PART II-CASE STUDY

1. -"Apple is an iconic and rare business, a technology company that not only is able to generate genuine passion among its customers, but also has come roaring back since near disaster in 1997. The renowned developer of the Apple Mac reinvented itself as a consumer electronics firm with the iPod and iPhone and is consistently ranked as one of the world's most innovative firms.The story of its rise has several lessons for aspiring innovators.

Network innovation

Apple uses an approach known as network innovation: the process of acquiring good ideas

from outside the business as well as from within. For example, Apple has been described

by The Economist as:3

An orchestrator and integrator of technologies, unafraid to bring in ideas from outside

but always adding its own twists.

The iPod was conceived by an external consultant recruited to manage the project. It

was designed to work with Apple's iTunes software (which was itself acquired from outside

and then overhauled) and a prototype was developed in-house. Network innovation is

achieved by cultivating external expert contacts, constantly searching for new ideas and

avoiding the "not-invented-here" syndrome.

Simplicity

Next, Apple emphasises simplicity, chiefly by designing a product around the needs of the

user. When introducing technology, the temptation is to overcomplicate, often with experts

including technical enhancements that appeal to them. This introduces a layer of cleverness

and complexity that may seem ingenious in theory but leaves customers cold. The iPod was

not the first digital music player but it was the first to make buying, transferring and

organising music fun. Similarly, the iPhone was not the first mobile phone to include a music

player, web browser and e-mail facility, but it was the first to be simple and highly appealing.

Understand customers

Apple's approach relies on its ability to understand customers. This is much more than

"user-centric" innovation or simply listening to customers. Apple believes that from time to

time it is necessary to ignore what customers say they want today. This is hazardous, but

the risks can be reduced by understanding what customers value, how they typically work,

what they want to achieve and what they will enjoy. It is crucial to understand customers

better today to predict what they will want tomorrow.

Fail wisely

This is another hallmark of Apple's approach to innovation. Failure is disappointing but it is

also an opportunity to learn and, significantly, it is inevitable. Everyone fails at some time so

view failure positively. The alternative is, at best, staleness, timidity and incremental

improvements; at worst, it can turn into blame, recrimination and a cycle of despair. For

example, the iPhone sprang from the failure of Apple's original music phone developed with

Motorola. Apple learnt from its mistakes and tried again. The leadership challenge is to

overcome the concerns that successful, talented employees may have about failure and to

make sure that failure is not stigmatised. Instead, employees should persist with new ideas,

secure in their own expertise and ability to learn, and improve with the support of

colleagues.

2.Analyse the network innovation of Apple Inc how they acquire good ideas. (5Marks)

3.Describe Apple's ability to understand customers which otherwise called users centric. Use your ideas to explain the market (5Marks)

2. In 1975, PepsiCo attacked its long-term competitor, Coca-Cola, with the "Pepsi Challenge",

claiming that in taste tests people preferred Pepsi. Coke's market share fell substantially in

the face of competition from Pepsi and from new beverages such as diet drinks, citrus

flavours and caffeine-free colas. Indeed, to combat this new source of competition, Coca-

Cola was itself marketing many of these new products. However, Coke's shrinking lead in

the cola market convinced the company that it needed to act. Brian Dyson, a former CEO of

Coca-Cola, told the New York Times:

There is a danger when a company is doing as well as we are ... to think that we can

do no wrong. I keep telling the organisation, we can do wrong and we can do wrong

big.

In December 1984 the company decided to reformulate Coke with a target launch date

of April 1985. Technically, it went well, but before they had tasted the new recipe, millions of

Americans reacted emotionally and angrily to the new Coke. Many were not even Coca-

Cola drinkers, simply consumers disappointed that an iconic American product had been

changed.

By mid-July, the pressure was such that the company decided to reintroduce the original

Coke. On the day the decision was announced, Coca-Cola's hotline received 18,000 calls -

people were positive, glad that their voices had been heard and that change had been

aborted.

Against all expectations, the original Coca-Cola rebranded as Coke Classic outsold the

new Coke, and sales overtook Pepsi's early in 1986. New Coke's market share shrank to

3% and Coke Classic began selling with renewed vigour.

One senior executive told the Wall Street Journal:

It's kind of like the fellow who's been married to the same woman for 35 years and

really didn't pay much attention to her until somebody started to flirt with her.

The lesson for competitors

Coca-Cola had focused too much on what a competitor was doing and on its own market

research (designed in the light of PepsiCo's campaign). It had lost sight of its brand's

strength and of the customer's unpredictability. The launch of new Coke was based on the

erroneous assumption that flavour mattered more than image. The information gathered

built upon this flawed notion to confirm that the original Coke needed replacing. But it was

not what customers wanted. Their goodwill towards the original cola was so strong that it

triggered its revival as consumers realised how much they appreciated it, or else tried it for

the first time.

4 'As a marketing manager for Pepsi which step would you apply to overcome competitive rivalry Pepsi'( 10Marks)