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Apple Computer Corporate and Business Strategy
recruited an executive team that instituted and managed these drastic operational improvements.
Outbound logistics refer to the activities required to collect, store, and distribute the output. Apple specifically excels in these activities. Their efficient web site order processing allows them to have the highest inventory turnover rate in the industry. The firm infrastructure supports these fast response capabilities through investments in MIS and knowledge sharing systems. Apple also eliminated thousands of resource draining distribution outlets and complemented their direct selling efforts with wholly owned retail boutiques. Additionally, Apple expanded their presence in national chains. These value added outbound activities translated into reduced distribution time and increased delivery reliability to the end user.
Marketing and sales activities act to build brand reputation and stimulate sales. In 1998, Apple demonstrated its competencies in marketing with the unveiling of the iMac. Backed by a $100 million campaign, clever strategic advertising helped sell 278,000 iMacs in just six weeks and 6 million in 3.5 years. This massive advertising campaign generated positive buzz for Apple and helped reinvigorate its image.
This campaigned strategically targeted young and contemporary market segments and helped position Apple as a differentiated product with plug and play multimedia peripherals that seamlessly complemented the PC. This advertised differentiation was by no means an accident. The iMac sold 6 million units at premium prices compared to its PC counterparts because the marketing campaign succeeded in communicating the differentiation advantages of the iMac over the cheaper PCs.
Service represents the last primary company activity in Porter’s value chain analysis. Service activities include all the activities required to keep the product or service working effectively for the buyer after it is sold and delivered. Here, Apple demonstrated value by creating nation wide support groups. Leveraging the ubiquitous attributes inherent to the Internet, Apple was able to establish regional and local software and technical support groups for its installed customer base. Strategically, Apple forged alliances with over 400 software developers to provide more than 1200 new software applications for Apple. The company’s ability to continually add functionality to its PC line via new software availability is a key value driving activity. What good is it from the customer’s perspective to have a quality product that is limited to a few functions?
To summarize, Apple’s distinctive core competencies lie within their ability to provide quality products through their vertically integrated inbound activities. Not only are Apple’s finished goods differentiated by quality, they are innovative and cutting edge. Innovation is driven by consistent investment in R&D. Although the company has excelled in delivery and order processing, it still has yet to prove its operational efficiency. Therein lies Apple’s principal weakness. In the past, Apple has failed to reconcile the added cost of differentiation with operational efficiencies in production and distribution. Apple has [next page]