Case: How Apple’s Corporate Strategy

Drives High Growth

Case Questions: How Apple’s Corporate Strategy Drives High Growth
1a.
They were focused on the ‘existing’ market of sophisticated and creatively-inclined users to sell fancy
and elegant computers with a high profit margin per device, while Windows was expanding their market
share to appeal to the ‘every man’ computer user using the slogan “Windows Everywhere”. In other
words, Apple was fighting for an existing share of the pie (red ocean strategy), while Windows was
looking to expand the pie and bring in new users to the PC market, which is ironic, considering that when
Apple first started out, their goal was to bring in new users to their customer base by simplifying
computer into an “every person’s computer” in order to offer value to new and potential customers and
cast away the perception of the computer as a complex machine only navigable by wonks and geeks.
When they strayed away from that strategy in order to cater to high-end, sophisticated users in their
existing market with higher-margin machines, they started losing considerable market share, as
Windows expanded and dominated the overall computer-user pie.

1b.
Which factors that the industry takes for granted on should be eliminated? They should do away with
complementary offerings, such as printers, and focus instead on the meat and potatoes of what their
customers want, which was user-friendly, easy-to-use computers. There were plenty of existing printers
from a whole array of manufacturers at the time customers could choose from. Complementary offerings,
such as printers, are worthless if the thing that makes them run (the computer) is too difficult for most
customers to understand. Sales of complementary offerings will only be significant if sales of computers
are high enough. People won’t buy a printer if they don’t first buy a computer, so Apple needed to focus
on making computers people wanted to buy, which at the moment, they weren’t, so it didn’t make a
whole lot of sense to push complementary offerings at a time when people weren’t buying their bread
and butter product in significant enough quantities. A company pursuing a Blue Ocean strategy has to be
willing to sacrifice some of their existing customer base in order to focus on the center mass of their core
market for things customers truly value. Which factors should be reduced well below the industry
standard? Apple should stop catering so exclusively to the high-end, technologically savvy users (it’s
existing market for it’s current Macintosh lines), in order to expand its customer base to bring in the
everyday user in mass numbers. They could still make products to service its existing high-end customer
base, so as not to lose them, but should be focused primarily on what buyers value most, which as
Microsoft had proven at the time, was the market for the average computer user, which if they made a
computer easy enough to use for most people to use, adding additional novel features of value, they
could not only do well in that market, but also bring in new users in order to expand the pie. They should
also look into simplifying the components of a computer and reducing the amount of parts/components
and time required to set one up. Which factors should be raised well above the industry’s standard?
Accessing the internet was a problem at the time and required a great many steps and time to do so.
They should look into improving their computer’s internet software/wizard for connecting to the net, as
that would be a strong selling point for the brand. They should also focus on creating a product with as
few parts as possible and time required for assembly, in order to provide value to the everyday customer
and bring in new users to the product who were previously weary of purchasing a computer due to the
amount of technical prowess required in both setup and use. Which factors should be created that the
industry has never offered? Apple should seek to step outside the boundaries of the current computer
industry/market, and create new products with the potential to attract both its current customers and
bring in new ones. They should ask themselves the question of what industry would we be in if we were
starting from scratch? Around the time of 1998, Napster and mp3’s were coming on the scene and were
immensely popular. Napster was a software program enabling users to download and share songs freely
and without cost, which required a computer to be able to use the software package to download and
listen to music. If they could come up with a way for customers to expand the potential of software like
Napster and mp3’s, such as a mobile device similar to Sony’s Walkman which customers could
download songs directly from their computers to and listen to them remotely on their device, it would not
only boost sales of the computer required to download them, but would also open itself up to a new
market for mobile mp3 player devices, catering to both existing computer users, helping sales of its
computers, and also bringing in new customers excited at the prospect of being able to download any
music of their choice without purchasing dozens of CDs and play it on the go, benefiting both their
existing computer markets and the newly created mobile digital music player market. Blue Ocean
Strategy at its finest. It didn’t take a rocket scientist to ascertain that Napster would face legal problems
with the music industry over its free downloadable content, so Apple, in 1998, should get ahead of the
curve to also look into a way to accomplish downloadable content in a similar fashion to Napster at an
acceptable cost to the consumer that both Apple and the music industry could profit and benefit from, as
well as consumers who would be able to legally download music directly from their computers to their
mp3 player.

