Apple, Inc. in 2012: Can It Sustain Its growth and Defend ...€¦ · APPLE INC. IN 2012: CAN IT SUSTAIN ITS GROWTH AND DEFEND Ledford 2 Introduction Apple Inc. should alter its mission

APPLE INC. IN 2012: CAN IT SUSTAIN ITS GROWTH AND DEFEND

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Apple, Inc. in 2012: Can It Sustain Its growth and Defend Against New Competitive Threats?

Brenda C. Ledford

MGMT 670

Professor Bosin

A1- Case Assignment

October 21, 2013


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Introduction

Apple Inc. should alter its mission and vision to suit the new leadership style and address the

driving factors in the industry’s external environment. It is advised that Apple follow the short term

and long term recommendations for each significant change identified. The external environment

analysis utilizing Porter’s Five Forces assessment reveals the following five most significant changes that

will influence future profitability: global economic uncertainty, regulatory/legal issues, competitive

rivalry, expanding globalization, and product/technology innovation. The original mission and vision

statements where ambiguous were restated to reflect the current leadership characteristics and beliefs

about the company. Failure to align the company’s mission and vision with strategic implementation of

recommendations will result in additional loss of market share and possibly undermine future

profitability.

Mission and Vision

Locating Apple’s mission and vision statements was elusive and resulted in extensive research

into industry business resources as well as review of the company’s latest press releases. The search

yielded conflicting assessments of what the mission and vision statements entail (see Appendix A and

Appendix B for mission statements, Appendix C for Value statement). In the end it was decided to

accept the second mission statement(Appendix B) because this statement coincided with what

appeared at the bottom of a recent Apple press release and also most closely matched the definition

of a mission statement found in Bosin (2013) and the Thompson (2013) course text. The statement

located in Appendix A, mislabeled as the company’s new mission by news websites, actually reads more

in line with a vision statement. Thompson (2013) defines a vision as a statement that “describes the

long-term path of the company while laying out a strategic course” (p. 14). However, the statement in

Appendix A is: generic in that it might be applied to any number of businesses or industries , and offers

‘feel good’ sentiments without conveying much about ‘how’ the company will achieve goals. Additional


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research was conducted to grasp the character of new CEO Tim Cook in an effort to reformulate the

vision, see Appendix D for quoted excerpts from an interview given to CNN.com. In summary, Cook

vows to retain previous leadership’s goals and beliefs and commitment to only expand into areas where

their products can make meaningful contributions to the respective communities. While admirable, the

intent is vague and can mean many things to many people. Please find the mission statement and re-

crafted vision below.

Mission:

“Apple designs Macs, the best personal computers in the world, along with OS x, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad”

Restated Vision- based on current leadership:

To bring consumers excellent and innovative personnel computers, mobile devices, and related services that contribute to societal wellbeing in meaningful ways wherever it sells its products.

Five Most Significant Changes

An external environmental scan was completed using Porter’s Five Forces as a guide(please see

Appendix E ). This effort utilized the Gamble and Merino (2013) case information and the 2012 Apple,

Inc. 10K report and additional resources where applicable (see Appendix E for full details). This scan

revealed that the five most significant changes occurring within the external environment are global

economic uncertainty, current and pending regulatory/legal issues, competitive rivalry, expanding

globalization, and product/technology innovation. Full evidence for selection of each change is provided

in Appendices F-J; a summary appears below.

Globalization changes occurring in the external environment are significant because they signal

a geographic and demographic shift in where the industry is going and who they are serving. The

potential for Asia is tremendous, but not without challenges. If Apple were to innovate the technology

to provide the China/Asia market with character keyboards, it would capture the buyers of standard cell


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phones who have expressed an interest in smartphones with character keyboard (Gamble & Merino,

2013, p. C- 195).

Global Economic Uncertainty is another significant change occurring in the external

environment that will take skill to navigate and stay on top of. While earlier economic challenges saw

declines in demand, Apple was able to sustain iPhone sales during the United States recession (Gamble

& Merino, 2013). The European Debt Crisis is an ongoing watch factor that may hit anywhere in the

region at anytime. Making sure to understand buyer demand and confidence in suppliers will be key

to sustaining sales through future European debt crises; as well as, keeping an eye on working capital

and keeping company debt low(see Appendix K for specifics on financials).

Current and pending regulatory and legal issues are another major change that offers

uncertainty. The company does not know when a negative court ruling will cost them millions. For

example, if Apple is required to terminate current contracts with e-book publishers, this would cause a

shift in where buyers will be able to buy e-books (Tibken, 2013). Apple has always prided itself on

retaining ownership of its patents, while other competitors such as Google acquired the patent and

product manufacturing cache of Motorola ( Efrati & Ante, 2011). Perhaps figuring out a way to protect

patents while diffusing the technologies to compete with the Android operating system would create

additional revenue and curtail expenditures of defending its copyright and patents.

