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How Apple Is Organized for Innovation

• Joel M. Podolny
• Morten T. Hansen

When Steve Jobs returned to Apple, in 1997, it had a conventional structure for a company of its size and scope. It was divided into business units, each with its own P&L responsibilities. Believing that conventional management had stifled innovation, Jobs laid off the general managers of all the business units (in a single day), put the entire company under one P&L, and combined the disparate functional departments of the business units into one functional organization. Although such a structure is common for small entrepreneurial firms, Apple—remarkably—retains it today, even though the company is nearly 40 times as large in terms of revenue and far more complex than it was in 1997. In this article the authors discuss the innovation benefits and leadership challenges of Apple’s distinctive and ever-evolving organizational model in the belief that it may be useful for other companies competing in rapidly changing environments.

It’s about experts leading experts.

Idea in Brief

The challenge.

Major companies competing in many industries struggle to stay abreast of rapidly changing technologies.

One Major Cause

They are typically organized into business units, each with its own set of functions. Thus the key decision makers—the unit leaders—lack a deep understanding of all the domains that answer to them.

The Apple Model

The company is organized around functions, and expertise aligns with decision rights. Leaders are cross-functionally collaborative and deeply knowledgeable about details.

Apple is well-known for its innovations in hardware, software, and services. Thanks to them, it grew from some 8,000 employees and $7 billion in revenue in 1997, the year Steve Jobs returned, to 137,000 employees and $260 billion in revenue in 2019. Much less well-known are the organizational design and the associated leadership model that have played a crucial role in the company’s innovation success.

• Joel M. Podolny is the dean and vice president of Apple University in Cupertino, California. The former dean of the Yale School of Management, Podolny was a professor at Harvard Business School and the Stanford Graduate School of Business.
• MH Morten T. Hansen is a professor at the University of California, Berkeley, and a faculty member at Apple University, Apple. He is the author of Great at Work and Collaboration and coauthor of Great by Choice . He was named one of the top management thinkers in the world by the Thinkers50 in 2019. MortentHansen

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Apple Five Forces Analysis & Recommendations (Porter’s Model)

This Five Forces analysis gives insights into the external factors influencing Apple’s success. Michael E. Porter’s Five Forces analysis framework is a strategic management tool for evaluating the five forces affecting the business organization: customers, suppliers, substitutes, new entrants, and competitors. This Five Forces analysis of Apple Inc. sheds light on what the company does to ensure industry leadership. Despite the negative effects of external factors in the competitive landscape of the computer software and hardware, consumer electronics, and online services markets, Apple’s mission statement and vision statement are fulfilled through relevant business goals and strategies. Based on this Five Forces analysis, the company addresses competitive forces and external factors through effective leaders, such as Tim Cook. This Five Forces analysis indicates external factors that Apple’s strategic efforts must focus on to keep its leadership in the industry.

Based on the Five Forces analysis model, external factors in Apple’s industry environment point to competitive rivalry or intensity of competition, and the bargaining power of buyers or customers as the primary forces for consideration in the company’s strategic planning. Nonetheless, all five forces influence the company’s business situation, together with the effects of other external factors, such as the industry and market trends identified in the PESTLE/PESTEL analysis of Apple Inc .

Summary: Five Forces Analysis of Apple Inc.

Apple’s generic competitive strategy and intensive growth strategies are partly based on competitive forces in the external business environment. These forces limit or reduce the firm’s market share, revenues, profitability, and business development potential. This Five Forces analysis points to the following strengths or intensities of competitive forces in Apple’s industry environment:

• Competitive rivalry or competition: Strong force
• Bargaining power of buyers or customers: Strong force
• Bargaining power of suppliers: Weak force
• Threat of substitutes or substitution: Weak force
• Threat of new entrants or new entry: Moderate force

Recommendations. Considering the results of this Five Forces analysis, Apple must focus its attention on competitive rivalry and the bargaining power of buyers. This external analysis supports the company’s current position of continuous innovation. Innovation and the business competitive advantages shown in the SWOT analysis of Apple address the five forces in the external environment, although much of the company’s effort is for strengthening its position against competitors and for attracting customers to its products. An applicable course of action is to intensify research and development for innovation to develop novel products that complement iPhones, iPads, and other current products. Apple can also improve its support and resources for software or app developers, to strengthen the company’s ecosystem of hardware, software, and online services against the competitive challenges identified in this Five Forces analysis.

Competitive Rivalry or Competition with Apple (Strong Force)

Apple faces the strong force of competitive rivalry or competition. This component of Porter’s Five Forces analysis model determines the intensity of the influence that competitors have on each other. In Apple’s case, this influence is based on the following external factors:

• High aggressiveness of technology firms (strong force)
• Low differentiation of many products (strong force)
• Low switching cost (strong force)

Competitors’ aggressiveness in innovation and marketing imposes a strong force in the information technology industry environment. In the market for consumer electronics, software, and Internet services, Apple competes with Google (Alphabet) , Microsoft , Samsung, and Sony . In the video-streaming market, Netflix , Disney , Amazon , and Facebook (Meta) compete with Apple TV Plus. This Five Forces analysis also considers other technology firms, such as IBM and Intel , which influence Apple’s competitive environment. Moreover, in terms of product differentiation, products in the market are generally similar in fulfilling specific purposes. For example, many popular apps are available for Android and iOS devices, and cloud storage services from different companies are similar and available to users on different platforms. In this Five Forces analysis of Apple, such a condition creates a strong force by making it easy for customers to switch to other sellers or providers. On the other hand, the low switching cost means that it is easy for customers to switch from Apple to other brands, based on price, function, accessibility, network externalities, and related concerns. The combination of these external factors in this part of the Five Forces analysis leads to tough competitive rivalry that is among the most significant considerations in Apple’s strategic management.

Bargaining Power of Customers/Buyers (Strong Force)

The bargaining power of buyers is strong in affecting Apple’s business. This component of Porter’s Five Forces analysis model determines how buyers’ purchase decisions and related preferences and perceptions impact businesses. In Apple’s case, buyers’ strong power is based on the following external factors:

• Small size of individual buyers (weak force)
• High availability of information to buyers (strong force)

It is easy for customers to change brands, thereby making them powerful in compelling Apple to ensure customer satisfaction. On the other hand, each buyer’s purchase is small compared to the company’s total revenues. In this Five Forces analysis of Apple, such a condition makes customers weak at the individual level. However, the availability of detailed comparative information about competing products’ features empowers buyers to shift from one provider to another. This external factor enables buyers to exert a strong force in the industry, although promotional strategies and tactics in Apple’s marketing mix (4P) can communicate tailored information to persuade customers to buy the company’s products. Thus, this part of the Five Forces analysis shows that Apple must include the bargaining power of buyers or customers as one of the most significant strategic variables in the business.

