Case Study 1 – Apple in 2008
1. History, Development & Growth of Company Over Time
Apple Computer was incorporated on April 1, 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne (Hill & Jones, 2012; Time, n.d.), just three months after incorporated Apple Computer, Wayne sold his share (Time, n.d.). Jobs was just 21 years old (Hill & Jones, 2012; Time, n.d.) and went on to develop Apple Computer into a revolutionary personal computer company with partner Wozniak (Hill & Jones, 2012; Time, n.d.).
Apple produced one of the first successful commercially produced microcomputers, the desktop computer Apple II in 1977 (Hill & Jones, 2012; Pineda, 2017). Many believe this to have been the “beginning of personal computing for mass consumption”. It was also the company's first experience selling consumer electronics (Pineda, 2017).
Jobs created the Macintosh computer (Hill & Jones, 2012), introducing it to shareholders on January 24, 1984 (Time, n.d.). Apple dominated the desktop publishing market segment with its Mac computer (Hill & Jones, 2012). The Macintosh was an instant hit as it “was the first affordable computer to offer a graphical user interface” (Time, n.d.).
While innovation and sales were positive, Jobs was known for his controlling behavior, following his own ideas, and ignoring input from others (Hill & Jones, 2012; Time, n.d.). This zealous behavior created a hostile environment and in 1985, the board voted to fire him (Hill & Jones, 2012; Time, n.d.). During Jobs' time away from Apple, he founded the computer company NeXT (Hill & Jones, 2012; Time, n.d.). His work at NeXT gave him software development experience that would work in Apple's favor in the future (Hill & Jones, 2012; Time, n.d.).
During Jobs absence from Apple, innovation floundered, and sales dropped. As Apple was operating at a loss and competition from Microsoft's Windows 95 was strong, Jobs rejoined the board in August of 1997 as an interim CEO, and one month later was hired permanently (Hill & Jones, 2012). Time and experience away from Apple had made Jobs into a better leader, one who cared about input from others, and making money, but he still cared about making beautiful objects (Time, n.d.). Overtime, he became recognized as one of the company's most valuable assets (Time, n.d.).
Jobs proved to be a strong leader, with a succession of popular products introduced to the market beginning with the iMac in 1998 (Time, n.d.). The iMac had two characteristics that made it the best-selling personal computer in America (Time, n.d.). The iMac was a “self-contained unit, requiring minimal setup” and its design was attractive (Time, n.d.). Its teal color stood out among all the beige computers on the market at the time (Time, n.d.).
When the iPod was introduced, it was in a category all its own and quickly became one of Apple's top-selling products (Time, n.d). It was reasonably priced at $399, had an innovative interface, large storage capacity, and very quick download capability (Time, n.d.). Jobs' statement, "You can fit your whole music library in your pocket," was a sentiment that consumers bought into.
In March of 2001, the operating system Mac OS X was released “and was touted as virtually crash-proof” (Time, n.d.) and was “also easy on the eyes because of its look and feel” (Time, n.d.). OS X's continued stability, speed and ease of use became a major selling point for new Mac users who switched from Windows-driven PCs over the ensuing years of its evolution (Time, n.d).
The next big Apple launches were the iTunes music storage software in 2001 and then the iTunes store in 2003, which offered an avenue to download music legally by purchase. Illegal music downloads had become a huge issue in the music industry. After Napster was shut down for violating copyright law, Apple's iTunes store's “entry into digital music sales changed the field entirely” (Time, n.d). The iTunes store was user friendly and offered a vast library of music downloads (Time, n.d.). Not only that, it coordinated with the iTunes software and iPod (Time, n.d). The iTunes store was an instant hit with 1 million songs sold in its first week and more than 50 million songs sold within the first year (Time, n.d).
The introduction of the iPhone on June 29, 2007 generated very long lines of customers outside of Apple stores (Time, n.d.). The iPhone was named TIME's "Invention of the Year" (Time, n.d.). Approximately 1.4 million units were sold by the end of September of that year (Time, n.d.).
When the iPad was unveiled on January 27, 2010, “some observers dismissed it as being nothing more than a giant iPhone” (Time, n.d.). However, the iPad became “Apple's fastest-selling new product ever” (Time, n.d.). By June of 2012 Apple had sold 84 million iPads (Time, n.d.).