Competitive Rivalry remains a perpetual change within the external landscape that can

potentially influence Apple’s future profitability. The tactics occurring within this external environment ,

cutting prices, acquisition of rivals, diffusion of technological know-how, all threaten to erode profits in

coming years. Product and Technology Innovation the fifth change occurring in the external landscape

that is important to sustaining Apple’s image and standing in the marketplace today as a lead innovator.


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Retaining the reputation for bringing innovative and life changing products and technology to market

quicker than rivals needs to remain a top priority.

Recommendations

Recommendation for alleviating risks and sustaining actions that are currently working against

profitability is important. Additionally, a comparison between Apple, Inc. , Google, Inc. and Samsung

was done to view the comparison on spending, working capital, total net income and debt structures.

This will serve as additional support when making recommendations. Because Google, Inc. only

acquire Motorola in 2012 the study did not go back further than that. The following recommendations

will outline both short term and long term actions and will take into consideration the stated values of

the company found in Appendix C (Thompson, 2013, pp. 17, 20). Full details on recommendations can

be located in Appendix N. A brief summary of those recommendations is provided here.

Short Term Recommendations

1. Aggressively increase advertising and marketing expenditure in current and prospective regions 2. Update value statement 3. Update vision statement to include expansion into new geographic areas 4. Proactively control and distribute technologies to other competitors as Google has done with

Android 5. Revisit mission and vision and alter where needed to reflect changes occurring in external

landscape 6. increase R & D budget to 10% of revenues

Long Term Recommendations

1. Actively pursue partnerships to establish retail stores in potential new regions 2. add wording to value statement that initiates a proactive agenda for social responsibility and

contribution in current and new regions 3. Consider purchasing an e-book publisher and pursuing various strategies for gaining and

retaining customers, also instill a subscription service for library like check out of e-books 4. Consider integrating backward to purchase suppliers businesses of key products so that it can

have more control over shortages and pricing 5. Consider steps to rebrand iPod to new groups of consumers who have previously been left out

of marketing 6. Subscriptions services for the App Store and ITunes

Re-evaluation of Mission and Vision


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The previous mission and vision statements are deficient because they do not consider the

current external environment driving changes that will influence future profitability (Thompson, 2013,

p. 14). The recommendations put forth in this analysis offer a concrete path for future strategic

direction and should be therefore incorporated into the company’s mission and vision. Bosin (2013)

declares that when new leadership occurs within a company, it can be an opportunity to examine the

mission and vision to make sure they are tailored to both internal capabilities of the company and the

external forces it faces in the industry. The following will review the recommendation summary above

and determine if it is with the scope of the State mission and vision. If not in scope, a brief description

of how the mission and/or vision might be altered is provided.

Short Term Recommendation Evaluation:

1. Will change the vision. The vision should specifically declare active pursuit of new regions. 2. Mission/value statement will be tailored to reflect the seminal goal of remaining debt-free to

ensure future sustainability 3. Will change the vision statement because it should reflect that the ‘significant social

contribution’ is not the driving factor in determining where Apple expands its business. 4. Will change the mission/value statement to include that the company will no longer be hoarding

its technology- but perhaps in the name of common good or social contribution it is deciding to actively share capabilities.

5. Definitely affects both the mission/value and vision statements by evaluating alignment of older declarations with the current changes and challenges the company is facing.

6. will not change the vision , as remaining innovative is a current pledge

Long Term Recommendation Evaluation:

1. Will change the vision in that it will need to mention active pursuit of partnerships and expansion as a means of reaching the mission

2. The value statement will see a significant shift away from reactive social contribution to proactive integration of social responsibility where ever the company foot treads

3. Might change both the mission and vision if what the company does changes to include e-book publishing and may need to add to the vision the direction this will take in the future

4. May change mission in that if Apple becomes its own supplier, this would need to be included as part of ‘what they do’

5. These collective recommendations (5-7) will change the mission in who Apple serves, and the services it provides through the App store and iTunes.


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References

Apple Inc. (2012a). Apple hardware: Regulatory and product safety certifications [e-Article

#TA37785]. Retrieved October 16, 2013 from the Apple.com website

http://support.apple.com/kb/TA37785?viewlocale=en_US

Apple, Inc. (2012b). 10 K Annual report [report]. Retrieved October 18, 2013 from

http://investor.apple.com/financials.cfm

Blodget, H. (2013, August 3). Apple’s ‘mission statement’ is making people worry that the

company has gone to hell[ weekly blog post]. Retrieved from the Business Insider

website http://www.businessinsider.com/apples-new-mission-statement-2013-8

Bloomberg News. (2013, October 9). Apple moves closer to China mobile with as seeking

network skill [e-article]. Retrieved from the Bloomberg News website

http:/www.bloomberg.com

Bosin, M. (2013). Mission, Vision, Strategies [lecture notes]. Lecture notes for University of

Maryland University College, MGMT 670 Capstone course, Fall, 2013.

Bush, W.R. (2007, January). Software, regulation, and domain specificity. Information and

Software Technology, 49(1), 44-54.

