Apple Is No Cheater, Essay Example
The success of any company depends on its ability to exhibit sustained and profitable growth. These factors come into fruition when a company can prove a competitive advantage over its competitors, while maintaining a lead in market share. Apple, Inc. is a multinational American-based corporation that manufactures and sells consumer electronics. The company has been named the most admired company in the world by Fortune Magazine for more than five years in a row (Fischer, 2008). In 2011, Apple, Inc. had worldwide annual revenue that exceeded $108 billion. The company’s success can be attributed to its ability to create ‘blue oceans’ of uncontested market space. In essence, Apple, Inc. has managed to create authoritative leaps in value for its customers, and for the firm itself. Such business practice has virtually rendered its rivals obsolete and has unleashed a new demand for its specific product market (Kim & Mauborgne, 2005).
Apple, Inc. utilized a systematic approach to make its competition irrelevant. That means that through a series of well-calculated steps, Apple, Inc. managed to become the leader in its industry so that its products and services remain unmatched by any other competitor in the same field. The company’s systematic approach was based on the four Actions Framework, which was developed as part of the ‘blue oceans’ strategy. In order for any company to gain an unprecedented advantage, it has to have a clear vision of its ultimate identity and its eventual goals (Kim & Mauborgne, 2005). In other words, it has to develop a strategy to illuminate its products and services from its competitors. Apple, Inc. employed the four components of this framework to sharpen its focus and renovate customer value. The framework is based on four specific question: eliminate, reduce, raise, and create (ERRC), which forces industry leaders to methodically pursue diversity and low cost. In other words, by answering the following four questions, Apple, Inc. gained a significant competitive advantage over its competitors.
- Question 1: “Which of the factors that the industry takes for granted should be eliminated?” (Eliminate);
- Question 2: “Which factors should be reduced well below the industry’s standard?” (Reduce);
- Question 3: “Which factors should be raised well above the industry’s standard?” (Raise); and
- Question 4: “Which factors should be created that the industry has never offered?” (Create).
By answering these four questions, company leaders are forced to simultaneously pursue low cost and differentiation (Kim & Mauborgne, 2005). In essence, answering these questions allows company leaders to analyze every single factor that their business competes on. Any company that employs the ERRC Grid promotes high levels of engagement throughout the entire organization. Apple’s corporate strategy transformed the company from a computer manufacturing business to a consumer electronics powerhouse (Kim & Mauborgne, 2005). Through the implementation of a series of ‘blue ocean’ strategies, the company managed to provide unprecedented value for its buyers; thereby transforming customers who would normally support another company into die-hard Apple fans. This move lifted Apple’s market value exponentially.
Although Apple offers products, such as the iPhone, iPad, iPod, MacBook, and iTunes, the scope of those offerings are too large for the constraints of this paper. As such, only the development of iTunes will be examined to confirm Apple’s success in gaining a competitive market advantage. In 1999, Napster launched an online music and file-sharing service. By 2003, the company facilitated the illegal music sharing service to the tune of nearly three billion songs (Fischer, 2008). That same year Apple, Inc. launched its iTunes online music store. The company successfully partnered with major music and film companies to develop a service where customers can legally download a quality product, for a very small fee. In addition, the service allowed customers to listen to, or view, a 30-second preview of the song or film they wished to download. This was a feature not available on Napster. By 2007, iTunes had sold four billion songs; 20 million of those on Christmas day of 2007 (Fischer, 2008). Napster could not compete with Apple’s new service, and was subsequently shut down for sharing music and films illegally. Apple successfully employed the ERRC Grid by answering the four questions.
For the first question, Apple found that the most prominent factor that was taken for granted, it the fact that music is readily available at the consumer’s finger tips. However, the methods of obtaining the music were less than admirable. Apple, Inc. decided to engage all music industry participants, to create a platform that would prove beneficial to all parties involved. By selling the songs, instead of sharing them illegally, Apple not only generated revenue for the firm, it also showed its support for artists and musicians responsible for delivering the music. In return, the artists and studios released their music to Apple. For the Second question, Apple found that the factors that should be reduced well below industry standards were the price of the songs. Instead of offering a limited amount of music for free through a file-sharing system, Apply, Inc. offered a plethora of music to consumers for 99 cents. For the third question of the ERRC Grid, Apple found that the quality of the product should be raised above industry standards. The company did so successfully by offering a 30 second preview to its customers, so they can be aware of what they are buying. In addition, Apple offered a much wider range of music to consumers than Napster could ever dream of; and it did so legally. By answering the fourth question, Apple offered an online music store, unlike anything the industry has ever seen. The company successfully eliminated its competition, reduced any legal issues associated with purchasing music online, raised the quality of online music offerings, and created a service unlike anything before it, or anything after. Kim & Mauborgne (2005) state that the purpose of the ‘blue ocean’ strategy is not to outperform other competitors in the same industry, but to develop a product or service that can be identified as new market space. This practice will therefore render any competition irrelevant. Apple, Inc. solidified this statement by developing a unique service that is accessable to any computer user. In addition to the development of the iTunes music store, the company released the iPod and iPhone, both devices that can be synced to a customer’s music library, so that their iTunes music can be accesible from anywhere. The company, therefore, created a blue ocean space that makes it impossible for competitors to match.
Since its inception in 2003, the Apple iTunes store now sells music, movies, TV episodes, podcasts, and e-books. It remains the only service of its kind, and has thusly secured a competitive advantage in the market place of online music services. Apple, Inc. has managed to create a series of ‘blue ocean’ offerings that provides unmatched value to its customers, and marks it as one of the most successful companies on a global scale.
Fischer, A. (2008). America’s Most Admired Companies. Fortune, 157(5), 65-67.
Kim, W. C., & Mauborgne, R. (2005). The Blue Ocean Strategy. Boston, MA: Harvard Business Review Press.
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