Apple Very Good Strategic Analysis

8/10/2019 Apple Very Good Strategic Analysis

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STRATEGIC MANAGEMENTADDITIONAL MATERIALS

Prof nadzw. dr inz. Waldemar Karwowski

[email protected]

WSIZ 2010/2011


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Learning Objectives:

By the end of this course, students will have the ability to

, ,

management2) apply the critical thinking skills required to analyze complexus ness s ua ons,

3) grasp the challenges facing todays organizations as they

grow, restructure and compete in an increasingly globalcontext and within newly emerging markets4) examine the multifaceted role of business organizations in

,responsibility and ethics


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STRATEGIC MANAGEMENT

The Nature of Strategic Management


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Strategic Management Defined

Art & science of formulatin ,

implementing, and evaluating,

-enable an organization to achieve

.


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Strategy Formulation

s on ss on

External Opportunities & Threats

Internal Strengths & Weaknesses

-

Alternative Strategies

Strategy Selection


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Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation


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Strategy Evaluation

Internal Review

External Review

Performance Metrics

Corrective Actions


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Achieving SustainedCompetitive Advantage

1. Adapting to change in external trends,internal ca abilities and resources

2. Effectively formulating, implementing &evaluating strategies


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Adapting to Change KeyStrategic ManagementQuestions

What kind of business

Are we in the right fields

Are there new com etitors What strategies should we

pursue?

How are our customerschanging?


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Key Terms

Vision Statement What do we want to become?

Mission Statement What is our business?


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Key TermsOpportunities & Threats (External)

Analysis of Trends: Economic

Social

Cultural Demographic/Environmental

Political, Legal, Governmental

Technological Competitors


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Key TermsStrengths & Weaknesses (Internal)

Typically located in functional areas of the firm

Management

Marketing

Production/Operations

Computer Information Systems


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Key Terms

Strategies

Means by which long-term objectives areachieved


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Comprehensive strategic management

modelExternalAudit

Chapter 3

Lon -Term Im lement Measure &Objectives

Cha ter 5

Evaluate,Select

Strategies

Chapter 6

Strategies:Mgmt Issues

Cha ter 7

Strategies:Marketing,Fin/Acct,

R&D, CISChapter 8

EvaluatePerformance

Cha ter 9

&Mission

InternalAudit

Chapter 4


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Benefits of StrategicManagement

Financial Benefits

Improvement in sales

mprovemen n pro a y

Productivity improvement


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Benefits of StrategicManagement

Non-Financial Benefits

Improved understanding of competitors strategies

Reduced resistance to change

Enhanced problem-prevention capabilities


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Business Ethics & StrategicManagement

Code of business ethics

rov es as s on w c po c es can edevised to guide daily behavior anddecisions in the work lace


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Advantages of InternationalOperations

Absorb excess capacity

Reduce unit costs

Low-cost production facili ties


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Disadvantages of InternationalOperations

Underestimate foreign competit ionCultural barriers to effective management

differences


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Vision & Mission

Shared Vision -- Creates commonality of interests

Reduce daily monotony Provides opportunity & challenge


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Vision Statement Examples

To be the first choice in the rintedcommunications business. The first choiceis the best choice, and being the best is

beingevery day!

-- Atlanta Web Printers, Inc.


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Mission Statement

u u


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Mission Statements

Endurin statement of ur ose

Distinguishes one firm from another

Declares the firms reason for being


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Vision & Mission

Profit & vision are necessary to effectively


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Mission Statement Example

The Bellevue Hospital, with respect,, , ,

the individuality and confidentiality of our

patients, employees, and community, and isfuture health care services.

