The History, Development & Growth of the

Company over time

Steve Jobs and Steve Wozniak founded Apple on April 1, 1976. The two Steves, Jobs and Woz

(as he is commonly referred to – see woz.org), have personalities that persist throughout Apple’s

products, even today. Jobs was the consummate salesperson and visionary while Woz was the

inquisitive technical genius. Woz developed his own homemade computer and Jobs saw its

commercial potential. After selling 50 Apple I computer kits to Paul Terrell’s Byte Shop in

Mountain View, CA, Jobs and Woz sought financing to sell their improved version, the Apple II.

They found their financier in Mike Markkula, who in turn hired Michael Scott to be CEO. The

company introduced the Apple II on April 17, 1977, at the same time Commodore released their

PET computer. Once the Apple II came with Visicalc, the progenitor of the modern spreadsheet

program, sales increased dramatically. In 1979, Apple initiated three projects in order to stay

ahead of the competition: 1) the Apple III – their business oriented machine, 2) the Lisa – the

planned successor to the Apple III, and 3) Macintosh.

In 1980, the company released the Apple III to the public and was a commercial flop. It was too

expensive and had several design flaws that made for less-than-stellar quality. One design flaw

was a lack of cooling fans, which allowed chips to overheat. In late 1980, Apple went public,

making the two Steves and Markkula wealthy – to the tune of nine figures. By 1981, the Apple

III was not selling well and Scott infamously fired 40 people on Feb 25 (“Black Wednesday”).

Scott’s direct management style conflicted with the culture Jobs and Markkula preferred, and

Scott resigned in July. Markkula stepped into his position as CEO. In August 1981, IBM

released their PC.

Unimpressed and unafraid, Apple welcomed IBM to the PC market with a slightly smug full-

page ad in the Wall Street Journal. It would not be long before IBM’s PC dominated the market.

The Xerox Alto was the inspiration for Apple’s Lisa. Apple employees were able to examine the

Alto in exchange for allowing Xerox to invest in Apple before Apple’s initial public offering

(IPO).

Apple released the Lisa in January 1983 and was notable for being the first computer sold to the

public that utilized a Graphic User Interface (GUI). Unfortunately, the Lisa was not compatible

with existing computers, and therefore came bundled “with everything and a list price to match.”

At $9,995 (over $21,000 in 2005 dollars), the Lisa missed its target market by a wide margin.

Jobs attempted to control the Lisa project. Scott, unimpressed with the performance of Jobs on

the Apple III project, had Jobs head up the dog-and-pony show for the pending IPO. Jobs,

looking for a project to lead, inserted him into the Macintosh development team. Using his

considerable influence, Jobs was able to procure the resources to produce a computer that was

faster than Lisa, used a GUI, had a mouse, and sold for ¼ th of Lisa’s price. Apple introduced the

Macintosh with great fanfare during the 1984 Super Bowl. The Orwellian-themed commercial

(directed by Ridley Scott, of ‘Alien’ fame) portrayed IBM as Big Brother and embodied

Macintosh and Apple as freedom-seeking individuals breaking away from this oppressive

regime. The commercial was largely successful and sales for the Mac started strong. However,

Mac sales later faded. John Sculley left PepsiCo to join Apple in April 1983. He was famous for

engineering the “Pepsi Challenge”, in which blinded testers tasted both Coke and Pepsi to unveil

the ‘truth’ of the taste of Pepsi. In response to lagging Mac sales, Sculley contrived the ‘Test

Drive a Macintosh’ campaign.

