The factors that led to change in Apple Inc - Research Paper Example

?How Apple Changed? Table of Contents Executive Summary 3 3 Introduction 4 Drivers to Change 5 SWOT Analysis 6 Michael Porter’s Five Forces Model 7 Change Models 8 Lewin’s Change Intervention Process: 8 PESTEL Analysis for Apple 9 Kotter’s 8-Step Change Model 10 Major Changes Unfolding at Apple 11 Return of Steve Jobs 11 Products That Changed the World 13 Disruptive Innovation Theory 13 Management Level Changes at Apple 14 Transformational Leadership 14 Change in Leadership at Apple 14 Conclusion 16 References 17 20 Executive Summary The paper will focus mainly to the factors that led to change in Apple Inc. A detailed report has been drafted below with statistical facts and references, which clearly shows how Apple changed from a company moving to bankruptcy to being the most profitable organisation in the world. The paper also discusses the pre and the post era of Steve Jobs. The facts and the references show how Steve Jobs planned, organised and designed his workforce to bring the changes in the resources of the organisation. The paper will also discuss how his transformational leadership and ability to judge the requirements of the consumers made Steve Jobs one of the greatest Chief Executives of all times. Introduction A brand of innovations, “Apple”, was established in the year 1976 on April Fools’ Day (1st April), though it was incorporated only on January 3rd, 1977 with a brand name of Apple Computer. After 30 years, the word “Computer” was removed from its branding as it shifted its traditional focus from computers to consumer electronics. It was founded by three budding entrepreneurs, Steve Jobs, Steve Wozniak and Ronald Wayne, though the latter moved out of the company by selling his shares to the other two for US $800. The first inaugurated model was the Apple I which was hand made by Steve Wozniak. It was sold as a motherboard consisting of CPU, RAM and basic video chips (Apple Inc, 2012). As times gradually passed and moving into the 20th century, a lot of products have been designed and created by the company. The products that the company possess at present are, Mac and accessories, iPad, iPod, iPhone, Apple TV and different software. Apple has spread its business over 10 countries with over 300 retail stores and workforce of 60,400 permanent and 2,900 temporary employees (Apple Inc, 2012). Apple’s annual worldwide sales had grown to US$108 billion in 2011. They say that impressions are constant and that’s why first impression is the last impression. Apart from all the latest electronic gadgets, the logo has also made lots of designer think “why on earth would a bitten apple be a company’s logo”. The former President Michael M. Scott was once found to quote, “the most expensive bloody logo ever designed” (Linzmayer, 1999). Drivers to Change Since the resignation of Steve Jobs in the year 1985, the company tried to identify, the factors that could be the reasons for the ups and downs of their business. The factors were: Inadequate Financial Performance: Not meeting the demands according to the supply turned out to be a financial loss to the company. The delay made the investors furious that resulted in a lot of unsold products. The debt to the supplier of raw materials increased and the company was in the edge to file bankruptcy (O’Grady, 2008). Change in Strategic Objectives: Apple started to focus more on the consumer electronics rather than computer electronics. They started to experiment more on the consumer oriented products like portable CD, audio players, digital cameras and video consoles. This sudden re-orientation resulted in huge finances in order to bring in the new resources required to manufacture the products (O’Grady, 2008). Competitors Market Invasion: The re-orientation of the company helped companies like IBM and Microsoft to substitute the shortages that Apple could not deliver. They brought in same products with much cheaper costs and attracted disappointed and confused customers (O’Grady, 2008). Later after the return of Steve Jobs as the CEO of the company in 1997, he announced the all-in-one computer, iMac. The distinctive design and modern technology sold about 800,000 units in first five months. He also felt the rise in fast growing industry of music listeners. Therefore, led by Jonathan Ive, they designed the iPod, portable digital audio player. This product was a huge success as it sold over 100 million units within six years. Thus, identifying the drivers that brought a fall to the company and targeting the new technologies brought the company, the lost reputation (O’Grady, 2008). The constant change in technologies and innovations that the company is famous for became a challenge for Steve Jobs to keep up the expectations. Therefore, the SWOT analysis and Michael Porter’s Five Forces Model will give a lucid picture that would help to recognise the drivers to change for Apple Inc. SWOT