1.0 Introduction
Apple Inc. is an American technology company that was founded in 1976. The company’s headquarters are located in Cupertino, in the state of California. Apple Inc. mostly deals with designing, development and selling of consumer electronics, online services and computer software(Linzmayer, 1999). From the history of the company, there is an emerging trend that shows a company that has evolved to become the business leader that it is today. In early 1980s, the company was one of the most profitable startup companies of the era. This would change in late 80s the when the company slowed down. In a change of tact, one of the co-founders rejoined the board as the company’s CEO in mid 1990s. From then onwards the company has been making significant strides that has made it to revolutionize computing and mobile phone industry. The significant growth of Apple in its second phase of life, that is from mid 1990s and the third phase that is from late 2000s up to now can be pegged to its identification of core competencies(West & Mace, 2007). According to Prahalad & Hamel (2006) Core competencies are a set of skills or a combination of resources that an organization has and can use to gain advantage over competition. They aim at coordinating diverse production skills and integrating multiple technologies. Core competencies fulfil the following three functions; they provide potential access to a wide variety of market for the products that a company deal in. They should directly make significant contribution to the value that a customer perceives the brand to have. They cannot be easily copied by competitors. This paper closely examines Apple Inc.’s core competencies and how it has used them to gain market leadership.
2.0 Apple’s Core Competencies
Prahalad and Hamel (2006) offered three key tests that a feature should be subjected to in order to determine whether the feature is a core competency. These tests are; relevance, the competency should be able to give the customer something that strongly influences them to choose your company’s products or services. The other test is that it should be hard to be imitated by competitors. Third criteria is the breadth of the applying the feature where it should be able to open a big number of potential market that can sustain significant growth (Linzmayer, 1999). Based on the above discussion it is evident that apples core competencies are its design concept, hardware software integration and customer satisfaction
2.1 Apple design concept
Apple’s design concept has been attributed to the cofounder Steve Jobs. Jobs was a stickler to details who had a passion for sharply designed products. As a founder and CEO of Apple Jobs pushed for designs that had a distinctive touch – clean, fun and friendly – which became the hallmark of all products under Jobs (Isaacson, 2012). The design concept of Apple gives the company relevance and make many customers globally to want to own Apple products. It is also very hard to be imitated by competitors. Apple has been characterized by aggressively protecting its intellectual properties such as its trademark, its patents and copyright. This repute of protecting its intellectual property has been rightfully dubbed as the IP strategy – one such example was the company’s decision to ban the cloned versions of its computers (Galasso, 2014).
The design concept also allows the technology that is employed to appeal to a global customer base, therefore qualifying the concept as a core competency. The guiding principle of Apple’s design concept was simplicity and not just the shallow simplicity that comes from uncluttered look and surface feel of a product but a richer one. Simplicity that is borne of knowing the essence of every product, the intricacies of its engineering and the function of every component (Linzmayer, 1999). In designing the Macintosh, Steve Jobs had the metaphor of the desktop where he was of the opinion that people in an office set-up had an intuition of the desktop. “When you walk to such an office,” He would say, “You are likely to be met by many papers on the desk. The paper on top of the desk is the most important” (Isaacson, 2012). The graphical user interface that would be embedded in the Macintosh would have such simplicity so that it would leveraging on an experience that people already had. In the original design of the Macintosh, Jobs worked with two designers at Apple who drafted the preliminary design.
2.2 Apple’s software and hardware Integration
Apple computers and their electronic gadgets such as the Macs, iPads and iPhones have a repute of being good performers. They are therefore mostly used by designers, engineers and other specialists who desire to have products that deliver a flawless experience due to their operating system (West & Mace, 2007). This feature of Apple products is a core competence as all Apple products run on the company’s iOS which is developed and maintained by the company. This makes sure that the company has control on the features and capabilities of their hardware. The iOS software is protected by copyright making it not possible for competitors to copy without legal and financial ramifications. Today, most of Apple’s computers are expandable, more so those that are aimed at professional users. Computers on the higher end of the Apple range are made in such a manner as to have several expansion slots (Kahney, 2012). Because of the programming tools and certification programs in the company that require rigorous testing, software drivers are much efficient on both Macs and Windows computers. However, Macs have enjoyed a better reputation on their performance and stability than computers running on the Windows operating system. The internal components of most computers today are also almost if not identical from the different manufacturers (Galasso, 2014). The operating system is a core competence because it has breath of applications that rely on the operating systems and these applications have large number of users that depend on them. For instance, iTunes is a very popular application that run on Apple’s operating system and it means that users of and lovers of iTunes are likely to be customers of Mac and iOS devices due to the wide range of applications supported by Apple’s operating system and computing devices (Khan et al., 2015).
