This is a report analysing the strategic management process and details in Apple Computer. Apple Computer is selected because it is one of the respectable firms, that turnaround from a near bankruptcy position, due to the successful transformation of the company by Steve Jobs (Cusumano, 2010; Elkind, 2008; Kirkpatrick, 2008; Finkle & Mallin, 2010). In other words, there are a lot of lesson to be learned from the company. In order to analyse the strategic management process and details in Apple Computer, three theoretical framework or models will be employed, and these include: Bowman’s Strategy Clock, Porter’s Generic Strategies and McKinsey’s 7-S Framework.
This report is structured in the following order. First of all, a brief review on company background of Apple will be provided. Later, the industry in which Apple is operating within, namely the communication electronic products industry will also be discussed and explained. Upon that, strategic analysis on the company will be performed, in which three theoretical models or frameworks will be used for the analysis purposes. These three strategic analysis frameworks include: Bowman’s Strategy Clock, Porter Generic Strategy as well as McKinsey’s 7-S Framework. From there, a critical discussion on the findings from the strategic analysis of Apple will be provided, before conclusion is drawn to finalise the report.
Apple Computer the market leader in the telecommunication consumer electronics industry, offering innovative and high quality telecommunication electronic devices for consumers around the world (Moy & Terregrossa, 2009; Finkle & Mallin, 2010; Boulton, Libert & Samek, 2000). The company is so successful that it eventually surpassed Microsoft Corporation as the most valuable technology company in 2010 (Cusumano, 2011). Currently, some of the marketing offerings by Apple include the following: iPhone®, iPad®, Mac®, iPod®, Apple TV®, the iOS and Mac OS® X operating systems, iCloud®, and other accessory and support products or services (Form 10-K filing by Apple). Among the distribution channels of Apple to sell to the consumers around the world include the following: wholesalers, retailers, resellers, online stores, and sales personnel, as well as third-party cellular network carriers (Form 10K of Apple Inc., 2011). Recently, it is reported that Apple has 245 outlets in the U.S. and 112 in other geographical region around the world (Breen, 2013).
The telecommunication consumer electronic industry that Apple Computer is operating within is a highly competitive industry. Among those powerful and aggressive industry players include the following: Samsung, Research in Motion (RIM), Microsoft, HTC, Nokia, Sony, Huawei and so on (Cocheo, 2010; Bulik, 2008; McCrum, 2012). It can be seen that the competitors are those giants in the consumer electronic industry. Continuous innovation is crucial for thriving in the industry, as we can see how the mobile phone giant Nokia (and Sony-Ericsson), is replaced by Research in Motion (i.e., BlackBerry), which is later dominated by Apple (i.e., iPhone) (and recently, Samsung Galaxy and Samsung Notes by Samsung) (Money Marketing, 2010; McCrum, 2012). Overall, the entire industry is dynamic, susceptible to innovative disruption (or technological change), and very competitive due to the fight over market shares by the giant corporations. The competition is somewhat oligopoly in nature, as the different big industry players are fighting with each other, while it is very hard for small players to even survive in the industry (Businessline, 2011).
Bowman & Faulkner (1996) had proposed a useful framework that can be applied for strategic analysis; and that framework will be used to analyse the strategic management process of Apple Computer. The framework is shown in Table 1 below.
Table 1: Bowman’s Strategy Clock
|Low price||Medium price||High price|
|Perceived Value||High added value||Hybrid||Differentiation||Focused differentiation|
|Mediocre||Cost leader||Raise prices|
|Low added value||Segment Specific||Increased price & low value|
Source: Bowman & Faulkner (1996)
From the products offered by Apple, it can be understood that the price charged by Apple is not excessively high, albeit the price is considered selling at a premium (as compared to the products sold by most other competitors). As such, the price charged is between ‘medium price’ and ‘high price’ – which is actually a price that can be accepted by the mass market. Then, from the dimension of perceived value, it can be understood that Apple is providing “high value added” offerings to the consumers. Considering that, it can be argued that based on the framework of Bowman’s Strategy Clock, Apple is pursuing a ‘differentiation’ strategy.
