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Apple Inc. as an Innovative Firm

Since the beginning of the 20th century, innovation determines business opportunities, brand uniqueness, and company image. Innovation is nothing more than the act of introducing newness into a process or product. It involves an idea, its implementation, the actual production of the innovation, and its acceptance by the market. Essentially, consumer reaction determines the success of an innovation. Without acceptance, an invention does not become an innovation. Apple Inc. is one of the outstanding computer companies founded as an innovative enterprise.

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Apple Inc. is a global computer company founded in 1976. The main categories are consumer electronics and software products. The main products are personal computers and media players, mobile phones, and computer hardware and software (Apple Home Page 2008). A stable market position is achieved by Apple because of its unique products and entrepreneurship in the software and computer industries. This can best be accomplished by allowing divisions that specialize in certain areas the freedom to experiment, promoting a culture that emphasizes a big hit, creating compensation systems that reward individual and group creativity, and implementing an accounting system that emphasizes business development. The historical success of the company was based on the unique personality and strategic vision of its founder, Steve Jobs (Amberg, 2000). The main technological changes took place during 1994-1997 and 1998-2005. These changes in modifications and software were influenced by increased competition and the global leadership of Apple’s direct competitor, IBM. Thus, the company always follows the blue ocean strategy, which helps Apple to compete and remain profitable. This strategy can be explained as constant innovations in all spheres and in all directions. iPod is one of the most recent examples of this approach (Crawford 2003). Thus, Apple has to shift from the blue ocean to the red ocean strategy based on the idea that the market is saturated with innovations and adapts to market conditions and products created by competitors (Apple Home Page 2008). A company’s executive leadership is instrumental in making the needed changes. The first step that Jobs takes is to perform an organizational audit of the strengths and limitations of the company in terms of its entrepreneurial capabilities. Once the audit has been completed, the next step is to develop some action programs for improving the company’s entrepreneurial capabilities. This typically involves some innovative planning exercise and possibly a management development program designed to help managers make the transition from technical specialists to more entrepreneurially oriented general managers (Crawford 2003).

Apple Inc. is a private global company. A market analysis of the current and expected needs, behavior, perceptions, and preferences of consumers and intermediate marketing organizations (retailers, wholesalers, and others) is critical to the firm’s ability to identify areas requiring creative solutions and innovative products and services (Hollensen, 2007). There is no substitute for thorough market analysis as a guide to understanding the firm’s customers and prospects and their distributors and identifying areas that can benefit from creative solutions and innovative products and services (Apple Home Page 2008). For Apple, competitive benchmarking can serve both as a way of identifying what creative and innovative things competitors are doing as well as finding out for each of the areas requiring creativity and innovation which is the best (Crawford 2003). Once such a “benchmark” is identified, whether in the firm’s industry or in any other industry, it is useful to study the case thoroughly to see what can be learned from the experience (McDonald and Christopher 2003).

There are many ways of distinguishing innovations. These are based on the degree of importance, breadth of application, and impact. The introduction of absolutely new products, variations of products, an extension of new services, new packages, new advertising campaigns, and different pricing arrangements are all innovations. A continuum of innovation exists, ranging from very slight modification to radically new, important developments that give rise to new industries. From the consumer’s perspective, three types of product innovations may be delineated: fundamental, functional, and adaptive. Fundamental innovations create totally new products that have a much greater impact than adaptive innovations (Crawford 2003). Apple Inc. is an innovative firm as it creates a conceptually new approach in the computer industry and technologies. Where totally new products are developed, new industries are created. As a result, fundamental innovation may create a monopoly position within an industry for a period of time. For such new products, the creation of primary demand is more important than for products that are adaptations (Crawford 2003).

In contrast to Microsoft and IBM, Apple Macintosh creates a conceptually new approach to operating systems and computer structure.

