Apple Inc. Business Case Study Sample Paper

Apple Inc.

Founded in 1976, Apple has grown from a computer designing and manufacturing company into an electronics company (Yoffie & Rossano, 2012). The company has ventured into the designing and manufacture of a plethora of consumer electronics including smartphones, personal computers, portable digital music players, tablets and other media devices. Additionally, the company does in-house software designing and creation and provides other range of services to its customers. Perhaps what makes Apple stand out from the rest of the companies in the computer and phone-manufacturing industries is its closed system, where the company maintains a strong grip in the designing and manufacturing of both its hardware and software.

Headquartered in Cupertino, California, among the most recognizable of Apple’s products include the iPod, iPhone, iPad and the wide range of the company’s desktops and notebooks (Schwartz, 2012). Making a comeback from near bankruptcy, Apple’s iPod helped the company gain its footing in the technology industry in 2001 (Schwartz, 2012). The iPod came after the company launched a series of failed products, and thus became the salvation of the company. The launch of the iTunes in 2003 helped revamp the digital music industry that was almost overrun by illegal downloads and piracy. The iTunes, therefore, offer consumers a legal avenue for downloading digital music to their iPods, PCs, and Macs, at the same time ensuring that artists and record companies received payment for the digital music downloaded. The success of iTunes with digital music saw it expand to include movies, television series and later books (Schwartz, 2012).

Perhaps the biggest of the company’s products is the iPhone launched in 2007 that completely changed the mobile industry. Introduced by the then co-founder and CEO Steve Jobs, the iPhone became a runaway success, and today still accounts for more than 50 percent of the company’s profits (Schwartz, 2012; Yoffie & Rossano, 2012). The first generation of the iPhone sold more than 6 million units worldwide, with an additional estimate of 1 million units sold in the gray market (Yoffie & Rossano, 2012). With the launch of the iPhone came the launch of the App Store that was originally part of the iTunes. Thus, while there were already many PDAs and smartphones in the market at the launch of the iPhone with software applications, the App Store opened a new world making it easy to download, distribute and access these applications directly to the phone (Yoffie & Rossano, 2012). Moreover, the App Store allowed developers to develop and sell their applications through the App Store, provided Apple approved their use. The agreement was for Apple to retain 30 percent of the revenue from the applications while the developers pocketed the rest of the revenue (Yoffie & Rossano, 2012).

After the iPhone came the iPad, which like the iPhone, revolutionized the tablet industry. Launched in 2010, the iPad redefined the tablet industry, which (tablet) had previously only accounted for an inconsequential portion of the PC market (Yoffie & Rossano, 2012). At its first week of launch, the iPad had sold more than 450,000 units, creating for Apple a $35 billion business, creating an industry segment projected to continue on its current growth trajectory (see table one for projected global tablet shipments)(Kerr, 2015; Yoffie & Rossano, 2012).

Table 1. Projected Global Tablet Shipment (Kerr, 2015)

Even with different products performing different functions for its consumers, Apple has centered its business on a Digital Hub strategy; wherein all its products integrate into one. At the center of this hub is the Mac, which acts as the hub to control, integrate as well as add value to the diverse product line that has become the company’s main stand (Yoffie & Rossano, 2012). The move towards the digital hub strategy involved making important changes to the overall operation of the company. First, in the step towards this was the introduction of a new operating system, OS X, which has undergone upgrades over the years. With the new operating system came the integration with the rest of the company’s digital devices such as the iPod, iPad and iPhone. Users can therefore seamlessly start work on one device and finish it off in another device given the integration between the OS X and the iOS that powers both the iPhone and the iPad, in addition to 12-18 month upgrades (Yoffie & Rossano, 2012).

The second step towards achieving the vision of a digital hub has been shifting the Mac CPU from IBM based CPUs to Intel-based CPU, in addition to developing its CPU for the iPhone and iPad (Yoffie & Rossano, 2012). The shift to the Intel-based CPU has meant that the company’s notebooks are less power hungry and can run Windows and its applications. This way, Macs appeal to a wide variety of customers, including those averse to Mac given the relative difficulty in finding Mac-based software.

