Contents

 

Abstract

 

1 Introduction

 

2 Core competences and dynamic capabilities: Apple and its competitors

2.1 Core competences and dynamic capabilities

2.2 Core competences and dynamic capabilities of Apples main competitors

2.3 Core competences and dynamic capabilities of Apple Inc.

 

3 Important strategic options for Apple

   3.1 Strategic Alliance

3.2 Mergers and acquisitions

 

4 Evaluation: Steve Jobs leading the innovation

4.1 The diffusion of innovation inside Apple

4.2 Breakthrough innovations of Apple

 

5 Conclusion

Abstract

 

Apple Inc. is without question one of the most impressive and successful corporation in nowadays global competition. This report shows three issues about Apple in order to explore the strategic features of it. Firstly, the core competences and dynamic capabilities of Apple and its competitors (IBM, Dell) are analyzed, and it shows that proactive and systematical innovation, and distinctive customer experience are critical for Apple’s success. Then the discussion is about Apple’s strategic options including strategic alliance and M&A activities which Apple should consider to make use of. The last part is to evaluate how Steve Jobs’ return changed Apple with his leadership and the following innovations about consumer electronics and entertainment of Apple.

 

Analysis and Evaluation of Corporate Strategy: Apple Inc. Case Study

 

1 Introduction 

 

Apple Inc. is one of the most successful corporations which adopts a innovative, global strategy, and has created its own culture and has substantial amount of enthusiasts of its products all over the world. And these successes all started with the return of Steve Jobs in 1997, who initiate all the remarkable changes in Apple and introduced iMac, iPod, iTuens, iPhone, and iPad. People keep talking about how Jobs and Apple change the world, which makes it meaningful to study the features and practices Apple have presented. It is beneficial for getting a better understanding of the strategic issues of corporation in the global contexts.

 

This report contains three parts. The first part focuses on the core competences and dynamic capabilities of Apple and its competitors, Dell and IBM. It is to be discussed  both theoretically and practically to illustrate why and how these competences and capabilities are important. The second part is about two of the most common strategic options (strategic alliance; mergers and acquisitions) and also discussed how should Apple benefit from those options. The third part is to evaluate Steve Jobs’ return, in that he initiated the innovation diffusion across the value chain of Apple and also generated astonishing innovation in different industries. In this part, Jobs’ spectacular strategic leadership is discussed. The conclusion is to be provided at the end of the report.

 

2 Core competences and dynamic capabilities: Apple and its competitors

 

2.1 Core competences and dynamic capabilities

 

The concept of core competences was first promoted by Hamel and Prahalad (1990), who suggested it as something that a company owns and can benefit customers, be leveraged to a large range of markets/products, and is hard to imitate by others. Johnson, et al. (2006) also defined that core competences are ‘the activities and processes through which resources are deployed in such a way as to achieve competitive advantage in ways that others cannot imitate or obtain’. It can be seen that core competences should have uniqueness (usually in a deep level so that the competitors cannot imitate). Actually, core competences can more specifically explained as ‘the collective learning’ inside the company, which considers more in the skills, technology and knowledge dimension (Hamel and Prahalad, 1990).

 

It should be noticed that core competence is different from capabilities, because core competences focus more on the particular point in the value chain and capabilities encompass the whole value chain and are more broad (Stalk, et al., 1992). Furthermore, Gorman and Thomas (1997) distinguish the concepts including resources, capabilities, and competences and claim that normal resources are more tangible, capabilities can be seen as less tangible and process-oriented resources, and competences are resources and capabilities which can add extra values.

 

It is clear from these views that core competences are different from capabilities for a company. And the concept ‘dynamic capabilities’ stress more the ability of the company can cope with changes in the dynamic conditions, renew and recreate their capabilities to meet the requirements of the changing circumstances (Wang and Ahmed, 2007). Also, according to Helfat, et al. (2007), dynamic capabilities can be concluded as ‘the capacity of an organization to purposefully create, extend or modify its resource base’. There can be gradual improvements or radical innovation for a company to adopt, and even a minor enhancement could possibly leads to dramatic change and affecting the competitive position of the company in the market (Salvato, 2009). Therefore, it is crucial for corporations to have sufficient dynamic capabilities. Actually, the concept dynamic capabilities is actually something built on the concept of core competences, which focus on the adjusting the competences to the environmental changes

 

To sum up, it is important for a corporation which intends to create its competitive advantage in the fierce competition to have its own unique core competences, and it is also of great significance to keep dynamic capabilities for companies to deal with the possible changes and innovations (this is especially important for the computer-related industry in which the changes seem common). In the following paragraphs the core competences and dynamic capabilities of Apple and its competitors are about to be evaluated.

