Innovations and Structure of Apple Inc - Case Study Example

Innovative Organisations CONTENTS EXECUTIVE SUMMARY INTRODUCTION Apple Inc. WHICH INDUSTRY DOES IT COMPETE IN APPLE’S PROPORTION OF MARKET SHARECOMPETITIVE STRATEGY MAIN CHALLENGES IN FUTURE MAIN BODY REVIEW LITERATURE IN INNOVATION ORGANISATIONAL CHARECTERISTICS THAT FACILITATE INNOVATION CRITICAL DISCUSSION ON WHETHER THE ORGANISATION THESE CHARACTERISE AND TO WHAT EXTENT DISCUSSION THE MOST INNOVATIVE PRODUCT OR SERVICE OF THE CHOSEN ORGANISATION CLASSIFICATION ON TYPE OF INNOVATION MAIN REASON FOR THE ORGANISATION TO DEVELOP THIS PRODUCT OR SERVICE PRODUCT OR SERVICE LIFE CYCLE HOW HAS THE DEVELOPMENT OF INNOVATION PRODUCT HELPED YOUR ORGANISATION TO HONE COMPETETIVE SKILLS CONCLUSIONS REFERENCES Executive Summary: A company’s success lies in its ability to identify and develop innovative products and maintain innovation to achieve long term success. A company, looking pre-destined some years ago may be capable of staging an impressive comeback and become an iconic company. The success story of Apple is based purely on its innovative products. The products and the loyal customers made it a consumer electronics firm which is ranked first in the world’s innovative firms. Starting from the first computer in 1977 to the mouse-driven Macintosh in 1984, the iPod music player in 2001 and now the iPhones - the success story of innovation is keeping ahead of the times. The focus of the writer’s study is on the Apple’s innovative product - iPod which is a current bestseller and in high demand. This product is having the features of downloading favourite music, books and other literatures which can be read and listened too. This iPod can be used in cars and other mobile settings. This report will be able to explain the innovation process and strategies used for the success of iPod product. Through this work the writer would like to put across the factors that help an organisation become innovative and iconic. Introduction: To withstand in the platform of performance, companies need to be innovative in their activities. So, innovation is getting importance in this highly competitive scenario. In 1960s and 1970s innovation meant a new idea, concept, product or process-invention and in the 1980s it changed in terms of creating something new and bringing it into use. Later in 1990s, innovation was defined as creating something new, bringing it into use and getting a profit from it. Innovation is given huge importance in organisation because keeping pace with innovation is equal to a key to prepare for the future. It will lead to future survival and success of the organisation and it can make competitive advantage out of it. That is why it is seen that organisations are spending huge amount of money for R &D activities. Through this research work, the writer would like to do a study on the innovative process in an organisation and analyse how innovative that organisation is, in the area of performance. For the purpose of this study, the selected Company is Apple Inc., an innovative organization and the writer would concentrate her work on the innovative product iPod. The writer has selected this company because it ranked first in FT500 list of most innovative companies in the world. Apple iPod is the most successful product of Apple Corporation and it has changed people’s way of listening to music. The objectives of this study are: to identify an innovative organization and understand its competitive strategy, analyze the future challenges for it, identify the characters that facilitate innovation, and study on an innovative product or service etc. Apple Computers got the name “Apple” because that time the major competitor was Atari and the name alphabetically comes before Atari in the phone book. Steve Jobs and Steve Wozniak co-founded Apple Computers in 1977. They started Apple computers by designing and offering Apple I to the personal computer world. It took them years to come up with Apple I and later this was replaced by upgraded version Apple II. Apple I was built in a printed circuit form and Apple II included graphics, and eventually colour. The Apple computer created the home computer market those times. Apple’s performance in innovation: Apple launched an Initial Public Offering (IPO) during 1980’s to generate capital for the company to move forward. By the early 1980s it began to face competition from Commodore, an established computer maker. The competition increased with entry of IBM, established maker of business level mainframes. The Apple III was designed to compete with IBM‘s PC’s. The Apple III versions were forced to be recalled from the market because of persisting overheating problems. While Apple III computer was in the market, it also launched Apple Lisa, the first GUI computer, during 1983. The Apple computer range was continuously concentrating on improvement in technology and product design. This