Third is the development of proprietary software such as the iLife suite that includes some basic Mac software. Additionally, Apple developed the iWork suite as a substitute to Microsoft’s Office suite that the company had developed for Apple (Yoffie & Rossano, 2012). Thus, although Apple still supports the Office for Mac suite, it also has its set of productivity software as a backup, and as a means of making Mac completely independent of third party software.

Although Apple relies on mobile careers and other resellers for the sale of its products, particularly the iPhone and the iPad, the fourth step in its digital hub strategy involves the use of its branded retail stores. The purpose of the retail stores is to not only attract customers with the attention-grabbing design of its products but also give the customers an opportunity to use and experience the company’s software (Yoffie & Rossano, 2012). The stores have thus been instrumental in giving customers the first exposure to the company’s product line, taking advantage of the popularity of the iPod, iPad and iPhone to introduce and win customers to Mac, in essence, completing its digital hub vision.

While the four steps come together to make Apple’s vision of a digital hub a success, they also essentially differentiate the company from its competitors. As a means of achieving competitive advantage, differentiation looks to set an organization apart from its competitors. Most companies that use differentiation as a strategy create value and appeal in their products aimed at convincing customer of the worth of the product or service the company is trying to sell to them. The company additionally creates products or services that differ from those provided by its competitors (Zekiri & Nedelea, 2011). At the core of executing a successful differentiation strategy is studying the needs and behavior of the buyer and learning what it is that the buyer considers as most important and valuable. After this study, the differentiating company must incorporate the features that the customers consider as most important to entice the buyers’ preference for the brand over competitors’ brands (Zekiri & Nedelea, 2011).

Apple has been a master in differentiation since its founding. Even at the launch of its most successful products, the company differentiated itself from the rest of the crowd. At the launch of the iPod in 2001, while there were already many portable digital music players in the market, only the iPod had the capacity to carry as much as 1000 digital songs in a singular device (Yoffie & Rossano, 2012). Moreover, the iPod’s battery life, design, and user interface were far superior to any in the market at the time of its launch. The iPod, therefore, became an instant hit taking up more than 70 percent of the US MP3 market (Yoffie & Rossano, 2012).

Apple’s launching of the iPod was followed closely with the launch of iTunes music store in 2003 (Yoffie & Rossano, 2012). Thus, while competitors were fast catching up to the intuitive design, simple user interface, longer battery life and high capacity for songs that were selling points of the iPod, Apple yet again differentiated itself by launching the iTunes.  iTunes is the native desktop software for the iPod that syncs iPods with computers. With the launch of the iTunes Music Store, the iPod could now synchronize the user’s online music purchases. At a cost of $0.99, users could download a title from the Music Store, burn the music to a CD or transfer the music to their iPods on the go (Yoffie & Rossano, 2012). Even more was Apple’s agreement with five of the biggest record labels and the myriads of independent labels to have their music available on the Music Store. No other portable MP3 player manufacturer had reached such levels of agreement, a factor that differentiated Apple from the rest of the industry players, giving it a major competitive advantage.

Apple’s other strategy of gaining competitive advantage is using the Blue Ocean strategy. Zekiri and Nedelea (2011) inform that organizations using the Blue Ocean Strategy choose to pursue a development path distinctly different from that of its competitors. The idea here for the organization is to innovate on value to the customers. The guiding principles of the Blue Ocean strategy include reconstructing market confines, having a vision of the future of the organization without necessarily concentrating on the numbers, looking beyond current demand and concentrating on the very workings of the strategic process (Zekiri & Nedelea, 2011). Further, implementing the Blue Ocean strategy requires that the organization exceed its problems and converts itself in implementing its strategy.

Apple’s implementation of the Blue Ocean strategy in gaining competitive advantage is evident in the years following Steve Jobs’ ascension to the helm of the company in 1997. The first step Jobs took in what would become the first of many was to slash the company’s product line from 15 to four (Yoffie & Rossano, 2012). Next was the hiring of contract assemblers (Foxconn among others) to manufacture the company’s products. This move essentially closed Apple’s manufacturing factories in the US and streamlined the company’s supply chain. Further, on streamlining the supply chain was the launch of a website for direct sale of the company products. These moves were Apple’s attempts, under Steve Jobs, to reconstruct not only the market confines but also create a vision for the company with a focus on a few products that the company could sell to its customers at the highest value.

