Apple Inc. has over the last ten years have enjoyed overwhelming performance in the technology industry. It has demonstrated market leadership and excellence in innovation. The companys entrance in the technology industry has been closely linked with its unrelenting success and dominance. It is worth noting that the company almost failed following its early success in the market but as a result of efficient organizational management it turnaround form decline to become one of the most successful companies in the last decade (Apple Inc. Annual Report, 1997, 2000-2011).
Get Help With Your Essay
If you need assistance with writing your essay, our professional essay writing service is here to help!
It is prominent that the strategies embraced by the company as a part of turnaround stage, have been the foundations of its survival and success in the market. This is apparent through the several initiatives of new-market disruptions among its services and products in the last decade (Appleyard, B. 2009). The company has been recognized for reaching consumer markets which were inaccessible to its competitors. This is primarily through clever or some would say aggressive marketing campaigns, quality products, good design as well as shrewd distribution strategies. As a combination of these strategies, the company has been able to attract and maintain a high range of consumers thus boosting its success and sustainability in the last decade. This paper will provide a detailed analysis and discussion on Apple Inc. strategies in the last decade.
Introduction:
Steve Jobs and Steve Wozniak, 20-something college dropouts, started Apple Computer on 1st April 1976. Operating out of the Jobs family’s garage in Los Altos, California, they built a computer circuit board – Apple I, followed by Apple 2 in 1978. It sparked a computing revolution that drove the industry to $1 billion in annual sales. Apple quickly became the industry leader, selling more than 100,000 Apple IIs by the end of 1980. Apple’s competitive position changed in 1981 with IBM entering the market. The IBM PC, was based on Microsoft’s DOS operating system and CPU from Intel. It was a fairly open system that other developers could emulate. Apple on the other hand relied on its own copyrighted designs and snubbed to license its hardware to third parties (Yoffie, D. B., & Kim, R. 2010).
Apple’s net income fell 62% between 1981 and 1984, creating a crisis in the company. Apple answered by introducing the Macintosh computer in 1984. The Mac marked a revolution in ease of use, design, and technical sophistication. However, the Mac’s slow processor speed and lack of compatible software limited sales forced Steve Jobs to resign from Apple in 1985 (Belk, R. W., & Tumbat, G. 2005). This was also a result of boardroom battle between John Sculley and Steve Jobs with the primary argument being that Steve’ Mac team were growing inside the company as a separate entity and was detrimental to Apple’s overall working environment (Miller, D. 1990).
The Impending Decline:
The years from 1985 – 1997 were the dark days in Apple’s history. Apple experimented with a number of failed products like digital cameras, portable CD audio players, speakers, Apple’s market share and stock prices continued to plummet. Apple’s gross margin dropped to 34%, 14 points below the company’s 10-year average. In June 1993, Sculley was replaced by Michael Spindler, the company’s president. Following a $69 million loss in Apple’s first fiscal quarter of 1996, the company appointed another new CEO, Gilbert Amelio, an Apple director. Despite more job cuts and restructuring efforts, Apple lost $1.6 billion under Amelio and its worldwide market share tumbled to around 3% . It is evident that Apple was in decline and could have resulted in failure (Weitzel, W. and Johnson, E. 1989). They were not making enough money to keep the company solvent and on the technical aspect , they simple didn’t have the vision required to evolve in the sector. In 1997 , Steve Jobs returned to Apple as a result of a buyout of NeXT computers ( owned by Steve Jobs) by Apple .
Organizational decline symbolizes considerable resource losses over time (Cameron, K. S et al 1987). It can be either a steady process or a unexpected disruption (Tushman, M. L., & Anderson, P. (1986). In case of Apple’s decline it was a steady one from 1985 to 1997 . However , according to Cater, J., & Schwab, A. (2008) , Considerable organizational decline eventually will turn into a survival crisis if handled well. It is often believed that higher management always links decline with external factors (Boyle,R.D.,& Desai, H.B. 1991). However in many situations , it is the internal factors which are more to be blamed than external . In case of Apple’s decline it was a mixture of both but certainly lack of vision , loss of innovativeness , mismanagement of resources from the top managers where few of many internal issues that are common causes of an organizational decline and were the cause in Apple’s decline (Starbuck, W. H., et al 1978) .
