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Table of Contents
- Introduction
- Competitive analysis of Apple and Nokia
- 1.1. Objectives................................................................................................................................
- 1.1.1 Vision and mission statements
- 1.1.2 Impact on strategy
- 1.2 Assumptions held by the leadership of both companies........................................................
- 1.3 Beliefs about its competitive position
- 1.4 Past History
- 1.5 Industry Trends
- 1.6 The strategic capabilities of both companies
- 1.6.1 Apple’s Strength
- 1.6.2 Apple’s Weakness
- 1.6.3 Nokia’s Strength
- 1.6.4 Nokia’s Weakness
- 1.7 Strategies being employed by both companies....................................................................
- 1.7.1 Apple’s strategy
- 1.7.2 Nokia’s strategy.............................................................................................................
- 1.8 Analysis and Conclusion
- years and its implications for strategy development 2 Problems with predicting how the market and the competition will change over the next few
- 2.1 Macro Environment
- 2.1.1 Political Challenges
- 2.1.2 Economic challenges
- 2.1.3 Social Challenges
- 2.1.4 Technological Challenges
- 2.2 Implications for strategy development.................................................................................
- 3 Lessons that can be learnt from Apple’s strategies
- 3.1 The benefits of learning from ones failure
- 3.2 The ability to take risk through innovation
- 3.3 The benefits of understanding your consumers and their needs.........................................
- 3.4 The benefit of having a keen eye for opportunities
- 4 References
Introduction
The recent trends in the increasing competitiveness of the global market place with its accompanying threats to the survival of many industries has forced several managers to rethink the way they do business. There has been a paradigm shift from the yester year’s philosophy where by apart from the recurring operational level planning for finances and basic forecasting, strategic management was relegated to the bench on most corporate level discussions on growth and success to a modern thinking where most managers now consider strategic management as an effective weapon in their arsenal for securing sustainable competitive advantage in their operational markets. The rise and fall of many businesses either through very good effective strategies or through a deficiency in sustainable strategy only go to reiterate this point further. In order to fully comprehend the many benefits of strategic management it is necessary that we understand what the concept means.
Strategic management in its basic form comprises of the many intended and emergent initiatives taken by the management of a company involving the usage of its resources to enhance the performance of the company in its external environment (Nag, et al., 2007). It involves a careful study of an organisation’s internal environment and its interactions with its external environment (customers, competitors, suppliers, macro environment) all with the aim of maximizing the positive influences of its environments whilst minimizing their negative effects. Central to the theme of strategic management is the need for business leaders to be in touch with their business environments so as to be in a better position to respond to varying stimuli. This need for greater environmental awareness can be as a result of a deliberate plot by the business to shape its future through a series of well thought out initiatives for the realisation of a specific end or as a means of continuous survival evolution without a concrete end (the end of one journey begins another).
Irrespective of the approach that a business takes to realising its strategic potential, all strategic planning initiatives consist of three distinct stages namely strategic analysis of the business’s environment, strategic development of options and the strategic implementation of one or a combination of the developed options. Strategic analysis of the business’s environment is concerned with identifying the impact on strategy of the environment, an organisation’s strategic capability (resources and competences) and the expectations and
- The objectives of both companies.
- Assumptions held by the leadership of both companies.
- The strategic capabilities of both companies.
- The strategy being employed by both companies.
1.1. Objectives
At the heart of every strategy lies its motive. An organisation’s motives are formed after an introspective assessment of its current position, its past and where it wants to go. The result of this is the formulation of its vision and mission statements which epitomizes its values, culture and philosophy. Time bound realistic objectives are then set based on this vision with specific, measurable targets for the business to attain. This gives the business a sense of purpose and direction in its operations.
It’s apparent therefore that an assessment of any organisation’s competitive strategies should begin with an understanding of what that organisation stands for.
