Unlocking Productivity and Sustained Success

Introduction

Strategic management is one crucial and often overlooked aspects of a business which in most cases results to stagnation of businesses or potential losses especially for some of its products that may not be adequately managed. An organization should not only make sure that its business is growing and making profit, but it should also ensure that it is the best possible owner of every business unit within the company and that each of the units its holds is productive in terms of sales and revenue consistently. According to Gluck, Kaufman and Walleck (2000) the factors that influence strategic management of one company in comparison to its counterparts and competitors goes beyond the level of technology available for the company and how sophisticated their planning is into how adequately and thoroughly decisions are made considering the strategic planning.

Different products within an organization will often perform differently in the market based on the specific strategic management and decision making behind the products. If not adequately monitored, one product in a company’s portfolio may be dominant over the others leading to the narrowing of the organizations inventory line. As such businesses need to adopt a well-understood conceptual framework that sorts out the many interrelated strategic issues on different products. Gluck, Kaufman and Walleck (2000) assert that the adopted management framework should be defined by future strategic goals and issues rather than the current organization structure available within the company. The strategic goals in conjunction with adequate strategic thinking capabilities that is widespread across the company rather than just the top management leads to the realization of productivity and success for all the company’s products. Further the adopted management framework should also have a performance review system and a motivational system and management values that promotes and rewards the exercise of strategic thinking. This essay looks to analyze Apple’s Product management strategies considering an established market-activated corporate strategy (MACS) to determine their performance as well as the management challenges faced by the firm and that impact minimized performance and value extraction.

Literature Review

The MACS corporate strategy was solely developed from other product management frameworks including the BCG growth share matrix and the old nine box matrix. According to the MBA Knowledge Base (2020), various limiting factors of the previous models such as BCG Matrix only considering two factors regardless of the many others that hugely impact product profitability led to the development of the upgraded old-nine box matrix. The old-nine box matrix developed by McKinsey and popularized in the 1970s on the other hand focused on product attractiveness and competitive strength within the products industry. The framework accounted for the competitive position of a particular business unit in each industry on one axis and the business units’ attractiveness to the industry on the other (Gluck, Kaufman and Walleck, 2000) thereby reducing the business units’ value creation potential to a single chart that can be easily understood by all personnel within the company. Stuckey and McLeod (2010), however, highlight that the nine-box matrix was only applicable to product markets and offered no benefits for companies looking to gain corporate control of their products within the market. This set back is what ultimately led to the development of the analytical tool referred to as the market activated corporate strategy (MACS) framework.

Market-Activated Corporate Strategy

Based on MBA Knowledge Base (2020) the MACS framework represents a strategy that allows companies and organizations a systematic approach towards deciding which business units or products to prioritize over others and which ones to sell. It offers a way for the organizations to be able to decide whether to sell or keep a business unit in addition to which business units among its competitors it can buy and adequately mange for increased profitability. This framework is critical for multi-product companies, especially those looking to expand their product portfolio as a way for growing and advancing their business. While the most relevant considerations for such an undertaking includes the products competitiveness within its industry alongside the overall attractiveness and viability of the industry within which the product competes, Gluck, Kaufman and Walleck (2000) assert that the major concern is whether the company holding the business unit can extract the greatest value from the product or whether another business is better placed to maximize on the products value realization.

The main principle advanced by MACS is that an organizations ability to extract value from a given product in comparison to other competing organizations should determine whether they ought to hold on to it or sell the business unit in question. The decision of whether to sell the business unit should not only be decided based on the unit’s value in isolation, rather by the determination that another company is for a given reason more suited to trade profitably with the business unit. The framework as such includes a measure of each products stand-alone value within the industry as previously exhibited by the old nine-box matrix but adds on a measure of the products fitness for sale to other companies making is unique and more useful for larger corporations than its predecessors (Gluck, Kaufman and Walleck, 2000).

The MACS Framework - Source: Gluck, Kaufman and Walleck (2000)

Dimensions of the MACS framework

Within the MACS framework the previous old nine-box frameworks axes measuring the competitive abilities of a business unit and its attractiveness within the industry have been integrated into a single x-axis currently representing the business units’ potential for creating value as a standalone enterprise (MBA Knowledge Base, 2020). On the other hand, the y-axis now represents the parents’ company’s ability, relative to other potential owners, to extract maximum value from the business unit. This second measure is what makes MACS a unique framework and one that is necessary for strategic product management among companies with multiple product portfolios. Gluck, Kaufman and Walleck (2000) advances that through representing the different products within an organization portfolio as bubbles within the framework, with their radii showing proportionality to resources used in their development, their proportion of sales and the value addition derived from them, managers and organizations can adequately plan on which business units to sell out and which ones to acquire within their respective industries and markets.

Horizontal Dimension

The frameworks horizontal dimension indicates a business unit’s potential value as a standalone business that is managed adequately and effectively. While this measure may be qualitative in certain instances, when precision is needed its quantitative value can be calculated by determining the business units Net Present Value (NPV) and scaling the value with factors including the resources employed in its development, its sales revenue and the value addition it realizes the company. According to Gluck, Kaufman and Walleck (2000) the units’ potential value is dependent on three basic factors including the industrial attractiveness of the industry within which the business unit is run, the position of the business unit within the industry and the possible chance of increasing the units’ competitiveness within the industry or improving the overall attractiveness of the industry within which the business unit is run.

