The 1997 Turn Around Of Apple Commerce Essay

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By 1997, Apple's share price was at a 10-year low and its market share had decreased to nearly 3% (Montgomery, 2008). At the same year, Steve Jobs returned as the CEO, who believed technology would change Apple and made the company into a new business. Nowadays, the Apple Inc is well known among most customers with its high level of brand awareness in the market. Apple provides personal computers, mobile communication and digital music players. The company also designs, manufactures and develops accessories and services, which involve the e-book, television shows, music and short films (Datamointor, 2009). The brand value of the company increased from $11.0 billion in 2007 to $13.7 billion in 2008 (Interbrand, 2008). This essay will divide into four parts, including key features of the Apple industry, evaluation of Steve Jobs' leadership, Apple's strategic innovation and strategic alignment.

To begin with, Porter's Five Forces Model is used to analyze the basic competitive ability of firms and industry, which provides a model to better understand the Apple's industry context (Lima, 2006).

The supplier influences the profitability of the enterprise and the product competitiveness mainly through improving the price of input elements and decreasing the quality of per product (Yoffie, 2005). Based on these two points, Apple faces low threats of suppliers because Apple is the largest purchaser of hardware and it builds its own Mac OS system and unique software application so that it can exercise power on suppliers (Barney,1995).

Usually, buyer bargaining power is influenced by the cost of products and customers' demands and requirements with providing higher quality of products or service (Lima,2006). Apple enjoys a high level of brand awareness throughout the markets. Its products differentiation and technical superiority make it difficult for Apple to be threatened by buyers (Bovet and Martha, 2000). However, owning to its existing product quality, Apple loses a lot of money.

The threat of substitutes' entry is low for Apple industry. First, Apple enjoys a high level of brand recognition so that new entries are difficult to break customer loyalty of current company. Next, owning to the strong innovation consciousness, Apple leads the market trend. According to Datamonitor (2009), in 2008, Apple invested $1.1 billion in product research and development. Moreover, Apple uses cross-platform technology to put its Mac platform into a digital hub which means linking iTunes video with customers' television screens and portable devices, thus enhancing Apple's digital content business. However, Apple also faces the intense competition with such as Google, Nokia, IBM, which launch some similar or better software and products to compete with Apple (Datamonitor, 2009).

Above all, it is the existing weaknesses and threats that need Apple to put forward some relevant countermeasures to keep its competitiveness advantages.

Focus on another point, Steve Jobs is a successful leader in Apple Inc. The essential role of leadership is providing encouragement, support, suggestion and essential resources. In "Leading Change," John Kotter presents an eight-stage model of planned change. It shows that successful implementation of change requires a wide range of leadership behaviors. (Kotter,1996)

First of all, leaders must identify actual crises and opportunities, and transfer the information broadly. Before Jobs' turnaround, Apple's market share fell to 3% (Montgomery, 2008). Then Jobs exclaimed that Apple's problem was the products. Secondly, the leaders must build a team of "change supporters" to share the commitment. Jobs restructured the board of directors as six members. However, his habits of making decisions individually, ignoring others' advice, and suddenly changing his mind made it difficult to work with him.

Then, leaders are responsible for formulating a vision to guide the change effort. Jobs' vision for Apple was "become a wonderful consumer products company". He aimed to develop a self-reinforcing system of products and to foresee and respond to customers' demand. The next stage for leaders is to communicate the change vision. Jobs encouraged the idea communication, which contributed to foster the tradition of long working hours. However, he was always throwing tantrums and berating employees who disagreed with his ideas, which may be the weakness of his leadership.

In the following step, leaders are supposed to empower people to act on the vision. Jobs recruited top talents, stimulated them to think out of the dogma. Every member in Apple was willing to make contribution to the organization with their competencies. Then, leaders should create short-term wins to boost the credibility of the process. From Jobs' turnaround on, Apple was keeping on developing new products or services almost every single year such as iPod, iTunes and iPhone which helped Apple successfully enter the entertainment industry and mobile phone industry.

