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Apple_Case Study Analysis

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Jul 1, 2014

A. Introduction (Summary of the case study): A.1 Apple: Taking a bite out of competition


 

A.     Introduction (Summary of the case study):
 
A.1 Apple: Taking a bite out of competition
 
Apple incorporated in the year 1977 has been the most innovative company in the personal computers segment. Working primarily on the Macintosh environment, the computers developed by Apple have been more reliable and sturdy and are known for seamless integration of peripherals. In line with the company’s efforts for transition to Intel microprocessor, in 2006, came Apple’s announcement of Bootcamp software making it possible to run Windows on Mac.
 
Apple has always enjoyed highest brand and repurchase loyalty however have continuously ceded their market share to other cheaper Windows run computers. The profit margins at Apple have always exceeded the industry standards in spite of declining market share since 1980.
 
Apple changed their battleground in year 2001 with the launch of extremely successful ipod followed up with itunes and iphone. With these products Apple was both a computers and personal entertainment company with strong financial performance much needed as a boost to their research activities.
 
A.2 Company Background
 
Apple computer was founded in Mountain View, California on April 1, 1976 by Steve Jobs and Steve Wozniak. Jobs was the visionary and led the marketing function while Wozniak was technical genius. In the year 1977, the first version of the Apple II became the first computer ordinary people could use right out of the box. By the year 1980, Apple was the industry leader and went public in December of that year. IBM entered the personal computer business in 1981 and initiated a major challenge to Apple’s business model. IBM used the easy to copy Microsoft DOS operating system to counter Apple which was priced competitively. Apple came up with updated Apple III to counter IBM computers; however serious technical flaws in Apple III led to the increased market share of IBM computers.
 
In 1983, Woznaik left the firm and Jobs hired John Sculley to take the role of CEO at Apple to take up the role of marketing function while Jobs could spearhead the technology function. Jobs also gave Bill Gates at Microsoft some Mac prototypes to be used to develop software and in the year 1985, Microsoft came out with Windows operating system, a version of GUI for use on IBM PC’s.
 
Jobs left the company in 1985 and founded NeXT computers which could never become commercially viable. In the year 1997, then Apple ceo Gilbert Amelio bought out NeXT and Jobs was brought back to Apple as part time advisor.
 
In 1986, under John Sculley, Apple introduced the Macintosh Plus with much expanded memory and the LaserWriter printers. By 1990, Apple still did all the design in-house and apart from the microprocessors produced most of the items in-house. In 1991, Apple introduced one of the first truly portable notebook computers, the Powerbook 100. Sculley further formed an alliance with IBM and Motorola to develop new operating system based around IBM’s new PowerPC chip.
 
All of the above Sculley’s efforts did not bring in financial fortunes for the company. He was replaced as CEO in 1993 by the company president Michael Spindler. Spindler continued to focus on innovation, producing PowerMac based on the PowerPC microprocessor in 1994. In one of the key decisions, Spindler allowed other companies to manufacture Mac clones, a strategy that led to 20% drop in sales by number of the Mac’s. Spindler was removed in 1996 due to mounting financial losses and quality issues.
 
Gilbert Amelio, an Apple director and a turnaround expert was asked to reverse the company’s financial condition. However, in spite of his innovative strategies and cost cutting measures Apple continued to accrue loss and he was also removed in 1997.
 
A.3 The return of Steve Jobs
 
Jobs returned to Apple in 1997 and his key focus immediately was to strengthen the relationships with third party software developers including Microsoft and Adobe to produce Mac compatible programs. From 1999 till 2001, Apple began acquiring software companies and creating entertainment software products. In 1999, Apple began selling built-to-order computer systems online and also introduced the i-book laptop.
 
In 2001, Apple introduced Mac OS X, the operating system based on NeXTStep and incorporating Unix stability, reliability and security. Also, in a significant move, Apple announced opening of retail stores in major US markets.
 
