The secret sauce behind Apple’s success

One can only think that Apple has some form of Disney-esque spell placed on it by its innovative godfathers, aka the creative CEOs that have been at its helm both past and present. After all, recent research found that Apple is possibly one of the most valuable brands today, “having gathered the highest accumulation of cash and liquid reserves of any listed company”.

Despite suggestions that said magic would eventually fizzle out after the loss of Steve Jobs, Apple has proved its mettle, with research from Loizos Heracleous,professor of strategy at WarwickBusiness School, citing that Apple’s magic is set to last.

But how does the company do it? Apple has obviously achieved something of a holy grail in terms of strategy and the question worth asking is how – something that Heracleous’ research generously delves into.

He suggests that the company pursues a strategy that is both rare and incredibly difficult for competitors to imitate.

“I call it Quantum Strategy, after the idea that at the quantum level of reality, the same electron can be at two places at the same time, and two different electrons can occupy the very same physical space, both seeming logical and natural impossibilities, which nevertheless do occur,” he said.

Essentially, Apple’s quarterly profits are the result of the company’s competitive advantages; namely great, and often addictive, design, innovation (both incremental in terms of product improvements, as well as periodically radical when a groundbreaking product comes to market), and intense efficiency.

He also suggests that the company’s new growth spurt is due to “Apple’s entry to China. The upside potential in revenues from this market is very significant. At the same time, economies of scale and scope led to even greater efficiencies. Combined with a higher selling price for the iPhones, operating profits are up to nearly 40 per cent of revenues – unprecedented in consumer electronics.

“Even though iPad sales are falling, overall, the product portfolio of Apple is balanced in terms of stages of the product life cycle. The strategic implications of ApplePay have not been appreciated by most people. Not only is the revenue potential huge, with Apple’s offering already benefiting from the existing market penetration of its devices; margins are also very healthy and the service has synergies with the iPhone and the iWatch, helping to solidify Apple’s strategy of building and controlling a product and service ecosystem. Similarly, the iWatch will provide a further boost in growth and will buttress the ecosystem when it comes to market.

“Apple’s strategy displays related diversification. Those who argue that its success is down to a single product do not appreciate the considerable synergies across Apple’s products and services, nor the continued development and strengthening of Apple’s ecosystem.”

By Shané Schutte

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