Business Model Dynamics: A Case Study of Apple Inc.

Yong-chun NING, Hui FU, Wen-fu ZHENG

School of Economics and Management Beijing University of Posts and TelecommunicationsBeijing, China
(Luojiaxiaomai224@hotmail.com, erfu1989@yeah.net, zhengwenfu@gmail.com)

Abstract - Traditionally, people once believed that
business model should be static (something that is 
unchangeable), but in recent years, scholars have suggested A. Literature Review
that the dynamic business model of companies can bring
about more lasting and more successful developments. This
paper, based on Dynamic Business Model Framework,
identifies and characterizes three stages: creation, extension
and revision by demonstration of the change of Apple’s
business models. The results of the empirical analysis
exhibited fully the good applicability of Dynamic Business
Model Framework for characterizing business model
dynamics.
 business models[ 6 ]. The role of individuals in
Keywords - Business model Dynamics, Business Process,
Apple Inc.
I. INTRODUCTION
 An assessment of the impact of changes can be
As business models are dynamic rather than static, it
is important to understand how they evolve over time [1].
A fantastic business model could provide necessary
stability for company’s development, while enabling the
campany to carry out new changes. However, it is not
always easy to change the focus from the stabilizing
properties to the dynamic properties of a business model
[2]. It takes a long period of time to be convinced of the
significance of the dynamic properties of the business
model.
So, what is the business model? It refers to the logic
of the firm, the way it operates and how it creates values
for its stakeholders [3 ]. Besides, a business model is
described as a ‘blueprint’ for how to run a business [4]. In
order to keep their competitive position, however,
companies must be continuously innovative in their ways
of doing business.
Absolutely, it's a fairly new marketing environment
which has magnified the demands of considering more
about how to address the customers’ needs as well as how
to capture values by providing newly invented products
or services. Without a well-developed business model,
advanced innovators will not be able to succeed in either
delivering or capturing values from their own innovations.
This paper studies the present e-tech industry in the
dynamic business model perspective. Apple presents a
valuable case to study deeply.
The rest of this paper is organized as follows: the
second section recalls the theory of dynamic business
model and the analysis framework, the third section
presents the methodology to analyze the activities of the
firm, the fourth section discusses the business model
dynamics of Apple Inc., and the final section elicits our
conclusion.
___________________________________
978-1-61284-449-7/11/$26.00 ©2011 IEEE
II. THEORETICAL GROUNDING
Although the dynamics of a business model have not
been investigated in depth so far[5], it has been found that
technology and market-related forces are the most
important external drivers of business model dynamics,
while some scholars stress the importance of customers,
technology, business infrastructure and profitability
sensing to the development and operationalization of new
organizational change, which is central to our view of
business model dynamics, has recently been recognized
by different streams of researches.
initiative on a company’s business model. Potential
projects based on emerging technologies for commercial
purposes, for example, deserve special attentions, since it
might prevent costly initiatives – such as mergers and
acquisitions [2]. The strategic business model change
framework proposed in this paper could be a useful tool
for planning changes and analyzing possible innovative
outcomes.
B. Analytical frameworks
Strategies and marketing plans of the firms are
always changing, but not all changes imply a change in
the business model. There are (i) changes that do not
affect the business model of a company (these are
nonfundamental changes, i.e. changes that do not affect
any core standard repeated process), and (ii) changes that
affect the business model of a company. Scholars suggest
four different types of business model change: (i)
business model creation, (ii) business model extension,
(iii) business model revision, and (iv) business model
termination. Each type of change involves specific
challenges and difficulties. The different categories of
business model change have been shown clearly in table
1.
Figure1 is a flow chart which helps us to illustrate
the relationships within the four categories of the business
model. The block1 means the business model of a firm,
refers to the materialization of a business idea into a new
venture. And the original of the business model often
comes from a simple idea. The primary idea required
changes before being put into practice. At this stage,
critical processes relate to future customers, suppliers,
partners, competitors, etc. So the stage 1 is still just ideas
or hypothesis [7] of the business model. The



Authorized licensed use limited to: Leeds Beckett University. Downloaded on May 06,2020 at 20:12:08 UTC from IEEE Xplore. Restrictions apply.