According to the argument by Porter (1980) and Porter (2008), there are three different generic strategies that a firm can pursue for the purpose of attaining competitive advantage in the marketplace, which are: differentiation, niche and cost leadership. For that, scholars have been perceiving that Apple is actually following a differentiation strategy, especially that the product offered by Apple is largely highly differentiated with the products offered by other companies (Steve Jobs, 2011; Mickalowski, Mickelson & Keltgen, 2008; Hopkins, 2011). To explain, Apple iPhone is an integrated phone, that is easy to use while allowing users to access to variety of features and functions (Nair & Leng, 2012; Petrie, 2012). The differentiation strategy can be seen, and can be supported by the observation that the profit margin of Apple is high (Lashinsky, Lev-Ram & Kimes, 2008). Furthermore, to lower the costs is obviously not a strategy pursued by Apple to win over the competition. Then, it is also not relevant to assert that Apple is following a niche strategy, as the consumer serviced by Apple is actually the mass public. Aside from that, it can also be seen that the differentiation strategy had also enable Apple to give rise to a highly differentiated lifestyle brand (Tariq, Ishrat & Khan, 2011; Kenney, 2007; Gobble, 2012). In short, the analysis reaffirm that Apple is actually pursuing a differentiation strategy. This conclusion is consistent with the analysis – from the use of Bowman’s Strategy Clock as discussed earlier above.
Under the McKinsey’s framework, ‘strategy’ can be interpreted as the plan or technique to attain competitive advantage. For this, a review of the relevant literature enable us to identify several strategy pursued by Apple. These strategies is discussed and presented below.
Innovation for growth. Innovation is core element of strategic management of Apple Computer (Hopkins, 2011; Mickalowski, Mickelson & Keltgen, 2008; Kenney, 2007). For example, prior to the iPhone, the traditional hand phone, which the industry is dominated by Nokia, would only allow people to talk over the phone, rather than to surf or get connected to the internet, despite internet is becoming more and more popular and important in the society. The iPhone introduced by Apple, suddenly allow people to get connected to internet in a highly reliable manner, immediately transform the industry and bring down Nokia which fail to innovate and add value to the industry (Pedersen, 2008). Furthermore, Apple do launch the new products with price cut, and that is effective in driving sales, and known as the disruptive strategy by scholars (Moy & Terregrossa, 2009; Tam, 2000).
Continuous innovation. Nevertheless, it is crucial to aware that innovation alone is not sufficient. For Apple, it is more appropriate to mention that it is continuous innovation that enables the company to constantly surprise the market and to win over more and more market share (Rothaermel & Hess, 2010). It is through continuous innovation that Apple also willing to cannibalise its own product line, such as the offering of these products progressively: iPod; iMac; Macbook Air; iPhone; as well as iPad (Form 10-K of Apple Inc.; Kinchen, 2010; Gobble, 2012).
Focus on core competency. Apple Computer concentrate solely on truly adding activities, such as design, research and development as well as marketing of the products offered by the company, while outsourcing other less productive or value adding activities such as manufacturing to the third party, such as Foxconn (Stanley Kam & Tong, 2012).
Customer orientation. To meet the needs and demand of consumers is the core strategy of Apple (Abel, 2008). Indeed, as disclosed explicitly on Form 10-K filing by Apple, the core strategy of Apple is stated as follow: “committed to bringing the best user experience to its customers through its innovative hardware, software, peripherals, and services”. Being a customer oriented company, Apple align its business activities to meet the needs and preferences of the consumers, thereby resulting in a situation whereby the products by the firm is becoming highly welcome by many loyal consumers around the globe (Bate & Johnston, 2005; Coget, 2011; Peterson, 2007).
