Apple was behind one of the successful microcomputers produced for mass consumers. The introduction of the desktop computer Apple II in 1977 ushed in the era of personal computing and the beginning of the digital information revolution. This same product also marked the emergence of Apple as a capable consumer electronics company.
It did not rest alone in designing and manufacturing personal computers. The leadership of Steve Jobs saw the expansion of its product portfolio with the introduction of the portable digital music player iPod and the digital content management and online music store iTunes in 2001. Products such as the iPhone and the iPad catapulted Apple to further success.
The company is also part of the Big Five technology companies in the United States alongside Amazon, Meta Platforms or Facebook, Google or Alphabet, and Microsoft. Understanding the success of iconic products such as the iPod and the iPhone requires an appreciation of the overall business strategy of Apple. This article provides a concise analysis and discussion of several strategies that have been developed and implemented by this company.
Elements of the Business Strategy of Apple
Product and Innovation Strategy
Apple was not the first to introduce the personal computer. It did not invent the first portable media player nor did it pioneer the first smartphone with a touchscreen input and heralded the first tablet computers in the market. Nevertheless, despite these undeniable facts, it is still interesting to underscore the fact that it has earned widespread recognition for being an innovator and a disruptor. It is important to note that Apple was not always innovative.
The Apple II and Macintosh received initial success but were later pitted against personal computers from IBM. This transpired after Steve Jobs left the company in 1985. The competition was tough. Apple was at the losing end as it struggled with sales until succumbing to defeat following the introduction of Microsoft Windows. This operating system became popular beginning in 1990 as more PC manufacturers carried it in their products.
An inferior product strategy was the cause of the poor performance of Apple. The company was designing, manufacturing, and marketing personal computers that were redundant and confusing. The Apple II and the Macintosh products proved this fact. However, when Steve Jobs returned in 1996 to lead the company, his first order of business was to forego all unprofitable products and realign product development based on the principle of simplification.
Integral to the revitalized business strategy of Apple is a specific product and innovation strategy that revolves around a reactive approach and a proactive approach built on the need to promote simplicity. It does this by using cues from already existing products and improving them further by removing undesirable qualities and integrating differentiating features through the introduction of novel functionalities and reinventing the entire user experience.
The reactive approach and proactive approach to product development and innovation have enabled Apple to leave a lasting influence over different industries and sectors. The introduction of the iPod and the iTunes revolutionized the music industry through the promotion of digital music. The company was also instrumental in ushering in the era of smartphones and tablet computers with the introduction of the iPhone in 2007 and the iPad in 2019.
Apple banked on its established experience in designing and deploying the ARM instruction set architecture that was first used in the A-series systems-on-chip for the iPhone. It later ditched the CISC-based x86 architecture from Intel in favor of RISC and ARM architectures for personal computing. This transpired following the introduction of the first Apple M1 chip for Mac devices in 2020 and it marked another attempt to disrupt the personal computing market.
Take note that the product and innovation strategy of Apple is applied across its diverse product lines. This is evident from its closed product ecosystem which is characterized by the presence of several Apple devices, applications, and services that complement one another. The extensive but controlled product portfolio of the company creates and maintains a uniform user experience while maintaining coherent branding and encouraging repeat sales.
The user interface of the macOS for Mac devices is an example. This operating system has similar design principles and functional operations as the iOS for the iPhone and the iPadOS for the iPad. This creates a sense of familiarity across the different operating systems. Another example is the Apple ID which serves as an all-access account that enables a user to link together and manage his or her Apple products for a seamless user experience.
Manufacturing and Supply Chain Strategy
Another notable aspect of the business strategy of Apple is outsourcing. It does not operate manufacturing facilities. Generic components such as storage media and wireless communication modules are either bought or licensed from suppliers while custom hardware components such as processors and panels are outsourced to contract manufacturers. Actual devices such as the MacBook and the iPhone are assembled in different production facilities.
The fact that production is outsourced to third parties should not be taken against Apple. This approach to manufacturing enables the company to be both effective and efficient. It can save costs due to reduced operating expenses that would come from running, maintaining, and upgrading production facilities. Outsourcing also gives it more resources and space to focus on research and development undertakings and marketing and sales activities.
Apple also alternates between lean and agile supply chain strategies depending on current market requirements and forecasted market direction. A lean strategy allows the company to focus on adding value for customers through the elimination of waste or whatever that does not add value. An agile strategy is a wait-and-see approach that involves monitoring consumer demand and market trends before developing and launching a particular product.
The lean supply chain strategy of Apple has been demonstrated in several of its product launches. These include the introduction of the iMac and the Mac OS in 1998, the launching of the iPod and iTunes in 2001, and the unveiling of the iPhone in 2007 and the iPad in 2010. Take note that these products were based on counterpart products from competitors but featured differentiating characteristics, significant reinventions, and innovative improvements.
