Apple's value chain strategy and organizational response to market complexity
Apple (NASDAQ: AAPL) has emerged as one of the most profitable and prolific companies in the world, generating a market capitalization rate of $623B as of this writing in late August, 2012, delivering $148B in Revenues in their latest fiscal year and $40B in Net Income (Apple Investor Relations, 2012). One of Apple's greatest strengths is its ability to quickly translate innovative product concepts and designs into state-of-the-art products that deliver exceptional customer experiences. Apple has honed this through decades of disciplined execution and a continual focus on creating a highly synchronized supply chain, highly collaborative product design and development workflows, and the ability to take concepts to completed products in a fraction of the time of their competitors (Murray, Goode, Muro, 2010). Apple is credited with creating the smartphone market, tablet PC, cloud-based music buying and delivery service (iTunes), centralized document and image storage (iCloud) and more innovations in operating systems in the last five years than Microsoft (Apple Investor Relations, 2012). All of these accomplishments taken together have led to Apple creating a catalyst of growth in the tablet PC market, fueling a 100%+ increase in iPad sales (13% year over year) and iPhone sales that have increased 152% over the last eighteen months as well (Apple Investor Relations, 2012). Apple continues to accelerate the sales of their iPad, iPhone, iTouch devices in addition to its mainstream laptops and systems. Apple is able to accomplish these significant results by concentrating on the execution of its value chain, a decades-only concept that Dr. Michael Porter originally created to illustrate how the functional departments of a company all must be synchronized to deliver profitability (Porter, 2008). Apple's value chain is exceptionally effective in managing the coordinating of supply chain, sourcing, quality management, production, product design, marketing services, logistics and retailing operations. As long as two decades ago Apple had been concentrating on how to create this level of synchronization across their entire enterprise (Larson, 1994).
As the business model of Apple has continually become more complex, the ability of the organization to stay agile and quick to respond has increasingly become more difficult. This is a common problem companies have as they grow in size and complexity of their business models. For Apple, the environmental factors in the areas of economic, social, technological and political change have challenged their ability to grow, and also forced them to create a more market-driven organizational structure, abandoning the highly successful product divisions of the 1990s and early 2000 timeframe (Apple Investor Relations, 2012). The intent of this analysis is to evaluate how Apple is managing to continually grow despite economic, social, technological and political environmental forces impacting their business. In addition, an analysis of their market environment, response to the turbulent economic environment they operate in, the nature of their product strategies, an assessment of their strategic direction and strategic options are all included in this analysis. A separate section is included for each of these areas throughout the analysis. The Porter Fives Forces Model is used for analyzing these market dynamics (Porter, 2008).
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