Management of Organizational Culture and Structure In Pursuit Of Generics Business Strategy – A Case Study of Apple

Organizational Culture and Strategic management is concerned with the activities of various domain of the organization, which encompasses the creation and management of business strategy, values, and various organizational constitutions. Through proper management of strategy, firms are able to translate its vision and sustain a competitive positioning in the industry. Therefore, strategic management involves the dedication of organizational resources to meet its various challenges associated with its internal and external environment.

With a vision to make great products, Apple Inc. represents one of the most successful organizations in these days. Apple has revolutionized personal computer, computer software and mobile and portable device market through integrating innovation with design and functionality to bring performance and sophisticated user experience and has manifested itself as the most notable iconic designer in the consumer electronic market. Apple has achieved numerous awards for its innovation and design and was Fortune Magazine’s most admirable company several times. Due to this outstanding achievement in innovation and creativity, Apple has become one of the most valuable company with a market value equivalent to US$623 billion by the year 2012 (Heracleous, 2013).

The aim of the current study is to determine what business strategy the organization has adopted in order to achieve this rank and to assess the implications of its business strategy with its corporate culture and structure. The research will also investigate the effects of organizational structure on its communication and decision making processes.

Review of Relevant Literature

Generic Business Strategy

Firms’ profitability depends upon industry structure and the firms’ competitive positioning within the industry. Professor Michel Porter (1985) devised two theories to explain firms’ profitability–i) five forces theory to determine the industry structure or attractiveness and ii) a generic competitive strategy to determine firms’ positioning within the industry. Porter (1985) distinguished three successful generic strategies to outperform competitors in an industry: overall cost leadership, differentiation, and focus.

Overall cost leadership: According to Porter (1985), if a firm can achieve a sustainable cost leadership, it will perform above average in the industry, assuming that the firm has the ability to command an industry average price. In order to achieve an overall cost leadership, firms need to adopt a number of low cost production strategies, such as cheap suppliers, special R&D efforts, appropriate inventory management, enhanced distribution channels, reduced advertising and promotional costs, etc. (Porter, 1985).

Differentiation: Through differentiation, firms create products and services with special values to the customers and position themselves uniquely in the industry. Through successful differentiation, technology firms can gain customers’ loyalty and can command a premium price for the products (Porter, 1985).

Differentiation strategy is peculiar to the industry type and structure, and based on this peculiarity, firms can undertake a product differentiation strategy (such as new features, enhanced values, etc.), a marketing differentiation strategy (such as launching special campaign to target particular class of buyers from a mass market), etc. or a combination of both. Through differentiation strategy, firms can mostly target price insensitive buyers. However, differentiated products are vulnerable to low cost competitors offering similar products. So in order to make differentiation sustainable, strong R&D outcomes, innovation, and creativity are tied with the products so that it becomes difficult to emulate by the competitors (Porter, 1985).

Focus: Focus strategy allows firms to narrow the competitive scope to gain advantages. In this strategy, firms select a segment of the industry that can facilitate them to pursue either a low cost strategy or a differentiation strategy. The selection of one of these strategies solely depends upon the nature of the customers in relation to the product within the segment (Porter, 1985).

Organizational Culture

Organizational culture can be defined as a set of value, assumption, beliefs, artifacts, rituals, and ceremonies that help organizations to accomplish various goals and to coordinate with internal and external environment (Schein, 2010). Deshpande and Farley (1999) recognized four types of corporate culture: consensual, entrepreneurial, bureaucratic, and competitive. This classification of culture is very similar to the widely accepted classification of organizational culture described by Cameron & Quinn (2006): hierarchy culture, clan culture, market culture, and adhocracy culture.

The hierarchy (or bureaucratic) culture: German sociologist Max Weber found seven attributes in bureaucracy culture in government organizations–rules, specialization, meritocracy, hierarchy, separate ownership, impersonality, accountability (Cameron & Quinn, 2006). Cameron & Quinn (2006) determined hierarchy organization as a formalized and structured place to work leading to stable, efficient, highly consistent products and services. Hence, organizations that require efficient, reliable, smooth-flowing and predictable output seem to adopt this culture. Other principle characteristic of hierarchy culture are– clear lines of decision making authority; standardized rules and procedures; and strong control and accountability (Cameron & Quinn, 2006).

