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Apple Incorporated is an American multinational corporation founded by Steve Jobs, Steve Wozniaks and Ronald Wayne on April 1st 1976. The company was industrialized in computer software, computer hardware, consumer electronics and digital distribution. It designs, manufactures and market its goods and services. Some of their most popular products of hardware are the MacBook, iPhone, iPad and iPod. For software, they have the OS X and iOS operating system as their leading products. Over the years, Apple Inc. has had 39 acquisitions, purchased 2 company stakes and 5 divestitures. In addition, it has established a unique reputation as well as brand loyalties amongst the consumers. In 2008, Apple Inc. was named most admired company by Fortune magazine. And by 2011, the corporation became the world's third-largest mobile phone maker.
On August 24th 2011, Steve Jobs has resigned as CEO of Apple Inc. due to his health issues and was replaced by Timothy Cook, the current CEO of the company. Even though it has not been a long period of time since Cook took over, significant changes can be seen throughout the company on the grounds of the different personalities of Jobs and Cook.
Apple Inc. continued to thrive despite the changeover from Jobs to Cook, but considering their rich in diversity of their products, we will be focusing on only one of their most successful products which is the iPhone, or more specifically the organization structure of the iPhone division.
What is organization structure? An organization structure is a structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational goals while, managers manage their huge company through their own organization structure. There are two type generic organization structure models which is mechanistic and organic organization. Now let`s take a look at how the Apple Incorporated organization is structured. This will depends on the four basic contingency variables which are strategy, size, technology, and environment.
First, let's look into the strategy part. Apple Inc. is using differentiation strategy to compete with other big companies such as Samsung, Motorola and Google. Differentiation strategy used by Apple Inc. is by having their own OS X and iOS operating system as leading products as mentioned above. For example, iPhone is using iOS which is unique and only Apple Inc. having this type of operating system and it is totally different with its competitors such as Android operating system. Android operating system is applying for most of mobile companies such as Samsung, HTC, Sony Ericsson and LG. Apple Inc. supply the world with the sophisticated technology, but ideas or technology during manufacturing products easy to be leaked out if does not have a proper structure to organize Apple Inc.
The second contingency variable is size. Apple Inc. had 60,400 permanent full-time employees and 2,900 temporary full-time employees worldwide which retrieved from a research on September 24th, 2011.The large amount of Apple Inc.'s employees which exceeding of 2000 or more people is considering a large organization and it is tend to be have more specialization, more departmentalization, more rules and regulation than small organization.
Third is the technology. Technology is the one which transforms the company's inputs into outputs more effectively and efficiently or in other way to say it is the way tasks are accomplished using tools, equipment, techniques, and human know-how. According to a British professor in organization sociology, Joan Woodward's study, she classified it into three categories of core-manufacturing technology which is small-batch product, mass production and continuous-process production and Apple Inc. is applying mass production theory. From the organization structure, we also know that Apple Inc. has a high departmentalization. Mass production is used to create a large number of uniform products in an assembly-line system. Workers are highly dependent on one another, as the product passes from stage to stage until completion. For example, when the hardware engineering department had finished their hardware design, they need to pass it to iOS and OS X department for internal software installation.
Last but not least is the environment. Apple Inc. competes in three main digital media markets which are personal computers, mobile communication devices and services (iTunes). Media market belongs in the dynamic environment. The technology it uses while in this environment need to be continuously improved and updated. If Apple Inc. stops improving and updating the technology, they will fall behind the line of other competitors. A simple and easy way to understand this will be by sampling the iPhone product line. It is highly competitive with several large, well-funded, and experienced competitors (Samsung and etc.).
From the above four paragraph, we know that Apple Inc. is applying mechanistic structure for its company which can centralize decision authority, employees are closely supervised, more specialization, more departmentalization and more rules and regulation to hander it to prevent it news / idea leak out although the environment is dynamic.
Now let`s look at the apple Inc. organizational structure. There are six basic elements of organizational structure while the mechanistic organization naturally is combines from the six basic elements which are work specialization, departmentalization, authority and responsibility, span of control, centralization versus decentralization and formalization and the six basic elements will affect the organisational designs too. Organizational design is the process when managers develop or change the organization's structure to facilitate the attainment of the organizational goals.
Apple Inc. practices work specialization as a norm by dividing their work activities into separate job tasks to ensure that individual employees 'specialize' in doing certain part of task in the production process rather than the entire task. The process is crucial to increase work output as when the employees are concentrating on his/her own particular task, they are able to work more efficiently to accomplish organizational goals. For instance, being a former senior vice president of IOS software, Scott Forstall who is only responsible to work on iPhone software applications and having no other responsibilities regarding the company's matters. This helps the company to generate one of the most prolific software application's inventors. In World Wide Developers Conference (WWDC) 2011, Apple Inc. succeeded in introducing iOS 5, which is a mobile operating system, through Forstall invention.
Departmentalization is also an important element for Apple Incorporated in its organization. Apple Inc. manages its business by practicing territorial departmentalization geographically. The company's operating segments are departmentalized globally in the United States, Japan, Europe and 393 retail stores all over the world. However, Apple Inc. possesses knowledgeable salesperson that can enhance the sales of its company. For example, the global communication department managed by the Katie Cotton, the vice president of the communication department is further departmentalize to other countries such as Europe (The Middle East and Africa) by Alan Hely, Asia Pacific by Jill Tan and Japan by Takashi Takebayashi.