 

2.2 Core competences and dynamic capabilities of Apples main competitors

 

In this part, two of the main competitors of Apple Inc. are chosen and their core competences and dynamic capabilities are to be evaluated.

 

IBM

IBM is a corporation which have great reputation and capacity on its technology (especially, hardware), once reached 40 percent of the computer industry sales in mid-1980s. However, in the early 1990s the performance of this corporation began to fall and was on the edge of total disaster by 1993. After the transformation brought about by the appointment of new CEO Lou Gerstner, the corporation began to change its strategy (IBM Archives, 2011). The core competence began to change from technology and quality of products to services and solutions. As Gerstner claimed, ‘customers would increasingly value companies that could provide solutions – solutions that integrated technology from various supplier … integrated technology into the processes of the enterprise’ (Harreld, et al. 2007) This strategy have been executed until now – It is not that IBM do not pay attention to their technology and products anymore, the only thing changed is their strategic focus. Some recent examples, like the ‘Open Client Offering’ software and ‘Project Big Green’, both focus on offering customers great solutions as a whole. They managed to transform the great but a little tardily developed technology giant into a service-concerned new corporation which considers how to provide the package of technology to customers in order to practically solve problems instead of just offering technology itself. This transformation of core competence of IBM proves the importance of dynamic capabilities are of great importance for corporations to adapt to the environments.

 

Dell

Dell has a firmly established market position which depends on its unusual core competence – its famous sophisticated direct selling model. By selling the customized computer to the customers directly without the intermediaries, they greatly limit the cost (both time and money) hence have great revenue all over the world. The vital point of this strategy is to build direct connection with customers, which is not just limited to the ‘direct selling’, but also associated networks, services, solutions, etc. The direct model with gives Dell the core competence for its remarkable success in computer industry.

 

As shown by Datamonitor (2011), Dell faces two threats in nowadays market: fierce competition and possible declining PC market. Dell seems not adaptable sometimes when facing the changing environments and the competition, as a result, in 2006, Dell lost its lead to HP. However, on the basis of the existing competence, Dell keeps expanding and seeking new opportunity to develop. One of the major change initiated by Dell is through acquisitions. In 2010 and 2011, Dell acquired KACE, Scalent and Boomi to boost its performance on software industry. Also, Dell turns to new program in 2007 to improve its products design. These changes shows that the efforts made by Dell to keep competitive advantage in the dynamic contexts.

 

2.3 Core competences and dynamic capabilities of Apple Inc.

 

After evaluating the core competences and dynamic capabilities of IBM and Dell, it is clear that large corporations have their own distinctive way to achieve success and have the ability to improve or change accordingly in the dynamic environments. Apple has different features with the aforementioned ones, with the also remarkable core competence. Indeed, there are many advantages of Apple and its products: Just think about the innovative products such as MAC, iPod, iTunes, iPhone and iPad, and the iOS system which is perfect with Apple’s product. However, the basic characteristic which results in all these capabilities is their core competences in two aspects.

 

Proactive and systematical innovation This is the most critical reason why Apple can create products even before the market needs are revealed. In iPod-iTunes example, Apple managed to create a new model of business and made a revolutionary change in music industry. Same thing happens in iPhone case, as it redefine the mobile phone industry. And the iPad created the market for tablet computer. It is likely that Apple has made proactive innovation a habit, which is based on systematically coordinated people, teams, processes and practices which has been established since Steve Jobs took charge of the company in 1997.

 

Distinctive customer experience Apple products have stylish design which is based on the perfectionism of Steve Jobs, which prove to be very welcome for customers. Apple distinctively offers hardware, software, and operation system for its products, which is hard to compare or imitate by its competitors, and have brought substantial advantage in customer experience. The superb customer experience finally result in the cult-like Apple enthusiasm around the world which greatly contribute to the brand image, and become an exceptional feature of Apple Inc.