Moreover, by launching the first all-in-one computer, the iMac, in 1998, Apple indeed reconstructed the industry standards. This became its habit as it did with the iPod, iPhone, and the iPad. All these products moved away from industry standards, creating their designs, user interfaces and running in the company’s closed system. Essentially, Apple was walking (and continues) a path distinctly different from its competitors. Herein, while licensing and open source have become the industry standard as Microsoft and Google do with their software, Apple does not license its software, preferring to do everything in-house (Yoffie & Rossano, 2012). While many have criticized the closed system, it remains Apples core competitive advantage and distinctive feature. By so doing, the closed system has also created near fanatic following of the company’s products in customer loyalty.

Apple’s operations have moved beyond its home country to become a globally operating entity. With manufacturing facilities in Taiwan and more than 300 company-operated retail stores in 13 countries, the company is essentially a global operator (Yoffie & Rossano, 2012). Apple’s global operations have segmentations, from where the company generates its revenue. An advantage of such global operation is the diversification of revenue as well as growth. According to Kerr (2015), Apple’s geographic diversification is in five segments that include the Americas, Greater China, Europe, Japan and the “Rest of Asia-Pacific,” which includes countries in Asia and Australia. In 2015, all the segments saw growth in revenues, with the Greater China region seeing the greatest revenue growth at 84 percent (Kerr, 2015). China has a major potential for growth for Apple’s main revenue earner, the iPhone, given that it only has a 45 percent smartphone penetration in comparison with 81 percent in the US and 80 percent in the UK (Kerr, 2015). This means that China will remain a major contributor to the company’s revenue, especially with the recent launch of the iPhone 6, with a larger screen, one of the most anticipated changes in the company’s flagship mobile device. Even more advantage for Apple’s global operation is the fact that apart from its home market in the US, foreign sales account for 60 percent of the company’s revenue (Kerr, 2015).

At the restructuring of Apple following the rise of Jobs as the CEO of the company, one of the changes had been shifting manufacturing from the US to China (Yoffie & Rossano, 2012). This was essentially Apple implementing a global strategy. The purpose of this shift was to take advantage of the low labor cost in China and, therefore, increasing the efficiency of the company. Moreover, by manufacturing in China, Apple significant reduced the cost of manufacturing its products, thereby increasing its profit margins.

Global operations additionally offer speed and flexibility to the company. It is stated that before the launch of the first iPhone, the then-CEO, Steve Jobs, noticed scratches made on the screen of the prototype he had been testing. He then made a decision to change the screen of the iPhone from plastic to glass, a decision that came only a few weeks before the launch of the phone. These changes were made and at the phone had a glass screen at its launch. Such efficiency would not have been possible had the company had its manufacturing plants in the US. Flexibility and speed are also visible through the simultaneous launch of the company’s products in different markets such as France, Germany, U.K. and Japan (Kana & Rohwedder, 2010). Such efficiency and speed are only possible when the company has global operations with an effective supply chain as Apple does.

Despite global operations offering advantages, it also creates challenges for the company. Among the challenges, include stagnating growth, especially in the advanced economies such as France, Germany, U.K. and Japan. These countries already have high smartphone saturation and do not, therefore, offer Apple any prospects for growth for its smartphone business, which is responsible for a large portion of the company’s revenue.

In China, where there are prospects for growth for the company’s flagship smartphone, most of the customers are price sensitive and may therefore not pay the premium price charged by the company on its products. Furthermore, smartphone and tablet manufacturers such as Xiaomi, Lenovo, and Asus, all based in China are making competition stiff for Apple, as well as eating into the company’s global smartphone, tablet and PC market share.

Despite the challenges that global operations present to the company, information technology continues to play an important role in the company’s global positioning as well as helping it gain and retain market share. One of the most important of technology implemented by Apple is iCloud, a cloud computing technology that not only propagates the company’s digital hub strategy but also helps consumers access their data across all its devices around the world (Yoffie & Rossano, 2012).  iCloud is specifically a rejoinder to the numerous other cloud computing products offered by Apple’s competitors: Google has Google Drive, while Microsoft has OneDrive for individual consumers and Microsoft Azure for corporates, even as Samsung and HTC struck deals with Dropbox (Yoffie & Rossano, 2012).

