Building a global strategy
This paper discusses the global strategy through which Apple Inc provides standardized and quality products across markets in different countries and gains competitive advantage in a dynamic and diverse market. As companies expand their operations in the international market, they will face more obstacles and increased global competition. Due to globalization, competition is no longer a local or domestic market situation, but firms will have to pit against other multinationals some which are distance away. The obstacles that the firms will face include the need to adapt to different business environment and any risks that comes with expansion. In building a global strategy, it is necessary for a firm to understand the kind of expansion that is being experienced, which may results from its resources, capabilities or even the present international position. To begin with, a firm will first have to consider whether there is variation there is for a brand and the kind brand to undertake. In the global economy, Apple Inc faces a different environment in terms of competition due to new global realities such as reduced time for movement, internet and other connections that ease business operations. In developing global strategy, organizations will have to consider the world to be a large single market and single supply source that has local variations.
The case of Apple Inc shows how a firm can use a global strategy that focuses on beating competition in the industry by use of its internal resources to gain competitive advantage. The firm has been among the largest global company beating its rivals Samsung, IBM and LG by employing intensive growth and generic growth strategies using the internal resources that include human sources, innovations and research and development to gain competitive advantage. In the release of the latest products like iPhone 7, the firm has employed high innovation while putting emphasis in an excellent design of products. This enables the firm to succeed even when it offers products at prices that are relatively high (Black, 2015). The generic strategy has also employed broad differentiation and involves focusing on key features that go a long way in differentiating the firm and its products from its competitors. The strategy is aligned to the Porter’s model, where competitive advantage is derived from broad differentiation of its products so that the company sets itself apart from rivals by various features rather than price. To have a higher bargain power, the firm adopts an effective and elaborate supply chain framework which plays a major role value creation and hence competitive edge. The framework also utilizes the internal capability of the firm which comprises of human resources and an efficient technology that ensures high sophistication in the retail sector. This ensures that its inbound logistics provides effectiveness while dealing with suppliers who are located in many parts of the world (Black, 2015). To minimize suppliers bargaining power, the firm adopts the strategy of making different suppliers to compete with one another.
The global strategy builds looks into three segments that can be followed in developing a strategy. They include an industry competition, institution-based view and resource-based view. Institution based view – firms’ competitive advantage depends on external and internal factors in business environment. Strategic choice is made due to interaction between a firm and formal and informal institutional environment (Peng, Wang, & Jiang, 2008).
Basically building a global strategy starts by an analysis of the market in which the firm is already engaged and looking at the prospects for its services or products around the globe in general terms. This would require using some basic international data for analyzing different markets to explore the purchasing power of potential customers in the foreign markets. In addition, there are specific areas that a business should look into to determine various international opportunities that can be exploited for improved growth and profitability (Peng, Wang, & Jiang, 2008). These include demand in the major geographical areas, competitors, the infrastructure both regional and international, economic trends and politics which constitute both internal and external business environmental factors (Peng, Wang, & Jiang, 2008). The main reason for considering these factors is to determine how to build a global strategy that is based on the premise that competitive advantage will be achieved in a diverse and ever changing global market environment.
Industry- based view
This model involves an examination of the industry environment and specifically on external circumstances in the global market and the possibility of achieving competitive advantage. Completion is not only between various competing firms certain industry, but goes beyond competitors’ mere behavior (Peng, 2013). It is rooted in economics so that suppliers, customers, potential entrants and possible substitute form part of competitors that are active or prominent depending on a specific industry.
Competition analysis and strategy- Porters model
In the global market, each passing decades comes with new ways of considering the business environment and how to act to remain competitive. Building a global strategy begins with analyzing a company’s competitive environment. In this model, the various forces that determine success include new entrants, suppliers bargaining power, buyers bargaining power, threats of new substitute services and products and rivalry for the company in the industry (Peng, 2013). These forces guide the development of a competitive global strategy since they also determine the nature of industry competition. They have to be addressed in the right way if the decision makers in the organization are to develop an effective and competitive strategy. This strategic tool offers a global over view, instead of just focusing on detailed internal business analysis approach (Peng, 2013). Using this strategy, it helps in reviewing the strength of a given market condition globally based on the five major forces.