Design rationale often means the historical record of the analysis that led to the choice of the particular artifact or the feature in question (Apple Home Page 2008). To illustrate, let us take as an example a particular feature of the Macintosh operating system, namely, the placement of all the window commands in the global menu bar at the top of the screen. By a window command, engineers mean a command specific to a window; for example, SAVE is a window command that saves the contents of the window (Amberg, 2000). The design rationale in this sense would be some description of the logically possible alternatives for placing window commands, how they are related, and what the trade-offs are. It is often difficult to provide such a description in a systematic way, but an example provides a vocabulary of the primitives and a set of composition operators for describing the design space of possible input devices (Kotler and Armstrong 2005). This meaning of design rationale seems different from the first meaning in its emphasis on design rationale not being a record but construction and from the second in its emphasis not on a particular artifact but on the relation among possible alternatives (Crawford 2003).

Drucker’s statement emphasizes the pivotal role of marketing activity in business enterprise. It implies that markets do not exist automatically and that effective demand depends on customers that are created through marketing activity. It stresses that the customer essentially dictates the directions and dimensions of what constitutes a business. “The customer is the foundation of a business and keeps it in existence, and it is to supply the consumer that society entrusts wealth-producing sources to the business enterprise” (Drucker p. 54 cited Crawford 2003 p. 92). Consumer-based approaches to the generation of new product ideas are, of course, used as part of any innovation aimed at identifying areas requiring creative solutions and innovative products and services. In addition, these approaches can be used on the “internal consumers,” all the organizational members who use organizational products and services. Organizational creativity and innovation in designing products and services, as well as in making any business decision, can greatly benefit from marketing concepts and methods. In this context, marketing is not only a function but also a management perspective and philosophy that offers a set of concepts and tools that can help an organization enhance its creativity and innovation. By utilizing marketing concepts and methods to increase organizational creativity and innovation, management has a better chance at preparing the organization for the twenty-first century (Crawford 2003).

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In functional innovations, the product or service remains essentially the same, but the method of performing the function is new. Examples are power brakes, electric knives, and gas and electric dryers. Such innovations may require considerable adjustment on the part of consumers. Adaptive innovations are the least complex and refer to such minor alterations in an existing product as package, color, design, shape, trim, and size variations (Crawford 2003). The adoptive innovations do not perform new functions for the user and do not require changes in consumer-use skills or behavior patterns. Apple’s innovations were adopted by a large number of other companies worldwide. They involve software solutions and computer technologies. For Apple, entrepreneurship can be explained as the process of creating a new business within an existing business. In contrast, entrepreneurship is the process of creating a new business per se. The entrepreneur creates a new business as a separate, stand-alone entity, while the marketer creates a new business within or as an adjunct to an existing business. Apple Computer was entrepreneurship, while IBM’s celebrated PC division was an innovative venture. Both required entrepreneurially oriented behavior. In firms that encourage entrepreneurial behavior, managers tend to adopt a very non-directive style. The most effective style under these conditions is a positive laissez-faire style in which the manager gives subordinates a great deal of freedom in both setting goals and how they are achieved (Degraff & Lawrence 2002). There is a great deal of trust between these managers and their subordinates. The philosophy is that employees know what they are supposed to do, so that they will do it with little direction. This affords subordinates a great deal of creativity in accomplishing their goals and may result in innovative products, production processes, or procedures that increase the unit’s efficiency (Apple Home Page 2008).

Basically, marketing is a mechanism for modification. It stimulates competition and generates changes in such factors as products, prices, channels, and advertising to satisfy the demands of dynamic markets changing opportunities (Amberg, 2000). This necessitates imagination and foresight to sense developments along new frontiers. However, when new frontiers are evident, risks and dangers are also present. For new environments, tax resources, and technology, planning becomes difficult, and timing and rewards are uncertain. Innovations developed by Apple are advantageous for the company as they represent the core of its business. During the 1970s, the main competitive products were C-PET (1976), C64 (1980), C500 (since 1985). The uniqueness of Apple’s products is in color graphics, open architecture, and a 5 ¼ inch floppy disk drive. Design rationale often means the historical record of the analysis that led to the choice of the particular artifact or the feature in question (Apple Home Page 2008). The main technological changes took place during 1994-1997 and 1998-2005. These changes in modifications and software were influenced by increased competition and the global leadership of Apple’s direct competitor, IBM. The 2000 year was marked by the emergence of a conceptually new device, the iPod. The next innovations came in 2005: Nanotechnologies and iPhone. So, the main trajectories which helped Apple to become a global leader are the science-based approach, specialization, scale intensity (Amberg, 2000).

