Business Theories - Chandler and Barney

CLAIM: Apple’s high success rates are due to their sustainable competitive advantages.

Business theories - Chandler and Barney

Chandler - First mover’s theory which is based on firms who are willing to make large scale investments in the following: production (flow of material must be constant), marketing (national marketing distribution is to be created) and management (teams of lower to middle managers of different specialties must be recruited). Additionally, Chandlers major claims also expand on the two concepts of economies of scale and economies of scope. The theory of economies of scale shows the relationships between cost and volume; how larger plants can lower their cost per unit due to an increase in volume. The theory of economies of scope is when a large firm can utilize the same resources and intermediate production processes to produce more. Chandler also supports secondary claims that elaborate on business ownership traditional patterns, unrelated diversification, and no investments. Included in his secondary claims, he states that in order for a firm to regain competitiveness, they must invest in research and development, find novel ways to produce, be innovative and find better sources of supply. In essence, firms that lose the chance to be a first mover company will have a difficult time regaining competitive advantage and if they do not make investments they won’t achieve long term success. In this case;

Apple’s business strategy supports Chandler's claims since they have a history of being a major first mover. They were the first innovators to create a need for computers when there was barely a demand in the market. They created a utility that, in reality, no one needed but everybody wanted. They immediately had a competitive advantage once they established their place in the market, since they were the first to create computers small enough to have in homes and offices. The demand for Macintosh computers increased significantly, which gave them the opportunity to capitalize and benefit from Economies of Scale. As the company grew bigger and the demand grew wider, they evidently had to purchase their raw materials in bulk, which lead to a cost advantage since the cost per unit drops as the volume of output rises. Following this concept is Economies of Scope, which Apple also benefits from. This concept consists of using semi-finished raw materials to create a variety of different products. Today, the company owns a wide variety of products such as: iPods, iPhones, Mac Notebooks, iPads, Apple Watch, Apple TV and many different accessories for each product. All of those different technologies are based on and upgraded from previously used materials such as, the touch screen concept, front facing camera, and Bluetooth technology amongst others. One of Apple’s biggest “flaws” or criticisms is that it never releases a truly new and improved product. One would think that this fact would effect demand negatively, but in reality all it does is make consumers want to buy the newest product. Using that “criticism” as an example, one could highlight the benefits of being a first mover, as well as the capitalization of Economies of Scope. Being a first mover adds longevity to the business and makes way for more criticism. If consumers are so unhappy with the growth and development of Apple’s products, then why hasn’t it affected its market share?