CNN.com. (2009, January 22). The Cook doctrine at Apple [blog post]. Retrieved from

http://features.blogs.fortune.cnn.com/2009/01/22/the-cook-doctrine-at-apple

Efrati, A., & Ante, S.E. (2011, August 6). Google’s $12.5 billion Gamble: Web giant pays big for

Motorola’s phone business, Patents; Risks alienating allies [e-article].Retrieved from The


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Wall Street Journal Website

http://online.wsj.com/news/articles/SB100014240531119033929045765099538214379

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Epstein, Z. (2013, April, 11). Samsung spent billions to ‘change the game on Apple’ [e-article].

Retrieved from the BGR website http://bgr.com/2013/04/11/samsung-advertising-

spend-analysis-430831/

Farzed, R. (2013, March 25). The hidden value of Dell: 3,449 patents and other intellectual

property [e-article]. Retrieved the Bloomberg Businessweek website

http://www.businessweek.com/articles/2013-03-25/the-hidden-value-of-dell-3-449-

patents-and-other-intellectual-property

Gamble, J.E., & Marino, L. (2013). Apple, Inc., in 2012: Can it sustain its growth and defend

against new competitive threats. In A.A. Thompson (Author), STRATEGY: Core Concepts

and Analytical Approaches (2nd ed.)(pp. C188-C197) [ebook]. Retrieved from

https://www.glo-bus.com/

Google, Inc. (2013). Form 10 Q. Retrieved from

http://investor.google.com/pdf/20130630_google_10Q.pdf

Guglielmo, C. (2013a, June 15). Apple Loop: Cook unveils mission statement iOS 7 gets colorful,

new iPhone in the fall [Blog post]. Retrieved from Forbes web site

http://www.forbes.com


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Guglielmo, C. (2013b, October 9). Apple to expand distribution of new iPhones to more than 50

countries by Nov. 1 [Blog post]. Retrieved from the Forbes website

http://www.forbes.com

Khan, J. (2013, March 13). Samsung’s add budget exploded past Apple and the rest in the field in

2012 [Blog post]. Retrieved from the 9To5Mac website

http://9to5mac.com/2013/03/13/samsungs-ad-budget-exploded-past-apple-and-the-

rest-of-the-field-in-2012/

Meyers, D. (2010, August 24). Regulations remain stiff challenge for mobile industry [e-Report].

Retrieved on October 16, 2013 from the RCRWireless U.S. website at

http://www.rcrwireless.com/

Murai, R., & Jim, C. (2013, April 21). Apple’s dimming luster roils suppliers, investors [e-Article].

Retrieved on June 13, 2013 from http://www.reuters.com/article/2013/04/22/us-apple-

suppliers-idUSBRE93K04520130422

Ogg, E. (2012, February 14). Tim Cook’s vision for Apple, and its cash [e-article]. Retrieved form

the Gigaom.com website at http://gigaom.com/2012/02/14/tim-cooks-vision-for-apple-

and-its-cash/

Rosenstock, J., & Bessette, A. (2013, October 14). Angela Ahrendts to join Apple as senior vice

president of retail and online stores [Apple press release]. Retrieved from

http://www.apple.com/pr/library/2013/10/15Angela-Ahrendts-to-Join-Apple-as-Senior-

Vice-President-of-Retail-and-Online-Stores.html

Samsung Electronics Co. (2013). 2013 2Q report. Retrieved from


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https://www.samsung.com/us/aboutsamsung/investor_relations/financial_information/downl

oads/2013/2013_con_quarter02_all.pdf

Shah, M. (2012, June 12). A review of Hewlett-Packard’s patent portfolio [e-article]. Retrieved

October 16, 2013 from http://www.trefis.com/stock/shah/articles/132197/a-review-of-

hewlett-packards-patent-portfolio/2012-07-1

The New York Times. (2013, February 10). Apple’s big spending competitor. Retrieved from

http://www.nytimes.com/interactive/2013/02/10/business/0210-apples-big-spending-

competitor.html?_r=0

Thompson, A. A. (2013). Charting a company’s long-term direction: Vision, mission, objectives,

and strategy. In, STRATEGY: Core Concepts and Analytical Approaches (2nd ed.)(pp. 12-

31)[e-book]. Retrieved from https://www.glo-bus.com/

Tibken, S. (2013, August 9). Judge says she won’t suspend ruling in Apple e-book case: That

likely means Apple will have to face whatever remedies the court sets, which could

include ending its current contracts with e-book publishers [e-article]. Retrieved from the

CNET website http://news.cnet.com/8301-13579_3-57597855-37/judge-says-she-wont-

suspend-ruling-in-apple-e-books-case/

Yarrow, J. (2013, September 25). Samsung is on track to spend ~$13 billion in marketing this

year [e-article]. Retrieved from the Business Insider website

http://www.businessinsider.com/samsung-ad-spending-2013-9


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Appendix A

First possible mission statement

This statement was put forth by CEO Tim Cook at the Worldwide Developers Conference, the company is entitling this statement Intention:

If everyone/ is busy making everything/ how can anyone perfect anything?/we start to confuse convenience/ with joy/ abundance with choice./designing something requires/ focus/ the first thing we ask is/what do people want to feel?/delight/surprise/love/ connection/then we begin to craft around our intention/it takes time…/there are thousands of no’s/for every yes./we simplify/we perfect/we start over/until everything we touch/enhances each life/it touches./only then do we sign our work./ Designed by Apple in California (Guglielmo, 2013a, para 1).