FOUR DIFFERENT TYPES OF CHANGE OF BUSINESS MODELS
Stages Distinguishing between the different types of business model change
creation Creating a new business model (by
start-up companies)
extension Adding new processes that do not
affect the company’s business model
revision Replacing processes that have a
significant effect on the company’s
business model
termination Abandoning/removing processes(closing down a business area or unit, or the entire company)
Source: See [2]
company should learn to confront the risks or barriers on
the way to the next stage.
Since a company has defined its core repeated
standard processes, and the staff of the organization
become more skillful and familiar with the procedures
related to the execution of their tasks. It’s time for the
company to explore new opportunities in order to extend
its business boundary. In the Figure1, this is illustrated by
the transition from one block 2 to the other block 2. The
main characteristic in this phase is the addition of
activities, which is illustrated by the sign (+) between the
two blocks. Expanding the business will require
initiatives such as offering better products, diversifying
product lines, and offering the products in a broader
geographic area.
The transition from block 2 to block 3 is the type of
business model named revision. Revision means
removing something that modifies an existing business
model and replacing it with a new process, which is
indicated by the signs (-) / (+) between blocks 2 and 3 [2].
New ways for the sake of meeting the existing demands
are guiding the companies to change their business model.
The final stage of business model change is
termination, illustrated in Figure 1 by the transition from
block 2 to block 4. Here, termination means
abandoning/removing processes, which is why block 4 is
shown outside its expected trajectory. The abandoning of
processes is indicated by the sign (-) between blocks 2
and 4 [2]. What’s more, the decrease of the contemporary
demands warns the company to cease the activities in this
area.
Fig.1. Four Different Types of Business model Change
Source: See [2]
Authorized licensed use limited to: Leeds Beckett University. Downloaded on May 06,2020 at 20:12:08 UTC from IEEE Xplore. Restrictions apply.

TABLE 1
Creating a new business model (by established companies)
 usually outside the company’s activities
Adding new processes that affect the company’s business model
 Inside the company(implies replacing old processes by new ones), it is
Business model Revision-
 Outside the company, it is Business model Creation-
Replacing processes that do not have a significant effect on the company’s business
model (‘minor’ revision)
III. METHODOLOGIES
For the sake of achieving our research goal, we used
an exploratory case study that is applied to qualitative
methods. The adoption of a qualitative methodology is
consistent with the fact that dynamics are embedded in
firms’ business model. Thus, they are pretty difficult to
identify through quantitative measures. In an attempt to
fill the research gaps in the literature, we investigate
Apple Inc. as the excellent and outstandingly innovative
firms in e-tech industry.
We choose Apple Inc. for three reasons: (1) The
company has been accepted by marketing recognition in
creative performance. (2) It makes the business model so
successful that it delivers the concept of products' value to
their target market. In addition, Apple created the way to
make the customers find themselves in a particular
community where they could experience a fire-new
lifestyle the same as their own taste of life .As a result,
Apple is becoming the e-tech leader of the world. (3) As
we know, Apple is not the first one that comes into the
electronic field, and it never acted like SONY to invent
the MP3 player or did something else. It just entered this
area lately and made complex things easy and elegant.
These features allow us to analyze the activities that
contribute to the companies’ dynamic business model.
We collect data in various ways: The first one is to
study the Apple’s website, abundant official reports, as
well as public media, e.g. the Internet, newspapers,
magazines. The second way is the real tryout experiences
related to the Apple’s products. The last way is to figure
out more information from the macroscopical
consumption environment.
Our analysis involved iterating between theory and
data to identify the choices of the company and the
objective consequences. According to the approach put
forward by S.A.,Cavalcante, P.,Kesting, and J.,Ulhoi, the
business model is composed of choices and consequences.
The activities we mentioned are considered to be the
mainly effects of the company’s destiny. We are trying to
build 3 stages of Apple’s business model especially
during a period in history where so much information has
now become available for analysis, and figure out the

 

similarities and differences to prove it is the existence of

the change that brings the company growth and
improvement.