2.3 Apple’s customer satisfaction as a core competence
Apple has been able to turn their customer experience into a core competence. They have done this by building one of the most expensive and memorable customer experience that one can expect. This is expensive to copy for businesses that are not as profitable as Apple. As noted by Meyer and Schwager (2007), a customer’s experience with an Apple device starts way before the purchaser turns the device on. This is in the form of the dancing silhouettes in the TV ads that the company runs for promoting its iPod(Gallo, 2015). Apple’s success as a retailer of mobile devices and computing gadgets can be pegged to the company’s realization that building relationships is the key to great business. When a customer walks into an Apple Store is met with a team that is hired, trained and taught how to engage the brand’s consumers. As per the Ritz Carlton Steps of service that the company relies on Gallo (2015), an Apple employee is required to approach customers with a personalized welcome. They are also required to probe politely so as to understand the customer’s problems. This kind of customer service is not only difficult to imitate but it also relevant with consumers. The employees are also trained to listen to and offer solutions where they can. Finally, they should part with a fond good bye and invite to come back in case of a need. This customer experience requires large number of employees, finance and customer care assistance capabilities which most company find hard to employ and train. Therefore, this customer experience gives the company a core competence that is relevant and hard to replicate and can be applied in the market (Galasso, 2014). Also the customer service has breath of application because it can be applied in all the company’s stores and attract large number of customers to visit Apple stores locations.
3.0 Inside out approach to strategy formulation
An Inside-out strategy is a corporate strategy that aims at using core competencies of the company to drive changes in an organization rather than relying on external forces such as competition, market forces and customer preferences (Summers and Scherpereel, 2008). This strategy is built on the basis of that managers and thought leaders are in better position to steer the business if they rely on inner competencies of the business rather than when they are pushed by all the blowing forces that are out of their influence.
3.1 Merits of inside out strategy
The advantage of this approach is that it gives room for introspection that can make a company discover latent possibilities and opportunities to exploit on (Godfrey, 2015). It also leads to development of better products or services as it is not built on focusing what competitors are doing. Businesses aiming at utilizing this strategy are mostly those that cannot benefit from copying what competitors are doing. These evolving unique experiences, contacts and assets are also referred to as asymmetries (Martin, 2014). The challenge with these asymmetries is that in most cases they are concealed, of apparent little use and appear as they are unconnected to the processes of value creation. One living testimony to the efficacy of this strategy is the recovery of Citi Bank in the 1990s. Year 1991 was the bleakest for Citibank (currently Citicorp) as its stock had greatly dipped thanks to a conflation of issues such as non-performing Latin loans that had been taken over by other banks. Though the bank had operations in more than 100 countries, the position of the banks was very weak as local rivals had better ties with local governments and were therefore efficient in gobbling up Citi revenues and eroding its margins(Miller et al., 2002). The bank CEO, Jim Reeds found himself in a precarious situation that needed him to make some choices that were not too good for the company. He would choose to either enter in lucrative markets such as those in Germany or Japan or end up copying rivals like Deutsche Bank. The other option was for him to negotiate and build better relationships with local businesses. Citi bank realized that either of these two strategies would always put the bank at a disadvantage against its rivals who had better government backing and support of local industries. This was a quandary that even today confront businesses (Mitchell, 2014).
To escape this quandary, Citibank deployed the inside-out strategy. Rather than emulating and copying competitors, they delved deeper into themselves to identify and build on their best unique, hard-to-copy assets relationships, experiences and knowledge (Godfrey, 2015). Reed keen on utilizing their unique capabilities first realized that Multinational corporations that were operating in the different countries were not properly served by the local banks. He also realized that the global network and reach that Citibank had, none of the competitors had the capacity to replicate it. Using this information, the Citibank was able to position itself to these MNCs as their banker of choice. Not that banking the MNCs was more lucrative but Reed saw that by restructuring the bank by redesigning the organization, streamlining processes and performance management processes he could make a network that would be more responsive to MNCs (Mooney, 2007). Finally, Reed was able to envision how the international banking network could be organized so that it would serve large clients that were doing extensive and lucrative cross boundary business. By employing the inside-out strategy Citibank was able to identify the asymmetries that it had that gave it the competitive edge over other competitors who would have been more difficult to dislodge from their deeply entrenched positions. This illustrates the need for managers who have the intuition to know which strategy to use and when (Irvin, Pedro and Gennaro, 2003).