Analysis Strengths Weaknesses Product development maintains high standards in the market Unmatched design with ultra slim products Brand name’s existence from a decade ago Innovative as well as Visionary Huge financial base and share price CEO Steve Jobs’ demanding and control freak nature Not shareholder-friendly, refused to pay extra dividends despite huge profits Majority of the products are quite costly compared to other competitors product Opportunities Threats Loyal customer base leading to increase in sales of different products Maintaining the standardisation resulted in accepting of new products Innovations in Apple TV could be an advantage to the present market Competitors developing same technologies and offering in lower prices New entrants in the market like Microsoft among others Google moving into the TV space can create a financial battle between Apple and Google Source: (Scribd Inc, 2012) Michael Porter’s Five Forces Model Source: (Lima, 2006). Potential Entrants: The entry of the other computer giant Microsoft can pose potential threats to the company i.e. Apple Inc. Competitors like Samsung and Motorola are not too far behind in offering touch screens gadgets. Bargaining Power of Buyers: The existence of similar products in the market offers a major bargaining power to the buyers where products, at a cheaper rate are available. Bargaining Power of Suppliers: Similar way, the presence of competitors in the market allowed the suppliers to dominate the company in terms of purchasing raw materials. Threat of Substitute Products: The variety in terms of available products in the market due to globalisation has seen consumers shifting from one brand to the other. Existing Competitive Rivalry: Existing companies have shown that they are not lacking behind when innovation is concerned. New innovations are quickly being replaced by another industry’s creative idea. Change Models Lewin’s Change Intervention Process: Kurt Lewin designed a model of change for the organisations, known as the “Lewin’s Freeze Changes”. Thus, the model of changes undergoes three phases, namely: Unfreeze – Lewin referred this stage as “frozen” state where growth has been stopped and efforts required to “unfreeze” them in order to bring in change. Steve Jobs after succeeding his former CEO made this very clear that he is going to remove the existing resources and replace them with new ideas and innovations. Change – It is very important to identify the technological and psychological factors and take the measures to bring a change in them. The CEO of the company understood the rapid growing music listeners around the globe and thus introduced the iPods and iPads. Refreezing – Refreezing signifies implementing the changes to see the outcome the change can bring. Therefore, after identifying the shifting market trend, Steve Jobs launched the unique and sleek iPods and iPads. After the launch of these products, the company sold large number of units all over the globe (Warrilow, 2011) PESTEL Analysis for Apple There are a few external factors that Apple should have in mind before exploring its business. These are: Political and Legal: The success of Apple depends upon the public policies that encourages healthy business environment. The company strictly follows the rules and the regulations that influences its business affairs and value their shareholders. The legal and the regulatory policies should have limited laws for intellectual properties, corporate taxation and trade (SlideShare Inc, 2012). Economic: Apple should target the richer and youth people of the society. Though their products are costlier than the competing companies, yet they are the highest seller, for their portability and design. Therefore, the country with high per capita income can be a great choice of business for Apple (Scribd Inc, 2012). Socio-Cultural: Apple has not significantly made its impression in the Asian and Middle East countries. They explored less in these countries because of the ‘under developed’ tag that was associated with these countries. However, now when the governments in these regions are ready to spend funds for modernisation, it can be a great opportunity to the company to explore the markets (Scribd Inc, 2012). Technological: The youth of the countries throughout the world are becoming more inclined towards using technological gadgets and the rapid changes of technologies in different countries can see Apple Inc to make a footprint. Countries where internet is a bit cheaper can encourage the youth generation to explore the innovations that the company brings along with its products (Scribd Inc, 2012) Kotter’s 8-Step Change Model John P. Kotter summarised the 8 steps that lead to successful organisational changes. Therefore, the success that Apple Inc achieved after Steve Jobs joined as a CEO may be for the following of these factors: 1. Ascertaining A Sense Of Urgency: Steve Jobs made the management examine the market and the competitive realities and discussed the major opportunities that can take place. 