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Appendix B

Second Mission Statement

Apple designs Macs, the best personal computers in the world, along with OS x, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad (Blodget, 2013; Rosenstock and Bessette, 2013) .


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Appendix C

Value Statement

We believe that we are on the face of the earth to make great products and that’s not changing. We are constantly focusing on innovating. We believe in the simple not the complex. We believe that we need to own and control the primary technologies behind the products that we make, and participate only in markets where we can make a significant contribution. We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and meaningful to us. We believe in deep collaboration and cross-pollination of our groups, which allows us to innovate in a way that others cannot. And frankly, we don’t settle for anything less than excellence in every group in th e company, and we have the self-honesty to admit when we’re wrong and the courage to change. And I think regardless of who is in what job those values are so embedded in this company that Apple will do extremely well (CNN, 2009).


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Appendix D

Interview Quote from CNN

Apple is this unique company, unique culture that you can’t replicate. And I’m not going to witness or prevent the slow undoing of it- because I believe in it so deeply. Steve [Jobs] drilled in all of us over many years that the company should revolve around great products and we should stay extremely focused on a few things rather than so many that we did nothing well. And we should only go into markets where we can make a significant contribution to society, not just sell a lot of products. Along with keeping excellence as an expectation of everything at Apple, these are the things I focus on (Ogg, 2012).


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Appendix E

Porter’s Five Forces Analysis

Industry competitors by product Substitute Products

Buyer Bargaining Power factors

Potential New Entrants

Supplier Bargaining power

Smartphones

Samsung

Nokia

Research in Motion (RIM)

HTC

Others Tablets

Dell

Acer

HP

RIM

Google PCs

HP

Dell

Toshiba

Acer

Others Operating System

Google- Android Proprietary/integrated services

Amazon.com

Google Play Source: Gamble & Marino (2013)

There is a constant threat of substitutes in all areas that Apple currently is involved in

1.Low cost of switching with the diffusion of copycat products: tablets, smartphones, PCs 2.buyer demand is weak in PC industry and personal media industry 3. brand awareness empowers 4. some sellers products are specific to particular products this serves to weaken buyer power Source: Thompson (2013)

Entry threats are fairly strong because there is a larger number of rival present. Samsung demonstrated that they were able to leap frog over the experience/know how entry barrier by using Google’s Android OS in the Galaxy smartphone. Existing members are acquiring other companies and edging out competitors. Some members are looking to take market share in new market opening up. Demand of smartphones and tablets is rising. Source: Gamble & Marino (2013) ; Thompson (2013)

Examination of “Supply Components” section of the 2012 Apple 10 K reveals that Apple is at the mercy of many suppliers for exclusive delivery of vital components for its products. There are current Shortages of components, while the rise of rivals has increased the demand for vital components form suppliers. Additionally at least one supplier (Google has decided to integrate forward and has acquired the means to enter several of the industries that Apple compete in. HP also has integrated backward and is a software supplier for its products. Source: Apple, Inc. (2012b) !0K report and Gamble and Marino (2013), Murai and Jim (2013)


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Appendix F

Globalization Changes

Change Factors Evidence

Demand for products growing in developing countries

“Overall Net sales in Asia increased by 174% from 2010-2011” (Gamble & Merino, 2013, Exhibit 2, p. C-190)

“demand for PC’s in Asia were healthy when other regions saw a decline” (Gamble & Merino, 2013,p. C-192)

“release of the iPhone 3G was in 70 countries in 2008”(Gamble & Merino, 2013, p. C-195)

“iPhone 4S began selling iPhone in Chine in January 2012 making it available to 90 countries”(Gamble & Merino, 2013, p. C-197)

Geographical challenges may impact future profitability for all companies in the smartphone

industry

“China the largest region for growth potential ( 700 million potential customers) “(Gamble & Merino, 2013, p. C-195)

“Demand for a smartphone that presents users with a keyboard for Chinese characters makes the standard cell phones more popular” (Gamble & Merino, 2013, p. C-195)

“China expected to hold nearly 10% of the smartphone sales in future” (Gamble & Merino, 2013, p. C-197)


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Appendix G

Global Economic Uncertainty

Change Factors Evidence Recession in the US between 2007-2008 “The recession impacted projected sales in negative ways

within the PC market. PC’s were expected to grow 5-6% by 2012, however, the recession caused decline in revenues and unit shipments” (Gamble & Merino, 2013, p. C-190)

“tough economic conditions that contributed to the decline in PC sales hit Dell hard- revenues declined from 61.1 billion in 2008 to 52.9 billion in 2010 the modest growth in other regions permitted China to become the world’s largest global market for PCs for 201”1(Gamble & Merino, 2013, p. C -192)