Vertical Dimension

The frameworks vertical axis on the other hand measures the parent organization’s ability to extract value from the business units relative to other potential owners. Gluck, Kaufman and Walleck (2000) highlights two classifications of the parent company within the axis, including as a ‘natural owner’ if it is the only company adequately suited to develop and sell the business unit profitably and as ‘in the pack’ if it is less suited to manage the business unit and extract maximum value compared to other available companies. The vertical axis indicates explicit requirements for organization performance to be able to extract more value from the business unit that anyone else. A wide range of factors are considered when determining whether the parent organization is uniquely suited to manage and extract maximum value from a business unit in comparison to other companies. These may include its unique vision for the business unit’s future, its adequate internal management strategies that optimizes production and maximizes sales and revenue or even its access to ready resources required for the development and production of the business unit (Gluck, Kaufman and Walleck, 2000). Other financial and technical such as taxation, differing valuation techniques and owners’ incentives may also significantly impact the vertical dimension of the MACS framework.

Once an organization’s business units have been identified and plotted within the MACS framework, the framework indicates significant strategic prescriptions that can assist a company in adequate strategic decision making regarding its products and their ultimate profitability and value for the company. The framework can indicate which business units to divest especially when they show more worth for some other company. It also indicates which business units to maintain and invest regardless of their current performance due to the potential for deriving more value from them in comparison to other companies. The matrix will also help organization decision making on which products to give more priority because of poor current performance and a potential for increased value if internal adjustments and developments are made.

Application of the MACS Strategy for Apple

The MACS strategy can be adopted by managers across all types of businesses to evaluate the performance of their business portfolio and to aid strategic decision making regarding which products business units to offload and which ones to enhance development on due to the potential for creating more value for the organization.

Apple is a multinational digital technology company headquartered in Cupertino, California in the United States. Based on Pearce (2015) the company operates both Business to business (B2B) and business to customer (B2C) models, directly transacting with its customers as well as accredited wholesale and retail stores across the world. Reuters (2019) ranks the company among the top 4 biggest technology companies in the world alongside Amazon, Face book and Google offering electronic communication devices, mobile connectivity, computers, iPads, and digital music players. In addition to these products, the company also offers digital services such as cloud computing and services, online network supply and connections as well as virtual reality modeling and exploration (Rowland, 2019). The framework will be used herein to evaluate the three distinct products offered by Apple Inc. including the iPhone, iPad, and the Mac

iPhone

The iPhone is Apple’s flagship product that was first launched into the market in 2007. The mobile smart phone utilizes Apples unique operating system in the iOS which is the most unique and differentiating factor of the iPhone and other apple products making them significantly adequate for management by the parent company (Nellis, 2021). Despite the industry having multiple smartphones companies that produce different types of smartphones, some of which are adequately cheap and more accessible than iPhones, the product has maintained a relatively high level of revenue since its inception and has continuously increased the number of sales over the years making it an adequately valuable business unit for Apple. Curry (2021) further advances that since its development, the iPhone has been Apples main source of revenue and is responsible for more than 50% of the company’s revenue despite their diversified portfolio including watches, laptops and other internet services. Curry (2021) highlights Apples iPhone revenue statistics across the world indicating a continuous increase of sales by the company over the last 3 years. In 2017, Apple launched three iPhone: iPhone XR; iPhone XS; iPhone XS Max. Tables below indicate price comparison between 2018 and 2020. In 2018, the cheapest iPhone (XR 64GB) retailed for $749, dropping to $599 in 2019, and then increasing to $729 (iPhone 12 mini) in 2020.

iPhone 2018 release with prices ranges

iPhone 2019 release comparison

iPhone 2020 release comparison

Over the same period, the price of its high end phone (Max series) fell $50 from $1,449 in 2018 and 2019 to $1,399 in 2020.

While 2020 saw a lower number of unit sold at 196.9 million compared to its 2018 which was 217.7 million units possibly due to the impact of the Covid-19 pandemic. However, the company saw its revenue jump to $274.3 billion from $265.4 billion despite drop in sales. This is due to change in its phones line-up and pricing strategy. The price of iPhone 12 Pro 128GB retailed at the same range as iPhone 11 Pro 64GB and iPhone XS.

IPhone can as such be classified within the MACS framework as a high value unit especially in the hands of its natural owner given the uniqueness of its operating system and the significant success in sales and revenue for the product over the years. Further according to the smartphones market share highlighted by Dea (2021) iPhones makes up an average of 15% of the world market share for smartphones making it a significantly valuable product for the company.

iPad

Another of Apples major products and business units is the iPad developed and launched into the market in 2010. Despite the products uniqueness given that it also uses a unique Apple developed operating system compared to other pads by different competitor companies the product has showed a steady decline in sales since its peak revenue year in 2013 when it sold 73.9 million units (Esposito, 2021). Since then, the products sales have gradually but surely declined only managing 45.5 million units in 2020 (Nations, 2021). This is despite the companies rebranding and potential upgrade made to affect a boost in its sales. In 2019, just prior the covid-19 pandemic, the iPads hit their lowest unit sold in the past three years managing only 40 million units.

