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of any retail outlets, including luxury stores such as Tiffany & Co. jewelry or LVMH, purveyor of fine handbags and other luxury goods.In 2003, Apple soared even higher when it opened the online store iTunes. Apple didn’t stop there. In 2007, the company revolutionized the smartphonemarket with the introduction of the iPhone. Just three years later, Apple created the tablet computer industry by introducing the iPad, thus beginning toreshape the publishing and media industries. Further, for each of its iPod, iPhone, and iPad lines of businesses, Apple followed up with incremental productinnovations extending each product category. By combining tremendous brainpower, intellectual property, and iconic brand value, Apple has enjoyeddramatic increases in revenues.A Good StrategyWhy was Apple so successful? Why did Microsoft’s once superior market valuation evaporate? Why did Apple’s competitors such as Sony, Dell, Hewlett-Packard (HP), Nokia, and BlackBerry struggle or go out of business? The short answer is: Apple had a good strategy. But this begs the question: What is agood strategy?A good strategy is more than a mere goal or a company slogan. A good strategy defines the competitive challenges facing an organization through acritical and honest assessment of the status quo. A good strategy also provides an overarching approach (policy) on how to deal with the competitivechallenges identified. Last, a good strategy requires effective implementation through a coherent set of actions. A good strategy, therefore, consists ofthree elements:21. A diagnosisof the competitive challenge.2. A guiding policyto address the competitive challenge.3. A set of coherent actionsto implement the firm’s guiding policy.
THE COMPETITIVE CHALLENGE. First, consider the diagnosis of the competitive challenge. Above, we brieﬂy trace Apple’s renewal from the year 2001,when it hit upon the product and business-model innovations of the iPod/iTunes combination. Prior to that, Apple was merely a niche player in the desktop-computing industry and struggling financially. Steve Jobs turned the sinking company around by focusing on only two computer models (one laptop andone desktop) in each of two market segments (the professional market and the consumer market) as opposed to dozens of non-differentiated productswithin each segment. This streamlining of its product lineup enhanced Apple’s strategic focus. Even so, the outlook for Apple was grim. Jobs believed thatApple, with less than 5 percent market share, could not win in the personal computer industry where desktops and laptops had become commoditizedgray boxes. In that world, Microsoft, Intel, and Dell were the star performers. Jobs needed to create the “next big thing.”3A GUIDING POLICY. Second, let’s consider the guiding policy. Apple shifted its competitive focus away from personal computers to mobile devices. In