Effectiveness of the Strategic Management Process in Apple Company - Case Study Example

Strategic Management Strategic Management Introduction Strategic management is the logical study of various factors related with the external environment, such as competitors and customers, and the internal environment in order to identify a basis through which optimum management practices can be maintained (Barney & Hesterly, 2012: p32). Strategic management provides general direction in which the entity will follow and specifies the entity’s objectives, making policies and decisions and then allocating the available capital to accomplish the set goals and objectives. Preferably, strategic management involve the logical formulation and implementation of diverse initiatives developed by the management. It facilitates the development of right decisions pertaining to production activities and operations of the business units. Variably, it enables managers to be strategic in their thinking and formulate operating structures that are strategic in nature to foster the realisation of set objectives. According to Sitkin (2013, p. 72), any institution that aspires to record exemplary performance in the current competitive business environment has a duty of formulating viable policies and operating guidelines. They also have a duty to implementing the decisions made and structures required. They must understand and know where they are in terms of performance, where they are headed, and the future prospects. This is vital in enabling the realisation of quality results that hold the capacity of boosting return on investment. These strategic directions are essential for institutions in diverse sectors including those in the electronic and phone field such as Apple and Nokia. This paper discuses the imperativeness of strategic management and its role in steering performance in Apple Company. It also evaluates the effectiveness of the three models as applied by Aapple Inc. The company is adopted due to its application of valuable management practices that have resulted in its exemplary performance over the years. The company operates in the competitive field that requires effective and viable strategy formulation for sustainability. Without proper planning and operating strategies, no institution can survive in the sector and gain the aspired competitive advantage. The company uses key performance models that fuel its successful implementation of strategic management ideals. The models give guidelines on how strategic management decisions and principles can be implemented for sustainable growth. The models include Johnson’s culture Web, Bowman’s strategy clock and porter’s generic model. The models equips users with incentives that allow them to make appropriate decisions at the right time based on the insights obtained that are realistic in nature. Evaluation of Apple Company and effectiveness of the strategic management process Apple Company is a renowned corporation that produces superior electronic items to customers globally. Apple Inc. serves the following industries: Computer software- Apple manufactures and sells software such as Safari, iLife, iWork, iPhoto and iMovie Consumer electronics-They include iPad, iPhone, iPod, Mac products and Apple TV Digital distribution includes Mac App Store, iCloud, iTunes Store The Organization was established with the aim of leading supplier of electronic devices globally (Lashinsky, 2013, p. 4). It was also initiated to provide unmatched services and products including provision of sustainable solutions to the emerging issues involving electronic items. Since its inception, the company whose headquarters is located in US has been recording tremendous performance. The performance is attributable to its effective management, quality products, and excellent structure of operation among others. Continuous innovation, creativity, availability of adequate and well knowledgeable human capital, also forms factors that influence its performance. The management strategy adopted in the company has fostered its competitiveness through the adoption of conventional approaches, and systems of operation (Lashinsky, 2013, p. 9). The approaches have ensured that the company remains strategic and informed on the emerging changes including ever-changing customer needs thereby initiating strategic changes. The strategic monitoring of the market and technological changes has enabled the company to remain ahead in terms of competitiveness compared to its rivals such as Nokia. According to Gitman & Mcdaniel (2009, p. 2), the company has ensured that a best business process that forms its culture currently, is embraced without any form of compromise. The management has been inculcating a viable culture in all its aspects of operations with the aim of setting a competitive performance pace. This is obvious owing to the company and the way it produces its products whereby lean production system that facilitates effective utilization of resources is embraced. The system ensures that all the procedures within the manufacturing sequence are followed to the later. They also ensure that the quality of the products is upheld based on the set standards. (Hill & Jones, 2012, p. 23). Effective identification, implementation and alignment of the activities to the strategies chosen, has been fruitful to the company. It has been able to formulate viable cooperate strategies that have linked it to various stakeholders such as investors, suppliers, distributors, customers and others. The strategy has enabled the management to identify the needs of the stakeholders and design amicable ways of addressing them entirely. For instance, the company has been able to produce acceptable items in the market since they are produced in consideration of the needs of customers. So the items are made to suit the requirements in relation to quality, functionality and cost. With respect to the company’s general management, the administrators mobilises the available resources, human capital, and various key competences in managing consumer power, supplier power, competitive rivalry, and distribution of the devices (Sitkin, 2013, p. 79). Similarly, it practices best methodologies of product differentiation, cost management strategies and leadership systems in the market. These strategies have been instrumental in enabling the company to expand its network and market share. In particular, the company adopts the best product differentiation strategy that enables it to produce different types of devices or product brands. The brands include but not limited to phones, ipads, iphones, PCs and laptops. The products are of high quality in terms of functionality, and durability that is expected by the users. Apple Company has been a beneficiary of the generic strategies developed by Michael porter since its inception. Its management has been employing cost leadership and differentiation strategies to gain competitiveness in the fast growing market (Gitman & Mcdaniel, 2009, p. 32). Firstly, the company adopts a favourable pricing strategy for its products compared to rival institutions. The price tag it levies on various items is lower than that of competitors. The strategy is adopted as a way of ensuring that the market share is maintained and expanded to attract new customers. Variably, the electronic producer operates several business units and produces multiple numbers of brands in the market that enables customers to have alternative items to choose from (Roney, 2003, p. 9). Critical evaluation of the models. Porter’s generic model Porters generic Model comprises a major contribution to the advancement and development of the strategic management or any company. Generic strategies first got a presentation in two books by Porter, a professor at Harvard university. He presented presented in his two books on the generic strategies (Porter, 1980, 1985) and Porter (1980, 1985) where he advocated that the most important aspects for a company are the scope of markets and the ways of maintaining competitive advantage in the respective industry. For instance, Apple Inc Company has to use Porter’s generic model so as to maintain competitive advantage in the field of telecommunication. Competitive strategies mainly focus on ways in which a company like Apple achieves the most advantageous position that it can possibly in the industry. A company’s profit is basically the difference between revenues and costs. he profit of a company is essentially the difference between its revenues and costs and thus Apple can achieve high profitability by lowering costs (Doole & Lowe 2004, p. 132). Apple Inc. Apple applies the Porter’s Generic strategies as follows Cost leadership-The top management of Apple Inc has been able to make policies, decisions and strategies aimed at ensuring that the company produces and distribute electronics at the lowest prices. By putting strategies on cost efficiency, the sustainability and success of Apple Inc has been enhanced. By lowering the costs of production, the company has been given the opportunity to determine the prices of their products thus enhancing a competitive edge. (Doole & Lowe 2004, p. 132). Apple Inc has a very powerful and experienced management and culture which calls for and promotes creativity and innovation in everything they engage in, from their marketing, products, delivery among other areas, which is crucial in differentiating their brand from that of competitors Another good example of cost leadership is the iTunes service which they offer. This service permits companies to digitally distribute music without the use of a physical compact disk. There are no expenses of physical production. Apple manufactures its products in China because labor costs in China are much cheaper. In addition, Apple has a huge access to big markets in China because China has the biggest population on the globe. This factor makes Apple to lower the prices of products thus staying competitive in the global market Differentiation Strategy-Apple Inc endeavors to improve market demand for most of its products through differentiation (Doole & Lowe 2004, p. 131). They mostly focus on making its products unique and attractive to its esteemed customers. Former CEO, Steve Jobs had one major strategy containing four pillars which are: Offer relatively small number of products Focus on the end to ensure that it is on the high Prioritize on profits other than market share Generate a halo effect that will make people yearn for new Apple products and services The current CEO, Tim Cook, said in an interview that they have never had an objective to sell low-cost phones; instead their primary objective is to present good phones and give great experience. This makes Apple to be unique from many of the companies in the Automobile industry who mostly major on market share and selling large numbers of products. Apple modifies most of its products in terms of the power source due to the different power voltages in different countries. This makes their products to be unique. Focus Strategy-Apple Inc has been focusing on producing differentiation to make a distinction between its products and those of the competitors. From the MacIntosh computers to the iPod music and video players, and iPad and iPhone mobile devices, Apple Inc has greatly focused on differentiation and has employed strategies to target certain consumer market sections and send authoritative messages that its products stand out from the competitor’s. This has made them to stay competitive in the market. Porter’s generic model is shown below Limitations of Poters Generic Model The risk of applying cost leadership strategy is that Apple may concentrate much on reducing costs at the expense of other crucial factors and this factor may become more dominant to the extent that the company may lose its main vision of why it engaged in the strategy. The main problem with differentiation strategy is that it may be difficult on the part of the company to estimate the extra costs used in differentiation and how to the prices on how the extra costs are recovered from customers through premium pricing. In addition, successful differentiation may attract competitors in the field of telecommunications for instance, Samsung Company who may copy the differentiated product. The Focus strategy on cost strategy and differentiation may turn out to be difficult where economies of scale play crucial roles in their profitability. Before applying this model, Apple Inc should bear in mind that Porter’s strategy should be considered as just part of a broader strategic analysis and not as an individual factor. This strategy only provides a basic starting point for exploring the whole concept of product differentiation and cost leadership. Perhaps, a major limitation to this model is that its components may not provide sufficient and relevant strategic routes especially in fast growing industries ( Lynch, 2003, p231). For example, the telecommunications industry from where Apple operates in. It is essential for Apple Company to combine Porter’s strategy with other models like the PESTEL analysis and SWOT analysis so as to add value to the entire strategy. Johnsons cultural Web Cultural practices are shared norms and activities that firms and compoanies embrace in their daily operations. The traditions influence decision making in institution and change process at diverse stages of operations. Cultural norms and practices entail procedures, policies, systems of employee selection and communication system including decision-making processes and organizational structure the institution has been adopted. Thai practices are important since they form part of the institution’s undertakings. They give direction of performance based on the prevailing conditions. According to Hill & Jones (2012, p. 29), for practice to become a culture, it must have been applied severally in the institutions operations. The practice then becomes the benchmark of performance of which any service delivery is based. This explains why it is vital for companies to develop result oriented cultural practices to guarantee success at all level of operations. Scholars indicate that a company that has a culture of good performance will always make result cantered decisions that steers it to exemplary performance. If the culture of performance is good, it is likely to increase while a culture of poor performance degenerates to inferior productivity. Elements of the Cultural Web The Cultural Web advocates for six interrelated elements that make up the ‘paradigm’ model or pattern of the work environment. Apple applies these factors in order to address issues like seeing the bigger picture of culture, operational as planned, not running and what needs adjustments. 1. Stories – This refers to the past events and people discussed in daily lives either within and outside Apple surroundings.Who and what the company’s employees talk about says a lot about its values and behaviours. 2. Rituals and Routines – The daily conduct and actions of staff that indicate acceptable behaviour. This decides what is expected to take place in certain situations, and what is valued by the top management. 3. Symbols – This includes the visual representations and emblems of the organization, and the modes of dressing. 4. Organizational Structure – This comprises of the structures are explained in the chart, power lines and influence that show whose contributions are most valued. 5. Control Systems – The ways and procedures in which an organization is controlled. Comprises of financial systems, quality control systems, and rewards. 6. Power Structures – Refers to the prospects of real power in the company. This may include one or two key senior executives or even a whole group of executives, or even a whole department. People have authority on operations, decisions and strategic direction. (Doole & Lowe 2004, p. 094). They influence the way organizations such as Apple Company execute their activities, design routines, develop organizational structures, perform product branding, and create power structures. In particular, stories are an element that facilitates the understanding of the institutions past events, value systems, behavioural standards, and perception that people have. The understanding of these aspects helps institutions in setting strategies that are attainable, measurable and realistic. Routines, symbols and organizational structures entail daily behaviour or actions of people, visual representation in terms of logos and structure of the organisational chart respectively. Control systems and power structures also give insights on how the institution controls its resources and operation powers guidelines (Hill & Jones, 2012, p. 29). Limitations of Johnsons Cultural web Apple Inc management team involved in cultural change calls for a substantial understanding of the diverse cultural values, attitudes, assumptions and behaviours of both the management and staff. The top management should be experienced and be in a point of spotting and distinguishing the the incompatibity of cultural elements and the respective deired strategies. They should embrace the challenge of ensuring that they differentiate between the themes that work for the benefit of the firm and embrace them as well as eradicating the obsolete themes. Not all cultural values and practices are essential for the company. Cultural themes are wide and pervasive and though they establish the relationship between the subcultures that hold Apple Inc together as an organization, they are at times difficult to spot and clarify. Most managers have ignored them. the relationship between. The most difficult part of this paradigm is how top leaders for an organization like Apple try to untangle the cultural relations, intervene to bring meaning to cultural themes as well as securing the commitments of staff members who in most cases don’t embrace change. Bowman’s strategy clock Bowman’s strategy clock is a vital model that is used in analysing competitiveness a company exhibit in the market in comparison to rival institutions (Ahmed, 2014, p. 1). Apple Company has been using the elements of this strategy to achieve effective market positioning that in turn leads to increased performance. The model has enabled the company to design strategies that promote cost advantage and differentiation advantage. The electronic producer has been operating under a differentiation strategy that has facilitated the production of attractive and quality electronics such as phones and laptops. According to Bowman, competitive advantage in institutions must be considered in relation to cost advantage. The consideration is imperative in ensuring that productivity is not characterized by poor procedures that are costly. He noted that institutions must establish and know how to deal with cost related issues by executing sustainable budgets. They should employ every effort to boost their capacity of improving customer acceptance to items while minimizing cost at the input level. Bowman’s strategy clock is characterized by the perceive value addition that it propagates and the price axes. It makes a clear representation of eight valid strategies that hold the capacity of enabling institutions to conform to quality standards in four quadrants. The strategies that are shown in the diagram below include hybrid, differentiation, and focused differentiation (Ahmed, 2014, p. 1). The strategies also include cost leader, segment specific, increased price and low value and raise prices. Firms compete to maintain competitiveness under these categories of strategies. For instance, in low price/ low value category firms compete for the existing customers despite limited fight for space. This strategy does not attract immense competition given that products are of low quality and low prices are charged. The strategy is adopted by firms with specific constraints that seek to employ low pricing strategy to attract more customers into purchasing of items (Thomson, 2009, p. 184). Various companies are using this strategy to curve a niche in the market and gain relevance. Low price is another strategy that companies use to gain competiveness. The strategy is common among firms that practice low cost leadership in the industry. The strategy entails driving commodity prices down to bare minimums while balancing low profit limits with higher sales volumes. Consequently, hybrid strategy that entails offering of items of higher value at low prices, contributes to success in most institutions. Mostly, various department stores that include White Rose Inc and Tesco use the strategy that is gaining prominence. Subsequently, companies like Apple, Armani, Rolls Royce uses differentiation and focused differentiation strategies to manage competitiveness in the market (Thomson, 2009, p. 189). The strategies that revolve around producing high value products and increased level of attractiveness enhances profit margins of the companies. The strategies enable the companies to satisfy the needs of the customers who prefer quality items at high rates. They have been able to outshine other institutions that have limited capacity of investing into such strategies in boosting productivity. Institutions that target high-end customers with high expenditure propensity adopt these strategies. Increased price and standard value is another strategy proposed by Bowman in his strategy clock. The strategy is highly viable for institutions with fair resources (Jacobsen, 2009, p. 141). It entails increasing product prices while ensuring that standard procedures of production are conformed to holistically. Other strategies include high price/low value that entails charging high amounts of money for items whose value is reduced. The strategy is to explicitly good for attaining competitiveness in the present world. Subsequently, low value/standard price that entail levying of fair prices while minimizing on product value influences performance. As noted, Apple Company has been adopting superior performance strategies that guarantee its place in the market. The company operates under best management models where it draws suitable elements that influence performance. The elements and strategies advance its activities at diverse levels of operation while ensuring that product value is maintained including favorable pricing (Jacobsen, 2009, p. 143). In particular, the company adopts product differentiation strategy as its performance driver. It invests heavily in the production process purpose to produce unmatched items that customers can easily identify with. The items are attractive, durable, easy to operate, and hold high standards of functionality. The strategy has enabled the company to earn reputation as the best corporation in-terms of the production of quality items that matches consumer needs. Limitations of Bowman’s strategy clock The Bowman’s Strategy Clock model has been applied a lot by organizations because of it brings clarity to competitive strategy in the industry and the options available for the success of the business. Bowman challenges Michael Porter’s ideas and suggests that a more differentiated and low cost position may be achieved by the firm. However, the Strategy Clock can lead to negative thinking and this could be damaging to the profitability of the firm. Apple should exercise certain degree of caution when lowering prices and when differentiating their electronic products. Sometimes they will have to be ready and take up risks and make decisions so as to do away with its immediate competitors such as the Samsung Company. If they fail to take such decisive moves, then the competitors will and they are left playing catch-up. The strategy clock is a model that is perceived to have a bias towards helping to direct competitive strategy so as to increase market share. Positions higher than the fair value line are expected to boost market share whereas positions below the fair value line will probably make the market share to fall. Its recommendations are not so clear and remain ambiguous to most managers on the profit impact of moves just about the customer matrix. Conclusion Indeed, business models are fundamental in contributing to competitiveness of institutions as evident in Apple Company. The models provide basic incentives and performance strategies that foster exemplary performance if executed well. They enable managers Ato identify and analyze the needs of customers with the aim of meeting the needs promptly. This helps them in expanding market share and performance levels through increased sales volumes. Subsequently, strategic management processes transforms performance in most companies. Effective management process embraced by Apple Company has resulted to its exemplary performance. The company enjoys high market share, returns and production volumes due to the viable operation strategy that it uses. For instance, the company embraces the use of diversification strategy that guarantees competitiveness through value addition, enhancement of product features and production of variety of items. Apple Company also has a strong cultural practice and system of operation that leverages its performance. It embraces the cultural practices that are provided in the cultural web. In particular, the strategies will enable Apple Company to identify its strategic capabilities that are embedded historically in the institutional culture. The capabilities will encourage development of pertinent strategies to boost productivity and service delivery. Similarly, corporate culture is bound to enable the company identify opportunities and operating constraints that may hinder the realization of set objectives Therefore, companies have to know when to develop right decisions pertaining to production activities and operations of the business units. Managers must also be strategic in their thinking and formulate operating structures that are strategic in nature to foster the realisation of set objectives. Ideally, any institution that aspires to record exemplary performance in the current competitive business environment has a duty of formulating viable policies and operating guidelines. They also have a duty of implementing the decisions made and structures required. They must understand and know where they are in terms of performance, where they are headed, and the future prospects. This is vital in enabling the realisation of quality results that hold the capacity of boosting return on investment. Reference List Ahmed, G. (2014). 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