2. Forming A Powerful Guiding Coalition Team: Steve Jobs had been able to assemble a group of energetic team members who had the belief that the change will be a positive impact on the consumers. 3. Create A Clear Vision Expressed Simply: Steve Jobs developed strategies and clear visions for the employees that would direct the change (Gallo, 2011). 4. Communication of The Designed Vision: Steve Jobs used every possible ways to communicate his strategies and vision to all the members of the team. 5. Authorizing Others To Act On The Vision: Steve Jobs totally changed the resources to bring in the new technologies that will be needed for the change. He also encouraged investors by making them believe that this change will be positive and encouraged them to initiate risks. 6. Planning For And Creating Short-Range Winning Scenarios: Appraisal, for the employees’ was brought in by Steve Jobs who brought in improvements in the organisation. 7. Combining Improvements And Producing Still More Change: Continuously hiring and promoting employees who can implement the vision. 8. Institutionalise the New Approaches: Connecting the new changes had been a major reason for corporate success. Steve Jobs also developed ways to ensure that leadership innovation and development sustained in the organisation (Mento & et. al., 2002). Major Changes Unfolding at Apple Return of Steve Jobs In 1985, after an argument with his appointed CEO, Steve Jobs was told to leave the company by the Board of Directors. After separating from Apple, Jobs founded NeXT, a computer company. He acquired the graphics division of Lucasfilm which later was named as Pixar (The New York Times Company, 2012). He became the CEO and was the principal shareholder till the time it was obtained by The Walt Disney Company in 2006. In 1996, Steve Jobs was recalled by the board of directors of Apple and he was appointed as the advisor for Apple Inc. He took control of the company and later in 1997 was named the CEO of Apple. He introduced the iPod, iPad, iPhone and numerous unique products to save the company from bankruptcy and thus the organisation became profitable by 1998. By 2011, Apple became one of the world’s most priceless publicly traded companies (Kahney, 2009). Products That Changed the World There were unique products that were innovated by Apple under the leadership of Steve Jobs that changed the definition of electronic gadgets. The five most innovative products that really changed the world are: 1. iPod – A palm sized portable music device which is user friendly. Songs can be loaded directly from a computer. 2. iTunes – An online music store with more than 200,000 songs was launched to accompany the hugely successful iPod (Marsal, 2006). 3. iPhone – In 2007, Apple launched its first iPhone, well ahead of its rivals in smartphones segments. With its multi touch features, it could attract lots of youth generations. 4. Mac – In 1984, the first Macintosh computer was launched. Later, it revolved around two types of Apple computer, The iMac and MacBook. 5. iPad – The first portable tablet computer was released in 2010. Still in its early days, it almost sold 28 million units worldwide (Telegraph Media Group Limited, 2012). Disruptive Innovation Theory ‘Disruptive Innovation’ as termed by Prof. Christensen is an innovation that is accessible to an entire new population or group that was previously consumed by only the richer sections of the society. Steve Jobs studied the characteristics of disruptive business that include simpler products, lesser profit margins and lesser target markets. Keeping in mind these factors, he introduced the iPods and iPhones that sold so fast that it turned out to be the highest selling electronic gadget in the history (Christensen, 2009). Management Level Changes at Apple Like Apple, many organisations come up with changed management levels but remains failure. When the world presumed Apple was dead, Steve Jobs returned and changed the management resources to bring life in the company and blooming thereafter. This is where he could tenfold his company’s share. Steve Jobs came up with innovations and resources to execute them. He hired talents from each field to make his innovations come true. Thus, he understood the trends and focussed on those products to make them more unique (Palmer & et. al., 2008). Transformational Leadership “Leaders should lead by examples” is the bottom line of transformational leadership theory. The charismatic and eagerness to be the champion makes Steve Jobs a great leader. His transformational ideas for products that required the changes and the motivational spirit to make the employees believe that the vision can be achieved through team work made the world believe that he had been the face of a modern day icon (Apple Inc, 2012). Change in Leadership at Apple Tim Cook had been appointed as the new CEO of