In this promotion, prospective users could take home a Macintosh with only a refundable deposit

on their credit card. While lauded by the public and the advertising industry, this campaign was

a burden on dealers and significantly impeded the availability of Macs to serious buyers. In

1985, Apple tried to have lightening strike twice with their ‘Lemmings’ commercial during the

Super Bowl. In what was becoming Apple’s typical patronizing fashion, these commercial

insulted current PC users by portraying them as witless lemmings, unthinkingly doing harm to

themselves? Although Jobs attempted to overthrow Sculley, the board backed Sculley. Jobs left

Apple to form NeXT computer. After Jobs left in 1985, sales of the Mac “exploded when

Apple’s LaserWriter met Aldus PageMaker.” Apple dominated the desktop publishing market

for years to come. Under Sculley, Apple grew from $600 million in annual sales to $8 billion in

annual sales by 1993. Apple introduced Mac Portables in 1989 and the first PowerBooks in

1991. By 1992, PC competition ate into Apple’s margins and earnings were falling. Sculley was

under pressure to have Apple produce another breakout product. He focused his energy on the

Newton – Apple’s introduction of the Personal Digital Assistant (PDA). Despite Sculley

generating substantial demand for Newton, it did not live up to the hype due to it being severely

underdeveloped. Sculley resigned in 1993 and Michael Spindler replaced him.

Spindler spent most of his time and energies on regaining profitability, with the end goal of

finding a buyer for Apple. Over the next several years, Spindler shopped Apple to Sun

Microsystems, Eastman Kodak, AT&T, and IBM. Meanwhile, Apple was unable to meet the

growing demand for its products due to supplier problems and faulty demand predictions. To

add insult to injury, Microsoft released Windows 95 with great fanfare in 1995. After significant

quarterly losses in 1996, the board replaced Spindler with Dr. Gil Amelio, CEO of National

Semiconductor. Dr. Amelio tried to bring Apple back to basics, simplifying the product lines and

restructuring the company. One of Apple’s most pressing issues at the time was releasing their

next generation operating system (code named “Copland”) to compete with Windows 95.

Amelio and his technology officers found that Copland was so behind schedule that they looked

outside the company to purchase a new OS. Ultimately, and somewhat ironically, they decided

to purchase NeXT computer from Jobs. Naturally, Apple welcomed Jobs back into the fold.

The board became increasingly impatient with Amelio due to sales not rebounding quickly

enough. Apple bought out Amelio’s contract after just 1 ½ years on the job. Jobs eventually

claimed the CEO position. Then, he cleaned house by revamping the board of directors and even

replacing Mike Markkula (who had been with the company since the beginning). Jobs

simultaneously put an end to the fledgling clone licensing agreements (which created a few Mac

clones) and entered into cross-licensing agreements with Microsoft. On May 6, 1998, Apple

introduced the new iMac, a product so secret that most Apple employees had never heard of it.

The new iMac was a runaway success with its translucent case, all-in-one architecture, and ease

of use. It brought Apple to a new market of users – those who had never owned a computer

before.

The year 2001 was an important year for consumers of Apple products. Apple opened their first

25 retail stores (totaling 163 stores in 4 countries as of May 2006). In September 2001, Apple

introduced the new iMac featuring a screen on a swivel. The new iPods (portable music players)

were a tremendous success. Apple sold so many that Apple’s dependence on Mac sales was

significantly less. This was no small feat considering that the 2001 iMac became Apple’s best-

selling product “by a long shot”. Apple offered iTunes (a free application) to help their

consumers organize music on iPods and Macs.

In 2003, Apple expanded iTunes by 1) opening the iTunes music store to allow Mac users to

purchase music online and 2) expanding iTunes to Windows users. Sales of iPods skyrocketed

and currently provide the bulk of product sales to Apple. In 2005, Apple announced that it would

start using Intel-based chips to run Macintosh computers. In April 2006, Apple announced Boot

Camp, which allows users of Intel-based Macs to boot either Mac or Windows OS. This

functionality allows users who may need both OSs to own just one machine to run both, albeit

not simultaneously.

SWOT ANALYSIS

a) Strengths:

(i) Produce innovative products by using innovative technology

(ii) Produce aesthetic / stylish products

(iii) They make diversified products

(iv)Customers of Apple computers are brand loyal

(v) Have technology of interacting with computer using human senses

(vii)They have virus free systems

(vii) First company which adapt calligraphic font style

(viii) Introduce USB and fire wire ports for digital connection

(ix) Has made music downloading website.

b) Weaknesses

(i) Apple has high manufacturing and inventory cost

(ii) Management is not stable

(iii) Has low market share in software industry

(iv)Majority of retail stores located in U.S.A.

