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Introduction

Apple Inc. is an American multinational corporation that designs and manufactures consumer
electronics and computer software products. The company's best-known hardware products
include Macintosh computers, the iPod and the iPhone. Apple software includes the Mac OS X
operating system, the iTunes media browser, the iLife suite of multimedia and creativity
software, the iWork suite of productivity software, Final Cut Studio, a suite of professional audio
and film-industry software products, and Logic Studio, a suite of audio tools. The company
operates more than 250 retail stores in nine countries and an online store where hardware and
software products are sold. Established in Cupertino, California on April 1, 1976 and
incorporated January 3, 1977,the company was called Apple Computer, Inc. for its first 30 years,
but dropped the 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. Apple has about 35,000 employees worldwide and had worldwide annual sales of
US$32.48 billion in its fiscal year ending September 29, 2008.For reasons as various as its
philosophy of comprehensive aesthetic design to its distinctive advertising campaigns, Apple has
established a unique reputation in the consumer electronics industry. This includes a customer
base that is devoted to the company and its brand, particularly in the United States. Fortune
magazine named Apple the most admired company in the United States in 2008 and in the world
in 2009.

Vision

Apple, Inc.’s vision, as found on their website, is “Apple is committed to bringing the best personal
computing experience to students, educators, creative professionals and consumers around the world
through its innovative hardware, software, and Internet offerings”

Mission

Apple, Inc.’s mission is stated on their company website and is the following: Apple designs Macs, the
best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple
leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile
phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and
computing devices with iPad

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Values

Apple, Inc.’s values can also be obtained from their company website and include the following factors:
We believe that we’re on the face of the Earth to make great products. We believe in the simple, not the
complex. We believe that we need to own and control the primary technologies behind the products we
make. We participate only in markets where we can make a significant contribution. We believe in saying
no to thousands of projects so that we can really focus on the few that are truly important and meaningful
to us. We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in
a way that others cannot. We don’t settle for anything less than excellence in every group in the
company, and we have the self-honesty to admit when we’re wrong and courage to change.

Strategy

Apple has two priorities: maintain the popularity of the iPhone and come up with a new world-
changing product.

In 2018 Apple released another round of iPhones with the new iPhone XS and iPhone XS Max.
They run on an Apple-designed chip that uses machine learning for dealing with photos, gaming,
augmented reality, and other functions and features. The cost is about $1,000 and up.

Apple has been encouraged by the 2018 performances of its Services and Other Products
segments. Services, which encompasses Apple Music, the App Store, and Apple Pay, grew 24%
in 2018 from 2017, and accounts for a higher percentage of overall sales than the iPad and Mac
segments. The company also introduced the HomePod, its entry in the home digital assistant race
against Amazon's Alexa and Google's Google Home. The HomePod runs about $350 compared
to less than $200 for the competitors' products, but it has better sound, according to
Apple. Revenue from Other Products (HomePod, Apple Watch and Apple TV) rose 35% year-
to-year. The company changed the name of the segment to Wearables, Home and Accessories.

With its 2019 financial reporting, Apple said it would no longer disclose the number of phones,
computers, and tablets sold, and, instead, rely on sales figures to convey its performance.

AR is the foundation for solving the second priority, innovation. The AR capabilities in the latest
versions of the iOS make the operating system the world's largest platform for augmented reality
and developers have created more than 1,000 apps with AR features. AR could provide phone

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users with more information about where they are and what they're doing. The company's history
of innovation has led the media, analysts, and customers to expect big products from Apple on a
regular basis. They're disappointed when it fails to deliver.Looking to increase its foothold in
corporations, Apple has partnered with IBM, Salesforce, Accenture, and General Electric to
develop business uses for the iPhone and iPad. With IBM, Apple developed a MobileFirst for
iOS app and has signed some 240 deals with companies. It also developed offerings involving
IBM's Watson and cloud technologies.

Apple is working with Salesforce and developers to build their native mobile apps for Salesforce
products. Apple also has made inroads with airlines with apps and devices designed for pilots,
customer service, and maintenance. It claims more than 450 airlines have adopted iOS devices.

Apple has money to develop new products and services. At the end of 2018 (ended September),
it has about $237 billion in cash, equivalents, and short-term securities. The company has
promised shareholders it would return cash to them through stock buybacks and dividends, but it
should still have enough money for R&D and manufacturing

Apple’s Product Strategy

Apple had been following a product strategy that can be thought of as a pull system. The
company was most aggressive with the products capable of making technology more relevant
and personal. One way of conceptualizing this product strategy is to think of every major Apple
product category being attached to a rope. The order in which these products were attached to the
rope was determined by the degree to which technology was made more personal via new
workflows and processes for getting work done. Accordingly, Apple Watch and iPhone were
located on the end of the rope held by Apple management. Meanwhile, Mac desktops were
located at the other end of the rope while iPads and Mac portables were somewhere in the
middle.

