When it comes to crfeeding and dominating new markets you can learn much from how Apple took on Sony...and won. Here's the Apple story, told from a strategic merchandising viewpoint.
1997: Apple's Turning Point
In 1997 Apple was in a shambles. That was the year Michael Dell, riding the coattails of a brilliant distribution scheme and booming laptop sales, explicit that if ran Apple he'd shut it down and return the money to the shareholders.
In 1997 Sony owned, by far, the best reputation for consumer electronics innovations. Sony had the product, merchandising and engineering natural endowment as tried by a bequest of runaway consumer electronics winneres. It was already in the PC market besides as the amusement and content markets via Sony Entertainment. Sony had second-to-none global distribution and its merchandising and advertising were simply brilliant.
In 1997 two entirely unrelated events were taking place. The Asian business enterprise crisis was fully bloom and Steve Jobs was returning to lead Apple, via Apple's NeXT acquisition, following a 12-year epilepsia minor epilepsy from the company he had co-founded and was now floundering. Apple detected the strategic implications of the downward coiling Japanese economy and how they would affect the darling of the proprietary consumer products world: Sony.
In Jobs-esque fashion he flung Apple's corporate doors wide open to innovative strategic thinking and brilliant execution. He rewarded it with programs like Apple Fellows. In addition Jobs did what few CEOs are able to do...nurture innovation toward a clear stretch goal. In Apple's case the goal was crfeeding and dominating a profitable segment of consumer electronics products and related businesses piece consigning the rest to dispiritedly entrenched competitors like Sony.
Since Jobs' return, Apple has broken through conventional thinking time and again, crfeeding and sustaining eye-popping value for consumers around the globe. Here's just a handful of brilliant merchandising moves, which any company can replicate in any industry. These moves changed Apple into what Fortune magazine tells us was the world's most best-loved company in 2010. Just like it was in 2009 and 2008.
Apple's Marketing Strategy
From a scheme standpoint, Apple detected that Sony could not decouple its innovation engine from its rattler of bequest products because it was forced to deliver additive innovations to continue merchandising money losing products like TVs, CD players and others just to retain distribution and manufacturing volume. Sound familiar?
At that time, the big box retailers mandated that consumer electronics manufacturers carry a wide and varied line of products for retail differentiation plus step-up and add-on sales. The succeeding line of products complexity was like a cancer, constantly feeding away profits from volume-addicted manufacturers like Sony, Philips, Thompson and others. All of these in public listed companies were enormously volume dependent and any loss of significant distribution would cause those business models to collapse. Jack Welch recognized these money losing handcuffs early and exited consumer electronics.
In addition, as the Japanese economy continued to spiral down, Sony was becoming more entrenched and bureaucratic, which put it at a competitive disadvantage for addressing any new trends.
Apple's Keen Ability to Strategize
Recognizing the trends, even when your competitors don't, is just the first step. With few exceptions it takes creative thinking to visualize what the trends imply for an industry or a target market. After that it takes concentration and cautiously applied effort to create profits from those implications. Apple's secret sauce was its power to think through the implications of trends that anyone could have seen at the time.
Specifically, Apple detected that no other competitor was addressing the product relipower problems created from mashing up hardware, package and operational systems from separate companies to create a PC or laptop. With a keen view toward making creative thinking simpler for innovative users Apple built a moat around their new iMac by becoming the only PC manufacturer with native hardware, package and operational systems. The iMac was introduced in 1998 and the OS X platform in 2001. Then Apple went to work on profitable line of products extensions and profitable satellite businesses that orbited around the iMac.
A key trend that Apple detected was a growing preference for personalization and that the microchip, data storage and amusement industries were running parallel with it. The company responded by introducing the personal-driven i-brand scheme. Apple introduced the iPod and the Apple Store in 2001. iTunes followed in 2003. The Apple Store ushered in a whole new build-to-order manufacturing scheme and other profit improvement platforms. At the center, still, was the iMac.
Apple detected a growing trend in consumer do-it-yourself audio and video production. The company introduced iMovie in 1999, followed by Garage Band and iPhoto in 2002. All three were optimized by the iMac. Apple detected that technology trends were mashing up PCs, laptops, mobile and consumer electronics. The iPhone and Apple TV were introduced in 2007. Apple also detected the potential for mobile computing and introduced the App Store in 2008 and the iPad in 2010. Again, all orbited around the iMac.
Customer Loyalty: Crfeeding The Apple Tribe
At a time when Sony was making missteps in merchandising and advertising, Apple began hit home runs. On top of one product winner after other Apple endlessly grew its tribe by:
- Partnering with archenemy and brand powerhouse Microsoft to introduce Microsoft Office for Macintosh and to allow Microsoft to invest $150 million in non-voting Apple stock.
- Partnering with global chip brand powerhouse Intel. By 2006 the entire Mac line of products had transitioned to Intel microprocessors.
- Partnering with major peripheral, photography, amusement and package companies to make products iMac compatible.
- Nurturing the Mac tribe's fanatism with conferences, Mac User Groups and other ways to bond the ever-growing group of loyalists with each other and the company.
- Crfeeding clever advertising that endlessly positions the company as anti-mainstream, appealing to Apple's target market of early adopters, innovators and mainstream defectors.
Fortune Names Apple World's Most Admired Company
It would seem that Sony should have fancied the iMac, the iPod and the juggernaut of innovative products and distribution. Since that time Sony has refancied itself and had several winneres. However it still plays a distant second banana to Apple. Apple's market cap is ten multiplication that of Sony's.
Sony is a great example of a enormously popular company that had it nearly was either handcuffed by product scheme or was too distracted by the noise to pay attention to the trends and the trend drivers.
Today, even though Apple's revenue is less, its market cap is large than Walmart's and Microsoft's. This tells us that investors are gushing bundle into innovation, not size.
Apple keeps on hit the long ball. Apple employees thrive in the company's rare culture of trends driven scheme and brilliant innovation in products and distribution.
The result is that Apple has an innovative, focused business model that eagerly seeks out trends, understands them and responds to them rapidly. For the near future this will much guarantee a continual new stream of innovative new products, markets, partnerships, distribution and more.
Investors see this and are dissipated money on Apple's power to continue to create new markets. The return has been healthy.
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