Corporate-level Strategy: The Case of Apple Inc.

Habiba Tidjani Geraldine

R1811D6876515
Strategic Thinking and Planning
UU-MPA-7060-ZM
Cristina Isabel
Sunday, 20th September 2020.

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Introduction
The global economic landscape today is punctuated by a profusion of industries no longer
limited in their expansion by territorial boundaries. The rapid spread of information and
telecommunication technologies has turned the world into a global village. Firms to gain
competitive advantage, need to put together well-planned actions designed to make use of
their core competencies. The goal here is to attain above-average returns that surpass returns
expected by investors if they had invested in another business with equal risk. Achieving above-
average returns or strategic competitiveness requires firms to show proof of flexibility in their
capacities to adapt to a rapidly changing environment. To do this, firms need to determine the
most suitable businesses/ industries and product markets in which they should compete by
choosing adequate corporate-level strategies. A Corporate-level strategy refers to are actions a
firm takes to gain a competitive advantage by selecting and managing a group of different
businesses competing in different product markets ((Furrer, 2016). It, therefore, proves
relevant to analyze how the corporate- level strategy of a publicly-traded company works
towards increasing the company’s value. Our paper shall study the evolution of Apple Inc.’s
corporate-level strategy to boost competitiveness (I), it’s resulting business-level strategy (II) as
well as emit a critique on how this strategy has impacted the company’s overall value (III).

I. The Evolution in the Apple Inc. Corporate strategy

Apple Inc. is an American multinational technology company founded in 1976 by Steve Jobs
and Wozniak as Apple Computer Company and later on changed to Apple Inc. in 2007. The
company first started as a computer manufacturing company and later expanded its
operations to online services, computer software, consumer electronics, networking
solutions, etc. Today Apple Inc. is the first publicly-traded company to have a value of $2
trillion on the stock exchange market. The firm stands as one of the biggest in the world but
this was not always the case. In between 1976- 1996, Apple Inc. had a huge problem facing
its competitors on the market. Internal pressures too due to lack of effective strategic

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 leadership despite several changes in CEO pushed the company to near bankruptcy (Pineda,
2017). It was not until Steve Jobs return in 1997 that the company operated a review of its
strategic management by adopting a resource-based approach to above-average returns.
This strategic thinking led to the reinvention of the company’s corporate-level strategy. We
shall therefore subsequently discuss the company’s new corporate-level strategy articulated
around a related-constrained diversification process (A) and the use of strategic alliances
with competitors (B).

A)From Dominant to Related Constrained Diversification

At inception, Apple Inc.’s corporate strategy was a dominant type diversification with in
between 75% to 95% of its revenue stream coming from the sales of a single business;
computers, and the rest from the sales of software and chips (Corporate Level Strategy of
Apple. (2017, Jan 19). This strategy allowed the company to penetrate the market as it brought
in an innovation in the personal computer industry in terms of technology and design which to
date are a reference on the market. Apple’s first computer reached $100million in annual sales
and again in 1984 hit $1billion in sales at the introduction of a later model the “Macintosh”.
Despite such impressive numbers, the company faced a huge problem with competitors on the
markets such as IBM and Microsoft who produced less engineered computers at a cheaper
price with more options for consumers in the availability of software on their computers. After
Steve Jobs return in 1997, the company switched to a related-constrained diversification
propelling it to the top. (Table 1)

Related-constrained diversification is characterized by less than 70% of a firm’s revenue

accounted for by a dominant business, with all businesses sharing product, distribution, and
technological linkages. (Unicaf) Apple Inc. to stay competitive shifted from a computer
producing business to operating businesses in mobile telecommunication, music, network
solutions, retail, digital products and so much more. (Corporate Level Strategy of Apple. (2017,
Jan 19).

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The company has successfully launched several products such as the iPhone, which has become
the main revenue source of the company since 2007. These products share a common
operating system as well as a common distribution channel via a retail business: the Apple
store. This has allowed the tech giant to reduce cost while upholding the best quality of
products on the global market. The company owns a chain of 511 retail stores worldwide.