Bargaining Power of Apple’s Suppliers (Weak Force)

Apple Inc. experiences the weak force or bargaining power of suppliers. This component of the Five Forces analysis model indicates the influence of suppliers in imposing their demands on the company and its competitors. In Apple’s case, suppliers have a weak bargaining power based on the following external factors:

• Moderate to high number of suppliers (weak force)
• Moderate to high overall supply (weak force)
• Large size of some equipment and component manufacturers (strong force)
• High ratio of firm concentration to supplier concentration (weak force)

The global size of its supply chain allows Apple Inc. to access many suppliers around the world. In Porter’s Five Forces analysis context, the resulting high number of suppliers is an external factor that presents only a weak to moderate force against the company. Also, the moderate to high overall supply of inputs, such as semiconductors, makes individual suppliers weak in imposing their demands on Apple. However, some large suppliers, such as OEMs and producers of chips, significantly influence the industry. Nonetheless, in this Five Forces analysis case, the high ratio of firm concentration to supplier concentration limits suppliers’ power and influence in the industry. This external factor reflects the presence of a small number of big companies, like Apple and Samsung, in contrast to a larger number of medium-sized and large suppliers. Thus, this part of the Five Forces analysis shows that the bargaining power of suppliers is a minor issue in developing Apple’s operations management strategies for supply chain management, value chain effectiveness, innovation, and industry leadership.

Threat of Substitutes or Substitution (Weak Force)

The competitive threat of substitution is weak in affecting Apple’s computing technology, consumer electronics, and online services business. This component of the Five Forces analysis framework determines the strength of substitute products in attracting customers. In Apple’s case, substitutes exert a weak force based on the following external factors:

• Moderate to high availability of substitutes (moderate force)
• Low performance of substitutes (weak force)
• Low buyer propensity to substitute (weak force)

Some substitutes for Apple products are readily available in the market. For example, instead of using iPhones, people can use digital cameras to take pictures, and landline telephones to make calls. In this Five Forces analysis of Apple, such an external factor exerts a moderate force in the industry environment. However, these substitutes have low performance because they have limited features. Many customers would rather use Apple products based on convenience and advanced functions. This condition weakens the force of substitution in impacting the company’s business in this Five Forces analysis context. Also, buyers have a low propensity to substitute. For instance, customers would rather use smartphones than go through the hassle of buying and maintaining a digital camera, an analog phone, and other devices. This part of the Five Forces analysis shows that Apple does not need to prioritize the threat of substitution in management decisions for business processes, like marketing, market positioning, and product design and development.

Threat of New Entrants or New Entry against Apple (Moderate Force)

Apple Inc. experiences the moderate force or threat of new entrants. This component of Porter’s Five Forces analysis model indicates the possibility and effect of new competitors entering the market. In Apple’s case, new entrants exert a moderate force based on the following external factors:

• High capital requirements (weak force)
• High cost of brand development (weak force)
• High capacity of some potential new entrants (strong force)

Establishing a business to compete with Apple Inc. requires high capitalization. Also, it is extremely costly to develop a strong brand to compete with large companies, like Apple. These external factors make new entrants weak in this Five Forces analysis case of the IT business. However, there are large firms with the financial capacity to enter the market. For example, Google has already done so through its consumer electronics. Samsung also used to be a new entrant. These examples show that there are large companies that have the potential to directly compete with Apple Inc. in multiple markets. Thus, the overall threat of new entry is moderate. This part of the Five Forces analysis shows that Apple must maintain its competitive advantages through innovation and marketing to remain strong against new entrants’ moderate competitive force.

• Apple empowers small businesses to grow and serve their customers .
• Apple Inc. – Form 10-K .
• Apple introduces global developer resource for labs, sessions, and workshops .
• Apple scores record 13 Academy Award nominations .
• Jahan, S. A., & Sazu, M. H. (2023). Role of IoTs and analytics in efficient sustainable manufacturing of consumer electronics. International Journal of Computing Sciences Research, 7 , 1337-1350.
• Sforcina, K. (2023). Digitalizing Sustainability: The Five Forces of Digital Transformation . Taylor & Francis.
• U.S. Department of Commerce – International Trade Administration – Software and Information Technology Industry .
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Rebuilding Trust: Apple Crisis Management Case Study

Crisis management is an essential skill for any business, as even the most successful companies can find themselves in challenging situations that threaten their reputation and bottom line. 

One such case that garnered significant attention and scrutiny is the Apple crisis. 

Apple, the tech giant known for its innovation and loyal customer base, faced a crisis that put its brand and reputation at risk. 

In this blog post, we will delve into the Apple crisis management case study, exploring the challenges faced by the company, the strategies implemented to navigate the crisis, and the lessons learned from their experience. 

By examining Apple’s crisis management approach, we can gain valuable insights into the importance of proactive crisis management and its impact on businesses in today’s hyper-connected world.

Let’s dive in and learn more 

Overview of Apple’s history and brand image

Apple, founded in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne, has emerged as one of the most influential and valuable companies in the world. The company’s journey began with the creation of the Apple I, a personal computer that laid the foundation for their future success.

Over the years, Apple revolutionized various industries, introducing groundbreaking products such as the Macintosh, iPod, iPhone, iPad, and Apple Watch.

One of the key factors contributing to Apple’s success is its unwavering commitment to innovation. The company’s ability to anticipate and meet consumer needs with cutting-edge technology has consistently set it apart from its competitors. Apple’s products are renowned for their sleek designs, user-friendly interfaces, and seamless integration across its ecosystem.

Beyond its products, Apple has cultivated a distinctive brand image that resonates with consumers worldwide. The company’s brand is synonymous with excellence, creativity, and a forward-thinking mindset. Apple’s marketing campaigns, such as the famous “Think Different” slogan, have fostered a sense of aspiration and uniqueness among its customers.