The clan culture: The typical values of clan culture are shared goals, cohesion, participation, individuality, and a sense of togetherness. This type of organization is largely managed through employee empowerment, employee commitment, and loyalty. In a clan organization, customers are treated as partners (Cameron & Quinn, 2006).

The market culture: Market culture is the typical to an organization that functions as a market. The foundation of market culture is the strong emphasis on various external constituencies, such as suppliers, customers, contractors, and other market regulators to achieve competitiveness and productivity (Cameron & Quinn, 2006). In a market culture, organizational effectiveness is determined by transaction costs, i.e., exchanges, sales, and contracts, and other market dynamics, instead of internally defined rules and controls. The core values of a market culture oriented organization are competitiveness and productivity which are opposed to the complacent, hierarchy and arrogance observed in a hierarchy organization.

The adhocracy culture: Adhocracy culture represents an organizational culture that is typical to the modern high-tech firms where the organizations have to face the ever challenging and ever changing landscape. The assumption in an adhocracy culture is that the innovation and entrepreneurial initiative is the central to the organizational success or profitability, and the organizational activities are product and service oriented. The organizational configuration is temporary and takes the shape around project and product based structure such as teams, taskforce and committee.

The major characteristics of the adhocracy culture are the absence of organizational chart, lack of centralized power and authority relationship, temporary role of employees, creativity, and innovation. Leadership applied to the adhocracy culture is visionary, innovative and risk oriented, and the power flows from person to person on the need basis.

Formal Organizational Structure

Organizational structure can be determined through both formal and informal contexts. While informal organizational structure relates the social structure of the organization, such as culture, behaviors, interactions and social connections within the organizational context, formal structure can be understood as the abstract form of structure that is comprehended more easily through management structure, hierarchical relationship, leadership type, etc. (Meyer & Rowan, 1977 ).

As organizational structure determines the relationship within various elements of an organization, it has profound impact on the behavior of employees, various organizational units, and the whole organization (DeCanio, Dibble & Amir-Atefi, 2000). Dissanayake & Takahashi (2006) recognized that the development of organizational structure is typically the result of two constructs–i) a “system organization” which is formed through the sharing of perception of their actors and ii) a “structural configuration” based on the first one. Csaszar (2012) noted that organizational structure can be conceptualized as the decision making structure among the people within the organization and argued that this structure substantially affect different initiative taken by the organization.

Chen (2006) noted four different types of leadership style, such as transactional, charismatic, transformational, and servant, and then identified interrelationship between the leadership style and organizational structure. Mintzberg (1989) demonstrated seven forms of organization in the effort to demonstrate organizational structure: entrepreneurial, machine, diversified, professional, innovative, missionary, and political organization.

Research Methodology

The aim of the current research is to assess the business strategy, organizational structure, and culture of Apple Inc. The research evaluated Apple’s business strategy through Porter’s theory of generic business strategy and investigated various cultural elements through the cultural classification (Section 2.2) of Cameron & Quinn (2006). The structural aspects of the organization were analyzed on the light of generally perceived organizational constructs and conventional leadership concepts. Due to the nature of theoretical implications with the research, a qualitative research approach in the form of case study was adopted, which fulfilled the purpose of the research as well as revealed important insights on the subject.

The method of investigation was both descriptive and explanatory (Baxter & Jack, 2008). An explanatory approach was adopted on contextual investigations, where a descriptive approach was taken to document facts and figures (Yin, 2003). Data used in the research was secondary in nature that comprises of case studies, peer reviewed journals, and blog articles collected through internet research.

Results and Discussion

Apple’s Generic Business Strategy

Porter (1985) demonstrated that an organization will be able to sustain profits and perform above average if it adopts a differentiation strategy that can incorporate substantial values for what users are willing to pay a premium price. Apple successfully integrated differentiation strategy through serial innovation with its various product lines (Heracleous, 2013). The organization can successfully command a premium price which is the principle sources of revenue growth, highest profit margin, and substantial market share.

