Reference no: EM132292289

Is Apple Its Own Obstacle? Innovation is one thing, but when a company has innovation with no strategy to define a market, take the lead in that market, and profit from that position it will most likely find that competition has arisen to seize the opportunity. This scenario has played out for Apple throughout its existence, starting with the Apple II in 1977. The Apple II introduced concepts that were novel at the time, such as a graphical user interface, a mouse, a laser printer, and a color monitor; yet today it has captured only 2 percent of the $180 billion worldwide market for PCs. Most consumers consider Apple's products as being easier to use, more powerful, and more elegant than their rivals. Despite this acknowledgement, Apple's competitors have been able to mimic Apple's innovative features while realizing the profits and scale that Apple has been unable to reach So the question is obvious: “If Apple is so great in respect to new product development, why do consumers keep going elsewhere? Analysts point to Apple's decision to not license its operating system in the 1970s as the root of Apple's decline in the home PC market; however, the same analysts argue that the company could have righted itself by capitalizing on its early lead in the $12 billion education market for PCs, which might have allowed Apple back into consumers' homes. Due to its failure to develop an aggressive sales force, the company slowly ceded its position, resulting in Apple owning only 10 percent of the market today. Another example of Apple's failure to seize a market can be found with the Newton, the first mobile pen-based computer. Although the product was far from perfect, conventional logic would suggest that Apple's position as first-to-market should have translated into it becoming the dominant player in the $3.3 billion market for personal digital assistants (PDAs), but the company has not even managed to capture a substantial stake With Apple being arguably the most innovative company in its industry, if not the world, conventional wisdom would argue that it would also be the most succ success is turning innovation into commercially viable products, and doing so more profitably than your competitors can. This step seems to be overlooked by Apple time and time again. Apple has been devoted to innovation since its inception, but such single-mindedness can often lead to neglect in other areas. For instance, iTunes was voted the "Coolest Invention of 2003" by Time magazine, and by the end of its first year on the market, 20 million songs had been purchased and downloaded from Apple's site; however, Apple generated only $6.2 billion-three-quarters of it from the sale of PCs during the fiscal year ending September 27,2003 So, it would seem that the more to ing a successful company than innovation alone. One critical component to a company Despite PCs representing such a large percentage of its sales, Apple has since fallen to fifth in PC sales in 2009, behind Dell, Hewlett-Packard, Acer nd Toshiba. Apple wa mere 0.4 percent today, which pales in comparison to the industry average of 2 percent. Notable exceptions are Apple's i-Pod, i-Phone, and i-Pad, the latest innovative developments in the mobile market, where Apple is commanding the wo one f the most profi mpanies in the PC mar ts operating margins declined from 20 percent in ith Nokia. These new innovations ha ulted A the t f this eme rging market. Only time will tell if they can sustain their d in this mark oning ?? r the sakc of creation is short-sighted. Inno t has skc ose sight of the risks. In the end, creat cthcr the pursu will only bencfit is causing companic ompany if i t generates cash to cover the f thc inno and rcwar sharcholders for the inherent risks. Additionally, consistency and follow-through are 1 generating new produ an become obscssed with op while competitors such as Microsoft were moving toward specialization by outsourcing functions like sarv: otherwisc companics c led A rather than fiting from the inimercializa In the this obses ers erything in house, regardles manufacturing Apple's primary focus has been on developing "cool," while its competitors have focused on generating profit. The problem, as seen by industry observers, is that by the time Apple gets a new product to market, they are ready to work on the next big thing, leaving the monotony of sales and strategic that this strategy also means Apple is losing revenue from burgeoning markets that it helped to create. The be its lack of interest in realizing profits from what it creates. As partnerships to its competitors. The bstacle for Apple in respect to its drive nno has been and continu long as the company continues to be infatuated with creation alone, it will continue to be merely an R&D boutique for its competitors TABLE 11-1 Obstacles and Effects of Traditional Practices Traditional Management Practices Enforce standard procedures to avoid mistakes Manage resources for efficiency and ROI Control against plan Plan long-term Manage functionally Avoid moves that risk the base business Protect the company's base business at all possible cost Judge new steps from prior experience Compensate uniformly Promote compatible individuals Adverse Effects Innovative solutions blocked, funds misspent Competitive lead is lost, low market penetration Facts that should replace assumptions are ignored Nonviable goals locked in, high failure costs Entrepreneur failure and/or venture failure Missed opportunities Venturing dumped when base business threatened Wrong decisions about competition and markets Low motivation and inefficient operations Loss of innovators 1. Using Table 11-1, what specific constraints on corporate entrepreneurship would you identify for Apple? 2. What other potential limitations on corporate innovation could Apple experience and why? 3. Discuss the ethical dilemma of “rouge middle managers” as it could apply to Apple.