Assessment Criteria for pass
On successful completion
of this unit a learner will:
To achieve each outcome a learner must demonstrate the ability to:
Understand the process of strategic planning
1.1 Explain strategic contexts and terminology – missions, visions, objectives, goals, core competencies
1.2 Review the issues involved in strategic planning
1.3 Explain different planning tech ...
1.2Review the issues involved in strategic planning
1.3 Explain different planning techniques
Be able to formulate a new strategy
2.1Produce an organisational audit for a given organisation
2.2Carry out an environmental audit for a given organisation
2.3 Explain the significance of stakeholder analysis
Understand approaches to strategy evaluation and selection
3.1 Analyse possible alternative strategies relating to substantive growth, limited growth or retrenchment
3.2 Select an appropriate future strategy for a given organisation
Understand how to implement a chosen strategy
4.1 Compare the roles and responsibilities for strategy implementation
4.2 Evaluate resource requirements to implement a new strategy for a given organisation
4.3 Discuss targets and timescales for achievement in a given organisation to monitor a given strategy.
M1 Identify and apply strategies to find appropriate solutions
Effective judgements have been made.
An effective approach to study and research has been applied.
To achieve M1, leaner would have applied an effective
approach to study and research to make judgementswith
Regards to APPLE strategies.
M2 Select / design and apply appropriate methods / techniques
Appropriate learning methods/techniques have been applied.
To achieve M2, learner would have used appropriate sources of information and suitable techniques to explore and evaluate the internal and external environments of APPLE. E.g. SWOT, PESTEL, Porter’s 5 Forces). (Evidence of research to be present) (Task 2)
M3 Present and communicate appropriate findings
Communication is appropriate for familiar and unfamiliar audiences and appropriate media have been used.
To achieve M3, the structuring and presentation of the report is appropriate. Relevant terminology and concepts have been used accurately.
D1 Use critical reflection to evaluate own work and justify valid conclusions
Conclusions have been arrived at through synthesis of ideas and have been justified.
Realistic improvements have been proposed against defined characteristics for success.
To achieve D1 Conclusions made are logical and consistent with the flow of arguments and information presented in the body of the report.
D2 Take responsibility for managing and organising activities
Activities have been managed.
Autonomy / independence demonstrated
Autonomy and independence of approach and critical
thinking has been demonstrated in evaluating APPLE
Innovation and creative thought have been applied.
Receptiveness to new ideas has been demonstrated.
To achieve D3, convergent, logical and creative thinking have been applied and new ideas are evident (e.g. response to competitors’ strategies and recommendations for APPLE) (Task 4)
Apple and its Business Strategy
Purpose of this assignment
This unit will develop learners understanding of strategy process which includes strategic planning, strategy formulation, approaches to strategy evaluation and implementation.
Apple’s profitable but risky strategy
When Apple’s Chief Executive – Steven Jobs – launched the Apple iPod in 2001 and the iPhone in 2007, he made a significant shift in the company’s strategy from the relatively safe market of innovative, premium-priced computers into the highly competitive markets of consumer electronics. This case explores this profitable but risky strategy.
To understand any company’s strategy, it is helpful to begin by looking back at its roots. Founded in 1976, Apple built its early reputation on innovative personal computers that were particularly easy for customers to use and as a result were priced higher than those of competitors. The inspiration for this strategy came from a visit by the founders of the company – Steven Jobs and Steven Wozniack – to the Palo Alto research laboratories of the Xerox company in 1979. They observed that Xerox had developed an early version of a computer interface screen with the drop-down menus that are widely used today on all personal computers. Most computers in the late 1970s still used complicated technical interfaces for even simple tasks like typing – still called ‘word-processing’ at the time.
Jobs and Wozniack took the concept back to Apple and developed their own computer – the Apple Macintosh (Mac) – that used this consumer-friendly interface. The Macintosh was launched in 1984. However, Apple did not sell to, or share the software with, rival companies. Over the next few years, this non-co-operation strategy turned out to be a major weakness for Apple.
Battle with Microsoft
Although the Mac had some initial success, its software was threatened by the introduction of Windows 1.0 from the rival company Microsoft, whose chief executive was the well-known Bill Gates. Microsoft’s strategy was to make this software widely available to other computer manufacturers for a license fee – quite unlike Apple. A legal dispute arose between Apple and Microsoft because Windows had many on-screen similarities to the Apple product. Eventually, Microsoft signed an agreement with Apple saying that it would not use Mac technology in Windows 1.0. Microsoft retained the right to develop its own interface software similar to the original Xerox concept.
Coupled with Microsoft’s willingness to distribute Windows freely to computer manufacturers, the legal agreement allowed Microsoft to develop alternative technology that had the same on-screen result. The result is history. By 1990, Microsoft had developed and distributed a version of Windows that would run on virtually all IBM-compatible personal computers.
Apple’s strategy of keeping its software exclusive was a major strategic mistake. The company was determined to avoid the same error when it came to the launch of the iPod and, in a more subtle way, with the later introduction of the iPhone.
Apple’s innovative products
Unlike Microsoft with its focus on a software-only strategy, Apple remained a full-line computer manufacturer from that time, supplying both the hardware and the software. Apple continued to develop various innovative computers and related products. Early successes included the Mac2 and PowerBooks along with the world’s first desktop publishing programme – PageMaker. This latter remains today the leading programme of its kind. It is widely used around the world in publishing and fashion houses. It remains exclusive to Apple and means that the company has a specialist market where it has real competitive advantage and can charge higher prices.
Not all Apple’s new products were successful – the Newton personal digital assistant did not sell well. Apple’s high price policy for its products and difficulties in manufacturing also meant that innovative products like the iBook had trouble competing in the personal computer market place.
