Summary

Steve Jobs became an icon for unrelenting perfection in product presentation during his time at Apple. He was far more interested in creating technology instilled with beauty and functionality than cost savings mass-market appeal. Despite his non-traditional approach, he created a cult following for Apple products. After Jobs’ death, Time Cook took over as CEO and spent a lot of time wondering what his next move as the head of Apple should be to maintain a competitive advantage and market share as his rivals drew ever closer. This paper will examine Apple with a SWOT analysis, review the top challenges for Tim Cook, and make recommendations for Apple to remain the de facto standard for innovation in user-focused digital products. 

To understand Apple’s place in the market, it’s necessary to examine the different factors that pushed in on its walls with the PESTEL framework. PESTEL is a way to examine factors influencing a business’ operations. The key aspects of PESTEL that influenced Apple’s growth were economic, social, technological, and legal. Economically, Apple’s products in the Jobs era were priced for a premium buyer, and they operated in their strategic group within the consumer electronics category. As the mobile device market size grew, Apple began seeing its competition, particularly Samsung, entering its strategic group. Throughout much of the seventies and eighties, computers were out of reach for many consumers and were lacking substantially in the modern features that society is accustomed to today. Apple did an excellent job capturing user desires and packaging them in an accessible and attractive product. Their human-centered design principles and curated industrial design created a cult following of consumers who sought out Apple products. Once in the ecosystem, they were unlikely to stray to a competitor. Technologically, Apple differentiated itself by using a UNIX-based operating system that was more stable and upgradable when compared to Windows. Jobs even partnered with Microsoft to bring their Office suite to his computers in exchange for working capital. As digital products progressed and homogenized, Apple found themselves in legal battles with rival Samsung over design patents. Hardware, design, and usability must be carefully considered to maintain a level of differentiation. Their reading platform also landed them in hot water as publishers leveraged it to align the pricing structure of Amazon. The US government considered the publishers to be acting like an illegal cartel. With these factors in mind, Apple’s strategic advantage can be analyzed with the SWOT method. 

A SWOT analysis examines a company’s strengths, weaknesses, opportunities, and threats. Apple’s strengths include its focus on innovation-based culture, brand loyalty, and market dominance for mobile devices. Its weaknesses are high dependence on specific products, premium pricing strategy, and increasing market saturation. Its Opportunities are the imminent expansion into emerging markets, new pricing strategies, and product diversification by enhancing its ecosystem through services. Apple’s threats are its intense competition from Google, Samsung, and Amazon, market saturation, and legal challenges. 

Innovation was a trait that Steve Jobs brought to Apple. He was considered a rebellious visionary who would blatantly ignore norms in the pursuit of a better product experience. Apple’s eventual rise is directly attributed to his innovation. Without Jobs, the company was unfocused and produced mundane products like printers and cameras. Jobs was quoted saying, “Innovation distinguishes between a lead and a follower. This innovation stemmed from employees being encouraged to take risks and not being reprimanded when failing. In 2011, they spent only 2.24 percent of their revenue on R&D compared to Microsoft spending 12.93% and Google spending 13.62%. For Apple, it was the emphasis on quality over quantity at its core that permeated all the way through to its products. This led to creating a natural brand loyalty from their customers. Apple consistently positioned itself as a hip alternative to the stuffy archetype commonly associated with its competitors’ products. Consumers gravitated toward this rebellious spirit from the first ad that then employee John Sculley created all the way through to the “I’m a Mac” ad that compared a frumpy personification of a PC to that of a youthful, energized MacBook. The trendiness of these products forced other companies to copy Apple just to stay relevant in the market. The two that stand out for Apple’s success are the iPod and iPhone. Both embraced touchscreen technology that competitors like Blackberry were resistant to adopt and unchained digital consumption from a desktop to something portable. The iPod did this with Music, and the iPhone with the internet. After only six years, the iPod sold over 100 million units at an astonishing 47.4% margin. The iPhone launched Apple’s stock price of over $100 per share and captured 32.7% market share one year later. 

There were still struggles that plagued the company. Apple’s position in its strategic group meant that its revenues were derived from two main products that leveraged high price points. Without Jobs at the helm, Apple’s image was dwindling. That, coupled with intense market saturation from handheld smart devices, created a perfect storm of chinks in the company’s armor. Apple eventually succeeded through product differentiation; however, early on, there were few products in its lineup. Consumers could signal the hip, rebellious virtues without the premium price tag. By 2012, 51.4% of Apple’s sales came from iPhones while only capturing about 33% of the market share. Samsung, at that time, held close to 28% market share, and a majority of mobile devices were currently running the Android operating system that it leveraged. Apple needed to innovate to maintain the premium price it charged for products, but that reputation was waning after Job’s death. 

There were now opportunities on the horizon that could once again temper Apple’s defenses. Apple was doubling down on its ecosystem by creating new services, new markets had an appetite for its products, and various pricing strategies could be created to best serve these markets. The App Store and iTunes were two complementary products created to enhance the value of their existing lineup. They enabled developers, content creators, and musicians to partake in the fervor of the company’s fan base. Continuing to develop their services will help distinguish the overall product offering when buying an Apple device from their competitors. New markets were also hungry to take a bit out of Apple. China and Brazil were growing consumer bases with a low cost of living and rising disposable income. The opportunity to create a two-pronged pricing approach for high-end and low-end products, like Samsung was doing, could have a massive impact on Apple’s profitability. The last significant opportunity for Apple is being able to harness the ever-evolving technological landscape to better their services. 

Harnessing these opportunities is critical with the looming threats from competition, market saturation, and legal battles ahead. Apple is, first and foremost, a design firm that outsources manufacturing. The components their physical products are created with can be found in many other devices. As Google and Amazon encroach on the market, devices are becoming more similar with each model released. This, along with the ease of production that comes with economies of scale, means that many devices are manufactured that all look and feel very similar. Design firms must be careful not to create something already patented by another company. The basis for being legally distinguished is ensuring your design is not copied and is minimally creative. That’s easier said than done, and Samsung has been quick to take Apple to court over these features. 

Tim Cook has several considerable challenges ahead. The first is being able to continuously innovate after Jobs’ passing. He should focus on aggressive R&D in areas of new technology and continue to hire the top design talent for industrial design, experience design, and development. By implementing technology that seems out of reach for most companies and consumers, he can continue to lean into the hip, rebellious image Jobs created. The next big challenge is expanding into new markets to save Apple’s falling share price. Increasing profitability is the biggest driver here, and Cook should first focus on creating a cheaper model that doesn’t impede other strategic markets that appeal to quantity over quality. This would test the durability of Apple’s image in more countries before investing in product diversification. Instead, diversification should be geared toward digital services unique to Apple products. Apple has always made essential services like the internet and music accessible and portable to the masses, and R&D should continue this. Technology will constantly be advancing, and focusing on what consumers can do with it will always be a winning strategy. 

Cook doesn’t have to be the next Jobs to continue Apple’s success. By understanding the needs and influences that shape the consumer electronics market, Apple can be positioned to leap ahead of its competitors. Leading with empathy and perfecting design brought Apple to the forefront in the early 2000s and will continue to support it as a leader in consumer mobile devices.