The World Around the Business - Essay Example

? STRATEGIC CHANGE Word count- 2960 …………………. College/ ………….. …………. TABLE OF CONTENTS Introduction …………………………………………………………….. 3 Apple Inc: An overview ……………………………………………….. 3 Management perspectives on Strategy …………………………………. 5 Management perspectives on Change and Strategic Change ………… 6 Apple Inc and Strategic Changes………………………………………… 7 1- Innovation and Innovative product design as strategic changes.. 7 Triggers to this change ………………………………………… 8 2- Product Differentiation as a strategic change ………………… 8 Triggers to this change ……………………………………… 9 3- Retail-marketing/ Own-store retailing as a strategic change … 10 Triggers to this change ……………………………………….. 11 Significant organizational issues facing the managers in strategic change .. 12 Conclusion…………………………………………………………………. 13 References …………………………………………………………………. 14 Introduction In the light of large-scale changes facing the world around the business, organizations require to undergo strategic changes and strategic re-orientations. Both the external and internal environments of a business face tremendous changes day by day, mainly due to technological advances, varying customer requirements, differences in marketing trends etc, and in order the business to survive in this challenging environment, it is highly important that business must be accustomed with the environments through the strategic change possible. For management, there are quite a large number of strategies to help the business achieve its specific or common goals. Out of these strategies, change itself is a strategy as it is, though a challenge to get it successfully implemented, an opportunity for the business. Apple Inc with the leadership of Steve Jobs has emerged to be an organization that prospered a number of strategic changes like retail-marketing, innovative product design, product differentiation etc. This piece of research paper is an attempt to address the strategic change from both literature perspectives as well as empirical evidences from Apple’s strategic change. This paper outlines how Apple Inc has managed strategic change at various situations and how it could successfully implemented changes like launching of its retail-marketing. Apple Inc: An overview Apple Inc, one of the most successful technology companies of today, has been established by Steve Jobs, Ronald Wayne and Steve Wozniak in early 1970. It’s startup story itself is amazingly interesting as it is closely linked to one-off hobby machine that an outstanding talented electronic wiz, Steve Jobs, made for himself and this has later become the core of the most successful companies of today (O'Grady 2008, p. 1). Apple Inc is a multinational company, headquartered in California, that designs, develops, and markets personal computers, servers, communication devices like cell-phones, portable music digital players and related accessories (Datamonitor 2010). The company has always been thriving on innovation and continuous changes. It ignited personal computer revolution in early 1990s with the development of Apple- II. The company thus went through a number of strategic changes in production, technology, marketing, innovation and so on. It later reinvented the personal computer within the next few years by the development of Macintosh. Macintosh and its another development called iMac gave the company deeply routed brand loyalty (Kerin, Hartley and Berkowitz, 2005, p. 395). In recent years, Apple found hidden marketing opportunities, that were until then explored by none, for digital music players, music software, iPhone, 3G iPhone etc and revolutionized its markets through effective distribution with its own retailing stores and other third party sellers. As Walker (2003, p. 4) opinioned, Apple’s management guided the company to create a focal point for effective decision making and this has been highly useful for the company in certain ambiguous and uncertain situations. More specifically, though there have been uncertain situations when ever the company projected a change, Steve Jobs’ effective managing and leadership style created a focal point for effective decision making and paved the company a successful way always. This illustrates that a strategic change plan cannot simply yield positive outcome unless there are efforts of a talented one behind it. Porter (1998, p. 29) stressed that an effective business strategy can either be in an offensive or defensive way in order to create a defendable position against major competitive forces. Apple’s business strategies, especially in implementing changes like innovation and retail marketing, were extremely capable of creating stronger defense against its competitors like Dell, Microsoft, Nokia, Acer etc. Apple shines to be very different among many other computer technology manufacturers, because its efforts on ease of use, utility, customer value, efficiency, fun etc through iPad, iPod, iMac, iLife, iTunes, iWork, Mac OS, Safari browser and Quick Time etc have been illuminating examples of how strategic change can bring greater success to a firm. Management perspectives on Strategy When it comes to Apple’s case, strategies like retail-marketing, innovation, customer-focus and differentiation played pivotal roles in leading the firm to greater success. Business strategy or corporate strategy is, as described by Mintzberg, et al (2003, p. 72), is a pattern of decisions in an organization that determine and define the objectives, purposes and goals by providing the framework on how to achieve these goals, by defining the range of business or other activity the organization is to pursue and by specifying the kinds of human and economic organization it intends to be. A business strategy is thus closely related to managerial decision making, the communication, and goal-setting. Mintzberg’s 5Ps of strategy explains the essential components of the strategy. According to this explanation, strategy can implicitly used to term plan, play, pattern, position and perspective (Smith, Berry and Pulford, 1999, p. 68). Strategy is perhaps one of the most widely used buzzwords in business terms in recent days. Business strategy explains why some organizations outperform others over time. Two firms, no matter whether they are in the same industry or not, are never same in size, products, people, location, productivity, profitability, way to achieve its goals, competitive advantage etc and strategy is one of the most significant elements that cause these basic differences (Walker, 2003, p. 3). Management perspectives on Change and Strategic Change Change is a powerful tool, a strategy, an opportunity and a managerial technique to achieve organizational goals