Apple: Turnaround


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History and Turnaround of Apple

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Apple: Turnaround

  2. 2. A Tribute to Steve Jobs Here's to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They're not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can't do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do. -Steve Jobs
  3. 3. Executive Summary  This project looks at the turnaround that Apple had gone through under the vision and command of Steve Jobs from 1997 to 2010-11  Apple has gone through every possible business emotion in its existence of nearly 44 years. It has seen the euphoria surrounding its first product, the Apple 1 to the uncertainty that prevailed during the end of Steve Jobs’ initial reign to the meandering and stagnant phase it got stuck in between 1984 to 1997. The company literally rose from the ashes in 1997 under Jobs to become the biggest titan in the technology industry and finally in the entire business world.  The entire chronology has been divided into 4 phases and each of the major aspects of Apple like Strategy, Innovation and Marketing approaches undertaken have been discussed under the ambit of these 4 phases.  Inception Phase (1969 – 1984)  Jobs-less Apple (1984-1997)  Return of Steve Jobs (1997-2010/11)  Post Jobs Era @ Apple (2011-Present)  This presentation also looks at the successful creation of blue oceans by Apple and the subsequent highs that the company achieved as it sustained its remarkable innovations with even more innovative products as follow-ups.  Finally the project looks at the current situation of the company and we have recommended a more proactive approach to new product development and a cautious outlook on its evolving strategy to go low-cost in emerging markets.
  4. 4. Introduction: A Timeline of Apple Inc. Inception of Apple by Jobs & Wozniak, post Atari Apple 1 Invented, Becomes a Commercial Hit Macintosh invented, 1984: the 1st ever self-sufficient desktop, Run-away Commercial Success Steve Jobs is removed from Apple following a power struggle with Sculley Apple starts on its downward decline Jobs returns to Apple as Interim CEO after Apple acquires NeXT iMac introduced, the 1st ever all-in-one computer. Also called the Candy Computer. iTunes launched, allowing for people to own music @ 99 cents iPod launched in 2004. Another bumper hit in the commercial segment Mac OS X launched iPhone launched in 2007 iPad becomes the last innovation by Apple under Jobs, 2010
  5. 5. History of Apple Inc. InceptionStage(1976-1984) Jobs & Wozniak got together and set up Apple Wozniak designed Apple 1 and 2 while Jobs became the figurehead due to his acute marketing acumen Jerry Mancock came on board as the exterior box designer for Apple Apple 3 launched in 1980, but turned out to be a failure due to design defects in 1983 Apple launched its IPO in 1980, the biggest since Ford IPO in 1956 Jobs showcased the 1st working model of a GUI GUI-based Lisa and Mac developed and launched Mac Office launched creating a complementor to Mac leading to huge sales Jobs-lessApple(1984-1997) Jobs had brought in Sculley from PepsiCo in 1983 Sculley was the protagonist in Jobs’ ouster from Apple in 1984 following a Board decision Jobs sold all his 605 million shares in Apple less 1, as protest Macintosh was developed into a fully-fledged product line and 1989-1991 was hailed as the golden age of the Macintosh due to stranglehold on the PC market IBM emerged as the biggest competitor to Apple and in retaliation, Apple launched undifferentiated, commodi tized products losing out on its brand equity. Apple was voted the worst managed company Apple licensed its Macintosh OS leading to flooding of clones and further damage to Apple’s identity AppleRisestothetop(1997-201011) Jobs returned to Apple as the interim CEO after Apple acquired NeXT in 1996/97 The company was floundering and was staring at bankruptcy around this time with an overburdened product portfolio of undifferentiated commoditized products Jobs came back and de- licensed the Mac OS on the back of a loophole in the contract NeXT provided the Launchpad for the redesign and development of the brand new Mac OS Jobs convinced Microsoft to invest in Apple @$150million