(v) No compatibility options in their soft wares

(vi)Decline in sales of iMac

(vii)Less emphasis on marketing issues to create awareness for

their innovative products.

c) Opportunities

(i) Should expand on the basis of sales

(ii) Should open retail stores in different countries

(iii) Should target government and educational institutions

(iv)Should make compatible soft wares

(v) Should capitalize on the basis of virus free systems

(vi)Should introduce the speech recognition program

(vii)They should focus on customized products for customers

(viii)Should start making their own microprocessor chips

d) Threats

(i) Merger & acquisitions of competitors

(ii) High cost can be a limitation in future

(iii) High market share of Microsoft Windows

(iv)Competition increases in music downloading sites.

External Environment

Porter’s 5 Forces:

Risk of entry by potential competitors: Apple faces this risk for every product they make.

Especially in recent times, the success of their combination of the online music store iTunes and

music device iPod has enticed other companies to come up with their own versions of this

strategy. Microsoft has introduced Zunes and its online music store; RealNetworks has teamed

up with SanDisk to make a music device to correspond with RealNetwork’s online music store

Rhapsody. Several other companies have introduced either an online music store like Wal-Mart

and Napster while some have chosen to introduce just similar music devices.

Intensity of competition among established companies within the industry: Although there is

intense completion in the PC industry, the competition is very dynamic. Apple only has about

2.2% and 4.8% market share worldwide and in the US respectively. On the brighter side though,

they have a very strong image among professionals and young people, which makes a niche

market for Apple’s very premium-priced products, which is a rarity in this industry.

Figure: Porters Five Forces

Bargaining power of buyers: Apple’s consumers are mostly passionate ones who are generally

more inclined towards superior quality. This gives Apple the freedom to charge premium prices

and not worry about contain the prices.

Threat of substitutes: As of late, Apple has been a symbol of innovation, coming up with new

products that replace old ones like it did with iPod and the subsequent death of the Sony

Walkman. There are few companies which spend as many resources on R&D as Apple so it’s

hard to suggest that there can be any, let alone challenging, substitutes of mainstream Apple

products. Bargaining power of suppliers: Possibly high as Apple expects maximum quality from every

level of the work process. Suppliers will be more willing to demand good prices for their good

contributions.

Product Life Cycle Stage:

iMac, iBook, MacBook: Growth.

These products are regularly updated with new features and designs. Mainly due to the positive

image that the iPod has created, demand for these products is on the rise.

iPod+ iTunes: Growth~ Maturity

It has been a few years since this product was introduced and it currently holds more than 70% of

the market share.

Environmental Opportunities:

Internet: Internet has allowed Apple to revolutionize the music industry through the iTunes

store. This store has the potential to revolutionize the film industry as well by offering movies to

be downloaded via this online portal. The store currently offers only movies from Disney but is

poised to offer movies from other studios as well soon.

Globalization: This 21st Century phenomenon has allowed Apple to sell its products beyond US

borders. Thanks to Apple’s attention to details and catchy designs, customers from all over the

world should embrace its products if made available to their markets as well.

Outsourcing: This is yet another modern day opportunity which allows companies to sub-

contract the manufacturing of their products to another company of a country that offers cheap

labor. This should allow Apple to either enjoy heavy margin on their sales or increase market

share by offering low prices.

Innovation: Apple has been the face of innovation in recent times by introducing products like

the iMac, iBook, and of course, the iPod. It seems all other companies are just following their

trails by coming up with similar versions of whatever products that Apple makes. This strong

image of Apple should encourage the company to continue to invest in its R&D and come up

with new products regularly and enter new industries; and possibly revolutionize them.

Environmental Threats:

Competitive PC Industry: Companies like Dell, IBM and Compaq are rapidly strengthening

their foothold on this market and Apple continuously seems more like an outsider. PC market

should essentially be Apple’s top priority and the company must find a way back into this

market.