1.1.1 Vision and mission statements
Although the vision and mission of both Apple and Nokia are not stated within the case, an examination of some released official documents, press releases and a look on the websites of both companies revealed in the case of the former the absence of a clearly defined vision and mission statement. Piecing together little bits of information and examining these further, Apple’s vision and its beliefs as revealed by its then COO, Tim Cook is presented as:
“We believe that we are on the face of the earth to make great products and that's not changing. We are constantly focusing on innovating. We believe in the simple not the complex. We believe that we need to own and control the primary technologies behind the products that we make, and participate only in markets where we can make a significant contribution. We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and meaningful to us. We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot. And frankly, we don't settle for anything less than excellence in every group in the company, and we have the self-honesty to admit when we're wrong and the courage to change (Frommer, 2009).”
Its mission statement was however seen to vary as per the strategic direction of the company at any point in time. Although Apple’s mission statement varies with its strategy the central theme of all the variations is as presented below:
“Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and internet offerings (Apple Inc., 2004).”
Nokia on the other hand had a clearly defined vision with an accompanying mission statement reproduced below:
“Our vision is a world where everyone can be connected. Everyone has a need to communicate and share. Nokia helps people to fulfil this need and we help people feel close to what matters to them. We focus on providing consumers with very human technology – technology that is intuitive, a joy to use, and beautiful. We are living in an era where connectivity is becoming truly ubiquitous. The communications industry continues to change and the internet is at the centre of this transformation. Today, the internet is Nokia's quest. Nokia's strategy relies on growing, transforming, and building the Nokia business to ensure its future success (CEMS, 2012).”
1.1.2 Impact on strategy
An assessment of both companies’ vision and mission statements reveal some similarities as well as differences in their approach to growth.
Table 1 A comparison of the vision and mission of Apple and Nokia
Mission components Apple Nokia Slogan Think Different Connecting People Products or services PC hardware, software, consumer electronics and internet services
communication products, internet services markets Global Global
Apart from these similarities Apple and Nokia are very different in their beliefs and purposes. These differences span the areas of defining key customers, approach to technology development and the company’s philosophies amongst many others. Apple clearly defines its key customers whilst Nokia is content in providing services to satisfy a wider market base. Their differences also show in their approach to technology development with Apple preferring to look in house for all its technological needs with Nokia choosing to emphasise on the kind of technology it prefers rather than the source. Their differences become even more profound through a comparison of their philosophies. Nokia believes that their garnered competitive advantage comes through the development of intuitive products with the ability to appeal to the senses of their customers. Apple on the other hand believes that by making their products more innovative albeit simple, they stand the chance to appeal much more to their intended customers.
These differences and similarities should show in their choice of strategies. Assessing their vision and mission alone will only provide the analyst with a summary of what to expect in terms of a company’s outlook and as such would not be the only determinant of a company’s strategy. A company’s vision and mission may be or may not be enshrined in its operations thus there is the possibility of a company having a very beautiful vision and mission statement on paper but with contradictions in its actions. Companies with a formalised vision and mission statement tend to gain an advantage in terms of an increased familiarity with the company’s purpose amongst its entire working populace although this does not necessarily translate to it having a competitive advantage over its competitors that do not have formalised vision and mission statements.
1.2 Assumptions held by the leadership of both companies
The perceptions of senior management about their internal and external environment often than not contribute a great deal to shaping the strategies of most organisations. The important role management assumptions play in shaping strategy can be seen through an example of a company that fails on various occasions at introducing a new product to the market being very unlikely to get management support for the reintroduction of similar products because of their past experiences of failure. A company’s held assumptions may be based on a number of factors. These may include:
- Beliefs about its competitive position
- Past history
- Industry trends
- Regional factors
- Rules of thumb (NetMBA.com, 2010)
1.3 Beliefs about its competitive position
A company’s competitive position relates to the way it differentiates its offerings and creates value for its market. A company’s competitive position is determined through the spot it occupies in its competitive landscape and what its best known for (Moderandi Inc, 2006).
