Apple and Microsoft Companies Organisation Strategies

Introduction

The paper will be assessing the similarities and differences of Apple Inc. and Microsoft Corporation’s strategies in terms of macro-environment, management structure, financial and operation issues, as well as the impact of potential change factors. The firms are competitors in Personal Computers (PCs) and operating systems market within the technology industry. The analysis is critical in the understanding of the manner in which competitive firms are strategically positioned in the market. Moreover, the analysis is critical in understanding the importance of a firm’s strategies, design, and management in enhancing competitive advantage.

Apple Inc. is a publicly listed American company specializing in the production of high technology electronic products, computer hardware, and software (Apple Inc, 2012). Under the electronic hardware category, the firm’s products include personal computers, media devices, mobile communication, and portable-digital music players. In addition to high tech hardware devices, Apple Inc produces a variety of software applications, including third-party digital content applications and networking solutions (Apple Inc, 2012). Within the mobile communications category, the firm has launched into the market a variety of Smartphones, including iPhone and other Android Smartphones, that has significantly hit the world’s Smartphone market.

On the other hand, Microsoft Corporation is a multinational firm majorly producing PCs and operating systems used in both personal computers and mobile phones (Microsoft Corporation, 2010). Besides, the firm produces a wide range of products and services within the technology industry. In addition, the firm is a close competitor of Apple in the operating system and personal computers product lines (Microsoft Corporation, 2010).

Management Structure

The management structure of the organization is critical in enhancing performance and productivity. In other words, the structure determines the manner in which the firm relates with employees as well as other stakeholders, which is critical in enhancing performance and productivity (Rothaermel, 2012). The structural design also has a direct relationship to increased efficiency and effectiveness in productivity as well as other firms’ operations (Thompson & Martin, 2010).

Apple has adopted simple management structure, which forms the core of its business strategy. In other words, the firm has adopted simple vertical structure and horizontal design that enhances the decision-making process (Bajarin, 2011). At the apex of the management structure, there is the board of directors that oversees the daily operations of the firm. The board of directors makes the firm’s critical and important decisions. Essentially, in Apple, the board of directors supervises the operations and Chief Executive officer (CEO). Besides, the board is the highest decision-making organ and is charged with the responsibility of managing the daily operations of the firm by ensuring that the top management team has undertaken their duties and roles (Meyer, 2012). Moreover, the board ensures that the long-term interests of the customers, as well as other shareholders, are served.

The board of directors, being the top management and decision-making organ, are expected to take a practical, focused approach in their managerial responsibilities. In addition, the board of directors is expected to set standards, lead by example, and ensure that the management team is dedicated to business accomplishments by maintaining ethical values and standards (Apple Inc, 2012). In essence, Apple’s management structure is designed to foster standardized procedures, effectual, and decision-making processes as well as suitable monitoring of both acquiescence and increased performance (Bajarin, 2011).

Essentially, Apple’s organizational structure is one of the key determinants of its success (Meyer, 2012). The structure is oriented horizontally with equal tasks and responsibilities for the management executive. In other words, every level below the CEO has extensive departments equal in authority and power. The meaning is that the organization has a very short vertical structure, which enhances decision-making, compliance and performance (Bertolucci, 2009).

As indicated, Apple’s CEO is answerable to board of directors. The CEO heads eleven executives departments with different roles and responsibilities but equal in terms of authority and power (Apple Inc, 2012). Senior Vice Presidents (VPs) that make independent decisions affecting their area of jurisprudence head the departments. The simple organisation structure has enabled the firm to be the most competitive in the industry (Bajarin, 2011). In other words, the top management relationship with various departments is simple with no complex matrices. However, central decision-making on important aspects of the firm characterise the structure of the firm. The CEO together with the board of directors makes important decisions that affect the firm (Apple Inc, 2012).

While similar structure is observed in Microsoft Corporation, the firm has adopted the elongated vertical management structure, which contributes to the stifled decision-making process (Microsoft Corporation, 2010). In fact, Microsoft has complex management structure divided in functional groups according to the line of products. Each functional group is expected to make independent decisions without consulting the top management. Moreover, the functional group is distinct with Research and Development (R&D) as well as customers and sales service staff (Microsoft Corporation, 2010).

Like all publicly traded firms, the board of directors, which occupies the apex of the corporate structure, makes top management decisions. Besides, the board supervises the CEO and executive managers of various business divisions. However, each business division is expected to make independent decision that affects its operations regarding product development and sales strategies (Microsoft Corporation, 2010). The Corporation is divided into five major business divisions ranging from Client to Entertainment and Devices. In between the continuum are Server and Tools, Online Services Business as well as Microsoft Business Division.