Next Came The Turnaround & Success Sustainability:
According to Cater, J., & Schwab, A. (2008) , turnaround strategies are as a set of significant, ordinance, enduring actions and targeted at the reversal of a crisis that threatens the company’s existence. This however does not account for the leadership values that are needed in order to spark the changes. However, leadership is a progression that is not explicitly a function of the person in charge. It is a result of dynamics of combined individual wills and objectives (Burnes, B., & By, R. T. 2012). Having said that, the central man to Apple’s turnaround was the new and improved Steve Jobs and his set of strategies. His second innings at Apple realm was characterised by personal charisma and effective strategies. He conveyed his mission and vision to the employees at an emotional level , which was the need at the time when the company was failing. As correctly pointed out by Riggio, R. E., & Reichard, R. J. (2008) , that the ability to convey emotional messages to others is an important skill for successful leader.
It is also evident from the progress that Apple made under Steve Jobs from 1997 – 2011, that he had a positive effect on employees behaviour and their commitment to turnaround and sustainability strategies. Leaders emotions be it positive or negative, directly and indirectly affect employees performance and behaviour (Rajah, R. 2011). It directly influenced the strategic decisions in the last decade. Strategic leadership literature believes that characteristics of leaders in organizations are indicators of their fundamental ideas, approaches and principles, which directly effects strategic decision-making (Leavy, B 1996). According to Hannah, S. T et al (2009) , leadership is centrally important for companies facing declines and that the individual characteristics of leaders may play an significant part in their reactions to performance decline and turnaround strategies implemented by them in the company. Steve jobs portrayed the much needed leadership from the front and Apple employees believed in his charisma and supported the strategies (Flynn, F. J., & Staw, B. M. 2004) . It is also important that a good leader always surround himself with capable individuals (Trice, H. M., & Beyer, J. M. 1986). One example of this is in 1997 Steve Jobs saw the promise in a young designer named Jonathan Ive, who designed the first iMac in 1998. The two formed a partnership and as a result of it produced the iPod, the iPad, and the iPhone.
Interestingly , the turnaround strategies can be categorised into either operating actions or strategic actions (Hofer, C. W. 1980 ; Bruton, G. D., & Wan, C. C. 1994). More so , the operating strategies aims on increasing efficiency by revenue creation, asset decrease, retrenchment, or combination of these , while strategic turnaround focuses on efforts by the company to change its overall strategic approach. Apple’s strategies were both operating and strategic in nature While researchers have widely discussed what types of actions will cause turnaround in a decline of a company (Mone, M. A et al. 1998; Robbins, D. K., & Pearce, J. A. 1992; Schendel et al. 1976), there is less debate over the belief that companies react to decline differently (Mone, M. A et al. 1998 ; Morrow Jr, J. L et al. 2004 ; Hofer, C. W. 1980). Hence we may assume that what worked for Apple might not work for other.
In August 1997, Apple linked up with Microsoft by accepting $150 million and made a five year deal to develop products like Microsoft office for the Mac. This deal was in a way a public appeal to Apple faithful to bury the hatchet and move on. This move demonstrated that it was time for Apple to worry about bigger things than petty differences. This showed that Apple needed to invest in new markets and products since the fruitless battle with Microsoft was not helping Apple’s cause in any ways. They needed to incorporate strategy of repositioning themselves by reconfiguration assets around creating new markets as a means to turnaround failure into stability and eventually success.
Next , the production line of Mac computers were minimized to only two for consumer desktops and two for commercial. Anything that didn’t fit in that received the chop. Also Apple halted the Macintosh licensing program. This was due to the fast that over 90 % of the buyer who bought clone were eating on Apple’s shares. Apple believed in controlling the total user experience from software to hardware and it could not be accomplished if the hardware side was out of their hands. Duplicates dampened the Macintosh brand, and if they had remained, Apple would not have become capable at the secrecy, desire, and new product execution as they later became famous for. The need of the hour was to concentrate on niche market . Steve stop production of many failed products like Newton pc ,
The product cuts resulted in the layoffs of over 3000 employees from 1997 – 2002. But those cuts enabled Apple to focus on developing few good products instead of many mediocre ones. This key turnover strategy is called Retrenchment. The associations between the level of decline, retrenchment and recovery has been one of the dominant discussions in the literature on organizational turnaround (Barker, V. L., III, & Mone, M. 1994 ; Bruton, G. D et al 2003). Organizational turnaround strategies often involve considerable retrenchment policies. Retrenchment is a practice in which the company reduces its current strategic and financial position in order to buy time for strict changes to take its effect (Robbins, D. K., & Pearce, J. A. 1992). However, there is some literature which is against retrenchment being an successful turnaround strategy , as Barker, V. L. & Mone, M. A. (1994) and Castrogiovanni, G. J.,& Bruton, G. D. (2000) argued that retrenchment strategies do not help turnaround. But we can see that Apple benefited from carefully planned retrenchment.