Apple in 2011. He was the only desirable one to be the successor after Steve Jobs. An MBA from Duke University, he also did earn a Bachelor of Science degree in Industrial Engineering from Auburn University. Previous to being chosen as the CEO in 2011, he was Chief Operating Officer of Apple, responsible for sales as well as operations worldwide. His CV included a tenure of Vice President of corporate materials for Compaq and an experience of 12 years with IBM as a Director of North American Fulfillment. In order to keep the hard tasks that his predecessor Steve Jobs had taken to achieve the vision, he made one thing clear to the employees that nothing is going to change towards the culture and focus of Apple Inc (Apple Inc, 2012). Conclusion One of the reasons for Apple’s sustained growth in the technological market in spite of having gone through lots of ups and downs during the decade has been the inspirational leadership skills of Steve Jobs. He was a confident and focussed leader who believed, that his innovations will be unique and set high standards in the modern world. He created history by leaving behind all odds while his competitors could just sit and watch. Innovations are successful when a realistic change is thought and steps are confidently taken to implement those changes. This is where Steve Jobs was much different from the other CEOs. He believed in his abilities and had a clear idea for the changing future trends. The shift in focus from computer electronics to consumer electronics made a mark in modern day’s technologies. His products have been a trend-setter in the constantly changing technologies. Most of the credit goes to the CEO, Steve Jobs because the company’s rise and fall revolved around his exit and re-entry into the company. Therefore, the detailed study of statistics and facts discussed above gives a clear picture “How Apple has changed” from time to time. At present, it is a challenge to the new CEO, Tim Cook to keep up the expectations of being a trend-setter in consumer electronics. He has to prove to the world that after the end of an era of Steve Jobs, his legendary predecessor, he can be the next legend in Apple Inc. The history that the iPods and iPhones have made in the electronics market worldwide may remain well out of reach for the other competitors. References Apple Inc, 2012. Apple Retail Store List. Over 300 Stores Worldwide. [Online] Available at: http://www.apple.com/retail/storelist/ [Accessed March 31, 2012]. Apple Inc, 2012. Apple Press Info. Tim Cook CEO. [Online] Available at: http://www.apple.com/pr/bios/tim-cook.html [Accessed March 31, 2012]. Christensen, C., 2009. Clayton Christensen. Key Concepts: Disruptive Innovation. [Online] Available at: http://www.claytonchristensen.com/disruptive_innovation.html [Accessed March 31, 2012]. Gallo, C., 2011. The Innovation Secrets of Steve Jobs: Insanely Different Principles for Breakthrough Success. McGraw-Hill Professional. Kahney, L., 2009. Inside Steve’s Brain. Penguin Group USA. Linzmayer, O. W., 1999. Apple Confidential: The Real Story of Apple Computer Inc. No Starch Press. Lima, T., 2006. Michael Porter’s “Five Forces” Model. Summary and Interpretation. [Online] Available at: http://arfuso.weebly.com/uploads/9/9/6/1/996130/porters_5_forces_model.pdf [Accessed March 31, 2012]. Mento, A. J & et. al., 2002. A Change Management Process: Grounded In Both Theory And Practice. Journal of Change Management, Vol. 3, pp. 45-59. Marsal, K., 2006. Apple Insider. iPod: How Big Can It Get? [Online] Available at: http://www.appleinsider.com/articles/06/05/24/ipod_how_big_can_it_get.html [Accessed March 31, 2012]. O’Grady, J. D., 2008. Apple Inc. ABC-CLIO. Palmer, I. & et. al., 2008. Managing Organizational Change: A Multiple Perspectives Approach. McGraw-Hill Irwin. SlideShare Inc, 2012. Apple Inc. Political Contributions and Expenditures Policy. [Online] Available at: http://www.slideshare.net/finance11/apple-political-contributions-expenditure-policy [Accessed March 31, 2012]. Scribd Inc, 2012. PEST Analysis. Apple Inc. [Online] Available at: http://www.scribd.com/doc/52991178/11/PEST-Analysis [Accessed March 31, 2012]. Scribd Inc, 2012. SWOT Analysis. Apple Inc. [Online] Available at: http://www.scribd.com/doc/52991178/11/PEST-Analysis [Accessed March 31, 2012]. Telegraph Media Group Limited, 2012. The Telegraph. Steve Jobs: The Five Apple Products ‘That Changed The World’. [Online] Available at: http://www.telegraph.co.uk/technology/steve-jobs/8810237/Steve-Jobs-the-five-Apple-products-that-changed-the-world.html [Accessed March 31, 2012]. The New York Times Company, 2012. Technology. Creating Jobs. [Online] Available at: www.nytimes.com/1997/01/12/magazine/creating-jobs.html [Accessed March 31, 2012]. Warrilow, S., 2011. Kurt Lewin's Change Model. How To Manage Change: Freeze-Unfreeze-Freeze. [Online] Available at: http://www.strategies-for-managing-change.com/kurt-lewin.html [Accessed March 31, 2012]. Read More