“net earnings for Dell fell from 2.9 billion in 2008 to 1.4 billion in 2010” (Gamble & Merino, 2013, p. C -192)

Recovery from economic recession boosts sales beginning in 2009 “Apple reported a 7% increase in Mac computer sales by 2012 to nearly 4 million units” (Gamble & Merino, 2013, p. C-187)

“Net sales for Apple portable computers increased by 26% from 2009 to 2010, and 56% from 2010-2011 in America” (Gamble & Merino, 2013, p. C -190)

“However, net sales and unit sales of other main product lines (Macs, iPod, iPhone) there was a decrease in sales with the most prominent increase occurring in 2011 with the introduction of the iPad” (Gamble & Merino, 2013, p. C -190)

“Apple has steadily increased its market share o f the PC market since 2007 from 5.8% to 10.7%” (Gamble & Merino, 2013, p. C -191)

“Leaders experienced less that 30% of the market share during the same period with nearly 24% of the market share reflecting a combined share for vendors other than the top 5”(Gamble & Merino, 2013, p. C- )

“the modest growth in other regions permitted China to become the world’s largest global market for PCs for 2011”(Gamble & Merino, 2013, p. C -192

“2011 showed an increase in revenues and net income for Dell (the modest growth in other regions permitted China to become the world’s largest global market for PCs for 2011”(Gamble & Merino, 2013, p. C -193)

“with 2012 net income rising to nearly 3.5 billion)( the modest growth in other regions permitted China to become the world’s largest global market for PCs for 2011”(Gamble & Merino, 2013, p. C -194

European Debt Crisis “dampened PC demand in Europe with overall sales fall 9% from 2010-2011” (Gamble & Merino, 2013, p. C -190)

“demand in Japan and US fell more drastically during the period of uncertainty in Europe” (Gamble & Merino, 2013, p. C -192)

“Japan PC sales fell by 7% during 2011 ;US sales fell 5% in industry revenues during 2011”(Gamble & Merino, 2013, p. C -192)


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Appendix H

Current and Pending Regulatory/Legal Issues


Litigation, lawsuits for copyright infringement/intellectual property

“Apple won lawsuit against Samsung for copyright infringement in August 2012 for

1Billion”(Gamble & Merino, 2013, p. C -197)

Pending: Apple iPod iTunes Antitrust case (Apple, Inc. , 2012b, p.21)

Lost Apple ebooks Antitrust Litigations and appeal (Tibken, 2013)

Google’s initiation of acquiring Motorola Mobility resulted from pending lawsuits

for Apple (Efrati & Ante, 2011)

Regulatory issues Apple and other rivals continually must face regulatory and product safety

certification standards (Apple, 2012a; Bush, 2007; Meyers, 2010)

Patents and copyright all companies in the industry deal with patent and copyright protection as a

necessary expenditure (Apple, 2012b;Farzed, 2013; Gamble & Merino,

2013; Shah, 2012)


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Appendix I

Competitive Rivalry


Threat of entry [ depends on barriers to entry that are present and the reaction from existing competitors (Porter, 1980, p. 7)]

Google enters tablet race itself(Gamble & Merino, 2013, p. C -193)

Android also used in competitors tablets(c-192

“Google is entering the download business with Google Play with hopes of capturing market share for music sales of Android based mobile phones”(Gamble & Merino, 2013, p. C -195

“Google entered into the smartphone market with its Android operating system that matched features of the iPhone” (Gamble & Merino, 2013, p. C -197)

“Google was set to enter the handset segment of the smartphone industry and table business with the purchase of Motorola Mobility in 2012” (Gamble & Merino, 2013, p. C -197)

Competitors ahead in market and sales “Microsoft’s market capitalization of $619 billion on December 30 of 1999 was greater than Apples”(Gamble &

Merino, 2013, p. C -187)

“Samsung number 1 market share for smartphones” (Gamble & Merino, 2913, p. C-196)

“in 2012 Android was the most widely used operating system platform for smart phones in the US with 50.9% share of the market “(Gamble & Merino, 2913, p. C-187)

Substitute products to market “Samsung surged to the top of the smartphone market in late 2011 with the introduction of Galaxy and additional models using Google’s Android OS- this matched key features of the iPhone”(Gamble & Merino, 2913, p. C-196)

“Google introduced its tablet, Nexus 7 in 2012”(Gamble & Merino, 2913, p. C-193)

“Dell, HP and others were rolling out new tablet products as well” (Gamble & Merino, 2913, p. C 187)

“Amazon.com second-largest seller of digital music in the US with 12% of the market” (Apple has 65% in 2011) (Gamble & Merino, 2913, p. C -195)

“in China popular selling mobile phones are quickly counterfeited” (c Gamble & Merino, 2913, p. C -195)

“Google’s Android OS became #1 smartphone platform in the US with 50.9% of market share in May of 2012 “(Gamble & Merino, 2913, p. C -197

