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As organizations adapt to be more effective in dynamic and competitive environments, the role

of their organizational culture in either supporting or resisting internal changes is critical. The

organization's leadership must seek a culture that fits with new strategic demands, and that

culture itself may need to change as the strategy evolves. Helping leaders manage culture change

effectively is the focus of this case study. Changing a culture generally means changing some of

the organization's values, beliefs, and customary ways of doing things. It is like one team

changing the rules of a game during the game. Depending on how this is done and

communicated to the stakeholders (e.g., fans, referees, the other team), some parties to the game

may view the changes as unfair, or even unethical. Leaders must be able to see, understand, and

attend to these changes to reduce the likelihood of dysfunctional stakeholder behavior.

Examining an organization's culture has become a target for organizational analysis. The

emphasis on understanding social and symbolic processes of organizations has increased,

rational aspects alone no longer dominate the management literature. The concept of culture is

used to capture the essence of what must change or adapt within an organization for it to be more

competitive in the marketplace.c

Culture is the set of shared values, shared beliefs, and customary ways of thinking and doing

things which shape and guide the behavior of organizational members. Its importance lies in its

ability to influence the activities of members and the functioning of the organization without the

direct imposition of measures and controls. Research shows that member perceptions of the

organization's culture are associated with cognitive and affective sources of motivation and job

satisfaction.

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As an example of the life cycle shift in culture can be illustrated by describing briefly the

development of Apple Computer Company.

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Apple Computer, Inc. is headquartered in Cupertino, California is a leader in the PC field for

home, business and education markets. Their products include the Macintosh line of desktop and

notebook computers, the Mac operating system, the iPod digital music player. The

manufacturing facilities are located in Sacramento, California and Cork, Ireland. Apple

Computers has experienced both good and bad times since it began its garage operation in 1976.

Although it has been a leader in computer technology in the past, it has struggled lately with

keeping pace in the rapidly developing computer industry. In this extremely competitive

industry, the developing technology and evolving computer applications have contributed to this

type of business environment. Over the last two decades, the popularity of personal computers

has made the computer market attractive to consumers worldwide. As mentioned before, Apple

developed as a major player in the computer industry in its early years. Apple grew to a publicly

traded company by 1980. Apple continued to experience early success in the industry being the

first computer company to reach one billion dollars in annual sales in 1982.

In Jan 2004, Apple announced financial results for its fiscal quarter ended December 27th, 2003.

For the quarter, Apple posted a net profit of $63 million. These results compare to a net loss of

$8 million in the year-ago quarter. Revenue for the quarter reached a four-year high of $2.006

billion, up 36 percent from the year-ago quarter. Gross margin was 26.7 percent, down from 27.6

percent in the year-ago quarter. International sales accounted for 44 percent of the quarter¶s

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revenue. During this quarter, Apple shipped 829,000 Macintosh units during the quarter, up 12%

from the year-ago quarter, as well as 733,000 iPod units, up 235% from the year-ago quarter.

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Having learned several painful lessons after introducing the bulky Macintosh Portable in 1989,

Apple introduced the PowerBook in 1991, which established the modern form and ergonomic

layout of the laptop computer. The success of the PowerBook and other products led to

increasing revenue. For some time, it appeared that Apple could do no wrong, introducing fresh

new products and generating increasing profits in the process. The magazine MacAddict has

named the period between 1989 and 1991 as the "first golden age" of the Macintosh. Microsoft

continued to gain market share with Windows, focusing on delivering software to cheap

commodity personal computers while Apple was delivering a richly engineered, but expensive,

experience. Apple relied on high profit margins and never developed a clear response. Instead

they sued Microsoft for using a graphical user interface similar to the Apple Lisa in Apple

Computer, Inc. v. Microsoft Corporation. The lawsuit dragged on for years before being thrown

out of court. At the same time, a series of major product flops and missed deadlines destroyed

Apple's reputation. On August 15, 1998, Apple introduced a new all-in-one computer

reminiscent of the Macintosh 128K: the iMac. The iMac design team was led by Jonathan Ive,

who would later design the iPod and the iPhone. At the Worldwide Developers Conference

keynote address on June 6, 2005, Steve Jobs announced that Apple would begin producing Intel-

based Mac computers in 2006. On January 10, 2006, the new MacBook Pro and iMac became

the first Apple computers to utilize Intel's Core Duo CPU. Apple also introduced Boot Camp to

help users install Windows XP or Windows Vista on their Intel Macs alongside Mac OS X.

