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Chapter 1

The Foundations of Business

Why Is Apple Successful?


In 1976 Steve Jobs and Steve Wozniak created their first computer, the Apple I.[1] They invested a mere $1,300 and set up business in Jobs’s garage. Three decades later, their business—Apple Inc.—has become one of the world’s most influential and successful companies. Did you ever wonder why Apple flourished while so many other young companies failed? How did it grow from a garage start-up to a company generating $65 billion in sales? How was it able to transform itself from a nearly bankrupt firm to a multinational corporation with locations all around the world? You might conclude that it was the company’s products, such as the Apple I and II, the Macintosh, or more recently its wildly popular iPod, iPhone, and iPad. Or you might decide that it was its people: its dedicated employees and loyal customers. Perhaps you will decide it was luck—Apple simply was in the right place at the right time. Or maybe you will attribute the company’s success to management’s willingness to take calculated risks. Perhaps you will attribute Apple’s initial accomplishments and reemergence to its cofounder, the late Steve Jobs. After all, Jobs was instrumental in the original design of the Apple I and, after being ousted from his position with the company, returned to save the firm from destruction and lead it onto its current path.
Before we decide what made Apple what it is today and what will propel it into a successful future, let’s see if you have all the facts about the possible choices: its products, its customers, luck, willingness to take risks, or Steve Jobs. We’re confident that you’re aware of Apple’s products and understand that “Apple customers are a loyal bunch. Though they’re only a small percentage of all computer users, they make up for it with their passion and outspokenness.” [2] We believe you can understand the role that luck or risk taking could play in Apple’s success. But you might like to learn more about Steve Jobs, the company’s cofounder and former CEO, before arriving at your final decision.
Growing up, Jobs had an interest in computers. He attended lectures at Hewlett-Packard after school and worked for the company during the summer months. He took a job at Atari after graduating from high school and saved his money to make a pilgrimage to India to search for spiritual enlightenment. Following his India trip, he attended Steve Wozniak’s “Homebrew Computer Club” meetings, where the idea for building a personal computer surfaced. [3]“Many colleagues describe Jobs as a brilliant man who could be a great motivator and positively charming. At the same time his drive for perfection was so strong that employees who did not meet his demands are faced with blistering verbal attacks.” [4] Not everyone at Apple appreciated Jobs’s brilliance and ability to motivate. Nor did they all go along with his willingness to do whatever it took to produce an innovative, attractive, high-quality product. So at age thirty, Jobs found himself ousted from Apple by John Sculley, whom Jobs himself had hired as president of the company several years earlier. It seems that Sculley wanted to cut costs and thought it would be easier to do so without Jobs around. Jobs sold $20 million of his stock and went on a two-month vacation to figure out what he would do for the rest of his life. His solution: start a new personal computer company called NextStep. In 1993, he was invited back to Apple (a good thing, because neither his new company nor Apple was doing well).
Steve Jobs was definitely not humble, but he was a visionary and had a right to be proud of his accomplishments. Some have commented that “Apple’s most successful days have occurred with Steve Jobs at the helm.” [5] Jobs did what many successful CEOs and managers do: he learned, adjusted, and improvised.[6] Perhaps the most important statement that can be made about him is this: he never gave up on the company that once turned its back on him. So now you have the facts. Here’s a multiple-choice question that you’ll likely get right: Apple’s success is due to (a) its products, (b) its customers, (c) luck, (d) willingness to take risks, (e) Steve Jobs, or (f) some combination of these options.
[1] This vignette is based on an honors thesis written by Danielle M. Testa, “Apple, Inc.: An Analysis of the Firm’s Tumultuous History, in Conjunction with the Abounding Future” (Lehigh University), November 18, 2007.

[2] Ellen Lee, “Faithful, sometimes fanatical Apple customers continue to push the boundaries of loyalty,” San Francisco Chronicle, March 26, 2006.

[3] Lee Angelelli, “Steve Paul Jobs,” http://ei.cs.vt.edu/~history/Jobs.html (accessed January 21, 2012).

[4] Lee Angelelli, “Steve Paul Jobs,” http://ei.cs.vt.edu/~history/Jobs.html (accessed January 21, 2012).

[5] Cyrus Farivar, “Apple’s first 30 years; three decades of contributions to the computer industry,” Macworld, June 2006, 2.

[6] Dan Barkin, “He made the iPod: How Steve Jobs of Apple created the new millennium’s signature invention,” Knight Ridder Tribune Business News, December 3, 2006, 1.


    1. Introduction


As the story of Apple suggests, today is an interesting time to study business. Advances in technology are bringing rapid changes in the ways we produce and deliver goods and services. The Internet and other improvements in communication (such as smartphones, video conferencing, and social networking) now affect the way we do business. Companies are expanding international operations, and the workforce is more diverse than ever. Corporations are being held responsible for the behavior of their executives, and more people share the opinion that companies should be good corporate citizens. Plus—and this is a big plus—businesses today are facing the lingering effects of what many economists believe is the worst financial crisis since the Great Depression. [1] Economic turmoil that began in the housing and mortgage industries as a result of troubled subprime mortgages quickly spread to the rest of the economy. In 2008, credit markets froze up and banks stopped making loans. Lawmakers tried to get money flowing again by passing a $700 billion Wall Street bailout, yet businesses and individuals were still denied access to needed credit. Without money or credit, consumer confidence in the economy dropped and consumers cut back their spending. Businesses responded by producing fewer products, and their sales and profits dropped. Unemployment rose as troubled companies shed the most jobs in five years, and 760,000 Americans marched to the unemployment lines. [2] The stock market reacted to the financial crisis and its stock prices dropped by 44 percent while millions of Americans watched in shock as their savings and retirement accounts took a nose dive. In fall 2008, even Apple, a company that had enjoyed strong sales growth over the past five years, began to cut production of its popular iPhone. Without jobs or cash, consumers would no longer flock to Apple’s fancy retail stores or buy a prized iPhone. [3] Things have turned around for Apple, which reported blockbuster sales for 2011 in part because of strong customer response to the iPhone 4S. But not all companies or individuals are doing so well. The economy is still struggling, unemployment is high (particularly for those ages 16 to 24), and home prices remain low.
As you go through the course with the aid of this text, you’ll explore the exciting world of business. We’ll introduce you to the various activities in which businesspeople engage—accounting, finance, information technology, management, marketing, and operations. We’ll help you understand the roles that these activities play in an organization, and we’ll show you how they work together. We hope that by exposing you to the things that businesspeople do, we’ll help you decide whether business is right for you and, if so, what areas of business you’d like to study further.
[1] Jon Hilsenrath, Serena Ng, and Damian Paletta, “Worst Crisis Since ’30s, With No End Yet in Sight,” Wall Street Journal, Markets, September 18, 2008,http://online.wsj.com/article/SB122169431617549947.html (accessed January 21, 2012).

[2] “How the Economy Stole the Election,” CNN.com,http://money.cnn.com/galleries/2008/news/0810/gallery.economy_election/index.html(accessed January 21, 2012).

[3] Dan Gallagher, “Analyst says Apple is cutting back production as economy weakens,”MarketWatch, November 3, 2008, http://www.marketwatch.com/news/story/apple-cutting-back-iphone-production/story.aspx?guid=%7B7F2B6F99-D063-4005-87AD-D8C36009F29B%7D&dist=msr_1 (accessed January 21, 2012).


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