“Samsung with the Android operating system surpassed iPhone sales to become #1 brand in 2011 and 2012”(Gamble & Merino, 2913, p. C -197)

Exit of major firms “Google purchased Motorola Mobility in 2012 for $12.5 billion dollars” (Gamble & Merino, 2013, p. C-197)

Now has ability to forward integrate to supplying market with own hardware like phones, tablets, etc. rather than just being a software supplier- potential to integrate its software to mimic Apple’s moves (Efrati & Ante, 2011)

came with 17,000 patents (Efrati & Ante, 2011)

risks involve Google not having the experience to run the manufacturing plants, inventory management, or relationships with suppliers and buyers (Efrati & Ante, 2011)

“Google still marketing its Android software to dozens of competitors for their phones “(Efrati & Ante, 2011)

“HP acquired Palm for 1.2 billion in May 2010 in an attempt to accelerate its entry into th e tablet market”


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(Gamble & Merino, 2913, p. C -192)

“HP divested sale of Compaq PC production because of dwindling sales “ (Gamble & Merino, 2913, p. C -193)

Brand awareness “Apple’s lead over rivals in brand awareness is fading. Samsung’s intro of the Galaxy couldn’t keep Apple customers loyal “(Gamble & Merino, 2913, p. C -188)

brand awareness and loyalty were once a strategic asset for Apple and often gave new products a boost on the competition when introduced (Gamble & Merino, 2913, pp. C 188-189)

“Mac saw sales increase slightly as a ‘halo effect’ from iPhone and iPod, iPad sales” (Gamble & Merino, 2913, p. C -192)

Various and diverse models for computer industry with competition offering comparable substitutes the number of models and type so f PCs available flood the market with less expensive products (Gamble & Merino, 2913, p. C -192)

“Apple sells 3 desktop versions, 2 notebooks, and all with higher pricing” (Gamble & Merino, 2913, p. C -192)

reducing price to gain more unit sales “Apple lowered the price on future generations of iPad to ensure sales and market share stayed high” (Gamble & Merino, 2913, p. C -193)

“Lenovos deep price discounts yielded 36% of volume gain Q1 2011 and Q1 2012” (Gamble & Merino, 2913, p. C -194)

competition becoming more broadly diversified “HP broadly diversified offering: information technology consulting services. large enterprise systems, software, personal computers, printers, imaging devices and financial services”(Gamble & Merino, 2913, p. C -193)

“Dell offered wide range of desktop computers and portables- low end, low-priced models to state-of-the-art high-priced models

offered servers, workstations, peripherals such as printers, monitors, projectors, Wi-Fi products”(Gamble & Merino, 2913, p. C -194)

“offered an Android-based tablet and Windows Phone 7 smartphone in 2012”(Gamble & Merino, 2913, p. C -194)

suppliers integrating backward or forward Google purchased Motorola mobility and thus enable itself the means to integrate beyond its software supplier relationships to produce substitute products

HP produced software (Gamble & Merino, 2913, p. C -193)

Partnerships “when Apple released its iPhone 3G it exclusively made it available in the US through A T and T Mobility“( Gamble & Merino, 2913, p. C -195)

“Apple expanded carriers to include Verizon, Sprint and C-Spire in the US with multiple carriers throughout Europe and Asia “(Gamble & Merino, 2913, p. C -195)

“Apple began selling its iPhone 4S in China in January 2012 with China Telecom- the country’s second largest wireless provider”(Gamble & Merino, 2913, p. C -197)


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Appendix J

Product/Technology Innovation

Change Factors Evidence Lack of innovation or new generational rollouts reduces demand and

profits “those companies struggling to get touch screen

technology tablets to market, utilized smartphone microprocessors and Google’s Android operating system in tablets” (Gamble & Merino, 2013, p. C -192)

“the rise in popularity of tablet computers affected PC sales “(Gamble & Merino, 2013, p. C -192

“became common replacements for aging laptops and PCs among non-business consumers”(Gamble & Merino, 2013, p. C -192)

Ongoing presentation of innovation subsequent generations of technology increases profits and driving competition

“contained upgraded features (dual core processor)” (Gamble & Merino, 2013, p. C -192)

“3rd generation iPad utilized quad core graphics chip, 5 megapixel camera capable of capturing photos and 1080p HD video and ultra-high resolution 9.7 inch display”(Gamble & Merino, 2013, p. C -192)

“iPhone combined iPod capabilities, wireless phone , and Wi-Fi internet capabilities also include built in GOS system, video calling, digital camera, video recording”,( Gamble & Merino, 2013, p. C -195)

“Apple needs a steady stream of innovative new products to justify the higher price

currently leadership f Apple untested in innovative product Apple left everyone else playing catch up with its debut of the tablet in 2010”(Gamble & Merino, 2013, p. C -192)

“Competitors continued to achieve touch screen capabilities [Dell, Acer, HP, RIM] “( Gamble & Merino, 2013, p. C -192)

technology becoming more widely distributed so that competitors can emulate products

