Strategic Management on Mobile Phone Manufacturer Apple - Case Study Example

STRATEGIC MANAGEMENT ON MOBILE PHONE MANUFACTURER APPLE Introduction Strategic management is a process of analyzing the external and internal environments of a business with the aim of coming up with best policies and meet organization goals (Ambrosini, Johnson & Scholes 1998). It is a process undertaken by the top management in order to maintain excellent management practices and prioritize activities. Bacanu (2010) states that, organizations across the world use a lot of strategies in order to meet their organizational goals. It is worth noting that strategies employed are not usually static; they change over time with changing consumer needs and changes in the economy. This report will look at Apple Inc. into deeper detail and analyze it using Yips drivers of internalization, porter’s generic strategies and Johnson’s cultural web. Apple is a company that manufactures electronics, software, phones and other communication devices. It was founded in the year 1976 by Steve Jobs, Ronald Gerald and Steve Wozniak who first developed it to sell personal computers (Pettinger 2004). In the year 1977, the company was incorporated to Apple computer Inc. The company has its headquarters in Cupertino in California. Their products range from programming software, computers, phones, media players and numerous applications. It services start right from designing and developing of the devices before selling them to its consumers. It produces ipads, iphones, Mac, iPod and many more. The company uses direct stores, online stores and retail chain stores in order to sell its products because it has stores across the globe (Shaoming 1996). It online stores include App store, Itunes store and Icloud. The year 2007 saw the renaming of the company to Apple Inc so as to reflect the organization’s shift towards consumer electronics. Yip’s drivers of internalization are a model that describes the drivers of globalization. The drivers include competitive drivers, market drivers, and government and globalization drivers. Yip (1995) describes that the drivers predict consumer trends, distribution channels, economic opportunities and polices. Johnson’s cultural web is a model that is used to explain about organization culture as well as influence it. It involves information regarding organizations, what they do, values, mission and operations (Seonaidh 2013). Porter’s generic strategies are strategies that are designed by an organization to gain competitive advantage. They include pricing, differentiation and focus (Porter 1996). Critical evaluation of models Porter’s generic strategies Porter’s generic strategies were created with the goal of giving a firm a competitive advantage over others. Porter highlights that performance can be increased by lowering costs and differentiating them from those of the competitors (1996). The strategies should be accompanied by focusing on a certain market segment and tailoring products to them. According to Porter, the strategies are not compatible when they are applied together at the same time. He suggests that such combination could lead to a loss in a company that strives to get advantage from employing both strategies. An example that Porter gives is that a company that works well with differentiation cannot use a cost-leadership strategy (Porter 1998). If a firm uses both strategies, it would portray a confusing image to the public and end up not having a competitive advantage. Snow (1980) argues that porter’s opinion of getting stuck in the middle when using more than one strategy does not always happen. He states that an organization can use both strategies without getting stuck in the middle. He gives the example of Samsung that used both differentiation and cost leadership and was able to emerge successful. The paper considers the strategies of cost leadership, differentiation and focus as notable and effective. The reason for this opinion is that markets and consumers differ in terms of tastes and preferences and therefore doing market segmentation and differentiation has a higher capacity of attracting many consumers. In addition it leads to customer satisfaction that is an important element to retaining customers (Solberg 2008). Cost leadership is also an effective strategy especially when products are low because it makes most consumers to be able to afford them. However, some ideas presented by the model are questionable. This paper is of the view that prices do not always have to be set in relation to market prices or below them. It argues that a company can set higher prices and still gain high sells. Strategizel (2014) supports this opinion by stating that some segments relate price with quality where a group has emerged with opinions that high prices translate to high quality. A recommendation proposed therefore, is to suit prices to segments because there are areas where high prices sell products. However quality has to be taken care of. Moreover, company reputation matters in relation to prices. Additionally, this paper argues that not all times do low costs lead to competitive advantage. When not integrated with production and labor costs, an organization can make loses by simply placing its products at low prices (.Pearce, 1994). The prices set make sense when they are in conjunction with unit values. Low costs call for the need to sell high volumes of commodities in order to achieve required profits. On the other hand, products with higher prices can easily make profits through the sale of only a few. Though Porter’s strategies are commendable, not all firms have the capacity