Strategic Leadership and Innovation at Apple Inc - Case Study Example

Case study analysis: Apple Inc. Strategic leadership and innovation at Apple Inc. Introduction Strategic management is imperative for organizational development and importance of strategies can be observed in successful organizations such as Apple in terms of their competencies and competitive advantage (Johnson, et al. 23-56). Apple is a very versatile example of innovation in the technology industry and in this regard, contribution of strategic leadership of Steve Jobs is considered irreplaceable. Apple has an interesting history comprising challenging business environment and the firm’s innovative approach to counter the challenges successfully. In a highly competitive technology industry, Apple has been successful in substantial value creation compared to that by its larger competitors. Strategic leadership of Steve Jobs directed the company to develop differentiable products in terms of quality, outlook, delivery and services and launch them successfully in an uncertain market with ever growing consumer expectation (Heracleous and Papachroni “Strategic Leadership and Innovation at Apple Inc”). Apple’s success story is considered as a unique blend of leadership, determination, innovation and hard work because the company has grown from an underdog in the industry to a shining start in mere 15 years. Apple hit rock bottom between 1985 and 1997 as Steve Jobs left the organization as a result of power struggle with the then CEO. Steve Jobs rejoined the corporation in 1997 and raised its net worth from $2 billion to $472 billion between 1997 and 2013. Jobs’ brilliance has helped Apple to gain a formidable position in the technology industry and consumer mind yet stiff competition and declining purchasing power can become major threats for the company in the long run (Heracleous and Papachroni “Strategic Leadership and Innovation at Apple Inc”). Moving forward with that, an analysis of the current position of Apple, its key skills and capabilities and upcoming challenges has been presented in this paper. Analysis of strategic position of Apple It is essential to undertake a thorough analysis of internal and external environmental factors for determining current strategic position of the enterprise with respect to the marketplace. Macro environment analysis: PEST Economic environment: Apple is a multinational company and is influenced by economic changes across the world. The world economy has turn out to be increasingly dynamic and competitive over the years. The dotcom bubble and financial crisis of 2008 affected the US economy significantly and had negative consequence on revenue of most firms irrespective of the industry. The recession diminished purchasing power of consumers worldwide. Since Apple’s products are premium priced, the sale may get hampered. However, recent economic improvement may increase demand for Apple’s products because of its quality and services. Wage has been determined to be a deterring agent in this regard; despite economic improvement, wages and salaries have not improved as companies are trying to control cost. On the other hand, health and other personal expenditures are increasing rapidly and may hamper sale of luxury products such as Apple products (Apple Inc). Political legal environment: Apple’s political environment is influenced by changes in regulatory and legal framework in the US as well as in other countries. For instance, the corporation tax and value added tax are comparatively high in the US while the UK is considered as tax haven for companies. Consequently, the company needs to pay more tax in its home country compared to other host nations. On the other hand, countries such as China are working towards minimization of preferential policies towards foreign organizations so that domestic industries can observe growth. Apple has numerous trade secrets and equivalent patents to protect the same. The trade secrets of the company are threatened by growing piracy in the technology industry. China can be considered as a strong potential market for Apple from legal perspective because Chinese government is more focused on controlling internet based information flow (Apple Inc). Socio-cultural environment: Apple has conveniently adopted the global culture and presents its products as a part of every individual’s identity. It is an important business strategy to develop product relativity with consumers’ identities for increasing its demand. Apple products such as iPod, iPad and iPhone are multipurpose devices and with advent of internet and virtual reality, they have proved to be extremely useful to consumers. Apple products have often being related to social status of consumers and are generally purchased by most consumers to exhibit their class besides availing its multi-facet services. According to CNN, Apple products reflect consumers’ status particularly in electronic gadget loving countries such as China. Apple’s success in China is way ahead of its competitors such as Google and Facebook because it primarily sells hardware and the compatible software (Chiang “Why China loves Apple”). Present-day consumers demand user friendliness and exclusivity and Apple deliver the same so it can be ascertained that socio-cultural environment supports Apple’s growth. Technological environment: The modern technology industry is driven by constant innovation and development of comprehensive products. Increasing level of device convergence has driven ordinary devices to the verge of obsolescence. Mobile phones are no more limited to making