Apple Inc. was behind one of the first successful commercially produced microcomputers. The introduction of the desktop computer Apple II in 1977 essentially marked the beginning of personal computing for mass consumption, as well as the foray of the company into consumer electronics.
Remember that Apple did not rest alone on designing and manufacturing computers. Under the leadership of Steve Jobs, the company expanded its product portfolio with the introduction of the portable digital music player iPod and the digital content management and music store iTunes in 2001. Products such as the iPhone and the iPad catapulted Apple to further success.
Nonetheless, 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 critical strategies employed by the Cupertino-based company.
The Business Strategy of Apple
1. 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 touchscreen input. However, the company has been widely recognized as an innovator and game-changer in the industry. But Apple was not always innovative.
Note that although the Apple II and the Macintosh received initial success, they were subsequently pitted against personal computer products from IBM. This was after Steve Jobs left the company in 1985. The competition was tough, and Apple was at the losing end as it struggled with sales until finally succumbing to defeat as Windows-based personal computers from Microsoft gained a stronghold in the Market starting the 1990s.
The poor performance of Apple stemmed from an inferior product strategy. The company was designing, manufacturing, and selling computer products that were redundant and confusing. The Apple II and the Macintosh product lines was a testament to this fact. When Jobs returned in 1996 to lead Apple, his first order of business was to discard all unprofitable products and realign product development and innovation initiatives based on a new philosophy: simplification.
Key to the business strategy of Apple is a specific product and innovation strategy centered on reactive and proactive innovation built on the need to promote simplicity. The company does this by using cues from already existing products and improving them further by removing undesirable qualities and integrating differentiating features, primarily by introducing novel functionalities and reinventing the entire user experience.
The reactive and proactive approach to product development and innovation has enabled Apple to leave lasting influence over different industries and sectors. For example, the introduction of the iPod and the iTunes revolutionized the music industry through the promotion of digital music. In addition, the company was also instrumental in ushering in the era of smartphones and tablet computers with the introduction of iPhone in 2007 and iPad in 2010.
Of course, it is also worth mentioning that the overall product and innovation philosophy of Apple are transmitted across the entire product and service lines through complementation. Essentially, the extensive but controlled product portfolio of the company creates and maintains a uniform user experience. For example, the user interfaces of Mac computers, the iPad, and the iPhone have similar functional and design principles, thus creating a sense of familiarity. Furthermore, a particular user of different Apple devices can take advantage of complementation through the Apple ID. This all-access account allows users to manage their digital identity, files, and preferences across different devices, thus allowing a seamless transition.
2. Manufacturing and Supply Chain Strategy
Outsourcing is another remarkable business strategy of Apple. The company does not own and operate manufacturing or production facilities. Instead, hardware parts such as display panels are either bought from third-party manufacturers, and propriety hardware such as the processors found in the iPhones and the iPads are manufactured by outsourced companies. Even the MacBook and iPhones are assembled in different outsourced facilities.
The fact that manufacturing capabilities are outsourced should not be taken against Apple. Outsourcing allows the company to be both effective and efficient. It can save cost due to reduced operating expenses that would naturally come from running and maintaining production facilities while also allowing it to concentrate more on research and development, product design, and marketing.
Apple also alternates between a lean supply chain strategy and an agile supply chain strategy depending on current market requirements and industry trajectories. Through the lean strategy, the company focuses on adding value for customers and eliminating identified wastes or anything that does not add value. On the other hand, through an agile strategy, it follows a wait-and-see approach by waiting for consumer demand and market trends before committing to and launching a final product.
The lean supply chain strategy has been demonstrated in numerous product launches of Apple such as the introduction of the iMac and the Mac OS in 1998, the launch of the iPod and iTunes in 2011, and the unveiling of the iPhone in 2007 and the iPad in 2010. Note that these products were loosely based on counterpart products from competitors but featured significant reinventions and new innovative improvements.
However, there have been instances when Apple follows an agile supply chain strategy, especially on product iterations. This has been demonstrated with the launch of the iPad Mini that represented a response to the market availability of smaller tablet computers, the iPhone Plus that corresponded to the popularity of phablets that were first popularized by Samsung, and hardware updates to the Mac and MacBook line of computers that followed updates from third-party hardware suppliers, including processors from Intel.
Full control is also another notable feature of the supply chain strategy of Apple. This is exemplified in the production of iPhones and iPads, as well as the development of the iOS, macOS, and other applications. To be specific, the company designs and engineers the hardware for these devices, specifically the system-on-chip or SoC hardware that houses different processing unit and connectivity components, among others, and have them fabricated and produced by outsourced manufacturers. The company also designs and develops the operating system for these devices, while also controlling the development of applications from third-party software developers.
Designing and engineering the hardware, having outsourced manufacturers follow instructions on the dot, developing the base operating system, and regulating third-party app developers mean that Apple has substantial control over a closed ecosystem. While this is undemocratic to some, this authority allows the company to optimize and synchronize hardware and software operations, thus resulting in the production of a more streamlined device.
3. Marketing and Branding Strategy
Every sound business strategy also includes a game plan for reaching people and turning them into customers. Note that the marketing strategy of Apple has incessantly evolved through the years due to changing market requirements. Currently, however, its marketing strategy is considerably straightforward as most marketing efforts revolve around premium branding positioning and cult marketing. Note that the company also spends on traditional marketing and advertising, other promotional activities such as sales promotion, as well as digital marketing activities.
Positioning Apple products as premium brands is possible through a product strategy that takes into consideration the addition of fashionable and innovative features, a pricing strategy following a premium pricing approach, and a distribution strategy that involves retail experience and reliable after-sales support.
Within the specific product strategy to promote and maintain a premium brand image, exclusive top-of-the-line features have always been evident in recent flagship Apple products. Examples are the metal chassis of MacBook line of computers such as the MacBook Pro or the 12-Inch MacBook, or the metal-and-glass aesthetics of the iPhone and iPad. Other examples are exclusive hardware and software features such as the use of high-end trademarked Retina display panels and the bundled free iCloud storage and synchronization services.
Another way Apple maintains a premium branding positioning is through a premium pricing strategy. Remember that most Apple products are expensive when compared to counterpart products from competitors. But these high price points help the company tell consumers that expensive products represent exceptional quality and distinctions. It is also worth noting that luxury consumers are willing to pay extra to maintain a sense of indulgence or a status symbol.
Retail experience through concept stores and universal after-sales support are part of the distribution strategy of Apple aimed at sustaining further a premium branding positioning. Authorized Apple retailers typified by minimalist and industrial interiors and appropriately organized product displays create a visually pleasing and immersive retail experience. Meanwhile, authorized service centers enrich further the customer experience through a universal after-sales support, thus ensuring customer satisfaction and loyalty.
Consistent premium branding reinforces another aspect of the marketing strategy of Apple called cult marketing. This is further reinforced by an overall product strategy that revolves around creating and maintaining complementary products and services.
Apple products create a halo effect nonetheless. Because each product complements one another, consumers would usually choose to stick with Apple rather than buying different products from different manufacturers and create a hodgepodge of diverse product and user experience. The halo effect means that aside from selling products, Apple is also selling a lifestyle built around its premium technology-based brands. This is central in cult marketing nonetheless.
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 production and innovation strategy, marketing and branding strategy, and manufacturing and supply chain strategies because they are very prominent and critical in the success of the company. These strategies essentially provide the defining characteristics and profile of Apple.
Of course, like any other business organizations and multinational corporations, the company employs a range of more specific strategies to include financial management strategies, human resource strategies that include recruitment and retention practices, as well as stakeholder relationship and social responsibility strategies, among others.