Module Name &

BA2520- Strategic management

Code

Candidate Name Taha

UoL Candidate
220395470
Number
Table of Contents

1. Introduction..............................................................................................................2

2. Corporate and business strategies..........................................................................2

2.1. Porter’s Generic.................................................................................................2

2.2. BCG matrix........................................................................................................3

2.3. Ansoff matrix-....................................................................................................4

3. PESTLE and Porter’s Five Forces.........................................................................5

A. PESTLE analysis.................................................................................................5

B. Porter’s Five Forces.............................................................................................7

4. VRIO analysis...........................................................................................................8

4.1- Manufacturing – Foxconn................................................................................8

4.2- Brand Image and Reputation –........................................................................8

4.3- Ecosystem Integration.......................................................................................8

4.4- Innovation and Design......................................................................................8

4.5- Retail and Market presence..............................................................................9

4.6- Supply Chain.....................................................................................................9

4.7- Intellectual Property.........................................................................................9

4.8- Human Resource...............................................................................................9

5. Recommendation....................................................................................................10

6. Conclusion...............................................................................................................11

7. Bibliography...........................................................................................................12

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1. Introduction

Apple is a multinational technology company which is headquartered in California. It

began in China when it joint ventured with South Park software in 1995 for Mac
computer release. (Keith, 1999) Afterward, it opened its first retail store in its capital
in 2008 and its first model of smartphone was officially available for sale in 2009.
(Ye, 2009) Since then, Apple has served the Chinese market till the date and has
marked 30 years in China this year. It has strengthened its bond by serving consumers
within different communities in China throughout the years and currently has 56 retail
stores there. (press release, 2023)

However, in China, Apple faces some challenges from consumers and supply chain
viewpoints.

2. Corporate and business strategies

2.1. Porter’s Generic

Apple has a competitive advantage over its rivals in China through a product
differentiation strategy known as one of Porter’s generic strategies. It offers high-
quality and unique design products within services and a fine user experience.
Additionally, through its intellectual properties like design patents, utility patents, and
trade secrets it gains an advantage over others which results in attracting consumers
through retail presence with flagship stores in China. Ultimately, inducing brand
loyalty and keeping its products different from the others,(Abu, 2023).

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 2.2. BCG matrix

Stars Question marks

High
I phones
App store Apple tv+
Services- i cloud, apple music, apple new products- iphone-15, wearables
pay
Market Growth

BCG Matrix

Low Cash cows Dogs

iPhone old models
Ipads
airpods Ipods- manufacturing closed
apple watch Itunes
Macs

High low

Market Share

Stars –

Apple’s iPhone holds a 15% share in China’s smartphone market with increased
growth continuously. (Counterpoint, 2023) The app store’s user base is growing
rapidly and its services like iCloud, Apple Music, and Apple Pay are generating great
revenue. (Louise, 2023)

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Cash Cows-

Older models of the iPhone and iPad still generate revenue in China. Further Macs are
a leader in the premium market with a 15% share, along with its Air pods and Apple
watches but these do not have the potential to grow as technology gets outdated in no
time with increased competition and substitutes. (Ben, 2022)

Question Marks-

New products like wearables and the new iPhone 15 have growth power but it is
lagging because of competition like Huawei and some bans imposed by China on
Apple in government firms. Likewise, Apple TV+ subscribers increase steadily but
face competition from Tencent Video and iQiyi.(Malik, 2022)

Dogs –

As of now, I do not think that Apple has a low market share and low growth product
in China, as it recently stopped its dog- the iPod, but it could be iTunes as consumers
move towards Apple Music and its competitors more there. (BBC, 2022)

The matrix portrays that, Apple should continue innovation in their stars and maintain
its products’ dominance by enhanced marketing and ecosystem expansion.
Leveraging its cash cows and utilizing revenue from it to invest in stars and question
marks will give more consumer base. Further, question marks can be upgraded
through partnerships, localizing with the Chinese market, and strategic pricing. As of
its dogs, iTunes should be closed, and the focus should be driven more towards Apple
Music. The analysis suggests that Apple should continuously monitor the Chinese
market trends, and its competitors’ actions and adapt to government policies for
greater dominance in China.(Afriyie et al., 2019)

2.3. Ansoff matrix-

Market Penetration

Apple through its ecosystem of software, hardware, and services has created a brand
image for its consumers globally and specifically in China. Additionally, through a
mix of pricing strategy, product innovation, community leveraging, and passionate

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marketing strategies it penetrates the market easily and this is what it has done in
China. (Lu, 2022)

Product Development

In a regular period, it is noticed that Apple launches a new product which is an

upgrade to its previous products and services. Through constant R&D and investing in
innovation it has developed outstanding quality products mostly manufactured in
China.

