Strategic approaches for Apple's expansion into new markets

Strategic Development

Supporting Strategic Development

One of the biggest development issues any company ahs is if they are at a stage where growth into new markets is possible. At some point the market place is going to get so crowded that a company has to decide whether it is going to try and survive in the present market or forge into new ones. Or, the company can simply create a new market through a niche product. Whatever the solution, the company first has to tak a close look at itself to determine if it is a good idea for them or not. The process by which companies do this is by determining a strategic plan whereby it is possible. To implement this strategic plan a company will have use different approaches that take into account how the company is doing at all levels of the process. Considering that a certain company is looking to move into a new market that utilize certain of their products in different ways and with a different clientele. The strategic development plan is to help bring this into action.

For any type of strategic plan, there are a large number of different approaches that can be used. The planning team has to use approaches that will lead them to a conclusion regarding the particular problem they are having. These steps are direction, creation, rehearsal, evaluation, and choice. The team has to be sure of the direction in which they want to move, and they have to base this on the information that they have about the firm and the market they wish to explore. Creation requires and in depth look at the company and how it will handle the proposed change. One example of analysis for this stage is using a strength, weakness, opportunity, threats (SWOT) model to determine how the company will deal with the upcoming strategic plan for growth. Rehearsal involves a simulated run to see what may need to be added or subtracted from the proposed plan, and then the effort is evaluated. Finally a choice is made as to whether the company should move forward or not. This paper looks at how different strategies will work when a company is planning a move into new markets, and if the approaches used are effective or not for this type of strategic development. The company used in this case study is Apple, Inc. And its attempt to create new markets that could induce new growth.

Brainstorming

Pride and Ferrell (2006: 315) say that "Brainstorming and incentives or rewards for good ideas are typical intrafirm devices for stimulating development of ideas." Brainstorming is about finding the direction that the company wants to take. It is a good technique to use when a company knows that it needs to move in a certain direction, but needs a list of options to consider prior to testing any for validity.

The idea was originally tom involve a group of people (or it could be an individual) in being creative and throwing out as many ideas as they could think of. The session usually lasts just a short period of time because it is a stream of conscious-type of idea. The creator of the concept, A.F. Osborn, said that there are four principles for making sure that creativity is allowed to flow through a brainstorming meeting (Osborn, 1963). He said that the more ideas that are presented, the better. No one should ever stop the flow of creativity because there is no way of knowing which idea will be the one that creates the most opportunity. In Apple's case, there were constant brainstorming sessions when the different teams were trying to come up with ideas for new products. The iPod and the iPad both grew out of such creativity sessions.

The next two phases of the brainstorming process is that the participants need to withhold even the slightest criticism to any idea that is presented, and the team must encourage people to come up with ideas that may at first seem unusual. These two parts of the plan flow into one another because people are going to want to criticize some ideas that seem "off-the-wall," but the plan says that anything is up for consideration. Many times during the creative thinking process, Apple's former CEO would have to ask that people stifle their criticism until all of the data could be gathered (Rubenstein, 2008). It is not anyone's job to tell another what is a workable plan and what is not. Without some out-of-the-box thinking, Apple would never have created products that some believed were impossible, and others believed were not doable with the knowledge to be obtained at the time.

The final part of brainstorming is that the people involved do need to critically analyze all of the ideas that have been presented and determine whether they are possible or not. This part of the process of brainstorming cannot devolve into personal critiques of the ideas presented because even the craziest sounding ones could still be workable solutions with a little bit of modification. This is a time when ideas need to be molded into something that can be used going forward.

The most positive aspect of this process is that it allows people with diverse ideas to express them. Sometimes this can work when all four steps are followed and the goal is to find many possible solutions to a strategic growth problem. However, this could be a waste of time and actually cause enmity between team members if there are strong disagreements about the viability of some of the ideas. The group needs to have a strong moderator who is willing to enforce the rules of the process from the very beginning of the exercise.

Cost Benefit Analysis

This technique is exactly what it sounds like. The company doing such an analysis will "quantify, and add all the positive factors. These are the benefits. Then it identifies, quantifies, and subtracts all the negatives, the costs" (Reh, 2012). It sounds like a simple process, but that depends on the scope of the project. In Apple's case, it was somewhat difficult to determine because they had no idea what came next when they were trying to see which niche or niches that they could exploit. Basically, they had to look at the costs of stepping into the unknown, and the benefits of same.

The cost to Apple was that the projects that they were working on would not succeed. When the iPod was introduced, the Mp3 format was brand new, and the company had no idea whether their slightly different take on this would be accepted or rejected by consumers. Therefore, the primary cost was that they would lose possibly billions of dollars that had been spent on research and development of the new product. There was also the danger that the company's name would further deteriorate, and that they would be the one's playing catch-up as most other companies would have already gone to the other format and gained market share that it would be almost impossible to win back from them.