Evaluating the SWOT analysis :

Apple are producing high quality consumer product. So people will not feel uncomfortable to

pay a higher premium for their product. Though research and development cost is high, it brings

high-tech product firstly to customer. As a result, it can maximize the company’s profit. Apple is

gradually moving to retail marketing which is one of the good moves in their marketing strategy.

One of the big weaknesses of Apple is now covered as the company has moved from IBM and

Motorola processor chips to Intel processor chips. Though it should have been done a long time

ago, this was a very vital step to helm in the PC market.

The halo effect of company’s product keeps Apple ahead than its competitors. Apple’s target

market is different from their competitors who are providing low price products. But now days

we see that technological development is going on everywhere of the world; so Apple should

rethink research and development strategy. Other factor is that the world’s economy is not

smooth in recent time so Apple should think the products price from customer perspective.

Overall by looking at the SWOT analysis, it seems that Apple should change its marketing

strategy. The company should focus more on retail marketing around the world. There is a huge

demand for Apple products in third world countries and Apple is missing out a huge margin due

to the intermediaries to the third world market.

Samsung is recently moving into high tech mobile which is a threat for iPhone. Although

Samsung is facing law suits for using Apple’s patent, Samsung or some other company will

eventually catch up iPhone. So Apple should re-evaluate the effectiveness of its research and

development work, pricing strategy and differential services exclusive only for Apple

consumers.

Corporate-Level Strategy:

Apple is pursuing a broad differentiation strategy. Apple differentiates by offering high-quality,

exceptional design, and personalized service. The scope of their strategy is broad targeting customers

ranging from unsophisticated beginner users to specials needs power-users.

All of Apple's products are in the technological market, but they have a lot of different products,

with different kind of functions. Apple offer personal computers, home computers, music

devices, phones, applications, and software and computer tablets. All of these products have a lot

of the same designs and the applications can be used on a lot of these devices without changing a

lot. Most of their products have the same trademarks, with the round button on them, and a fancy

design that is easy to use.

This means that they use both corporate relatedness and operational relatedness. Their human

resources are very important to them, and they use a lot of the same people in more than one

business. They have something between moderate and high level of diversification, with related

constrains. All of their businesses are in the same area.

I think that this is a value-creating diversification, because it gets harder for their competitors to

understand why they are doing so well, and since they have a lot of both tangible and less

tangible resources that can be used in a lot, or all of their business, this can lead to economies of

scope.

Business Level Strategy

Apple adopts a differentiation strategy with its distinctive marketing campaigns that position itself as

a hip alternative to other brands in the industry. Despite being a premium brand that is capable of

commanding high price margins, Apple is still able to undercut its competitors‟ pricing with the

latest iPad 2 release by leveraging its balance sheet and its position as one of the largest buyers to

secure components at low prices. This further gives Apple a competitive advantage.

Apple focuses on making the best products. They are a company that focuses on innovation, and

by that I mean with new products, but also improvements on their existing products. They use

the focused differentiation strategy, by making products that are exclusive, and pretty expensive.

Not everyone can afford an Apple product.

They focus on aligning their business strategy and their marketing strategy with product

development. This is something that they do much better than their competitors, and this is a

huge advantage for them.

Apple's target market is people who are willing to pay more for products with better user

experience, people who like to have fun with technology, music enthusiasts and people who

work with media and design professional. They have done a good job by finding out which

customer needs to satisfy. They have found out that these customers wants a nice, beautiful and

simple design and user input, and they have focused on programs that help you to take pictures,

programs that edit both pictures and videos, and good music programs, both to listen, and to

make music. To make these programs, they have to have to focus on innovation, and have

programmers and designers that can make program like this, that are both easy to use, beautiful

to look at, and can do everything you can expect from programs like these.

Apple’s premium price differentiation strategy has its pitfalls given the intense rivalry of the

industry. Without constant innovation to set itself apart from its competitors, Apple’s products may

appear overpriced in comparison to its rivals. An example was the Mac Mini which failed to outdo

the Windows desktop in terms of functionality. Consumers could get a desktop with more functions

and faster performance at a lower price,58 resulting in less than ideal sales for the Mac Mini.