The security of Apple’s closed system has been another IT strategy that Apple has used to gain and retain its market share. While Microsoft has been plagued with cases of viruses and hacking over the years, Apple has remained relatively away from such incidents. Furthermore, many people, both PC and Mac users perceive that Mac is not only safer but also more stable than PC (Mills, 2010). The security of Apple’s operating system, therefore, continues to win it more consumers gain and retain more market share in not only the computer but also the smartphone and tablet markets.

The current nature of IT is that many companies consistently want to use it for the benefit of the organization in not only advancing organizational goals and objectives but also gaining market share and in decision-making. The bulk of information used by the organizations is supplied by consumers of the company products, who through the use of the products provide information on how and what they want the products to do. This is especially true for technology items such as smartphones, tablets, and notebooks that are a specialty of Apple. Taking advantage of this the information supplied by the consumers can go a long way in supporting the company’s decision-making process.

Advanced analytics, therefore, is the technology that can assist Apple in its decision-making process. In its basic form, advanced analytics is a combination of analytic techniques instrumental in the prediction of future outcomes based on information from various sources. Also known as big data, advanced analytics have the potential of transforming the means of doing business for companies as well as redesigning the core processes of companies (Barton & Court, 2012).

The working of advanced analytics in businesses is such that information comes from different sources. Choosing the right data for analytics is far important than just having the data itself. Noteworthy is the fact that bigger and better data helps in providing the company with a more balanced and granular view of the business environment (Barton & Court, 2012). With this newfound ability through big data and advanced analytics, the company stands in a better position to improve its operations, customer experience and its strategy (Barton & Court, 2012).

Although it is important to collect as much relevant data as possible from consumers and the business environment, this data is only useful if it, in fact, assists the organization in making improvements and gaining competitive advantage. The beauty of advanced analytics is that it is instrumental in helping the organization build a model allowing the prediction and optimization of outcomes (Barton & Court, 2012). Optimization and the prediction of outcomes do not, however, come naturally from the advanced analytics. The organization must model the data collection and processing in such a way that it posits some elements of the business process such as sales and sales volumes and the factors that affect the elements. Only that way can the data and model provide important insights essential in the decision-making process (Barton & Court, 2012).

Aside from choosing the right data and building a model for the processing of the data, advanced analytics can only be useful if the organization does transform its capabilities to take advantage of the advanced analytics. To maximize the use of the analytics, it is necessary to develop processes that are relevant to the business (Barton & Court, 2012). For Apple, for example, the analytics could include customers’ response and complaint on particular products through it customer service network. By collecting information on the products, it is easier to make improvements on subsequent products, or during the routine upgrades of the products’ software, as it is customary of the company.

Advanced analytics and big data are far more than a trend for companies and Apple in particular. The technology has the potential to improve the decision-making process given it ability to predict outcomes. Additionally, the fact that the information collected is largely from the customers provides a link between the organization and the customers. This way, the organization knows what the customers want, and should, therefore, work towards satisfying the needs.   

Advanced analytics are far more than a fantasy. Companies such as Google and Amazon are already using the technology with impressive outcomes, as they have been able to surpass their competitors (Barton & Court, 2012). Apple can therefore not afford to be left behind on a technology that is revolutionizing business processes and decision-making.

References

Barton, D. & Court, D. (2012). Making advanced analytics work for you. Harvard Business Review. Retrieved from https://hbr.org/2012/10/making-advanced-analytics-work-for-you

Kane, Y., I. & Rohwedder, C. (2010). Apple strives for global markets. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/SB10001424052748703302604575294530119152528

Kerr, J. (2105). Apple Inc. (AAPL). The Henry Fund

Mills, E. (2010). In their words: Experts weigh in on Mac vs. PC security. CNET. Retrieved from http://www.cnet.com/news/in-their-words-experts-weigh-in-on-mac-vs-pc-security/

Schwartz, C. (2012). Apple Inc. Oregon: University of Oregon Investment Group

Yoffie, D., B. & Rossano, P. (2012). Apple Inc. in 2012. Harvard Business Review

Zekiri, J. & Nedelea, A. (2011). Strategies for achieving competitive advantage. The Annals of The “Ştefan cel Mare” University of Suceava. Fascicle of The Faculty of Economics and Public Administration, 11(2), 63-73