Apple' Retail - The Internal Politics

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As a follow-on to yesterday's post, something struck me about Apple's 10K.

Apple says that it manages its business by geography. Its operating reports reflect it: Americas, Europe, etc. Yet its Retail business - across all geographies - is a separate segment. That makes a lot of sense from a business sense, and is probably a critical reason for its success. However, what is more impressive is that they managed to get it done.

Undoubtedly, Apple's region managers are powerful people. Any executive, and especially powerful ones like at Apple, are likely to have fought tooth and nail against it. First of all, it dilutes their power. Second, and more importantly, the retail stores are likely to, and probably did, cannibalize the other segments. While the retail stores likely did significantly increase sales, it is unlikely that the $9+BN in retail sales last year did not have some portion of it come out of segments. Put in other words, some of the Retail manager's bonus came out of the Americas, Europe, etc. managers' bonuses.

In this scenario, it often is necessary to restructure a comp plan, if not an entire business, to set it up, and even then internal politics starve the new child in its infancy. It is impressive that Apple managed to nurture and grow this one so successfully despite the internal incentives and politics against it.