NOT LONG AFTER Apple became the world’s most valuable company, signs of trouble emerged. Although Apple enforced its intellectual property in a legal dispute with Samsung, it entered into a licensing agreement with HTC, a Taiwanese maker of mobile phones. Some argue that Apple under Steve Jobs’ leadership would never have entered any agreements that would allow direct competitors to benefit from Apple’s proprietary technology. Despite Apple’s courtroom victory against Samsung, Samsung sold more smartphones than Apple in 2012. With its GalaxyS3 model running on Google’s Android system, sales prove that Samsung has a viable competitor against Apple’s iPhone 5. In 2013, Samsung introduced the new Galaxy
S4 model, further intensifying the head-on competition with Apple. Uncharacteristically, Apple botched the product launch for the iPhone 5. The embedded Apple map app was far inferior to Google maps, which was used in earlier versions of the iPhone. Subsequently, Apple’s top management team also experienced sudden turnover, with some of its executives being forced out. In one instance, CEO Tim Cook asked Scott Forstall, vice president of iPhone and iOS Software and a Steve Jobs protégé, to leave after Forstall refused to sign an apology letter to customers for the shortcomings on the iPhone5’s mapping service. The head of Apple’s famed retail operations was also forced out after only six months on the job. After reaching $658 billion in market valuation and becoming the world’s most valuable company, by March 2013 Apple’s share price had dropped more than 45 percent, wiping out close to $290 billion in shareholder value. Clearly, while it is difficult to gain a competitive advantage in the first place, it is that much more difficult to sustain it.
Questions
1. Explain Apple’s success over the last decade. Think about which industries it has disrupted and how. Also take a look at Apple’s main competitors
2. Is Apple’s success attributable to industry effects or firm effects, or a combination of both? Explain.
3. Apply the three-step process for developing a good strategy outlined above (diagnose the competitive challenge, derive a guiding policy, and implement a set of coherent actions) to Apple’s situation today. Which recommendations would you have for Apple to outperform its competitors in the future?
4. Why do you think it is so hard not only to gain but also to sustain a competitive advantage?