Apple Case Study
By the end of the 20th century, the initial path that Apple had chosen for its growth and development initiatives was facing competition from other companies in the technological market. The company was using the propriety approach in the designing both hardware and software. This hampered its ability to become a niche player that could compete in the market on price (O’Grady, 2011). By 2000, Apple introduced a series of new products and services, which were successful in the market. These included iTunes, iPod, the iPhone, and online music services (O’Grady, 2011). These innovations propelled the company to become one of the most successful fortune 500 companies in the world today. The shift that improved on the competitive advantage of Apple Company did not only emanate from product innovation. The success of the company resulted from its ability to define a workable business model to enable downloading of music. This is considered as an innovation that had eluded the music industry over the years (O’Grady, 2011).
The main objective of this paper is to assess the extent to which innovation management at Apple has facilitated the development of highly competitive products and the extent to which such innovations promise to sustain the competitive position of the company on the international market with regard to iPhone 6s
Apple Company Inc. is a technological company involved in the design, manufacture, and marketing of technological products and services such as mobile communication devices, personal computers, and portable video and music players (O’Grady, 2011). In addition, the company is also involved in the development and the sale of variety of softwares, peripherals, services and networking solutions. Apple’s products include the iPhone, iPad, iPod, Mac line of personal computers, and desktops, Apple TV, software applications such as Mac OSX operating system (O’Grady, 2011).
Apple sells its products in different markets across the world through its retail store, online stores, third party wholesalers, direct sales, and value added resellers. Furthermore, the company also sells a variety of third party products and services through its online and retail stores (Lüsted, 2012).
Through its management, Apple is focused on the provision of innovative solutions and products to its clients. This has been ensured by its overall business strategy that aims at controlling the design and the development of hardware and software for all its products. This leverages its unique capacity to engage in the design and the development of its own hardware, application software, operating system in the provision of customers with new products and solutions (Morris et al, 2014).
Managing innovation at Apple Company
The combination of business model innovation and product innovation has been considered as the contributing factors in the company’s position in the market. This is based on the realization that the current market is approximately 30 times larger than the initial market. These approaches to innovation management also helped in the expansion of the company’s share of the traditional computer market (Morris et al, 2014). Novel products in the market contributed to enhancing customer loyalty. The iPod for instance, increased the level of customer attachment to the company and its products. This helped in boosting the sale of other products from Apple. Customer attachment to the company was not only because of the types of products offered by the company but also in the quality and the innovative nature of the products compared to other products and services in the market.
In many companies, the greatest frequency of distribution and dislocation can be attributed to shortening the lifecycles of the business models. However, the contemporary market is characterized by the emergence of new global competitors and the migration of assets and activities to low cost countries (Morris et al, 2014). Furthermore, the systematic risk is growing considering that global business is becoming more interconnected. There is also the emergence of social and corporate actions. These factors necessitate companies to bolster and accelerate their levels of innovation. Business model innovation provides a new way of thinking in how to renew a company’s competitive advantage and how to reignite growth in the highly competitive and challenging environment (Morris et al, 2014). For Apple, business model innovation is more than a competitive insight that confers a reliable competitive advantage. This is because this approach to innovation is often systematically cultivated, supported and managed explicitly
Value proposition and innovation at Apple Inc
For Apple company, value proposition is considered partly as determined by the level engagement that consumers can achieve with a product in terms of range of features, frequency of use the services that can be accessed. The higher the level of engagement, the higher the value proposition that a product can achieve (Morris et al, 2014). Value proposition provides answers to the question, what products is being offered to whom. This is an expression of explicit choices along the dimensions of target segments, products and service offering and the revenue models.
In terms of customer demographics, iPhone mainly targets individuals aged 18-35. This means that the primary target for the company is the youthful population of students and young professionals. iPhone is integrated with stylish appearances, sensitive tough, operational camera, and easy to use technology among other multiple applications that appeal to the sense and demand so the target customer (Hart-Davis, 2016). One of the factors driving the sales of the iPhone is the brand name. iPhone belong to Apple company which has established itself as a highly competitive brand in the technological market this is because of the quality and the innovative nature of the products and services that the company offers (Hart-Davis, 2016). The iPhone attracts image conscious customers whose main concern is their status in the society and among peers or friends. Apple has been able to produce different lines of the same products such as iPhone 6s, which is not only fashionable but also operate on the latest technology (Hart-Davis, 2016).