IV. RESULTS

Apple Inc. has experienced three major stages since

its establishment in 1976. Much has been written about
Fig.1. Business model In Stage 1
the business model of Apple’s individual product, virtual
organization, and the like. However, for the last few years,
papers scarcely put these products together to study
Extension period (1998-2008)
deeply.
Figures 3-5 are the three representations of Apple’s
In 2001, Apple released the Ipod, a portable digital
business model where underlined elements are choices
audio player .The product was phenomenally successful
and non-underlined elements are consequences.
— over 100 million units were sold within six years. In
Consequences in boxes are ‘rigid,’ those not in boxes are
2003, Apple's iTunes Store was introduced, offering
‘flexible’. A consequence is flexible if it is highly
online music downloads for $0.99 a song and integration
sensitive to the choices that generate it. In contrast, a rigid
with the iPod. The service quickly became the market
consequence is one that does not change rapidly with the
leader in online music services. Apple also introduced
choices that generate it [3].
Boot Camp to help users install Windows XP or Windows
Vista on their Intel Macs alongside Mac OS X which is
Creation period (1976-1998)
developed by its own team of engineers.
When it comes to the business model of Apple in the
Apple was established on April 1, 1976 by Steve
early 21st century, we define it is in the period of business
Jobs, Steve Wozniak, and Ronald Wayne, selling personal
model extension stage. Expanding the business will
computers. By the end of the 1970s, Apple had a large of
require initiatives such as offering better products,
computer designers and a well-rounded production line.
diversifying product lines, and offering the products in a
In the period, between 1989 and 1991, which was
broader geographic area. In contrast to changes in the
regarded as the "first golden age of personal computer,
creation phase, in business model extension, it is no
Apple was continuously introducing new types of desktop
longer unacquainted, but a stage when previous working
computers, laptop computers, as well as their own
experiences can be used as frame of reference to deal
operating systems. The success of the products led to
with emerging difficulties.
increasing revenue for Apple. In 1994, Apple allied with
However, as we know, Apple was not the first one
IBM and Motorola to create a new computing platform
came into the fire-new electronic fields all the way, they
(the PowerPC Reference Platform), which would use
acted neither as Sony to invent the MP3 player, nor did
IBM and Motorola hardware coupled with Apple's
they open the search engine era as Google. They just
software. Only three years after that, Apple joined
entered some bursting areas following the exploiter’s step
Microsoft to release new versions of Microsoft Office.
and tried to make the complex products easy and elegant.
This is the Apple’s business model-creation in the
Style was always Apple’s brand. In the fierce competition,
high-tech industry. During the early stage of creation,
Apple expended its business model all along to meet the
various adjustments are necessary to fit the new venture
diverse demands of consumers.
into its relevant business environment. There may be
some difficulties as the need for products to be accepted
by customers and succeed in a market that is profitable
enough to guarantee survival; the need to improve the
technological and commercial competences in connection
with the products offered [8].
Apple chose to introduce both hardware and
software to open up their business market. In addition, it
is advisable for Apple to cooperate with other companies
in the same field to expand the market together. In fact,
it’s a successful business model for a newly built
company. Fig. 2. Business Model In Stage 2

Revision period (2008-present)
The company was previously named Apple
Computer, Inc., for its first 30 years, but removed the



Authorized licensed use limited to: Leeds Beckett University. Downloaded on May 06,2020 at 20:12:08 UTC from IEEE Xplore. Restrictions apply.
 
