Apple has fallen from the tree Heet Shah Logo cited from Svetlik, 2011 An exploratory study into organisation and innovation decline in successful companies: the case of Apple Inc Abstract Apple is one of the biggest tech giant that enjoys being the icon of the technology industry, heavily dominating that industry through its product. Recent events shed light of the continued weakness in ever changing global economy that is likely to raise concerns and challenges for businesses. In doing so, this research aims to review and synthesise current research on the antecedents and consequences of organisational failure whilst providing with new insights to existing literature. Keywords: organisational decline and failure; innovation performance; business strategy Acknowledgement I would like to thank my supervisors for their support throughout the dissertation process. Then I would also like to thank other academic staff at university who have indirectly assisted me while writing this through their teaching and guidance. Second, I would also like to extend my gratitude to all my friends, for troubling them a lot in order to keep me motivated during the dissertation. Finally also late Steve Jobs (1955 - 2011) for inspiring me into the world Apple. Table of contents Chapters Page I Introduction 1 II Literature review 3 2.1 Defining organisational decline 3 2.2 Perspectives on organisational failure 4 2.3 Environmental explanations 5 2.4 Resource based view 7 2.5 Organisational studies 9 2.6 Innovation performance 12 2.7 Performance measurement 13 2.8 Other perspectives III Research methodology 15 IV Findings 19 4.1 Early history 20 4.2 Jobs return (1994 onwards) 21 4.3 Decline 28 4.4 iPhone 32 4.5 Mac 33 4.6 Apple Watch and services 35 4.7 iPad Chapters Page V Discussion 37 5.1 External 38 5.2 Internal 40 5.3 Innovation performance 41 5.4 Performance measurement VI Conclusion, Limitations and managerial implications 42 VII Appendices 45 VIII References 51 AIBM thesis 2019 Heet Shah B6042389/S3904911 CHAPTER I INTRODUCTION Apple is the first company in the world to reach 1 Trillion in valuation in 2018 eventually declining to $853 billion (Yahoo, 2019). During this year, Apple’s market share price has taken a nose dive from $234 to $186 in June 2019, with a historic low of $142 in January 2019 (Yahoo, 2019). Although it eventually reached an all time high of $260 at the time of this article, becoming one of the largest company in the world. This Cupertino based company established in 1977 that designs, manufacturers and markets media devices such as iPhones and iPads, personal computers such Macs and services such as iTunes and iCloud (Apple, 2017). Moreover, they have been subject to severe criticisms regarding sustainability and lack of innovation alarming their very existence. The company has also seen its sales decline, profitability questioned and loss of market share, indicating some form of organisational decline. It is not the first time that a highly successful company faces such a crisis (Anheier, 1999; Lawler and Galbraith, 1994). Over 600,000 American firms disappear each year, accounting for 10% of all economically active firms Ormerod (2005). In spite of the commercial importance of organisational decline in real world, this topic has not been a central topic of research by many academics (Cameron et al, 1998; Sheppard, 1994; Whetten, 1988). The study of competitive strategy to help ensure long term profitability has received considerable attention for example Porter’s five forces, value chain, blue ocean, etc. Yet, little is discussed about what happens when these competitive advantage become a source of disadvantage over time. To hasten the theoretical knowledge of organisational decline and failure, this paper aims to understand the symptoms of organisational decline in case of Apple Inc. The study of organisational failure has predominately been on either small or public sector organisations (Hambrick & D’Aveni, 1988). These research had theoretical limitations being, liability of newness for small organisations (Stinchcombe, 1965; Hannan and Freeman, 1977; Carroll, 1984; Aldrich and Auster, 1986) or restricted strategic options in case of public sector organisations (Whetten, 1980; Zammuto and Cameron, 1985). Hence calling for a need for research for decline and failure of large organisations (Hambrick & D’Aveni, 1988). Moreover, prior research has considerable limitations owing to studies being solely qualitative (Daughen and Binzen, 1971; Richards, 1973; Starbuck, Greve, and Hedberg, 1978), anecdotal (Ross and Kami, 1973; Argenti, 1976) or financial ratios (Altman, 1968, 1982). The aim of this study is to combine qualitative and financial ratios approach to provide a holistic view of organisational