Instances in which Apple followed an agile supply chain strategy are obvious in product iterations or the introduction of a new product within the same product line. Specific examples include the launch of the iPad Mini which represented a response to the clamor for smaller table computers, the iPhone Plus which corresponded to the popularity of phablets, and hardware upgrades to the Mac and MacBook product line and the iPhone and iPad lines.
The supply chain strategy of Apple is also centered on maintaining control over how it wants its products to look and function. Consider the iPhone as an example. The company designs this device and some of its critical components. It then selects contract manufacturers that are capable of turning its designed specifications into an actual and working final product. Apple also designs and develops the operating system and controls other app developers.
Hence, from the aforementioned efforts to maintain control, designing the hardware, requiring contract manufacturers to follow instructions on the dot, developing the operating system, and regulating app developers allow Apple to maintain an unrivaled hardware-software integration and optimization while also ensuring that the user experience across all of its product, software, and services or its diverse product ecosystem streamlined and seamless.
Marketing and Branding Strategy
Every sound business strategy also includes a game plan for reaching people and turning them into customers. Take note that the specific marketing strategy of Apple has evolved throughout the years. Its current approach to marketing is straightforward. Most marketing efforts revolved around premium branding positioning and cult marketing. It also spends on traditional promotional activities such as sales promotions and digital marketing activities.
Positioning Apple as a premium brand is made possible through a product strategy that takes into consideration the addition of innovative features and inclusion of a simple and classic design language, a pricing strategy based on premium pricing or the use of higher price points relative to the competition, and a distribution strategy that centers on an providing an experiential retail experience and reliable after-sales support using various distribution channels.
The specific product strategy aimed at supplementing its premium brand image has been evident from the top-of-the-line features and defining characteristics of its flagship products. These include the muted look and metal chassis of the MacBook line, more premium metal components in the newer generations of the iPhone line, the use of high-end display panels trademarked as Retina, and the metal-and-glass aesthetics of the iPad and the Apple Watch.
Another way Apple maintains a premium branding positioning is through a premium pricing strategy. Remember that most of its products are expensive when compared to counterparts from its competitors. These high price points help the company tell consumers that expensive products represent exceptional quality and distinctions. It is also worth mentioning that luxury consumers are willing to pay extra to induce a sense of grandeur or as a status symbol.
The retail experience in its experiential concept stores and universal after-sales support are aimed at sustaining further its premium brand image. Authorized physical stores feature a minimalist interior design and showcase products similar to a vehicle showroom. These provide a visually pleasing and immersive experience. Authorized service centers enrich further the customer experience through servicing, product tutorials, and even product recycling.
It is also worth mentioning that the company further reinforces its premium brand image through a particular aspect of its product strategy that centers on developing complementary products. The actual experience of using a specific device, a particular software, or a specific service is similar across different product categories. This seamless user experience helps maintain a premium brand image because it fosters positive perception and reduces churn.
The seamlessness of using different Apple products creates a halo effect. Most consumers would prefer sticking with Apple rather than purchasing and using products from other companies and experiencing a hodgepodge of varied user experiences. This halo effect also means that the company is selling not only a product but also a lifestyle. This is essential in cult marketing for encouraging repeat sales and nurturing a pool of dedicated customers.
Another notable characteristic of the marketing strategy of Apple is its minimal promotional activities as evident from its low budget for advertising. The company does not need to spend on advertising and other expensive promotional activities. It banks on its established brand and a pool of dedicated customers. The various events it hosts create anticipation and buzz before and even after the event proper from the media, digital influences, and enthusiasts.
A Note on the Business Strategy of Apple
The aforementioned specific aspects of the business strategy of Apple are selected for the purpose of conciseness. This article highlights the specific production and innovation strategy, manufacturing and supply chain strategy, and marketing and branding strategy because they are prominent and have been critical to the success of the company. These strategies provide the foundational basis for the defining characteristics of Apple as a business organization.
It is still important to note that Apple utilizes a range of more specific strategies and tactics. These include a financial management approach, human resource activities for talent acquisition and retention, and even a stakeholder relationship and social responsibility policies. It is interesting to note that it has a dedicated corporate social responsibility program that includes initiatives aimed at promoting sustainability and protecting the environment.
FURTHER READINGS AND REFERENCES
- Garcia, C. 2023. “Apple Stock: Advantages and Disadvantages.” Fincier. Esploro Research. Available online
- Garcia, C. 2023. “How to Invest in Apple: A Guide for Beginners.” Fincier. Esploro Research. Available online
- Martinez, I. 2023. “Competitive Advantage of Apple.” Konsyse. Esploro Research. Available online
- Martinez, I. 2023. “Differentiation Strategy of Apple: Channels and Components.” Konsyse. Esploro Research. Available online
- Martinez, I. 2023. “Promotion Strategy of Apple: Key Promotional Activities” Konsyse. Esploro Research. Available online
