Apple has a traditional hierarchical structure with product-based grouping and some collaboration between divisions.
Department
Type of Structure
Structure Details
Advantages
Drawbacks
Corporate Leadership
Hierarchy
Apple’s corporate leadership operates within a hierarchical structure. It includes the CEO, senior executives, and various departments such as hardware engineering, software development, design, marketing, retail, and finance.
– Clear lines of authority and accountability. – Efficient decision-making process. – Well-defined roles and responsibilities.
Potential slow decision-making due to multiple levels of approval. Limited flexibility in responding to rapid changes in the technology industry.
Hardware Engineering
Functional Structure
Apple’s hardware engineering functions follow a functional structure, with specialized teams responsible for hardware development in areas like iPhone, Mac, iPad, and wearables.
– Specialized expertise in hardware development. – Efficient management of hardware-related activities.
Potential challenges in cross-functional collaboration between hardware and software teams.
Software Development
Functional Structure
Apple’s software development functions, including iOS, macOS, and other software platforms, also follow a functional structure. Teams focus on developing and maintaining software for Apple’s products.
– Specialized expertise in software development. – Efficient management of software-related activities.
Potential challenges in cross-functional collaboration between software and hardware teams.
Design
Functional Structure
Apple’s design department follows a functional structure, with design teams responsible for product design, user interface (UI), and user experience (UX) design across various product lines.
– Specialized expertise in product design and user experience. – Consistency in design philosophy across products.
Potential challenges in integrating design considerations across different product categories.
Marketing and Sales
Functional and Matrix Structure
Apple’s marketing and sales operations have elements of both functional and matrix structures. While there are specialized marketing teams, cross-functional collaboration is essential to coordinate product launches and marketing campaigns.
– Specialized marketing expertise. – Collaboration between functions for effective product launches.
Potential complexity in reporting relationships and decision-making in a matrix structure.
Retail
Divisional Structure
Apple’s retail operations are organized with a divisional structure, with Apple Stores grouped by regions and markets. Each division has its own leadership team responsible for retail strategy, store operations, and customer experience.
– Tailored approach to different markets and regions. – Quick adaptation to local market conditions. – Specialization in retail operations.
Coordination challenges between regional retail divisions. May result in variations in store strategies and customer experiences across regions.
Research and Development
Functional Structure
Apple’s research and development activities follow a functional structure, with specialized teams focused on research in areas like artificial intelligence, machine learning, and hardware innovations.
– Specialized expertise in research and technology development. – Efficient management of R&D activities.
Potential challenges in aligning R&D efforts with the broader business strategy.
Human Resources
Functional Structure
The Human Resources function at Apple operates with a functional structure, focusing on HR-related functions such as talent acquisition, training, and employee relations. HR teams handle HR matters across the organization.
– Efficient management of human resources and talent-related activities. – Specialized expertise in HR functions.
Potential challenges in cross-functional collaboration with business units. May not align with specific business divisions.
Table of Contents
History of Apple
Apple Business Model
Understanding the Apple organizational structure
Former CEO Steve Jobs is credited with transforming Apple from a struggling company to one dominating the world with its innovative products.
How exactly was this accomplished?
When Jobs returned to Apple in 1997, the company had a typical product-based structure divided into business units with their own P&L responsibilities. However, Jobs noted that this approach hampered innovation.
He laid off each business unit general manager and put the entire company under one P&L, effectively combining unrelated units into one functional organization. Under this new arrangement, product managers could work insulated from short-term market pressures. They were also encouraged to share their work with other divisions to ensure innovations were not duplicated.
Jobs argued that the function-based structure required two crucial elements. First, product managers had to be product experts and not rely on others for decision-making expertise. Second, senior research and development personnel should receive a bonus based on the performance of the entire company – not simply on their own products. This gave them the freedom and impetus to focus on innovation not involving the iPhone.
Components of Apple’s organizational structure
Today, the company combines the functional and hierarchical structure instituted by Jobs with the somewhat more collaborative approach implemented by successor Tim Cook.
But there are also some other important characteristics to consider. Following is a look in general terms at the Apple corporate structure.
