1. Describe how Simon Sinek's Golden Circle analysis of Apple (What, How, Why) relate to Apple's vision, objectives, and strategy.

2. Answer the following questions.

a. Which entrepreneurial orientation dimensions are strongest and weakest in Apple? Justify your answer.

b. Have Apple's What, How, and Why changed since Simon Sinek's presentation in 2009? Justify your answer.

3. What does Apple do? 4. How does Apple do it? 5. Why does Apple do it?

6. How did Steve Jobs' celebrity help Apple? 7. How did Steve Jobs' celebrity harm Apple? 8. How did having an entrepreneurial orientation help Apple? 9. How did having an entrepreneurial orientation harm Apple? 10. How should organizational performance be evaluated at Apple?

Case study exclusive was a major strategic mistake. The company was determined to avoid the same error when it came to the launch of the iPod and, in a more subtle way, with the later introduction of the iPhone. Apple's profitable but risky strategy Apple's innovative products When Apple's Chief Executive - Steven Jobs - launched the Apple ipod in 2001 and the iPhone in 2007, he Unlike Microsoft with its focus on a software-only strategy, Apple remained a full-line computer manufacturer made a significant shift in the company's strategy from the relatively safe market of innovative, premium- from that time, supplying both the hardware and the software. Apple continued to develop various innovative priced computers into the highly competitive markets of consumer electronics. This case explores this computers and related products. Early successes included the Mac2 and PowerBooks along with the world's profitable but risky strategy- first desktop publishing programme - PageMaker. This latter remains today the leading programme of its kind. It is widely used around the world in publishing and fashion houses. It remains exclusive to Apple and Note that this case explores in 2008 before Nokia had major problems with smartphones - see Case 9.2 and means that the company has a specialist market where it has real competitive advantage and can charge Case 15.1 for this later situation. higher prices. Early beginnings Not all Apple's new products were successful - the Newton personal digital assistant did not sell well. To understand any company's strategy, it is helpful to begin by looking back at its roots. Founded in 1976, Apple's high price policy for its products and difficulties in manufacturing also meant that innovative products Apple built its early reputation on innovative personal computers that were particularly easy for customers to like the iBook had trouble competing in the personal computer market place. use and as a result were priced higher than those of competitors. The inspiration for this strategy came from a visit by the founders of the company - Steven Jobs and Steven Wozniackio the Palo Alto research Apple's move into consumer electronics laboratories of the Xerox company in 1979. They observed that Xerox had developed an early version of a Around the year 2000, Apple identified a new strategic management opportunity to exploit the growing computer interface screen with the drop-down menus that are widely used today on all personal computers. worldwide market in personal electronic devices - CD players, MP3 music players, digital cameras, etc. It Most computers in the late 1970s still used complicated technical interfaces for even simple tasks like typing would launch its own Apple versions of these products to add high-value, user-friendly software. Resulting - still called 'word-processing' at the time. products included iMovie for digital cameras and iDVD for DVD-players. But the product that really took off was the iPod - the personal music player that stored hundreds of CDs. And unlike the launch of its first Jobs and Wozniacki took the concept back to Apple and developed their own computer - the Apple personal computer, Apple sought industry co-operation rather than keeping the product to itself Macintosh (Mac) - that used this consumer-friendly interface. The Macintosh was launched in 1984. However, Apple did not sell to, or share the software with, rival companies. Over the next few years, this Apple Computers: share of sales US$24m In 2087 Launched in late 2001, the iPod was followed by the iTunes Music non-co-operation strategy turned out to be a major weakness for Apple. Doshiops 17% Store in 2003 in the USA and 2004 in Europe - the Music Store being a most important and innovatory development. iTunes was Other music-colwood Battle with Microsoft products and services essentially an agreement with the world's five leading record diPhone Although the Mac had some initial success, its software was threatened by the introduction of Windows 1.0 companies to allow legal downloading of music tracks using the Peripherals from the rival company Microsoft, whose chief executive was the well-known Bill Gates. Microsoft's strategy 0 Sollware services internet for 99 cents each. This was a major coup for Apple - it had was to make this software widely available to other computer manufacturers for a licence fee - quite unlike persuaded the record companies to adopt a different approach to Apple. A legal dispute arose between Apple and Microsoft because Windows had many on-screen the problem of music piracy. At the time, this revolutionary similarities to the Apple product. Eventually, Microsoft signed an agreement with Apple saying that it would agreement was unique to Apple and was due to the negotiating not use Mac technology in Windows 1.0. Microsoft retained the right to develop its own interface software skills of Steve Jobs, the Apple chief executive, and his network of similar to the original Xerox concept. contacts in the industry. Figure 1.9 shows that Apple's new strategy 2:600 was beginning to pay off. The iPod was the biggest single sales Coupled with Microsoft's willingness to distribute Windows freely to computer manufacturers, the legal contributor in the Apple portfolio of products. agreement allowed Microsoft to develop alternative technology that had the same on-screen result. The result is history. By 1990, Microsoft had developed and distributed a version of Windows that would run on In 2007, Apple followed up the launch of the iPod with the iPhone, a virtually all IBM-compatible personal computers - see Case 1.2. Apple's strategy of keeping its software mobile telephone that had