Furthermore, Apple has successfully built a loyal and passionate community around its products. The Apple ecosystem encourages users to remain within the brand’s ecosystem, promoting customer retention and brand loyalty. This devotion is evident in the enthusiastic anticipation and high demand for new Apple product launches.

Explanation of the crisis situation faced by Apple

Apple, a company known for its strong brand image and customer loyalty, faced a significant crisis that posed a considerable challenge to its reputation. The crisis situation arose when reports and allegations surfaced regarding unethical labor practices in Apple’s supply chain.

These reports highlighted issues such as poor working conditions, excessive overtime, child labor, and inadequate safety measures in some of the factories producing Apple products.

The crisis was exacerbated by extensive media coverage and the viral spread of information through social media platforms. News outlets, consumer advocacy groups, and concerned individuals amplified the allegations, putting pressure on Apple to address the situation swiftly and transparently.

The crisis not only raised ethical concerns but also posed a threat to Apple’s brand image. The company’s reputation for innovation, quality, and customer satisfaction was at risk of being tarnished by association with these labor controversies.

Apple was faced with the challenge of not only addressing the immediate issues within its supply chain but also effectively managing the perception of its commitment to social responsibility and ethical business practices.

Factors that led to the crisis

The crisis faced by Apple regarding unethical labor practices in its supply chain was influenced by several factors that contributed to the emergence and escalation of the issue.

• Globalized Supply Chain: Apple’s success as a global technology leader relies on a vast and complex supply chain spread across various countries. The company sources components and assembles its products through a network of suppliers and subcontractors worldwide. The extensive reach of this supply chain increases the difficulty of monitoring and ensuring ethical practices at every stage.
• Outsourcing and Cost Pressures: To remain competitive, companies like Apple often outsource production to regions with lower labor costs. This outsourcing, while driving efficiency and cost savings, can sometimes lead to compromised labor standards. Suppliers under cost pressures may resort to exploitative practices such as excessive working hours, low wages, and poor working conditions to meet demand and maintain profitability.
• Lack of Supply Chain Transparency: Managing a complex supply chain poses challenges in terms of visibility and transparency. Apple, like many other companies, faced difficulties in monitoring and enforcing labor standards across its entire supply chain. The lack of transparency made it challenging to identify and address ethical issues promptly, allowing problems to persist and potentially escalate.
• Limited Supplier Oversight: Despite Apple’s efforts to implement supplier codes of conduct and auditing processes, the sheer number of suppliers and subcontractors involved made it challenging to maintain stringent oversight. This resulted in instances where unethical labor practices went undetected or were inadequately addressed.
• Social Media and Activism: The rise of social media platforms and increased activism empowered consumers, workers, and advocacy groups to expose and publicize the labor issues within Apple’s supply chain. The widespread dissemination of information and the ability for individuals to amplify their concerns quickly led to significant reputational risks for the company.

Impact of the crisis on Apple’s brand and reputation

The following are key impacts of the crisis on Apple’s brand and reputation:

• Brand Perception : The crisis undermined Apple’s carefully cultivated brand image. The allegations of unethical labor practices tarnished the perception of Apple as a company that prioritizes the well-being of its workers and upholds high ethical standards. The negative media coverage and public scrutiny eroded trust and raised doubts about the authenticity of Apple’s commitment to responsible business practices.
• Consumer Trust: Apple’s loyal customer base, which had been drawn to the company for its innovative products and perceived values, was confronted with allegations of worker exploitation. This eroded the trust and loyalty that customers had placed in Apple. Concerned consumers started questioning the ethics behind their purchasing decisions and may have become hesitant to support the brand.
• Investor Confidence: The crisis had implications for investor confidence in Apple. The negative publicity and potential ethical implications affected the perception of Apple’s risk management practices and corporate governance. Investors may have raised concerns about the company’s ability to effectively manage supply chain risks and protect its brand value, leading to potential impacts on the company’s stock price and shareholder sentiment.
• Reputational Damage: The crisis resulted in significant reputational damage for Apple. The labor controversies received widespread media attention, leading to negative headlines and public discourse about the company’s ethical standards. This damage extended beyond Apple’s core customer base, reaching a broader audience and potentially influencing perceptions of the brand among potential customers and stakeholders.
• Competitive Disadvantage: The crisis also created a potential competitive disadvantage for Apple. Competitors in the technology industry could capitalize on the negative publicity and position themselves as more socially responsible alternatives. Apple’s reputation for innovation and quality alone might not be sufficient to counterbalance the ethical concerns raised by the crisis.

Apple’s Crisis Management Strategy 

Following are key aspects of Apple crisis management strategy:

Immediate response to the crisis

When faced with the crisis of unethical labor practices in its supply chain, Apple swiftly initiated an immediate response to address the situation. The company recognized the gravity of the allegations and understood the importance of proactive crisis management.

The following are key aspects of Apple’s immediate response strategy:

• Acknowledgment and Investigation: Apple promptly acknowledged the allegations and expressed its commitment to investigating the issues thoroughly. The company recognized the need for transparency and took responsibility for addressing the labor concerns within its supply chain.
• Supplier Audits: Apple conducted comprehensive audits of its suppliers to assess the working conditions, labor practices, and adherence to ethical standards. These audits aimed to identify non-compliant suppliers and gather detailed information to formulate appropriate corrective actions.
• Collaboration with Suppliers: Apple worked closely with its suppliers to address the identified issues and enforce compliance with ethical labor standards. The company engaged in open dialogue, sharing its expectations and implementing measures to improve working conditions and protect workers’ rights.
• Supplier Code of Conduct: Apple reinforced its supplier code of conduct, which outlines the expectations and requirements for ethical labor practices. The company communicated the code clearly to all suppliers and emphasized the importance of compliance. Non-compliant suppliers were urged to make necessary improvements or face consequences.

Initial actions taken by Apple to address the crisis

During the initial stages of the crisis, Apple took several immediate actions to address the labor concerns and mitigate the negative impact. These actions demonstrated the company’s commitment to resolving the issues and improving working conditions within its supply chain.