Hierarchical mixed with functional
Apple is a predominantly hierarchical organization. In the past, every strategic decision would have to go through Jobs. When Cook took the helm, however, he introduced a more collaborative approach between managers and employees.
To address business needs in the context of functional units, Apple employs several senior vice presidents. For instance, there are senior vice presidents for worldwide marketing, design, finance, and retail, among others. This level of management has to report to the CEO but is given more autonomy than they were under Jobs.
There are currently 10 SVPs in Apple’s executive leadership team:
Katherine Adams – SVP and General Counsel.
Eddy Cue – SVP Services.
Craig Federighi – SVP Software Engineering.
John Giannandrea – SVP Machine Learning and AI Strategy.
Greg Joswiak – SVP Worldwide Marketing.
Sabih Khan – SVP Operations.
Luca Maestri – SVP and CFO.
Deirdre O’Brien – SVP Retail + People.
Johny Srouji – SVP Hardware Technologies.
John Ternus – SVP Hardware Engineering.
A functional structure is more suited to the holistic culture of a compact start-up and is uncommon in a company the size of Apple. But this approach ensures there is no competition for resources between product division heads. Furthermore, it allows Apple to neglect short-term financial targets when developing resource-intensive products.
Product-based grouping
Apple also incorporates a product-based leadership model embodying the divisional approach.
Product managers (vice presidents) report to the senior vice presidents. Product managers lead product divisions responsible for iOS apps, human resources, policy, environment, and policy and social initiatives.
Ultimately, this helps the company address specific product components before releasing them to the market. It also helps Apple evaluate marketing or manufacturing requirements.
Max Muller – a 20-year veteran who became VP of Maps.
Charlie Zhai and Fabian Klass – who became VP-level executives in the Silicon group headed by Johny Srouji, and
Payam Mirrashidi – the new VP of engineering under Services.
Group and division collaboration
Under Jobs, hardware and software teams would have to run their ideas by the CEO with little interaction between the teams themselves.
The development of each Apple product now involves an intensive collaborative effort between various groups and divisions. In other words, some degree of functional rigidity has been sacrificed to enable creative and efficient innovation.
Key takeaways
Apple has a traditional hierarchical structure mixed with elements of function and product-based grouping.
Former CEO Tim Cook relaxed the highly rigid hierarchy present under Jobs. Instead of routing every decision through the CEO, divisional senior vice presidents and product managers are now given more autonomy.
Collaboration between divisions and teams is now a non-negotiable part of every Apple product. This creates an environment where creative innovation has a chance to thrive.
Key Highlights
History and Transformation: Former CEO Steve Jobs played a pivotal role in transforming Apple from a struggling company to an innovative industry leader.
Product-Based Structure Transformation: When Jobs returned to Apple in 1997, he restructured the company from a product-based approach into a functional organization under a single P&L. This allowed for more innovation and reduced duplication of efforts.
Key Elements of New Structure:
Product managers became experts in their domains.
Senior R&D personnel received bonuses based on overall company performance, encouraging innovation beyond iPhones.
Hierarchical and Functional Mix: Apple’s structure combines a hierarchical approach with functional roles. While Jobs previously made most strategic decisions, Tim Cook introduced a more collaborative approach between managers and employees.
Senior Vice Presidents (SVPs): Apple has several SVPs who lead functional areas such as marketing, design, finance, and operations. These SVPs have more autonomy than before but still report to the CEO.
Product-Based Leadership Model: Apple’s structure also incorporates a product-based leadership model. Product managers report to SVPs and lead divisions responsible for specific product components, facilitating focused development and evaluation.
Vice Presidents (VPs): Around 100 VPs are chosen from Apple’s extensive employee pool. VPs have been appointed for various areas, including Maps, Silicon group, and engineering under Services.
Group and Division Collaboration: Apple’s approach has evolved from limited interaction between hardware and software teams under Jobs to intensive collaboration between divisions and groups. This flexibility fosters creative and efficient innovation.
Autonomy and Innovation: Tim Cook’s changes brought more autonomy to divisional SVPs and managers, fostering an environment where creative innovation can thrive.
Balancing Hierarchy and Innovation: Apple’s structure combines traditional hierarchical elements with a focus on innovation through collaboration and functional specialization.