Apple’s move into consumer electronics
Around the year 2000, Apple identified a new strategic management opportunity to exploit the growing worldwide market in personal electronic devices – CD players, MP3 music players, digital cameras, etc. It would launch its own Apple versions of these products to add high-value, user-friendly software. Resulting products included iMovie for digital cameras and iDVD for DVD-players. But the product that really took off was the iPod – the personal music player that stored hundreds of CDs. And unlike the launch of its first personal computer, Apple sought industry co-operation rather than keeping the product to itself.
Launched in late 2001, the iPod was followed by the iTunes Music Store in 2003 in the USA and 2004 in Europe – the Music Store being a most important and innovatory development. ITunes was essentially an agreement with the world’s five leading record companies to allow legal downloading of music tracks using the internet for 99 cents each. This was a major coup for Apple – it had persuaded the record companies to adopt a different approach to the problem of music piracy. At the time, this revolutionary agreement was unique to Apple and was due to the negotiating skills of Steve Jobs, the Apple chief executive, and his network of contacts in the industry. Figure 1.9 shows that Apple’s new strategy was beginning to pay off. The iPod was the biggest single sales contributor in the Apple portfolio of products.
In 2007, Apple followed up the launch of the iPod with the iPhone, a mobile telephone that had the same user-friendly design characteristics as its music machine. To make the iPhone widely available and, at the same time, to keep control, Apple entered into an exclusive contract with only one national mobile telephone carrier in each major country – for example, AT&T in the USA and O2 in the UK. Its mobile phone was premium priced – for example, US$599 in North America. However, in order to hit its volume targets, Apple later reduced its phone prices, though they still remained at the high end of the market. This was consistent with Apple’s long-term, high-price, high-quality strategy. But the company was moving into the massive and still-expanding global mobile telephone market where competition had been fierce for many years. (Note that with regard to Figure 1.9, the new iPhone was too new to have made any impact on sales or profitability in 2007.)
The leader in mobile telephones – Finland’s Nokia – was about to hit back at Apple, though with mixed results. But other companies, notably the Korean company Samsung and the Taiwanese company, HTC, were to have more success later.
So, why was the Apple strategy risky?
By 2007, Apple’s music player – the iPod – was the premium-priced, stylish market leader with around 60 per cent of world sales and the largest single contributor to Apple’s turnover – see Figure 1.9. Its iTunes download software had been re-developed to allow it to work with all Windows-compatible computers (about 90 per cent of all PCs) and it had around 75 per cent of the world music download market, the market being worth around US$1000 million per annum. Although this was only some 6 per cent of the total recorded music market, it was growing fast. The rest of the market consisted of sales of CDs and DVDs direct from the leading recording companies.
In 2007, Apple’s mobile telephone – the iPhone – had only just been launched. The sales objective was to sell 10 million phones in the first year: this needed to be compared with the annual mobile sales of the global market leader, Nokia, of around 350 million handsets. However, Apple had achieved what some commentators regarded as a significant technical breakthrough: the touch screen. This made the iPhone different in that its screen was no longer limited by the fixed buttons and small screens that applied to competitive handsets. As readers will be aware, the iPhone went on to beat these earlier sales estimates and was followed by a new design, the iPhone 4 in 2010.
The world market leader responded by launching its own phones with touch screens. In addition, Nokia also launched a complete download music service. Referring to the new download service, Rob Wells, senior Vice President for digital music at Universal commented: ‘This is a giant leap towards where we believe the industry will end up in three or four years’ time, where the consumer will have access to the celestial jukebox through any number of devices.’ Equally, an industry commentator explained: ‘[For Nokia] it could be short-term pain for long-term gain. It will steal some of the thunder from the iPhone and tie users into the Nokia service.’ Readers will read this comment with some amazement given the subsequent history of Nokia’s smartphones that is described in Case 9.2. ‘Nokia is going to be an internet company. It is definitely a mobile company and it is making good progress to becoming an internet company as well,’ explained Olli Pekka Kollasvuo, Chief Executive of Nokia. There also were hints from commentators that Nokia was likely to make a loss on its new download music service. But the company was determined to ensure that Apple was given real competition in this new and unpredictable market.
Here lay the strategic risk for Apple. Apart from the classy, iconic styles of the iPod and the iPhone, there is nothing that rivals cannot match over time. By 2007, all the major consumer electronics companies – like Sony, Philips and Panasonic – and the mobile phone manufacturers – like Nokia, Samsung and Motorola – were catching up fast with new launches that were just as stylish, cheaper and with more capacity. In addition, Apple’s competitors were reaching agreements with the record companies to provide legal downloads of music from websites –described in more depth in Case 12 at the end of this book.
Apple’s competitive reaction
As a short term measure, Apple hit back by negotiating supply contracts for flash memory for its iPod that were cheaper than its rivals. Moreover, it launched a new model, the iPhone 4 that made further technology advances. Apple was still the market leader and was able to demonstrate major increases in sales and profits from the development of the iPod and iTunes. To follow up this development, Apple launched the Apple Tablet in 2010 – again an element of risk because no one really new how well such a product would be received or what its function really was. The second generation Apple tablet was then launched in 2011 after the success of the initial model. But there was no denying that the first Apple tablet carried some initial risks for the company.
All during this period, Apple’s strategic difficulty was that other powerful companies had also recognised the importance of innovation and flexibility in the response to the new markets that Apple itself had developed. For example, Nokia itself was arguing that the markets for mobile telephones and recorded music would converge over the next five years. Nokia’s Chief Executive ex