Apple’s Mac computer was the onset of the masterful combination of innovation and design in hardware and software in computer industry. Mac particularly targeted K-12 education, graphic artists, and high-end users, which is a unique indictor to differentiation (Gamble & Marino, 2011). Mac was unique from other computers, and the added values were realized by customer classes who were willing to pay high. The campaign that the Mac computers are immune (relatively) to viruses also attracted creative workers who need a very stable and consistent work environment (Bhatnagar, Gupta & Chauhan, 2012).

The most notable differentiation strategy of Apple’s iPhone was its 3.5 inch scratch resistance gorilla glass display–a unique attribute that carry substantial value for the product (Mickalowski, Mickelson & Keltgen, 2008). But this is one of the many features that the product offered, including the ease of use, simplicity, faster performance, and overall users’ experience.

Apple implemented differentiation in iPad through, among others, incorporating attractive design, introducing its own line of applications, and a built-in App store. Apple introduced focused differentiation by introducing sleeker and lighter second generation iPad. Apple added more value to the third generation iPad through incorporating processing speed. In both cases, Apple targeted high-end customers who are willing to buy the new products with extra price for its added value. Brand image, customer loyalty, etc. served to quickly reach differentiated products to the customers. Mac also gained a boost in sale after the success of iPad and iPhone, which indicates the effect of image and customer loyalty significantly created opportunity for Apple (Porter, 1985; Gamble & Marino, 2011).

Strategic route in differentiation: In order to successfully differentiate a product, firms may adopt extra means, such as outsourcing and strategic partnership (Porter, 1985; Hill & Jones, 2011). Apple successfully utilized both in its operation, for example, conducting high value added functions in California and outsourcing manufacturing activities to the cheapest locations (Heracleous, 2013).

Strategic partnership of Apple with AT&T helped the organization distribute their iPhone quickly first time to the US market (Yoffie & Kim, 2011). Apple also was able to command cost substantially over other players. When Apple launched its first iPhone, the major rival Nokia was selling their N95 at $749 in the US market (Mickalowski, Mickelson & Keltgen, 2008).

Apple’s differentiation strategy in marketing and sells: Porter (1985) argued that organizations can adopt more than one differentiation strategy to successfully pursue the strategy. Apart from great innovation and product design, Apple incorporated differentiation in its marketing strategy. Apple seems to create all sort of marketing buzz and creative marketing ploy before product launch, which adds substantially to the product success (Anderson et al., 2013).

Apple dedicates substantial resources and multiple subsidiaries in marketing and sells. Each retail points are organized with trained employees. In the retail outlets, customers have the opportunity to test and experiment with the products (Wooten, 2010). Apple indeed trained employees to interact creative ways to teach customers about the product, such as through one-on-one or workshop training, so that the customers can enjoy the best buying experience (Wooten, 2010).

The Nature of Apple’s Corporate Culture

Apple has a highly unique organizational culture that serves its vision and innovation. The principle characteristics of Apple’s organizational culture are–innovation, confidentiality, compliance, and self-responsibility.

An innovative culture: Innovation is the cornerstone of a successful differentiation strategy. Apple’s CEO Steve Jobs created an innovative culture that sustains enthusiasm and hard work (Anderson et al., 2013). Jobs and his leadership team put substantial efforts to recruit employees and socialize employees into its innovative culture (Wooten, 2010). The most emphasis Jobs would give was on intelligence and passion. To cultivate true entrepreneurship and innovation, Jobs established “Apple University” that teaches employees the fundamentals of Apple’s corporate DNA and creative culture.

A secretive culture: According to Porter (1985), an organization’s differentiation strategy will be sustainable if the product cannot be easily imitated. In today’s competitive landscape, corporate information is vulnerable to leakage and exploitation. Apple maintains a very secretive culture to protect its intellectual property. Each project or product development initiative takes a team-based structure, where teams work individually, tasks are micromanaged, and one unit is physically separated from other units (Anderson et al., 2013). Apple does not encourage people to discuss projects and share ideas. Instead, ideas are directly incorporated within the products. Team coordinates under the direction of CEO or top executives and on the need basis (Anderson et al., 2013). Despite this secretive nature of the organization, Apple has been able to manage seamless co-ordination of projects through clear direction, self-accountability, and constant feedback.