and a 5 year commitment to develop the Office Suite for Apple Apple launched the iMac, iBook, iPod, iTunes, iPhone and the iPad over the next 13 years PostJobsEra,Apple(2011-Present) Jobs resigned as Apple CEO in August, 2011 Tim Cook officially took over after Jobs’ death in October Thus ended Apple’s existence as the pioneer when it came to passionate product development and arrogant marketing techniques Since, then Apple has been on a slow and steady decline with share price erosion and a lack of innovation plaguing the company Samsung has emerged as the biggest threat to Apple and has been capturing the market from Apple quite rapidly over the last 2 years
  6. 6. Strategy @ Apple after 1997 Silent Incremental Development Online Stores & Going Retail Protocol Change in Manufacturing Increased Operational Efficiency R&D Focus shifted from Science to Product Losing Small to Win Big (Microsoft Deal) • Incremental Development was put on a continual, piecemeal basis • Mega Media-Events were reserved for new product launches rather than upgrades • Greater time was afforded to creating the next “insanely great” product which could put Apple on a higher step in the technology ladder • Apple created its own online ordering store after the acquisition of NeXT. • The idea was sourced from DELL’s initiative and Apple managed to gain an advantage here after DELL had to change from the market leader WebObjects technology to Microsoft’s Active Server for hosting its web channel due to Apple not making available WebObjects for external vendors, as it was a NeXT property. • Apple developed its strategy of “Store within Store” in which Apple products were to displayed separately in a different section of a store which would be manned by employees hired by Apple themselves. • This led to a perceived sense of differentiation among the buyers • Apple reduced its retail partners from 20,000 to 11,000 within a year after Jobs’ return • Apple shifted to a order-based manufacturing strategy rather than the assembly-line system it had previously adopted • This led to reduced inventory levels that were hampering Apple’s profitability earlier • Apple hired Tim Cook, the current CEO as the COO of Apple • He was instrumental in clearing up the clutter that Apple had accumulated over the years due to incorrect demand forecasts & loose cost control mechanisms • Inventory held was reduced from 90 days to 2 days within a year • Cash Interim duration increased from 10 days to 60 days under Cook • The sector focused on inventions while Apple took on a different route of “Product Innovation” • Apple tried to focus on the user experience when it came to developing new products • They pioneered the concept of allotting technical experts to scout for commercial technologies and this, at times, led to Apple co-inventing even at the most basic level like chips. • This was the time when Apple moved into the well-documented shroud of secret product innovation and only Jobs and his trusted colleagues knew what exactly was going on. • Apple managed to convince Bill Gates to invest $150million in Apple which helped it stay afloat a bit more comfortably • Jobs also managed to convince Microsoft to develop the Office suite for Mac with a commitment of 5 years for this initiative • This strategy went a long way in creating the almost unbeatable combination of the Mac OS and the Microsoft Office Suite
  7. 7. Innovation @ Apple •Original Innovator: APPLE I •Apple II, the first commercially successful computer •Apple III, LISA : Failures •Macintosh: Hit but was misused and turned into a commodity Apple @ Inception •Decline in Innovative Capacity •Inability to make Competition redundant •Incremental Innovation becomes the order of the day @ Apple Jobs-less Apple •NeXT becomes the next growth engine •Indigenous Innovation became central to Apple, again •Sales Channel Innovation •Launch of “Insanely Great” Products made a comeback Jobs returns to Apple iPod iTunes iPhone iPad Post Jobs, Apple has again gone back to its era of innovating incrementally. It has been 3 years since the last breakthrough product was unveiled by Apple. With the demise of Jobs, Apple distinctly looks like it has lost its focus towards creating a product that would be both new but can be used like old.