Of course, the possible benefits were extensive. The format that Apple introduced with the new iPod was paralleled by the website, iTunes, which was directly linked to the iPod. A person could by the iPod, and then buy music cheaply for it at iTunes. This had the benefit of very possibly creating a niche from which it would be difficult to unseat the company. As history records, that was exactly what happened. Apple took a gamble, they did the evaluation, and they created a new market which they continue to dominate.

Robustness

This is an analysis that can either be done after the product is already out on the market (or the strategy has been implemented), or it can be used as an evaluation of the strategic development plan. This would work with the tow other approaches, and especially with the way that Apple wanted to conduct business, because it will give an idea to the management team how strong the idea is. Also, it gives an idea about whether any of the other ideas that have been presented will be a better fit for the outcome that is wanted (Dias, 2001).

Dias (2001) says that the process can be defined as;

"a procedure to identify robust conclusions, given sets of combinations for the parameter values. Here, robust conclusions can be classified as: perfectly robust: formal assertions that are verified for all the combinations in a set; approximately robust: formal assertions that are verified for all the combinations in a set, except a few ones, which are considered negligible; or, pseudo-robust: less formal assertions that are verified for all the combinations in a set.

In the case of the Apple scenario, the group would use the analysis to sift between the different ideas that had been determined as workable in the preceding processes. The different ideas could be graded against the market analysis to decide which level of robustness they fell into. This would allow the company to make a better decision as to what product to release first in the marketplace.

This coincides with the actual procedure that took place prior to Apple producing and selling the original iPod. Jobs said that the company had many ideas that it believed were viable given their situation, but they needed to determine which would work the best given all of the conditions. They chose the iPod design because people, especially teens, were already purchasing Mp3 players, and Apple knew that it had a superior digital product that would store more music, and could be adapted better than the Mp3 format (Rubenstein, 2008).

Risk Analysis

This is a technique that has been used by businesses for many years which will hopefully tell that company what possible risks are involved with a certain decision. The stated goal of the process is to "help…to assess…risks and decide what actions to take to minimize disruptions to your plans" (Manktelow & Carson, 2010). Doing a risk analysis is what most likely helped Apple take the plunge into new markets because they realized that they could accept the small risks.

The process is done in four steps -- identify threats, estimate risk, manage risk, review -- which can be repeated as many times as is necessary to come up with the perfect risk management scenarios. Many may see threats as coming from the outside, but there are just as many that happen from inside the company as from the outside. In Apple's case, they had to look at the teams that were developing the product and how those teams could cause a delay or shut down the project. Manktelow and Carson (2010) talk about how illness, pregnancy or death to a key player could be enough to derail a project. The way to manage this risk, and what Apple does, is make each member of the team equal in that task. All of the software people are able to take on what another person was dong because the team stays on top of what everyone is trying to do. The same goes for other areas. There are also dangers from financial issues, which were very real for Apple at this critical juncture, and from the possibility that technology would pass the company by before it could release it product. Apple managed these risks by making sure that the projects were funded at the appropriate level and that there were no cost overruns (Rubenstein, 2008), and by creating a technology that no one else had thought about so it was at the leading edge.

Ordering of the Methods

The ordering of the methods used to from determining the plan to finding out whether the plan was effective or not is prescribed by the activities that need to take place. One researcher in strategic planning lists the steps as a set of questions (Sullivan, 2006). The first question gives direction and is: "Where are we?" The company first asks and answers this question to determine where they want to go, and for what purpose. The second question then has to be: "Where do we want to go?" This is the creation step that the text talks about. It is the first step in the realization of a plan. The rehearsal step is found in the question: "How are we going to get there?" Once the initial plan is created, then the team needs to determine what steps they need to take to implement the plan discover the actual possibility of that plan leading to the outcome that the team wants. Finally, maybe the most important question of all is: "Are we getting there?" Or "Are we there yet?" These questions speak to evaluation and choice of the proper strategy. The team now knows direction, plan, and evaluation method, but they must also be able to ensure that they are going to get where they want to be (Sullivan, 2006).

The reason that the strategic process is formed in this way is that it allows the team to build from a solid foundation which will stand regardless the problems that are encountered. If each phase is followed honestly, and the team is willing to follow the process, the strategic plan will yield success. In Apple's case, the different teams that were trying to determine which way the company should go had to conserve funds and only choose one direction. At one point there was a fight between the developers of the OS system and those who were developing the iPod. The teams choose to go with the iPod, and they were right. But, they did it through a strategic plan that followed this process. They were able to later implement the superior OS system also.

Conclusion

A company moving into new markets or trying to decide how it can better its position in an existing market structure, has to examine its market and financial positions, but it also has to have ideas. What Apple needed was a means to get away from its past, and design concepts that would be recognized as uniquely innovative. This was only the first of many innovative products, but it led to Apple not only climbing out of its past doldrums, but dominating the market. The main reason that they dominated was because they took the leap to create new markets. However, this was done with creativity and a wise marketing analysis.