Threat of New Entry: Where a new business can be established in the organization’s sector easily, this represents a threat. This reality has been made possible in many sectors by the internet, especially in sectors such as retail and publishing. The global strategy to be built will consider the threat of a new business being set up in the sector which can pose competitive risks to the organization. This includes determining how easy it is to start a business, the existing rules and regulations and finances needed for a startup. This strategy should also consider the kind of barriers that exist and which grants more power to organization against new entrants (Peng, 2013). A competitive global strategy is one that uses the organizational resources and influence to harness power which will in turn present a challenge to potential rivals that may plan to expand to these markets.
Buyer power: In the global market, few buyers of a given commodity or services will have control over the market. The global strategy that is effective will consider the kind of power that buyers have, the number of buyers, whether they can influence a reduction in cost and whether their power can dictate terms.
Threats if new substitute: An effective strategy will consider how to gain and improve a market share in a global market that has substitute products or services. This involves an examination of how easy it is for alternative product and service can be found within the market and whether such can be automated or outsourced.
Supplier bargaining power: The effective global strategy will consider that where suppliers are view, they retain a bargaining power. Hence, the analysis involves examining the number of suppliers in the market, whether prices are controlled by a few or they are many bringing the prices lower. An effective strategy will consider whether suppliers hold bargaining power, the ease of switching to other suppliers and related cost.
Competitive rivalry: The effective global strategy will focus on expansion into markets that have few competitors which makes them attractive and then ensuring that they will not be short-lived. Such markets are highly competitive since firms are chasing same customers or same work and this may reduce one’s power in this particular market (Peng, 2013). It will be essential to consider the level of competition in the intended sector and the situation of the competitor.
In this respect, Apple would develop a strategy that provides a tactical advantage to the firm over its competitors in the global market. It will involve various generic strategies that can be pursued to achieve this strategic advantage .The strategy may consider leadership in overall cost , where the decision made focus on coming up with functional policies through an exploitation of experience curve , plant scale, labor and overhead cost and such related aspects . The strategy may also involve differentiation, which will ensure that services and products of the firm in the market will be viewed as distinctive. Differentiation in this case will be derived from various sources including the development of the brand image of the product, distribution networks and customer loyalty. The strategy based on these two approaches will lead to differentiation and low-cost advantages in the industry and this can lead to improved profits and market share. In addition, the strategy can revolve around providing services and products to particular segments in a more effective way than competitors in the global market. It will involve taking advantage of the underperforming or over-performing competition within some segments of the market.
Resource – based view
The resource-based view focuses on internal resources and how they can be utilized to achieve competitive advantage in the international market. The resources of the firm have to be rare, valuable, non-substitutable and imperfectly imitable. A firm within an industry can be heterogeneous in regard to some resources that it controls and the heterogeneity of the resources can persist over a given time. This is due to the fact that resources used by the firm imperfectly mobile in the industry, in that some these resources are impossible to trade in factor markets and are not easily imitated or accumulated. The uniqueness of these resources is, therefore, necessary for a bundle of the resources to bring about a competitive advantage (Peng, 2013). On the other hand, if all the organizations in a given industry can access the same resources’ stock, there exists no strategy for a single firm that would not be used by other firms in the sector of the market. Immobility and heterogeneity of the resources do not offer enough conditions that can ensure sustainable advantage. The resource must also be rare, of value and not easily substitutable or imitable for competitive advantage to be sustainable. Porter assertion that competitive advantage will be realized in case of rare and valuable resources is true if the definition of the two terms, competitive advantage and valuable is the same. The organizations should endeavor to look within firm to found out competitive advantage sources rather than looking seeking it through the competitive advantage (Peng, 2013). It will better to use the existing resources in the firm in exploitation of external opportunities in new ways instead of acquiring skills for every opportunity.
A resource plays the key role of assisting companies in achieving the set organizational performance in the global market. This applies to both the tangible and intangible resources. Moreover, value will help the firm to improve the value of products or services provided to the customers through an increment in differentiation and a reduction in the production cost (Lin & Wu, 2014).If the resources in the firm do not qualify for this condition, developing strategy is infeasible. Temporary achievement in form of competitive advantage will be possible of the company’s resource are rare and valuable; but they should be costly for a rival to imitate or substitute for competitive advantage that is sustained to be achieved. The strategy must employ organization of the resource so as to value can be captured from them (Peng, 2013). This can also extend to human resources where a workforce can created that can provide a competitive advantage that is sustainable and to achieve this. An environment must be created that allows growth human capital just like any other resource.