led to the launch of Macintosh in 1984, and the advertisements aired during that time, facilitated the market support for that product. The Macintosh computer was different from other computers because it was following a mouse-driven operating system, rather than key board driven operating system, which was largely prevalent those times. Steve Job left the organisation during 1985 because of disagreement he had with other members in the board. After a few months of launching Mac Apple, the company released a compact version of Apple IIC. In 1986 Apple introduced Apple II GS, a mouse-driven product. Until 1990’s Apple II was in the market till it was discontinued. At the same time Mac was creating a series of products Mac Plus in 1986, Mac SE and Mac II in 1987 and Mac Classic and Mac LC in1990. Apple attempted to come with first portable computer named Mac Portable in 1989 but it failed miserably. Then it came out with more popular Power book during 1991; during the 1980s Apple’s technological rivals were Amiga and Atari ST. In 1990s IBM PC was more popular than all the other three. Then the Microsoft 3.0 was out in the market competing Apple. In response to the PC market threat Apple came with Macintosh lines Quadra, Centris and Performa. In 1994, Apple made an alliance with its competitor IBM known as PReP, in which it used IBM and Motorola hardware and Apple software. This alliance upset Microsoft by its exceptional performance. In PReP platform Apple came with Power Macintosh line using IBM’s Power PC processor. In addition to the computer products Apple was also producing consumer devices. Apple launched Newton an early PDA. It failed economically but it inspired to come with new devices Palm pilot and Pocket PC. During 1996, Steve Job returned to the company and it helped to use NEXT technology in the foundation of Mac OX operating system. The Apple retail store introduced in 1997 an online retail store. In 1997 Gli Amelio was ousted as CEO of Apple by the Board of Directors and Jobs stepped in as the interim CEO. Apple entered in partnership with Microsoft in1997 which led to a US$150 million investment in Apple. The new CEO of Apple Mr. Jobs decided to discontinue the licensing of its operating system to third party computer manufacturers and developed iMac. It helped to re-introduce Apple products. The new products like iBook, the Power Mac G4 and the AirPort product series helped to popularize the use of wires LAN technology. In 2001 Apple introduced Mac OS X an operating system based on NEXT s NeXTstep. In 2001 Apple decided to open retail stores throughout US. It was done to improve the market share in the computer market and also to improve the poor response in the third party retail outlets. The iPod: In October 2001, Apple came up with its innovative product its first iPod portable digital audio player. Formerly, iPod was capable of storing 1000 songs (five gigabyte player). After introduction of the first iPod it came out with series of products like Mini, IPod Touch, the Shuffle, the iPod Classic, the Nano and the iPhones. As of now the largest storage capacity of an iPod is 160 gigabytes. In 2002 Apple came out with a redesigned iMac using the G4 processor. In 2002 it also came with a new product X Serve 1U rack mounted server, a cheaper product than that of the competitors. It released a new product X serve RAID which was cheaper than the former one. In mid-2003, it came with the Power Mac G5 based on IBMs G5 processor. A new iMac product based on G5 processor unveiled in 2004, named iMac G5 was the world’s thinnest desktop computer. A new product featured Dual core processor Power MacG5 was released in 2005. In 2006 Apple started producing Intel based Macintosh computers. In January the first Intel based machines; the iMac and Mac Book Pro were introduced. It was based on Intel Core Duo. The Apple Computers shortened its name in 2007 to Apple Inc. This was because it was dealing not only in computer products but also products like iPod, Apple TV as well as Macintosh brand. Apple came out with a new product iPhones which led to the entry into a new industry. IPhones combined first widescreen iPod with the world’s first mobile device boasting visual voicemail and an internet communicator enabling web browsing. (The new iPod shuffle. The first music player that talks to you, 2009). Which Industry Does It Compete In? Apple started its operation in computer designing, manufacturing, and marketing PCs, software and peripherals. It was concentrating mainly on lower cost uniquely designed computers such as iMac and Macintosh models. Later, it changed its operations to entertainment equipments and phone industry. Proportion of Market Share: In Fortune Global 500 listing, Apple Corporation ranked first in top 50 and it ranked second in computers in US, Microsoft ranked 10 in the list. (Apple tops the fortune list of most admired cos 2009). In JFM 2009 quarter