Other than addressing the needs of status and fashion in the society, the iPhone is also a mini-computer, which allows customers to access information from the internet. In addition, the device also provides entertainment to the customers considering that it is incorporated with portable music and video services. In addition, through other applications such as phone calls and social media service, iPhone 6s provides the customer with a platform of socializing and communication to different individual across the world hence promoting social integration maiming members of the society (McFedries, 2016). Socializing on these sites has been enhanced by the installed cameras, which allow customers to take photographs or videos and upload onto their social networking pages using their devices. iPhone 6s just ice all the other Apple products and services such as the iPod and the iPad provide the users with a platform of social inclusion. The innovative nature of Apple products keeps the customers updated in terms of the latest technology available in the market. In addition, by providing trendy applications and products the company has been able to maintain its position as one of the most innovative companies in the world today (McFedries, 2016).
Product or service offering
Apple Company provides its clients with varieties of products and services at different prices and with the ability to perform varied activities. This is based on the realization that customers are varied in terms of their needs and expectation of products. The contemporary society is interconnected through the internet (Morris et al, 2014). This means that for Apple to maintain its position in the competitive market it must provide its customers with internet-enabled mobile phones as a way of enhancing their communication irrespective of their location. This explains why iPhone 6s is internet enabled and that it supports Wi-Fi, dual-band and hotspot applications (Hart-Davis, 2016). Other related services that enable communication and virtual interconnection include the camera and social networking applications. Through the camera, individuals can communicate using applications such as Skype (Hart-Davis, 2016).
The need to secure information in the phone has made it possible for Apple to introduce different security measures in the iPhone. For instance, iPhone 6s uses the fingerprint sensor when unlocking the phone. This guarantees security to confidential information stored by the user in the phone (McFedries, 2016).
In terms of entertainment needs, iPhone 6s has a memory capacity of 16 GB, 64 GB, and 128 GB. The provision of variety of memory capacities is based on differences in the needs of the customers with regard to the amount of data needed to be stored in the phone (McFedries, 2016). The iPhone supports the use of loudspeaker and 3.5-millimeter jack pin. In addition, through its high quality camera, ability to support high quality video and 4.7 inches LED screen, iPhone 6s provides users with an effective entrainment platform (McFedries, 2016).
Other than the use of social media for communication, iPhone 6s also provides users with the ability to communicate through phone calls, instant messaging, and short message services. These allow communication among users without the need for internet connectivity hence enhancing social integration (McFedries, 2016).
Innovation at Apple has been a major contribution factor doe the company in terms of the establishment of a competitive advantage and in the compensation that it receives from these innovations. For instance, since the introduction of the iPhone 6s and other highly innovative products Apple has been able to produce approximately $2 million in revenue per employee (Hart-Davis, 2016). This has established Apple as a performer and a dominant player in the technology industry with regard to product and service innovation. Three factors have been essential in driving the innovation attributes and the high levels of compensation with regard to revenue. These include continuous innovation, high-level secrecy with the process of product development and continuous brainstorming on the future products of the company. In 2015, following the launch and overwhelming sale of iPhone 6 the company announced record profit largely derived from massive iPhone sales (Hart-Davis, 2016). In its 2015, financial report the company recorded $18 billion in profits. This was considered record profit because it was higher than the previous profit records that had been held by other successful companies such as ExxonMobil, which recorded approximately $3 billion in profits alone. Other than the profits, in 2015, Apple recorded revenue of $74 billion. Put in perspective, the revenue record by Apple is greater than the Gross Domestic Product of some European countries (Hart-Davis, 2016).
Value chain analysis of Apple Company entails an analytical approach, which helps in the identification of business activities, which create value and competitive advantage. In terms of its inbound logistics, Apple involves hundreds of suppliers from different parts of the world and maintains a highly sophisticated supply chain management (Morris et al, 2014). The company’s purchase commitments cover its requirements for about 5 month. The management employees the strategy of getting suppliers to compete to ensure that the company acquires high quality supplies for product and service development (Schneiders, 2011).
More than 100,000 fulltime employees and about 5,000 temporary employees and contractors conduct the company’s operations. Majority of the company’s hardware products are currently by outsourcing partners who are mainly located in Asian countries. Furthermore, a small number of outsourcing partners mostly located in China conducts majority of the manufacturing activities (Schneiders, 2011).
In terms of outbound logistics, the company’s net sales through its direct and indirect channels count for 30% and 70% of the total net sales respectively. Cost considerations have necessitated the company to introduce strategies aimed at the minimization of the volume of its inventory. Throughout the 2014 financial year, Apple incurred $2 billion in inventory compared to $170 billion in sales in 2013.
In marketing and sales, Apple sells its products and services using four channels of distribution. The company’s marketing budget of $1 billion s often spent on utilization of marketing communication mix, which integrates advertisement, public relations, direct selling, events, and experiences (Hart-Davis, 2016).
Apple Company offers exceptional quality of customer service in all three stages of marketing and sales. These are the pre-purchase, during purchase and in post purchase. One way by which the company has been able to facilitate the provision of high quality customer service is by maintaining Apple experience centers in major markets where the potential and actual customers can use the company’s products and become convinced of their quality (Lüsted, 2012). The company trains its sales personnel on customer service techniques and in the knowledge of their products to ensure that they have the capacity of demonstrating product features and capabilities to the customers (Lüsted, 2012). Post purchase customer services are considered a unique quality of the company. This enables the creation of an association between the company and the clients hence facilitating the success of iPhone trade in programs. These programs allow iPhone users to engage in projects aimed at upgrading their mobile phones to relatively newer models at additional costs (Lüsted, 2012).
Through its network of suppliers, Apple outsources variety of products and services essential in the development of highly innovative products that meet the demands of the customer. When the outsourced products and services are merged with the resources available at Apple, the company establishes its competitive advantage (Schneiders, 2011).
The value chain below is an illustration of the context in which Apple Company has been able to deliver value to its customers with iPhone 6s.
The functionality of the iPhone makes it attractive for individual of different demographic backgrounds. Compared to the price of its competitors, the IPhone’s price is relatively higher. The high price of Apple products is associated with the high cost of production. This is because for the company to ensure that it is successful in the provision of innovative products it invest billions of dollars in research and development initiatives (Hart-Davis, 2016). In addition, the company outsources some of its component products from other countries and this contributes to the relatively high price of its products. However, as a way of mitigating the high prices, Apple through the management is seeking ways of cutting cost by reducing the amount of outsourced components and encouraging innovation within the United States (Lüsted, 2012).
Apple Company recorded approximately $18 billion in profits since it is a brand that attracts customers loyal to the company. Majority of the target customers emanate from relatively high social classes and therefore their main area of focus is not in the price of the product but the needs that the product can satisfy (Hart-Davis, 2016). This makes it the responsbility of the company through its management to provide customers with innovative and high quality products while considering less of the costs incurred. A group of loyal customers in different markets across the world guarantees the company steady market as it continues to innovate and develop more products to establish its competitive advance in the technological market. As a way of ensuring that it spreads its cost of production, the company produces varieties of iPhone 6s. These varieties are in the form of color of package and memory capacity. This makes it easier to sell to diverse customers hence not only regaining the cost of production but also making profits, which provide the company with a technique of development (McFedries, 2016).
A sustained and enhanced competitive advantage is only realizable in a situation where the organization develops structures that encourage employees to be involved in innovation. The contemporary technological market is characterized by innovations aimed at improving customer experience and sales of companies (Morris et al, 2014).
At Apple, the concept of innovation from an organizational perspective was a mechanism, which was applied in an attempt to the changing conditions of the technological market, development in technology and the need for market expansion. This necessitated the production of newer products and services (Müller, 2014). This was enhanced by the ability of the organization through its management to create a platform of renovating ideas and knowledge of new products. iPhone was a concept developed to revolutionized the word of mobile technology, internet use and entertainment. The company needed a strategy that could help in attract more customers, retain existing customers, and improve on the level of loyalty of the customers (Müller, 2014). Research and development was an essential strategy in the development of the iPhone. This is because for the company to be able to establish a competitive advantage there was need to improve the capacities of its product. These were in terms of the size of the phone, memory capacity, ability to multi-task, improved security measures, enhanced mobile entrainment and ability to communicate through phone calls, message services and internet enabled communication platforms (Müller, 2014).
In terms of organizational capacity to manage innovation, Apple Company operates on the assumption that for the realization of superior business performance, it is the responsbility of the company to ensure large-scale investment in innovation capacity (Morris et al, 2014). As a leader of innovation, the company considers innovation capacity to be more than research and development since every sector of the organization requires some level of restructuring to accommodate any innovation initiatives. The company also perceives innovation as an element of competitive advantage and a mechanism enhancing the creation of new knowledge and links to future innovative activities (Morris et al, 2014).
