Apple’s Ecosystem
Part of the
co-innovation strategy is how an organization utilizes its ecosystem. In order
to fully realize the advantage of co-innovation the organization must utilize
it partners. An ecosystem is defined as “a network of organizations and individuals that co-evolve their
capabilities and roles and align their investments so as to create additional
value and/or improve efficiency.”[1]
Apple has managed to be as
successful as it is in large part due to its ecosystem. By giving their stakeholders
more input and freedom to contribute to Apple the stakeholders. The ecosystem
is made up of hardware, software and online services. These include Apps,
Operating Systems, software, music, movies, books, games, add-ons and
peripheral devices that connect to Apples devices. Money is made by getting you
to buy products that only interact with each other.[2]
The contributors to the Apple ecosystem interact more flawlessly with Apple
devices than Android does with devices it operates on. Some these ecosystem is
tied to Apple staples like iTunes, and include well known Apps that first
appear to Apple users. Apples also has dedicated stores that Apples users can
go to that deal only with Apple products.[3]
The biggest competitors of Apple
include Google, Amazon, and Microsoft. Microsoft and Apple are the older
companies with deep roots in computer hardware and software industry. Google
rose from the internet as a search engine and expanded its presence when it
became to primary search engine of most online users. Amazon had an ecosystem
from the beginning with its partners in Amazon’s shopping network. [4]
Apple started
developing an ecosystems with iMovies in 1999, iTunes in 2001 and iPhoto in
2002. However, it was the introduction of the iPod in 2001 which really
launched the Apple ecosystem. Using iTunes as the intermediary for the device
that was dependent on software only provided by Apple the music players than
was able to sell to the public digital music and albums. In 2007 Apple
introduced the iPhone and in 2010 the iPad. Both of these devices expanded on
the idea of the iPod allowing users to download Apps and software that
interacted with these devices delivered by Apple and its partners. There are
119 countries that iTunes is available. Each country has at least 20 million
tracks available on iTunes. In the U.S. alone there are 35 million tracks
available for sale. 25 billion music tracks have been sold through iTunes. [5]
There are other
music apps available on for Apple devices as well such as Spotify, Pandora,
Shazam and SoundHound. Music can delivered to an Apple TV or an AirPlay
receiver. Apple is also offering a cloud service for music called iTunes Match
which stores up to 25,000 songs for $25 per year. A recently announced iTunes
Radio will allow for a streaming radio service from over 200 radio stations
which is either free while supported by ads or for $25 per year ad free.[6]
One app that is
part of the Apple ecosystem is the iBookstore. The iBookstore carries over 1.75
million books in 155 countries. It include many free titles and rarely goes
above $14.99. The number of computers and devices you can put the books on is
limited to five computers with iTunes, but an unlimited number of iOS devices
that are synced with these computers.[7]
In addition to
iBookstore are Apps from other book providers that are available to users of
the Apple ecosystem. This includes Newsstand which allows for subscriptions to
magazines and newspapers that can be accessed by users. However, Apple came
under scrutiny by the U.S. Justice Department for antitrust violations by
conspiring to price fix with publishers to keep the price of books artificially
high. [8]
Apple has a large
number of apps dedicated to gaming in its Apps Store. There are over 144,000
gaming apps available through Apple. The quality of these games vary greatly,
but there is a vast amount to choose from. Gaming on Apple devices has spawned
a large number of accessory devices such as wireless controllers and other
devices that interact with iOS devices. There are even third party devices that
can be controlled by iOS devices such as remote controlled vehicles. However,
Apple has not been as successful in desktop gaming largely due to not producing
a console such as Playstation or Xbox.[9]
The iTunes store
also sells movies with over 60,000 titles available in 109 countries. In 2012
there 65% of movie downloads and 67% of television show downloads were through
iTunes. Many movies are available the same time as DVDs and videos can be
rented from the service as well. These videos can be streamed to any iOS device
and up to five computers with iTunes. Netflix and Hulu can also be streamed
through Apple devices and Apple TV. There are also video apps available in the
Apps Store and other streaming services from Networks such as HBO that can be accessed
for a service fee.[10]
Through the iPad
and iPhone a user can easily shop for merchandise. There are apps dedicated to
specific merchants such as amazon, E-bay and many others. Food can be ordered
through apps for specific restaurants and delivery services. There are even
apps that allow the user to scan an item at certain brick and mortar stores,
pay on-line and walk out without having to go to a cashier. One weakness,
though, is that Apple does not have a central payment application that stores
user information for payment.[11]
Apple also had
iCloud which is online storage which stores the data on your devices
automatically and synchronizes them to your other Apple devices. Apple devices
are designed to work seamlessly with other Apple products. The theory is that
because the Apple products work so well together as opposed to different
products from different manufacturers that are not as seamless the users will
stay within the Apple ecosystem and not look to outside manufacturers. This
creates brand loyalty and is known as the “Halo Effect”.[12]
Apple Supplier
Responsibility
Apple’s supply
chain is dependent on more than a million people and hundreds of manufacturing
partners worldwide. Apple promotes a safe working environment and audits it
supply chain to hold its suppliers accountable. Apple performed 451 supply
chain audits in 2013 and trained 1.5 million workers in their rights. 3.8 million
workers have been trained on their rights since 2008. The suppliers have a 95%
compliance with Apple’s rule of a maximum 60 hour work week for its employees.