Even though the firm has used the structural design over the years, it has lead to decreased competitiveness particularly in decisions regarding products development that need to be consolidated (Johnson, Scholes & Whittington, 2008). Currently, the firm is undergoing a restructuring process in which the business divisions will be consolidated into a single decision-making organ to facilitate efficiency and effectiveness, which is critical in enhancing competitive advantage of the firm.

Economic Environment

Microsoft Corporation and Apple share a common economic environment. In fact, changes in economic conditions have direct impact on the sales and developments of firms (David, 2009). Microsoft Corporation is one of the firms that are hugely affected by the depressed economic conditions. The current economic situation around the world has a profound effect not only on the Corporation’s products but also on the general production capacity. The recent oscillations in economic situations experienced in America, Europe and Asia has a considerable consequence on the firm’s products in both domestic and international markets (Dan, 2012).

Conversely, Apple’s products are majorly targeting individuals rather than corporations. As such, individual earnings and the level of disposable income determine the sales of the firm’s products (Kahn, 2012). Essentially, Apple’s products are seen as personal luxurious products. Therefore, economic factors such as increased inflation rates and individual income have greater impact on the sales of the firm’s product. While disposable income continue to decline domestically, sales for personal items such as Smartphones has reduced as majority of consumers switched to other essential products (Kahn, 2012).

In particular, the reduction in sales has been experienced in many parts of Europe as well as in many countries around the world. However, this presented an opportunity for the firm to introduce cheaper products in the market. Moreover, in such an economic environment, the firm must increase its capital flow in order to avoid negative effects of the economic shocks (Linzmayer, 2006).

Social Environment

Similarly, the two firms are operating under analogous social environments. However, Microsoft is operating in highly diversified cultural settings. In other words, the firm is working under diverse cultural and social environments, which have greater effects on its operations particularly on its products development (Hess & Coe, 2006). Essentially, Microsoft has to align its developed products to the social need of the customers. The firm has learnt that its products must reflect the social diversity in which the stakeholders particularly the clients belong (Herzog, 2010). The firm’s products are made in such a way that it reflects the cultural diversity in terms of language, ethnicity and faith. The product diversification also reflects the changes that take part in the society, which forms the customer base of the firm. Essentially, the large and diversified population provides the firm with increased opportunities to develop new products. Actually, the firm has to develop diversified products according to the preferences that depend on faith ethnicity and language of the customers (Henry, 2008).

On the other hand, Apples products are majorly focusing on the interactions and communications around the globe. As such, people interaction will affect the manner in which new products are developed and distributed. Essentially, the global exchanges as well as other interactions determine the manner in which the firm operates in the global market. Moreover, the change in the music industry, which has grown into the cyber world, has determined the evolutions in the firm’s products such as iTunes, which is a head of competitors in its product class (Apple Inc, 2012)..

Moreover, the firm’s products are sold in an open cultural environment. In addition, its target market of younger generation pursue vogue and like cultures (Apple Inc, 2012). Their lifestyles are similar in almost all parts of the world. In addition, the firm’s product process designs are simplified to meet the needs of all cultures. Moreover, Apple’s products designs combine simplicity and beauty, the logic that is praised highly in all parts of the world (Apple Inc, 2012). All the personal products that firm has launched into the market has been popular among the younger generation, which has revolutionised the generation cultures. With the current globalisation where there are no cultural boundaries, the firm’s products has been seen as the engine behind the current globalisation.

Besides, the firm’s products designs focuses on the needs and wants of the target market. In other words, younger generation needs gargets that are simple and with wide applicability. For instance, the Apple android Smartphones have achieved that objective. The apple android Smartphone currently released into the market has sophisticated attractive style that has gone beyond the fashion. The firm’s products applicability, design, and style have cut across cultures.

The two firms share similar legal environment that regulate their operations. As indicated, Microsoft is operating across multiple political systems with diverse regulations that affect its operations ranging from the management systems to the marketing of the products and services (Eaton, 2010). Essentially, the operations of the firm are regulated by various legal parameters ranging from accounting and property rights to environmental regulations. Like any other firm, Microsoft needs to operate within reliable regulatory systems to become highly competitive in the market niche. The regulations have to prevent the monopolistic attributes that characterise large firms (Eaton, 2010).

Similarly, Apple is operating in many countries around the world with various legal regulations. Moreover, these countries have their own domestic companies that produce similar products. Commercial regulations are varied ranging from preferential regulations to patent and rights laws (Robbins, DeCenzo & Coulter, 2014). The firm is facing various challenges and legal tussles with many competing companies relating to patent and copyright laws and regulations. The reason explains increased risks for the firm. Besides, most of the products take long time before being introduced in the market because of legalities relating to patent and copyright. The legal procedures and regulations have significantly contributed negatively to the growth of the firm’s market share particularly in big emerging economies such as China and Indonesia.