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Apple's success during this period was evident in its stock price. Between early 2003 and 2006,

the price of Apple's stock increased more than tenfold.

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The Apple¶s culture can be characterized by profile 1 in the below figure.

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As is typical of most adhocracies, a single entrepreneurial, charaismatic leader was setting

direction, and the company was flexible and freewheeling. The group can be described as

renegades and crazies. This culture profile has been produced from the organizational culture

assessment instrument. The high degree of emphasis in the adhocracy quadrant, moderate scores

in the clan quadrant, and low scores in the hierarchy and market quadrants produce the profile

illustrated in profile 1. Apple¶s culture was dominated by an entrepreneurial, innovative,

adhocractic culture. Within a few years of incorporation, apple established one of the most

successful ventures ever experienced in the industry, the formation of a group of pirates, dubbed

the macintosh team. This team of selected employees was charged with developing a computer

that people would want to purchase for use in their homes. Until then computer were large,

intimiditating pieces of hardware that merely replaced slide rules for engineers and

mathematicians. Few people would have considered using one for personal or family

applications. This small group of apple pirates, however, designed and developed the macintosh

computer.

The team¶s endeavors were so successful that the entire organization adopted the team culture

and to look like profile 2 in figure1, a highly cohesive clan. Employees wore apple logos on their

clothes, had apple bumper stickers on their car, and spoke warmly of the apple family. The

enormous success of the company led it toward a third kind of culture. With hundreds of

thousands of computers being sold, distribution channels expanding worldwide, the freewheeling

clan faced a need for controls and standard procedures. Policies and regulations were needed and

a hierarchy orientation had to be developed(profile 3 in figure1).

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Appe¶s CEO was the quintessential innovator and team leader, perfectly comfortable in an

organization dominated by adhocracy and clan cultures. He was not an effeciency expert and

administrator and not inclined to manage a hierarchy. John Scully from Pepsico was hired,

therefore, to manage the shift to stability and control. Predictably, this shift created such a crisis

in the organization, with the clan and adhocracy orientations being supplanted by a hierarchy

orientation, that founder Jobs was ousted from the company. A new set of values and priorities

reflected in a new culture made Job¶s orientation out of sync with current demands. The shift to a

hierarchy culture generally produces a sense of apprehension, of abandoning core values, of

replacing family feelings with rules and policies. Scully was a master effeciency and marketing

expert, however, and his skills matched more closely the shifting culture of Apple as its growth

produced a new cultural orientation.

As Apple developed into a large, mature organization under Scully, the culture again shifted into

a fourth stage, profile 4 in figure1. It ceased to be the agile, innovative company that

characterized the young group of renegades in its early life but instead was an outstanding

example of effeciency and marketing savvy. In many organizations this becomes the norm, with

the clan and adhocracy cultures being minimized and the hierarchy and the market cultures being

emphasized. Many management consultants and leadership gurus therefore spend a great deal of

energy assisting companies in developing the capability to reinstitute clan- and adhocracy-like

attributes so that they can be more balanced organizations. It is not that all four types of cultures

must to be emphasized equally. Rather, it is that the organization must develop the capability to

shift emphases when the demands of the competitive environment require it.

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One reason for the performance difficulties of the Apple is the continued emphasis in the

company¶s culture on the bottom two quadrants in figure1. In an industry faced in the late 1990s

with the need to innovate constantly with very rapid cycle times, instead of a shift back up to the

adhocracy quadrant, seems to have negative effects on Apple¶s performance as a company until

the development of the innovative iPod.

The company¶s culture changed in response to new environmental and competitive pressures.

This pattern of culture change was less standard than that occuring in new, young companies.

According to surveys by J. D. Power, Apple has the highest brand and repurchase loyalty of any

computer manufacturer. While this brand loyalty is considered unusual for any product, Apple

appears not to have gone out of its way to create it. At one time, Apple evangelists were actively

engaged by the company, but this was after the phenomenon was already firmly established.

Apple evangelist Guy Kawasaki has called the brand fanaticism "something that was stumbled

upon". Apple has, however, supported the continuing existence of a network of Mac User

Groups in most major and many minor centers of population where Mac computers are available.