The following are some of the key initial actions taken by Apple:

• Supplier Engagement and Remediation: Apple actively engaged with its suppliers to address the identified labor issues. The company worked collaboratively with suppliers to develop and implement remediation plans that focused on improving working conditions, ensuring fair wages, and eliminating unethical labor practices. This approach emphasized corrective actions rather than simply severing ties with non-compliant suppliers.
• Worker Empowerment Programs: Apple recognized the importance of empowering workers and ensuring their well-being. The company implemented programs to educate workers about their rights, provide channels for reporting grievances, and establish mechanisms for feedback and improvement. These initiatives aimed to empower workers and create an environment where their voices were heard.
• Enhanced Supply Chain Transparency: Apple took steps to improve supply chain transparency, making information about its suppliers more readily available. The company published annual reports that detailed its supplier responsibility initiatives, audits, and progress made in addressing labor concerns. This transparency aimed to build trust among stakeholders and hold Apple accountable for its actions.
• Collaboration with Industry Peers: Apple actively collaborated with other industry leaders and stakeholders to address the systemic challenges within the technology supply chain. By partnering with organizations and sharing best practices, Apple sought to drive industry-wide improvements in labor practices and create a more sustainable and ethical supply chain.

Crisis containment and damage control

In addition to the immediate response, Apple implemented crisis containment and damage control measures to limit the negative repercussions of the labor crisis. The company recognized the importance of effectively managing the situation to protect its brand and reputation.

The following are key actions taken by Apple for crisis containment and damage control:

• Clear Communication: Apple developed a comprehensive communication strategy to address the crisis. The company proactively communicated with stakeholders, including customers, employees, investors, and the public, to provide updates on the progress made in resolving the labor issues. Transparent and timely communication aimed to rebuild trust and maintain transparency throughout the crisis.
• Public Statements and Apologies: Apple’s top executives issued public statements acknowledging the gravity of the situation and expressing apologies for any harm caused. The company took responsibility for the issues within its supply chain and emphasized its commitment to remediation and preventing similar incidents in the future. Public apologies were crucial in demonstrating accountability and a willingness to learn from the crisis.
• Continuous Improvement and Reporting: Apple emphasized continuous improvement by regularly reporting on its progress in addressing the labor crisis. The company shared annual reports, sustainability updates, and supplier responsibility progress reports to showcase the strides made in improving working conditions and upholding ethical practices. Transparent reporting aimed to rebuild trust and demonstrate Apple’s ongoing commitment to accountability.

05 lessons learned from Apple Crisis Management Case Study

These lessons learned from Apple crisis management case study can serve as valuable takeaways for other organizations facing similar challenges. 

Let’s discuss each of these:

Proactive auditing and monitoring

Apple learned the importance of proactive auditing and monitoring of its supply chain to identify and address potential issues. Regular audits and inspections help ensure compliance with ethical standards and allow for early intervention and remediation.

Transparent communication

The crisis highlighted the significance of transparent communication with stakeholders. Apple realized that timely and honest communication about the crisis, its causes, and the steps taken to address it was essential for rebuilding trust and maintaining transparency.

Supplier collaboration and support

Apple recognized the need for collaboration and support with its suppliers. The company learned that working closely with suppliers, providing resources, guidance, and training, helps improve ethical practices and strengthens the overall supply chain.

Long-term commitment

Apple understood the importance of a long-term commitment to addressing the crisis and preventing future incidents. The company recognized that sustainable change requires ongoing efforts, continuous improvement, and a steadfast commitment to ethical practices and responsible business conduct.

External validation and partnerships

The crisis highlighted the value of external validation and partnerships. Apple sought certifications and accreditations from recognized third-party organizations to provide independent verification of its efforts. Collaborating with industry peers, NGOs, and advocacy groups allowed Apple to gain insights, share best practices, and drive collective change.

Final Words 

Apple crisis management case study provides valuable insights into how a company can navigate and recover from a crisis while minimizing the negative impact on its brand and reputation. The labor crisis presented Apple with significant challenges, but the company responded with a comprehensive and strategic approach.

Ultimately, Apple crisis management case study highlights the significance of a holistic approach that goes beyond immediate crisis response. By taking responsibility, implementing meaningful actions, and fostering a culture of responsible business conduct, a company can rebuild trust, enhance its reputation, and position itself as a leader in ethical practices and sustainability

About The Author

Tahir Abbas

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Home » Management Case Studies » Case Study: The Business Strategy of Apple

Case Study: The Business Strategy of Apple

Apple Inc is a multinational American company that design and sells computer software, consumer gadgets and personal computers. It was co-founded by Steve Jobs , Steve Wozniak and Ronald Wayne. Apple Inc is well-known for being innovative as they kept on producing new innovations from the first Apple computer Macintosh to the more recent iPhone and iPad series.

Today Apple Inc. is very well known in the world because of their advanced technology in products such as iPods, iPhone, Macbooks, Apple TV and other professional software. All the high tech products provide consumers with a better living standard in many different ways. Moreover, Apple Inc’s dominant position in the global market has changed the trend of consumer usage of electronic appliances such as in virtual communication. People will never need to carry multiple devices where each one only offers a handful of functions. Furthermore, Apple also created a substantial value in highly competitive market and industry which help them to achieve competitive advantages in an industry with stiff competition. In addition, it resolves the other external factors that present difficulty challenges to Apple Inc. Therefore, now Apple Inc is known as a strong company and the market leader in industry. Now, let us discuss about the current expansion strategy that used by Apple that make the company has greater success in marketplace.

The first strategy that use by Apple Inc for their current expansion strategy is creating innovative idea that slightly different from the competitors that already exists in market and industry. In order to make the company more innovative, Steve Jobs focused innovation on competitive pressure and value proposition by stressing his management style on customer center innovation and customer experience. As CEO in Apple, Steve Jobs carefully evaluated competitive pressure and opportunity in market place by continuously pursuit customer experience innovation. He also focused their business and IT strategy on customer center experience. It means that Apple will be more focused on looking outwards, market and business drivers rather than at the products or services that already exist. Steve Jobs focused on this strategy because the customers can help the company to understand what customers need and scarcity of the people so that he can use the feedbacks as inspiration to deeply investigate and then to create more innovative, creative and highly advanced technological product or services that can fulfill the needs of the customers. Therefore, Apple products design is always attractive and elegant compared to those existing competitors. Apple products like iPods and iPhones are good examples that show the innovation of Apple Company by creating digital lifestyle .

The second strategy applied by Apple is differentiation . Apple is using Macintosh as operating software whereas other personal computer’s producers are using Windows. The differentiation in operating software gives Apple a competitive advantage in the personal computer industry. Macbook users are satisfied with Macintosh performance because it is very energy saving where the processor will automatically “close” those programs which are not in use when it is in standby mode. On the other hand, Windows does not have such technology. Thus, Windows’ users might have to charge the laptop more often due to the battery consumption is higher than Macintosh.