Apple’s top line increased from $7.51 billion to $ 8.16 billion and bottom line increased from $1.05 billion to $ 1.21 billion. Apple sold 2.22 million iMac computers, 11.01 million iPods and 3.79 million iPhones in the JFM 2009 quarter. Apple’s activities are not only in computer industry but also in entertainment electronics industry and phone industry. (Apple results bring some cheers for IT industry). Competitive strategy: Since 1976, when Apple came in the market, it has made lot of competitive advantages. Four such differentiations are brand loyalty, innovative hardware design, dedicated market shares, and ease of use. Apple’s brand commitment is too strong because of this loyalty. Apple was able to form a tight knit relationship with its customers, largely emanating from education, design and publishing industries. Competitors like Intel and Microsoft were making a difference in the profit margins of Apple because they were giving products at a lower price. Brand proliferation and wide array of products provided by the competitors were also making threat to the company. Apple is dealing with differentiated strategies for serving different customers. IPod strategy to withstand competition Apple positioned the product iPod, aimed at middle class/high class. So this product is positioned in department stores associated with prestige products. It helps to create a strong consistent and clear image in customers’ mind. Apple iPod is given a warranty for one year to keep the product perceived as quality one. Apple packed this product uniquely to differentiate it from others. Price creates perception of quality; so Apple priced it high with 65% profit revenue. Apple promoted this product through television and magazines to reach target markets. It offered the iPod accessory products at half the price, to increase the sale by bundling the two products. Apple iPod is using the indirect distribution channel through this distribution channel. Apple is getting the benefit of intermediaries who will fragment the bulk supplies of inventory, give financial services to retailers, increase ease of customer purchase etc. This strategy will help Apple to concentrate on other areas of business. Apple iPod is leasing their trucks to their intermediaries. Apple’s warehouse is near those of intermediaries, and this would reduce logistics and transportation costs of the company. Apple is adding new features to the product for its success. Apple meets the demand for product on time. They are much efficient in keeping inventory stocks and inventory prices. Mobile phones are one of the major competitors for iPod. Main challenges in future: Consumer confidence boosts Apple’s sales. Maintaining this confidence in the time of tough competition is a challenge for Apple. IPod touch, iPod Nano, iPod classic, iPod shuffle are the new products in the market. The Apple’s strengths are a good reputation for the products, good financial background, products appealing to both males and females, advanced technology, product innovation etc. It has got the opportunity to use the financial resources, goodwill etc. The main competitors of Apple iPod are Rio Carbon (5GB) and Iriver H10. These products are concentrating to increase their sales by 10% by next year to become a leading supplier in MP3 players market. These two products are trying to sell their products at competitive prices and keep updating their products by innovation. They do not have brand image, awareness and good market share. These two things will help Apple to keep away from threat. Entry of imitators, changing market conditions, toughening laws, growing market trends, etc., would be creating future challenges for the industry. Literature Review in Innovation: Identify Organisational Characteristics That Facilitate Innovation: Growth orientation, organisational heritage and experience, key individuals, go it alone strategy, Commitment to technology and R&D intensity, Strategy towards innovation etc are the organizational characteristics that facilitated innovation. Critically Discuss Whether Your Organisation Facilitates These Characters And To What Extent: Company has shown orientation towards growth with the guidance of Mr. Steve Jobs. Organization has shown fluctuating kind of heritage and experience made the company stronger in its area of activity. Apple’s commitment to technology and R&D intensity can be seen while looking its cause of success-styling, design, upgrading technology from time to time. The variety of products itself shows the importance given by the company on strategy towards innovation. Key individuals like Mr. Steve Jobs and Mr. Steve Wozniac Jonathan eve have got important role in the success of Apple Corporation. By looking at the history we can see that these two people have contributed much. The time when Steve Jobs was back, the company was doomed and his decisions helped the company’s success. Go it alone