1. Company's Internal Strengths and Weaknesses
A SWOT analysis of Apple identifies the strengths that enable the company to overcome weaknesses, take advantage of opportunities, and withstand threats in its business environment. Apple's internal strengths include strong brand image, high profit margins, and effective rapid innovation processes (Smithson, 2018).
The Apple brand is one of the most valuable and strongest brands in the world (Smithson, 2018). Apple's marketing involves premium pricing strategy, which comes with high profit margins. This internal strategic factor is a major strength because it maximizes profits, even when sales volumes are limited. Moreover, the competitive strategy and intensive growth of Apple involves effective rapid innovation. This allows Apple to keep ahead of the latest competitive technological advances (Smithson, 2018). Apple stays at least two years ahead of the competition by focusing on developing products that meet what consumers expect, with a strong attention to detail, fast processors, and streamlined designs (Bajarin, 2011). Developing both hardware and software allows Apple “to control all aspects of its computers” (Hill & Jones, 2012).
The following business weaknesses are the most notable in the case of Apple: limited distribution network, high selling prices, and dependence of sales on high-end market segments (Smithson, 2018). Apple Inc. has a limited distribution network because of the company's policy of exclusivity Smithson, 2018). In addition, because of its premium pricing strategy, the company has the weakness of the dependence of sales on high-end market segments. Middle- and high-income customers can afford Apple products, but low-income customers are prevented from purchasing many, if any, of the products due to premium pricing (Smithson, 2018). High-end market segments represent only a minority of the global market, making the premium pricing strategy a weakness (Smithson, 2018).
2. External Environment Surrounding the Company
External opportunities for Apple include expanding the distribution network, expected higher sales volumes based on rising demand, and the development of new product lines (Smithson, 2018). An expanded distribution network can help Apple reach more customers in the global market (Smithson, 2018). Apple also has the opportunity to increase sales volumes through aggressive marketing. While the current product lines are highly successful, Apple has the opportunity to explore new innovative product lines to support business growth in the international market (Smithson, 2018).
External threats Apple faces include aggressive competition, imitations of their products, and rising labor costs. Samsung is one of Apple strongest competitors due to its own quick innovation (Smithson, 2018). Apple must maintain its competitive advantage, otherwise its growth will be limited by its competitors' innovative products as well as imitation products. Imitation products pose a serious threat because of the large number firms throughout the world that imitate the design and features of Apple's products (Smithson, 2018). In addition, rising labor costs of contract manufacturers may reduce profit margins or increase retail pricing.
3. SWOT Analysis
The success of Apple is linked to how it utilizes its business strengths to overcome its weaknesses and threats, and to act on industry opportunities. The SWOT analysis of Apple reviews the businesses relevant strengths, weaknesses, opportunities, and threats, with reference to various industries and markets. Apple develops and sells computer hardware and software, consumer electronics, cloud computing services, and online digital content distribution services industries (Smithson, 2018). To be successful, it is necessary for Apple to develop a diverse set of strategies to ensure its competitiveness and business growth.
With operations in various markets around the world, Apple must utilize different sets of SWOT factors based on regional situations. Apple faces strong competition linked to the aggressiveness of other technology firms, such as Google, IBM, Amazon.com, Samsung, and Dell (Smithson, 2018). Such competition requires innovative strategies to achieve continued growth and development.
4. Type of Corporate Strategy
Apple Inc. is one of the most successful companies in the world and their corporate strategy is most of the reason why. Apple's strategy is to continuously expand their product base, but by using very similar inputs every (Bauer, Hogan, Raiche, & Styles, n.d.). Apple's horizontal integration strategy across devices and channels, and vertical integration strategy from hardware to software and retail has created sustainable competitive advantage that is hard to replicate (Mootee, 2011).
5. Type of business strategy
Apple's business strategy leverages its ability to design and develop its own operating systems, hardware, application software, and services to provide its customers new products and solutions (Nielson, 2014). Apple has established a unique reputation in the consumer electronics industry as an innovator and has a loyal customer base (Nielson, 2014). The company has been widely recognized as an innovator and game-changer in the industry, however Apple was not always innovative. While the Apple II and the Macintosh received initial success, they were competed with personal computer products from IBM after Steve Jobs Apple in 1985 (Pineda, 2017). Eventually, Microsoft's Windows computers began outselling Apple computers in the early 1990's (Pineda, 2017).