In terms of design, Apple came out with an ultra-thin Macbook Air which is extremely thin compared to those existing laptops. To those consumers who prefer lighter and thinner laptops will definitely be attracted to the Macbook Air. Apple does not produce laptops in various colors like Dell or Hewlett Packard to increase the choices for consumers. However, to those consumers who are concerned about technology and high performance, Apple is still the preferable choice.

In terms of applications and software, Appstore provides a platform for customers to download software and applications according to categories. It is easy to search for any application or software by using Appstore. iTunes allow consumers to categorize and download songs easily . By using iTunes, consumers can choose their preferable album cover for their songs. They can also “synchronize” and update the songs in their iPhone with a laptop. Besides that, iTunes also allow consumers to transfer photos from iPhones to PCs.

As for pricing, Apple is using skimming pricing strategy where they set high selling price for their products. However, there are still a lot of loyal customers who prefer to spend more money on Apple products. This is due to the self esteem where consumers feel good by carrying Apple products because it somehow shows their status as being up-to-date and their taste is better than others. Some customers think that Apple products are not cheap but also not high-priced products because the value of Apple products bring to them is never disappointing.

Other than that, Apple is using specialization strategy where they customized customer’s laptop according to their requirements. Customers are required to add in features into the laptop which can serve them better. Beside this, Apple also emphasizes customizability on the part of entertainment that offer computer-build for high performance such as gaming. Gaming plays important roles to help Apple to customize in features and specification to make the products more attractiveness and creativity.

In a nutshell, the key to Apple’s success is down to creating a unique product with the ability for it to be customized to suit each individual’s needs.

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This is a popular strategy case, based upon a survey of strategy instructors. Click on the Publisher link below to go to the distributor's case page.

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Case description by publisher

At the end of 2014, Apple Inc. recorded the most profitable quarter of any firm in history, and its market capitalization soon topped $700 billion. 'Apple Inc in 2015' explores the history of Apple, its successes under Jobs, its continued growth under Tim Cook, and the challenges facing the company in 2015. With iPod sales continuing their freefall, tablet sales in decline, and the Macintosh's market share remaining small, Apple was increasingly dependent on the iPhone to drive its growth. Could Cook continue Apple's dominance in the smartphone market in the face of growing competition? Could he revitalize the iPad business, become a leader in payments, with Apple Pay, and replicate Apple's success in other device categories, such as the Apple Watch, the first new product the company had released since 2010?

Page West comments

This case may be useful in a couple different parts of a Strategic Management course. First, it enables you to explore how the evolution of industry structure impacts the strategic position and approach of a key player. As the PC industry matured and commoditized through the 1990s, the competitive position of Apple eroded. To facilitate this analysis, there is a good section on the evolution of the PC industry that parallels the story of Apple's development. Second, the case provides rich material to explore the appropriateness of business level strategies (and their necessary resource requirements) at different stages of an industry's evolution – see Chapter 8 of our textbook (Industries and Life Cycles).

Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)

Apple Inc. Strategic Marketing Analysis and Evaluation

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These authors contributed equally.

Apple Inc is an innovative multinational company in the world, which has revolutionized and facilitated the development of the personal electronics devices and the media industries. This case study essentially generated a comprehensive analysis on the current marketing situation of the multinational technology company, Apple Inc, and provided strategic marketing plans recommendation for its future development. Besides, it was carried out through data analysis and a considerable number of secondary literature collection. Our team used PEST (political, economic, social, and technological) analysis and SWOT (strengths, weaknesses, opportunities, and threats) analysis to demonstrate the strengths and challenges of Apple Inc, which were formulated by its related development characteristics and current marketing environment, including political, economic, social, and technological factors. In order to provide specific marketing recommendations, our team did a detailed financial analysis on the product categories and geographical basis.

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Apple Inc. Case Analysis

Apple Inc. is an American multinational technology company headquartered in Cupertino, California, that designs, develops, and sells consumer electronics, computer software, and online services. The company’s hardware products include the iPhone smartphone, the iPad tablet computer, the Mac personal computer, the iPod portable media player, the Apple Watch smartwatch, the Apple TV digital media player, and the HomePod smart speaker. Apple’s software includes the macOS and iOS operating systems, the iTunes media player, the Safari web browser, and the iLife and iWork creativity and productivity suites, as well as professional applications like Final Cut Pro, Logic Pro, and Xcode. Its online services include the iTunes Store, the iOS App Store and Mac App Store, Apple Music, and iCloud.

Apple was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in April 1976 to develop and sell Wozniak’s Apple I personal computer. It was incorporated as Apple Computer, Inc., in January 1977, and sales of its computers, including the Apple II, grew quickly. Within a few years, Jobs and Wozniak had hired a staff of computer designers and had a production line. Apple went public in 1980 to instant financial success. Over the next few years, Apple shipped new computers featuring innovative graphical user interfaces, such as the original Macintosh in 1984, and Apple’s marketing commercials for its products received widespread critical acclaim. However, the high price tag of its products and limited software titles caused problems, as did power struggles between executives at the company. In 1985, Wozniak stepped away from Apple, while Jobs resigned and founded a new company—NeXT—with former Apple employees.

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Apple Inc.: Strategic Management Case

Introduction.

Strategic management involves a continuous process that includes setting targets, implementing them, evaluating them, and making changes where necessary. “As performance results or outcomes are realized at any level of the organization, organizational members assess the implications and adjust the strategies as needed” (Lamb, 2000). In today’s constantly changing business environments, management strategies have to be flexible enough to allow a business to adapt to new needs and opportunities. It is supposed to be a continuous effort aimed at achieving a business’ long and short-term objectives (Oxford Business Group, 2008).

According to Selznick (2000), “the strategic management process is up of four elements; situational analysis, strategic formulation, strategy implementation, and strategy evaluation”. When developing a strategic management plan, the elements are implemented in a specific order aimed at achieving ensuring necessary improvements in a business (Jensen, 2000.). “Situational analysis is an important step when a business is formulating its mission statement. It involves scanning and evaluating the organizational context, the external environment, and the organizational environment” (Ansoff, 2003).

Different organizations will use different techniques and tools among them being communication and observation. A company’s internal environment is an important consideration in the process and key factors include employees, management, shareholders, and their interaction (Pommerening, 2007).