As of 2023, major Apple shareholders comprised Warren Buffet’s Berkshire Hathaway with 5.73% of the company’s stock (valued at over $130 billion). Followed by other individual shareholders like Tim Cook, CEO of Apple, with about 3.3 million shares, Artur Levinson, chairman of Apple, with over 4.5 million shares, and others.
Apple has a business model that is divided into products and services. Apple generated over $394 billion in revenues in 2022, of which $205.5 came from iPhone sales, $40 billion came from Mac sales, over $41 billion came from accessories and wearables (AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch, and accessories), $29.3 billion came from iPad sales, and $78.13 billion came from services.
iPhone and Services sales represented the main revenue drivers in 2022. Within the service revenues, the fastest growing sub-segment was the advertising business Apple built on top of the App Store, followed by the Mac, Accessories & Wearables, and the iPad.
In 2022, most of Apple’s sales (62%) came from indirect channels (comprising third-party cellular networks, wholesalers/retailers, and resellers). These channels are critical for sales amplification, scale, and subsidies (to enable the iPhone to be purchased by many people). In comparison, the direct channel represented 38% of the total revenues. Stores are critical for customer experience, enabling the service business, and branding at scale.
In 2022, Apple generated 62% from indirect channels vs. 38% from its direct channel. In 2021, 64% of Apple’s sales came by indirect channels vs. 36% from its direct channels in 2021.
Apple is a tech giant, and as such, it encompasses a set of value propositions that make Apple’s brand recognized, among consumers. The three fundamental value propositions of Apple’s brand leverage the “Think Different” motto; reliable tech devices for mass markets; and starting in 2019, Apple also started to emphasize more and more privacy to differentiate itself from other tech giants.
Apple’s mission is “to bring the best user experience to its customers through its innovative hardware, software, and services.” And in a manifesto dated 2019 Tim Cook set the vision specified as “We believe that we are on the face of the earth to make great products and that’s not changing.”
In 2022, Apple is worth two and a half trillion dollars. Apple generated over $205 billion from iPhone sales in 2022, which accounted for over 52% of its net sales—followed by services revenues at over $78 billion, wearables and accessories at over $41 billion, Mac sales at $40 billion, and iPad sales at over $29 billion.
Apple’s mission is “to bring the best user experience to its customers through its innovative hardware, software, and services.” And in a manifesto dated 2019 Tim Cook set the vision specified as “We believe that we are on the face of the earth to make great products and that’s not changing.”
It costs Apple $501 to make an iPhone 14 Pro Max, and the company sells it at a base price of $1099. This makes Apple’s base markup on the latest iPhone model at 119% Apple is the only tech company able to sell its tech products at a such a premium, thanks to a combination of hardware, software and marketplace.
While Apple Tim Cook’s salary has been $3 million since 2016, most of Tim Cook’s compensation is performance-based. For instance, in 2022, while the salary of Tim Cook was $3 million, he had total compensation of over $99 million, which comprised stock awards and other incentives and bonuses.
In a functional organizational structure, groups and teams are organized based on function. Therefore, this organization follows a top-down structure, where most decision flows from top management to bottom. Thus, the bottom of the organization mostly follows the strategy detailed by the top of the organization.
In a flat organizational structure, there is little to no middle management between employees and executives. Therefore it reduces the space between employees and executives to enable an effective communication flow within the organization, thus being faster and leaner.
Project portfolio management (PPM) is a systematic approach to selecting and managing a collection of projects aligned with organizational objectives. That is a business process of managing multiple projects which can be identified, prioritized, and managed within the organization. PPM helps organizations optimize their investments by allocating resources efficiently across all initiatives.
Harvard Business School professor Dr. John Kotter has been a thought-leader on organizational change, and he developed Kotter’s 8-step change model, which helps business managers deal with organizational change. Kotter created the 8-step model to drive organizational transformation.
The Nadler-Tushman Congruence Model was created by David Nadler and Michael Tushman at Columbia University. The Nadler-Tushman Congruence Model is a diagnostic tool that identifies problem areas within a company. In the context of business, congruence occurs when the goals of different people or interest groups coincide.
McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.