Given the broad range of products launched from its Digital Hub Strategy, Apple has to divide its

organizational resources and capability to manage the various product arms. These has incurred

opportunity costs for Apple as it could have focused on the more profitable target segments and

utilize its resources more efficiently in generating higher returns. Certain less receptive ventures such

as the Mac Mini and Apple TV prove the case in point and could also highlight the weaknesses of

over diversifying its business.

Company’s Structure:

Apple’s management uses a functional structure as the company is organized in different

functional lines. The CEO is at the very of all functional lines and under the CEO lies the

different departments such as Finance, Operations or Sales, Marketing, Hardware, Software, etc.

This structure groups people according to their expertise and allocate them with corresponding

resources. This structure also allows efficient monitoring and activities whih in turn reduces cost

and increases operational flexibility. As we can see in this Apple’s case, a functional structure

enables the managers with a greater control of organizational activities. By this decentralization

approach, Apple enhances the company’s planning, decision making and control processes due

to better information availability.

Apple primarily uses a geographic structure for managing its business. The corporation’s

reportable operating segments are the Americas, Europe, Japan and Retail. The Americas

segment includes both North and South America. The Europe segment includes European

countries as well as the Middle East and Africa. The Japan segment includes only Japan. The

Retail segment currently operates Apple-owned retail stores in the United States. Like all other

major manufacturing companies, Apple has also moved its major production facility in China to

acquire lower production costs.

So far, as a whole, Apple Inc. is responding well to fit into the global dynamics.

Integration and Control System:

In order to best synchronize the coordination problems between people, functions and divisions,

Apple has successfully used integration mechanisms and control systems. Apple follows direct

contact due to its relatively open and casual culture. Moreover, direct contact among Apple’s

managers allows them to work closely together in terms of problem-solving and other strategic

issues

.

Control systems, on the other hand, are targeted at efficient monitoring or evaluation and enable

the company to achieve higher efficiency, quality, innovation and responsiveness to customers.

In case of efficiency, it can be stated that on one hand Apple apparently produces its goods and

services efficiently, that is explained by its profitability. On the other hand the efficiency in

several areas such as Apple’s network of huge retail stores was doubtful and later proven as huge

success. Most of all, the control system that Apple utilizes the best is their Information

Technology. IT improves information and knowledge or distribution and availability, facilitates

output and financial control and several other positive aspects through a common software

platform, a company-wide intranet and Apple’s general expertise in terms of IT.

Recommendations of Future Strategic Actions for Apple

In light of our SWOT analysis, we have identified a three-pronged approach which Apple may adopt. Leverage on Innovation and Consumer Feedback Given the nature of the industry where technological advancement is rapid with high risk of

product obsolescence, we recommend that Apple continues to invest in R&D in order to keep up

in the fast-paced industry. By constantly innovating and coming up with cutting-edge products,

Apple would be able to maintain its position as one of the industry leaders.

As Apple is adopting a differentiation strategy, it is imperative for Apple to leverage on its

strength in R&D to generate products that will meet the expectations of its customers.

Understanding the tastes and preferences of its consumers is the crux. It is important for Apple to

be receptive to both positive and negative feedback from its consumers and to appropriately

incorporate them into winning solutions.

An example would be recent criticisms on how Apple‟s iPhone and iPad are incompatible with

the popular flash technology. Analysts have predicted that Apple‟s decision not to support Flash

would have a “limiting effect on the iPad‟s sales potential”.68 Such product limitations, as

identified under our weakness analysis, may lead to a loss of certain customer segments.

Though it is not feasible for Apple to act on every criticism, Apple should strive to improve and

re-invent with each new product launch to minimise product limitations without compromising

on its core values and product uniqueness. This will help to ensure that Apple is able to remain

as one of the leading firms in the industry.

