Apple iPhone Strategic Analysis

8/2/2019 Apple iPhone Strategic Analysis

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Cooperstown Inc.

Apple, Inc.:

Creating and Sustaining a Competitive Advantage


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By:

Brian Lubeck

John Nitz

Jeff Danforth

Josh Brannon

EXECUTIVE SUMMARY

The mobile devices industry is a competitive market dominated by key

firms like Nokia Corporation, Samsung Electronics Company, and Motorola, Inc.

These companies, which have extensive product lines, capture a large portion of

consumers in the mobile devices industry. However, the release of Apple, Inc.s

iPhone, in June of 2007, positioned the company as a direct competitor in the

industry as the iPhone offered a variety of unparalleled features. Although the

product has confronted various problems since the unveiling, Apple has done

well to identify key internal and external threats that challenge the success of the

iPhone.

Conceptual frameworks, such as Porters fives forces model and VRIO

analysis (Value, Rarity, Imitability, Organization) establish Apples resources and

capabilities and identify the organizations positioning within the market. The

analysis also provides an understanding of Apples current competitive

advantage and provides information necessary for strategic planning.

From these studies, it is apparent that the iPhone has had tremendous

success per volume of sales. However, with Apples severely limited product line,

little product diversification capabilities, and the recent release of similar

alternatives, such as the T-Mobile G1 by Google and the Dare by LG, the

iPhones competitive advantage seems fleeting. New strategy and direction is

pertinent to the continued success of Apples iPhone.

Upon review, it is Cooperstown, Inc.s position that Apple adopt one of two

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strategic solutions: an open market service provider strategy or an iPhone

customization and diversification strategy. The former solution would allow

iPhone to pair with any particular provider upon end user discretion. Currently,

AT&T has contractual rights to the distribution and sale of the iPhone in the

United States as the mobile device is only compatible with AT&T service plans.

Allowing consumers to choose service providers eliminates contractual buyer

bargaining power and attracts more customers who are using different providers.

The latter solution provides consumer specific customization and

hardware packaging which would increase Apples product diversification and

eliminate the threat of competitive alternatives. Meeting consumer wants is

crucial for the continued success of Apples iPhone.

Although these two strategies would solidify Apples competitive

advantage in the mobile devices industry, the implementation of an open market

service provider strategy is a stronger solution that provides long-term revenue

benefits and attracts a larger consumer base. Although the initial cost of exiting

the contract with AT&T might be detrimental, increasing competition in the

telecommunications industry will favor Apples future success. This increase in

competition will lower the cost of service plans for the consumer, attracting more

end users to the iPhone. As alternative products, such as the new LG Dare, have

also teamed up with exclusive providers, Apple will be able to exploit its new

open market provider strategy to maximize full potential benefits.

Table of Contents

2.2 INTERNAL VRIO ANALYSIS ...............................................................................................................11

VALUE.......................................................................................................................................................... 11

RARITY......................................................................................................................................................... 12

IMITABILITY................................................................................................................................................... 12

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ORGANIZATION ............................................................................................................................................. .13

1. Strategy Identification

1.1Mission Statement

In 1976, Apple Computer, Inc. was established and was incorporated in

1977. Apples first product was the Apple I which began the personal computer

revolution. In 2007, Apple Computer, Inc. changed their name to Apple, Inc. They

made this change because they shifted their focus from only producing

computers to producing other products for industries such as entertainment and

mobile telecommunications. The current mission statement for Apple is as

follows:

Apple ignited the personal computer revolution in the 1970s with

the Apple II and reinvented the personal computer in the 1980s

with the Macintosh. Today, Apple continues to lead the industry in

innovation with its award-winning computers, OS X operating

system and iLife and professional applications. Apple is also

spearheading the digital media revolution with its iPod portable

music and video players and iTunes online store, and has entered

the mobile phone market with its revolutionary iPhone. (Investor

Relations, 2008)

This case analysis is going to focus on last part of the mission statement:

the iPhone industry of Apple.