Jobs wanted to have a board with a more positive attitude and a greater loyalty towards his leadership. He managed to force resignation of most of the board members . The new board was made of his close friends like Larry Ellison and Bill Campbell. Jobs brought with him some of the employees from NeXT . Most notable was Avie Tevanian, the brain behind OS X and Jon Rubinstein. Steve hired a variety of NeXT old-timers and other employees loyal to him, which ensured that few would question his drastic new strategies. This strategy of firing the board and getting new people who had a good relationship with the leader is largely associated with attaining locus of power strategies and many authors have written about top management replacement as a key step in turnaround. According to Hofer, C. (1980), it is fundamentally important for a turnaround strategy to work that the top management needs to be replaced. This helps in creating the much needed aura of “newness” as opposed to “old” ways of doing things . More so if they are opposed to change in the company strategies (Barker, V. L., & Barr, P. 2002). The turnaround literature supports top-management change for organizational turnaround-in spite of potential disadvantages associated with the loss and transition issues (Arogaswamy, K 1995; Barker. L., & Mone, M.A. 1994). The formation of a new board in the case of Apple can be seen as a theoretically sound strategy , despite some of the researchers believing in the opposite (Harrison, J. R et al 1988; Phan, P., & Lee, S. 1995). However, it could also mean that Steve Jobs wanted to gain locus of control and hence put dummy members on the board who he knew would not go against him . Whatever the motive might be , the result was a favourable one for Apple’s fortunes .
Another strategy which Apple did was to increase spending on R&D. According to Hitt, M. A et al. (1996) stated that it is fairly important for companies to invest in R&D as part of turnaround strategies . This is because among all the cut backs , growth needs to come from somewhere and investing in R&D , provides an opportunity for the company to restructure its startegies .This strategy was in total opposition to the move undertaken by Apple prior to Steve Jobs second coming. Former CEO Gil Amelio in 1996 , reduced R&D expenses significantly. This in turn directly affected the innovativeness, which had been a primary principal for Apple. This shows how retrenchment policy can be a negative sometimes on the business. Pant, L. W. (1991) stated that the companies with higher levels of R&D investment are More likely to have a successful turnaround. In contrast Hambrick, D. C., & Schecter, S. M. (1983) found out that cutting R&D spending is an action associated with successful organizational turnaround. However from figure 1 below, we can see that investing in R&D in the turnaround period did result in production of new products like iPod , itunes , iMacs etc therefore it is clear that Apple’s strategy of investing in R&D and simultaneously reducing cuts elsewhere was a success . Apple are still bearing the fruits of the initial high investment in R&D .
Figure 1: R&D spending . Source: http://www.cnet.com
Next was the release of revolutionary iMac in August 1998. Apple understood that the PC market was becoming personal and to attract consumers , it designed an easy on eyes iMac . Thanks to the innovative iMac, Apple’s sales outperformed the industry’s average for the first time in years. Apple posted a $309 million profit in 1998 compared to previous year’s $1 billion loss. This was partially helped by an aggressive campaign of buying digital production programs from competitors so that Apple could release a Macintosh that would work right out of the box.
Find Out How UKEssays.com Can Help You!
Our academic experts are ready and waiting to assist with any writing project you may have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs.
