Why innovation could be the key to Apple’s growth

Apple

Apple Inc. (AAPL) is based in Cupertino, California. The company designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players, and Apple sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. Established on April 1, 1976, by Steve Jobs, Steve Wozniak, and Ronald Wayne, and incorporated January 3, 1977, the company was called “Apple Computer, Inc.” for the first 30 years, but dropped the word “Computer” on January 9, 2007, to reflect the company’s ongoing expansion into the consumer electronics market in addition to its traditional focus on personal computers. On September 30, 2013, Apple surpassed Coca-Cola to become the world’s most valuable brand in the Omnicom Group’s “Best Global Brands” report.

Think different?

Apple’s business strategy leverages its unique ability to design and develop its own operating systems, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative design. Known for its innovation, Apple has established a unique reputation in the consumer electronics industry and has a loyal customer base for reasons as diverse as its philosophy of aesthetic design to its unusual advertising campaigns. The company believes a high-quality buying experience greatly enhances its ability to attract and retain customers. So Apple’s strategy also includes enhancing and expanding its own retail and online stores and its third-party distribution network to effectively reach more customers and provide them with a high-quality sales and post-sales support experience.

Apple’s stock price was flat for 2013, although the shares rose 33% in the second half of the year, reversing steep losses in the first six months as the company saw concerns regarding slowing revenue growth and losing market share to Android. The company saw stock price decline Monday after it reported its 1Q 2014 earnings due to disappointing iPhone sales and outlook. Apple CEO Tim Cook is also facing pressure over a lack of innovation, as Apple has yet to introduce any groundbreaking products, although there have been speculations around an iWatch or iTV that could offer a new revenue opportunity.

Before returning to Apple, Steve Jobs said in a 1996 interview for Wall Street Week with Louis Rukeyser:

• “Apple was a company that was based on innovation. When I left Apple ten years ago, we were ten years ahead of everybody else. The problem was that Apple stood still. Even though it invested cumulatively billions in R&D, the output has not been there and people have not caught up with it and the differentiation has eroded in particular with respect to Microsoft. And so the way out for Apple, and I still think Apple has a future, there’s some awfully good people there and tremendous brand loyalty to that company. I think the way out is not to slash and burn, it’s to innovate. That’s how Apple got to its glory, and I think that’s how Apple could return to it.”

Apple’s products

The company’s best-known hardware products include Macintosh computers, the iPod, the iPhone, and the iPad. In October last year, Apple unveiled the sleeker iPad Air and iPad Mini with a Retina display at a premium price. In 1Q 2014, the company said it sold 26 million iPads during the quarter, compared to 22.9 million in the year-ago quarter. Apple said on its recent earnings call that based on the latest data published by IDC, iPad has a 78% share of the U.S. commercial tablet market.

Apple software includes the Mac OS X operating system, the iTunes media browser, the iLife suite of multimedia and creativity software, the iWork suite of productivity software, Aperture (a professional photography package), Final Cut Studio (a suite of professional audio and film-industry software products), Logic Studio (a suite of audio tools), iCloud, and a variety of accessories, service, and support offerings. On December 6, 2013, Apple Inc. launched iBeacon technology across its 254 U.S. retail stores. Using Bluetooth wireless technology, iBeacon senses the user’s exact location within the Apple store and sends the user messages about products, events, and other information tailored to the user’s location.

Apple also sells and delivers digital content and applications through the iTunes Store, App Store, iBooks Store, and Mac App Store. The company sells its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers. Plus, Apple sells a variety of third-party iPhone-, iPad-, Mac-, and iPod-compatible products, including application software and various accessories, through its online and retail stores.

The tech giant’s products also include Apple TV (previously known as iTV), a set-top video device intended to bridge the sale of content from iTunes with high-definition televisions. The device lets users play 1080p HD videos from iTunes and Netflix, enjoy music and photos from iCloud, and use AirPlay to stream from their iOS devices. Recent reports indicated that Apple TV could see an update that would add support for iOS games and Bluetooth game controllers.

Apple announced the seventh iOS operating system alongside OS X Mavericks, the tenth version of Mac OS X, and a new Internet radio service called iTunes Radio at the 2013 Worldwide Developer Conference (WWDC). iTunes Radio has garnered 20 million unique listeners since it debuted on September 18, Apple said on its 4Q earnings call.

As of September 30, 2013, the company operated 416 retail stores in 13 countries and an online store selling hardware and software products.