 

The proactive innovation system of Apple and its constant concern about customer experience makes it almost perfect in dynamic capabilities – their strategy is actually creating the trend. During the recent years, Apple has kept its distinctive quality to attract the customers almost without the sign of declining in the increasing competitive environment.

 

3 Important strategic options for Apple

 

In this part the focus is on the evaluation of strategic options such as strategic alliance and mergers and acquisitions and the way how Apple can take advantage of these options.

 

3.1 Strategic Alliance

 

As defined by De Wit and Meyer (2004), strategic alliance is ‘a partnership or network involving two or more competitors jointly collaborating to achieve a common goal’. It should be noticed that the conflict between ‘collaboration’ and ‘competition is especially crucial in this topic (Amaldoss, et al. 2000). In the context of global corporation strategy, strategic alliance is usually chosen by corporations which intend to enter a specific market and seek cooperation with local firms. By the means of joint venture, license agreements, franchising, etc., strategic alliance can help to achieve the aims such as technology and skills improvement, easy entry to new market, sharing financial resources and creating competitive advantages (Gümüs and Apak, 2011).

 

For Apple Inc., it is not always entirely satisfactory on strategic alliances when entering new markets. How Apple use alliance with China Unicom from 2010 to promote iPhone series in China is a good example. China Unicom is the second largest mobile networker operator in China which intends to take this opportunity to expand its market share in China and to boost its smartphone sales, while Apple wants to promote its products and enter the Chinese market with great potential. However, the alliance has not been going very well since Apple believes China Unicom fails to reach the sales aim and China Unicom claims that Apple do not offer enough stock. In the meantime, Apple stores in China and stores of China Unicom, who both sell iPhones, involve in the pricing competition, which makes the alliance more fragile and unstable. It can be seen that Apple’s strategy in China stumbles after the alliance. To avoid the possible serious problems in strategic alliance, it is vital for Apple to take the three steps suggested by Luffman et al. (1996): determining the aim and express it clearly; critically evaluating the potential partner; and reaching agreement concerning crucial success factors. The strategic alliance should be well managed by Apple if the positive results would like to be achieved. The culture problem should be understood – to avoid unnecessary disputes between Apple and its partner like China Unicom. And another important thing is to clarify the role and get a mutual understanding to avoid the future confusions of responsibilities.

 

3.2 Mergers and acquisitions

 

As defined by Johnson, et al. (2009), acquisition is ‘where an organization takes ownership of another organization’ and merger is ‘a mutually agreed decision for joint ownership between organizations’. There might be complex motivations for a company to execute M&A strategy, but there are a few major ones: seeking synergy, getting entry of new markets/products, externally obtaining capabilities, increasing the size, etc.(DePamphilis, 2010). However, as mentioned by Reuvid (2007), 50 – 80 percent of all acquisitions are unsuccessful because of not generating expected benefits, costing too much and problematic implementation. Due to the considerable failure rate of M&A activities, corporations should take every step carefully, especially for those companies with global strategies like Apple.

 

In Apple’s history, Steve Jobs’ return was led by an acquisition of NeXT, which is without doubt one of the most important events for Apple. However, until 2010 Apple only acquired 11 small companies since Jobs’ return, which are far fewer than its competitors (Burrows, 2010). It seems the companies have much less intention on this, and their M&A activities are less organized (ibid, 2010). Considering that the main competitors participate in M&A in a remarkable pace and have some positive effects (Dell, using it as a main strategy for dynamic change, and Google bought many companies including Motorola), Apple should also consider getting involved this, correctly, of course, to benefit its shareholders’ value.

 

According to Reuvid (2007), the most important issues leading to success of M&A activities are doing the right deal, generating value, and doing both efficiently. For a special corporation which has its particular culture, Apple should consider step by step if the acquisition is suitable instead of just copying the more radical M&A strategy of the competitors, like Google. However, the other thing should be aware of is that Apple should also get involved in the M&A activities especially in the emerging markets on the basis of not damaging its brand identity. At last, things should be done efficiently, otherwise the AdMob failure might happen again (Google swooped in to buy the company when Apple was still in the negotiation with them).

 

4 Evaluation: Steve Jobs leading the innovation

 

In this part, the strategic leadership of Steve Jobs is to be evaluated, mainly focusing the diffusion of innovation across the value chain of Apple and the breakthrough innovation of Apple’s consumer electronics and entertainment.