word "Computer" on January 9, 2007, to reflect the
company's ongoing expansion into the consumer
electronics market in addition to its traditional focus on
personal computers. The App store was primarily
launched to support the services of their products when
Apple realized the enormous potential of applications that
could be used via their devices. It figures out the present
business model is not effective anymore. Further more,
customers are no longer satisfied with the limitation of
the antiquated application. According to the analysis
framework, we can confirm it to the business model
revision stage.
Business model revision is likely to come up against
significantly more challenges than business model
extension, because it requires changing organizational
processes. There will be forces which constrain
companies’ ability to make structural change in response
to environment threats [9].
The App store as a software platform to give a
connection between the third-party developers and the
customers is an objective of the plan. The third-party
developers have free rights to develop the applications
that can run on the platform, such as games, books,
education, life style, etc. Thanks to the varieties of
functions given by the advanced technology, it amplifies
the life scale making people feel incredible when they use
the devices. Although we can find some applications have
successfully attracted a lot of users to login in, the
guarantee of customer’s accountability and the addition of
safety is also one of App store’s advantages which cannot
be sure in other business model. Besides, it could make
enormous profits as well. The increasing number of the
download indicates the success of this business model
and implies the great demands of interesting applications.
The chain of the service will not only be provided by
Apple, but also should be connected to any other efficient
social applications. The App store has created a new
example for how to strategically control a vast of
customers and software partners in the new ecosystem.
Fig.3 .Business model In Stage 3

V. CONCLUSION
It is crucial to identify the boundaries of a business
model in order to determine whether a change initiative
will affect it or not, and to what extent. When there is a
significant impact, the business model will not be the

Authorized licensed use limited to: Leeds Beckett University. Downloaded on May 06,2020 at 20:12:08 UTC from IEEE Xplore. Restrictions apply.
same anymore. After a detailed analysis of the dynamic
business model system, it comes to a conclusion that
Apple Inc. could be divided into three changing periods,
as business model creation, extension and revision. At
present, Apple has found its successful business model to
perform as a platform which is responsible for integrating
resources within the high-tech industry. Conventional
wisdom says “help your customers help you.”
Along with the gradual enlargement of the platform,
early adopters of Apple are adding their voice to Apple’s
own marketing efforts. It’s a significant revision of the
business model which can be imitated in many other
commercial areas.

REFERENCES
[1]. Bouwman, H., Vos, H.D. and Haaker, T., (2008) Mobile
Service Innovation and Business Models. Springer-Verlag
Berlin Heidelberg.
[2]. Cavalcante, S.A., Kesting, P. and Ulhoi, J. (2010)
Business Model Dynamics : The Central Role of
Individual Agency. Management Meeting in Montreal,
Canada.
[3]. Casadesus-Masanell, R., Ricart, J.E.(2010) From Strategy
to Business Models and onto Tactics. Long Range
Planning.
[4]. Osterwalder, A., Pigneur, Y. and Tucci, C.L. (2005)
Clarifying business models: origins, present, and future of
the concept. Communications of AIS.
[5]. Reuver, M.D., Bouwman, H. and MacInnes, I. (2009)
Business model dynamics: a case survey. Journal of
Theoretical and Applied Electronic Commerce Research.
[6]. Voelpel, S.C., Leibold, M. and Tekie, E.B. (2004). The
wheel of business model reinvention: how to reshape your
business model to leapfrog competitors. Journal of
Change Management.
[7]. Harper, D.A. (1996). Entrepreneurship and the Market
Process. An enquiry into the growth of knowledge.
Routledge, London and New York.
[8]. Davidson, P. and Klofsten, M. (2003) The business
platform: developing an instrument to gauge and to assist
the development of young firms. Journal of Small
Business Management.
[9]. Kelly, D. & Amburgey, T.L. (1991). Organizational
inertia and momentum: a dynamic model of strategic
change. Academy of Management Journal.