  8. 8. Trend Identification Commoditization of PC Industry & a Digital Boom were key drivers along Apple’s Marketing Campaign iPod and iTunes were developed keeping these in mind Analyze Competitors De-licensing led to market share erosion Apple tied up with Microsoft & Intel to produce software and chips. This allowed it to become even more stronger against competitors Innovate Apple’s design has been unparalleled throughout history Apple’s marketing campaigns have also been innovative like Think Different which included all the world’s leading thought agents as their ambassador Product Positioning Complementors are central to extended life of a computing device Apple’s App Store has been instrumental in creating the eco-system that has helped position Apple as a premium product Brand Awareness Building Creative Advertising & Use of Non-Traditional Media Channels helped create the aura of Apple in the minds of potential customers The use of simple but sophisticated colors has also increased the brand equity of Apple Distribution Optimization Apple moved from small regional stores to national chains to increase its reach Individual retail stores were also opened to get 1st hand access to customers Online selling was introduced leading to higher inventory optimization Customer Focus Apple pioneered the concept of “Participatory Design” in which company executives would observe people and their habits to draw conclusions on how a product should function Ease of use and product quality were at the forefront of anything Apple did Marketing @ Apple Macintosh Restoration of Distribution Channel Reduction of Number of Product Lines from 16 to 4 Allocating the biggest part of the budget for R&D Differentiati on Strategy Creative Advertising New Website for Managing Sales Launch of Apple Retail Stores Focus on Customer Service iMac Apple’s Philosophy 1. Timely Product Launches 2. High Quality Product 3. Absolute Secrecy during Development Apple’s Promise Once launched, Apple products were commercially available in every Apple store worldwide Jobs’ 1st & 2nd Marketing Initiative after his Return
  9. 9. Leadership @ Apple Steve Jobs Passion Focus on Core Charisma & Simplicity Vision Driven Authoritari an & Firm Innovative Potential Product & Quality Driven Stay Hungry, St ay Foolish Reality Distortion & Mental Innovation
  10. 10. Company Analysis Strengths Global presence Brand image Synergistic portfolio Strong media content Weakness Low returns Dependency for key components Opportunities Wireless products New digital platform MP3 player market Threats Strong competition Slow Eurozone economy Lawsuits During Steve Jobs as CEO Strengths Branding Retail Strategy Superior Quality Weakness High price products Less penetration Cannibalization Opportunities Technology Innovation Strategic alliance Fast growing Industry Threats Extensive competition Substitute Products Technical advancement Economical factors Current 2012- 13, After Steve Jobs
  11. 11. Industry Analysis Competitive Rivalry HIGH Supplier Power MEDIUM Buyer Power HIGH Threat of New Entrants LOW Threat of Substitutes HIGH
  12. 12. Current Scenario @ Apple  Prominent lack of innovative capability.  No new product launches  Focus seems to have shifted from an innovation- based model to an operationally efficient, assembly line like model.  Competitors now catching up to it,  Stiff competition from Google-based Android smartphones  Launch of a low-cost smartphone in the developing markets can lead to the revival of sales of the iPhone,  iWatch is a product in the pipeline but has not seen the light of day for nearly 2 years since it went into the prototype stage.
  13. 13. Recommendation & Conclusion CONCLUSION • One of the greatest turnaround in corporate history, possibly the greatest in the last two decades has been the turnaround of Apple. • From near bankruptcy to the pinnacle of the world corporate ladder. • Growth rates of over 50% Y-o-Y for over a decade was maintained by the company as it went on launching one gadget after gadget which captured the imagination of one and all. • Steve Jobs was the single most important factor when it comes to outlining the causes, which helped Apple turn the corner. • His leadership and his vision were instrumental in leading Apple out from the brink of non-existence • Disruptive innovation became a norm rather than a chance event while incremental innovation was always on the horizon as Apple released a new version of its current offerings, every year. • Apple is on the brink of another important milestone in its life as a corporate entity. The sluggish growth has led to a change in the strategy which has shifted from innovation to operational excellence under Tim Cook. • Low cost models are a form of diversification of the product portfolio and acts as a medium of entry into markets which cannot afford the premium products Apple has in its portfolio. • It is a fascinating story that Apple has lived through its existence and expecting more of the same may not be that outlandish an idea. Recommendation 1: Active Innovation Recommendation 2: Perfect Market Timing & Properly Tested Products should be launched as a Priority Recommendation 3: Cautious Approach for the new Low-Cost Model that has been broached
  14. 14. Thank You 