Market Development

Apple has globally expanded successfully in previous years and has plans to further
expand in emerging markets like India and Vietnam. This strategy gives Apple a
competitive advantage over its rivals, as in China it has created a large market for its
sales throughout the time. But due to competition, it has faced hindrances in sales in
recent years. (TOI, 2022)

Diversification

Apple has diversified and localized its products in China, as it has made not only
iPhones but also Macs, iPads, air pods, smartwatches, services, and applications.
However, it has not succeeded in every product like its services for Apple TV+ is still
behind competitors like Netflix, Amazon, and others. (Moses, 2023)

3. PESTLE and Porter’s Five Forces

A. PESTLE analysis
Political

There are political issues affecting Apple, like the trade war over technology and bans
from the U.S. where it has banned sales of design software, semiconductor machinery,
and advanced chips to Chinese firms with a ban on TikTok in government devices.
And bans from China In retaliation, it has refused to provide rare earth metals to
Micron the main U.S chip provider. Moreover, China has banned the usage of Apple
products in government and state-owned firms which leads to its declined sales there.
To refrain from further damage, it has started to shift its production to other countries.
(Sarhan, 2023)

5
Economical

Labor costs are increasing in China and currently, it is facing an economic slowdown
which affects the Apple most in production and pricing. The slowdown leads to less
spending power of consumers for high-priced products like Apple. (Kennedy et al.,
2023)

Also, a strong exchange rate of dollars could be a factor for increased pricing and
making it difficult for Apple to operate in China.

Social

There are some ethical concerns in socially conscious consumers about Apple’s
manufacturing in China which limits people's attraction to it and countries who resent
China could get offended by Apple products. Also, it faced a shortage of labour in
China during the pandemic, which resulted in slow manufacturing of its iPhone 14
pro.(chang, 2022)

Technological

Apple has a unique product because of its innovation but its competitors are providing
rich-featured smartphones at a much affordable price, capturing the Chinese market
more.

Legal

Apple was accused of labour violations in Chinese factories like cutting bonuses, not
conducting safety training programs, and hiring more temporary workers than the law
allows in China. In addition to that it is accused that to maintain its operation in China
it is sharing consumer data with the Chinese government. These factors could lead to
litigation and hindrance in future operations and sales. (human right, 2019)

Environmental

The manufacturing process of Apple in China was criticized for releasing much
pollution and toxic gases, but it has overcome the issue to an extent in collaboration
with the Chinese government and has complied with zero waste in its final assembly
production. (Apple, 2016)

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B. Porter’s Five Forces
1- Threat to new entrants

To enter the Chinese market with such a giant presence of Apple poses a low threat
but if they come up with innovative products, it could affect Apple’s market share and
will force it to provide more cost-effective products.

2- Bargaining power of suppliers.

The bargaining power of suppliers is very weak in China because Apple is not
dependent on a single supplier. Its supply chain is on a global level for that reason
Apple asked its suppliers like TSMC and Foxconn in previous years to come to its
terms and they had to agree. However, the 5g element provider Qualcomm has
bargaining power over Apple because there are limited companies that can make
processors under 10nm. (Che, 2023)

3-Bargaining powers of consumers

Consumer’s bargaining force is high in China because of low switching costs and
cost-effective and feature-rich products available for them to buy. However, the brand
image and services of Apple retain its consumers mostly.

4- Threats of substitutes

As a tech giant and holder of IP in innovative products, there is a very low threat for
the substitute of Apple’s technology.

5 Rivalries in the industry

Competition in the industry is very high and poses a severe threat in China because
rivals like Huawei, Xiaomi, Oppo, Vivo, and Honor also have a strong supply chain
and offer great products at affordable prices. In the computer sector HP, Dell, and
Lenovo are using different chips powered by AMD, indel, and NVidia but Apple is
only using its Apple silicon. And in wearables, Google, Fitbit, and Samsung are
encountering Apple watches in the market. (Liu, 2020)

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4. VRIO analysis

VRIO analysis of resources and capabilities.

4.1- Manufacturing – Foxconn

V- Apple’s manufacturing capabilities with its partner Foxconn contribute to its cost-
effective manufacturing and high-quality products.

R- Its quality control and processes make it rare in an intense manufacturing

environment in China.

I- Imitability of its manufacturing components is hard which gives it an advantage

over rivals.

O- Its control over manufacturing and strategic partnership improves manufacturing.

4.2- Brand Image and Reputation –

V- Apple’s brand image and reputation provide it with a successful market capture in
China.

R- Creating a brand like Apple is rare.

I- And it is not easy for competitors, how hard they try, to imitate its brand, but they
can build strong brands.

O- The brand management of Apple is effective in China and globally. (Yu, 2023)

4.3- Ecosystem Integration

V- Its ecosystem offers great value and user experience.