2.
a. IPod/iTunes software – Blue Ocean in portable digital music/mp3 software industry. MP3’s and MP3
players were around a year or two before the iPod was introduced, but they encouraged people to
download songs illegally. ITunes not only improved the sound quality of mp3’s by creating an m4a file,
but it also allowed iPod users to download legally purchased songs directly to their players. This was a
new industry, which was relatively attractive at the time, given the infancy of the field and the small
number of competitors in the digital player industry at the time, in addition to the fact that the software
used to download files to players was illegal to use. You needed a computer to get iTunes, so it likely
would have also boosted sales of Apple’s computers at the same time, in addition to sales of its iPods.
iPhone – Blue Ocean in the consumer electronics/cell phone industry. Industry was not attractive at the
time, given the number of other competitors making cell phones at the time. iPad – Blue Ocean in the
computer industry. Computer industry was not attractive at the time, given the number of competitors.
However, the iPad was a different type of computer, which could be marketed to a different type of user,
one who is more concerned with using a computer for media-intensive purposes and would seek benefit
from applications from the iTunes store and the mobility of the device.

b. IPod/iTunes software – Apple was a new entrant to the industry iPhone – Apple was a new entrant to
the industry

iPad – Apple was an incumbent in the computer industry, although this was a completely different type of
computer which could appeal to media-intensive users looking for a highly mobile device who would
benefit from the iTunes app store integration with their device.

3.
a. iPod/iTunes software – Innovation came from value to the consumer. The technology and market for
mp3’s and devices capable of playing them was already there, but the method for obtaining mp3’s and
getting them on your device was illegal. iTunes provided a legal way to purchase cheap m4a’s (better
sound quality mp3’s), and saved customers from having to buy dozens of CD’s just to get a few songs
they like, as customers could literally choose from any song they wanted to create custom playlists to
download to their iPod player. iPhone – Innovation came from both technology and value pioneering.
The technology of the phone allowed customers to select from a plethora of different apps to purchase,
in order to customize their phone to their specific needs, which provided a great value to the customer,
previously unavailable. iPad – Innovation came from both market and value pioneering. The technology
existed for tablet computers, but it never reached the mainstream before the iPad. Apple’s App Store
also existed prior to the iPad, brought about in 2008 after the iPhone’s launch. What the iPad did was
pair the tablet technology with the App Store to create a highly customizable portable computer at a
lower price point than laptops, which was a great value to customers, who could customize it specifically
to meet their needs. This opened Apple up to a new market of computer users, ones less inclined to
seek out traditional computing functions like word processing, seeking instead portability, media
applications, and customability at a lower price point than a traditional computer.

b. iPod/iTunes software – iPod/iTunes consumers likely included many Apple Computer owners, as you
needed a computer to run iTunes, but it also brought in many new customers outside of their core base.
iPhone – iPhone consumers likely included many Mac users, but in launching the iPhone they expanded
their customer base from their core consumers to reach the larger cell phone industry consumers in
mass numbers. iPad – iPad users probably would have included some traditional Mac users, but they did
not focus on those core customers, choosing to try to expand the overall computer industry pie and bring
in new users who would find value the iPad’s size, simplicity, customability to specific user needs, and
price point. c. iPod/iTunes software – Apple pursued differentiating themselves, as a legal means of
downloading songs was not available at the time, and they provided that avenue, and, even though the
iPod was relatively expensive compared to other mp3 players at the time, it could also be said they
pursued low-cost from the customer perspective, as being able to choose from just about every song
available and purchase them individually saved customers money in not having to buy dozens of CD’s
just to get a few songs they want. iPhone – Apple pursued differentiation and low cost. The iPhone
eliminated many often unnecessary features of typical phones and streamlined the iPhone to have
minimal user interface hardware (it only had 4 buttons), which likely helped keep some of the
manufacturing costs down. They differentiated themselves by creating an online marketplace called the
App Store, where users could customize their phones to their specific wants and needs by downloading
the apps they wanted, and they also maximized the phone’s ability to access the internet easily in a
user-friendly manner. iPad – Apple pursued differentiation and low cost simultaneously. With the tablet
PC, they removed features which often hiked up the cost of a computer like keyboards, peripherals, etc,
and made just a touchscreen compact computer at a lower price point to the consumer, which media-
intensive consumers could customize to their specific needs through the App Store. Although ICD
(Android-based), Nokia, and Microsoft had made tablet PC’s prior to the iPad’s launch, they didn’t offer
the customability and functionality/user-friendliness the App Store allowed the iPad to attain, which is
how they differentiated themselves from other tablet PC’s. The iPad popularized tablets into the
mainstream. 4a. Sony was in the right industries to have been able to potentially have had experienced
the success of Apple in those same industries (consumer electronics market, music industry, mobile
phones) had it been able to think outside the box and not be beholden to certain customers and
interests. Sony’s profits really started to drop in 2004, several years after the iPod had really started to
take hold. Sony knew that digital music was the wave of the future, but the execs were beholden to the
people in the music industry who didn’t want to see the CD go away, so they missed the boat. The digital
music player and software to do it would have provided an enormous value to the customer, in not
having to buy dozens of CDs just to get the few songs they wanted. Apple knew this and were able to
execute on it, while Sony was still clinging to technologies of the past, ones which provided less value to
the customer. It’s failure to seize the moment of the mp3 marked the beginning of the company’s
downward spiral. It continued to compete within existing markets it had traditionally relied on instead of
looking to enter new ones or create new ones altogether, which didn’t significantly shift the value curve
its products provided to customers, so profits continued to tumble from the days when it was a value
pioneer (Walkman, Playstation eras).