Apple views itself as the producer of very innovative high quality products which usually sets the pace in which ever market they compete in. Due to this, most of Apple’s products are premium priced to match this perception of higher added value to the customer. This sense of innovation translates into:
- Leadership in the PC hardware and software for the creative arts consumer market through its reputation as being the developer of the world’s first desktop publishing software (Page Maker).
- Leadership in the personal music player market through the IPod.
- Leadership in the digital music purchasing market through its online music store ITunes.
Nokia in comparison to Apple with its core business being in the production of communication related products and services sees itself as the leader in the mobile telephone market.
1.4 Past History
A company’s history recited through its origins, challenges, successes and failures plays a role in determining the company’s present state as well as where it may be heading. Most manager gain experience as they grow in the business and these experience usually come to bear on their judgement in decision making.
that offer similar functions and the intensity of the rivalry between existing competitors. In an industry where the odds have always been against new entrants will see existing market players placing very little emphasis on the threat from a new entrant. A company’s held views about the industry in which it belongs can be its advantage as well as its demise. Correct views held by an organisation about its market may help determine where the company’s efforts should be channelled to gain advantage whilst an organisation with a wrong perception about its market may be blind to possible threats which can affect its survival.
Apple’s perceptions about the PC industry in its initial foray into business led to its loss to Microsoft, with the latter growing to become the market leader in Personal Computing software. Apple has since moved on from its initial setbacks in becoming a force to reckon with in varying markets. Nokia as a market leader had always seen itself as insulated from the threats of new entrants in the mobile telephone market, after all, existing competitors were already struggling to compete in the market. This oversight allowed Apple to foresee a strategic gap in Nokia’s product offering and take advantage of that.
1.6 The strategic capabilities of both companies
A company’s strategic capability can be defined as the key resources and competences needed by the company for its survival and prosperity (Johnson, et al., 2008). An understanding of a company’s capabilities is useful in understanding how it might respond to a competitive attack. A company’s strengths usually lie in its resources and the way it utilizes these resources (competencies) to counter threats and secure opportunities. A company’s resources can be both tangible (physical assets such as workers, factories, and equipment) and intangible (non-physical assets like information, intellectual rights) and comprises of physical, financial, human and intellectual resources (Johnson, et al., 2008). Adherents of the resource based view believe that a company’s competitive advantage only comes through the resources it possess and not from a thorough understanding of both its internal and external environment. In order for a company to gain competitive advantage they argue that its resources and competencies must be rare, hard to imitate and not easily substituted. This ideology goes to show how relevant a company’s capabilities are to its survival and growth.
A SWOT analysis of both Apple and Nokia should reveal their strengths and Weaknesses which together determines their strategic capabilities.
1.6.1 Apple’s Strength
In accessing the strength of Apple, it can be seen that Apple is a company with a strong brand name, a leader in the online music download market, possesses a strong vision led by the charismatic Steve Jobs and has a solid financial base. Apple by offering exclusive contracts on their mobile phones maintain their identity as a premium brand producer. Apple’s ability to offer innovative but yet easy to use quality products coupled to its skill in product design contributes to its strength. Apple is known within the industry circles to be very cost efficient.
1.6.2 Apple’s Weakness
Apple’s weakness lies in its pricing strategy which has the tendency to discourage potential customers whose selection is based on low pricing. Also Apple’s history shows that although the company has always been a first mover through innovation, its competitors have always been able to imitate this over time. This presents a challenge to them staying competitive over the long haul. Further the company’s preference for direct distribution or limited partnered distribution chains as was in the case of the IPhone means that the company will be missing the benefits of a broader exit through multiple channels for its products into the market. Currently in comparison to Nokia, it holds a smaller share of the mobile phone market. This means any open confrontation with the market leader may be to its disadvantage since Nokia can count on its market position.