R- Not all companies have this type of software, hardware, and service integration.

I- It is challenging for others to build an ecosystem like Apple, but it can be done.

O- The capability to maintain and keep upgrading its ecosystem is outstanding.

(Schultz et al., 2011)

4.4- Innovation and Design

V- Consumers prefer new designs and innovation which drive sales for Apple and add
value for customers.

R- Its commitment to design and innovation improvement is rare in the industry.

I- Competitors can imitate and try to build new designs.

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O- Apple’s culture promotes innovation and design.

4.5- Retail and Market presence

V- Market presence and retail stores in China add value to its sales but it is not the
driving factor.

R- Other brands also have a market presence and stores in China.

I- Easily imitable

O- Retail presence is well executed, and engagement is well managed by Apple in

China as it has both flagship stores and an online presence.

4.6- Supply Chain

V- Apple has an efficient supply chain which results in timely product launches and
reduces inventory costs.

R- Having many suppliers and a managed supply chain in China provides a

competitive advantage for Apple.

I- Integrating this kind of supply chain is a long time and heavy investing process
which gives Apple an advantage temporarily.

O- The use of technology and maintained relationships with suppliers adds power to
efficiency in the supply chain.

4.7- Intellectual Property

V- Its patents act as a barrier to rivals.

R- To have many patents in designs and utility is rare.

I- Protection from IP law makes it difficult to copy.

O- With continuous investment in R&D Apple handles its patents and trade secrets
efficiently.

4.8- Human Resource

V- Leaders in Apple and skilled workers in China are an asset that contributes to its
supply chain management.

R- A motivated workforce is a rare asset that gives a competitive advantage.

I- Hiring this type of workforce is not easy it requires much investment.

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O- Employee development is of importance in Apple which enriches its human
capital.

These resources and capabilities are Apple’s greatest assets and give it a competitive
advantage over its rivals in China. A mix of resourceful manufacturing, well-known
brands, skilled human resources, and wide retail presence position it as a leader in
China.

However, it faces challenges because of its so much dependency on China and it has
to adapt to the rules and preferences of Chinese consumers.

5. Recommendation

According to the different analysis, Apple should perform some tasks to navigate
through the challenges faced in China.

It should diversify the portfolio of its products by manufacturing different-priced

products to overcome economic fluctuations and cater wide range of consumers. This
task is aligned with the BCG matrix analysis. Apple should invest in stars, manage its
cows and questions to maximize profits and divest its dogs to free resources. this
could empower Apple to well manage its product lineup and conquer a larger market,
gaining a competitive edge over rivals.

For a deeper consumer engagement in China, it should align its marketing strategies
more with cultural preferences to attract patriotic consumers who tend to move
towards local products like Huawei which could be the next apple of China.(Li,
Sanghavi and Mattos, 2014)

Further, due to geopolitical tensions and technological wars between China and the
U.S., which pose a threat to Apple’s supply chain, it should foster stronger relations
with other suppliers and diversify its sourcing locations and supply chain more
intensely as it has started production in India and Vietnam.

Additionally, it should induce cost management in its supply chain for more
affordability among consumers. To achieve it, Apple should expand partnerships
beyond Foxconn and streamline production by using more affordable raw materials.

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Also, Apple should improve its image of environmentally friendly sustainable
manufacturing and should achieve less pollution emission in the environmentally
conscious market in China by integrating renewable energy sources across its
production hubs. It will attract a broader customer base with the embracement of
corporate social responsibility.

Moreover, it should set up R&D centres in China to build more features according to
Chinese preferences and invite Chinese consumers to product testing to improve its
customer attraction.

To enhance the efficiency of operations it should organize more training programs for
employees ensuring for skilled human force and educate employees on Chinese
culture for better communication.

Apple could also provide a unique customer experience in its retail stores in China
through Mandarin language support and allowing personalization to instil brand
loyalty and create differentiation from its competitor’s stores.

Lastly, Apple should enhance its Apple TV+ services according to consumer demand
by including popular Chinese titles, collaborating with local content creators, and
providing Mandarin language and subtitles support to get ahead of its competitors.

6. Conclusion

Concludingly, Apple has its fair share of both success and challenges faced across
years in China. The strategic recommendations to overcome these challenges and
fortify its position as a market leader in China are based upon the results from Porter’s
generic, BCG matrix, Ansoff matrix, PESTLE, porters’ five forces, and VRIO
analysis tools.

Hence, Apple’s success is not only dependent on its technological innovations but
also on its strategic adaptability to emerging trends and perspectives of Chinese
markets. This harmonious mix of having global brand techniques and localizing
according to consumer preferences will surely take Apple to soaring heights in China.

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