The Strategic Initiatives, Essay Example

The need for strategic innovation has increased in recent years because of the global economic crises. The consumer technology sector is particularly prone to the effects of the global recession. The global recession has resulted in massive job losses in US as well as Europe and this has significantly reduced the disposable income of individuals and families.  The reduction in disposable income has meant that consumers have cut back on unnecessary expenditure and this includes spending on consumer electronics.  As a result the price of consumer electronics has reduced. The Information technology market in the post recession era  is characterized by cut throat price competition . Consumer Electronic Companies can survive in a highly competitive market  by either trying to win the price war or  seeking  to procure competitive advantage by rapid innovation not only in their products  but also  in their strategies .

Strategic innovation is the concept of generating corporate growth  by creating new business. This is done by creating differentiated products that offer unique features and cater to the customer’s needs in a singular manner.  By finding a new market for their products a technology company can create competitive advantage and generate greater corporate profitability in the long run (Moeller Stolla and Doujak  2008)

Strategies and Tactics adopted by Apple in the Past

One information technology company which has employed strategic innovation policies in the past to secure competitive advantage is Apple Inc. In 2001 Apple ventured into the music business and launched the iPod a mobile device for playing music. In a few short months the product achieved phenomenal sales and became a part of the contemporary life style. (Moeller Stolla and Doujak  2008). In 2007 Apple launched iTunes an online music store for playing music on the iPod. ITunes achieved phenomenal success by catering to a unique market of existing company customers who were already using the iPod. (Moeller Stolla and Doujak  2008). This strategic innovation of the online music business proved to be very lucrative for the company as it made profits by not only increased iPod sales or iTunes subscriptions but by procuring proprietary rights for distribution of technology as well as digital rights management.  Today Apple has market dominance over a new   multi –billion dollar business genre. (Moeller Stolla and Doujak  2008)

Apple’s success in the online music business is attributable to integration techniques which propel consumers to use one apple product in conjunction with the other. In their design and application apple products are heavily interdependent on each other. For example  If you buy an iPod  you will have to subscribe to iTunes to listen to music on it as one will not work without the other. (Moeller Stolla and Doujak  2008)

New Strategic Recommendation

We recommend that Apple utilize strategic innovation techniques to sustain competitive advantage and expand into new business markets by launching an online video store under its iTunes brand. Consumer trends dictate that people use the internet more frequently for entertainment purposes. Apple already caters to customers who use the internet to download songs. However there is a large market of online users who access the internet to download movies and video content which iTunes does not cater to at the moment

The launch of iPad offers the company an opportunity to use the product to cater to the needs of consumers who want a portable “personal video player” which can give them access to online video just as the iPod provided access to online audio.

By providing online videos through iTunes Apple will be able to offer consumers a singular platform that satisfies both their audio and video requirements. Customers would no longer have to log on to different sites to download music and movies and this would offer Apple an advantage over other providers.

When formulating a strategy it is imperative to analyze the Competitive environment of iTunes.  Currently the competitive scenario of the company can be divided into the following categories (Sokollu 2007)

• Video Sharing sites like YouTube and Daily Motion gives access to a wide range of video content ranging from music videos, to personal videos and movies. These sites are free and do not operate by charging a membership fees. You Tube has already established the position of being the leading video  sharing website in the world.
• Intermediaries connect businesses who need video with businesses who create them. They function as third party brokers and primarily serve commercial and not individual users.
• Video Search Sites work along the same guidelines as a search engine except that it searches only for online video content. It includes popular sites like Google video and AOL video search among others.
• Video e-commerce sites. Allow users to view movies and TV shows through online streaming. Such sites like Netflix website offers members subscription at very affordable rates and also the option to watch movies online. It also offers the option to download movies through game consoles like Wii and X-box.
• Personal computing giant Microsoft has taken a lead in integrating streamed video content through its MS Windows 7 application. It stands to gain competitive advantage over Apple in this market if it delays the launch of the new iTunes application

The target group that the new iTune application seeks to attract includes

• Individual users will access the application to  watch  video clips, music videos and movies for their personal entertainment
• Business Users: These would use the application to download business videos, movies on industrial safety, corporate profiles, instruction videos, corporate training videos etc.
• Academic Users can access videos for teaching purposes. These videos can be used in educational settings to impart information to students about a particular subject.