In October, 2001, Apple released its first major non computer product, the iPod. The device was an MP3 player that could pack upto 1000 songs and was ultra portable. In 2002, Apple launched iPod that could download from Windows and did not a Macintosh environment to operate. This step changed the financial fortunes of the company.
 
In 2003, Apple sold 939,000 of the iPod devices, bringing in $345 million in revenues. In January, 2004, Apple released the iPod mini. The iPod mini sold so fast that Apple had tough time to maintain the delivery right through. Apple announced the switch to Intel chips in their personal computers in 2005 with a goal to provide best personal computers.
 
Competition Landscape
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
B.     Analysis of the case
 
The case presents a detailed report on Apple’s business history and the changing leadership. The company has seen some of the most difficult times and yet is back with making profits and creating products that are favourites the world over. The case presents the series of events that have led to changing leadership positions of the company.
 
The company as originally thought to be a personal computer manufacturer has changed the battleground for itself during the course of its business life cycle. The company is now more a personal entertainment company than a pc manufacturer. With iPod, iTunes and iPhone, Apple has come a long way in carving a niche for itself in the software development industry. The company continues to develop in Mac environment which is not done by anyone else across the globe and yet has the highest profitability percentage.
 
Apple, under the able leadership of Jobs has now support from leading software developers who also design the software for Mac environment. The shift in using the Intel chips and alliance with Microsoft and adobe has resulted in soaring company sales. The reliability and sleekness offered in Apple is incomparable as to the fact that the average life of a Mac is 5 years as compared to the 2 year life of a dos based system. With the ever dynamic external business environment, of moving from CD’s to MP3 player, Apple has been able to identify the needs and come up with products that entice consumers. With research firms hinting out at strategic shift from compact music players to mobile phones as media partners, Apple has been innovating products like iPhone which inspire envy and provide the best in communication and entertainment.
 
Strong alliances have been one of critical success factors for Apple under the visionary Steve Jobs. A strong alliance network with Samsung, Microsoft and Adobe has enabled company to reduce on to the costs and at the same time provide the most popular applications on their devices. With the advent of boot camp software, Apple customers could enjoy the reliability of Mac and at the same time use their favourite application suing Windows.
 
Company owned and operated retail stores have been critical in building the brand that Apple is today. Large number of iTunes stores and attractive pricing gave music industry a new look to the customers. With large number of Apple operated stores with exceedingly well footfalls, Apple could build in a system of respect of its brand and managed to escape the price war that other leading pc manufacturers are following.
 
C.     Innovation & Entrepreneurship
 
Steve Jobs has always had charisma. In his early career as head of Apple Computer, Inc., ome said that was all he had. But by the time he took the MacWorld Expo stage in January 2000 to announce that he was returning as Apple’s permanent CEO, he was a changed man. Fifteen years of failure had humbled and humanized him. Even long estranged Apple co-founder Steve Wozniak was moved to tears by the sight of the man Jobs had become.
 