1.2 Key Issues with the iPhone 3G

Back on June 29, 2007, Apple officially entered the mobile devices and

telecommunications industries with the release of the first iPhone. This last

summer, the second edition was released, the iPhone 3G. Since the release date

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of the iPhone, Apple has faced several issues and problems with its product.

Some of the issues that the Apple is facing are the cost, battery life, 3G

connectivity and the service provided by AT&T.

Cost

When the original iPhone was released, the sales price for the phone was

$399. The biggest portion of Apples marketing campaign for the release of the

second generation iPhone was that the phone was going to be half the size as

the original phone and also half the price. Only the former came true according to

researchers. These researchers found that the iPhone 3G did cost half the price

as marketed, $199, but there was a catch. With the lowered price, AT&T

increased the data package cost by 150%, or from $20 to $30 per month. In

addition, he new iPhone service did not include an SMS, or text messaging, plan.

The first generation iPhone package came with 200 complementary text

messages per month. To make up the difference between the old and new SMS

packages, it will cost you $5 per month. As these extra costs do not seem like a

large issue, the data plan for the second generation iPhone costs $160 more

over the necessary two-year contract with AT&T. The table on the next page

shows the price difference between the original iPhone, the iPhone 3G and their

closest competitors (Chen, 2008).

(Chen, 2008)

As can be seen from the table, the iPhone 3G would cost $1,975 after two years

as compared to the $1,815 with the original iPhone. This change in the coverage

AT&T has inflicted has made a liar out of Apples advertising campaign, as the

new iPhone is actually more expensive then the original iPhone.

Battery Life

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Another issue which relates to most Apple products and also relates to the

iPhone is the battery life and replacement options. In most cell phones, like

Blackberries and PDAs, the battery can be replaced by the consumer. With the

iPhone, when the battery eventually wears out, the consumer has to send the

phone in to Apples headquarters to have the battery replaced. The charge for

this service is $79 plus shipping and handling which costs $6.95 (Battery

Replacement, 2008). According to the Verizon Wireless website, the cost to

replace a battery for any model of the BlackBerry costs $39.99, a difference of

$45.96 (Standard Battery, 2008). This is another hidden cost which the end user

will have to deal with after 400 charges of his/her battery.

With the new slick and slim look of the iPhone, they have lost valuable

space for a more powerful, long-lasting battery. When using the high-tech

services such as 3G connectivity and other functions, the amount of battery time

decreases significantly. If the user of the iPhone has their 3G function turned on,

the phone only has 5 hours of talk-time or 5 hours of internet use before the

phone will need to be charged. If the iPhone is in standby, the battery will last up

to 300 hours but if a businessman or woman is traveling and needs to access

email and other information from his or her phone, they will need to bring a

charger with them even on a day trip (Battery Replacement, 2008).

3G Connectivity and Service

The iPhone 3G has been having issues with its ability to connect to the

AT&T network towers in the U.S. According to iPhone Atlas, The root cause for

the phones reception issue has not been exactly identified, but many are saying

that the problem is with the relatively new Infineon Technologies chip set used in

the iPhone 3G (iPhone 3G Connectivity Failure: Roundup, 2008). Apple tried to

resolve these issues with releasing the iPhone OS 2.0.2 and 2.1 updates but the

problems continued. On September 23, 2008, the chief technology officer of

AT&T, John Donovan, admitted that some of the issues with the connectivity of

the iPhone 3G had to due with the AT&T 3G service as it was unprepared for

the US success of the iPhone 3G (iPhone 3G Connectivity Failure: Roundup,

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2008).

AT&Ts Monopoly over the iPhone

In the United States, AT&T has a monopolistic advantage over all other

mobile telecommunication companies as Apple and AT&T have signed a contract

which made AT&T the exclusive carrier of the iPhone. In the beginning of August,

Apple and AT&T extended their allegiance through 2010 (Dannen, 2008). There

has been much speculation as to why Apple would choose to make an exclusive

allegiance with AT&T. Many possible customers who are interested in investing

in an iPhone are unwilling to give up their service with other providers whose

service they value more, such as Verizon wireless. As a result, Apples sales of

the iPhone have failed to reach the levels Apple has hoped for. According to the

latest estimates as stated by the website Seeking Alpha, the market for

unlocked iPhones will cost Apple over $1 billion in lost revenue over the next 3

years (Sullivan, 2008). With AT&Ts monopolistic control over the iPhone market,

they have complete control over the voice and data package costs as were

mentioned earlier, causing the price of owning an iPhone to increase

significantly.