of applying them. Those organizations that are able to implement the strategies are those that have resources such as technology, have highly skilled personnel and have access to research in order to determine changing market trends. Yip’s Drivers of Internalization model The model can be termed as effective based on the ideas it presents. First, it recognizes differences that exists in markets and therefore, identifies both local and global driver benefiting both companies that operate locally and those that have international markets (Thompson 1995). The model also helps organization to identify success areas because it presents elements of success such as what to do to stay competitive and having good government relations. Though the strategy is aimed at improving performance of organizations in the international arena, Thompson (2005) argues that a pure globalization strategy does not work at all times. It is important to give markets a regional approach rather than focusing on global integration (Levitt, 1998). Taking such approach will make it easier to understand markets. Attention should also be paid through fostering cross-cultural awareness. It will then be easier for consumer to easily adapt to new products because they have an understanding of how other cultures function. It is the view of this paper that each region has drivers of success that should be paid attention to (Hill 2008). Embracing globalization strategy should be taken with caution while retaining the optimism. Johnson’s cultural web Every organization has a certain culture that guides its operational activities. It presents elements such as structures, stories, routines, symbols and many more (Johnson 2010). The cultural web and McKinney’s 7-S framework are interrelated because they are majorly based on elements of an organization that can be combined to ensure that the organization works in harmony. The similar elements include structure, values, systems and style. These elements relate to culture hence making the models to complement each other. It can be said that Johnson effectively intertwined elements that make a culture. The inclusivity of the framework is effective which makes it complete and gives it the ability to be successfully used by mangers (Kemp 2001). The model is simple to understand because it highlights elements clearly and in a simple language. It also uses an integration approach that is considered important by Johnson in understanding culture. The model also uses differentiation, a strategy that can be termed as commendable because culture entails what makes one different from another. The model identifies the beliefs of employees in an organization and how those beliefs affect their behaviors. The model is embedded in people minds that make it effective. Dividing the model into various elements brings clarity and makes it easier to understand. However, the paradigm is limited in that it looks at the culture of an organization and a whole but fails to recognize the diversity that exists among the employees. Considering individual beliefs is important to the success of the organization. It also fails to note that the surrounding environment upon which an organization operates can affect the internal culture. Nevertheless, the benefits of using the cultural web outdo its limitations. Integration of the models Yip’s model integrates with Johnson’s cultural web in that it is through an organization’s cultural that competitive drivers of the organization are created. Through the culture of the organization, the structure, goals and mission of the organization are created. The culture also dictates the behavior of employees and skills that they have through training. If a company’s structure is well organized and has recognized lines of operations, then it will be easier for the operations of the company to be integrated. An open structure will also lead to quick and efficient services that will create a competitive advantage for the company. An organization that practices continuous employee training creates a strong competitive base compared to the one that does not. Therefore, a culture of continuous training links Johnson’s cultural web to Yip’s model because it creates a competitive driver for the organization. Porter’s generic strategies also integrate with Yip’s model in that pricing, differentiation and focus in Porter make up competitive drivers in Yip’s model. When an organization has competitive prices, unique products and has a market niche, then it has a competitive advantage compared to other companies in the industry. In Apple, a strong culture that is seen in its mission and structure, training of employees and unique products see the integration of the three models in the organization. Application of the models Johnson’s cultural web The cultural web by Johnson can be used in several areas in Apple. Culture is important, Miller (1996) states that “company cultures are like country cultures.” First it can be used to strategically manage people. Apple, being an international company needs effective strategic management in order to be successful and stay ahead of competition. Its elements such as organizational culture will enable Apple to re-evaluate its structure and come up with a better structure that supports proper management of people. Its element of ‘routines’ can be used to come up with practices and behaviors that enhance proper functioning of the organization. Aligning routines to organizational goals will lead to commitment hence meeting of organizational goals. The model can also be used to explain the links that exist between culture and behavior. Because it