Apples Strategic Management - Case Study Example

APPLE’S STRATEGIC MANAGEMENT By Location Apple’s Strategic Management Introduction The telecommunication industry is highly competitive, a factor that compels companies operating in the industry to strategize properly. Failure to define effective strategies would mean that companies in the industry have to struggle with stiff competition and limited demand in the market because of increased rivalry. This explains why many companies in this industry have sought to define a competitive advantage that puts them several steps ahead of their competitors. The definition of effective strategies is only possible if a company has a clear understanding of both its internal and external environments. It is critical for a company to carry out a critical analysis of several internal factors as well as the external ones in order to define potential strategies that can give the company a sustainable competitive advantage. The main reason why companies take time to define effective strategies is that they intend to develop strategies that can give them a sustainable competitive advantage over a long time. One of these tools is a McKinsey 7S framework. Tom Peters and Robert Waterman developed this framework in the 1980s. Worth noting is the fact that this framework has persisted over the years and it remains useful in the analysis of the internal factors in an effort to develop effective strategies. Many organizations use this framework in order to ensure that all the internal departments exhibit a proper alignment and to determine the implementation process of a proposed strategy (Elmer-DeWitt 2014, p. 1). This framework has seven elements, which are of critical importance in determining the company performance in the market. In addition, Michael Porter developed generic strategies in an effort to explain some of the leading strategies used by companies in an effort of gaining competitive advantage. Many companies carry out a SWOT analysis and consider the five forces analysis before developing the generic strategies. The third analytical process emerged from a modification of Michael Porter’s generic strategies. Cliff Bowman and David Faulkner developed the Bowman’s strategic clock, which reveals eight different positions that a company may hold in the market. The strategic clock modifies the Porter’s three generic positions to eight by the price of the product, and the perceived value in the market. These three analytical processes will be critical in this paper, as they will determine whether the Apple Company has developed strategies that ensure that it is fit for the telecommunication industry, which is highly competitive. Analysis of the Apple Company using the McKinsey 7S Framework The McKinsey’s 7S framework comprises of seven elements, which exhibit a high level of interdependence. Three of these elements, namely strategy, structure, and systems are categorized as hard elements. On the other hand, the model has four soft elements, which include shared values, skills, styles, and staff. There is evidence that managers can easily influence the hard elements while soft elements are intangible and only organizational culture can alter them. However, all the seven factors are critical contributors to an organization’s success. In the illustration of the model, shared values take a central a position. This is because the original vision of a company determines the established values. Many organizations denote them as core values, which determine all the other six elements. If an organization chooses to change its shared values, then all the other elements change as well (Faarup, Aabroe, & Grafisk 2010, p. 78). The strategy of a company denotes its plan over a long time, which defines its competitive advantage. Unless an organization has a strategy, it is impossible to define what it needs to achieve and how it will achieve any goal that it has. Companies that lack strategies are less likely to prove competitive in the market. In the telecommunication industry, there is an increasing pressure for an organization to develop effective strategies. The strategies define the scope of the company, the objective, and the benefits it will enjoy through such a strategy. The second element in the model focuses on the structure of the organization. The structure of an organization determines power sharing in the organization as well as the decision-making models. The structure can have a direct effect on the success of the organization depending on whether individuals have the room to exhibit their creativity and participate in decision-making. Systems refer to all the procedures and activities that define the tasks of the organization. Systems may range from hiring, recruitment, training, reward systems, distribution systems, information systems, and finally the performance assessments. As mentioned earlier, shared values bring into concept the organizations core values and the corporate culture. Style as used in this model brings into concept the type of leadership exhibited by the executives of the company (Finkle & Mallin 2010, p. 49). On the other hand, staffs refer to the employees while skills denote the core competencies of the employees in the organization. If all the seven elements exhibit a proper alignment, the company is destined for success. A close analysis of the Apple Company reveals that its operations relied on a clear strategy established in the 1980s. The Apple Company highlights that its main strategy is using innovation in an effort to design a range of personal computers and other telecommunication devices, which satisfy the needs of technology savvy customers. Evidently, the company has exhibited its expertise in innovation and product design. With a clear strategy, all the company employees are well aware of what the company intends to achieve (Frieden 2001, p. 62). Worth noting is the fact that the company has adopted a functional structure as one of the moves of supporting its strategy. The functional structure is comprised of several functional lines. Each functional line has a manager who exhibits control over the activities of that line. Since the company’s main strategy focuses on innovation, the functional structure allows low-level managers to develop creative initiatives within their units. In terms of systems, the company has defining systems that have defined its success. For example, the company’s hiring process ensures that Apple only hires candidates who prove to be smart and intelligent and who can create ideas and implement them. Moreover, the company has an Apple fellowship program, which ensures that all the employees understand the functional operation of the company (Grossman 2005, p. 66). Moreover, the company relies on the potential of integration mechanisms in order