“The diversification strategy suits Apple very well as being evidenced as follows: •
Diversification into the music download industry boosts the sale of computers, iPods,
iPhones, and Apple TV. Net sales in 2007 of Desktops increased by 59%, 40% (portables),
17% (iPod), 27% (music-related), 29% (peripherals & hardware), 81% (software
& services) • Change from only computers to digital product enhance Apple’s
market powers. In 2007, Apple controlled more than 70% of the digital music market.”
Corporate Level Strategy of Apple. (2017, Jan 19)

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Table 1: Timeline Evolution of The Apple Inc Corporate-level Strategy
Period Events
Steve Jobs, the company’s founder was ousted,
    

Apple Inc. starte d facing se rious diffi culti es in

competi ng on the market. This was due among other
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things to poor product strategy and design that saw a
sharp fall in in sale s with the failure of the Appl II
and Macintosh. Both star lines of the fi rm.

a new CEO was brought in to reme dy the situati on

1996
but faile d
Ste ve Jobs was brought back as CEO aft er Apple Inc.
bought his company NeXT . During this period Apple
Inc. shift s to a re lated-contained diversifi cati on
1997- 2007
strate gy and releases new products. A new de sign
team works on major proje cts and release; the iMac,
iPod, iTunes, iTunes Music store the Mac OS X.
Apple Inc. launched the company’s dominant
product ti ll date , the iPhone which revoluti onized
smartphones. During this period the company also
launched the new products and se rvices in the apple
2007-2011
ecosystem such as; the Appstore, the iCloud and
updated several of its product lines w ith more
advanced features that worked to increase the
company’s success.
This period was marked by the de ath of the
company’s visionary CEO but this in no way aff ecte d
the company’s growth. In recent year the company
has diversifi e d even more by ente ring businesses
2011- date such as; smart speaker industry, transportati on,
audio, augmente d reality, music streaming etc. This
ti es with the company’s business strategy not to rely
solely on the success of the iPhone for above-
average returns.

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B) Cooperative linkage strategy.
“A cooperative linkage is basically an alliance formed by two or more companies that work
together for achieving a common objective” (Apple Company - Corporate Level Strategy
Researchomatic, 2013). This corporate-level strategy offers the benefits of economies of scale,
information gain from competitors as well as shared risk and cost between the companies that
come together. Example include its cooperative alliance with Intel in 2006 (Downling, Kerris, &
Beerman, 2005) to use Intel chips on Apple computers to compete against DELL and HP; the
alliance with AT&T for the production of the iPhone, and Microsoft for the use of their software
on Mac computers.

II) Apple Inc.’s Business-level Strategy: Product Differentiation

A good business-level strategy is one that expertly allocates a firm’s resources, capabilities, and
competencies in such a way that is aligned with the external environment as well as is in line
with the company’s mission and vision. (Unicaf) The company’s mission is “to bringing the best
user experience to its customers through its innovative hardware, software, and services.”
(Cuofano, n.d.) A breakdown of this mission statement reveals how the company has
succeeded to structure its core competencies. Apple Inc.’s core competencies are high quality
engineered software and innovative designs. ( Apple’s Corporate Level Strategy, 2018). As
such, the firm’s business-level strategy is based on product differentiation. As stated by
Dudovskiy in 2019, “Specifically, the multinational technology company differentiates its
products and services based on simple, yet attractive design and advanced functionality.” This
strategy is mainly declined in the following three elements:

A)Disruptive product design and functionality

Apple Inc. focuses its resources on creating innovative products that have successfully
disrupted the market. This was the case with the iPad. This was the first tablet of its kind
capable of storing a huge musical library. The Macintosh which was the first computer to use a
Graphic User interface. The revolutionary design of the iMac set a reference for the future
design of computers and the company’s most successful product, the iPhone reinvented

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smartphones to how we know it today. All of these factors have worked to set Apple Inc. as a
leader in ICT on the global market.

B) The Apple Ecosystem

The company has successfully carried out a vertical integration which sets it apart from the
competition. By combining the production of hardware, software, and services Apple Inc. can
provide a unique user experience to its customer via its ecosystem. The Apple operating
system, the IOS which is used in all their devices, has succeeded in establishing an ecosystem
that draws in clientele. Devices that run on IOS easily synchronize with each other and have
similar interfaces creating a smooth transition from one device to the next. At the same time,
the fact that this ecosystem is closed to devices from competitors makes Apple consumers
more prone to remain within the ecosystem to benefit from all its advantages.