1.3 Problem Statement

The previously identified problems outline the challenges that Apple is

facing as it enters into a new competitive industry. To solve these issues, an in-

depth look at the external threats of the industry and an internal analysis of

Apples resources and capabilities will be necessary to produce sound solutions

which confront current issues and create prohibitive barriers against entry.

2.1 Porters Environmental Threat Analysis

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Apple competes as a manufacturer in the mobile devices industry, which

consists of all analog and digital handsets used in mobile telecommunications. In

an industry report conducted by Data Monitor in January 2008, the United States

mobile phone industry accounted for $21.4 billion in revenue in 2006. The

industry is expected to grow at seven percent annually until 2011, when it is

projected that annual revenues will reach $30 billion. However, forecasted U.S.

revenues dwindle in comparison to 2011 European and Asian-Pacific market

revenues, suggested to be $34.6 billion and $84.8 billion respectively.

Currently, European and Asian-Pacific mobile phone industries continue to

generate more revenue. In fact, the United States only accounts for 20.6% of the

international mobile phone markets value (Data Monitor 2008; 7).

However, being a substantial contributor in each major market, Apple has

found domestic and international success. Apple has integrated core

competencies, such as touch screen capabilities, with successful

commercialization strategies to introduce a new generation of phone. A five

forces analysis will provide an overview of the industry and help define Apples

positioning within the mobile phone market.

Threat of Buyers

Network operators and independent retailers are the most frequent buyers

of mobile devices in the industry. For these entities, it is necessary to carry the

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latest fashions in mobile device technology so as to create the most value for end

users (Data Monitor 2008; 12). Although network operators sometimes limit the

performance of firms through contracts, their bargaining power is limited as

success is closely linked to the popular mobile device products. Vertically

integrated manufactures that sell directly to the end user, such as Motorola,

eliminate buyers from the supply chain and further reduce buyers bargaining

power in the mobile devices industry.

Threat of Suppliers

Suppliers in the mobile phone industry provide the raw materials

necessary to manufacture phones. Since the hardware and software components

are highly specialized, mobile phone manufactures are dependent upon suppliers

for quality materials (Data Monitor 2008; 12). Thus, suppliers can inhibit the

performance of manufactures by raising the price or lowering the quality of the

raw materials provided.

Continually, the revenue generated by servicing the mobile phone industry

is a small percentage of total revenue for suppliers because suppliers provide

materials for various industries (Data Monitor 2008; 13). Suppliers are able to

influence supply contracts, as the mobile phone industry is not a significant figure

in their total revenues.

Threat of New Entrants

The threat of new entrants into the mobile devices market is relatively low

with the exception of companies that already operate in the electronics industry.

For companies interested in competing as new entities, the cost of capital is

extremely prohibitive as large amounts of capital would be required to establish

research, development and production facilities (Data Monitor 2008; 13). Apple

is, however, an example of an electronics company that has expanded its

product lines into the mobile devices industry with the introduction of the iPhone

(Data Monitor 2008; 13). Apples success is attributed to its ability to manufacture

an innovative product at a reasonable cost, which could not be attained by a

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startup company.

Threat of Substitutes

Substitutes to mobile devices include fixed line telephones and voice-over-

internet options. However, mobile devices incorporate a multitude of services,

which deter users from switching to alternatives (Data Monitor 2008; 13). The

threat from substitutes in the mobile devices industry is low, as companies have

established barriers of entry for competing products.

Summary of Position

Overall, rivalry in the mobile devices industry is relatively intense because

of the increased penetration in domestic and international markets. The rivalry,

however, brings new technology to market. Apple, for example, entered the

mobile devices market with an innovative product that other firms have come to

imitate. Although the iPhone has recently attracted the attention of a large

percentage of consumers, Apple is at a disadvantage because of its lack of

product diversification. Larger firms with various products appeal to many

consumers, rather than targeting a particular segment. But because buyers of

mobile devices, both end users and network operators, crave the latest

accessories, the iPhone will be in high demand until a better, more advanced

product is introduced.