Mintzberg’s 5Ps of Strategy is a strategy development model that examines five different perspectives (plan, ploy, pattern, position, perspective) to develop a successful business strategy. A sixth perspective has been developed over the years, called Practice, which was created to help businesses execute their strategies.
The COSO framework is a means of designing, implementing, and evaluating control within an organization. The COSO framework’s five components are control environment, risk assessment, control activities, information and communication, and monitoring activities. As a fraud risk management tool, businesses can design, implement, and evaluate internal control procedures.
The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.
Lewin’s change management model helps businesses manage the uncertainty and resistance associated with change. Kurt Lewin, one of the first academics to focus his research on group dynamics, developed a three-stage model. He proposed that the behavior of individuals happened as a function of group behavior.
OpenAI is an artificial intelligence research laboratory that transitioned into a for-profit organization in 2019. The corporate structure is organized around two entities: OpenAI, Inc., which is a single-member Delaware LLC controlled by OpenAI non-profit, And OpenAI LP, which is a capped, for-profit organization. The OpenAI LP is governed by the board of OpenAI, Inc (the foundation), which acts as a General Partner. At the same time, Limited Partners comprise employees of the LP, some of the board members, and other investors like Reid Hoffman’s charitable foundation, Khosla Ventures, and Microsoft, the leading investor in the LP.
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.
The Amazon organizational structure is predominantly hierarchical with elements of function-based structure and geographic divisions. While Amazon started as a lean, flat organization in its early years, it transitioned into a hierarchical organization with its jobs and functions clearly defined as it scaled.
The Coca-Cola Company has a somewhat complex matrix organizational structure with geographic divisions, product divisions, business-type units, and functional groups.
Costco has a matrix organizational structure, which can simply be defined as any structure that combines two or more different types. In this case, a predominant functional structure exists with a more secondary divisional structure.
Costco’s geographic divisions reflect its strong presence in the United States combined with its expanding global presence. There are six divisions in the country alone to reflect its standing as the source of most company revenue.
Compared to competitor Walmart, for example, Costco takes more a decentralized approach to management, decision-making, and autonomy. This allows the company’s stores and divisions to more flexibly respond to local market conditions.
Dell has a functional organizational structure with some degree of decentralization. This means functional departments share information, contribute ideas to the success of the organization and have some degree of decision-making power.
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams are based on the main corporate functions (like HR, product management, investor relations, and so on).
Goldman Sachs has a hierarchical structure with a clear chain of command and defined career advancement process. The structure is also underpinned by business-type divisions and function-based groups.
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.
McKinsey & Company has a decentralized organizational structure with mostly self-managing offices, committees, and employees. There are also functional groups and geographic divisions with proprietary names.
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.
Nestlé has a geographical divisional structure with operations segmented into five key regions. For many years, Swiss multinational food and drink company Nestlé had a complex and decentralized matrix organizational structure where its numerous brands and subsidiaries were free to operate autonomously.
Nike has a matrix organizational structure incorporating geographic divisions. Nike’s matrix structure is also present at the regional and sub-regional levels. Managerial responsibility is segmented according to business unit (apparel, footwear, and equipment) and function (human resources, finance, marketing, sales, and operations).
Patagonia has a particular organizational structure, where its founder, Chouinard, disposed of the company’s ownership in the hands of two non-profits. The Patagonia Purpose Trust, holding 100% of the voting stocks, is in charge of defining the company’s strategic direction. And the Holdfast Collective, a non-profit, holds 100% of non-voting stocks, aiming to re-invest the brand’s dividends into environmental causes.
Samsung has a product-type divisional organizational structure where products determine how resources and business operations are categorized. The main resources around which Samsung’s corporate structure is organized are consumer electronics, IT, and device solutions. In addition, Samsung leadership functions are organized around a few career levels grades, based on experience (assistant, professional, senior professional, and principal professional).
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.
Starbucks follows a matrix organizational structure with a combination of vertical and horizontal structures. It is characterized by multiple, overlapping chains of command and divisions.
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.
Toyota has a divisional organizational structure where business operations are centered around the market, product, and geographic groups. Therefore, Toyota organizes its corporate structure around global hierarchies (most strategic decisions come from Japan’s headquarter), product-based divisions (where the organization is broken down, based on each product line), and geographical divisions (according to the geographical areas under management).
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