Apple’s innovation management strategies
New products such as iPhone 6s delivered to the customers by the company involves an innovation strategy characterized by embracing innovative business models (Shalley et al, 2015). The company has been successful in the delivery of high quality software in magnificent hardware and in attractive packaging one of the techniques that Apple has continuously used in maintaining its competitive advantage is by hiring innovative minds with the desire of creating products that could provide solutions to existing technological problems (Shalley et al, 2015). The recruitment and selection process is not only based on the academic qualifications of the interest applicants but also in their ability to demonstrate the use of talent and creativity in the provision of solutions to existing problems (Morris et al, 2014).
In the process of creating new products and services, Apple does not only focus on the outward appearance but also on the functionality of the product in relation to existing operations. For instance, in the development of the iPhone, Apple incorporated services and functions available in the iPod. This led to the creation of a product that could not only perform the operations of an existing product but also perform additional activities such as making telephone calls and short message services (Morris et al, 2014).
The management at Apple has been considered effective in ensuring continuous innovation because the company’s commitment to innovative approaches is not process driven but cultural. Some of the most successful product as Apple such as the iMac, iPod and the iPhone were started by without formal structures and with little corporate oversight. Individuals such as Steve Jobs were able to use these ideas in the development of a company that has continued to innovate over the years (Lüsted, 2012). This is an indication that through an effective and culturally founded innovative system, the company has been able to harness creativity in its stakeholders by stimulating ideas and streamlining the design process in ways that enable successful launching of profitable and relevant innovations (Lüsted, 2012).
Through its innovation management, Apple has continuously demonstrated the essence of developing user friendly devices through its design process. The ergonomics that the company employs while designing its products enable effective operationalizing of its devices while at the same time ensuring high standards in the quality and general appearance of these products (Morris et al, 2014).
Additional innovation management techniques that the company has been able to use include innovative partnerships and venture acquisitions. Apple leverages it diverse culture of innovation and processes through the creation of partnerships and networks with suppliers in different parts of the world. This has enabled the company to seize new opportunities in the market and experience exponential growth in business (Müller, 2014). This means that innovative partnerships form an essential part in the development of the company’s innovation strategy. The company’s venture investing and acquisition strategy is relatively aggressive enabling Apple to say ahead in the technological industry. Inasmuch as the company makes relatively fewer acquisitions compared to its competitors such as Microsoft, the few acquisitions are often based on the best approaches through which the acquired companies will fit into Apple’s strategies in an attempt to integrate its operations with external projects (Müller, 2014). For Apple Company, acquisitions are only made based on the realization that they have the ability of adding essential features to existing product lines or in expanding the operation of the company into new markets. The realization of the need to expand its operation explains why in 2010 Apple spent $275 million in the acquisition Quattro Wireless, a mobile advertising company. Through this acquisition, Apple has been able to strengthen its mobile network portfolio considering that the acquisition gave Apple a competitive ground against Google’s dominance (Müller, 2014).
Apple Company Inc. is a technological company involved in the design, manufacture, and marketing of technological products and services such as mobile communication devices, personal computers, and portable video and music players. Through its effective management of innovation, Apple has continuously demonstrated the essence of developing user friendly devices through its design process. The ergonomics that the company employs while designing its products enable effective operationalizing of its devices while at the same time ensuring high standards in the quality and general appearance of these products. iPhone 6s is one of the technological revolutions of the company has a memory capacity of 16 GB, 64 GB, and 128 GB. The provision of variety of memory capacities is based on differences in the needs of the customers with regard to the amount of data needed to be stored in the phone.
Hart-Davis, G. (2016). Teach yourself visually iPhone 6s. Indianapolis, IN : John Wiley & Sons,
Lüsted, M. A. (2012). Apple: The company and its visionary founder, Steve Jobs. Minneapolis,
MN: ABDO Pub.
McFedries, P. (2016). iPhone 6s. Indianapolis, IN : John Wiley & Sons
Morris, L., Ma, M., & Wu, P. C. (2014). Agile innovation: The revolutionary approach to
accelerate success, inspire engagement & ignite creativity. Hoboken, New Jersey : Wiley
Müller, C. (2014). Apple’s approach towards innovation and creativity: How Apple, the most
innovative company in the world, manages innovation and creativity. München: GRIN Verlag.
O’Grady, J. D. (2011). Apple Inc. Westport, Conn: Greenwood Press
Schneiders, S. (2011). Apple’s secret of success – traditional marketing vs. cult marketing.
Shalley, C. E., Hitt, M. A., & Zhou, J. (2015). The Oxford handbook of creativity, innovation,
and entrepreneurship. Oxford ; New York : Oxford University Press