Another important element is strategy formulation which involves designing an organization’s objectives and strategies to achieve them. This step is necessary when evaluating an organization’s strengths and weaknesses. The formulation is further divided into different levels such as corporate, operational, and competitive (Drucker, 2000). The strategies are also divided into the short and long term.

The third element is strategy implementation where all the formulated strategies are put into work. “It involves developing steps, methods, and procedures to execute the strategies and it also includes determining which strategies should be implemented first” (Chafee, 2005). The last element is strategy evaluation which involves measuring the strategies’ results and how well they have worked. It includes putting in place metrics and time scales, all of which should be realistic and achievable (Hudson, 2010).

Organization analysis: Case study Apple Inc.

For a business to successfully implement their strategy, there needs to be clearly defined mission and vision statements (Tahir, 2008). The business must also have what they consider as their core competency. “It outlines the overall goals of a company, guides decision-making and gives the company a sense of direction” (Daft and Dorothy, 2009). Vision on the other hand defines what a company intends to achieve in future in terms of its strategic direction (Levinson, 2005).

It offers a long term view of what a business would want to be or the business’ fundamental objective. Core competency in any business refers to a unique factor, which the business considers as being fundamental to the way it operates (Kessler, 2000). Core competencies are supposed to have a positional advantage applicable to many products and should not be easily imitable by competitors (Cleland and Lewis, 2006).

Apple Inc. is among the global organizations that have used strategic planning to maintain good positions in their industries. Its mission statement is:

Apple’s business strategy leverages its ability, through the design and development of its own operating system, hardware, and many software applications and technologies, to bring to its customers around the world compelling new products and solutions with superior ease-of-use, seamless integration, and innovative industrial design (Miller, 2010).

Its vision statement is “Introducing innovative, high quality consumer electronics to the masses through impressive performance and leadership” (Miller, 2010)

The company’s core competences are its marketing mix, technology and their product Lifecycle Management (PLM). Technology and design have allowed the company combine functionality and beauty. Its marketing mix puts together all the P’s (Product, Price, Placement and Promotion) to give its customers an intuitively working product.

Apple’s internal and external analysis

Apple’s strong market presence has been influenced by different factors. Its iPhone market has grown from 21% to 25.3% in the last four years. Bigger gains have been predicted for the business. Apple is considered one of the most successful companies in the consumer electronics industry. The company’s iPod product and the iTunes music store is currently enjoying a market lead and giving the business good revenues.

Swot analysis

Pest analysis, political-legal factors.

Apple has an international presence, making it vulnerable to global legislation and regulations. Since different countries have different legislation concerning consumer electronics and their trade, Apple may be restricted in some regions and denied opportunities in viable markets. Regional trade such as the European Union offers the company enormous potential by making it possible to operate in bigger markets under the same regulations. Political unrest in different regions, such as the ongoing riots in Arabic countries and terrorism, largely impacts Apple’s overall business operations and revenues. “Since Apple largely relies on access to intellectual properties from third parties, it is constantly faced with infringe issues in different countries” (Bach, 2010). Legal suits against it may then impact its reputation and costs it a lot of money. Different environmental regulations in different countries may be a challenge for the business in its attempt to comply to all of them.

Economic factors

Economic environments in different countries largely affects Apple’s revenues and profits. The recent global crisis and reduced profits for Apple was a good example of just how big a factor the global economy is for it. A slow economy growth in recent years has resulted in a slow growth rate for Apple due to decreased consumer spending. In the educational segment, Apple has faced decreased sales, after many governments cut their expenditures in their educational sectors in recent times due to the global crisis. Any products dependent on foreign supplies affect the company’s costs of operations and profit margins. Tariffs and tax rates also differ in different markets, causing fluctuations in the company’s revenues.

Social-cultural factors

Apple’s products are embraced differently in its many markets. Computers and internet usage in developed countries has been much higher than in developing markets. Currently, computers, phones and other consumer electronics are experiencing increased demand in almost all markets. This presents a good opportunity for Apple and has resulted in better revenues for the company. Education is a priority for many nations today, a key factor in Apple’s business.

Technological factors

New problems in the market call for new solutions each day and this demands that Apple keeps pace (Harrison and Edward, 2007). Technology forms the basis of Apple’s business and therefore, the business cannot afford to offer outdated products in the market. As more and more people appreciate technology, Apple is forced to invest more in technological innovations and development. Technology therefore has a major influence on how Apple does business and its results.

Environmental audit

“Apple’s environmental record has been marred with conflict and confrontations by different environmental organizations for promoting non-recyclable hardware components” (Bach, 2010). In 2003, different organizations led by Greenpeace campaigned against Apple’s chemical policies especially in relation to their use of BFRs and PVS in their products. In 2008, the company was listed last among the greenest electronic companies by Climate Counts. Through its continued environmental efforts, Climate Counts ranked Apple first in the same list this year. The Environmental Protection Agency also ranks Apple highly in the list of most environmentally conscious companies.

“Apple’s designs ensure that its products use less material, are free of toxic substances, are as recyclable as possible, and are shipped in smaller packaging” (Bach, 2010). The company follows strict environmental standards from its manufacturing, to transportation, product use and finally recycling. Its designers and engineers pioneered the development of small, thin and light products to minimize amounts of raw materials used. Its engineers also ensure that the raw materials they use have the lowest levels of toxic materials possible and suppliers are put to task to ensure that they only supply raw materials free of such toxins. Packaging and transportation is done in such a way that it minimizes toxic emissions to the environment and products are designed is such a way that they use minimum energy, giving environmental advantages to the final consumer. “Most of Apple’s products today meet and exceed the energy star guidelines for energy efficiency” (Bach, 2010).

Porter’s generic strategies

“If the primary determinant of a firm’s profitability is the attractiveness of the industry in which it operates, an important secondary determinant is its position within that industry” (Thompson and Strickland, 2000, Pg. 11). A business succeeds in a market through its power to act effectively, ability to influence a system and strength to multiply the outcome of its strategy. In his analysis of business strategies, Michael Porter argues that a business’ strength can fall into the cost advantage or the differentiation category (Fuller, 2007). Porter discusses the cost leadership strategy, focus strategy and the differentiation strategy. “The cost leadership strategy calls for being the low cost producer in the industry for a given level of quality” (Nag, 2006). It is not one of Apple’s strategy and instead, the company has chosen to implement the focus and differentiation strategies.