decline, whilst primary focus being Page 1 of 69 AIBM thesis 2019 Heet Shah B6042389/S3904911 decline instead of failure. Along with using innovation performance as a supplementary factor in deterring decline in multinational companies such as Apple Inc. The rest of the paper is organised as follows. First, I outline the definition of organisational decline and define the scope of this research. This is then followed by a catalogued and revised theories surrounding the topic of organisational decline and failure. Specifically, integrating innovation performance as a dimension contributing to organisational decline. Second, the research mythology is discussed that is used for this research. Third, these assertions are investigated using various findings to provide an empirical based discussion for future research. On the basis of the analysis, the final section draws lessons learnt from this analysis, outlines directions for future research, limitations and highlight implications for managers. Page 2 of 69 AIBM thesis 2019 Heet Shah B6042389/S3904911 CHAPTER II LITERATURE REVIEW 2.1 Defining organisational decline In this section I will briefly define the term organisational decline and failure since there are variations to be found in the literature. Some scholars have viewed organisational failure as either discontinuance of business (Hamilton, 2006; Walsh & Bartunek, 2011) or discontinuance of ownership through sale of the firms assets by its owners (Everett & Watson, 1998). Another, more widely adopted definition is the state wherein the firm ceases its operations and loses its identity because of failure to adapt and respond to changes in the industry (Cameron, Sutton, & Whetten, 1988; Hager, Galaskiewicz, Bielefeld, & Pins, 1996). Arguably these definitions perceive failure only as an exit in comparison with decline in performance. It would make sense to include organisations suffering temporary performance problems. Hence, it would be important to distinguish organisational failure with decline, as the later would indicate the circumstances when a firm’s resources base or performance deteriorates over prolonged period of time (Bruton, Oviatt & White, 1994; Weitzel & Jonsson, 1989). This prolonged period usually lasts for a period of at least two years (McKinley et al, 2013). Only one study (Latham and Braun, 2009) is identified that specifically investigates an industry sector in connection with an industry-wide downturn, a situation where “... all ships are sinking at the same time, but not at the same rate” (Bozeman, 2010). 2.2 Perspectives on organisational failure & decline The concept of decline or failure in research has been primarily split between two perspectives i.e an outcome of either firm specific internal or external causes, also known as environmental changes (Trahms et al., 2013). Another review by Amankwah-Amoah (2016) on past theoretical and empirical research found that the antecedents of organisational failure has been polarised between the deterministic and voluntarist perspectives. Although, there are subsets of the two perspectives which are further classified into Resource based view, upper-echelon, ecological and liabilities of ageing (Amankwah-Amoah, 2016). He also mentioned that literature on the combined or interactive effect of the above perspectives Page 3 of 69 AIBM thesis 2019 Heet Shah B6042389/S3904911 lack sufficient explanation (Amankwah-Amoah, 2016). This has inspired my research to understand the complimentary effect of both factors when determining organisational failure. Each of the above mentioned perspectives will be discussed in the following sub- sections. 2.3 Environmental explanations (External) The mainstream literature emerges from Schumpeter’s conceptualisation of creative destruction (Schumpeter, 1942). In which are ephemeral perturbations whose materialisation are difficult to foresee and whose impacts on organisations are disruptive and potentially destructive (Meyer, 1982). These environmental occurrences have been classified into two categories that are either beneficial or hostile (Meyer, 1982). Beneficial shocks such as an increase in the customer population because of demographic changes, reduction in taxes, technological advancements and upswings in the business cycle have the potential to forestall the demise of firms (Venkataraman & Van de Ven, 1998; Carter & Van Auken, 2006). Conversely, hostile conditions such as competitive intensity, declining prices, price competition, elimination of government subsidies and others are likely reasons for business failure (Baum & Mezias, 1992; Covin, Slevin, & Heeley, 2000; Jones & Bouamane, 2012; Platzer, 2015; El Hennawy & Morris, 1983; Platt, 1989). Research indicates that the reduction of government subsidies