Understanding the Origin of Apple’s Success
The main reason behind Apple’s success can be connected to the strategy employed by Job’s wherein he hired and surrounded himself with brilliant individuals who collectively helped to design products that were not only aesthetically pleasing but had a simple user friendly software that could easily be adapted by a wide variety of consumers (SWOT, 1-9). With an estimated $1 billion marketing budget (which has elevated the brand to a “cult” like status) and the Apple online store which enables customers to purchase a variety of songs, videos, movies and applications, these combined factors have thus enabled the company to surpass it competitors and has resulted in it being the most valuable company in the world to date.
Business Strategy
The business strategy of the company revolves around the production of its products at rock bottom prices through cheaper labor and production costs in countries such as China and Brazil, adding a significant markup to the aforementioned products once they hit store shelves, and lastly supporting these products through the sale of a variety of content through its iTunes store (SWOT, 1-9).
Vision and Mission Statement
The company’s new vision and mission statement should be: to uphold the standards of aesthetics, user friendliness and innovation as established by the founders of the company.
Corporate Level Recommendation
Avoid Product Obsolescence
In order to understand the inherent dangers in relying too much on a particular business model without taking into consideration current changes in consumer markets, it is thus necessary to examine the case of Research in Motion (RIM) and show the impact of product obsolescence on a company. Going back a few years ago, RIM used to have a far larger share of the smart phone market (roughly 40%) starting from the latter half of the 1990s till 2005. It was only when other manufacturers (i.e. Nokia, Samsung, Siemens, and Motorola) gained sufficient traction that smart phone sales for the company began to dip.
The proverbial nail in the coffin came when Apple released the iPhone, from 2009 till the present the iPhone dominated the smart phone market pushing other competitors, especially RIM, onto the sidelines. While RIM has attempted to compensate for this by venturing into other markets and attempting to diversify its service offerings, the fact remains that the company should have delved deeper into appropriate product development early on instead of relying on its old business model.
The reason this has been brought up is due to the inherent dangers found in depending too much on a current business model which may inevitably result in product obsolescence. It was almost unthinkable nearly 6 years ago that RIM would ever be in danger of being put out of business yet at the present the company is teetering on the edge of closure. The potential problem of product obsolescence in the case of Apple is that a large part of its success depended upon the “vision” that Job’s had for the company and its products (Nair, 21-24). It is based on this that the corporate level strategy that the company should focus on for the next 5 years is one that is competitor oriented yet continues to focus on the strength of its products (i.e. being user friendly and aesthetically pleasing).
By competing based on its competitor’s offerings and shaping its business strategy to align with what the market is after, the company should be able to continue to along its current method of operations. Such a strategy should be implemented in conjunction with considerable investments into product research and design as well as the acquisition of various business startups that show potentially innovative products that can be incorporated into Apple’s current business infrastructure.
Business Level Recommendation
Implement Proper Pricing Strategies
One approach that should be considered by companies when approaching consumer relationships is to take into account business cycles and market slumps and adjust prices accordingly. As explained by Professor Leonard Lodish of the Wharton school of Business “pricing is a critical element of successful marketing, in good times and in bad and many companies do not focus enough on getting their pricing right”. It is based on this and the cyclical cycle of business that companies should consider proper pricing strategies especially in situations involving changes within the market environment.
This takes the form of taking into account the physical value of the product being sold as well as various non-tangible elements that consumers take into consideration before they will be willing to pay for a product. For example, the state of the housing market in the U.S. is at an all time low however there are still individuals who are in need of homes. In such cases developers need to take into account the physical cost of the home itself and factor in the current housing slump before creating a price range for a particular apartment or home. It is based on this that it can be said that the greater the amount of non-tangible assets that are taken into consideration by the customer before making a purchase the greater the need for companies to fix prices in accordance with what is necessary to sell the product itself.
At the present, Apple finds itself in an enviable position wherein its products have developed a considerable market following which has allowed it to in effect markup prices to a considerable level (Helft, 2011). However, when taking into consideration the actions of its competitors it cannot be stated that such a position can be retained within the upcoming quarters especially when taking into consideration the new product offerings and pricing strategies being implemented. For example, Google’s Nexus 7 and Microsoft’s Windows 8 tablets that are set to be released by the 4th quarter of 2012 are priced at a far lower rate ($199 to $399 respectively) compared to Apple’s iPad.
Not only that, on average nearly 1 million android based mobile phones are activated each day (as stated by Google) which actually surpasses the number of activations of Apple’s flagship product the iPhone. One of the reasons behind this is due to the fact that a large percentage of android based phones are far cheaper than the iPhone and are increasingly reaching a level of sophistication that may rival the technological prowess of the iPhone in the coming quarters.
It must also be noted that the debt crisis in Europe, the faltering economy in the U.S. and the resulting low consumer demand for high end technological products as a result of low incomes casts a considerable degree of doubt over the sustainability of the current pricing scheme utilized by Apple for its products. It is based on this that it is recommended that Apple reduce the cost of items such as the iPhone and iPad to levels that are commensurate with the current market environment. If it does not do so then it may find itself in a situation where it will be surpassed by its rivals due to their lower price offerings.