calls and texting; instead, they are being developed in such a manner that they serve multiple functions of a portable computer. The functional boundaries are dissolving rapidly and traditional products are becoming obsolete at an alarming rate. A number of organizations are adopting differentiation strategy to stay competitive. For instance, Google and Microsoft are producing hardware along with software to grow their market and retain their competitive position. Similar trend was adopted by Jobs as he joined Apple. Apple minimized its total number of products and started developing only those products that will deliver competitive edge in the long run. For instance, iPod acquired the major market of mp3 players because of its superior technology and user-friendly interface. Apple is considered as a market leader in technology industry because it recognizes and delivers consumer needs in an innovative manner. Apple was the first company that developed seamless integrated software with a certain degree of exclusivity (Apple Inc). Micro environment analysis: SWOT Strength: The key strengths of Apple are brand image, innovation, strong corporate culture, product and service quality, financial viability and third party strategic collaboration. Apple has been successful in developing quality products and delivering above expectation services to consumers by means of concurrent engineering resulting to strong brand and product image. Innovation is main priority at Apple and also source of motivation for the employees. The financial position of Apple has improved dramatically over the years and as a result, the company has made significant investment in research and development (Apple Inc). Weakness: Apple’s products and services are premium priced making it a weakness for the company to penetrate consumer base in developing countries. In this context, Apple has very limited presence in developing nations and its majority of revenue is drawn from developed nations such as the UK and other European countries. Apple products suffer from problem associated with short product life cycle. The company requires investing consistently in R&D so that new products and software are developed because of limited product life cycle (Apple Inc). Opportunity: One of the prominent opportunities to Apple is the increasing number of youth consumers who are considerably interested in new technologies and are rarely reluctant towards acceptance of technological innovation. Another profitable sector for the company can be to access vast corporate sector. The company primarily serves individual consumers but approaching corporate sector will result in huge profitability for the company (Apple Inc). Threat: Stiff competition from companies such as Google, Microsoft and Samsung can be considered as a major threat for the company. The iOS is facing strong rivalry from windows OS and android mobile platform. Additionally, free availability of music and videos can affect business of Apple’s online store, iTunes (Apple Inc). Apple’s response to environmental factors Porter’s value chain analysis was considered appropriate for understanding Apple’s strategic capabilities with respect to its environmental factors. Firm infrastructure Sustainability: Apple has been questioned several times for contributing towards carbon footprint. As a response, Apple has adopted green strategy where the company has redesigned its product packaging so that they are lighter, eco-friendly and consume less space in transit. Financial stability: Apple has developed a strong financial position over the years and has maintained large cash reserve which is used for meeting cost associated with operational expansion, research and development and capital investment (Heracleous and Papachroni “Strategic Leadership and Innovation at Apple Inc”). Human resource management Selective recruitment: Apple recruits its employees in a very vigilant manner. It selects only those employees who are highly successful in their respective fields. All employees are bounded by strict organizational policies so that trade secrets of the company are not leaked. Motivation: Jobs was a translational leader who maintained strong discipline in the organizational premises. Employees at Apple are not compensated generously but are driven by strong motivation of being part of an innovative organization. Employee benefit program: Employees at Apple are rewarded by means of various benefit programs and stock options (Heracleous and Papachroni “Strategic Leadership and Innovation at Apple Inc”). Technological development Apple invested $6 billion in research and development in 2014 so as to stay competitive in an industry that is driven by rapid technological changes. Apple presently holds numerous patents and copyrights related to hardware devices, software, services and accessories so that innovations of the firm stay protected (Apple Inc). Procurement Apple’s product distribution process chiefly depends on cellular network carriers, regional retailers, resellers, wholesalers and distributors. Additionally, in most locations the Apple products are sold through its authorized online store. The company work closely with its suppliers and maintain strong positive relationship thereof (Apple Inc). Inbound logistics Lean manufacturing is considered of great importance at Apple and most processes have been designed to minimize environmental footprint and to ensure employees’ health and safety (Heracleous and Papachroni “Strategic Leadership and Innovation at Apple Inc”). Operations Apple makes optimum utilization of economies of scale