Key lesson that comes from Citibank’s restructuring and adoption of the inside out strategy is underscoring the fact that competitive advantage in this strategy does not come from imitation but from deploying organizational processes and designs that identify asymmetries that the organization has and build them into capabilities (Eisenstat et al., 2001). These asymmetries have to be hard-to-copy as they make it possible for the organization to have ways that it differs from competitors. Asymmetries may also consist of outputs, relationships and alliances, systems, processes, routines, skills and knowledge provided that rivals cannot imitate them within practical time and cost constraints. The other advantage of asymmetries is their accessibility. Due to what Miller, Eisenstat, & Foote (2002) call accidents of history, and the normal variations in the skills of organizations many companies naturally have asymmetries. Capabilities and best practices of other organizations might be hand to imitate making it easier for managers to hunt for asymmetries in their own backyards.
3.2 Limitations of inside out strategy
The limitation of this strategy though is that configurations and asymmetries that provide the competitive edge are hard to identify and exploit. This well captured in the expression that asymmetries are like personality attributes that can be of gain or loss to the individual (Miller et al., 2002). The problem with asymmetries is that they are neither resources nor core competencies(Miller et al., 2002). They can be mostly likened to personal attributes such as aggressiveness or shyness which can either be an advantage or disadvantage to a person. But when asymmetries are carefully fostered and directed they might come to underlie the most important capabilities that an organization has. This means that companies have to keep on identifying and building on asymmetries so that they can attain sustainable advantage (Yrjola et al., 2018).
For a company to do well, it has to develop certain capabilities or resources that their rivals cannot replicate. However, this is not usually possible unless a company has some realized or potential advantage (Godfrey, 2015). Asymmetries usually arise as a result of vagaries of corporate history as evidenced by the Citibank case. They can also be made from long-term contracts and company’s patents that have been consciously created. Asymmetries provide advantage by the fact that they cannot be imitated by competitors. The imitability of an asymmetry can be provided by legal barriers as it happens with patents, but in most cases asymmetries are as a result of subtle and interrelated attributes that arise over a significant period of time (Wansink, 2016). Because of these reasons the search for asymmetries demands for a thorough and persistent inquiry within the operations of an organization. There must be an understanding of how a particular firm differs with its competitors on the different levels of its operations (Ozeritskaya, 2014). The search should also provide insights into how the discovery of the asymmetries will generate the resources or capabilities that will bring advantage.
The other major weakness of the inside out is that is obsessed with the internal capabilities in such a way that the company can forget about the external environment and the implications that they have on the company (Mooney, 2007). Some of the external factors such as political factors and economic factors can negatively affect the company’s capabilities. According to Mantere & Sillince (2007) having capability and core competence in an area or industry does not diminish the place of external environment especially industry factors influencing the company’s strategy especially when the factor instigates disruptive change. For instance, companies such as Kodak were unable to innovate and overcome due to their focus on capabilities that they thought were inimitable and relevant in the photo making industry. Therefore, inside out approach can turn out to be detrimental for companies that do not like observe the external environment and respond to those changes (Yrjola, et al., 2018).
4.0 Conclusion
The inside-out business strategy is a very important concept more so for business owners or managers who find themselves in unique situations. This is because the strategy works by focusing on things that a business can do by focusing on the asymmetries that it has that can be deployed for gaining advantage over competitors. However, a key point to be noted is that these asymmetries that are the source of advantages are usually not strengths. Unlike resources, asymmetries can be either be the undoing of the business or the source of rekindling the performance of the business. They are like personality traits that such as aggressiveness that can make someone be loathed in certain circumstances and also be feted as a hero in another situation. A point that was well elaborated in the paper is that when companies do not have a draft on how to go about their businesses because of being in unique circumstances, that is the best time to leverage on asymmetries. These different and unique circumstances can be as a result of major shifts in business due to policy adoption or political processes such as the exit of a country from an economic block or entry of new competitors. The tough part in this strategy is in identifying the asymmetries and knowing how to use them to gain competitive advantage.
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