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Apple Sources of Competitive Advantage

Apple Sources of Competitive Advantage

Apple

 

Apple, the leading technology brand and the maker of iPhone and Mac was founded in1976 by Steve Jobs and Steve Wozniak. In 2018, the brand touched a market valuation of 1 Trillion dollars. However, within two years, the market cap of Apple has continued to surge upwards faster. In June 2020, its market cap has touched $1.59 trillion and analysts expect that by or before 2021 end, its market cap would have touched $2 trillion. Apple founder Steve Jobs has been hailed as one of the most visionary leaders of the era who did not just create a great computing company but brought several unique products to the market like iPhone, iPod, and many more. The cult status of both the founder and the company remains unchallenged globally. Mac is a leading operating system that offers a seamless computing experience. However, Apple is remarkable for several other things as well. In the field of computing and smartphones, it holds its own distinct place. Even after the departure of Steve Jobs, the company has continued to grow stronger. The past three years have seen Apple performing very well financially. In 2018, its revenue has touched an all-time high. Its product portfolio has grown larger and the brand has also added more services as well as iCloud. Apple has an edge over its rivals and not just Mac OS and the iOS, there are other key technologies too owned by Apple that have helped it achieve a strong competitive edge. We will discuss these sources of Apple’s competitive advantage in this article.

Brand equity:

One major source of competitive advantage for Apple is brand equity. The company has built a very high level of trust in the market. It is known the most for its technology and great quality products. Its high-level popularity is a sign of a strong brand image and the reliability of its technology and technological products. Apple has always brought innovative products to the market that are unique and outstanding as well as very different from the rival products. Apart from technological innovation, its products are remarkable in terms of design and style. Millions around the world eagerly await new releases of iPhones and Macs. Nearly all of the products it has released until now have become major hits. However, both in terms of quality and innovation, Apple is considered matchless around the world. Its users are willing to pay a premium price for Apple products which is a sign of strong brand equity. Strong brand equity translates into higher equity and better sales and revenue. Today, Apple is the world’s leading technology company. However, its biggest asset is the trust, people place in its name.

Product Range :-

Apple has improved its product range a lot in recent years. A larger product range has translated into higher revenue and popularity. From Macbook to new versions of iPhones as well as Apple Watch, Apple TV, Mac Mini, the brand has brought several technologically innovative and attractive looking products to the market. iPhone is the best selling product in the entire range of products Apple offers. Apart from that, iPads and MacBooks are also major sources of revenue for the brand. Its product and service range also includes iCloud, Apple Pay, digital content, and services.  A large and hit product range is a leading source of competitive advantage for Apple.

Premium Pricing:-

While premium pricing can often become a weakness for a brand especially during times of economic fluctuations, it is a strength and a source of advantage for Apple. The company has maintained the image of a premium brand. It will not compromise on quality and technology. It is why Apple invests a large sum in research and development every year. Premium pricing has also helped it maintain a distinct image that is very different from competing brands like Microsoft, HP, Huawei, and Samsung. Premium pricing in the case of Apple could not become an impediment to growth which was because it never compromised on technology and product quality. Moreover, it has a distinct marketing strategy which has helped it retain the uniqueness of its brand and products. All of these factors have resulted in high-level popularity and sales. So, the premium pricing strategy of Apple is a source of competitive advantage for the brand.

Financial Performance:

Apple’s financial performance over the last several years has remained strong. While many industry analysts believed that its position s a technology brand was weakening, Apple made a strong comeback with its new iPhone, Mac, and iPad models. The result was a performance better than expectations. Apple’s revenue took a sharp jump in 2018 rising from 229.3 Billion dollars in 2017 to 265.6 Billion. iPhones were the largest source of revenue for Apple in 2018, fetching a total revenue of 164.9 Billion dollars. Services were another major profitable segment for the brand, fetching 39.75 Billion dollars in revenue.  In this way, the financial performance of Apple as continued to strengthen over the past three years. This allows it strong leverage since the brand can invest more in R&D as well as marketing. In 2019, Apple’s revenue was less than 2018 mainly due to lower unit sales of iPhones.

Leadership:

Leadership is also a major strength of Apple. Since the time of Steve Jobs, the brand has benefitted from strong leadership. Jobs was a visionary leader and under his leadership, Apple saw a lot of growth and international expansion. Now, Tim Cook is leading Apple and he has made several strategic changes inside the company. However, Apple is also enjoying a lot of growth under his leadership. It is perfuming well financially and has also brought new products to the market. Apart from that Apple’s position has improved in other areas too including R&D as well as HRM. leadership can be a major source of competitive advantage and it has been proved in several cases including Starbucks, Microsoft, Google, Ford, and several more brands. In the case of Apple too, it has proved to be a distinct advantage.

Innovation:

The technology industry has grown highly competitive. Companies have to invest a lot in research and development to remain ahead of their competitors. Apple is known to be a highly innovative company right since its foundation. It has brought several innovative products including Mac OS, iOS, MacBooks, iPhones, iPads, iTunes, and others. In this way, it has brought an entire range of innovative products to the market that set itself apart from the competition. Research and development is  primary driver of growth at Apple and in the entire technology industry. Apple invests a large sum each year in R&D. It invests 5% of its net sales each year in R&D. Its research and development costs rose to 14.24 Billion dollars in 2018 from 11.6 Billion dollars during the previous year. In just three years, its research and development costs have increased by more than 4 Billion dollars. The reason is a fast rise in Apple’s revenue as well as intense competition in the technology industry. However, Apple’s focus on research and innovation is also bearing great results. Its financial performance has grown strong and the brand is enjoying unprecedented growth.

Global Presence:-

Apple is a global company and operates in a very large number of countries throughout the globe. It manages its business mainly on a geographic basis. The reportable segments of Apple include the Americas, Europe, Greater China, Japan, and Rest of Asia Pacific. Americas includes both North and South America. Europe includes European countries, and apart from them India, the Middle East, and Africa. Greater China includes China, Hong Kong, and Taiwan. The rest of Asia Pacific includes Australia and other Asian countries that are not a part of Apple’s other reportable segments. Although the company sells similar hardware and software products and similar services in each of these segments, it manages each one separately. This is done to align with the location of the customers and distribution partners and the unique market dynamics of each geographic region. There are a few factors that are unique about each of these geographic segments including economic and social conditions and government regulation. the company’s presence in several countries leads to higher sales and revenue. Americas are the biggest source of revenue for the company followed by Europe and Greater China.

Customer loyalty:- 

Customer loyalty can be a major advantage in the 21st century. Every brand works to retain its existing customers and to create customer loyalty. The technology industry is marked by intense competition. each brand is aggressive about grown and apart from marketing uses several more methods of customer engagement and retention. However, the premium quality of Apple products is a major strength that has helped it build strong customer loyalty. Its products enjoy a very high level of popularity despite their premium prices. iPhone, Mac, iPad, etc are quite popular and the Apple customers are highly loyal. They buy most of these products from Apple which is because of their inter compatibility as well. Apple’s Mac OS and iOS are not compatible with other bands. These products offer a distinct experience which is also a reason behind their popularity. Apple is a customer-centric brand and its customer orientation is also a reason that its customers love it so much.

Other Sources:

Apple Annual Report 2018 and 2019

Written by Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.

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