As Apple management pulled on the rope, the Apple Watch and iPhone received much of the
attention while the Mac increasingly resembled dead weight. The preceding exhibit may make it
seem like all of Apple’s product categories moved in sync with each other as Apple management
pulled on the product “rope.” In reality, the quicker Apple pulled on the rope, the more chaotic

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the end of the rope moved. The following exhibit does a better job of demonstrating the chaos
found at the end of the rope.

The Apple Watch and iPhone were Apple’s clear priorities while the iPad, Mac portables, and
Mac desktops ended up facing a battle for management attention. The iPad seemed to have the
clear advantage in that battle, at least when it came to capturing mindshare among Apple’s senior
ranks. Recall Tim Cook’s comment about the iPad being the clearest expression of Apple’s
vision of the future of personal computing.

Today

Over the past two years, we received clues that a major change was beginning to take hold in
Apple’s product strategy. This change was on display during this year’s WWDC. Consider the
following announcements:

 The Apple Watch continues to gradually gain independence from iOS and the iPhone
with its own App Store and the ability to create watchOS apps without an iPhone app.

 iPadOS is a promise from Apple that iPad will be given unique software features versus
iPhone. Features like multitasking and Apple Pencil support give iPad differentiation
from its more popular sibling (iPhone).

 The new Mac Pro is clear evidence of Apple industrial design, along with the engineering
and product design teams, attempting to come up with a long-term solution for the most
powerful computer in the product line.

 SwiftUI is the kind of foundation Apple needs to properly leverage a thriving iOS
developer ecosystem in order to benefit other product categories.

Apple no longer appears to be relying so much on a pull system when it comes to advancing its
product line. Instead, a push system is being utilized, and every major product category is being
pushed forward simultaneously. The change was designed to reduce the amount of chaos found
at the end of the “rope” that Apple was pulling. Accordingly, the primary benefactors arising
from this new strategy are the iPad and Mac. This explains why this year’s WWDC

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announcements felt more overwhelming than those of previous years. Apple was able to move its
entire product category forward at the same time.

This revised strategy ends up supporting a core tenet of my Grand Unified Theory of Apple
Products - a product category's design is tied to the role it is meant to play relative to other Apple
products. (A deep dive into Apple’s product vision and the Grand Unified Theory of Apple
Products is available here for Above Avalon members.) By pushing the products geared towards
handling the most demanding workflows, Apple has a greater incentive to push the products
capable of making technology more personal and relevant. It’s not that every product category in
Apple’s line is now on equal footing in terms of importance and focus. Some products will
receive updates every few years while others require more attention due to needing annual
updates. In addition, Apple’s revised product strategy likely won’t change the sales ratios
between product categories (iPhone outselling iPad by four times while iPad outsells Mac by
more than two to one). Instead, the change from a pull to push system manifests itself with each
product category being given a defined and unique role to handle within the Apple ecosystem.

 Wearables are tasked with handling entirely new workflows in addition to a growing
number of workflows that had been given to iPhones and iPads.

 The iPhone is the most powerful camera and video player in our lives.

 iPads and Macs are content creation tools.

Strategic options

Market penetration

Apple could sell existing products to existing markets, for example the Mac computers and
MacBook laptops to increase market share. This can be achieved through utilising core
competencies and resources in marketing and sales attracting consumers by lowering retail prices
whilst continuing to focus on user interface innovation to gain a competitive advantage.

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Product development

The company could utilise its highly talented design teams and R&D investment capital to create
new innovative products for existing loyal customers to maintain satisfaction and retain
customers.

Market development

Apple could extend into new markets with existing products by increasing the geographical area
it covers directing particular intent on identifying new customer who will use Apple products in
new ways such as education in public and private schools or in government.

Diversification

This option carries the most risk as it involves introducing new products into new markets such
as when the iPhone which was introduced in 2007, prior to this Apple had never entered this
market, even though it is Apple’s most successful product initially they were considered to be at
a disadvantage due to the lack of experience.

Implications

There are a number of product-related implications arising from Apple’s revised strategy:

Mac Desktops.

Despite being in the post-PC era, desktops are experiencing some kind of renaissance. Some of
this isn’t entirely surprising given how the desktop has always been viewed as an antidote to
some of the ideals found with mobile. However, what is new is the realization of the desktop’s
role in the AR era. Mac desktops are niche in terms of the number of users relative to other
Apple product categories, albeit a very powerful and crucial niche.

Mac Portables.

It is time to take Apple management at its word when it says the Mac is important to Apple’s
future. Mac portables will likely retain a place in Apple’s product line for the foreseeable future.
A few years ago, low-end Mac portables seemed to be on a dead-end path thanks to iPads. There

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is no longer any evidence that such thinking is widely held in Apple’s senior ranks. An ARM-
based Mac portable seems inevitable at this point.

iPad.