The focus strategy has found a place in Apple Inc. For most of its products, Apple has concentrated on a high class market segment. As a result, it enjoys better customer loyalty than most of its competitors, a factor that discourages them from direct competition with Apple. Through this strategy, Apple has also been able to develop strengths in the markets it has focused on. A major risk in this strategy is imitations, which Apple has been able to curb by using unique technologies that imitators may not have access to.

Even though the focus strategy has been applied in Apple Inc., the company has focused on the differentiation strategy by developing unique products with attributes that keep its customers loyal. The products’ uniqueness adds value to them, making the favourable regardless of their price. As a result, Apple is able to charge a premium price for some of them. This way, the business can easily afford the costs that go into making its products unique. When the company’s cost of production goes up, it is able to easily pass it down to the consumers, who may not be able to enjoy the services anywhere else other than in Apple’s products.

Apple has been able to succeed using a differentiation strategy by implementing several internal strengths. It has established a good reputation for quality for itself and has ensured it stays as the best firm in terms of innovations. The company’s stable financial position allows it access to the best research technologies. The position also allows Apple the privilege of being able to hire and retain the best designers and software developers. The company invests enough on advertisements and its financial status allows it to hire the best talent in the marketing industry, perfectly capable of making the products’ strengths well known in the market.

Competition analysis

Apple’s business strategy has allowed it stay ahead of the competition for a long time now. The company develops its own hardware and software and is an expert in doing so, giving it an advantage in cost saving and products’ perfection. It’s niche audience protects the company from the effects of competition on the basis of price. Since its customers are more concerned about the products’ quality and experience, they are hardly influenced by price competitions in the market. Utilizing the web technology and marketing has also accorded the business a major advantage. The brand enjoys a strong brand loyalty and its healthy financial position and low debt level allows the business to take advantage of new opportunities.

Porter’s five force analysis

The consumer electronics market is not yet mature, offering Apple opportunities to experiment. Apple’s brand identity is strong putting it in a better position to market itself. Microsoft’s windows OS and media player for video and music still remain a big competition for Apple. Rivalry in the OS and computer hardware market still remains a challenge especially in the Linux applications. There are many upcoming online music stores with similar features to those of Apple such as Napster while other companies now have music playing devices such as MP3.

Supplier power

Apple’s market is experiencing a positive growth as it establishes a presence in more countries. However, lack of substitute inputs poses as a major challenge for the company. Apple’s processors suppliers include IBM and Motorolla, both companies with high bargaining powers. Strategic alliances between suppliers Apple will offer the business considerable advantages. Its music suppliers such as BMG, Warner and Sony are all big companies with high bargaining powers. A strategic alliance with Apple’s competitors will harm Apple’s online music store, which is among the company’s strongest products.

Barriers to entry

Due to high levels of competition today, Apple may not enjoy absolute cost advantages as it tries to penetrate new markets. In its existing markets, Apple’s brand identity serves as an advantage, making it hard for new entrants to gain market share. Its financial position also makes it easy to meet the capital requirements for new markets and fight new entrants’ strategies. However, there is a bigger threat from businesses offering streaming video and audio technologies such as Verizon. “There is also a threat for new entrants who come with disruptive technologies” (O’Grady, 2009b).

Buyer power

Apple’s brand identity once more offers Apple a big advantage over its competitors. The company ensures buyers have the right information about its products through advertisements and Apple stores. Many countries are today experiencing positive economic growth, which results in bigger buyer volumes (Werther and David, 2011). Price sensitivity is an issue of concern and may play a key role in product differentiation. Apple’s products are much more expensive and may discourage buyers in the low end markets.

Threat of substitutes

Due to high costs of doing business in many parts of the world, switching costs are high. A majority of consumers of Apple’s products exhibit brand loyalty, minimizing their inclinations to substitutes. As a result, performance is not very much affected by new the entrance of new products.

Strategic planning

Current strategy.

Apple has focused on a differentiation strategy to stay ahead of its competitors so far. Its business strategy is centered around attracting and keeping new customers, building a bigger market share and staying ahead of its competitors. Its rule since the beginning has been to design their own software to work on their hardware and not to use anybody’s else. This strategy has raised complains from different competitors but customers don’t seem to mind. They are willing to trade freedom for quality and efficient alternatives. In regard to communication, the company has now developed and adopted a “never talk to the press” strategy after too much publicity which almost ruined their reputation under the leadership of the former CEO. By doing this, the company is able to shut down rumors easily. It does not leak out new products until it is ready to announce and then uses the same discipline to create huge attention and coverage with new announcements.

Apple’s initial approach to staying ahead in the industry was to acquire small businesses with products that can be easily integrated into the company’s products and business. “A good example is their 2002 acquisition of Emagic which led to creation of Apple’s digital audio workstation software” (Miller, 2010). “Apple’s first acquisition happened in1998 when they acquired Network Innovations and since then the business has acquired more than five small companies, the biggest number of acquisitions taking place in 2002 with five acquisitions” (Linzmayer, 2004). The company enjoys a world wide presence with offices in almost every region of the world.

The other approach to its business strategy is making sure it stays ahead of the competition and being in a position that allows it to easily influence the market. Competitors at the moment don’t seem to have a real solution to the company’s inventions which means they remain very powerful in the market with an amazing advantage over the competitors. The company has in the recent past announced that its product iPod touch is the best selling portable game machine in the world. Any company making games therefore would want to ensure that its product is compatible with Apple’s products. Apple enjoys much more power over its competitors, business partners and even stakeholders due to the kind of reputation it has built for itself.

Over time, the company has developed a policy which allows them a good relationship with its customers by having shops all over each country they have establish a market in. This way, customers are able to make connections easily, ask questions and have technical problems solved easily. Its relationship with suppliers and other stakeholders has been without major hitches in the past, helping Apple earn trust in its external environments.

Even though Apple has faced several challenges with its reputation as an employer, especially in the Asian region, it still remains one of the most attractive companies for talented professionals. Good salaries, benefits and rewards have made it easier for Apple to attract highly skilled people in the labour market, and most importantly retain them. Retention saves the business a lot of money that would have otherwise been used for recruitments and training new employees. Apple also allocates a big percentage of its budget on training and team building, allowing the employees an optimum performance.