C) Decrease in Dependency of Dominant Product Sales

As aforementioned, the company’s main revenue is based on the sale of the iPhone. This is a
situation the company’s business strategy is set to change through a focus on service
businesses to boost above-average returns. The iTunes store today is the biggest digital music
marketplace. Apple Inc. equally has a portfolio of consumer and professional software
applications, operating systems, and services divisions which in 2019 generated record
revenues of USD 10,9 billion in the first fiscal quarter of 2019, which is a 19% increase year-on-
year. (Clover, J. 2019).

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C) fig 1: A summary of how apple product makeup its revenue 2016-2018 Source: FourWeekMba

Looking at all this, we conclude that, strategic planning and thinking is key for a company’s
strategic competitiveness. Apple Inc. through the elaboration of corporate-level and business-
level strategies in line with its mission and vision was able to strategically allocate its resources
and boost above-average returns. Nevertheless, we must not turn a blind eye to the faults this
strategy presents. The second part of this paper will present a critique of the Apple Inc.
corporate-level strategy.

III) A critique of Apple’s Corporate strategy

A)Lessons from the Apple Inc. Success Story

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After the analysis of the timeline of the evolution of Apple Inc. corporate-level strategy, we
realized that the company’s success is not only due to the company’s ability to combine
innovative hardware and software to create a more valuable product for its consumers. The
ability of Apple to create interrelated products also accounts for the overall increase of the
company’s value as shown in fig 2 &3 below

Fig 2: Sales of the iPhone boosted by the introduction in July 2008 of service AppStore available for download on
iPod and iPhone. Source: FourWeekMba

Fig3: Increase in sales pf the iPod in 2003 after the introduction of the iTunes Music Store. Source: FourWeekMba

By diversifying through product differentiation and vertical integration, Apple Inc. has been able
to keep being able to command the market power between suppliers and consumers. The
company has kept its production cost in check while providing customers with superior and
ground-breaking technology. Through its retail distribution not only does Apple Inc succeed to
control and offer its consumer a high buying experience as well as control the perception of the
brand (fig 4). More than selling technology the firm has succeeded to sell a lifestyle and built a
loyal community sealed off from competitors through the Apple ecosystem.

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Fig 4: impact on sales of Apple’s distribution channels. Source: FourWeekMba

B) Flaws of the Apple Inc. Corporate Strategy

It is clear from our previous analysis that Apple Inc. has succeeded to adapt its core
competencies which are product design and innovation to fulfill its mission to provide the best
consumer experience through innovative products. Nevertheless, it remains that the company’s
corporate strategy presents disadvantages worth noting

i) The most glaring disadvantage Apple’s corporate-level strategy presents is its closed
ecosystem. Though it allows the firm to control the production process of its
products, it equally causes a strain on the company’s development cycle. As stated
by Baetti (2020) running as a closed ecosystem pushes the company to get involved
in all other businesses close to its dominant business. As opposed to its primary
competitor Samsung who focuses on producing Android devices that run on the

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 Google Inc. Ecosystem. This may lead to over-diversification of Apple Inc.’s resources
forcing it to scale back at some point. (IvyPanda, 2019)
ii) The company has equally created a high expectation for the release of new products
to feed the brand perception that Apple Inc. always delivers protects that work
perfectly. This gives little or no room for product testing which increases risk in case
of product failure once in the market.
iii) Apple Inc. is in hyper-competition on several markets at the same time. This slows
down the company’s innovation speed. For example, on the service market, it
competes with Google Inc., and on the hardware market, it competes against
Samsung both. This equally adds pressure on the company’s employees and leaders
who need to work twice as hard to make up for slow product releases to stay
competitive. In a post-Steve Jobs era, the products recently released by the
company are yet to be as ground-breaking as during the Steve Jobs era.

Conclusively, our paper was aimed at analyzing how a publicly-traded company’s

corporate-level strategy can increase its overall value. An analysis of Apple Inc.’s
strategic management revealed to us how a transition from a dominant to a related-
constrained diversification strategy enabed the copmany to gain a competitive
advantage on the global market. The alignment of the company’s core capacities to
the external competition as well as its vision and mission reflected by a
differentiation business-level strategy has allowed Apple Inc. to create a unique user
experience and increased its value to $2 trillion. Despite its closed ecosystem and
the strain, the diversification impacts on the company’s employees and leaders,
Apple Inc. has proven its great flexibility and capacity to stay ahead of the innovation
curve to maintain its competitive advantage.

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