Operational Excellence by Companies: A Case Study of Apple Inc.
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Apple Inc., formerly known as Apple Computer Inc., is a global technology company that is based in Cupertino, California. Initially founded in April 1976, it grew to become one of the most profitable companies in the world alongside other global giants such as Goggle, Amazon, and Microsoft (O’Regan, 2015). Its founders include the legendary tech guru Steve Jobs, Steve Wozniak, and Ronald Wayne. It made a name for itself as the first successful personal computer company that first used and popularized the graphical user interface.
Apple’s product portfolio ranges from personal computers, computer peripherals, computer software, cloud services to online entertainment. Its marquee signature product is the iPhone smartphone that has a wide range of collections up to the current iPhone 11 pro max. Their personal computer is namely the Mac personal computer. Its other computer peripherals include the iPad tablet computer, the iPod portable media player, the Apple Watch smartwatch, the AirPods wireless earbuds, the Apple TV digital media player, and the HomePod smart speaker (Sulzer, 2019). Its software product line includes macOS, iOS, iPadOS, watchOS, and tvOS operating systems, the iTunes media player, the Safari web browser, the Shazam acoustic fingerprint utility, iLife, and iWork suites, Final Cut Pro, Logic Por and XCode. It offers cloud service, namely the iCloud (O’Regan, 2015). Its entertainment services include Apple Music and Apple TV+. Other online services include iMessage, iTunes Store, the iOS app store, Mac App Store, Apple store, Genius Bar, AppleCare, Apple Pay, Apple Pay Cash, and Apple Card.
Apple differentiates itself in the market based on four main factors. These factors include offering a few of its products, prioritizing profits over market share, creating a halo effect that creates an eagerness for new Apple products, and focusing on the high end. To increase its market demand for its products, it differentiates them from becoming unique and attractive to consumers by creating different features or handling tasks that are unique to those of competitors. For example, when Apple launched the iPod, iPhone, and iPad, they were the only gadgets in the market with the quality uniqueness they had in an all-in-one package. The company is always committed to designing its products ahead of its competitors, therefore, becoming the trendsetter in the tech world. Apple has managed successfully to create an influx demand for its products despite high competition.
Consequently, the company is a price setter through product differentiation and has power through innovative advertising, brand loyalty, and hype during new product launches (Heracleous & Papachroni, 2016). Apple targets customers that are willing to pay more as well as maintaining a premium price at the cost of unit volume, giving them a sense of high value and exclusivity. The cheapest priced Apple products usually fall in the mid-range, but customers will be willing to pay that price for the high quality. This move is aimed at countering actions by its competitors who sell their products at low prices and depend on high volumes to counter their slim profit margins. Additionally, Apple managed to set up an artificial entry barrier to new competitors.
For most of its products, Apple sells directly to consumers and small/medium-sized businesses as well as reselling third-party products through its retail and online stores. Apple has also set up indirect distribution channels like wholesalers, retailers, cellular network carriers, and value-added resellers to sell its products. Apple sets itself differently from other competitors by offering limited quantities to high-end retailers as well as focusing its retail efforts on its Apple stores (Heracleous & Papachroni, 2016). To maintain its prices, Apple uses a minimum advertised price strategy that hinders resellers and dealers from promoting its products below a specific minimum price. This strategy is usually enforced through providing market subsidies such as marginal wholesale discounts to its dealers.
Apple has differentiated itself from its competitors, also by maintaining brand loyalty. Whenever there is a new product launch by Apple, there are massive numbers by loyal Apple customers who wait in line to purchase these latest products or even download the latest music through iTunes or watch new episodes of their favorite TV show on Apple TV. By capturing a large market for its products, Apple has created a virtual split in the world of electronic gadgets, that is Apple devices vs. everyone else. It has enhanced its exclusivity to customers by keeping their products at the top of countless must-have lists every year.
Several resources have led to the success of Apple in the tech world. The most important one is effective leadership. Apple enjoyed its best era under the marquee leadership of its co-founder Steve Jobs whose leadership was autocratic. He successfully micro-managed a wide range of business operations with everything flowing through him. When Tim Cook, the current CEO, took over, the leadership style drastically changed to a more democratic style (Jose, 2014). Another resource that Apple possesses is its unique innovativeness. Apple has always been ahead of its curve with a policy of being at least two years ahead of the market. This innovation has still allowed Apple to dominate the market before competitors produce similar products.
The operational excellence by Apple can be majorly attributed to the current CEO, Tim Cook. Before being appointed as the CEO, Cook served as the chief of operations. He is regarded as one of the best chief operations officers in the world as he transformed the services of Apple drastically. He joined Apple, and his first action was to decrease the number of Apple’s key suppliers from 100 to 24 while renegotiating better deals with them and encouraging them to relocate near Apple (Sulzer, 2019). He reduced inventory from one month to six days. To build a capacity for sapphire crystal displays to be used for future devices, Cook personally financed GT Advanced. This led to Apple creating a new supply chain for displays. Additionally, its operational success can be attributed to the creativity of its workforce, giving its competitors like Samsung a run for their money.
References
Heracleous, L., & Papachroni, A. (2016). Strategic leadership and innovation at Apple Inc. https://doi.org/10.4135/9781526446565
Jose, K. (2014). Apple’s leadership strategies. Steve Jobs and Tim Cook. GRIN Verlag.
O’Regan, G. (2015). Apple Inc. Pillars of Computing, 25-30. https://doi.org/10.1007/978-3-319-21464-1_5
Sulzer, D. (2019). Apple Inc: A paramount example of dynamic capabilities with an uncertain future.