strategy - sharing ideas and technology of Apple Inc like inter-industry alliance and intra- industry alliance helped the company to attain success. Inter-industry alliance: In 1994, Apple made alliance with its competitor IBM known as PReP in which it used IBM and Motorola hardware and Apple software. This alliance upset Microsoft by its outstanding performance. In the PReP platform Apple came with Power Macintosh line using IBM’s Power PC processor. Intra-industry alliance: Apple made an alliance with BMW to offer an in-car adapter that allows the users to plug iPod in to the car stereo. Also the car stereo makers Pioneer, Alpine and Clarion added an adapter in their stereo designed to use iPod in it. Japan’s Nissan and a good number of European luxury car makers also started selling car with iPod compatible stereo systems. Discussion: Identify What You Believe May Be The Most Innovative Product Or Service Of Your Chosen Organisation What Type Of Innovation Can It Be Classified As: The Apple iPod is an innovative product. It changed the way of thinking about digital music. When introduced during October 2001, it created a new way of enjoying music. It avoids the burden of carrying a CD or bulky audio equipment around. Apple came out with different models of iPods having the capability of storing amazing amount of digital audio and video. Apple’s variety of iPod products are iPod shuffle, iPod Nano, Apple iPod Touch, Classic iPod etc. The technology, functions and efficiency of Apple iPod created a superior position than other players in the industry. (Apple (AAPL) 2009). Apples iPod came out with a radical innovation, because it changed the nature of thinking of the people about the music. It came with technical innovation also. It came with a product which can store amazing amount of data. Through Apple iPod we can see the product innovation because it came out in the industry with a new product to capture the entertaining market. IPod began to act as a computer peripheral which added a momentum to success. Apple’s I Tune site also helped the success.. Main Reason for Your Organisation to Develop This Product or Service: Apple identified the market for a small product which can store huge amount of data. Apple revised its product and made it slimmer and compact one. The portable device market was less touched that time and it made Apple to come with the iPod. Product or Service Life Cycle: The Apple iPod is currently in the growth stage. More and more people are getting awareness about the product and are demanding the product. Sales are increasing and profit is also increasing. By looking at the Apple iPod touch’s growth of 36% net share shows the current demand of the product. Development – Application – Launch – Growth – Maturity - Decline these are the stages through which an innovation can happen. Innovation process describes the activities that are done in each stage of the innovative product’s development. Management, technology, and capital are the three factors that influence a product internally during its development. Overseas influence, competitors, and demographical patterns are the factors which externally influence a product. How Has The Development Of Innovation Product Helped Your Organisation To Compete? Apple capitalizes on the success of the iPod, which has got a warm welcome from the audience and this success helped the company. The remarkable success of the Apple iPod helped the company to reach the first position in FT500 ranking. It helped the company to rise from disaster and it helped increase its share price five times. Conclusion: Innovation is very much important when it is the only survival strategy available for corporate to stay on. ‘Innovations’ means changes, by the unlimited needs of customers and competitive environment over time. If apple focuses on its competencies and move away from inefficient practices, no doubt there will be success in future. In future the company might face challenges of consistency and maintaining customer satisfaction. Through this study, the writer identified that the growth orientation, organizational heritage and experience, key individuals, go it alone strategy, commitment to technology and R&D intensity, strategy towards innovation etc are the organizational characteristics that facilitated innovation. References Apple tops the fortune list of most admired cos 2009, The Financial Express, viewed 6 May 2009, http://www.financialexpress.com/news/apple-tops-the-fortune-list-of-most-admired-cos/430300/ Apple results bring some cheers for IT industry, Professor Sadagopan’s Weblog, viewed 6 May 2009, http://ss.emergic.org/2009/04/22/apple-results-bring-some-cheers-for-it-industry/ Apple (AAPL) 2009, Wikinvest, viewed 6 May 2009, http://www.wikinvest.com/stock/Apple_(AAPL)/Bears The new iPod shuffle. The first music player that talks to you: small talk 2009, viewed 6 May 2009, http://www.apple.com Read More