18 factories offer free education and development programs. In 2013 over
280,000 took courses in these programs which included accounting, English, web
design and even flower arranging. Apple started the Apple Supplier EHS Academy
to develop qualified environment, health and safety (EHS) personnel. This is a
formal 18 month program and one of the most comprehensive for any global supply
chain. This program enrolled 240 personnel in 2013 representing 270,000
workers.[13]
Apple has 12,000
student interns from 130 vocational schools. Apple has actively sought to
improve the quality of education and the legitimacy of on the job training at
supplier facilities. 33 audits were performed in 2013 specifically for the
purpose of preventing the abuse of migrant workers. Apple required US$3.9
million in labor fees charged by labor brokers to be paid back to contract
workers. Apple has made a code of conduct publicly available since 2005 for the
improvement of workers and has third party auditors verify compliance with this
code of conduct.[14]
Future Innovation
for Apples on Going Success
Apples strategy
includes its third party distribution network to reach more customers and
provide high quality sales and support services. Apple intends to increase
market demand through differentiation. Apple sells most of its products and
third party supplier products directly to customers. Apple prohibits resellers
and dealers from selling Apple products below a “Minimum Advertised Price”
(MAP) and does so by offering subsidies to its retailers. This prevents
retailers from competing with Apple stores.[15]
Apple CEO Tim Cook
stated that Apple is distinguishable from other companies in the vertical
integration in it three fields of expertise: software, hardware and services
and continued to say “Apple has the ability on all three of these spheres to
innovate like crazy and cause magic. People are trying desperately to catch up
and they are finding it’s not so easy to do.”[16]
Vertical
integration has given the company more control over its value chain and the
cost of its components. Apples devices are synchronized and work well with each
other. When Apple expanded its product line Apple leveraged its existing
relationships to create enhanced offerings. In 2013 Tim Cook stated that Apple
has 6 million developers and added an additional 1.5 million developers since
2012. Additionally, 80% of Apples devices run iOS 7 which makes it the most
used operating system in the world as Android’s latest operating system was
adopted only in the single digits. The research firm GfK found that 84% of
iPhone users intended to purchase another iPhone in the future when replacing
the current phone they have. Over 70% of respondents in the study stated that
the reason for their continuing with Apple being the seamless integration of
access and content being significant reasons for their remaining with Apple. Apple
Maps has increased in popularity resulting in a decrease in Google Maps market
share from 81 million users in September 2012 to 58.7 million users in November
2013.[17]
The
ecosystem of Apple allows it to maintain quality control of its products and
ensure seamless integration. The accountability and education of its labor
force empowers its partners and employees to contribute more to the company and
be valuable resources beyond their current roles. This empowerment of employees
and stakeholders gives Apple the opportunity to innovate while maintaining
higher product standards and integration that Apple is known for.
[1] “Ecosystem
Advantage: How to Successfully Harness the Power of Partners”. California Management Review, Peter
James Williamson and Arnoud De Meyer, Vol 55, No. 1, University of California,
Berkeley, Fall 2012, p. 24, pp 24-46, Retrieved March 14, 2014.
[2]
“Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson
Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft
[3]
“The Stickiness of the Apple Ecosystem” Citeworld,
Matt Rosoff, Nov 11, 2013, Retrieved April 18, 2014. http://www.citeworld.com/article/2115170/mobile-byod/why-i-just-bought-my-third-iphone.html
[4]
“Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson
Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft
[5]
“Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson
Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft
[6]
“Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson
Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft
[7]
“Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson
Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft
[8]
“Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson
Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft
[9]
“Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson
Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft
[10] “Battle
of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson
Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft
[11]
“Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson
Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft
[12]
“Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson Gralla,
JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft
[13]
Apple “Supplier Responsibility 2014 Progress Report”, p.4, Retrieved from http://www.apple.com/supplier-responsibility/
[14]
Apple “Supplier Responsibility 2014 Progress Report”, p.5, Retrieved from http://www.apple.com/supplier-responsibility/
[15]
Apples Premium Pricing Strategy and Product Differentiation, MarketRealist, Smita Nair, Feb 6, 2014,
Retrieved April 19, 2014, http://marketrealist.com/2014/02/apples-premium-pricing-strategy-product-differentiation/
[16]
Why Apples Ecosystem is its biggest competitive advantage. MarketRealist, Smita Nair, Feb 6, 2014, Retrieved April 19, 2014, http://marketrealist.com/2014/02/ecosystem/
[17]
Why Apples Ecosystem is its biggest competitive advantage. MarketRealist, Smita Nair, Feb 6, 2014, Retrieved April 19, 2014, http://marketrealist.com/2014/02/ecosystem/
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