of Original Equipment Manufacturer (OEM) partners so that total production burden is equally distributed. However, product designing and planning are done internally so that intellectual properties of the firm are not violated (Chakrabortty “Apple: why doesnt it employ more US workers?”). Outbound logistics Apple has established first party retailing stores for product distribution so that brand image of the product is maintained. Furthermore, on many occasions the company deliver products directly to costumers so that warehousing cost is minimized (Apple Inc). Marketing Apple has employed a number of marketing tools yet has maintained strong sense of sophistication and simplicity in its product marketing. Apple has employed advertisement using digital media and print media such as newspaper, magazine and billboards for promotion of its products (Demers “Heres The Simple Secret to Apples Marketing Success”). Service Apple provides free consultation to its consumer from its flagship stores along with services such as extended warranty and software updates. Consumers are delivered solutions by means of face to face interaction instead of telecommunication. The other services of Apple comprise iCloud where consumers can store data free of cost to a certain limit and Apple Pay, through which consumer can easily make mobile payments (Apple Inc; Apple “Apple store locations”). Key resources and capabilities Hall (607-618) has emphasized significantly on intangible resources and capabilities for achieving strategic advantage. The capabilities have been further classified by the author as functional capability, cultural capability, positional capability and regulatory capability. In this regard, Peteraf (179-191) also contributed by agreeing that firm resources should be considered as one of the essential cornerstones for competitive advantage. On this note, skills and capabilities of Apple that are responsible for strategic advantage of the company consist of leadership and innovation, motivation, flagship stores, relationship with OEMs, industrial design capabilities, committed software developing teams, tailored software and hardware. Leadership and motivation: Job’s contribution to Apple success is unparalleled. Jobs played numerous roles within the organizational framework such as creative vision developer, business negotiator and motivator. It was Job’s idea to develop simple, user-friendly yet outstanding products for consumers. The leadership and motivating skill of Jobs inspired employees and management to put best effort in product and service development. All employees at Apple are considered as asset and are selected after rigorous processing (Heracleous and Papachroni “Strategic Leadership and Innovation at Apple Inc”). Flagship stores: Apple was initially a virtual organization from consumers’ perspective. In other words, consumers could only make online purchases. However, keeping in mind consumers’ convenience, Apple stores were established at a number of locations giving the company benefits of having physical presence. Many of these stores have ‘genius bar’ where consumers can interact with support executive regarding the products and services (Apple “Apple store locations”). Innovation: Innovation is considered as life blood of Apple and was actually introduced by its late CEO, Steve Jobs. Jobs idea was to capitalize on upcoming changes in the technological trend. For instance, iPod were developed and launched to compete with mp3 players and applications like Winamp and MPMan. Number innovative ideas were incorporated in Apple’s ecosystem so that unmatched and high quality products are developed. Relationship with OEMs: Apple generally designs its products in California but assembling and manufacturing activities related to its products are pursued in Asian countries such as China. Apple maintains strong and close business relationship with Chinese OEM giants such as Foxconn so that high quality products and services are delivered to the company. Jobs recognized that Chinese or other Asian workers were relatively more competent and skilled in terms of engineering than Americans and also cost less for providing services (Rushe “Apple manufacturer Foxconn improves on Chinese workers hours and safety”). Industrial design capabilities: Apple recruits employees who are best in their respective fields and the outcome is breakthrough design and innovative ideas. The engineering teams are classified in small teams with small tasks so that together all the teams fit in the large picture of the company. Every product in the company is designed to amaze consumers and to make continuous improvement thereof. Commitment and dedication: Commitment and dedication can be regarded as one of the prominent talents of Apple employees. The company trains its employee and managers so that they deliver the best. Apple’s brand image can be considered as one of the reasons that hold back its employees even in the toughest situation. Employees are provided learning opportunities and are also given credit of product success. Tailored hardware and software: One of the inimitable features of Apple’s products is seamless integration of hardware devices and software. Apple’s specialized closed system is rare in the technology industry as the company does not depend on third parties for software and hardware development. The closed system is one of the numerous trade secrets of Apple that are inimitable in the industry (Heracleous and Papachroni “Strategic Leadership and Innovation at Apple Inc”). Assessment of strategic choices to Apple The strategic