HOW APPLE'S

CORPORATE
STRATEGY DROVE
HIGH GROWTH

By Yekaterina Kurochkina
Ani Grigoriani
Julija Šakuro
INTRODUCTION Mission Statement:
“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.”

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 1976 1979 1980 1984 1985 1987 1992 1993 1995199619971998 ‘01 ‘04 ‘06 ‘07 ‘08 ‘10 ‘11 ‘12
iMac iPhone
Apple iPod 4 iPod iPod
th 5th
App iPad Team
Apple II Went Jobs left Newton Sales US$68 New Jobs -
founded MAC iTunes; Classic;Classic; Store Cook-
public Decreased million CEO; interim CEO
Jobs 1st iPod new COO
by US$410 loss
returned retail Mini Minis;
million;
Apple III, Apple IIe, as advisor store Shuffle;
new CEO
Lisa, Apple IIc Nano

363 Apple
Stores

1976: Apple Computer Company

founded

KEY DATES 1980: Apple goes public

1983: John Sculley becomes president
and CEO.
1985: Jobs forced out of company
1993: Sculley forced out
1997: Steve Jobs returns to Apple
2007: Apple changes name to Apple,
Inc.
2011: Steve Jobs resigned as CEO
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 1997: Gilgert Amelio
resigned
1998: New CEO appointed

Question: How would you

diagnose the problem of
Apple in terms of value,
profit, people?

1MS(4) /4
 PESTEL, 1997-1998
Political
• Any political insurgence in
USA could affect the
company’s position
Technological
• High competition in PC
market
• High customer
requirements in terms of
device size, weight,
simplicity
• Competitors producing
substitutes
1MS(4)
Economic
• Recessions and economic
crises can affect the
company’s revenues
negatively to a greater
extent compared to other
businesses due to the
choice of premium pricing
policies
• Inflation
Environmental
• Exploding devices – safety
concern
• Growth of electricity costs
Social
• People did not want to use
complex devices
• Brand name was not yet
recognizable
• Limited market share
Legal
• Court cases
• Copyrights, IP
• As company began
operating globally it made
it vulnerable to legal
factors and litigation
worldwide
/5
 SWOT, 1997-1998

Strengths Weaknesses
• Strong R&D • Unprofitable Products and
• Market requirements Projects with lower demand
understanding from customer side
• Experience in IT sphere • Low Quality & quality control
• Mergers & Acquisitions • 10% of products returned
• High COGS
• Products are complex in terms
of using interface
• High prices
• Re-organizations

Possibility Threats
• Uncontested market space • Competitor's technology &
• Rivals unsuccessful products pricing
• Brand name creation • Less global coverage compared
• Opening Retail Stores for unique to competitors
customer experience • Substitution
• Easy to use products
• Final re-organization of the
company
• Funds transfer from low product
profile to high profit profile

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SALES & PROFIT

US$ -1.0
billion

US$ 7,1
billion

• Decreasing Revenue
• Decreasing New Profit
• Extremely low profit margin
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SHARE PRICE

• Decreasing & volatile price per share

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MARKET SHARE

• Low company value compared to rivals

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 PRODUCT LINE

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/
10
 PEOPLE &
SUBSEQUENT
PROBLEMS

• Constant re-organizations
• Quality Control Problems

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/
11
 Question: Using the four
actions framework (E-R-R-
C Grid) introduced in Blue
Ocean Strategy, what
would you do to revive the
company?

1MS(4) / 12

1MS(4)
E R RC G R I D

Eliminate Raise
• Unprofitable Products • Quality & quality
and Projects control
• Products with lower • Focus on innovation
demand from & emerging markets
customer side

Reduce Create
• COGS • Uncontested market
• Volume of returned space (tablet)
products • Align company’s
• Focus on market activities with
segments with high differentiation and
competition low-cost strategy
• Difficulty in using • Simple user interface
interface to increase customer
• Prices of products demand
• Network with rivals /
1MS(4)
• New pricing policy 13
P R O S A N D C O N S O F B L U E O C E A N S T R AT E G Y

• Move quicker towards the • Risk of failure in new market

needs and wants of their
• High R&D expenses for
customers and market
changing products profile
• New market means new
• Increasing R&D expenses
customers
could impact already high
• No competition in new price of products
market
• Reducing risks
• Overcoming key
organizational hurdles and
reducing organizational risks

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QUESTION: AS FOR IPOD, ITUNES MUSIC STORE, IPHONE
A N D I PA D

• I N W H I C H I N D U S T RY D I D A P P L E C R E AT E A B LU E O C E A N ?
WA S T H AT I N D U S T RY AT T R A C T I V E ?

• WA S A P P L E A N E W E N T R A N T O R A N I N C U M B E N T I N T H E
I N D U S T RY ?