The case of Apple vividly portrays that the management of change implies the management of new market situations, the solution of new problems on a continuous basis. Yet, change is often viewed as a threat to existing profitable markets and products. In reality, it is just the opposite. By recognizing profitable opportunities in continuing change, companies overcome threats and achieve growth. To manage change, companies must forecast developments, predict logical consequences, translate them into potential opportunities, and plan to capitalize on profitable alternatives. Marketing management must, therefore, create an atmosphere in which market change is expected, anticipated, and sought (Keegan and Green 2003). To survive, business systems must adjust to environmental changes and be flexible enough to adjust to their consequences. New products and services must be planned and developed on a programmed basis. The opportunities inherent in change must become a major focus of executives (Kotabe and Helsen 2006). Management must, therefore, create an atmosphere in which market change is expected, anticipated, and sought.

For Apple, innovations result in two groups of forces, competitive and monopolistic. The monopolistic forces, or the delayed action of competition, offer the innovator incentives to innovate. The competitive features diffuse the benefits of past innovations into the public domain (Kotabe and Helsen 2006). This puts the innovator under pressure to make further innovations if he is to maintain his competitive advantage and the better-than-minimum profits that go with it. Successful management of innovations must stress the competitive aspect. Innovation is, then, one of the competitive tools of the business firm. It is a major means of creating a differential advantage, albeit sometimes short-lived. In adjusting to change and in attempting to meet the demands of the marketplace, it must be managed, and programmed innovation is becoming one of the foundations of business strategy. Programmed innovation is an extremely important process that involves great amounts of resources and effort in promoting and accelerating economic change. The result of R&D is newness and change, and hence market opportunity (Kotabe and Helsen 2006). They come from both, and marketing plays a significant role. Acceptance of the inevitability and necessity of change and innovation in a period of accelerating technology is basic management and organizational responsibility. This is essentially a directorship responsibility that requires an awareness on the part of top management of the need for discerning unsatisfied market demands (Kotler and Armstrong 2005).

In sum, as an innovating firm, Apple faces a range of possible marketing policies. At one extreme, they can choose policies to make the maximum short-run profit and then decide to meet competition as it arises, as with a pricing policy of skimming markets. At the other extreme, they can build a solid market position by accepting modest immediate returns and taking a longer period of time to cover their outlays, thus making it more difficult for new entries, as with a pricing policy of market penetration (Kotler and Armstrong 2005). Between these extremes, they may choose to be reimbursed for their original outlays while still holding a competitive advantage and then use the advantage to increase volume and build a stronger market position. From a social perspective, the benefits of various innovations are often challenged. Fundamental innovations that create something new in the physical sense are hailed as beneficial. The case of Apple shows that the key activities in the innovation process are delineated: acceptance of change, programmed perception of market needs, relating opportunity and corporate resources, specifying innovative opportunities and strategies, and evaluating, deciding, promoting, and assuring market acceptance.

Bibliography

Amberg, A. 2000, Apple Power Mac G4. T H E Journal (Technological Horizons In Education), 27 (1), 82.

Apple Home Page. 2008. Web.

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Crawford C. Merle. 2003, New Products Management. Irwin-McGraw Hill. 7th edition.

Degraff, J., Lawrence, K.A. 2002. Creativity at Work: Developing the Right Practices to Make Innovation Happen. John Wiley & Sons.

Microsoft Home Page. 2008. Web.

Hollensen, S. 2007, Global Marketing: A Decision-Oriented Approach. Financial Times/ Prentice Hall; 4 edition.

McDonald M., Christopher M. 2003, Marketing: A complete Guide. Palgrave Macmillan.

Keegan, W. J., Green. M. C. 2004, Global Marketing. Prentice Hall; 4 edition.

Kotabe, M., Helsen, K. 2006, Global Marketing Management. Wiley.

Kotler, Ph., Armstrong, G. 2005, Principles of Marketing. Prentice Hall; 11th edition.

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