (and challenges) of algorithmic decision-making: A call for action on the long-term societal effects of ‘datification’. In Strategic Information Management (pp. 430-449). Routledge.

Pedrini, M. and Ferri, L.M., 2019. Stakeholder management: a systematic literature review. Corporate Governance: The International Journal of Business in Society, 19(1), pp.44-59.

Raja, J.M., Elsakr, C., Roman, S., Cave, B., Pour-Ghaz, I., Nanda, A., Maturana, M. and Khouzam, R.N., 2019. Apple watch, wearables, and heart rhythm: where do we stand?. Annals of translational medicine, 7(17).

Sutton, R.T., Pincock, D., Baumgart, D.C., Sadowski, D.C., Fedorak, R.N. and Kroeker, K.I., 2020. An overview of clinical decision support systems: benefits, risks, and strategies for success. NPJ digital medicine, 3(1), p.17.

Tien, N.H., 2019. International distribution policy comparative analysis between samsung and apple. International journal of research in marketing management and sales, 2020(1), p.2.

Tien, N.H., Dat, N. and Chi, D.T.P., 2019. Product policy in international marketing comparative analysis between Samsung and Apple. Int. J. Res. Mark. Manag. Sales, 1, pp.129-133.

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