 

4.1 The diffusion of innovation inside Apple

 

According to Rogers (2004), diffusion of innovation is a complicated process that the innovations become adopted in the whole social network. The innovative change inside Apple can be seen as the diffusion of innovation across the Apple’s value chain, which is led by the return of Jobs who is a extraordinary strategic leader. As claimed by Kotter (1996), there are eight stages an organization should experience under the innovative leadership, which can be used to evaluate Jobs’ work in Apple.

 

Stage 1: Establishing a sense of urgency

After taking over the corporation in 1997, Steve Jobs managed to remind the Apple group members how emergent the situation was. In this step, the sense of urgency were established inside Apple and people started to understand the need for change.

 

Stage 2: Creating the guiding coalition

Apple has never been in lack of talents and creators. The thing Jobs needed to do is to make a strong team so that the innovative idea can be executed in an organized manner. Actually, Jobs perfectly did that and set ‘innovation’ as the core value of the guiding coalition of talents. This stage established the innovation start from the designing apartment of the corporation.

 

Stage 3: Create a vision and strategy

This stage is critical and Jobs made ‘products’ as his vision for Apple. He believed the innovative and exceptional products are the heart of Apple and reduce the product types of Apple’s production, with more efforts concentrating on their ‘killing’ ones.

 

Stage 4: Communicate the change vision

Steve Jobs is always seen as a transformational leader with fantastic communication skills. This ensured the vision he set could be perfectly transformed as the vision of the whole corporation. ‘Think different’ became the core idea of the legendary giant.

 

Stage 5: Empowering employees for broad-based action

Steve Jobs is always described as a leader who brings both fear and passion, which can be seen as the great power to empower the members in the Apple group. This includes nearly all links of Apple value chain and the innovation began to spread in this company.

 

Stage 6: Generating short-term wins

Under the leading of Jobs, Apple introduced iMac and some following versions, which were innovatively designed which attracted substantial interests of market. The short-term wins motivate the corporation and the morale was boosted.

 

Stage 7 Consolidating gains and producing more change

This is an amazing part because in this stage the innovation has gradually become a part of his corporation. For Apple, it is not strange that they promoted their following products like iPod, iTunes, etc. after the early innovation being consolidated by iMac. More changes were created to lead Apple to a next level.

 

Stage 8 Anchoring new approaches in the culture

Along with those following changes, Apple finally established innovation as the core of their culture. The innovative approaches have been institutionalized and then become their core competence.

 

This process shows how Steve Jobs has changed Apple into a innovative corporation across the value chain of the company. From the new product design and development, Apple spread the idea to the whole company and establish the distinctive culture.

 

4.2 Breakthrough innovations of Apple

 

Although known as a computer company from inception, Apple Inc. has seen more possibilities in other markets. Their vital step is to enter new markets with strategic innovation, which means that the company should break rules in the existing structure and create a new game (Markides, 1997). More specifically, Apple took disruptive innovation approach in their iPod, iTunes, iPhone and iPad products. Disruptive innovations, according to Christensen (1997), are those innovations which introduce new products with different attributes than existing products, and initially are attracted to the emerging market. This approach overturns the rule of the existing game, and would finally invade the mainstream market to be dominant.

 

Jobs introduced iPod in 2000, which initiate the disruptive influence on the music player and the following iPod-iTunes model made a further impact and changed the game rule of the whole music industry. This was a smart strategy, because stepping out of the computer industry which it expert in and seeking competition with Sony in the global music player market were really ambitious yet remarkable move. Apple achieved success relying on its great design and genius marketing. Then Apple decided to entry the mobile phone market – the iPhone smartphone combines the function of mobile phone and computer, and the great market the App store opened was amazingly fascinating so that Apple achieved another success. As Jobs is always good at finding potential needs of customers, he launched another product iPad and create another market – tablet computer which proved to be another success.

 

After Steve Jobs taking over Apple, the corporation began its turnaround. The strategic leadership of Jobs changed the company as well as the computer and consumer electronics industry, which shows how important innovation is for the corporations to achieve success.