“Apple kept bringing innovative products to the market, while closely guarding the secrets behind the technology”(Gamble & Merino, 2013, p. C 188)

“even today the statements coming out of Apple indicate they still are hording know how as a competitive factor”

“Microsoft’s Windows 95 matched many capabilities of the Mac OS and prevented the Power Mac from gaining significant market share” (Gamble & Merino, 2013, p. C 188)

proprietary services such as iTunes and App Store Apple is very innovative at proprietary support services such as iTunes and the App Store. These (Gamble & Merino, 2013, p. C 188)

“Apple’s iTunes/iPod combinations offered a wide array of downloads: music, videos, movies, TV shows and could be played on multiple Apple devices: iPods, iPhones, iPads, Apple TV “( Gamble & Merino, 2013, p. C -194

App Store worked in conjunction with iPhone and iPad( Gamble & Merino, 2013, p. C -195)

“additional service like iMatch and iCloud services integrated apps, iBooks and iTunes could be stored on devices owned by the individualiCloud permitted sharing between users” (Gamble & Merino, 2013, p. C -195

psychological impact of switching “despite Apple’s proprietary operating system and strong graphics-handling capabilities differentiated MACs from other PCs, but many business users hesitated because of pricing and learning curve of mastering the proprietary


Ledford 22

operating system” ( Gamble & Merino, 2013, p. C -192)

“Apple tried to combat this by designing the Mac OS X operating system to emulate the look and functionality of its iOS operating system used for its mobile devices”(Gamble & Merino, 2013, p. C -192)


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Appendix K

Financial Comparisons

Apple, Inc. Google, Inc. Samsung Electronics Co.

2012 2013

(approximate)

2012 2013 2012 2013

Research and

Development (in

millions)

~$3.4

Billion

(2.2% of

sales)

~4.7 billion $2,979 $3,824 10.5 Billion

(5.7% of

sales)

Advertising/Marketing $333(US)

1Billion

total

~1.32 Billion $2,682 $3,321 $401(US)

4Billion

total

12.7 Billion

Net Income $41,733 5,674 6,574 8,908,307 12,984,911

Long-term debt - $2,988 $1,989 3,151,281 1,831,896

Working Capital

(Current Assets-

Current Liabilities)

$137,522 $79,421 $75,853 $121,481 $150,485,149

Sources: Apple, In. (2012b), Epstein (2013), Google, Inc. (2013). Khan (2013), Samsung Electronics Co. (2013), The New York Times (2013), & Yarrow (2013). Please see Appendices L-M for various figures and statistics used in this table.


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Appendix L

Advertising and Marketing Budget Comparison for U.S. Region

Khan (2013) http://9to5mac.com/2013/03/13/samsungs-ad-budget-exploded-past-apple-and-the-rest-of-the-field-in-2012/

http://9to5mac.com/2013/03/13/samsungs-ad-budget-exploded-past-apple-and-the-rest-of-the-field-in-2012/


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Appendix M

Advertising Expenditures

Epstein (2013) http://bgr.com/2013/04/11/samsung-advertising-spend-analysis-430831/

http://bgr.com/2013/04/11/samsung-advertising-spend-analysis-430831/

http://boygeniusreport.files.wordpress.com/2013/04/samsung-advertising-spend-2012.jpeg


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Appendix M

Research and Development and Advertising Spending

The New York Times (2013) http://www.nytimes.com/interactive/2013/02/10/business/0210-apples-big-spending-competitor.html?_r=0

http://www.nytimes.com/interactive/2013/02/10/business/0210-apples-big-spending-competitor.html?_r=0


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Appendix N

Recommendations

Recommendations

Globalization Change Factor Recommendations: Short Term:

Aggressively pursue advertising in all areas and specifically in areas marked for potential expansion. research notes that Samsung outspent Apple in advertising by almost 3 times (Apple: 1 Billion in 2012, Samsung 4 billion in 2012 (Khan, 2013). Apple is set to release its 2013 figure later this week but projected advertising expenditures suggest their 2013 budget may only increase by about 32%, given past increases. This would be under Google’s 3.3 billion dollar budget and far below Samsung’s nearly $13 billion. While its working capital is under Samsung, Apple carries no debt so this is an advantage in increasing the advertising budget for next year.

Long Term:

Begin pursuing partnerships and establishment of retail stores in China and Brazil. Recent industry news reports indicate that the majority of expansion will occur in this areas ( reference). Apple, indeed has already begun actively pursuing this recommendation and reports indicate that Apple is set to expand iPhone distribution to 50 countries by November 1, 2013 (Guglielmo, 2013b). Bloomberg (2013) also reports that Apple CEO Tim Cook is actively negotiating with China Mobile Communication Corp. to establish relation s toward a partnership that will increase iPhone sales in the region. Success of this will depend on the significant increase of advertising budget put forth in the short term recommendations above.