View our academic writing services
Apple began to capitalize on the good work by continuously producing innovative products coupled with smart marketing campaigns . In the last decade Apple Inc. has constantly changed the technology scene to redefine the market. Apple was late to enter the MP3 market. In 2001 they began selling their music players called iPods. The iPod was released to compete with traditional MP3 players and its USP was its compact size, speed of transferring music and large storage size. The market was already there , Apple didn’t create a new market with iPod , they revolutionised it with innovation mixed with intelligent marketing strategy . They utilized the turnaround strategy of new product creation by introducing first the iMac in 1998 and then the iPod in 2001. According to Bibeault, D. B. (1998 ) stated that new product which challenge the market can create an astonishing turnaround . The two products did great financially but also put Apple back on the market as a dependable company . This developed consumers’ faith for Apple again. See figure 2 for global shares of ipod. It is still visible that iPod and its various alternatives still hold 70 % market share of mp3 players market. Apple didn’t stop at the iPod , they kept in innovating the product . Hence explains the high percentage on R&D . Next came the iTunes, which were the first to present an online store for selling music and gained market share as consumers took to this new and innovative way of obtaining music (Boddie, J. (2005).
By 2002, Apple not only entered the music player market but they changed how consumers listen to music. In next ten years they created touch screen music players , which took the marker by storm and eventually lead to near monopoly of the market . In 2003 they produced the second generation, followed by third generation in 2004 of iPod ( called iPod classic now). Every year a new generation of iPod classic was released and every year consumers flocked to buy it. By year 2008 , iPod touch was released . This was again an innovative product which had touch screen and music player combined together. This was a market stealer product . In the last decade, Apple imposed no-press companywide policy, it had the effect of creating a firm blanket of mystery, uncertainty, and shock that accompanied Apple product announcements. By strongly monitoring the flow of information out of Apple, Jobs kept the tech media in the palm of his hand.
Figure 2: iPod global sales . Source Apple.com
Barney (1991) suggested that a company has a sustained competitive advantage , when it has implementing a distinctive value-creating strategy which none of the competitors can replicate . Also Bharadwaj, S. G et al. (1993) and Kim, K. H et al. (2011) pointed out that competitive advantage can be achieved and sustained by superior implementation of the same strategy as that of the competitors. Apple created a competitive advantage and sustained it with iPod and iTunes in 2001, iPhone in 2007 and iPad in 2010. There products were not the first ones in the market sector however they had executed the plan to perfection. Also All this time they didn’t stop investing and improving their flagship product -iMac. Hence, their competitive advantage was sustained by investment in innovation and product marketing . According to Duane Ireland, R., & Webb, J. W. (2007) and Hauser, J et al. (2005) , innovation after every five years is the key to sustaining competitive success in the technology industry . This is what Apple has done in the last decade .
Innovation continued and in 2007, Apple teamed up with AT&T and launched the much awaited iPhone. They entered the smartphone market , the market which was already there . Again much like the iPod , they revolutionized the market with their innovation and esthetical design product. The iPhone was labelled as the most stylish smart phone out there. It was an instant hit with the consumers. From 2007-2009, Apple experienced a 266% sales increase of the iPhone. Ipod and itunes also had a boost in sales during this period. However it had its share of criticism from technical point of view. Apple in response to the criticism was to release a new version in early 2008 that addressed few of the issues but not all . Apple did not declare or pay any cash dividends in 2008 or 2009, as the company planned to retain the earnings to use in the operation of their business for the future (Apple Annual report 2009). Apple continued to expand its operations by growing the market share, prolonging products’ life cycles, sinking production and consumer expenditures, and pursuing higher vertical integration . See figure 3 for iPhone sales .
Figure 3: iPhone sales worldwide
In 2000 , Apple revenues were $8 billion. Apple posted net profit around $800 million , an increase of more than 450% in last 8 years. In 2007 Apple Computers Inc changed its name to just Apple Inc. This change echoed its growing mobile device market. In 2008 Apple revenues were about $37.5 billion Apple posted profit of over $6 billion Increase net profit more than 1700% in last decade.. By 2010, over 75% of revenues come from iPhone ,iPad and iPod sales worldwide. This was a strategic move for the benefit of the company. It made sense as the company was no longer limited to computer and have successfully expanded to consumer electronics market and product offered needed to reflect the Apple Brand and vice versa.. In 2012, the revenue was recorded at $36 billion and net income at $8 billion , which is higher than compared to last 5 years see figure 5 .