The increase post COVID-19 pandemic is attribute to overall recovery in the market and the product management strategies adopted by Apple to enhance its quality and affordability. According to Apple Insider (2021), the recent surge in revenue can be attributed to the combination of brilliant iPad upgrades in iPad Air and the super affordable 8th generation iPad. While in comparison to the iPhone, the iPad is a clearly a less valuable business unit, its recent resurgence because of the significant upgrades made by the company to boost its sales shows a potential for management activities that can impact an increased value extraction from the product. Comparatively, the sold units and revenue aligned with strategizing iPad features. The change from conventional 32/128GB to 64/256GB saw a fall sold units and revenue the increasing once it reverted to its traditional features in 2020.

The uniqueness of the products especially when you consider the iPads operating system and design which is different from what all other iPad producing company are making means the iPad is adequately suited to be handled by the natural owner, however in consideration of the declining performance of the product, a radical shift in the business unit management strategy may go a long way in making it more valuable and increase its sales and impact within the market. Within the MACS framework, as such the iPad falls in the middle box of the business Units value creation potential as well as between natural ownership and one for the pack on the parent company’s ability to extract value axis.

MacBook

Despite Apples shift from the personal computer and laptop market to the smartphones market to attract more customers and develop increased sales, the company has retained Mac as a major product for the company. Within the Mac category, the product management in the company has maintained a core set of products which are quite popular across abroad spectrum of the company’s professional customers including MacBook Pro, MacBook Air, Mac Pro and iMac (Curry, 2021). In term of pricing and sizing, new MacBook Air starting price (8GB, 128GB, and 13.3in) was $1,199 in 2018 changing to $1299 with upgraded internals (256GB storage) in 2020. While MacBook Pro touchscreen versions sold for $2,399 in 2018, in 2019 the maxed in spec MacBook went for up to $4,699 owing to upgradable features. The remodeled 2020 versions of MacBook featuring M1 chips sold at starting $1,299 (8GB, 256GB, for 13in) and $2,299 for a maxed 16GB RAM and 2TB SSD storage. Increased sold units between 2020 and 17.5 is largely due to the changes in its features making it more powerful but with reduced prices. The drop in 2019 sold units and revenue is owed to having little improvement in features and small drop in pricing.

However, over the past year, the sales for Apple Mac computers have reached their peak of 9.18 million units in the 4th quarter of 2021 since development, showing a significant improvement of the Mac as a business Unit. Miller (2021) asserts that this surge in sale can be attributed to the increasing demand for M1 MacBook Air a recent development of the company in the Mac product line.

Having been one of the company’s original products for which the company has remained active with despite the development of newer more successful business units in the iPhone and Mac, the Mac holds a significant value for the company and recent sales show that the company is indeed capable of creating and extracting more value from the product overtime especially with significant product management upgrades. The product is also one of the company’s initial designs with a completely different operating system to all other personal computer companies such as Samsung and Dell. This makes the natural owner the best company to handle the product and derive maximum value from it.

Findings and Recommendations

All the three products by Apple are significantly unique especially when one considers their operating systems which are completely different from what other companies produce and use in their devices. This means that the products regardless of their level of development or sales performance can only be best managed by the natural owners who are Apple. Other companies will need additional resources and a divulgence of Apples operating system design which are critical business secrets and significant for the company’s competitive advantage. However, when it comes to value creation, the iPhone is a way more valuable business unit compared to the Mac and iPad. The Mac is more valuable relative to the iPad making the iPad the least valuable business unit out of the three. In the three years analyzed, the company has driven by continuous improvement towards having better and best features in the market. It has stratified its pricing of its products to attract consumer base.

Despite the relative value of the three business units however, all three of them bring in significant revenue into the company and are in fact not operating at any losses. The sales revenue of all the three products have shown a potential increase in the last year post pandemic and while this can be attributed in part to the reopening of the economy after the pandemic, a big part of the increased revenue is due to the changes in management strategies adopted by Apple in the past year for all the three products. It is therefore recommended that the company retains all the three products as they are in the best position to extract the most value out of them. In addition, switching and using different strategies as has already been demonstrated in 2021 by all the three products will have a significant impact in increasing their overall value and increasing their sales revenue for the ultimate increase in productivity for Apple.

The MACS framework provides a significant tool for big companies with multiple business units enabling them to effectively evaluate the performance of each of their units and determine which ones are performing as required as well as those that could benefit more from new owners. Based on the framework, Apple retains a unique position in being able to manage and create value out of their own products and as such none of their business units can be sold to any other companies. In addition to the unique operating system, all the three products by the company are performing well when it comes to sales and showing significant improvements that can be long lasting for a continued increase in productivity for Apple.

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References

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