position of an enterprise within its corresponding industry helps in determining its profitability with respect to the industry average. An enterprise develops sustainable competitive advantage if it is capable of maintaining its profitability in the industry for a prolonged period. In this regard, Porter proposed three strategies namely differentiation, cost leadership and focus strategy. In cost leadership, the aim of a company is to be a low cost producer by acquiring resources and developing capabilities at minimum cost. The resources and capabilities generally comprise economies of scale, preferential access to location, raw material and labor force and technological innovation (Porter 11-15). The differentiation strategy indicates that firms should develop its strategy in such a manner that it is able to create unique dimensions for the business as well as for its products. Differentiation helps a firm to create innovative product and services for its consumers and deliver competitive advantage. Contrastingly, the scope of focus strategy is very limited. It is considered that adoption of focus strategy result in development of competitiveness in niche market. Focus strategy is deployed in a specific target market and can be either cost focused or differentiation focused (Porter 11-15). Apple is a highly innovative corporation with sufficient resources to develop competitive advantage. To a certain extent, it was observed that the company has adopted niche marketing in the developed economy and consequently facing moderate level of difficulty to penetrate most of developing economies. Consequently, it is recommended that the company should adopt differentiation strategy to make a way into the global economy. Apple can implement differentiation strategy in its personal computer segment as the segment exerts a consistent downward pressure on product price resulting to profit erosion. The company can minimize impact of price war on its product by developing strong brand image that separates the Apple PCs from competitors’ products. In this regard, the company can focus on horizontal integration by developing strong collaboration with PC manufacturers so that cost minimization is possible. The smart phone, tablet and PC industry is flooding with competitors but Apple is ahead of the floor level competition by means of seamless integration among all devices. The company needs to undertake further innovation in this regard so that it can broaden its offerings by developing complementary services and products. Differentiation need to be incorporated in its marketing strategies as well. Lifestyle branding has not gained significant attention so far; hence, can be implemented for Apple’s branding and market development as Apple is often considered as lifestyle and social status symbol (Johnson, et al. 23-56). Another kind of differentiation that can be recommended for Apple products is differentiation in product design. Design innovation can also result in delivering competitive advantage to the company. The other recommendation that can be proposed with respect to strategic innovation at Apple is greater expansion of Apple stores. In most countries, Apple has earned limited exposure due to less number of physical stores. Careful analysis of existing and latent demand of product and establishment of Apple stores will have positive impact on its revenue and sales volume. Conclusion The paper is focused on understanding strategic position development in the technology industry. Specifically, Apple has been chosen for the analysis. In the report, the micro and macro environment of Apple was scrutinized so as to have a clear picture of strategic capabilities of the organization with respect to its environment. It was determined that the strongest capabilities at Apple are innovation, leadership and collaborative organizational culture. Value chain analysis was used to assess the organization’s capabilities. Furthermore, the primary resources, skills and capabilities were also assessed in the paper and it was observed that Apple has adopted strong measures to protect its trade secrets and maintain organizational culture. Lastly, recommendations have been proposed with respect to a suitable strategy that was considered appropriate for Apple from Porter’s generic strategies. Works Cited Apple Inc. “Annual report 2014.” Form 10-K (2014): 1-88. Apple. PDF file. Apple. “Apple store locations.” Apple. Apple, 2014. Web. 29 December 2014. Chakrabortty, Aditya. “Apple: why doesnt it employ more US workers?” The Guardian. The Guardian, 2012. Web. 29 December 2014. Chiang, Jeongwen. “Why China loves Apple.” CNN. CNN, 2013. Web. 29 December 2014. Demers, Jayson. “Heres The Simple Secret To Apples Marketing Success.” Forbes. Forbes, 2014. Web. 29 December 2014. Hall, Richard. "A framework linking intangible resources and capabilities to sustainable competitive advantage." Strategic management journal 14.8 (1993): 607-618. Print. Heracleous, Loizos and Angeliki Papachroni. “Strategic Leadership and Innovation at Apple Inc.” Case Centre. Case Centre, 2013. Web. 29 December 2014. Johnson, Gerry, et al. Exploring strategy: text & cases. Harlow: Financial Times Prentice Hall, 2011. Print. Peteraf, Margaret A. "The cornerstones of competitive advantage: A resource‐based view." Strategic management journal 14.3 (1993): 179-191. Print. Porter, Michael E. Competitive advantage. New York: The Free Press, 1985. Print. Rushe, Dominic. “Apple manufacturer Foxconn improves on Chinese workers hours and safety.” The Guardian. The Guardian, 2012. Web. 29 December 2014. Read More