majorly engages in producing various devices, it is important for its employees to understand how they should behave (Lynch 2009). The model will function well when culture is related to the organization’s mission and vision. Another way in which the model can be used is to analyze people’s behavior in the organization. After analysis, it can be used to change behaviors that hamper productivity and success leading to the attainment of organizational goals. Helm (2005) notes that Apple is among the top companies that portray a strong culture of commitment. He relates its success to Steve Jobs whose leadership was that of sheer will and commitment. He directed various activities in Apple and motivated people towards change and productivity (Herrmann 2005). Adopted from Steve Jobs, it is the culture of Apple to combine diversities in people to enhance productivity. The company recognizes different experiences of people and gives them a chance to portray their skills. The organization also has a culture of inclusion where all its stakeholders are considered as members. This culture creates a sense of belonging leading to customer and employee satisfaction as well as loyalty (Hawes 1989). The cultural web is therefore applicable through its logos, routines, structure and behavior. The company also has a culture of openness and transparency. Herrmann (2005) states that Apple has a strong culture where each role is defined and employees have to stick to it. The goals of the organization are also reflected in the mission that makes the staff to be committed towards achievement of the goals. Porter’s Generic strategies Porter’s generic strategies can be applied to Apple Inc. The strategy can be used to establish unique and diverse products that meet the needs of a certain organization. Apple Inc has used the differentiation strategy by coming up with products such as ipods, Imacs and Ipads. Differentiation can further be seen from its software such as Macintosh (Glasser-Segura 2010). The paradigm can as well be used to come up with ways of maximizing on profits through prices. Though Apple has been able to use this strategy to make some of its products affordable, Dress (2008) suggests that most of its products are still considered as expensive. This paper is of the view that creation of joint ventures can help in cost leadership and gaining of a large market share Yip’s framework Using its drivers, Yip’s strategy can be applied to Apple. Market drivers relate to consumer behavior and structure of distribution channels. It applies to the organization because across the world people have the need for mobile phones. With globalization, people now purchase smart phones such as Iphones especially the high and the middle class people (Grant, 2010). The phones are widely purchased for communication purposes and use of other applications such as the internet. Apple utilizes this strategy by having global distribution channels that enhance delivery of their products. Cost drivers can be used to gain profits through processes such as mergers and acquisitions. Through product development, new products can be created and developed. In the case of apple, new devises are made regularly to match the emerging market trends. Government drivers relate to Apple because the company operates in several countries and is subjected to their policies and tariffs. The government drivers can be used to determine the international markets that have fair tariffs that can result to profits (Capon 2008). Advantages and disadvantages of the models Porter’s generic strategies Porter generic strategies involve strategies majorly aimed at gaining a competitive advantage in the market (Calin 2010). One of the advantages of Porters generic strategies is that it describes ways for one to understand the sources of competitive advantage. David (2009) argues that many organizations that have effectively applied the strategy have been able to stay ahead of competition through creation of a market niche. The strategies offer clear explanations of how a firm can get profits even when the market is faced with an economic downtown. The disadvantage of the strategy is that it does not explain how product differentiation occurs. Product differentiation sometimes can be challenging because it requires skills and competencies due to stiff competition. With competition, it requires innovation and creativity in order to bring about differentiation (Barney 2007). Yip’s internalization strategy Application of this strategy has both benefits and costs that largely depend on how it has been used. Through economies of scale presented by the strategy, an organization is able to save a lot of money that can be used to in completing other projects. The strategy also benefits an organization because it allows for the recognition of brands across the world (Balogun (2008). Through switching of manufacturers, organizations are able to carry out their operations at cheaper prices. The affordable prices usually results o gaining a large market share and being able to sell high volumes. The strategy guides organization on ways upon which customer satisfaction can be attained. The strategy benefits the consumers as well because they are able to receive quality commodities that suit their needs at affordable prices. Another advantage of the strategy is that it analyses both the industry and the market and can be integrated to Porter’s five forces. However, through the strategies have their own advantages, Dess (1984) notes that the costs may outdo the benefits. One of the disadvantages relates to costs. If manufacturing and distribution takes place in two