2.1.1 Position Grid

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Consumer Price


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2.2 Internal VRIO Analysis

To gain competitive advantage over its competitors, Apple will have to

look into its internal advantages as well as its external advantages. There are

three main internal advantages that Apple has focused on in its design for the

iPhone. These three advantages are the Apple brand name, the simplicity of it

user interface, and the advanced technology incorporated into its design.

Resources and

CompetenciesValue Rarity Imitability Organization

Competitive

Advantage

Brand Name Yes Yes Yes Yes Sustained

Simplicity Yes No No Yes Parity

Hardware Yes No Yes Yes Temporary

Software Yes No No No Parity

Value

The target of the iPhone is to combine the communications ability of a

phone with the Internet, data storage, and dissemination capabilities of a

Cheap

Product Design

Expensive

BasicTechnical

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computer and the compact and quick access features of a PDA. In addition, they

wanted to make it fast and easy to use. Since the introduction, they have added

the features of their other products such as the music playback and photo

viewing of the iPod. The biggest value here is that the iPhone combines so

many things people had to carry with them into one portable device.

Rarity

There are many products competing with the iPhone that are much

cheaper. Apple has been using their reputation of providing quality, glitch-free

products and the hype of owning Apple products as being a status symbol

among young adults to make their product worth the extra money. Unfortunately,

they have been failing to provide the former recently as glitches have begun to

surface. They have been releasing updates to fix these glitches but just recently,

a design flaw was discovered. The iPhone has been experiencing call dropping

problems and slow Internet connection speeds and until last week, they had

been pointing the finger at the service provider, AT&T. However, the real

problem was discovered to be the chip that managed the devices operations

(McLean, 2008). This could cause Apples reputation to suffer and they could

lose some of their market share for a while but since the operations chip is

replaceable, this design flaw can be easily repaired in future models. In the

meantime, it is likely that the hype of owning Apple products and the simplicity of

the phone functions will continue to keep their sales high.

Imitability

There are very few other products on the market capable of providing the

features of the iPhone. The new LG Dare is most likely going to be the iPhones

biggest competitor (Zeman, 2008). It will be especially tough competition since

not only does it have the closest reproduction of the touch screen feature out of

the iPhones imitators, but it also has more advanced multimedia capabilities in its

camera and video recording equipment. Since the iPhone was designed to do a

large number of things well, its competitors are able to incorporate the basics of

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the iPhone while focusing on improving one aspect and pushing sales on that

feature.

Now, Google has released a phone of its own named the T-Mobile G1

(Quittner, 2008). It is expected to give the iPhone quite the run for its money.

Though it is a new product and no one can tell how well it will do so early on, it

has two features that the iPhone doesnt have. The first is an open platform for

customization. Though Apple has relied on third-party applications for the

iPhone, they have to be approved by Apple, which gives consumers fewer

options. On the other hand, it also means that the programs Apple releases

should be safe to install on your iPhone but they have already lost some of that

appeal, as they have had to recall some of the applications they approved due to

malfunctions.

The other bonus that the G1 holds over the iPhone is a cut-and-paste

function which may not seem like much but to a market that has voiced an

interest in it; it can tip the scales out of Apples favor. This shows that Google

has done a better job of listening to the market.

Regardless of how much it costs to imitate the iPhone, the market demand

is so huge that people are willing look at competitive alternatives. In addition, all

of the companies attempting to imitate the iPhone have gotten the chance to see

Apples initial mistakes and can, therefore, avoid them.

Organization

Apple has done an excellent job of exploiting its Brand Name which is its

biggest competitive advantage. In addition, it has kept in line with the ideals of its

brand name which includes simplistic user interfaces and long lasting, glitch-free

hardware, despite the one piece of malfunctioning hardware that is easily

replaced in future models. However, Apple is trying to exploit the applications

market by forcing their customers to only buy programs that it provides. This is

the same tactic Apple used with iTunes and the iPod, only in that case, iTunes

was the best and easiest music library application available. In addition, it was

free. This same tactic will not work with the iPhone.