Furthermore, Apple Inc. also demonstrates functional departmentalization in the company by separating the activities into different functional groups. For instance, Craig Federighi who is the senior vice president of software engineering is responsible in the development of Apple Inc.'s software with his team members. In 2009, Mountain Lion was the most successful OS X (a computer software) released in Apple Inc.'s history by Craig Federighi and his team. On the other hand, Phil Schiller, senior vice president worldwide marketing is departmentalizing into marketing function. He was instrumental in the formation and marketing of iMac, iBook, iPod and OS X but not Craig Federighi.
A line of command extending from the upper organizational levels to the lower organizational levels can also be seen in Apple Inc. organizational chart. It is the line of authority clarifying that the lower level reports to the upper level whereas the upper level will direct and supervise the lower level employees. Todd Teresi, the vice president of a mobile advertising group, iAD needs to report to Eddy Cue who is the senior vice president overseeing Apple Inc.'s iTunes and the Application Store and Eddy Cue is responsible of reporting to Timothy Cook, the CEO of Apple Incorporated. Moreover, the company is structured in the way that the Board of Directors, the CEO and the senior managers hold the highest authority.
In Apple Incorporated, the employees will know who is responsible which task as it has its own directly responsible individual (DRI). Normally the name of the responsible person will appear on an agenda for a meeting and everyone in the meeting will know who is responsible for which task.
Span of control is the number of employees a manager can effectively and efficiently supervise. There are two types of span of control which are narrow and wide.
According to the Apple Incorporated, the company can be classified as having a wide span of control. Under the CEO of Apple Inc. Tim Cook, there are 13 departments and each department have their own group of employees. For example, under Phil Schiller there are many other employees like the iPad Director, vice president of iPad marketing, vice president of education, vice president of iPhone Product marketing and vice president of software marketing.
Apple Inc. is a centralized company and that is the main reason that Apple Incorporated is the largest technology company in the world. The company planned a high capital investment of 8 billion US dollars in 2012. Nowadays, technological businesses can be said to be the most competitive business in the world. This applies especially to smart phones and tablets. And for that Apple Inc. must maintain their high level of technology to prevent itself from losing customers to the other companies. Due to all these, Apple Inc. is highly encouraged to become a centralized company. In additional, Apple Inc. has many experiences in doing international businesses which leads to Apple Inc. being the most complimented company in the world.
Formalization of a company meanshow standardized an organization's jobs are and the extent to which employees behaviors are guided by a set of rules and procedures. For Apple Inc.,we know that it's high in formalization.Tim Cook, who is the CEO of the company,hasthirteen departments under him. Each of the departments has their own jobs and they will not do the other department's jobs.For example, the marketing department is only doing marketing and marketing only.If the other department, for example, the hardware engineering department hasfaced some problems,they will have to solve it themselves because the other department will not intervene.
The Most Important Things Leading to The Success of Apple Inc.
While there're a lot of reasons that made Apple Inc. a successful company, we think that the most important factor that facilitates its success is the mechanistic organization approach by the company. Now its atypical for a company which is predominantly based and relying on innovation and creativity to run its businesses, had chosen to adopt a more rigid mechanistic way to run it, but that's precisely the reason why it is successful.
As explained in the previous section, mechanistic organizational structure emphasize on centrally controlled decision making system, and Apple Inc. took this concept one step further, where even the employees keep their work detail a secret from one another. Through this strict enforcement of secrecy and compartmentalization, Apple Inc. is able to keep the specification of their new product from being leaked to the public, and the technology developed from their competitors, that way, they can ensure that no other company will be able to imitate or "steal" the tech before they officially unveil them. And keeping the product news tightly wrapped will also keep the customers on their feet and keep them interested and intrigued about it, thus helping the company to make more profit.
Being a mechanistic organization also means that the top managers make all the decision and all processes need to run through them before they're executed. This way, Apple Inc. can ensure that all of its decisions and policies are unified throughout the company and avoid confusions from the decentralized model where lower level managers have their own authority to make their own decisions.
Major Challenges That Will be Faced Over the Next 5 Years
Every company will have challenges throughout its operating years, and Apple Incorporated is not exempted from it. One of the biggest challenges it will face over the next few years is whether the company can continue to innovate like what it did under the leadership of Steve Jobs. Since Tim Cook took over, the general consensus of his management had been positive, however critiques also cited that Cook hasn't really unveils his "signature" products like what Jobs did with iPad and iPhone. However, Cook did stabilized the ship over his one plus year of tenure as the CEO, and is riding the wave of Jobs' success, but sooner or later the company will have to be creative again and churn out new products that will excite the consumers due to the eventuality that the consumers growing tired of the current products and move on to other companies for more exciting and interesting ones.
The last sentence also brings us to the next challenge that will be faced by Apple Incorporated, which is the increasing competitiveness of the market it is competing in. Almost 2/3 of the company's current profit is produced by its iPhone sales, and although the product is still popular amongst its consumers, other competitors are gearing up to challenge iPhone for its market. Samsung, HTC, Nokia, Motorola and many others are producing better and better smart phones, so it's up to Apple Inc. to rise to the challenge. Then there's the tablet computer market where its iPad is leading the sales, however, it won't last if the company is satisfied with its current glory, as even Microsoft, a company which only known to produce software, decided to diversify and enter the hardware industry by producing its own tablet, the Surface tablet.
Of course there are other challenges, for example how will Apple cope with the current global economic crisis that is predicted to continue into 2013; however in my opinion both points that were elaborated above are considered as the main ones that will do much more damage to the company, either financially or its reputation, if they're not handled carefully.