Question

What Is Strategy and Why Is It Important?

A creative, distinctive strategy that sets a company apart from rivals and provides a competitive advantage is a company’s reliable ticket to above-average profits. Illustration Capsule 1.1 discusses how Apple’s strategy led to its becoming one of the most profitable companies in the world, with revenues of more than $225 billion. It’s reputation for superior technological innovation and design capabilities has made its products and services the most popular in the world.

A company’s strategy is management’s game plan to grow the business, attract and please customers, compete successfully, conduct operations, and achieve targeted levels of performance. The central thrust of a company’s strategy is undertaking moves to build and strengthen the company’s long-term competitive position and financial performance. Ideally, this results in a competitive advantage over rivals that then becomes the company’s ticket to above-average profitability. A company’s strategy typically evolves over time, arising from a blend of (1) proactive and deliberate actions on the part of company managers and (2) adaptive emergent responses to unanticipated developments and fresh market conditions. Closely related to the concept of strategy is the concept of a company’s business model. A company’s business model is management’s blueprint for delivering a valuable product or service to customers in a manner that will generate revenues enough to cover costs and yield an attractive profit. The two elements of a company’s business model are (1) its customer value proposition and (2) profit formula. A winning strategy fits the circumstances of a company’s external and internal situations, builds competitive advantage, and boosts company performance.

This exercise is important because it will help you to understand why every company needs a sound strategy to compete successfully, manage the conduct of its business, and strengthen its prospects for long-term success.

The goal of this exercise is to aid you in developing an awareness of the five most dependable approaches for setting a company apart from rivals and winning a competitive advantage.

After reviewing Chapter 1, including Illustration Capsule 1.1, read the case below and answer the questions that follow.

Apple Inc.: Exemplifying a Successful Strategy

For more than ten consecutive years, Apple has ranked number one on Fortune’s list of the “World’s Most Admired Companies”. Given the worldwide popularity of its products and services, along with its reputation for superior technological innovation and design capabilities, this is not surprising. The key elements of Apple’s successful strategy include:

Designing and developing its own operating systems, hardware, application software and services. This allows Apple to bring the best user experience to its customers through products and solutions with innovative design, superior ease-of-use and seamless integration across platforms. The ability to use services like iCloud across devices incentivizes users to join Apple’s technological ecosystem and has been critical to fostering brand loyalty.

Continuously investing in R&D and frequently introducing products. Apple has invested heavily in R&D, spending upwards of $11 billion a year, to ensure a continual and timely injection of competitive products, services and technologies into the marketplace. Its successful products and services include the Mac, iPod, iPhone, iPad, Apple Watch, Apple TV, and Apple Music. It is currently investing in an Apple electric car and Apple solar energy.  

Strategically locating its stores and staffing them with knowledgeable personnel. By operating its own Apple stores and positioning them in high-traffic locations, Apple is better equipped to provide its customers with the optimal buying experience. The stores’ employees are well versed in the value of the hardware and software integration and demonstrate the unique solutions available on its products. This high-quality sale and after-sale support allow Apple to continuously attract new and retain existing customers.

Expanding Apple’s reach domestically and internationally. Apple operates globally in 500 retail stores across 18 countries. During fiscal 2017, 63% of Apple’s revenue came from international sales.

Maintaining a quality brand image, supported by premium pricing. Although the computer industry is incredibly price competitive, Apple has managed to sustain a competitive edge by focusing on its inimitable value proposition and deliberately keeping a price premium – thus creating an aura of prestige around its products.

Committing to corporate social responsibility and sustainability through supplier relations. Apple’s strict Code of Conduct requires its suppliers to comply with several standards regarding safe working conditions, fair treatment of workers, and environmentally safe manufacturing.

Cultivating a diverse workforce rooted in transparency. Apple believes that diverse teams make innovation possible and is dedicated to incorporating a broad range of perspectives in its workforce. Every year, Apple publishes data showing the representation of women and different race and ethnicity groups across functions.

Note: Developed with Shawnda Lee Duvigneaud

Sources: Apple 10-K, Company website

Apple’s strategy has proven successful, largely due to

Multiple Choice

• competing head-on in the existing technology market.

• Apple’s ability to bring the best user experience to its customers through products and solutions with innovative design, superior ease-of-use and seamless integration across platforms.

• keeping prices competitive with rivals.

• limiting store growth to maintain the “exclusivity” of the brand image.

• being an early mover in essentially creating a distinctive new market segment and using a differentiation strategy to build demand for its brand.

Answer 1

· Apple’s ability to bring the best user experience to its customers through products and solutions with innovative design, superior ease-of-use and seamless integration across platforms.

Over the past few years, Apple has successfully introduced and marketed multiple products by leveraging its software and hardware capabilities, strategically locating its stores in key locations around the world and expanding international operations. At the same time, it invests in many CSR initiatives and develops a strong work force. All these actions have enabled the company to bring the best user experience to its customers. Today, it is one of the most recognized brands in the world and also the world’s most admired company.