 

5 Conclusion

 

In this research about Apple Inc., several critical issues are discussed, analyzed and evaluated. Apple has the core competences in two aspects (proactive and systematical innovation; and distinctive customer experience), which provides the uniqueness of this corporation and creates competitive advantage for the company. IBM and Dell have been used as examples to illustrate the importance of dynamic capabilities, which is also what Apple is good at – to adapt the changing environment.

 

After identifying Apple’s core competences, the more practical part – strategic options for Apple is discussed. One of the options is strategic alliance in the global contexts in order to enter the new markets, in which Apple should pay more attention on the culture elements as well as the role in the alliance; another is called mergers and acquisitions, which have not been Apple’s focus, but still should be emphasized to compete with its acquisitive competitors like Google in the global market.

 

It is also intriguing to study Steve Jobs’ strategic leadership and innovation happened in Apple. After returning to Apple, Steve Jobs successfully reshaped the culture of Apple and managed to make innovation the core idea of the corporation. Their turning to consumer electronics and entertainment market was huge achievement which is led by genius innovative ideas and creative marketing practices.

 

To sum up, Apple Inc. has achieved so much in the global market which proves the importance of innovation and proactive strategies. It is amazing that how ‘think different’ can change a company and the whole world to this extent.

 

References

 

Amaldoss, W, Meyer, R, Raju, J, & Rapoport, A. (2000). Collaborating to Compete, Marketing Science, 19(2), pp. 105-126.

 

Burrows, P. (2010). IS APPLE READY TO GO SHOPPING? (cover story), Businessweek, 4164, pp. 32-33.

 

Christensen, C. M. (1997). The innovator’s dilemma. Boston: Harvard Business School Press.

 

DATAMONITOR (2011). Dell, Inc. SWOT Analysis, pp. 1-11.

 

DePamphilis, D.M. (2010). Mergers, Acquisitions, and Other Restructuring Activitie: An Integrated Approach To Process, Tools, Cases, And Solutions. Amsterdam; Academic.

 

De Wit, B. and Meyer, R. (2010) Strategy Process, Content, and Context International Perspective, 4th Edition, Thomson Learning

 

Gümüs, S. and Apak, S. (2011) Strategies of international growth in enterprises and strategic alliances. Procedia – Social And Behavioral Sciences, 24, The Proceedings of 7th International Strategic Management Conference, pp. 737-744

 

Hamel, G. and Prahalad, C.K. (1990). The core competence of the corporation. Harvard Business Review, 68(3), pp.79-91.

 

Harreld, J.B., O’Reilly III, C.A. and Tushman, M.L.(2007). Dynamic Capabilities at IBM: Driving strategy into action. California Management Review, 49(3), pp.21-43.

 

Helfat, C. E., Finkelstein, S., Mitchell, W., Peteraf, M., Singh, H., Teece, D., & Winter, S. (2007) Dynamic capabilities: Understanding strategic change in organizations. Oxford: Blackwell.

 

IBM Archives (2012).http://www-03.ibm.com/ibm/history/ accessed 23-11-2011.

 

Johnson, G., Scholes, K. and Whittington, R. (2006). Exploring Corporate Strategy, 7th edtion. Harlow: Pearson.

 

Johanson, G., Scholes, K. and Whittington, R. (2009). Fundamentals of Strategy. Harlow: Pearson.

 

Kotter, J.P.  (1996). Leading Change. Boston: Harvard Business School Press

 

Markides, C. (1997) Strategic Innovation. MIT Sloan Management Review. [Online] Available from:   http://sloanreview.mit.edu/the-magazine/articles/1997/spring/3831/strategic-innovation/.   Accessed: 21 November 2011.

 

Reuvid, J. (2007). Mergers and Acquisitions, London: Kogan Page.

 

Rogers, E.M. (2004). Diffusion of Innovations. 5th Edition. New York: Free Press.

 

Salvato, C. (2009) Capabilities  unveiled: The  role of  ordinary  activities in the  evolution of  product development processes. Organization Science, 20(2), pp. 384-409

 

Stalk, G., Evans, P., and Shulman, L.E. (1992). Competing on capabilities: The new rules of corporate strategy. Harvard Business Review, 70, p.158.

 

Wang, C.L. and Ahmed, P.K. (2007). Dynamic capabilities: a review and research agenda. International Journal of Management Reviews, 9(1), pp.31-52.

原文链接:Global Corporate Strategy