Paying attention to quality and ‘perfection’. It is not hard to observe that products offered by Apple are often of very high quality, which is designed for ‘perfection’, style and easy usage. It is then not surprising that many analyst describe the products by Apple as the sexiest piece of technology device in world (Coffin, 2007)
How an organisation is structured can affect the outcomes of an organisation. For that, scholar largely acknowledge that the business structure in Apple is simple, and have a business model that focus only on its core competencies, which is about research and design as well as the marketing of products to the consumers (Petrie, 2012).
System can referred to the way activities and processes are arranged or carried out in order to complete the tasks to be done in an organisation. The business system of Apple is one that focuses mainly on those truly strategically important activities and processes that enable Apple to stand out from the competition as well as delivering best possible quality and innovative products to the marketplace. Other less value adding activities such as production, assembly and manufacturing activities, are outsourced (Petrie, 2012).
Shared value can be interpreted as the core values of an organisation, which will affect the culture of that particular organisation. From the review of the relevant literature, some of the shared values of Apple include the following: innovative, flawless user experiences, attention to details, and customer orientation (Philp, 2013; Anders, 2006). Many of these shared values are actually influenced by Steve Jobs, whom is the legendary leader in Apple (Gobble, 2012; Mueller, 2002). Then, it is also easy to observe that the shared values actually influence the strategy employed by Apple (and contributed significantly to how Apple winning over the competition in the industry).
Skills can be interpreted as the competencies of the employees or the organisation. For that, there are several reasons leading to the success of Apple Computer. These are the ‘skills’ possessed by the company, which lead to the respectable and remarkable success of the firm. Among these skills include:
- Ability to understand about the consumers’ needs, even when that is not known within the marketplace (Coget, 2011; Finkle & Mallin, 2010).
- Ability to deliver exceptionally good quality products that contribute to flawless user experience (Gobble, 2012).
- Design of products of easy to use function with Zen-like simplicity (Penenberg, 2007; Coffin, 2007)
- Skillful in hyping consumer emotion, through the art of media build-up, to raise anticipation of people on its to-be-launched products (Mickalowski, Mickelson & Keltgen, 2008)
- Masterful in crafting an excellent brand name that represent the lifestyle of people (Tariq, Ishrat & Khan, 2011; Nair & Leng, 2012)
- Innovation and improve upon its existing products (Tariq, Ishrat & Khan, 2011).
- Excellent marketing communication programmes (Dykstra-Erickson, Hoddie & Wasko, 2011)
Style can be understood that the leadership process or style in an organisation. This is an important element of the success of Apple. Indeed, one of the widely perceived reasons for the success of Apple is about leadership of Steve Jobs (Transformational leadership, 2002; Koch, Fenili & Cebula, 2011; Finkle & Mallin, 2010). For that, Steve Jobs is often regarded as a leader of such qualities or traits: attention to details, open-minded, committed (Dykstra-Erickson, Hoddie & Wasko, 2011), charismatic and inspiring (O’Rourke, 2012; Harvey, 2001), entrepreneurial (Moy & Terregrossa, 2009), have excellent presentation skills (Stern, 2012), innovative, creative (Mueller, 2002), and very importantly, visionary (Mickalowski, Mickelson & Keltgen, 2008). It is for that of which the leadership style of Steve Jobs is also considered as one with transformational leadership style (Reinberg, 2011; Gobble, 2012; Murugesan, 2011), of which he have a strong vision, and able to motivate and engage people through his inspiring and charismatic personality in leading people to achieve the mission of Apple.
Staff can be interpreted as the employees, which can also be analysed via understanding about the human resources management process in an organisation. From the review of the relevant materials on Apple, it can be learned that human resources is one of the crucial elements that contributed to the success of the firm. Among these include the following:
- A performance-oriented corporate culture (Dykstra-Erickson, Hoddie & Wasko, 2011)
- A variety of talented multi-disciplinary staffs, with broad and deep expertise in various areas (Dykstra-Erickson, Hoddie & Wasko, 2011), and even with Nobel prize-winning scientists that try to join Apple after being persuaded to participate in something grand that may change the world (Maccoby, 2012).