in more effective way that hasn’t been yet tried. Exploring new ways for doing organizational activities that have been till now carried out by other methods can help the firm achieve its specific as well as organizational goals like sustainable competitive advantages. When change agents project a specific change in an organization, it is more likely to cause resistance from the people and therefore managing the change effectively is highly critical to success. As Thompson (1993, p. 697) stressed, Change is certainly one of the very important strategic initiatives that a manager is required to take in volatile business contexts as a reaction to external threats or as a proactive effort to seize business opportunities and manage the environments. This view highlights the relevance of effective change management and the perception that change is an opportunity or a tool to seize opportunities. Change management incorporates a number of managerial functions like direction, planning, coordinating, organizing and controlling. The change management thus involves process, people and managerial techniques and strategies (Palmer, Dunford and Akin, 2009, p. 24).. Jacobs (1997, p. 22) defined strategic change as an informed and participative process resulting in new ways of doing business that lead the organization in to success, for now and for future. Strategic change is the process by which the present state of strategies get altered to compete with the rivals and their differentiated functioning so that the organization can attain greater adaptability and viability in the current environmental contexts. Re-engineering, restructuring and innovation are the very basic three kinds of strategies change (Sekhar, 2009, p. 76) and Apple’s case shows that it has been prospering on innovation through differentiation, product design, and other strategies as part of its strategic change. According to the strategic change theory of Peters and Waterman, the excellence in an organization is equated with the ability to change. Excellent organizations are those that continually innovate, gear to quick actions and conduct regular experimentations (Dobson, et al, 2004, p. 122). Apple Inc and Strategic Changes An analysis in to Apple’s management and business strategies illustrates that Apple’s business success has been mainly triggered by its strategic changes, they are innovative product design, differentiation and retail-marketing. These strategies are detailed below, considering the change, triggers to each change and how Apple managed each change process. 1- Innovation and Innovative product design as strategic changes A company may be a technology maker or technology follower. Apple Inc, until mid 1990s, has been depending on borrowed technology and it was not a technology maker until the 1990s. When Steve Jobs realized that a company cannot stay long on technology leaders strategy unless it becomes a technology creator. After 1997, Steve Jobs reduced total product lines of Apple Inc, cutting its entire product lines to four, they were a) laptop for consumers, b) desktop for consumers, c) laptop for professional users and d) desktop for professional users (Betz 2002, p. 194- 195). Steve Jobs implemented a strategic change from being a technology follower to a technology creator which in turn has later helped the company build deeply routed brand loyalty and long term profitability. With the strategic change of innovation and technology, Apple has been able to design, develop and market varieties of technology-products that have until then been quite unknown to the market. This strategic change has helped the company design its products lines like iMac, iPad, iPod, iPhone etc. Triggers to this change As mentioned above, Steve Jobs realized that a company being just technology follower cannot survive long in a business context which is characterized by fierce competition and quicker advances in technology. The main reasons behind the attempt to change Apple from being technology-follower to technology-creator were survival of the business in a complex business environment, achieving long term profitability and gaining superior brand loyalty among its customers. 2- Product Differentiation as a strategic change A company may depend on product differentiation strategy especially if the market is highly competitive. Apple Inc has designed and developed a large number of very different technology products, including laptops, desktops, computer accessories, digital music players, mobile phone etc. All these product lines have been developed again in to different styles, features and configurations and thus Apple Inc created a strong strategy of differentiation which in turn has helped that company gain greater accessibility to large numbers of customers around the world. As Hoskisson, Hitt and Ireland (2008, p. 133) found, Apple’s strategic change was to develop computers and other products that are highly differentiated. Many of its competitors, including HP and Dell focused on cutting costs and keeping selling high volume of goods where as Apple focused on technology with a product differentiation motive. Until 1998, Apple hasn’t focused on differentiating its product lines, but since it started iMac in 1998 and started an Operating System in 1999, it has eventually been getting in to concentrating on product differentiation. (Linzmayer, 2004, p. 297). Since then, Apple Inc has been moving through a number of strategic changes of developing different products, like iMac, iBook, iPod as central for digital life style strategy. When Apple Inc focused on product differentiation as a strategic change, it then eventually changed the way people approached Music, technology, computer and so on. As part of its product differentiation, Apple Inc introduced iDvd, iMovie, iPhoto and iTunes in 2003 (Linzmayer, 2004, p. 300- 302). Triggers to this change Apple’s CEO Steve Jobs realized that offering a single kind of product to its customers wont help the company stay long in its marketing track. Apple Inc found product differentiation as an important marketing strategy and implemented this change, mainly focusing on innovation. By offering differentiated products, Apple Inc found that it will be successful to reach wide markets and large customer base and gain long term profitability. 