Challenges of the new strategy

• The online video market is a new unchartered area for Apple. The company will have to invest in repositioning its brand as catering to both the online audio and video industry. The challenge lies in re-associating the brand to a new product in the minds of the consumer.
• Consumer perceptions differ between downloading video content and downloading audio content. Online video streaming requires a lot of time and customers do not enjoy the same quality of visual and sound they would when buying or renting a DVD.
• As compared to the audio industry the online video industry has more diverse providers such as studios media houses etc. I-tunes will have to build new relationships with these providers and negotiate legal contracts that would allow the company to procure these videos in a manner which does not violate any copyright or licensing requirements. Some of these negotiations would have to be done with global movie studio as well if the company plans to offer access to download foreign movies.
• Though the iPad is a popular device it is not as easily affordable as the iPod. Not everyone will buy the iPad to use as their personal video player. The portable DVD player is a much cheaper alternative to the i-pad and also easier to install in a variety of transport situations such as the car or on the plane where the internet is available

Risks associated with the new strategy

• ITunes must strictly abide by copyright and licensing requirements. Video content available for download should not be pirated. The use of pirated content would place the company at risk of a legal violation as well as affect its overall brand image and goodwill.
• All video content must meet ethical and social constraints. Adult video and content should be rated clearly as such. Videos concerning explicit pornographic or ethnically insulting content should not be available for viewing by non adults. If it is available for download it should require proper user identification and details. Following ethical and social norms will ensure that the company enjoys a good reputation in the community that it operates.

Critical Success Factors

• A comprehensive marketing strategy aimed at repositioning the brand as a online video provider should be adopted  This would involve considerable amount of advertising in print media as well as broadcast media about the brand’s entry into the realm of online video.
• Monitoring available online video content to ensure that it follows stipulated legal and ethical requirements. Videos which do not follow these stipulations should not be available for download in the online store
• The application should not just be restricted to the iPad. Though the company may market it in a fashion that propagates its compatibility with iPad it should also be made available to non iPad users who may form a significant chunk of its target market.
• The price of the new application should be competitive. New users would only be attracted to the application if it is a cheaper option than renting ort buying DVDs

Key Resourcing Requirements

Some strategic resources which would Apple in launching the new application include:

• A comprehensive study of consumer trends in the online video industry. Apple can either commission this study itself or purchase this resource from a research company.
• Investing in quality control measures to ensure that all videos comply with copyright requirements and also follow ethical constraints.
• Investing in a promotional campaign that seeks to both attract new users and also encourage existing iTunes consumers to use the application for their online video requirements

Role of Human Resource Management

Efficient managerial decision making is heavily reliant on employee performance. Management can make decisions and set goals but without staff input and performance these goals will be rendered useless and in-effective. (De Wit & Meyer 1998) It is very important to train, motivate and communicate with staff in order for managerial decision making to be effective. It is also essential to have clearly defined organizational practices such as reward and recognition procedures to value employee contributions. This will also encourage team-work and creativity to foster more productivity.. Promotions, increments and bonuses that accompany an appraisal process are all signs of recognition from the company for the employee’s hard work and contributions. If individuals are rewarded well for their contribution they develop a sense of loyalty and commitment to the organization and are less liable to defect to competitors. Positive Feedback helps strengthen employee performance and helps management align the employee’s performance with the management’s strategic objective

Conclusion

In conjunction with the detailed  financial, SWOT and business analysis conducted above I would heavily recommend my clients to invest in Apple Inc. The company is in sound financial health. It has more than doubled profits over the last four years. The company also has a high performing finance function which is evidenced in the form of a healthy assets to liability structure, steady reduction of production costs  , a strong balance sheet and a highly liquid cash reserve base. Apple  also has a very good reputation in the market due to the strength of  its policies and strong managerial policies. It also has strong good will generated by ethical and socially responsible corporate practices which will make it appealing to investors from diverse backgrounds.

Works Cited

Moeller, Michael Stolla Cornelia Doujak  Alexander  (2008) Strategic Innovation Goldegg Verlag.

Sokollu Emre (2007) Online Video Industry Index. Retrieved 21 May 2011 from the website http://www.readwriteweb.com/archives/online_video_index.php

Below, Morrisey & Acomb, (1990) The Executive Guide to Strategic Planning . Jossey-Bass, San Francisco.

De Wit, Bob & Meyer, Ron (1998), Strategy: Process, Content, Context. Thomson Publishing Company, London.

David Fred (1995) Concepts of Strategic Management (5th Edition) Prentice-Hall. New Jersey.

Money Central (2011) Company Financial Statements- Apple  Retrieved 21 May 2011 from the website http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?lstStatement=CashFlow&symbol=US%3aAAPL&stmtView=Ann