Marketing
Currently, Apple spends $1 billion a year on marketing costs for its various products. Yet, it must be questioned whether such an amount is excessive given the current valuation of Apple’s competitors (Helft, 2011). When examining companies such as Motorola, Samsung, Nokia, RIM, HTC etc. their total market valuation does not reach even half of Apple’s (235 billion in total). The company already has a well established brand and as such it is recommended that the company lower its current marketing budget to $250 million through a 5 year devaluation period. By doing so this lowers the cost of doing business while at the same time ensures a more efficient method of operations.
Operations
Outsourcing of HR, Management and Customer Service Infrastructure to the Philippines
When examining the current trend in business process outsourcing it is undeniable that a company can in effect save millions of dollars in salaries if it were to outsources various aspects of its operations to other countries. Apple has been doing this for years through various manufacturers such as Foxconn which has numerous factories in China. In order to help the company cut costs and boost profits one way in which this can be done would be to outsource its customer service, Human Resources department and various aspects of its management departments to the Philippines through companies such as Convergys.
The Philippines has been noted as being the best location in world when it comes to call based and business processed based outsourcing services due to largely English speaking population that has a considerable degree of knowledge about American culture as well as having a far lower minimum wage salary as compared to other locations. Within the next 5 years Apple could shift various parts of its operations to the Philippines which would drastically reduce the cost of operations.
Financing
When examining the current state of the smart phone and tablet PC market it can be seen that companies such as Google, Microsoft, and Samsung have been gaining considerable ground on Apple given their new product offerings which have been priced at less than half of Apple’s equivalent type of offering. Based on this, it can be expected that within the next 2 years Apple’s current market share may in fact erode resulting in a revenue drop from $450 billion to $400 billion or even more. It is based on this that is important for the company to devote at least 15 percent of its current revenue within the next year into product development so as to create new products that can rival the current low priced offering of its rivals.
Measurable Goals and milestones
Measurable goals and milestones for this particular business plan within the next 5 years comes in the form of a distinct reduction in the cost of operations within the company in its management, HR and customer services departments. Not only that, the company should also be at a point where it is able to appeal to more consumer markets through its affordable offerings as well as should be able to maintain its current position as a world leader in smart phone development and sales.
Innovation
Research and development into new ways of producing and utilizing technology is one of the practices most often seen in technology intensive enterprises. This is due to the fact that technology has as of late been under a constantly accelerating level development and as a result has enabled new players to enter into markets whereas in the past distinct barriers to proper entry would have been present. As such failure to sufficiently innovate along with new technological trends and products can be thought of as a failure on the part of the managerial practices at a company since being able to anticipate trends and use them to either reach greater market penetration or keep the company relevant to consumers is a necessity in today’s technology intensive market economy.
While Apple can be considered as being at the forefront of technological innovation as seen through its software and hardware product offerings, the fact is that the company has not been following recent trends in innovation involving declining phone and tablet prices. In fact the reverse is actually true wherein prices for the latest Apple products have actually been increasing rather than decreasing (Nair, 21-24).
When comparing such a situation to the increasing amount of market innovation by its competitors involving the production and sale of affordable consumer electronics it must be questioned whether Apple’s current business plan is sufficient in continuing a legacy of innovation in a post-Job’s era. It is based on this that it is important for the company to institute a plan wherein it evaluates its current product offerings vis-a-vis market demand and competitor offerings and develop new product lines that stay true to Apple’s distinct aesthetic style while at the same time conforms to the present day trend of low cost electronics for the average consumer.
Techniques to Manage Change within an Organization
While this report has so far detailed a variety of different methods and procedures that Apple can utilize in order to improve its business model, this paper has yet to address what methods will be necessary in order to help the employees and the business culture of the company adapt to the proposed changes.
Changing Employee Mindsets
One of the first techniques necessary in managing change is to change the way in which employees think about the way in which they work. It is often the case that employees develop a certain mindset regarding work which makes them far less apt to change when the need arises. It is based on this that what is needed is slowly change internal company policies and workplace culture so as to make it more amenable to the desired change rather than implement it all at once. This conforms with the first principle of change in which a person is adjusted via a change in the system that they work.
Establish Goals/Purpose driven work
In their study examining employee performance it was discovered by Bishop (2011) that it is often the case that employees work better and adapt to change faster if there is a given goal or rather their work is driven by a specific purpose. Taking the third principle chosen into consideration it can be assumed that by creating a defined vision by which employees can work towards not only would this result in a smooth transition during change but can actually result in improved employee performance as well.
Works Cited
Helft, Miguel. “Steve Jobs’ Real Legacy: Apple Inc.” Fortune 164.5 (2011): 59-65. Business Source Premier. Web.
Nair, Praveen Balakrishnan, and Quay Ai Leng. “The Sweet And Sour Apple: The Case Of CEO Strategies At Apple Inc.” Vidwat: The Indian Journal Of Management 5.1 (2012): 21-24. Business Source Premier. Web.
SWOT.”Apple Inc. SWOT Analysis.” Apple Computer, Inc. SWOT Analysis (2012): 1-9. Business Source Premier. Web.