the same user-friendly design @ Richard Lynch 2012 Richard Lynch 2012characteristics as its music machine. To make the iPhone widely available and, at the same time, to keep 'Nokia is going to be an internet company. It is definitely a mobile company and it is making good progress to control, Apple entered into an exclusive contract with only one national mobile telephone carrier in each becoming an internet company as well,' explained Olli Pekka Kollasvuo, Chief Executive of Nokia. There major country - for example, AT&T in the USA and 02 in the UK. Its mobile phone was premium priced - for also were hints from commentators that Nokia was likely to make a loss on its new download music service. example, US$599 in North America. However, in order to hit its volume targets, Apple later reduced its But the company was determined to ensure that Apple was given real competition in this new and phone prices, though they still remained at the high end of the market. This was consistent with Apple's long- unpredictable market. term, high-price, high-quality strategy. But the company was moving into the massive and still-expanding global mobile telephone market where competition had been fierce for many years. (Note that with regard to Here lay the strategic risk for Apple. Apart from the classy, iconic styles of the iPod and the iPhone, there is Figure 1.9, the new iPhone was too new to have made any impact on sales or profitability in 2007.) nothing that rivals cannot match over time. By 2007, all the major consumer electronics companies - like Sony, Philips and Panasonic - and the mobile phone manufacturers - like Nokia, Samsung and Motorola - The leader in mobile telephones - Finland's Nokia - was about to hit back at Apple, though with mixed were catching up fast with new launches that were just as stylish, cheaper and with more capacity. In results. But other companies, notably the Korean company Samsung and the Taiwanese company, HTC, addition, Apple's competitors were reaching agreements with the record companies to provide legal were to have more success later. downloads of music from websites -described in more depth in Case 12 at the end of this book. So, why was the Apple strategy risky? Apple's competitive reaction By 2007, Apple's music player - the iPod - was the premium-priced, stylish market leader with around 60 As a short term measure, Apple hit back by negotiating supply contracts for flash memory for its iPod that per cent of world sales and the largest single contributor to Apple's turnover - see Figure 1.9. Its iTunes were cheaper than its rivals. Moreover, it launched a new model, the iphone 4 that made further technology download software had been re-developed to allow it to work with all Windows-compatible computers (about advances. Apple was still the market leader and was able to demonstrate major increases in sales and 90 per cent of all PCs) and it had around 75 per cent of the world music download market, the market being profits from the development of the iPod and iTunes. To follow up this development, Apple launched the worth around US$1000 million per annum. Although this was only some 6 per cent of the total recorded Apple Tablet in 2010 - again an element of risk because no one really new how well such a product would music market, it was growing fast. The rest of the market consisted of sales of CDs and DVDs direct from be received or what its function really was. The second generation Apple tablet was then launched in 2011 the leading recording companies. after the success of the initial model. But there was no denying that the first Apple tablet carried some initial risks for the company. In 2007, Apple's mobile telephone - the iPhone - had only just been launched. The sales objective was to sell 10 million phones in the first All during this period, Apple's strategic difficulty was that other powerful companies had also recognised the year: this needed to be compared with the annual mobile sales of the importance of innovation and flexibility in the response to the new markets that Apple itself had developed. global market leader, Nokia, of around 350 million handsets. However, For example, Nokia itself was arguing that the markets for mobile telephones and recorded music would Apple had achieved what some commentators regarded as a significant converge over the next five years. Nokia's Chief Executive explained that much greater strategic flexibility technical breakthrough: the touch screen. This made the iPhone different was needed as a result: 'Five or ten years ago, you would set your strategy and then start following it. That in that its screen was no longer limited by the fixed buttons and small screens that applied to competitive does not work any more. Now you have to be alert every day, week and month to renew your strategy.' handsets. As readers will be aware, the iPhone went on to beat these earlier sales estimates and was followed by a new design, the iPhone 4, in 2010. If the Nokia view was correct, then the problem for Apple was that it could find its market-leading position in recorded music being overtaken by a more flexible rival - perhaps leading to a repeat of the Apple failure 20 The world market leader responded by launching its own phones with touch screens. In addition, Nokia also years earlier to win against Microsoft. But at the time of updating this case, that looked unlikely. Apple had at launched a complete download music service. Referring to the new download service, Rob Wells, senior last found the best, if risky, strategy- Vice President for digital music at Universal commented: 'This is a giant leap towards where we believe the industry will end up in three or four years' time, where the consumer will have access to the celestial jukebox Copyright Richard Lynch 2012. All rights rese ase was written by Richard Lynch from published sources through any number of devices.' Equally, an industry commentator explained: "[For Nokia] it could be short- only' term pain for long-term gain. It will steal some of the thunder from the iPhone and tie users into the Nokia service.' Readers will read this comment with some amazement given the subsequent history of Nokia's Case questions smartphones that is described in Case 9.2. 1. Using the concepts in chapter 1, undertake a competitive analysis of both Apple and Nokia - who is the stronger? @ Richard Lynch 2012 @ Richard Lynch 2012