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Conclusion

The iPhone is highly valued among the cell phone market. New models

are highly anticipated to eliminate any problems while keeping the overall design

and function simple. Any substitutes that attempt to take away from their market

share are generally too complicated and include large numbers of superfluous

features. This means that even if other companies add features like a cut-and-

paste function, they are not actually adding to the value of their product.

However, even though they are struggling to compete with Apple, there is such a

huge market for the next generation cell phone that, regardless of the cost to

develop imitations, the other big cell phone manufacturers will have to continue

to compete for their share of a market that could very well make a good deal of

their current cheap, basic cell phones obsolete.

3. Strategic Option Development

3.1 SWOT Strategy

Strengths Weakness

Strong brand image

Advanced Smartphone

technology

Application/update availability

Selective providers

Limited product selection

New entrant stage

International markets

Insufficient network/system

Opportunities Threats

Niche market

Online capability/options

App Store

Overall pricing control

Product diversification

Immense competition

Superior technology

Dependence on third party

suppliers

To successfully compete within a variety of alternative markets, such as

the wireless telecommunications market, a company must stick to their core

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values and strengths in order to generate any sort of financial growth. As Apple

continues to expand into the mobile phone industry it must continue to build upon

its niche market through its unique iPhone product(s) along with the support of its

strong brand image. According to MarketWatch the iPhone looks likely to be the

next step in the convergence of mobile telephone, portable media playback and

mobile internet technologies; the device is attractively designed, while also

having market leading functionality and usability(MarketWatch: Global). By

linking its MP3 technology with a quality mobile service provider (AT&T), Apple

was able to bring a large number of its current customers into its new business

venture. The niche market that Apple is striving for involves less product

differentiation; unlike its competitors who produce a handful of varied products

each year to meet consumer demand. Furthermore, Apple has placed more

focus on the creation of a single dynamic, updatable and reliable Smartphone

without sacrificing its reputation of creating simplistic user interfaces.

On the other hand by searching for a niche market that requires less

product differentiation, Apple has created a possible weakness towards meeting

consumer demand. Despite the fact that the creation of a single, dependable

device may meet the needs of most consumers, Apple could potentially strike out

within the enterprise market. The enterprise market pertains to firms who allow

employees to check and send emails, as well as exchange important internal

company information to one another via their mobile phones. A common trend of

this market has been the allocation of mobile devices, such as Blackberry, to

employees to enable them to check their email and be responsive when they are

away from the office (MarketWatch: Global). The problem inherent with this

freedom stems from the enterprises need for mobile phone monitoring to ensure

company security. At the same time, they must incorporate the employees need

for customization with their mobile phones for personal usage outside of work.

Without the development of a product to compete directly with Blackberry for the

enterprise market, Apple will likely see a loss in a very profitable market.

The online opportunities created by the iPhones advanced Smartphone

technology provide a whole new generation of phone usage and mobility, while

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offering consumers a new level of personalization with their everyday phone. The

key aspect that Apple is bringing to the mobile phone market is their innovative

style and technological competencies with user friendly products. Adversely,

Apple is entering into a market that is already highly competitive with such

companies as Sanyo, Samsung, and LG. Apple can prove to be successful within

this competitive market if it is able to stay ahead of the pack with increased

developments in online surfing via its mobile phone device. By expanding the

online capabilities of its mobile phone, Apple creates a whole new sector to the

already diverse telecommunications market. Recently released phones such as

the LG Dare and Samsung F700 have shown striking resemblances to the

iPhone both in look and function. While these large mobile phone companies

continue to trail behind the original iPhone, Apple can address bigger concerns

with the current system defects of its 3G model.

The iPhone allows for an extraordinary computer-like experience with a

place to upload phone applications as well as products updates in general; the

Apple App Store. The App Store is an online department for iPhone users to

continually improve and personalized their phone. This service provides

consumers with many more opportunities for incorporating the iPhone into their

daily lives. Unfortunately, Apple has had little success implementing this aspect

of the iPhone in foreign countries. It has had an especially difficult time in Japan.