to ensure that all the departments function effectively. One to ensuring that all the departments function effectively is that Apple has established direct communication channels within the organization. In addition, it has reward systems of motivating employees. The staff of the Apple Company exhibit outstanding expertise and personal competencies in the high-tech industry. As mentioned above, the company makes efforts of tailoring its hiring procedures in an effort to ensure that the company only brings to board intelligent individuals with outstanding skills and capabilities (Holston 2011, p. 92). The company is keen on hiring people who add value to its efforts of innovation. Therefore, a rigorous process of hiring filters only the best candidates for Apple. Currently the company has over 50, 000 employees, including managers and supervisors. The company also ensures that the employees brought on board can work effectively in teams. This is because teamwork is the preferred approach of completing tasks within the organization. This teamwork explains how the Apple Company can come up with unique product designs suited to satisfy the needs of the customers. The Apple Company is a hub of different skills. In this company, employees form the most critical resource. The company invests in employee training in an effort to ensure that there is a high level of talent and outstanding performance among employees (Sahoo 2012, p. 43). Creativity and innovation remain the core competencies of the organization. Teamwork is of critical importance because it improves efficiency of the company. The fact that the company only hires the best candidates translates to the fact that all the Apple staffs have outstanding talent. The executive team of the Apple Company had adopted effective leadership styles such as oriented leadership style, which focuses on both people and tasks. Evidently, this leadership style ensures that the leaders can offer the relevant support and motivation to the employees so that they can register exemplary performance in their task. In addition, Apple leaders have exhibited a preference for path-goal leadership model, which ensures that the leader creates a favourable environment for the employees and for the completion of tasks in an effort to achieve organizational goals. This means that leaders focus on offering motivation and empowerment as well as rewarding salary packages, which can ensure employee satisfaction. The company has also focused on developing leadership styles that can contribute positively to employee retention. The company’s decentralized approach also facilitates the participative decision-making, a factor that gives lower level managers a measure of control (‘Strategy Session 17: Strategy Implementation Using The 7-S Model: Exercise: Transition At Apple Inc’ 2014, p. 25). Apple’s leadership style presents numerous benefits that have contributed to outstanding success in the market. The central element in the McKinsey 7S framework is the shared values. Apple’s core values focus on innovation as the only way to producing great products. Moreover, the company prefers to focus on a few projects that add value to the company. Deep collaboration and teamwork are of critical importance to the company. The Apple Company does not find contentment in anything that does not register excellence therefore; the company makes efforts of designing remarkable products in its quest for excellence. Other values include quality management as well as an aggressive attitude in the market. The company places the customer as the priority and seeks to offer value to its loyal customers (Tan 2013, p. 94). These outstanding core values have ensured that Apple is at the top of the game and is way ahead of its competitors. The findings of Apple’s analysis using McKinsey 7S framework highlights that all the seven elements exhibit a proper alignment that helps the company remain highly competitive by producing quality products and having a clear strategy. One of the company’s core values is the priority given to the customers and the quest for excellence in product design. The staffs of the company have the relevant skills to make this a possibility. Moreover, all the systems of the Apple Company ensure that the employees register remarkable performance (Waddell 2014, p. 78). Without doubt, the company has placed its internal factors in the proper alignment a factor that keeps propelling it to greater success. Analysis of the Apple Company using the Michael Porter’s Generic Strategy As mentioned above, Michael Porter defines three generic strategies used by companies that intend to have a competitive advantage in the market. According to Porter, the first generic strategy is cost leadership. Cost leadership focuses on registering high profits by minimizing the cost of production and operating at average prices. This gives a company a competitive advantage because it operates at average prices while it registers minimal costs in production. Cost leadership may also prompt an organization to set lower prices for its products yet be able to register remarkable amount of profit. Notably, companies adopting this strategy have to study the market prices effectively and ensure that lowering their prices will not attract a price war among competitors (Finkle & Mallin 2010, p. 54). However, although cost leadership may present an organization with an opportunity to register higher percentage of sales because of the reduced prices, and a higher profit achieved through reduced costs of production, there are critical factors of consideration before adopting the strategy. A company must ensure that it has the required amount of capital that will enable it to adopt advanced technology, which translates to reduced costs. The company must also define ways of maintaining a sustainable low-cost base. Companies adopting cost leadership should also have proper logistics (Finkle & Mallin 2010, p. 48). These three factors ensure a remarkable reduction of the cost of production, allowing the company to set lower prices for its products. The second generic strategy defined by Michael Porter id the differentiation strategy. Differentiation focuses on launching products and services that have attractive features with the potential of appealing customers and outdoing the products of competitors in the market. It is impossible to achieve this without investment in research and development as well as adopting innovation. Prior to adopting the differentiation strategy, a company should consider its potential to create high quality products with appealing features as well as functionality. Moreover, differentiation should target a specific market segment that will benefit from the added product features. Therefore, the company should analyse its sales and market potentials