Born in 1955, Jobs grew up in California, a wilful, free-spirited young loner with a penchant for trouble. In his high school years, he already was fascinated with electronics. In 1969, he met Wozniak, known as “Woz,” who was five years older and already an electronics whiz. Jobs attended college but soon dropped out. He embraced the hippie lifestyle, drugs, Zen and Eastern philosophy. After months spent travelling India in rags, he returned to California and started a thriving business with Woz. They built and sold “blue boxes” that let users make long distance calls for free. In 1976, Jobs, then 21, and Wozniak started a new business to build computers for hobbyists. Jobs chose the name Apple Computer. The original Apple I was only a circuit board with no case. Jobs pushed for an Apple II – the first-ever complete home computer. It was fully functional out of the box, and its expansion slots made it flexible. Jobs was ruthless, manipulative, charismatic and utterly determined.
For a company that looked doomed a decade ago, it has been quite a comeback. Today Apple is literally an iconic company. Look at the iPod: the company name appears only in the small print. Some of the power of its brand comes from the extraordinary story of a computer company rescued from near-collapse by its co-founder, Steve Jobs, who returned to Apple in 1997 after years of exile, reinvented it as a consumer-electronics firm and is now taking it into the billion-unit-a-year mobile-phone industry. Apple's zest comes from its reputation for inventiveness. In polls of the world's most innovative firms it consistently ranks first. From its first computer in 1977 to the mouse-driven Macintosh in 1984, the iPod music-player in 2001 and now the iPhone, Apple has prospered by keeping just ahead of the times.
The change in company fortunes happened not because everything was good at the company, but because the leader wanted it that way. The apple’s turn around tale is of its kind. The company has reinvented its potential and is now on the fast track to making profits. Lagging far behind the industry statistics in sales with Dell, HP & Lenovo, Apple still has the highest profitability percentage. As Jobs put it “Statistics are for statistical pleasures”, our main goal is to make the best things in the world”.
Is Steve Jobs the right man to lead Apple? For most media and technology observers, this is an absurd question: how can you doubt the man who almost single-handedly regenerated Apple from near obscurity in the early 1990s to the multi-billion dollar force it is today. However on more than one occasion Wall Street has wondered if his West Coast style leadership is the right one, and the way he has chosen to handle his ‘‘illness’’ in 2009 has left
many scratching their heads.
 
"Steven Jobs made Apple successful first by making peace with Apple's former blood enemy, Bill Gates. Coexistence with the dominant player, Steven felt, was Apple's only survival strategy. Microsoft would continue writing Mac software, a prerequisite to have any hope of recovery. Jobs ended the policy of licensing Apple's software to other computer makers because he felt those "clones" sucked up profits that were rightfully Apple's. "Apple needed a plan." Jobs believed that there was sufficient talent at Apple to regain glory, but they have no understanding of their strategy. The idea was to focus efforts on Apple's key markets: publishing, education and consumer. Ultimately the product list would be winnowed to four: desktop and laptops for the consumer and the professional. (Levy 1998)".
 
Having undergone surgery for pancreatic cancer in 2004, the Apple chief executive officer’s (CEO) seemingly gaunt appearance in 2008 lead to much speculation about his health, including a run on stocks, until he said he would take a six month sabbatical. However the refusal to divulge the exact nature of his condition, and the limbo his chief operating officer (COO) was left in as to whether he was the de facto CEO or not, has led some commentators to criticize Jobs’ and Apple’s handling of the situation. It has also raised questions as to whether they have their succession planning right, if indeed they have any.
 
C.1 Diagnosing the change situation:
Steve Jobs came to Apple when it was reeling under financial crisis and quality issues. He had the responsibility to lead the company from the front and identify a suitable path for reconstruction. The first challenge is obviously to identify the change situation. For Apple, this would definitely be the turnaround as the company had to be restructured and streamlining of efforts in the right direction was all that was required to take company out of the situation it was in year 1997.
 
Adaptation to the fact that consumers were still hesitant to change with Windows based computers and reconstruction that led to strong alliance in the software development companies led the company reach at a stage where company developed some of the best products which were acceptable to the end user.
 
C.2 Style of Managing Change at Apple
With dominant frames being embedded in organizational practices this raises the question of whether managers can simply step outside of them by deciding to see the organizational world in a new way. The assumption that such action is possible ignores the “circumtextual” (MacLachlan and Reid, 1994,
p. 4) features of dominant frames – that is, the circumstances in which the frames have developed and the material practices in which they have become inscribed. Reframing does not occur in a socio-historical vacuum. An example of this situation is well documented in a dispute within Apple Computer over distribution strategy (Harvard Business School, 1993). Donna Dubinsky, Apple’s Director of Distribution and Sales Administration, sought to have a proposed radical change in distribution strategy rejected on efficiency grounds by Apple’s senior management. She believed that it was a mistake of sufficient magnitude that the future of the company would be at risk. However, despite believing that her case was almost beyond dispute, she was unable to have the decision reframed as an issue of corporate survival. Central to this situation was that the proposal for radical change was being pushed by Steve Jobs, Chairman of the Board of Directors and General Manager of the Macintosh division, and his supporters. At the time, Jobs was involved in a struggle for control of Apple with John Sculley, the CEO. The framing of the distribution issue, the dominance of the radical change frame, and the inability of Dubinsky to assert successfully an efficiency or survival frame, can be made sense of only through an understanding of these “circumtextual” issues.
 