1.6.3 Nokia’s Strength
Nokia’s main strength is by virtue of its position. Observed to be the market leader in the mobile telephone market it can draw on a large customer base for future product development endeavours. Its reputation for making good products adds to its already strong brand name. Its solid financial foundation makes the company an even more formidable opponent in its market of operation.
1.6.4 Nokia’s Weakness
With the mobile phone market maturing and heading towards becoming commoditized with the release of every new product, Nokia is presented with the challenge of staying relevant.
products exist. By developing products that can be integrated in a way although for different markets, apple capitalise on the potential to cross sell existing products to buyers of the new products. This strategy falls in line with Apple’s strategic direction of not just developing standalone products but rather an ecosystem of functionally related consumer products which work in harmony to the ultimate satisfaction of the customer.
Apple’s core strategic principles in its business endeavours can be summarised to be:
- Focused strategy to market development through product differentiation.
- Related diversification taking advantage of strategic gaps in surrounding markets.
- Vertical integration taking control of its up and down stream supply networks.
- Achieving cost efficiency so as to increase profit margins.
- Form strategic alliance when beneficial.
- Seek first mover advantage where possible.
The fuel behind apple’s strategies is its ability to rapidly innovate to match the requirements of the competitive markets in which the company operates in. its in-house technological know-how working in tandem with its strong product design skills have enabled Apple to churn out market defining products time and time again.
1.7.2 Nokia’s strategy
Nokia had enjoyed considerable success on its way to the top of the mobile phone market till Apple disrupted the market with the launch of the first touch phone, the IPhone. Although Apple had targeted a section of the market not catered for, the premium touch screen phone segment, Nokia foresaw the possibility of Apple eating into its revenue streams due to the strong appeal of Apple’s product wooing over its admirers and as such had to adjust its strategies.
Prior to Apple’s arrival, Nokia’s strategy had been to provide a wide range of personal communication devices tailored for various market segments. Nokia’s competitive advantage was through cost leadership with the ability to provide products to suit the varying income levels of its customers. Nokia’s strategic direction had been conservative choosing only to develop its existing markets for increased market penetration.
Nokia’s response to Apple’s foray into the mobile phone market in a bid to quell Apple’s ambitions was to launch its own line of products similar in design and function to Apple’s IPhone offering a lower price advantage. Subsequent actions included attacking Apple’s strong hold, the online music download market, through diversifying into the provision of such services.
Nokia’s change in strategic direction takes into consideration the need to protect the value accrued to its stakeholders by diversifying into other sources of income hitherto ignored.
1.8 Analysis and Conclusion
Apple and Nokia are currently embroiled in a competitive cycle with Apple keen on breaking Nokia’s hold on the mobile phone market whilst Nokia is determined to stay at the top. This competitive rivalry is good for the industry which have for a long time been stifled of innovation and gone stale approaching commoditization. Both companies have their own strengths and weaknesses and have been able to create value for their shareholders although through different strategies.
There exist a strong correlation between their purpose, assumptions and strategies. In the context of the case study using the BCG Matrix to assess their product portfolio, Apple have three cash cows in IPod, ITunes and the IPad, a star with their IPhone and a problem child with their PC line. In comparison to Nokia whose entire portfolio had been centred in the mobile phone market under different segments. Its foray into the online music market can be seen as a problem child since the outcome on its investments had not been determined during the time frame of the case.
Most markets are not static and as such makes it difficult to predict the outcome of any company’s strategy in the long term. History has shown that although Apple always have an advantage through its innovative approach to development, this advantage is usually short lived as most of its competitors are able to imitate its strategies easily. Only time will tell if Apple can continue its rapid cycle of innovative development as without it the company loses its edge over other competitors.