According to Yukari Iwatani Kane of the Wall Street Journal it is estimated that

demand in Japan has fallen to a third of what it was initially and analysts are now

expecting fewer iPhone sales (Kane, WSJ). The decline in sales can be

contributed to the lack of information being provided about the iPhone to foreign

buyers, the availability of far more advance cellular technology, and an overall

lack of any strong App Store presence. The ability to quickly address the issues

overseas through the help of companies like SoftBank Corp., an Apple partner,

and services like the App Store could mean the difference between victory and

defeat for the iPhone in Asia.

Lastly, by selectively choosing its service providers (AT&T, Orange, etc),

Apple, is able to effectively maintain a strong control on the pricing of its

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products. Additionally, by restricting the total number of service providers Apple

is able to keep the demand for its products high in order to maximize total profits

with limited total costs. Currently, Apple has set its new iPhone 3G at an

astonishing $340-$400 price range, which is also accompanied by an expensive

service plan. Although, Apple has shown tremendous success thus far there are

still immense threats and weaknesses that stem from its suppliers and current

service providers technological capabilities. From the software perspective Apple

is facing a risky business partnership through its service providers as there have

been multiple bugs, defects and general malfunctions with the iPhone and its

wireless connections. If the issue isnt address immediately Apple could see

enormous losses in consumer satisfaction and trust. In addition, there are

perceived threats in Apples hardware providers as Apple uses third party

suppliers to manufacture its goods. If a sharp increase in demand were to take

place, Apple would potentially be vulnerable to a shortage in goods.

3.2 Strategic Option One

Currently Apple only permits exclusive rights to AT&T as its sole service

provider. Apple will open up its service options to all service providers. AT&T will

no longer be the sole service provider. Therefore, access will be available to

other carriers such as Verizon Wireless, T-Mobile, and Alltel, worldwide.

3.3 Strategic Option Two

The iPhone is Apples sole product offered in the mobile devices industry.

The lack of product differentiation limits sales because the company is unable to

meet different customer wants and needs. Therefore, Apple will offer its

customers different variations of the iPhone to cater to their personal wants and

needs.

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4. Strategic Option Development

4.1 Open Market Service Providers

Throughout 2007 and early 2008 Apple reached contract agreements with

select service providers granting exclusive service provider rights to its second

generation of iPhone, the iPhone 3G. It is our proposal that Apple terminate its

current domestic agreement with AT&T, creating an open market of service

providers. By making the iPhone available to a broader range of service

providers, Apple will increase market share and overall profits through by

attracting a larger consumer base.

Additionally, a single service provider limits the introduction of the iPhone

throughout the wireless telecommunications services market. As a result, Apple

voluntarily minimizes its consumer base and potential revenues.

Furthermore, Apples current providers offer insufficient network

connections that reduce the quality of the iPhone. According to iPhoneAtlas.com,

the iPhone 3G is capable of attaining higher speeds when linked to networks

other than Apples current service providers. For example, its French service

provider, Orange, has been proven to be nearly six times slower than other

possible 3G service providers.

Although, an open market service provider strategy has many benefits,

there are also several trade-offs that accompany such implementation. For

example, allowing iPhone to be paired with any service provider reduces the

rarity of the product because consumers unwilling to change service providers

are granted access to the phone. Also, the open market service provider strategy

could reduce the revenue percentage earned from each service plan sold.

Currently, Apple is receiving an estimated three dollars a month from AT&T per

iPhone user and an additional eight dollars a month for new subscribers (Krazit,

2007). A reduction in these revenues could adversely affect Apples net income.

Overall, despite potential drawbacks, the open market service provider strategy

provides sustainable solutions to current problems.

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4.2 iPhone Differentiation

The iPhone is only customizable through its downloadable applications,

which must be authorized by Apple The authorization process is time consuming

and limits customers options. The Google phone, however, provides an open

installation forum for installing third party software that provides limitless options

for end users (Quittner, 2008). Since Apple declines some third party software,

the applications that are finally released to end users are supposedly safe.