Financial and Operational Issues

The stocks indices in the last five years show that Apple has greater performance compared with its rivals in the industry (Apple Inc, 2012). The simple moving average index show that Apple‘s stocks have increased 362.25% from 2007 financial year to 2012 financial year. However, Microsoft stocks have decreased by 72.68% in the same period. In addition, on the similar period, the Microsoft return on sales decreased by 1.4% and the market capitalisation further shrunk by 44.71 million (Microsoft Corporation, 2010).

Apples financial performance continues to strengthen in every financial year. The firm is considered third in the PC market with the 12% market share. In the Smartphones market, Apple is the leading with over 29% revenues and market share. Similarly, in the tablet market, the firm is the leading with over 61% in the market share. According to the industry standards, Apple currently has the least Price-to-Earnings (PE) ratio estimated at 4.5 against the industry rate of over 15.7 (Apple Inc, 2012).

The indication is that the firm is less risky compared with other firms in the industry in terms of investments. Moreover, apples current ratio is around 1.6 equal to the industry current ratio and greater compared with S&P 500 index (Apple Inc, 2012). The current ratio indicates that the firm’s assets that can be converted into liquid cash are enough to meet its current undertakings. The firm’s quick ratio, which is approximately 1.5, supports the firm’s strong liquidity. Further, Apple possesses a proportionate equity base and has the ability to mobilise capital to support its product developments and growth (Apple Inc, 2012).

While Apples financial performances show considerable improvements, Microsoft financial indicators show mixed trends in terms of profitability and liquidity. However, on average, Microsoft financial performance has declined compared with that of the industry. The meaning is that Microsoft has below average prospect for future investments. Compared with Apple, Microsoft is more risky for future investments.

Apples effective and efficient management strategies have been central in the product developments innovativeness and superiority in terms of market share. In addition, the firms efficient operations have resulted in increased profitability, higher inventory turnover and strong sales (Kahn, 2012). The increased capabilities in developing new products have enhanced the competitiveness of the firm in the industry. Moreover, the firm has the ability of attracting and retaining the customers through efficient operations and the capability of developing new product lines. Apple is efficient and effective in generating revenues through the applications of its assets with increased turnover rates. Considering the firm pricing strategy, the firm is capable of generating high profit margins compared with Microsoft.

The Impact of Potential Change Factors

The change factors introduced impact differently on the two firms. The differences are attributed to diverse management capabilities, the firms’ competencies, strategies and the expected change outcome. Apple business strategy is anchored in the unique capability to internally design and develop products ranging from operating systems to software applications. In addition, the firm success is based on its capability of developing products and services proficient in delivering solutions to the daily needs of the clients. Moreover, the success of the firm is based on its capability of developing products that are differentiated by increased usage, seamless integration as well as innovativeness in terms of industrial design. Changes in the organisation will majorly focus on these capabilities.

In most cases, the change factors have focused on these competencies and resulted in simple and aesthetic product designs which has generated increased customer interest and satisfaction on the firm’s products. Moreover, in an industry characterised by low profit margins and cost cutting tendencies, the firm’s significant changes focused on the developing radical concepts on products designs that differentiate the firm from competitors. Moreover, most of the changes have resulted in creating diverse and highly differentiated products that have increased the clients’ loyalty and reduced price sensitivity.

While most of the competitors continue to imitate most of the firm’s products, Apple continue to introduce into the market groundbreaking new products with innovative complementary relationships. Apple continues to re-invent itself into new product categories and continuously avoid price wars on mature market segments. In fact, the changes in new products developments are timed perfectly to help the firm attain first mover advantages. Essentially, the firm tends to focus changes on the manner in which people behave rather than on how people compete in the market place. Apple will always utilise its core competencies to attain the required changes.

Conclusion

The management structure of the organisations has come out to be critical in enhancing performance and productivity. In other words, the structure determines the manner in which the firm relates with employees as well as other stakeholders, which is critical in enhancing performance and productivity. The structural design also has direct relationship to increased efficiency and effectiveness in productivity as well as other firms’ operations.

Besides, PESTEL tool has been applied to analyse the macro-environment of the firms. The tool is normally used to analyse the macro-environment in which the firms operate as well as the external factors that may affect its products. The macro-environmental factors include the political, economical, social technological, and legal. In terms of performances, Apple has shown continuous improvements due to suitable management structure, competencies and strategies. On the other hand, Microsoft have to change its mode of management in order to improve its capabilities that would enable it compete effectively in a highly competitive technology market.

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