Just a few years ago, some in the tech pundit world thought the iPad lacked a future. Such
thinking was due to slowing iPad sales combined with larger iPhones being able to handle many
of the use cases originally given to iPad. While the iPad has always been viewed as the future of
computing within Apple, we are starting to see that vision materialize. iPad sales are now
routinely surprising to the upside as Apple adds a “pro” layer to the iPad category in terms of
powerful hardware and software.

iPhone.

The iPhone as a product category continues to mature, as seen with a longer upgrade cycle.
Going forward, the iPhone will primarily be known as the most powerful camera in our lives and
a video consumption device. Many of the less intensive use cases and workflows currently given
to the iPhone will naturally flow to wearables over time.

Wearables.

Apple is the wearables leader. Fitbit would arguably be the closest from the perspective of unit
sales but even then, the company is quickly losing momentum. Lessons that Apple learned with
iPhone and iPad are now giving the company a wearables advantage that is likely at least five
years. An independent Apple Watch not requiring an iPhone to set up is inevitable. The move
would increase Apple Watch’s addressable market by three times overnight. In addition, Apple is
well on its way to establishing a wearables platform as it competes for prime real estate on our
wrists, in our ears, and in front of our eyes.

Will It Work?

Is Apple making the right product strategy decision moving from a pull to push system? It’s too
early to tell. At first, the revised strategy may seem like a no brainer as each product category
ends up benefitting from more attention. However, it’s not a given that such a dynamic is in
Apple’s best long-term interests.

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The source of my hesitation in Apple’s new product strategy is that the company’s long-term
success is dependent on one item: making technology more personal. Anything that takes away
from that goal ends up being a hurdle. Is Apple supporting legacy workflows to the detriment of
Apple’s long-standing mission of making technology more personal and relevant?

One reason Apple decided to change product strategies in the first place was to avoid an all-out
uprising among the 1% of the user base creating content consumed by the other 99%. The
mistake Apple made over the past few years was pulling the product “rope” too fast and in the
process, leaving many of its pro users, defined by the workflows needed to be supported, behind.

For a company that is resource constrained when it comes to time and attention, there is no
guarantee that Apple’s functional organizational structure and design-led culture can realistically
scale to push an endless number of product categories at the same time. This was the key benefit
found with Apple’s pull system. The focus was to advance the products capable of making
technology more personal and relevant while trying to bring as much of the broader product
portfolio along for the ride. The move to a push system is inherently more complex. Apple finds
itself doing a whole lot more that it did just a few years ago.

Some will push back at the claim that Apple is resource constrained considering the company
has $113 billion of net cash on the balance sheet. However, such a view doesn’t take into
account how Apple functions. Apple could have thrown together some components in a big box
and shipped a new Mac Pro shortly after realizing that the previous Mac Pro design was a dead
end. Instead, Apple’s industrial designers, working in close collaboration with various teams,
took a little over two and a half years to come up with what is marketed as a long-term solution
for handling the most demanding content creation workflows. Similar questions now plague
Apple pertaining to its approach to “pro” Mac portables.

Conclusion:

Apple Inc were a smaller company the complexity of the organization would be lower and a
simple structure maybe adopted with a flat hierarchy approach which would decentralization
operations. Smaller companies show a lower degree of specialization and formalization with a
lack of highly skilled managers and efficient complex processes and procedures as seen in larger
companies. This would not which suit Apple’s vision of innovation achieved through a
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differentiation premium pricing strategy, Apple relies heavily on innovation made possible by
their highly skilled managers and designers, research and development budgets to create
complex integrated hardware and software systems for their products, together with advantages
from economies of scope which are not necessarily available to smaller firms. An integrated
differentiation cost leadership strategy should be adopted to allow mid -range pricing to be
competitive pursuing limited growth until market share increases and profit margins become
large enough to allow growth and expansion. Moreover an increase in profit margins and growth
would allow Apple to recruit higher calibre talent and incrementally improve primary and
support functions specifically research and development and supple chain infrastructure until a
broader differentiation premium pricing strategy could be adopted.

Key strategic recommendations:

 Incremental and disruptive design innovation (hardware & software)

 User interface technological advancements in Apple products
 Diversification in mobile and PC products and services
 OEM’S exclusivity agreements utilise economies of scope
 Increased global presence
 Emphasise on acquisition of third party complimentary technologies

References:
https://smallbusiness.chron.com/product-strategies-iphone-32460.html Assessed on January 12
2020, 9:20pm

https://www.aboveavalon.com/notes/2019/6/19/apples-product-strategy-is-changing Assessed on
January 12 2020, 9:20pm

https://en.wikipedia.org/wiki/Apple_Inc. Assessed on January 12 2020, 8:00pm

https://www.vault.com/company-profiles/computer-hardware/apple-inc Assessed on January 12

2020, 11:20pm

https://www.ijser.org/researchpaper/Apple-Inc-Industry-Analysis-Business-Policy
andStrategy.pdf Assessed on January 12 2020, 9:20pm

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