- A work culture that respects and values employees (Dubberly, 2012)
- High degree of identification to the company among the employees (Nair & Leng, 2012)
- Human resources management practices that empower employees (O’Rourke, 2012)
- Strong collaboration between teams and departments, of which of different strengths and competencies (Maccoby, 2012), which give rise to the possibility of concurrent engineering and scientific innovation in the organisation
- The leadership style that able to drive the workforce to accomplish what the workforce itself may not think that they are capable of (Dubberly, 2012)
- The success of Apple as an important factor that attract even more talent to the company
- Very high employee retention rate (Dubberly, 2012)
Overall, the strategic analysis presented above had shown that Apple is a successfully managed company, from strategic management point of view. The company is pursuing a differentiation strategy (based on the analysis via the Porter Generic Strategy framework as well as Bowman’s Strategy Clock). The differentiation strategy occurs not only at the product level, but also in the context of design of the products, as well as branding of the company. The evidence of the application of differentiation strategy is from the distinguishing different product offered by Apple (as compared to other competitors), as well as from the premium price charged by the company. Nevertheless, while Apple is pursuing a differentiation strategy, the company is also being noted for paying attention to costs. To reduce wastages and costs is indeed crucial part of strategic management of the company to boost its profitability (Lashinsky, Lev-Ram & Kimes, 2008). As such, from such observation, it is also crucial to aware on how Apple does not neglect about the costs in the process of managing the business, despite having a broad direction of being differentiated from the rest of the players.
Then, the use of McKinsey’s 7-S framework had even identified even more details about the company (and also more able to explain about the reasons or factors contributing to the success of the company). It can be seen that the strategy employed by Apple is not merely able differentiation, but also include other strategy such as: continuous innovation, customer orientation, quality management, a strong focus on core competencies, and paying attention to the details and strive for perfection. All of these combined, are what lead the firm to exceptional success. Then, the structure of Apple is also designed to support the strategic direction of the company. That is a structure that focus only on those most important business activities that generate the highest value; and that is consistent with the argument that a firm should focus only on its core competencies to become more effective strategically. In a similar vein, the system within Apple is also aligned to meet such needs, and also to meet the needs and preferences of the customers.
Aside from that, the use of McKinsey’s 7-S model also informed the analyst that Apple has the following corporate culture: innovative, customer orientation, attention to details, and continuous improvement. These are positive and excellent corporate culture and push Apple forwards, in becoming more competitive. Then, the leadership styles of Steve Jobs had also influence Apple positively, and leave a strong legacy within the organisation. The transformational leadership process had eventually also contributed to better human resources management process (i.e., ‘staff’) and capability of Apple in meeting the needs and preferences of marketplace (i.e., ‘skills’). In that way, the ways that propelled Apple towards successfully gaining competitive advantage in the dynamic and highly competitive industry can be understood better.
While it is largely acknowledged that Apple is a successful company, there are also evidences that Apple does have the needs to improve its business. These weaknesses are sometimes not captured by the tools used in this report, in trying to analyse the strategic management process in the company. Some of these weaknesses that should also be catered for from strategic management perspective include the following:
- Bad treatment of the low-wages employees in Foxconn, the key supplier of Foxconn (Temperton, 2012)
- Lack of concerns on the natural environment, as Apple Computer was accused of polluting the environment (Chao, 2011).
- Overly reliant on Steve Jobs (Koch, Fenili & Cebula, 2011).
- The catching up by Samsung, and the struggle between Apple and Samsung on legal issues (Breen, 2013; Philp, 2013)
- The lack of compatibility of software produced by Apple with the rest of the software in the marketplace
Overall, this report that performed an in-depth strategic management analysis on Apple, via three famous and yet practical strategic management frameworks. That provide insights on the success of Apple, from the strategic management point of view. Nevertheless, from critical analysis and discussion, it is also identified several issues that worth the attention from the management in Apple. The strategy employed by the company is effectiveness, but there are still room to further refine and enhance its competitiveness, so to sustain its competitive advantage.
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