To his credit, Steve Jobs, the enfant terrible widely reputed to be one of the most aggressive egotists in Silicon Valley, has an unrivaled track record when it comes to pulling development teams through start-up hell. Using monomaniacal zeal and charisma, he's a natural Pied Piper in an industry littered with good ideas that have been killed by bad managers. But Jobs, like virtually all charismatic leaders, also has a well-documented dark side that causes him to mutate from mesmerizing allure to sadistic perfectionism, often without discernible provocation. According to many reports, Jobs's habit of dressing down subordinates helped get him booted from Apple when John Sculley was managing the company. The major advantage of having Jobs on the job (forgive me) during uncertain and anxious times is his capacity to dispel feelings of ambiguity. With the exception of grief, there is no feeling more emotionally disruptive than the helplessness induced by not having a sense of direction or purpose in life. And the "reality distortion field" that leaders like Jobs bring to ambiguous times is just what the management doctor ordered.
 
D.     Managing innovation
 
Innovation is driven by the ability to see connections, to spot opportunities and to take advantage of them. But innovation is not just about opening up new markets – it can also offer new ways of serving established and mature ones. Whilst competitive advantage can come from size, or possession of assets, etc. the pattern is increasingly coming to favour those organizations which can mobilize knowledge and technological skills and experience to create novelty in their offerings (product/service) and the ways in which they create and deliver those offerings. Innovation contributes in several ways. For example, research evidence suggests a strong correlation between market performance and new products.
New products help capture and retain market shares, and increase profitability in those markets. In
the case of more mature and established products, competitive sales growth comes not simply from being able to offer low prices but also from a variety of non-price factors – design, customization and quality.6And in a world of shortening product life cycles – where, for example, the life of a particular model of television set or computer is measured in months, and even complex products like motor cars now take only a couple of years to develop – being able to replace products frequently with better versions is increasingly important. ‘Competing in time’ reflects a growing pressure on firms not just to introduce new products but to do so faster than competitors.
 
Whilst new products are often seen as the cutting edge of innovation in the marketplace, process innovation plays just as important a strategic role. Being able to make something no one else can, or to do so in ways which are better than anyone else is a powerful source of advantage.          
 
Types of Innovation:
‘Product innovation’ – changes in the things (products/services) which an organization offers;
‘Process innovation’ – changes in the ways in which they are created and delivered;
‘Position innovation’ – changes in the context in which the products/services are introduced;
‘Paradigm innovation’ – changes in the underlying mental models which frame what the organization does.
 
Innovation is about knowledge – creating new possibilities through combining different knowledge sets. These can be in the form of knowledge about what is technically possible or what particular configuration of this would meet an articulated or latent need. Such knowledge may already exist in our experience, based on something we have seen or done before.
 
D.1 Innovation in product or process: Apple’s way
 
In fact, most important in the innovation process is the problem creation moment. That is, the positing of the correct problem, which allows the solution to be discovered (information to be created). The key to the creation process is information. Information can be divided into two categories: syntactic and semantic (Machlup and Mansfield, 1983; Nonaka, 1987). Syntactic information can be reduced to a digital form which has no inherent meaning. This is exemplified by the discrete type of information used in computers and which can be manipulated through logical operation. The process of interpreting the results gives this type of information value and meaning3. Semantic information is qualitative; what is important here is the meaning or content of the information4. Semantic information is more holistic and capable of evolving and transforming. It is not created in the traditional deductive model hypothesized as the way Western science operates, but rather through insights which allow the creation of new models5. The tools in this creation process are often metaphors and analogies (i.e., devices to help in rethinking or even discarding old ways of thinking).
 