However, as previously mentioned, this process has introduced applications

which had to be recalled. The best solution to this problem is to authorize

particular software developers rather than the applications themselves. The

endorsement of various software developers would increase competition and

quality of programs offered, giving the end user a wider variety of customization

through downloadable applications. Also, increased competition between

software developers would prevent any class action lawsuits claiming that Apple

is being monopolistic by only authorizing applications that do not compete with its

own (Elgan, 2007).

An additional way Apple could increase customization options would be to

diversify hardware arrangements based on customer preferences. For example,

Apple could offer hardware packages designed for gaming, movie or music

playback, internet surfing, picture taking, etc. Although these options would only

be provided for AT&T customers, it would increase the marketability of the

iPhone by targeting more specific consumer groups. Furthermore, package

options could increase the price of the iPhone as additional raw materials would

be needed to meet consumer needs.

Application and hardware customization are solutions that could lead to

increased sales and a larger customer base. Also, the integration of

customization options would negate adverse diversification limitations.

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5. Strategy Selection

5.1 Strategy Selection- Open Market Service Providers

After discussing the two mutually exclusive courses of actions above,

Cooperstown, Inc. suggests the implementation of the open market service

provider strategy. Apple is in a contract with AT&T until 2010. At this point, Apple

will need to implement a plan for open market service providers. The most

conventional method to implement this plan is by releasing the next generation of

the iPhone by 2010. The new phone should be capable of multi-service

expansion. Before 2010, Apple should also attempt to resolve or end its contract

with AT&T and all exclusive international providers.

By implementing this plan, Apple, would began to build upon greater

future successes via multiple networks. Apple creates an opportunity for

increased growth and increased market share. Additionally, Apple would benefit

by reaching out to a consumer market yet to be tapped. The most likely reaction

to this strategy by competitors would be to produce new generations of phone

that are accompanied by similar provider strategy.

Continually, by utilizing all service providers, Apple reduces the

contractual bargaining power of buyers. Buyers would have limited influence on

the price of the iPhone because the demand of iPhone is strong. However, Apple

would no longer have a guaranteed or contracted portion of each service plan

sold to the end user. Regardless, Apple would likely gain significant competitive

advantages over competitors as all service providing companies would pursue

the product with the highest demand to satisfy consumers.

6. Strategy Implementation

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6.1 Strategy Implementation

By implementing the strategic plan of opening up the iPhone market to

other service providers, Apple will encounter various policy and restructuring

changes. Some policy changes will primarily deal with negotiating and

restructuring AT&Ts exclusive provider rights. Apple will develop policy that

incorporates other national and worldwide providers. Apple will have to diversify

its product line to meet consumer demands. Currently, Apple releases a new

model of their iPhone yearly, and by opening up to multiple providers, it will have

new iPhone products on the market frequently.

The execution of opening the iPhone market to other service providers is a

necessity in order to increase Apples desired market share. The decision to use

all main service providers will increase its profits substantially as many potential

buyers whom are locked in contracts with Verizon Wireless, T-Mobile and other

providers will be able to buy Apples iPhone. To ensure that this expansion plan

will be feasible, Apple should begin cultivating new relationships with other

service providers. This is necessary to give the providers several years to ensure

they have the required towers and services needed to be an efficient provider for

the iPhone.

7. Apples Competitive Advantage

7.1Strategic Implications

In addition to the competitive advantages identified by the VRIO Analysis,

the implementation of the chosen strategy will provide the market with more

options for its service provider. This will allow providers to compete with each

other and drive down the service price. This adds value to the competitive

advantage in that it will allow greater service plan customization to suit the needs

of each individual customer. It also adds rarity because the developers of the

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other next generation cell phones have followed Apples example and teamed up

with only one service provider and since they will have entered into contracts with

these providers, it will be very costly to imitate Apple. After Apple has broken

away from its contract with AT&T, it will need to focus on exploiting this new,

unbounded situation in order to maintain a sustainable competitive advantage

and stay ahead of its competitors.

Works Cited

Barney, Jay B. William S. Hesterly (2006). Strategic Management and

Competitive Advantage. Upper Saddle River, New Jersey: Person

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