Leadership

Job’s has become an icon that strongly represents the firm and its prospects. He has, after all,

played no small role in designing and developing Apple’s core products and has grown to define

Apple’s renegade culture. His skill at salesmanship has been dubbed the “reality distortion field”

and is evident during his keynote speeches (colloquially known as “Steve notes”) which have

been known to move the stock price.69

In discussing Apple’s weaknesses, however, there is a concern of how Jobs‟ health problems and

leave of absence would leave investors and shareholders alike unsettled. It has become apparent

that Jobs is indeed the „soul‟ of the firm and his absence will prove to be an uncertain transition

for the firm.

Therefore, it is our recommendation for Apple to prepare for eventualities and transition of

leadership. Despite Apple’s efforts of having the next line of management team in the pipelines

with plans for future products, it is equally, if not more critical, for Apple to put a new face on

the leadership of the firm. The increased visibility of its leader would reassure stakeholders of

Apple’s future prospects.

Apple should gear itself for the future and groom its successor to be of Jobs caliber. The internal

managerial labor market should be used to select an insider as the new CEO. Due to the internal

successor’s experience and understanding of the firm’s culture, he/she will be better positioned

to carry on Apple’s culture and differentiating strategy.70

From within the firm, Job’s successor should be able to effect Apple’s brand differentiation and

transcend orthodoxy by adopting a transformational leadership style. This will serve to continue

Apple’s strong ability to innovate and to stay ahead of its competitors. At product launches,

Job’s successor should be able to front the firm and its values and connect with the audience by

exuding passion, energy and enthusiasm. Fans will be rallied and the hype created will continue

to keep consumers excited and looking forward to the next revolutionary Apple product. In

essence, Apple will be fronted by a new face representing everything Apple is thus far.

With a clear leader to succeed Jobs in taking charge of the firm while connecting with the

followers, stakeholders and shareholders can be reassured that the firm is in good hands and will

not be losing its vigor in the technology and entertainment industry.

Target Emerging Markets As discussed in our opportunities analysis, the market potential of emerging economies

represents huge opportunities that Apple can tap on. We have two recommendations at which the

firm can implement to increase its presence in these markets.

Launching a New Product Line

Many emerging economies may not have the infrastructure to support some of Apple‟s products.

Mobile and Wi-Fi networks may not be in place. Other issues in such markets include the

premium pricing of Apple products which may exceed what consumers and businesses are able

to afford.

One of the ways Apple can increase market presence is to develop simple but adequate products

specifically for these markets. Apple can leverage on its expertise in research and innovation, as

well as its strong balance sheet to obtain bulk discounts from suppliers to drive costs down.

Given the limitations in certain emerging markets, product features which are not supported by

the infrastructure such as the 3G network will be dropped for the new product line. This

reduction of features will enable the products to be relatively more affordable to consumers of

these countries.

Brand dilution can be avoided by keeping the product line separate from the mainstream. The

products will not be marketed as a cheaper alternative as product quality standards will still be

maintained. The marketing and the launching of these products will also be done exclusively

within these targeted markets.

Expand on Its Current CSR Initiatives: Throughout its history, Apple has focused on the use of technology in education and has been

committed to delivering tools for the education sector. Some of the firm’s initiatives in the

education sector include having an online education store, which allows students and educators

to purchase most of its available products at a discount, as well as support mobile learning

through the iTunes U (for University) programmes where students and teachers can share and

distribute educational media through iTunes.

However, such initiatives are not implemented in many education sectors in less developed cities

across emerging economies such as Brazil, Russia, India and China. Given the rapid and

unpredictable pace of product obsolesces, there is a likelihood that Apple will be faced with

excess inventory, due either to inaccurate forecasting or the unpredictable consumer behavior.

Apple could donate, or sell at a discount, these excess stocks to schools and aid in upgrading the

school’s infrastructure, as well as enhancing the learning experience of youths. This initiative

can be an expansion of Apple’s CSR programmes and will increase Apple’s visibility and brand

awareness in these emerging economies. In the long run, when these markets mature, Apple will

be well poised ahead of its competitors to roll out its full product range.