Nokia on the other hand takes solace in its large market share in its core business. However a lack of diversification puts a huge strain on it being overly dependent on its sole source of revenue. This approach leaves the company susceptible to market shocks.
areas of business such as the level of education of the workforce, the infrastructural quality of the country such as the road and rail system and the overall health of its citizens. The uncertainty in predicting what a change in government will bring makes it very difficult to plan effectively. This situation becomes worst in highly volatile areas where the political climate is very unstable.
2.1.2 Economic challenges
Another factor that poses an obstacle to effective market prediction is the degree of economic uncertainty that may impact on a customer’s purchasing power as well as an organisation’s ability to produce. Economic factors represent the wider economy so may include economic growth rates, levels of employment and unemployment, costs of raw materials such as energy, petrol and steel, interest rates and monetary policies, exchange rates and inflation rates.
2.1.3 Social Challenges
Social factors represent the culture of the society that an organization operates within. They may include demographics, age distribution, population growth rates, level of education, distribution of wealth and social classes, living conditions and lifestyle. Changes in social trends can impact on the demand for a firm's products and the availability and willingness of employees to work.
2.1.4 Technological Challenges
New technology creates new products and new processes. Technology can reduce costs, improve product quality and increase innovation. As much as technological advancement can be beneficial for businesses this can also result in the loss of a competitive advantage especially in the case where by this may lead to competitors being able to imitate competencies. Easy and open access to technology can greatly reduce the barriers to entry for new entrants. This can also result in the commoditization of the market. An example will be open standards like Bluetooth and Wi-Fi which has greatly commoditized the consumer electronics market.
2.2 Implications for strategy development
The uncertainties in predicting the market brings into question the effectiveness of the deliberate or rational approach to strategic planning. A prescriptive or deliberate corporate
strategy is one where the objective has been defined in advance and the main elements have been developed before the strategy commences (Lynch, 2011). This is what some managers will call long term planning whereby a company decides on a strategic direction and puts in measures for that. This approach will require a degree of certainty as to know the future behaviour of the market in which the organisation participates in. However events in the real world like the global financial meltdown proves that this is not always possible. Most companies can control their micro environment which may include their industry competitors, suppliers, competencies and to some extent their customers. They however are faced with the challenge of the impact of their macro environment, which is out of their control, on their operations. How do they predict what the Government will do next or whether the economy in their operational markets will decline or grow? These are some of the difficult questions managers are faced with day by day. An alternative to the deliberate approach to strategy development is the emergent way. An emergent corporate strategy is a strategy whose final objective is unclear and whose elements are developed during the course of its life, as the strategy proceeds (Lynch, 2011). The emergent approach to strategy development sees strategy as a continuous process taking into consideration actual environmental factors at any point in time so as to maximise the company’s advantage. The advantages of the process include its consistency with actual practice in organisations; it takes account of people issues such as motivation; it allows experimentation about the strategy to take place; it provides an opportunity to include the culture and politics of the organisation; it delivers flexibility to respond to market changes (Lynch, 2011).
3 Lessons that can be learnt from Apple’s strategies
Apple’s strategies over the years have taken it from a small maker of PCs to a global giant in the personal consumer electronics market. There are many lessons that other companies can learn from Apple’s strategies:
3.1 The benefits of learning from ones failure
No company ever wants to fail but in today’s ever changing markets, failure might come. Apple lost its first competitive battle to Microsoft which most industry pundits would have
3.4 The benefit of having a keen eye for opportunities
Apple’s ability to recognize strategic gaps between already existing markets and capitalize on them is profound. The music industry was not a product of Apple’s creation neither was the mobile phone market, however the company’s ability to identify a strategic gap in the offerings of existing market players and capitalize on that was what really set them apart. The IPod and the ITunes music store helped the music industry solve an existing issue with piracy and the IPhone set the standard for a new way users interacted with their phone. This gave the company first mover advantage in already existing markets something very rare in hyper competitive markets. Strategy is about the way and manner companies take advantage of the opportunities in their environment. Being attentive to detail will help managers pick up on opportunities their competitors might have ignored.
4 References
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