A culture of responsibility: Another feature of Apple culture is a strong sense of self-responsibility. Jobs would instill responsibility through clear and directive instruction to demonstrate employees’ positions and tasks. The term DRI is an integrated jargon in Apple’s culture which points to the “Directly Responsible Individual”, particularly at the executive level, for various agendas (Barry M. P., 2013).

Employee motivation: The employee perks in Apple are not similar to that of other high-tech companies, and in this regard, employee motivation comes from other sources, which is the product itself. Despite being a big multinational company, employees’ salaries in Apple are not better than the other places (Anderson et al., 2013). Apple believes that a great product development opportunity will retain people who are motivated (Anderson et al., 2013). So, Apple sustains a culture with people having some kind of passion for the organization. Nonetheless, employees are able to choose a customizable benefit package to suit their individual needs under the program called FlexBenefits (Anderson et al., 2013).

Apple’s Formal Organizational Structure

The structure has profound impact on an organizational management. Apple has a very unique and flat organizational structure. Before returning of Jobs in Apple (in 1997), the organization maintained a large number of middle managers. Jobs fired 4000 middle managers and rebuilt a flat structure composed of only the executive team and vice presidents. The executive team would directly pass Jobs decisions onto the employees (Anderson et al., 2013). This would facilitate direct and more personal level interactions. This flat organizational structure and considerable authority to the executive team successfully managed a large organization with approximately 60,000 full time employees along with 364 retail outlets situated in fifteen countries (Anon, n. d.).

Organizational Communication and Decision Making in Apple

Organizational communication and decision making is very unique in Apple. Apple’s flat organizational structure typically serves to reduce the layers of bureaucracy and creates a fast paced and collaborative environment (Sawayda, 2011; Anderson et al., 2013).

Before Jobs’ returning to Apple, the projects were discussed openly. Jobs created a patchy, segmented and team-based structure where team interactions were absent. Despite this secretive nature in its culture, the flat organizational structure increases communication and faster implementation of decisions (Heracleous, 2013). The co-ordination is done on need basis with the direct supervision of CEO and the executive team (Anderson et al., 2013).

Apple conducts a series of weekly meetings, which is the central strength of its organizational communication. The purpose of the meetings is to bring clarity, unity, and simplicity of the message, keep everyone at the same page, and to set the right tone for its upcoming journey (Barry, 2013).

Decision making at Apple is very unique and unusual. During the time of Steve Jobs, most decision would come from Jobs without any analysis, focus group or thorough consultations (Morrison, 2009). This style of decision making imply the fact of authoritative rather than autocratic, which was one of the Jobs leadership skills who had exceptional ability to provide clear and powerful message (Chaffin, n. d.). In many cases, Jobs would directly interact with the employees.

Conclusion

In the core of Apple’s success, there remains innovation, performance, and reliability, where a combination of differentiation in product design, marketing and customer services has been adopted. Apparently, two most important factors driving these successes–Jobs’ leadership skills, and the right set of people. Organizations’ culture and structure have profound impacts on people and their behavior, which is important for the success of any business strategy. The successful composition of various structural and cultural components in organizations is achieved through appropriate directions and a competent leadership. The paper discussed how leadership of Jobs applied to simplify the organizational structure and processes, such as to enhance communication and decision making.

From the study of this paper, it can be concluded that the organizational culture of Apple is that of adhocracy category where all challenges and tasks circle around the product success. This product oriented culture can be attributed to the reflection of Jobs’ leadership vision to make great products that customers will fall in love with, which is a significant proposition for its differentiation strategy. Jobs successfully diffused his passion and motivation in Apple’s culture and instilled accountability, self-responsibility, innovation, and creativity. To sustain innovation and entrepreneurship, which is the central to an adhocracy culture, Jobs surrounded his workplace with creative people through recruiting right talent and rewarding the creativity.

Adhocracy organizations lack of centralized power and authority relationship, which may apparently seem contradictory in Apple’s case. However, it is notable that Jobs reduced the bureaucracy of the organization to support a more flattened organization where authority can do more interactions on the need basis. Jobs’ visionary, innovative and risk-oriented leadership style is the perfect match to that of an adhocracy organization culture. Apple’s project or product based business units and team oriented structure also reflect the nature of the adhocracy culture.

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