The company has a better financial status than most of its competitors right now making it more attractive to organizations seeking partnerships in the market such as music content providers. Apple has a stable business model, a big market share, a high level of technology and ability to keep inventing new products, factors which keep it at the top and once more favourable to consumers. Other strategies for Apple include consistency, education sales, developing products that deliver, outsourcing most of its operations, new innovations and attractiveness.

Strategic plan for the future

Apple Inc. seems to have everything in place for a brighter and better future. However, it still has areas which need to be addressed if the company has to stay at the top. The company’s reputation as an employer is under threat after proven allegations that one of its contracted manufactures in China has been overworking employees and paying them badly. “Foxconn company has been accused of having more than 200,000 workers living in the factory and working for over 60 hours a week”” (Bach, 2010). It is for this reason that the company needs to put more emphasis on labor audits. The strategy will help the company retain most of its employees and attract better talent in the market.

The company is also faced with challenges in its advertisements. Even though it has very professional commercials, the adverts are criticized for giving very little information to the consumer. The business’ future strategy must include better advertisement methods that will help Apple’s customers make more informed decisions. The company’s digital rights management doesn’t allow easy sharing of content and this is causing a lot of criticism from both the competitors and customers. This could be a potential threat for the company as it could cause content providers to withdraw if they got better offers. With proper considerations, the company’s future strategy should include a revision of this policy to allow its customers access more content from the competitors’ online stores.

Strategy evaluation and selection

Apple’s hardware and software integration has received a major step after it introduced its own iPad’s chipset. As a result, the company will not need the third party chips from other designers, making it less independent of third parties. It will have cost saving effects on the business and it will help it make a chip that meets the specific needs of its products. Other bigger manufactures of chipset include Qualcomm and Nvidia, who Apple is hoping to outperform. According to O’Grady (2009a), “Apple has moved from buying something off the rack to buying something where they have the pieces and they can tailor it themselves to their unique body shape”. The A4, chipset is one of the pieces expected to be very successful.

Apple seems to be moving away from the adobe Flash, which is currently still commonly used for access and use of video and animation products. “This campaign is aimed at steering its customers to its iTunes and app stores, where they can find video content and applications that replicate the flash content, often at a price” (Linzrr, 2010). The companies strategy is to move more things to the app store from the web. This also allows the company attract a lot of attention from the developers, giving it an advantage.

The computer making industry still holds a lot of potential for Apple. Currently, Dell seems to be a real threat to Apple in the computer industry by offering affordable products. Just like it has done with its digital products, Apple is investing on developing high quality and unique computers and taking advantage of its global presence to sell them. Another area of major focus for Apple is solving the current challenges it is facing such as poor employment terms and advertisement strategies. The business needs to offer more information about its products to its customer when advertising them. It also needs to carry more employment audits to ensure its reputation as an employer remains intact.

Strategic management involves a continuous process which includes setting targets, implementing them, evaluating them and making changes where necessary. “As performance results or outcomes are realized at any level of the organization, organizational members assess the implications and adjust the strategies as needed” (Lamb, 2000). Many business today appreciate the concept of strategic management as they try to adapt to constantly changing business environments and consumer needs. It has become an important tool as organizations try to meet their short and long term goals.

“Strategic management is reliant on an organization’s capacity to maximize trends, express decisions by constantly reassessing progress and on the availability of enough resources” (Karami, 2007, Pg. 20). An important resource in this process include efficient and enhanced management and organizational structures. Other important resources include competent employees, financial capability to launch new strategies and strong business tools. Lastly, time is an important resource in strategic management.

In strategic management, targets and timescale are relevant in evaluating the bench-marked outcomes (Hage, 2007). Time as a resource must be used well when implementing strategies and the only way to tell whether this is being done is by using timescales. A good strategy is one that is timely and relevant for the business at that period (Sharma and Mark, 2004). Timescales must be realistic and put in place in consideration to the available resources. Smaller businesses with less financial capacities might take long to implement strategies (Shonfield, 2001).

Reference list

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Bach, B., 2010. Implications of enabling technologies for Apple Inc . Ohio: South-Western College Publishers.

Chafee, E., 2005. Three models of strategy. Academy of Management Review , 10(1), p. 200-258.

Cleland, D. and Lewis, R.I., 2006. Project management; Strategic design and implementation . New York: McGraw-Hill Professional.

Daft, R. and Dorothy, M., 2009. Understanding management . Mason, OH: South-Western Cengage Learning.

Drucker, P., 2000. The practice management . New York Harper.

Freeman, P.R., 2007. O rganizational ethics . New Jersey: Berrett Kohler Publishers.

Fuller, M.A., 2007. S ustainable stakeholder strategy: An investigation of stakeholder inclusion, strategic domains and competitive advantage . New York: Routledge.

Hage, M., 2007. Management concerns: Towards an economic theory on management and governance . Assen:Van Gorcum.

Harrison, J.S. and Edward, R.E., 2007. Management: Survival, reputation and success. New Haven: Yale University Press.

Hudson, E., 2010. Strategic management . Web.

Jensen, M.C., 2000. Value maximization and strategic management theory . Web.

Karami, A., 2007. Strategy formulation in entrepreneurial firms . Aldershot[u.a]: Ashgate.

Kessler, E., 2000. Innovation Speed: A concept model of context, antecedents and outcomes. Academy of Management Review, 21 (4), pp. 1143.

Lamb, R., 2000. Exploring strategic management . Englewood Cliffs, NJ: Prentice Hall.

Levinson, J.C., 2005. Guerrilla Marketing, Secrets for making big profits from your small business . New York: Houghton Muffin.

Linzmayer, O, W., 2004. Apple confidential 2.0: The definitive history of the world’s most colorful company . San Francisco, Calif.: No starch Press.

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Nag, R., 2006. What is strategic management really? Inductive derivation of a consensus definition of the field. Strategic Management Journal , 28(9), p. 935-955.

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Pommerening, T., 2007. Strategic changes for business models . Norderstedt: Druck Books.

Selznick, P., 2000. Leadership in Administration: A sociological Interpretation. Row:Peterson, Evanston.

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Tahir, M., 2008. Marketing Strategy of businesses today . Pakistan: Blekinge University Publishers.

Thompson, A. and Strickland, A., 2000. Strategy formulation and implementation: tasks of the managers . Homewood, IL:Irwin.

Werther, W. and David, C., 2011. Strategic corporate responsibility . Los Angeles: SAGE.

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