The earlier Apple II success meant that there was a constant stream of cash flowing into the company. Management was still largely in the hands of the founding team and within this environment there was little financial or bureaucratic discipline. Apple was in a constant state of confusion, with many
different R&D projects going on simultaneously. Within this turmoil the Macintosh group was formed in 1979 to examine the feasibility of developing an extremely low-cost computer for the public. At that time the Mac project was limited to three people. In late 1979 Steven Jobs, one of the Apple’s founders was removed from the Lisa project. This led Jobs to look for another project, and he was attracted to the small Macintosh group. By early 1981 Jobs had replaced the original leader of the project and had begun to build up the project team. Jobs was going to he the “product champion” and was prepared to battle within Apple for the resources necessary to bring the product to market. He was determined to build a computer that was in his words, “insanely great”. Jobs set some difficult challenges for the project team that demanded a complete rethinking of the personal computers features. For example, as Jobs began to contemplate the role of computers in society he reconceptualised them as having the same transformative role as telephones had in an earlier period. On the basis of this observation he became convinced that the new computer should have a base the dimensions of a telephone book. This was much more difficult because it made it necessary to lay out the interior of the computer in a vertical rather than horizontal manner. It also gave the Mac a distinctive design and made it much more compact (Young, 1988, p. 226-228).
 
 
 
E.     Innovation & Entrepreneurship: Steve Paul Jobs
 
Apple makes it look easy. From the sleek design of its personal computers to the clever intuitiveness
of its software to the ubiquity of the iPod to the genius of the iPhone, Apple consistently redefines
each market it enters by creating brilliant gadgets that put the competition to shame. What’s the secret? Apple has built its management system so that it’s optimized to create distinctive products.
That’s good news for would-be emulators, because it means Apple’s method for innovation can be
understood as a specific set of management practices and organizational structures that — in theory,
at least — anyone can use.
 
What is Apple’s fundamental soul? The company’s motto, “Think Different,” provides a hint. Apple maintains an introspective, self-contained operating style that is capable of confounding competitors and shaking up entire industries. Internally, Apple barely acknowledges competition. It’s the company’s ability to think differently about itself that keeps Apple at the head of the pack. Current and past employees tell stories about products that have undergone costly overhauls just to improve one simple detail. Other products are cancelled entirely because they don’t fit in or don’t perform up to par. Apple’s culture has codified a habit that is good for any company to have but is especially valuable for firms that make physical things: Stop, step back from your product, and take a closer look. Without worrying about how much work you’ve already put into it, is it really as good as it could be? Apple asks that question constantly.
Steve Jobs innovative idea of a personal computer led him into revolutionizing the computer hardware and software industry. When Jobs was twenty one, he and a friend, Wozniak, built a personel computer called the Apple. The Apple changed people's idea of a computer from a gigantic and inscrutable mass of vacuum tubes only used by big business and the government to a small box used by ordinary people. No company has done more to democratize the computer and make it user-friendly than Apple Computer Inc. Jobs software development for the Macintosh re-introduced windows interface and mouse technology which set a standard for all applications interface in software.
Two years after building the Apple I, Jobs introduced the Apple II. The Apple II was the best buy in personal computers for home and small business throughout the following five years. When the Macintosh was introduced in 1984, it was marketed towards medium and large businesses. The Macintosh took the first major step in adapting the personal computer to the needs of the corporate work force. Workers lacking computer knowledge accomplished daily office activities through the Macintosh's user-friendly windows interface. Steve Jobs was considered a brilliant young man in Silicon Valley, because he saw the future demands of the computer industry. He was able to build a personal computer and market the product. "The personal computer was created by the hardware revolution of the 1970's and the next dramatic change will come from a software revolution," said Jobs. His innovative ideas of user-friendly software for the Macintosh changed the design and functionality of software interfaces created for computers. The Macintosh's interface allowed people to interact easier with computers, because they used a mouse to click on objects displayed on the screen to perform some function. The Macintosh got ride of the computer command lines that intemidated people from using computers.