Apple Store openings can draw crowds of thousands, with some waiting in line as much as a day

before the opening or flying in from other countries for the event. The New York City Fifth

Avenue "Cube" store had a line as long as half a mile; a few Mac fans took the opportunity of the

setting to propose marriage. The Ginza opening in Tokyo was estimated in the thousands with a

line exceeding eight city blocks. People talk about technology, but Apple was a marketing

company. It was the marketing company of the decade. Market research indicates that Apple

draws its customer base from an unusually artistic, creative, and well-educated population, which

may explain the platform¶s visibility within certain youthful, avant-garde subcultures.

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The internal environment of Apple Computer, Inc. consists of variables that are within the

organization itself. Strengths and weaknesses are the variables that form the context in which

work is done.

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Because Apple has been around for so long, they have become a household name within the

computer industry. Not only does Apple have name recognition within the industry, the name is

also synonymous with a product interface that is easy to use. Apple holds a significant niche in

the graphics industry. Their hardware and software have a strong graphics platform. c

Early in the industry¶s life cycle, Apple Computer, Inc. decided to pursue a strategy to

competitively position their product. They decided to focus on a specific market segment and

promoted their product within the educational community. Because of this early strategy, Apple

Computer has become a strong presence in the education markets.

Steve Jobs is considered to be the most important person in Apple¶s history and the company¶s

present. Not only has he founded Apple Computers, but he also saved it from the brink of

disaster when he returned as CEO in 1997. Steve Jobs has done an amazing job revitalizing

Apple Computers. He was an important character in transforming the cultural change Apple has

undergone. With Job¶s deep understanding of the computer market as a pioneer in two

businesses, consumer, and a technician, he implemented many of the strategies Apple should

have done in the beginning. He added value to the Mac software, customized the products to a

target market, and simplified the product chart. As long as Jobs can maintain Apple¶s

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competitive advantage and sustain it, increasing market share should not be too much of a

problem.

These key strengths form a set of core competencies that Apple Computer, Inc. can use to gain

competitive advantage.

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If Apple is unable to continue to develop and sell innovative new products with attractive gross

margins, its results of operations may be materially adversely affected by its operating costs

structure. Apple has also been lacking in their business marketing strategies and distribution

networks. With regards to the personal computer industry, the familiarity of the Apple software

is not there.

Many of Apple¶s products are manufactured in whole or in part by third-party manufacturers.

While outsourcing arrangements may lower the fixed cost of operations, they also reduce the

company¶s direct control over production and distribution.

Apple has become unable to effectively penetrate the business market. Taking advantage of

Apple¶s current opportunities could mean the difference between strategic success and failure.

The rapid advancement of technology and business processes creates an atmosphere of high

competition in which Apple must be dynamic to survive. Apple has been able to effectively do

this with the introduction of commercially strong products and services.

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In the past, it might have been harder to locate an Apple dealer in contrast to a PC dealer.

Making use of the internet and retail outlets, Apple has strived to make that change. Apple has

recently adopted Dell Computers¶ procedure of using the Internet to sell their product. The

benefit of selling a product through the internet is it reaches a far wider market and reduces

inventory costs.c

A great opportunity for Apple can be found in the growing population of older individuals.

Apple can grasp this opportunity by targeting older individual with their integrated and easy to

use computer system that allows for less hassle and more enjoyment.

Although Apple has lost market share in the education market it is still an opportunity for them

to gain that market share back. Computers are an important tool to help schools maximize their

investment in student technology. Apple¶s products and services are designed for education

customers and failure to increase or maintain market share in the education market may have an

adverse impact on the company¶s operating results and financial condition.

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Apple operates in a highly competitive market that is constantly making major advancements. If

they are unable to keep pace with these changes, then a share of the market is lost. Risk of

obsolescence is a major concern in their industry. Within two years, a once top of the line

computer can become out-of-date. Apple is in direct competition with companies such as Dell

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and Gateway. These two firms have captured a major share of the computer market. Dell has

been able to gain a large share of the market by selling customized computers directly to the

customer. Dell has an advantage over Apple with the low prices they offer. An average Apple

computer costs over $2,000, where as a fully loaded Dell computer can be purchased for under

$1,500. However, Apple still currently controls the multimedia area of computers.

Demand for Apple¶s products has been negatively impacted by worsening global economic

conditions. Some of the company¶s education customers appear to be delaying technology

purchases due to concerns about the overall impact of the weaker economy on their available

funding.