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 BLUE OCEAN STRATEGY

• 1997 - Cruel competition in consumer electronics

industry
• New line of Macintosh computers - failed
• Market share decreased from 7.4% in 1995 to 3%
in 1997
• Steve Jobs - Apple`s CEO again
• New thinking - BLUE OCEAN STRATEGY

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 BLUE OCEAN STRATEGY

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 I P O D + I T U N E S S O F T WA R E
(2001)

R E C O N ST R U C T IO N OF T H E D IG ITA L MU SI C / 18
( MP3 ) PLAY E R I N D U ST RY
DIGITAL MUSIC (MP3) PLAYERS IN THE
LATE 1990S

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 IPOD – BLUE OCEAN STRATEGY

• Targeted noncustomers: the over 34-year-

olds

• Great capacity (5GB=1,000 songs)

• Simplified user interface with one wheel &

four buttons

• Simple to use software to transfer music

from CD to player

• Automatic battery charge from the computer

• Easy to use together with iTunes

• Sleek design unlike conventional electronic

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devices
 ITUNES MUSIC STORE (2003)

• Increase in demand for MP3 players

• 2003 – flood of illegal music sharing
• CDs lost popularity, due to price and limited
selection

• Introduction of iTunes Store

 Diversity and high quality
 Opportunity to buy individual songs not entire
CD
 Reasonable price
 Friendly interface and easy to use (iPod)
 Win-win for customers and copyrighters

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 IPHONE (2007) & APP STORE
(2008)
R E C ON ST R U C T I O N O F T H E MO B ILE P H ON E
IN D U ST RY

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 IPHONE (2007)

• 2000s - the handset manufacturers invested

in the R&D
• New features to handsets
• Voice calls prices declined
• Red ocean market
• Imperfections - smartphones had computer-
like performance, business apps only and
mobile internet

• iPhone – blue ocean strategy

innovations

 Advanced internet in your pocket

 Style & Entertainment (less computer-
/ 23
1MS(4)
like; not only business apps)
 I PA D ( 2 0 1 0 )

R E C O N S T R U C T I O N O F T H E P E R S O N A L C O M P U T E R I N D U S T RY

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 IPAD (2010)

• 2000s - low PC sales growth

• Global competition
• Threats from substitutes: smartphones

• 2010 – IPAD – in between PC and smartphone

 Ease to use, intuitive navigation
 Portability
 Non-PC functions (e.g. handheld gaming, e-
book reader)
 Hardware add-ons + App Store

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 CONCLUSION: BLUE OCEANS
OF APPLE

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 Question: As for
iPod, iTunes,
iPhone and iPad,
where did the
innovation come
from?
(technology,
market, value)

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1MS(4)
 Innovation Lessons
• Creating value:
• Start With The Customer
Experience And Work Backwards
to The Technology
• Simplified interface
• Attractive Pricing Policy
• Studying market:
• Apple made a product that
achieved market requirements
• Observing trends:
• Apple observed the flood of
illegal music file sharing that
began in the late 1990s - iTunes
broke a key customer annoyance
factor: the need to purchase an
entire CD when they wanted
only one or two songs on it.

/
1MS(4) 28
 Question:
Did Apple
focus on
the
existing
core
customers
?

1MS(4) / 29

1MS(4)
 1976 1979 1980 1984 1985 1987 1992 1993 1995199619971998 ‘01 ‘04 ‘06 ‘07 ‘08 ‘10 ‘11
iMac iPhone
US$68 New Jobs - iPod 4th iPod5th iPod App iPad
Apple II Went MAC Jobs left Newton Sales
interim CEO iTunes; Classic;Classic; Store
public Decreased million CEO;
Jobs 1st iPod new
by US$410 loss
returned retail Mini Minis;
million;
Apple III, Apple IIe, as advisor store Shuffle;
new CEO
Lisa, Apple IIc Nano

363 Apple
Stores

• iPod – Tier 3
• With opening retail stores, Apple
focused on Current Market and Tier 1

/
1MS(4) 30
 Question: Did
Apple pursue
either
differentiation or
low cost? Or
both?

1MS(4) / 31
 Differentiation
• iTunes - allowing customers
to download songs legally via
internet for as cheap as 99
cents. It also differentiated
itself by quality of music and
the intuitive interface of
iTunes. 
• iPhone – centralizing apps
via app store

Low cost
• iTunes store - offer low-prices
on songs

/
1MS(4) 32
1946 1970 1976 1980 1990 ‘01 ‘04 ‘06 ‘07 ‘08 ‘10
iPhone
Sony Walkman Apple iPod 4th iPod5th iPod App iPad
founded cassette founded iTunes; Classic;Classic; Store
Player Sony 1st iPod new
“Discman” retail Mini Minis;
store Shuffle;
Nano

363 Apple
Stores

1MS(4) / 33
 ST E P S F O R S U C C E S S , W H AT WA S
W R ON G ?

Diagnose the problem:

• Cutting age technology

• Missed opportunities
• Lost the momentum to enter the rapidly
growing tech market
• Sony stock value fell 54% in 2011
• Yen dropped profits brought back home
(crisis)
• Not strong leadership of Howard Stringer

Running a big company is like running a

cemetery: there are thousands of people
beneath you, but no one is listening.

It was a bit like that at Sony.

/
1MS(4) 34
 E-R-R-C GRID FOR SONY LE
NAME
Eliminate Raise
• Cutting age products • Safety
and improving of less • Quality & quality
advanced or outdated control
technology • Focus on innovation
• Attractive design and & emerging markets
simplicity • Maintenance of
• Safety even Green product and warranty
ECO AGE period
Reduce Create
• COGS • Create a new value
• Volume of returned curve
products • More advanced
• Focus on new tech technological
segments with high products with
competition attractive design
• Difficulty in using quality and safety
interface • Cutting age,
• Prices of products harmless tech /
1MS(4) 35
 PRO S AND CO NS

• Move quicker towards the • Risk of new products failure

needs and wants of their
• High R&D expenses for
customers and market
changing products profile
• Attracting customer from
• Increasing R&D expenses
existing market share and
could impact already high
customers from all “tiers”
price of products

• Increasing Revenues by
decreasing volume of
returned goods

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 QUESTIONS

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