3- Retail-marketing/ Own-store retailing as a strategic change Apple has been using online store, sales force and third party sellers for distributing its products until 2001. Since Steve Jobs realized that opening its own retail stores for marketing products will be a far better marketing strategy, Apple Inc designed and developed its first own-retail store in McLean, Virginia in 2001. This strategic change has been one of the major milestones in its history as it had helped that company achieve greater competitive advantage. The success story followed by this change was that Apple’s own-store retailing from one store in 2001 has been grown to become 215 stores in six countries by 2008, contributing more than 20% of its total revenues (Mohr, Sengupta and Slater 2009, p. 326). Apple Inc has strategically developed its retail stores so as to create an atmosphere where consumers would be able to experience a thrill of owning and using Apple’s complete lines of Macintosh computers, varieties of entertainment equipments and utilities like iPod, iPad, iPhone and cameras (Kerin, Hartley and Berkowitz 2005, p. 395). Apple’s strategic change of launching its own-retail stores have left a number of strategically important lessons. When the company first thought to open its retail store in 2001, many experts and media wrote that Apple’s attempt to launch its own retail stores would be utter failure. They argued that it would help the company nothing more than adding to higher fixed costs and increase the price of its offerings (Gitman and McDaniel 2008, p. 345). Business Week in 2001 wrote “Sorry Steve Jobs, here is why Apple’s stores won’t work out”. One management expert David Goldstein wrote: “I give Apple two years before they’ are turning out their lights on a painful mistake” (Jerry, 2006). Despite predictions, rumors, writing and opinions that Apple’s retail store will be big mistakes, Apple proved its strategic decision to be extremely effective. There was a genuine reason behind this predictions. A number of companies like CompuAdd, Gateway, IBM and Microsoft, that tried to operating their own-retail stores had later to shut them and discontinue their stores. As Dvorak (2010) reviewed, retail marketing has been tried by some technology-manufacturers before Apple tried it out. They all expected Apple’s failure for this obvious reason. But, Apple’s strategic planning, strong desire to its success, greater innovative techniques in store designing and closer relationship have helped the company succeed with its retail stores. As O’Grady (2008, p. 14) found, behind the success of Apple’s retail-marketing has been its very effective strategic planning. Apple Inc first built a prototype store in one of its warehouse to test drive the concept and possibilities by arranging photos, videos and music etc. Triggers to this change Apple’s management has been dissatisfied about how its third-party distributors sell and market Apple’s products (Lamb, Hair and McDaniel 2008, p. 339). This has been the main reason behind Apple’s thought to start its own retail stores. Distributing through own-retail stores will also help the company reduce prices of the goods offered to the final customers because third party sellers may charge higher to cover their profits and costs. By avoiding middle-men costs, Apple has been able to provide its goods quite cheaper to customers. Another reason behind this strategic change was that retail-stores, if they are designed and developed in a way to provide entertainment to the customers, can help the company maintain closer relationship with its customers. Significant organizational issues facing the managers in strategic change When change management propose a change, it is very likely that some people in the organization resist that change. People’s response to a change may vary widely, including commitment, strong commitment, resistance and strong resistance. People may show commitment, involvement, support, apathy, passive resistance and active resistance to a change (Spector, 2010, p. 9). Resistance to change is one of the major challenges that management faces in implementing a strategic change. Faulkner (2003, p. 40) found that managing change has several challenges and issues like resistance to change, fear of change, fear of underlying motives, fear of job loss, fear of losing out, insecurities, personalities, change of routine and learning new tasks etc. Though these seem to be different issues, the main challenges are resistance, fear of change and getting in to new tasks etc. Because, as Dijk and Dick (2009, p. 144) argued, people do not resist changes for it is a change, but rather, their resistance is more likely to be caused by many other factors like fear of job loss, fear of insecurity etc. When a new strategic change is proposed, people in an organization will be affected differently as some may loose their jobs, some may be lost of their payment, some may be terminated and so on. Most people resist changes due to that they may loose their status in the organization. It is highly important that management must be able to recognize the level of resistance, make them aware of the relevance of the change and possible consequences and motivate them towards positive thoughts about the change. Other obstacles to implementing change are poor leadership, lack of management support, lack of reward and recognition, internal conflict etc (Gilley, Godek and Gilley, 2009, p. 5). Effective management, better leadership styles, collaboration, effective communication between management and subordinates, team work, employee motivation are some the techniques that management can use to manage resistance to change and thus to implement change successfully. In managing resistance, the management should either consider the opinions and feedback of people and take it positively so that their concerns and issues can be understood and their queries can be answered or their issues can be overcome. This is basically an important step to managing resistance. When it comes to the case of Apple Inc, it has introduced a number of changes like innovation, product differentiation and retail marketing at different times and has successfully implemented all these change strategies. The company has also been able to manage all the concerns from its people time to time. Outstanding management and leadership qualities of Steve Jobs for no doubt have been of greater flagships that showed success-path to the company. Conclusion Change is an opportunity if it is effectively managed, and is a challenge if it cannot me managed effectively. Apple Inc has introduced many changes as part of its business and corporate strategies and found them to be highly useful for the business to achieve its sustainable competitive advantage and long term profitability. This paper has detailed change, strategic change and managing change from theoretical perspective as well as from the empirical evidences of how Apple Inc has become successful with its strategic changes. 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