effectively recognizing that the differentiated products will need a specific marketing mix (Edward 2004, p. 42). The final strategy described by Porter is the focus strategy. This strategy allows a company to divert all its focus on a niche market. The company undertakes rigorous research in order to understand the trends of the market niche as well as the outstanding needs of the customers defining that niche. After understanding the niche market properly, the company can then focus on designing products that satisfy the unique needs of the customers. With time, the company should earn brand loyalty because of satisfying the customers of its niche market (Elmer-DeWitt 2014, p. 3). The Apple Company has exhibited several of the Porter’s generic strategies. After carrying out a SWOT analysis of the company, it emerged that the Apple Company was facing stiff competition from other companies in the industry. At one time, the Dell Company offered products at a lower price a factor that threatened the leadership of Apple. Steve Jobs considered the application of cost leadership strategy by introducing Apple products that could trade at lower prices. This was through the identification of market needs and the design of products such as iMac computers and iBook computers, which suited the needs of the basic compute buyers. These products traded at relatively lower prices compared to the premium prices, products of the Apple Company. The Apple Company has proved to be a best cost provider. This is because of incorporating excellent product features in other products ensuring that customers can experience the value of their money (Elmer-DeWitt 2014, p. 6). For example, the incorporation of the iPod digital music player placed the Apple Company at a competitive advantage because it was offering customers remarkable product features, but not for premium prices. The Apple Company has also undertaken a broad differentiation strategy. The company has identified two large market segments namely the consumers and the professionals. Therefore, the company designs products for these brad market segments. The company moved further to the focus strategy relying on differentiation. It offered the professional market segment with computers that have outstanding complex functions that suit their daily needs within the work place. For example, the Apple company designed the iPad, exhibiting a smaller size and weight with a specific target of the high-end customers. The iPad was a quality product with a premium price because of the modification in size and weight. This example defines the efforts of Apple in ensuring that it designs products suited for a certain market segment and ensuring that the products have unique features which appealing to the customers. Through the adoption of the focus strategy, the Apple Company could invest in high cost of production with the target of producing quality products suited for a specific market niche (Edward 2004, p. 45). The fact that these products exhibit a high level of value qualifies them to trade at premium prices. This has immensely increased Apple’s profitability in the market. The company was well aware that this market niche could afford expensive products as long as the products suit their lifestyle. In addition, the Apple Company has achieved focus strategy based on the cost of its products. Its focus on an identified market segment enables the company to design products that suit their customers’ needs, yet placing lower prices for those products (Edward 2004, p. 49). Evidently, the Apple Company has benefited from Porters generic strategies and made it highly profitable in the market. Analysis of the Apple Company using the Bowman’s Strategy Clock Cliff Bowman and David Faulkner developed a strategy clock that highlights eight positions that a company may hold in the market. Companies hold the first and second positions on the clock that produce products with low benefit, hence the products sale at low prices. The third position is a combination of moderate value added to the product priced averagely. At the fourth position, companies begin to differentiate their products by increasing the value. The fifth position represents the focused differentiation whereby high value products trade at premium prices. The sixth position is for companies who sale standards products at high prices taking a risk in the market. Position 7 presents a worse risk because low value products with high prices, a factor that contributes to the loss of market share. This trend is common with monopolies. This leads to a worse situation in position 8 whereby the products of low value trade at standard prices (Edward 2004, p. 52). Each of the eight positions depends on the value of the products as well as the price in the market. Companies that have a competitive advantage are those with high value products going for high prices. Positions 1 and 2 are majorly for beginners who are yet to gain the market share. The Apple Company takes the fifth position in the Bowman’s clock because of its focused differentiation. Notably, the company has exhibited expertise in product design, which has become the hallmark of its success. Its products have different physical appearances, unique functional features, and have the potential to perform advanced tasks. For example, when the company released the iPod, iPad, and iPhone, none of the other companies in the industry had managed to produce products with such outstanding features. These products suit the needs of the high-end customer who need the functionality of the features and can pay the premium price for the products. The company has managed to create premium products, associate its products with high quality, and value (Finkle & Mallin 2010, p. 53). This is the reason why the identified market segments crave for Apple’s new products. One of the companies’ pillars is offering a minimal number of products at premium prices and with the high-end customers in mind. This has contributed to the company success in the industry, helping it to register high profits. Conclusion Without doubt, the rigorous analysis carried out above highlights that the Apple Company has defined effective strategies that give it a competitive advantage over its competitors. The company recognizes its unique resources and uses them to its advantage. Moreover, the company has focused on differentiation with a specific target on the high-end customers who can afford its premium products. All the elements defining the internal factors in accordance with the McKinsey’s model have placed the company in an outstanding position. Bibliography Edward, C 2004, In this corner, the iPod.., Businessweek, 3893, p. 42, Business Source Premier, EBSCOhost, viewed 10 December 2014. 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