Figure 4: Revenue and net income
In the midst of all the innovation and market changes, Apple continued to reinvent iMac. The launch of the iPad in 2010 was yet another brave move by Apple to redefine the industry. Between 2008 and 2010, Apple bought two microprocessor design companies for about $400 million. The iPad became the first Apple product to run on its own branded chip, the A4. More than 450,000 iPads were sold during its first week on the market . It can be seen from the above , that from 1997 – 2001 , Apple focused on a mixture of turnaround strategies . Beginning the launch of iPod in 2001 , the strategy of turnaround transformed into need to sustaining success . They did what they knew best – innovative products . Like the early Macintosh in later 1980 , they began to develop products like iPod , iPhone and iPad to move into different market other than computers . The strategy of diversify within a niche has been their key . Apple forced a combination of Top- Down and Bottom-Up innovation strategy to create new innovations . One of Apple’s key business strategy is the last decade has been to bring the best computing, transferrable digital music and mobile communication experience to customers via innovative products and services (Apple Inc. Annual Report, 2008). This strategy allowed Apple to leverage its unique ability to design , develop and provide its customers its own developed products and solutions.
Conclusion & Future:
Often when we think of a company’s strategy, organizational culture is the missed out. Organizational culture is the collective beliefs, ideologies, standards, and expectations that shape behavior by formulating obligation, providing direction, creating a collective identity (Schein, E. H. 1988 ; Jones, R. A et al 2011). It displays the organization’s behavior that has endured over time and allowed the organization to adapt to the changing environment. Therefore, culture is the glue that holds together an organization’s strategy and becomes institutionalized as members reiteration patterns of successful behavior. The success of culture depends on its placement with the organization’s environment, resources, values, and objectives. Additionally, it requires leaders to comprehend how the culture can be a vehicle for creating positive strategies (Barney, J. B. 1986).
Steve Jobs exceled at positioning Apple’s culture with its strategies. Jobs built a culture that was driven by a vision to make great products. Innovating is the dominant value of Apple’s culture. Employees were rewarded for experimenting, risk taking, and creativity. It can be concluded that Steve Jobs was an charismatic and transformational leader . According to Trice, H. M., & Beyer, J. M. (1986) , Charismatic leaders are socially and intellectually gifted people , who will to appear as leaders in times of disaster when they can ,formulate drastic solutions to the crisis, entice supporters through the power of their charisma and legalise followers’ confidence in them through continual successes. He helped employees to forge stronger links to Apple , by expressing personalized attention toward them. Who in return felt more trust and loyalty towards their leader (Waldman, D. A 2012) . This behaviour of the employees transformed into unconditional support for the strategies that were implemented at Apple in the last decade .
Apple in the last decade has been a strategic entrepreneurial company by combining entrepreneurship attributes of Steve Jobs along with other employees and strategies to develop consistent streams of innovation and to remain technologically ahead of its competitors. It has been able to anticipate and then properly respond to environmental changes. The company has plenty of challenges up ahead after the demise of its cofounder Steve Jobs in 2011. However, Apple has over $65.8 billion in reserve cash to invest in innovation as it pleases. Its supplier contracts, market position, and monopoly on software markets and music players along with its App Stores have created several difficult barriers to entry for competitors. The new CEO Time Cooks ,would be wise to adopt Steve Jobs’s fixation with refining a small product line to create a scalable development model. However, Apple would need to keep an close eye on the technological advances and ever changing consumer behaviour in the market that is driven by innovation . Apple need to remain true to their identity of “reinventing” markets or create new markets if they wish to survive without its entrepreneur and visionary leader Steve Jobs .
Apple in the next decade will face tough competition from other technology firms like google, microsoft and even facebook . There consumer base is nothing less than a cult at the moment . However , according to Duane Ireland, R., & Webb, J. W. (2007) and Hauser, J et al. (2005) , between 30% and 50% of a firm’s sales and profits originate from products commercialized in the previous 5 years. These percentages have continued fairly steady over the past decade, emphasizing the importance of creating consistent streams of innovation to maintain the success in the next decade .The technology industry can be explained by Charles Darwin famous misattributed quote “It is not the strongest of the species that survives, nor the most intelligent, but rather the one most adaptable to change”. Apple Inc. to survive in the next decade will need to continue to evolve and develop innovative products and services.
Cite This Work
To export a reference to this article please select a referencing style below:
