One company that defies herd mentality and walks out on its own is the Cupertino based Apple Inc. Founded in 1976 by Steve Jobs and Steve Wozniak, Apple Inc is a typical example of the phrase common in business parlance, a garage start-up. The whole idea behind its conception and its propelling to the zenith of computer and entertainment industry is that of conviction: Jobs was convinced that his ideas would work, the company would work and it did, braving all the odds. Apple I was the first computer designed by them and its sales were not that impressive but enough to keep the confidence of the founders buoyed up.
The computer industry then was rapidly expanding with more and new players like IBM, Microsoft, Dell and Intel entering the market or introducing new products with higher technological capabilities. In 1981, when IBM launched their first PC, Apple Inc welcomed the move and hoped for a healthy rivalry and better products for the consumers. Such is the mettle of the company since the days of its inception. There is nothing ordinary or commonplace about Apple Inc. By the end of 1984, it had already launched its own versions of three computers: LISA, NEWTON and Macintosh.
Amongst the three, Macintosh garnered the most number of accolades and continues to be popular till date. Mac was faster than Lisa, had a Graphic User Interface based functionality and a mouse. It gave the computer users community their first experience with WYSIWIG and menu driven user interface and was an instant hit. By 1993, Macintosh had managed to create a niche, a differentiated segment of users who were driven more by brand loyalty than price. Apple Inc has historically been adamantly opposed any form of licensing, it had its own hardware and own operating system, thus a full fledge in-house PC design.
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It had even refused to license Macintosh OS to Microsoft, thus providing the reason to Bill Gates to design his own Operating System and thus Windows was born. The downfall of the company had initiated back in 1985, when Steve Jobs had bowed out of the organisation’s affair and John Sculley had the commands of the company. Though, under him the company went on to register 8 billion USD in annual sales by the year 1993, but the success was owed to the increasing popularity of Macintosh and emergence of Apple computers as highly efficient desktop publishing tools.
By 1992, it had become very difficult to maintain competitive edge the Mac had because the profits of the company were already suffering because of the intense rivalry in the PC market. De-motivated by the dwindling figures, Sculley resigned from the office of CEO and by 1995, Apple was on the verge of a sale out, had it not been for the charismatic return of its Co-founder, Steve Jobs to the power in 1997. If the reasons for the downfall of the organisation are to be analysed, it can clearly noticed that concentrating only on marketing without paying due attention to innovation and technology upgradation was at the heart of the failure.
It took Apple a gap of good 17 years to come up with another advanced OS after the launch of Mac in 1984, while its core competitor Microsoft was coming up with a version every year. With the release of Windows 2005, Microsoft had hammered the penultimate aim in the coffin of Mac, but still there was hope. The re-entry of Jobs saw the revamping of business strategy. Both on the software and the hardware fronts, Jobs made some landmark policy shifts. For instance, Mac Os was ported to Intel architecture and switched to Intel processors.
This helped in bridging the gap between Mac and Wintel (which was becoming increasingly popular and was more cost efficient and faster than Mac). The compatibility problems between Windows and Mac Os were solved to a great extent by the switch to the Intel architecture as now most of the Windows based software could function on Mac as well. Still Microsoft Office applications remained to be a problem to be solved and in a breakthrough move, Apple Inc entered into an agreement with Microsoft to develop a Mac version for the popular Office suite of application.
But the biggest breakthrough for Apple Inc came in the winter of 2001, precisely in November 2001 when the first iPod was launched and it changed the way people listened to music the world over. It was a hard drive based music player, one that enabled people to keep their favourite songs on the disc and listen to them whenever they want to. iPod versions were launched in succession and soon people could view videos, podcast became the word of the year for 2006 and in 2003, iTunes was expanded into the official online music store selling downloads for the iPod.
There was no beating the sales of iPod as it accounts for 70% of portable music players’ sales in USA alone. Steve Jobs could see the demand for exclusive content as well and his nexus with Pixar and Disney assured regular and exclusive video and movies content for the iPod users. iPhone by Apple was another landmark product. It was a smart phone that combined the capabilities of iPod and a standard mobile phone that was capable of just more than talking and texting.
But the high price of iPhones accounted for low sales and quickly Apple took some concrete policy measures that led to a decrease in the price of the iPhone and an increase in their popularity and sales (Jie He et al, 2009). As said earlier, Apple’s products have become a style statement, a kind of status symbol. They are atrociously high prized, especially the PCs and Notebooks, and there are many low prized substitutes in the market available as far as performance and functionality is concerned.
But there is cult like devotion showed by Apple loyalists towards the company’s products and it is to them the company serves the best. The niche segment of its customers believe in maintaining a fashion statement, a style of their own and Apple gives them enough opportunities to do so while continuously optimizing on cost and functionality to cater to the mass needs as well. The launch of iPad and iPhone generation 4 have been welcomed by Apple loyalists the world over. The year saw the launch of these two great products and the sales of iPod continue to remain on the higher side till date.
The company has still to emulate the success of its iPod and iPhone in the Personal PC and Notebook market. It still occupies a meagre 8% of total PC and laptop sales in US and lesser than that in the world. IBM, Dell and Microsoft still rule the PC and laptop industry and Apple still has to break down their dominance in this industry. Vision Statement “Man is the creator of change in this world. As such he should be above the systems and structures and not subordinate to them. “ Mission Statement
“Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and internet offerings”. Indeed, Apple is the only player in the highly dynamic PC industry that manufactures its own Operating System, own hardware and peripherals and its own software applications to run on the system. It is the pioneering power in the field of plug and play as far as iPods were concerned; in the rest of the industries it uses works on the principle of reinvention and reengineering to even overshadow the original product.
Global Operations Strategy Global Operations Strategy of Apple Inc has been fairly simple and holistic. For any company, as far as operations are concerned, they can be defined on three categorical grounds: low cost strategy, differentiation strategy and cost of differentiation strategy. For Apple Inc, the strategy has been that of differentiation since its inception and continues to be so even today. The company has innovative product offerings to its customer base the world over and has a differentiated section of consumers buying its products.
The former CEO John Sculley paid adequate attention to marketing needs of the company but failed to look into operations aspect and as a result lots of wastage in the form of inventory and terminated R& D projects were generated that ate into the revenue as well as the capital of the company (Huzefa et al, 2008). In 1998, when Tim Cook joined Apple as the senior Vice President of Operations, amongst other things, he managed to reduce the inventory from 30 days to 6 days. Previously, components were being shipped from Asia to Ireland for the manufacturing of iMacs and later the iMacs were being shipped back into Asia for sale.
This was a costly affair and Cook revamped the policy. Except for customized build-to-order, manufacturing for all other orders was outsourced (Huzefa et al, 2008). One major factor that worked in the favour of Apple and helped it to reduce inventory seven-fold was that like other PC manufacturers, it did not assemble the end product. All the components that went into the manufacturing of PCs and Laptops were manufactured in-house and even if they were procured from outside, Cook talked with the supplier over the need of Just-in-time technology and its implementation in-house.
The externally procured components were of standard nature which allowed the company to hold them in the suppliers’ warehouse until and unless need for them was felt. Though the build-to-order customised products meant higher investment in the form of in-house manufacturing and need to hold the components in inventory, it provided the company the much needed idea about latest consumer requirements and improved their ability to forecast and plan better products. As far as sales and distribution are concerned, since its inception, the company sold its products through famous computer retailers in the country.
But after the peak season in the year 1996, the sales fell tremendously and by the start of the year 2000, it had terminated its on-going business contracts with four out five of its retail shelf providers. Later in the year new millennium, it decided to open its own distribution stores which were more like High Street Fashion stores around the world. But it wasn’t anything like overnight mushrooming of Apple iStores. They had strategically selected the venue and did thorough market research before opening a store.
To boost the sales of their iPhones and iPods, they contracted shelf space on major retailers like Wal-mart and other iconic departmental stores. When it comes to outsourcing of its major manufacturing activities, there are not a lot of companies to whom Apple has outsourced its operations. Flextronics, Hon Hai (Foxconn) and Sanmina-SCI are amongst the major outsourcing partners of Apple Inc but then again, they are not in a position to produce on a massive scale if the need be (West, 2009). The marketing strategy of Apple Inc has primarily been US centric.
This is in stark opposition to the aggressive marketing opportunities and outsourcing utilities being pursued by Nokia, the Finnish mobile giant. The major sales of Apple products including iPhones and iPads come from USA only. The sales fell flat in the Asian region of India and China due to their high prices. The company also succumbed to the flourishing sales of iPhones and iPods in the grey markets in these territories where they were sold at much lower prices. For Smartphone production Apple is completely dependent on its limited number of suppliers for components.
Though the components are standardized and suppliers are reputed companies, it doesn’t pay off well to outsource all the production activities (West, 2009). It opened its online store in the year 1997 after the shrinking shelf space for its products and not impressive success of its third party mail order catalogue mechanism. The online stores were a hit and more sales flowed in for the Cupertino PC giant. For its entertainment industry based products, such as iPhone and iPod, Apple entered into exclusive contracts with Disney and Pixar.
For video downloads on its iPods, it signed an agreement with YouTube. Nobody could anticipate consumer demand and expectation as did the charismatic CEO of Apple, Steve Jobs and a lot of people are becoming apprehensive about the future of the company once Jobs calls it a day off. Lean Manufacturing The origins of Lean Manufacturing system are still disputed. While the popular notion is that of it having been originated in the sanctum Santorum of Toyota’s workshops in Japan, many are of the view that the system is aesthetically American.
But undoubtedly, it was the Japanese who refined the system of Lean Manufacturing and used it to not only revolutionize its automobile sector, in particular the Toyota Motor Manufacturing, but also rebuild the nation devastated by nuclear catastrophe. The Americans have prided themselves on their ability to lower down the prices and cost of production through the system of mass production. But this system of traditional manufacturing had its own serious flaws that in future led to a greater increase in the cost than had been controlled by the administrators.
Taichi Ohno at Toyota was designated the task of designing a system that was more efficient than the American system of mass production and enabled them to design selected models in low quantities and yet at lower prices. Ohno and his colleagues learnt well the manufacturing system followed by Ford Motors and instead of imitating them point blank, they studied them thoroughly and analysed their pros and cons. Among various discrepancies found in the traditional system, the most important was that of increasing wastes and inventory redundancies.
Typically, the final product of earlier process was fed as input to the later process and this way the production cycle went on, creating the final product for sale. This was fine up to the point where each process worked just fine and produced only the amount required by the later process. But this was the ideal case scenario and it was very difficult to forecast the exact requirement. Moreover, breaking down of one process lead to impairment of the production process and inventory went on building up, tethering on the brink of wastage.
To prevent against this Just in Time, Total Quality Management, Self Directed Work Groups, Single Minute Exchange of Dies etc were amongst the few techniques used to optimise the production process and eliminate wastage, thereby reducing the overall cost of production. In fact, the much hailed specialisation and division of labour were also discouraged as the need of the hour was versatility or multitasking. A single labour or machine operator was trained to operate more than single machines and the machines themselves were automated with a dash of human intelligence.
This meant that as soon as anything went wrong with any machine, it stopped functioning and required human intervention to restart it. The process was aimed with a larger view to enhance the machines’ capability and to try to remove the defect or the cause of it forever. The operators were made to ask the Five Why’s to investigate into the root cause of the problem and as time proved it, the method actually worked (Ohno). Toyota Production System, as it was known in the earlier days was known by the Toyota employees as the Kanban system and was perfected at every step before it became known to the world.
After the Oil crisis of 1970s, the entire world economy was paralysed for the time being and it was then that the importance of Lean manufacturing system was realised better than ever before. In those times while every other enterprise reported negative growth, the growth at Toyota was monumental. It was at the centre of world spotlight and gave the world a few of its guiding principles. “Globalization is challenging and driving all manufacturing industries to improve their products, compete effectively, reduce manufacturing cost, and make a profit.
Lean manufacturing is becoming more and more attractive because various manufacturing techniques have been incorporated into the lean concept” (Manjoo and Caplan, 2010). Now the manufacturing is driven by consumer demand. Previously the notion was to produce and then create demand. But this system is followed only in the initial days as the business is trying to set itself up and establish its products in the market. Once that is done, it strictly follows the lean manufacturing system whereby it produces the required amount of goods using Just in Time methodologies.
The principles of lean manufacturing work just as fine for the Fortune 500 companies as it does small and medium scale enterprises. It gives everybody an equal opportunity to reduce cost of production through eliminating wastes and improving the process efficiency. Apple Inc has holistically followed the lean manufacturing principles, especially that of inventory control and Just in Time technology. Steve Jobs, the visionary he is, could foresee the need of doing away with the redundant parts of a typical computer set up as the technology progresses. This helps in reducing the cost of the product.
For example, it’s been long since Apple computers stopped having a floppy drive in them. Soon, the computers will do away with optical disks as well because even they are becoming redundant soon. This has immensely helped the organisation in keeping the cost of its offerings under control though they are still high by the current industry standards. It is not very easy to achieve smooth transition from conventional system of manufacturing to the Lean system of Manufacturing. It requires business process reengineering and a lot of learning and tolerance on the part of important position holders and the workers.
But it is still a better way to reduce cost than to lay off people from workforce or affect a cut in their salaries. It is a common business practise to increase sales by increasing expenditure on advertisement and leveraging it with downsizing or reduction in salary in order to prevent increase in costs. “Another important element of the lean concept is the empowerment of the worker to make decisions that are vital to the smooth running of operations within the company, The fact that workers are multi-skilled gives them the ability to undertake this important responsibility.
Their responsibilities however, must be within the limits of their skills, training, and workstation. This empowerment gives the workers a sense of accountability for errors that may occur in the production processes. ” (Manjoo and Caplan, 2010) At Apple, Jobs encourages his designers and creative professionals to ‘Think Differently’ but ultimately the decision to accept a design or reject it remains with him and he affirms it rather proudly that he doesn’t hesitate in saying no to a design because it saves a lot of money that would have been spent in materializing it without any success.
Another principle followed at Apple Inc is that of reinvention and not invention. Jobs takes up a successful product in the market and lends it the Apple touch, that is innovates it to be stylish and provide enhanced performance and be better than the original product. This he has worked out efficiently with portable music players, smart phones, PCs and iPad. Process Performance and Quality A typical designing process for a new product or enhancements to an existing product includes various stages and meetings between the creative professionals.
There are Mockups carried out that require the designers to come up with their own designs and ideas on a paper, in the form of a presentation or any other way. They have to think out the box, think of the things that will work and that work. In an informal meeting, these mock ups are presented and one by one the pros and cons of each design are enumerated. These are naturally time taking and it may happen that nothing worthwhile may come out of them, but at least the team has an idea of all that would not work. This reduces the chances of errors later on.
Then out of the mock ups prepared, the designers are asked to select any ten and continuing the filtering process eliminate 7 bad ones, and out of the remaining three, choose the one that best fits the requirements. This gives them enough space to design the best product they think that will work and will be in tune with the company’s principles. Then Paired Design Meetings are held twice a week. One is an informal one where the designers brainstorm with each other and come up with the design ideas to materialize the product design selected.
Some of the craziest ways of accomplishing end design are thought of in these meetings. But the second meeting that takes place is more on a serious note where the agenda is to nail down every requirement in order to materialize the product design. Then the ideas are presented to senior leadership at a formal meeting and if they are approved then the production process begins. This was about the designing process. When it comes to production process, Apple has its strategy outlined.
Any electronic giant who has done an in and out analysis of Apple iPod will confirm that the Apple Inc has just made revolutionary changes to the design. The components used still remain the same. In the production of iPod, keeping the basic requirements of a classy look, high sound quality, easy navigation and touch screen in mind, the best and standard components from the suppliers were procured or custom ordered in order to fit into the architecture of the iPod design.
There was a Sony battery, Wolfson Codec, Wolfson DAC, Toshiba Disk Drive, Firewire by Texas Instruments and Power Management devices by Linear Technology. So this is how the production process takes place principally. After the designing is done, the components that can be built in-house are manufactured in house, ones that can be procured from suppliers are procured or are custom built according to the requirements. Just in Time technology is followed as a part of the lean manufacturing technology. Very little is held in inventory and the production depends on the demand by the consumers.
Currently Apple invests a lot of money in the R & D facilities, probably more than any other PC manufacturer does. But it still doesn’t have a factory or plant of its own. In future, if there were to be conflicts between Asia and USA or to be Precise Taiwan/China and USA, Apple’s production would be severely hampered. When the speculations were ripe about Apple building its own manufacturing utility, it announced a new Production Process by the name of Brick for the production of its new MacBook and MacBook Pro.
The cutting edge technology enabled the company to build the entire system out of a single block of aluminium, making it thinner and sturdier and encasing various parts and components into it, including the LCD. It was a breakthrough design and production process and remains largely unparalleled in the industry. As it is said earlier, it is the only company that produces its own hardware, operating system and software applications. What it cannot produce, it outsources to the best manufacturing units or procures the components that are standardized.
Quality Jobs places a lot of impetus on the superior quality, design and functionality of Apple’s products. Apple follows Total Quality Management and though some people argue that increased production will lead to technical and quality flaws, the management at Apple Inc is dedicated to provide quality product to its consumers. This is how they even justify the high cost of their products in comparison to other similar products from other competitors in the industry. Quality has never been an issue for the products manufactured at Apple Inc.
The high clarity afforded by the laptop, desktop, iPad, iPod and iPhone screens are an example of this. The apps, the mini applications for iPhones and iPads are increasingly becoming popular. The software designed by Apple geniuses at Loop Infinity is free of any technological flaws. They have been tested time and again in more than 100 ways to remove any bugs or discrepancy. But of late some people have reported occurrence of bugs in the some software of apps and that can be owed to the fact that as number of people using Apple Products increases, a few bugs will indeed come to the surface.
No company can claim a product to be full-proof and moreover, increased numbers of users mean an increased number of ways of operating the device or using the software. This will inevitably lead to resurfacing of a couple of mild flaws. Overall, the company is striving hard to maintain the high quality of its products in order to maintain and further increase its sales in the market. Conclusion Apple’s success has not been one of a fairy tale kind but Steve Jobs does seem to possess a magic wand.
The man with the vision knows exactly what will work with the consumers and what won’t and has an obvious preference of elegant and fashionably designed high quality product, even if they come at a cost. In its 24 years journey, Apple Inc has gone from being the highest grosser in the computer industry to being the lowest and then rising from its own ashes like a phoenix, it went on to become a household name. It clearly dominates the portable music player industry and has created a niche segment of its high styled consumers which follow Apple as a religion.
It has become an iconic part of the digital lifestyle and allows convergence of computers, smart phones and music players in very smart way. Though its sales have increased in the past years, they are still not very impressive as compared to Dell or IBM. A part of it can be attributed to the fact that the company follows only US-centric marketing strategies and apart from iPod, all its other products do not generate high revenue across the world. But despite this, the company has remained to be the highest margin earner since the time it launched Macintosh.
The pressure right now is high on Apple Inc to allow licensing of its technology, if not it’s OS, at least its iOS for mobile phones so that platform issues for various applications are solved. This is one way its iPhone Sales can be increased. But if Jobs is convinced that this is not to be and will go on to get similar applications as offered by other smart phones manufacturers designed in-house, there is nothing that can stop him and 10 to 1, he will succeed in taking Apple inc a step higher in popularity and profitability.
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Manjoo, Farhad and Jeremy Caplan. Apple Nation. 01 July 2010. Ohno, Taichii. Toyota Production System: Beyond Large Scale Manufacturing. New York: Productivity Press, 1988. sherman, eric. inside the apple iPod design triumph. 2002. 13 july 2010
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West, Joel. Apple Computer: the iCEO Seizes the Internet. Irvine: Globalization of I. T. , Center for Research on Information Technology and Organizations, UC Irvine, 2002.
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