In the words of the former Apple’s chairman Steve Jobs, carrying out market research is useless since customers were not aware of what they wanted until it was showed to them. Hence, the firm utilizes internal resources to create valuable bundle of services and products to present to the customers and satisfy their needs. The resource allows the creation of value proposition in research and development, services offered at the Apple’s stores, unique products’ user experience and improved product performance (Apple Inc, 2017). For the company, resources include its tangible and intangible assets or attributes in terms of innovation and reputation and even information. It is the know-how which the firm controls which enables it to develop a strategy that improves efficiency and effectiveness. These are the assets required by Apple in the creation of value proposition for its global customers. The key resources include human, physical and intellectual resources. Physical resources includes manufacturing plants in Huaian, China , and various retail stores that helps in sales location and worldwide sales and even advertisement such products (Apple Inc, 2017). The human resources include a software development team that is highly skilled and other workers with broad experience, problem solving skills and even knowledge. Creativity capability is another resource which has been used in the development of products that are easy to use and with software’s that are greatly designed.
Intellectual resources also form part of the intangible assets and comprises of patents such as touch sensing design and strategic partnerships with other firms like Microsoft (Apple Inc, 2017). These resources are valuable to the firm and enable management and products’ development teams to carry out their operations successfully. In creation and offering value proposition , the firm is able reach the global markets , gain more market share and maintain good customer relations that lead to improved earned revenues. The retail store design for the firm acts as its face and they are characterized by exclusivity in design, where customers are allowed to interact and test the products (Apple Inc, 2017). The creation of the unique user or customer experience means that the firm uses the internal resources to create value for customer and therefore, gain competitive advantage in a global environment with changing customer needs and specification. The described network of suppliers which makes it possible for the business to work is enabled by sufficient and valuable internal resources. The firm is able to build a supply chain management that cannot easily be copied or imitated by its various competitors in the international market. The creation of alliances with partners and suppliers results to a business model that ensure risks are reduced and acquisition of key resources, and hence gaining a competitive edge through the distribution channel. The creation of strategic alliance help in extending the companies capabilities so that they are always in the market , acquiring knowledge or even accessing a wider group of customers in the global market . The key resource acquired through this supply chain framework includes data and voice network which are very essential for the user.
This discussion shows the resource based view as an effective way of developing a strategy of a company and creating adequate competitive advantage. If the firm is able to exploit opportunities or even neutralize any threat by use of its resources it will gain an edge over rivals. The competitive advantage will also arise if these resources involve high cost to imitate or copy them. Apples historical path has involved developing resources, making them hard to imitate through patents and therefore gaining a high end segment of the market that has a higher purchasing power. Combination of an industry based view and resource based view has resulted to development of a generic strategy that is focused on a sustainability of the competitive advantage. The business model has resulted to a brand reputation, first movement of products and customer loyalty. The combination of hardware and software of high quality and user friend has also contributed to the improved performance of the company. The mixture of the intellectual resources in a way that is socially complex but simple to use and the improved partnership supports the strategy.
Further research on the generic global strategy of the firm should involve the institution based view. Like any other organization, Apple has regulative, cognitive and normative structures and various activities that offer stability and sense to social behavior. Since the firm has its operations in different countries with each having varying institution fabric and such contexts are not adequately addressed through the resource and industry based review. Other than forces in the market and resources available to the firm, there is need to consider the impact of informal and formal rules in the formation of Apples global strategy. The firm must have considered the formal and informal rules in this game for it to be a winner in the global market.
References
Peng, M. W. (2013). Global strategy. Cengage learning. 64-65
Peng, M. W., Wang, D. Y., & Jiang, Y. (2008). An institution-based view of international business strategy: A focus on emerging economies. Journal of international business studies, 39(5), 920-936.
Lin, Y., & Wu, L. Y. (2014). Exploring the role of dynamic capabilities in firm performance under the resource-based view framework. Journal of business research, 67(3), 407-413.
Apple Inc, (2017). Retrieved from: https://www.apple.com/
Black, K.,(2015). Apple: A Global Leader in Supply Chain Management. Retrieved from: https://smbp.uwaterloo.ca/2015/06/apple-a-global-leader-in-supply-chain-management/