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Since one of the company¶s weaknesses is absence of effective research and development, they

need to focus on expanding their current R&D efforts. The company¶s success depends heavily

on the ability to produce new and innovative products and technology. In an industry where

competition is fierce and the chance that a product may become obsolete is great, Apple can no

longer cut their research and development budget. Apple is known for developing innovative

products and bringing them to the market first. Without the proper R&D these products will

become out-dated and quickly become overshadowed by a competitor¶s product. The iPod has

been a tremendous success for the company, partly because the hardware is compatible with all

operating systems. It is important for the company to develop hardware products that bear the

Apple brand name, but are now compatible with all software.

Another suggestion that Apple Inc. should take advantage of is to better position them selves in

the market. Apple currently is the only company in the PC market whose systems do not run a

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Microsoft operating system. They make an operating to run with their systems. The ³war´ for the

operating system was lost long ago, Microsoft dominates the market. It is our recommendation

that they adopt the Microsoft Operating Systems. Ninety six percent of the market knows how to

operate windows and not Mac OS X. The Macintosh would be more attractive for their

customers but it could also pull potential customer over the barrier of purchasing an Apple

computer.

Apple distribution centers are few and far between. The current retail stores are costly but are an

asset to the company. They allow the customer to test and use Apple products. The solution to

this problem would be to align with stores such as Circuit City, Best Buy, and Wholesalers to

distribute higher end products. This would greatly reduce costs but still allow customers to

experience their products. Apple should improve its distribution channels by promoting internet

and telephone sales, as Dell has done. Posting advertisements on websites such as yahoo.com

and netscape.com.

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Apple was one of several highly successful companies founded in the 1970s that bucked the

traditional notions of what a corporate culture should look like in terms of organizational

hierarchy (flat versus tall, casual versus formal attire, etc.). Originally, the company stood in

opposition to staid competitors like IBM more or less by default. Steve Jobs often walked around

the office barefoot even after Apple was a Fortune 500 company. By the time of the "1984" TV

ad, this trait had become a key way the company attempts differentiated itself from its

competitors. As the company has grown and been led by a series of chief executives, each with

his own idea of what Apple should be, some of its original character has arguably been lost, but

Apple still has a reputation for fostering individuality and excellence that reliably draws talented

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people into its employ, especially after Jobs' return. To recognize the best of its employees,

Apple created the Apple Fellows program. Apple Fellows are those who have made

extraordinary technical or leadership contributions to personal computing while at the company. c

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During the change of CEO in 1997, Apple has undergone a lot of cultural change. This cultural

change could not be handled by Steven Jobs in the beginning. Culture measures have been used

in his leadership to change situations. Its uses have ranged from assessing 'gaps' between an

existing and future desired state of affairs to helping top management articulate strategic and

structural changes for the organization.

Two questions emerge for those using culture as a construct for driving change:

(a) To what extent does culture, as an index of the norms, values, and beliefs of organizational

members, have the power to guide change, foster adaptation, and yield competitive success?

(b) To what extent are there ethical issues involved in endeavors intended to change the

organization's culture?

There is a significant evidence in Apple company that suggests culture is a determinant of

employee attitudes, their motivation, and subsequent organizational performance. Early evidence

comes from research reported by Jobs in which they simulated three companies, each with a

different climate. They succeeded in creating very different organizations in which the quality

and quantity of the output and the employee attitudes and motivation were very different.

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Relatively little has been reported that shows how the leaders of Apple organization have

actively influenced culture or leveraged it to attain competitive advantage.

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Although Apple is having some success in controlling their internal operations relative to

responding to their weakness, they should not be satisfied with being average in this highly

competitive business environment. Every company¶s main goal is to establish a competitive

advantage over other firms, and Apple has plenty of room for improvement. Apple needs to

identify ways to improve their operations to gain this competitive advantage.

The business strategy literature has steadfastly maintained that for Apple company to attain and

sustain a competitive advantage it must have a fit between its strategy, structure, processes, and

environment. Since the organizational structures and processes significantly affect, and are

affected by, the organization's culture, it is critical for the Apple¶s culture to be compatible with

its strategy, consistent with the environment, and support its intended competitive advantage.c

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http://en.wikipedia.org/wiki/Apple_Inc.

http://books.google.com/books

http://findarticles.com/p/articles/mi_m1TOT/is_1_10/ai_n25009732/pg_3/?tag=content;col1

http://www.essaywow.com/2008/05/strategic-analysis-of-apple-computers-inc/

http://www.fundinguniverse.com/company-histories/Apple-Computer-Inc-Company-

History.html

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