During Jobs' ousting, Apple's performance was poor, stemming from an inferior product strategy (Pineda, 2017). The company was not designing or manufacturing innovative products. When Jobs returned in 1996 as CEO, he discarded all unprofitable products and realigned product development, focusing on innovation initiatives, and simplifying the company's product offerings (Pineda, 2017).
Apple has lasting influence over different industries and sectors. It introduced the iPod, iTunes, revolutionizing the music industry. Apple was also instrumental in ushering in the era of smartphones and tablet computers, with the introduction of iPhone and the iPad. The overall product and innovation philosophy of Apple are transmitted across the entire product and service lines through complementation, maintaining a uniform user experience (Pineda, 2017). An important component of Apple's business strategy is to improve its products promote simplicity (Pineda, 2017). Every Apple product complements each other. Effective integration of hardware, software, services, and third-party applications into differentiated devices allow Apple to capture a premium price on hardware sales (Competitive Advantage Review, 2017).
Apple does not own and operate manufacturing or production facilities, rather manufacturing and production are outsourced (Pineda, 2017). Full control is another feature of Apple's supply chain strategy. The company designs hardware for these devices, then has them produced by outsourced manufacturers (Pineda, 2017). Apple also designs and develops the operating system for these devices, while also controlling the development of applications from third-party software developers (Pineda, 2017). This authority allows the company to optimize and synchronize hardware and software operations (Pineda, 2017).
The marketing strategy of Apple has evolved through the years due to changing market demands. Currently, its marketing strategy revolves around premium branding and cult marketing (Pineda, 2017). Apple positions its products as premium brands through a product strategy that takes into consideration the addition of fashionable and innovative features, a pricing strategy following a premium pricing approach, and a distribution strategy that involves retail stores, and excellent customer service (Pineda, 2017).
Most Apple products are expensive when compared competitors' products. However, Apple's premium pricing represents exceptional quality and innovation. Luxury consumers are willing to pay extra to maintain a sense of indulgence or a status symbol (Pineda, 2017). Jobs' vision for Apple was always to create a premier product and charge a premium price (Nielson, 2014). Apple's least expensive products are priced in the mid-range with a high-quality user experience (Nielson, 2014).
Consistent premium branding reinforces another aspect of the marketing strategy of Apple called cult marketing. This is further reinforced by an overall product strategy that revolves around creating and maintaining complementary products and services. Each Apple product complements one another, so consumers can avoid creating a hodgepodge of products that do not coordinate.
6. Company's structure and control systems
Apple's effective and rapid innovation is attributed to its organizational structure, while its success is linked to innovation and the leadership of Jobs. Apple has made small changes in its organizational structure, under Tim Cook's leadership, to suit current global market and industry demands (Meyer, P. (2018).
Vertical integration has given Apple a competitive advantage, as it owns chip manufacturers, controls manufacturing, follow extremely strict software standards, and operate in a nearly closed ecosystem of proprietary retail stores (Nielson, 2014). With these advantages, the company has more control of its value chain and, more importantly, its component costs (Nielson, 2014).
The devices and software Apple make are designed to work well with each other and sync easily so that preferences and media can be copied or shared with multiple devices without much effort (Nielson, 2014).
Apple, under the leadership of Tim Cook, has done extremely well. Apple announced in November 2017 that “revenue from its services division came in at $8.5 billion in quarter three, a 34 percent year over year increase” (Garun, 2017). That revenue is now more than Apple's “other products” division (which includes AirPods and other accessories, Apple TV, Apple Watch, iPod touch, and Beats products) combined (Garun, 2017). Apple's services division has been the company's second strongest source of revenue behind iPhones since April 2016 (Garun, 2017). Services include Apple Music and iCloud, which the company said saw a 75 percent subscriber growth (Garun, 2017). Apple's services growth was also attributed to the expansion of Apple Pay to countries around the world, including Denmark, Finland, Sweden, and the UAE in the last month (Garun, 2017).
I believe that Apple's competitive position is sustainable as long as they continue to come up with products that are cutting edge and customers are forced to buy them first from Apple if they want to get their hands on the latest and greatest technologies. It is harder and harder to beat Apple with its deep integration between apps, OS and devices.
...(download the rest of the essay above)