different places, transportation may be costly especially if it involves heavy products. Another disadvantage in relation to costs is coordination costs. With distance, coordinating projects becomes costly. One reason for this is that they make take time to be implemented and may involve travelling. Poor coordination also affects quality that can be costly in the long term because the profits and market share may reduce. Johnson’s cultural web The framework has an advantage because it has incorporated all aspects of a culture to enhance better performance (De wit 1998). The elements under this framework are easier to implement because they do not require a lot of resources. The strategy is easier to understand because it is formed in a simple way. It guides organizations on how they can bring about change. However, the challenge that presents itself is that culture is complex and tough to understand. It does not guide mangers on ways to effect change. Relation of the strategies to Apple Inc Apple, according to David (2009) is one of the companies that have been able to withstand stiff competition from other giants in the market because it employs various strategies that have made it successful. Porter’s five forces model relates to Apple Inc especially in regards to differentiation, a strategy that has been widely employed in the organization. From its inception, Apple creates product differentiation by producing goods that are unique and different compared to its competitors. The differentiation strategy has been successful because of the creativity and skilled human resources who work in Apple. Furthermore, continuous innovation enables the organization to be able to come up with new products before their competitors that attract the attention of many consumers hence a large market share. An example of innovation and uniqueness is when Apple came up with the Macintosh operating system. Through market segmentation, Apple has been able to have a successful differentiation strategy. Porter’s model also relates to apple in terms of cost leadership. This is visible from the organization cost strategy. The company has used cost leadership by producing a variety of products and relating their prices with their market segmentation. For example, the Imac computer is priced at comparatively low costs making them affordable for consumers to obtain them. The cost leadership strategy is enhanced to other products by incorporating several characteristics or applications to one product (Allen 2006). An example is where it has incorporated the internet, music player and downloader to computers. This strategy creates value for consumer’s money who then views the products as being affordable. Apple has been able to beat competition through this cost leadership strategy. Relating costs to market segmentation can be viewed as focus that is another strategy of attracting a certain market niche. Johnson’s cultural web relates to Apple in many ways. It is visible from the structure; communication style and symbols that the organization uses that are unique to it. Culture is given a lot of attention where Balogun (2008) highlights that the company has been able to refine the culture for over 35 years. One way in which culture is visible relates to the communication styles used. The company uses different styles to communicate to different audiences. Internally, the company practices open communication through open door policy and regular meeting that inform employees of the activities of the organization. To the external community, the organization has specific people in place who have the responsibility of giving out information. The company uses this strategy in order to create a unified image and prevent any ambiguities. The cultural web is also portrayed in symbols such as logos and behavior where a lot of accountability is exhibited. Yip’s internalization strategy relates to Apple because it has been used in the organization. The company has globalized its operations in that it has given a Chinese company a contract to manufacture its iPods in the way that they want them. This decision was reached because the company was well known for manufacturing quality products. Furthermore, it was s strategy aimed at withstanding the global competition. The company also exploits differences in the global market through producing products and giving them different features in order to suite a particular market. Its market strategy also employs Yip’s model, an example being where the company uses different billboards in different countries to advertise similar products. In summary, the company adapts its strategies to markets because each market has different consumers, government policies and even competitors. Conclusion The paper has looked into deeper detail various strategies that have a similarity in that they are both aimed at improving organizational performance. The porter’s model has four elements that include cost leadership, differentiation and cost focus. The Johnson’s cultural web involves elements that make the culture of an organization; symbols, routines, structures, control systems and stories. The Yip’s framework talks about drivers of change such as market drivers Figure 1: Strategy clock Source: mindtools. com References Allen, R.S., Helms, M.M. 2006. Linking strategic practices and organizational performance to Porter’s generic strategies, Business Process Management Journal, Vol. 12, No. 4, pp. 433-454 Ambrosini, V. Johnson, G & Scholes, K. (1998) Exploring Techniques of Analysis and Evaluation in Strategic Management, Prentice-Hall Europe. 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