Consolidation comes to the next point. Great leaders will launch new change projects to ensure that all the new practices are firmly grounded. Jobs established some strategic alliances to improve Apple's customers' experience with Apple's products, such as Intel, EMI, YouTube, Google and so forth. Jobs also strengthened Apple's core competencies by acquiring both specialists and small professional companies. Finally, the new approaches must be institutionalized in the organizational culture. It was the high praise as well as high criticism that instilled the pursuit of perfection into Apple's culture.

To sum up, as a strategic leader, although Jobs was always considered as ego-centered, he did lead Apple to be one of the most profitable companies in the world.

Johnston and Bate state that the strategic innovation actually is finding an approach to set up a new business model, which could make more value and more competitiveness than before. The core of strategic innovation is "changing the roles" (Johnston and Bate, 2003), which presents in two aspects. One is how to make customers receive these values; the other is how to implement that "changing" better than the previous one by establishing a new business model.

Generally, the conception when people mention innovation is probably the product innovation. In fact, the strategic innovation stands on an overview of a whole company which is not just inventing a product, but also diagnosing a new business model. Why would a successful company like to choose strategic innovation? Markides (1998) mentioned that companies have to deliberate "Who-What-How" issues firstly to identify whether they need to change. Who are the customers, what kind of products they want, and how to create the new product to satisfy them (Markides, 1998). A method for strategic innovation is named "The Discovery Process" (TDP) (Johnston and Bate, 2003) It includes 5 phases as following: "Staging Phase", "Aligning Phase", "Exploring Phase", "Creating Phase" and "Mapping Phase" (Johnston and Bate, 2003). These five phases represent the process of the strategic innovation.

In this Apple case, Steve Jobs' turnaround to Apple in 1997 became a milestone of Apple. He led the hopeless company change successfully, and this action would happened in the staging phase. Steve Jobs expanded their product to enter the entertainment industry which belongs to the exploring phase. One of the most successful products - iPhone would emerge in the creating phase. All the theories and examples prove that Apple has engaged in strategic innovation.

Porter's value chain model is an appropriate tool to evaluate the alignment of a firm. Porter noted that every firm could be defined as a collection of activities, and they can be represented by using the value chain (Porter, 1985) (see Appendix-1).

Porter (1985) separated the firm activities as the support activities and primary activities, and each of them involved several categories as the above chart showed. The core competences of the firm could be found by analysis of the value chain. Since the total value is created by all of these activities, the profit margin equals the firm value minuses the total cost. Porter pointed out that there were two methods getting superior profit: reduce the cost, and get better differentiation.

According to the value chain of Apple, it owns its core competences mainly on the following parts: the innovative company culture, the high technology level, large amount of costumers with high loyalty, and diversity services. Company culture is one of the forming parts of company infrastructure. A good company culture can lead to extra outcomes. Leading an innovative company culture, Apple can always maintain the competences in innovation. Apple has been the company with one of the highest technology level in the world since it was founded. Apple gains the competence in the market area by its loyal customers, who believe that everything made by Apple is the best, even though it contains problems. Apple also forms many strategic alliances with online shop, retailers, and music companies in recent years. It allows Apple to get better differentiation on sales and to provide further services. For example, diversity software and music could be downloaded almost anywhere by an iPhone. In the other part, Apple is also attempting to reduce the cost. For instance, it has outsourced parts of the manufacture.

Compared with the theory, Apple leads a healthy strategic alignment. It owns its core competences on different areas, and gets more differences on them. In our view, further decrease of cost can lead more improvement of its profit level.

It can be argued that Apple Inc has experienced a transformation. In the future, there are four recommendations for Apple Inc. First of all, Apple may need to keep on developing innovative products. A wireless smart phone is just a start of Apple. Besides, it might be a huge opportunity to enter new market in the globalisation environment. For example, opening new markets in many Asian countries such as China may increase revenue of sales. Moreover, strategic alliance with more companies could influence the compatibility of the software and open the closed system. Furthermore, after Jobs' leave, Apple needs to focus on expert teams, not only concentrating on senior manager.

Overall, under a competitive environment, Apple uses differentiation strategy which focuses on innovative and competitive products. There is no doubt that this innovation strategy has preformed so well and helped Apple be turnover and get achievement. The competitive advantage is essential to a company. Will Apple still be good if Steve Jobs leave? In the future, the new CEO needs to keep one eye on how the company add value and the other eye on changes of inner and outer sides of the company.


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