Global Economic Uncertainty Change Factor Recommendations: Short Term:

When outlining mission and vision goals, consider updating the value statement to include firm commitment in following Steve Jobs’ legacy to keep the company debt free. This will secure its stability as it moves forward expanding into area that may experience economic uncertainty in the future (Europe, Latin and South America). Apple’s competitors have reduced their long-term debt by almost half from 2012 to 2013. If they are able to follow Apple’s past lead and run their companies without long-term debt, this will increase the tempo of competition tremendously (Thompson, 2013) and may have a negative effect should current CEO deviate from past sustainability plan (Ogg (2012) quotes Cook as saying he is not as committed to the process of remaining debt-free as former CEO Jobs was).

Also update vision statement to include pursuing sales where ever interest from buyers is known rather than limiting expansion to only the communities and countries where they can make the most “significant social contribution”(Ogg, 2012).

Long Term:

Add significant wording to value statement that fosters an active significant social contribution agenda for each region that the company pursues sales in. This way there is a plan to go in and be socially responsible, rather than limiting where sales will be perused to evaluation of if a significant social contribution can be made. Put forth a definition of what ‘significant’ means to the company and then lay out several action plans for various contexts that can be applied in pursuit of this agenda and satisfy the commitment to make a difference.

Regulatory/Legal Change Factor Recommendations: Short Term:

If the company intends to keep control of its patents, intellectual property “primary technologies” (Appendix C) and reduce lawsuit expense for violations they should become proactive in managing this. This will include considering offering there protected technologies to other companies to put into their phones and also enable others to successful create products that can be used with Apple products. Google who with the purchase of Motorola now has the capability and patents to pursue Apple and Samsung with like products. However, they also benefit from knowing that they are actively competition with competitors that run their Android OS. They already know the


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competitor in this respect and will have firsthand knowledge of updates, etc. Not to mention they are earning profits off this. Apple needs to follow suit, but do so in a way that is conducive to their value of controlling their product. they can have competitors who choose to use their technologies in their products sign agreements and have legal restrictions that prevent from infringement. They could also, charge a hefty price for the service. This would generate additional revenues, and would also take the Android/Apple OS war to the customers who would be able to buy the capabilities in other products.

Long Term: With respect to pending legal order to sever contracts with e-book producers (Tibken, 2013), Apple should begin

considering a way to circumvent this negative consequence. One way to do this would be to acquire an e-book publishing firm so that it controls the e-book production, pricing and sales. This may even bring in new revenue if it offers specific subject, novel books or books that are not already on e-book. They could even pursue deals with other publishing companies to be the exclusive e-book provider for yet to be published titles. Perhaps also children’s book publishers would offer a way to bring parents in on such a new e-book provider. Additionally, they might consider adding a subscription service for e-books that would let readers ‘borrow’ books they want to read, but not keep them unless they want to purchase. Marketing could offer parents a 2 for 1 deal or get a children’s’ e-book for free with e-book purchase, etc. Another way is to actively use such a service to seek new customers for its e-book service by considering Higher Education institutions who might swish to publish their dissertations and master’s theses in e-book form through such a service. Such a partnership may also lead to other possible avenues, such as owning databases that scholars use , or sources that offer Open Educational resources that could be pushed to educators, students and businesses.

Competitive Rivalry: Short Term:

Revisit company Mission and Vision Statement and update to reflect changes occurring in the external environment (specific suggestions will be provided in the respective section of this document)

Long Term: Apple, should begin negotiations with key suppliers to acquire those plants or firms that it most relies on and

become its own supplier. This would provide a safeguard against shortages and the potential consequences to price fluctuations described in Apple’s 2012 10K report. Google took a step in this direction with the purchase of Motorola, but Google does not have the experience or expertise Apple does in managing production of its products (Efrati & Ante, 2011).

Product/Technology Innovation Change Factor Recommendations: Short Term:

Since innovation is Apple’s earmark of success, it need to put its money where its reputation is by committing at least 10% of its revenue to R &D. This would be significantly higher than leader Samsung who only currently spend 5.7% of revenues on R & D (The New York Times, 2013).

Long Term: Consider how to rebrand iPods to a new market so that sales can be revamped. Perhaps this might involve

considering those to whom the iPod has yet to be introduced- say senior citizens. An iPod touch to stay in touch with family might spur the sales.

With respect to Apple’s App Store – a monthly price for unlimited apps would be great. Also, if Apple would consider showcasing its socially beneficial apps- (red cross or healthcare ) for free. Also, perhaps it should consider pushing users and purchasers App notifications via email so they receive up to date looks at the new apps as they become available.

With respect to iTunes, Apple should consider a subscription service that would enable purchasers to purchase in different packages. Unlimited, certain # of new songs a month, etc. Additionally, being able to return unwanted items for credit would be beneficial to those who purchase as music and video trends approach and recede.


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Documents

Apple, Inc. in 2012: Can It Sustain Its growth and Defend ...€¦ · APPLE INC. IN 2012: CAN IT SUSTAIN ITS GROWTH AND DEFEND Ledford 2 Introduction Apple Inc. should alter its mission