-- The Bellevue Hospital


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Importance of Mission

Benefits from a strong mission

Resource Allocation

MissionOrganizational Climate

Focal point for workstructure


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Mission & CustomerOrientation Vern McGinnis

Define what the organization is

Limited to exclude some ventures

Distinguishes firm from all others


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Social Policy & Mission

Social policy should be integrated in allstrate ic-mana ement activities.

ss on s ou convey e soc aresponsibility of the firm


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Vision & Mission

, ,

firms with formal mission statements --

2x average return on shareholders equity

Positive relationship to companyper ormance

30% high return on certain financial measures


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CustomersMarkets

ProductsServices

Technology

ss onElements

Employees

Public

SurvivalGrowthProfit

ImageSelf-Concept Philosophy


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Ben & Jerr s MissionBen & Jerrys mission is to make, distribute and sellthe finest ualit all-natural ice cream and related

products in a wide variety of innovative flavorsmade from Vermont dairy products. To operate

profitable growth, increasing value for our

shareholders, and creatin career o ortunitiesand financial rewards for our employees. Tooperate the Company in a way that actively

the structure of society by initiating innovativeways to improve the quality of life of a broadcommunitylocal, national and international.


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COMPONENTS

Concern for

Survival,

Organization Customers

Products

Services Markets

Growth,

Profi tabi li ty Technology

PepsiCo Yes No No Yes No

Ben & Jerry's No Yes Yes Yes No


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COMPONENTS

Organization Philosophy

Self-

Concept

Concern for

Public Image

Concern for

Employees

PepsiCo Yes No No No

Ben & Jerry's No Yes Yes Yes


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External StrategicManagement Audit

the control of a single firm

Population shifts


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Key External Forces & the Organization

CompetitorsSuppliers

DistributorsCreditorsus omers

EmployeesCommunities

ExternalForces

Opportunities&

Threats

StockholdersLabor Unions

S ecial Interest Grou s

ProductsServices


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Performin External Audit

Long-term orientation

ExternalMeasurable

pp ca e ocompeting firms

erarc ca


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I/O Perspective Firm Performance

Industry Properties

Economies of Scale

Barriers to market entry

Product differentiation

Level of competitiveness


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Social, Cultural, Demographic& Environmental Forces

U.S. Facts

Aging population

Less Caucasian

en ng gap e ween r c poor

2025 = 18.5% population >65 years

2075 = no ethnic or racial majority


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Key Social, Cultural, Demographic &

Childbearing rates

Number of special interest groups

Number of marriages & divorces

Number of births & deaths

Immigration & emigration rates


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Political, Government & LegalForces

Globalization of Industry

consumption patterns

E-commerce

Technology for instant currency transfers


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Competitive Forces

Identifying Rival Firms

Strengths

Weaknesses

Capabilities

Threats

ec ves

Strategies


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Competitive Forces

7 Characteristics of most. .

. Market share matters

2. Understand what business you are in

3. Broke or not, fix it

4. Innovate or evaporate


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Competitive Forces

7 Characteristics of most. .

. Acquisition is essential to growth

6. People make a difference

7. No substitute for quality


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The Five-Forces Model of Competition

Potential developmentof substitute products

Rivalry among

competing firms

Bargaining power

of suppliers

Bargaining power

of consumers

Potential entry of newcompetitors


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The Global Challenge

Faced by U.S. Firms --

Gain & maintain ex orts to othernations

imported goods


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Industry Analysis: The External Factor

Evaluation (EFE) Matrix

ummar ze va ua e

GovernmentalDemographicEconomic

TechnologicalEnvironmentalSocial

CompetitivePoliticalCultural


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Key External Factors Weight RatingWtd

Score

Opportunities.

20% in 20040.10 3 0.30

2. Cost of PC component parts 0.10 3 0.30expec e o ecrease -

3. Internet use growing rapidly 0.05 2 0.10

4. China entered WTO; lowered taxesfor importing PCs 0.10 1 0.10

5. The avera e income for PC workerhas declined from $40K/yr to $30k/yr

. .


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Score

Opportunities (contd).

government agencies0.05 2 0.10

7. U.S. (& world) economies recovering 0.05 3 0.158. 30% of Chinese population canafford a PC; only 10% of homes have a 0.05 1 0.05

Threats 0.10 1 0.10

1. Intense rivalry in industry 0.10 1 0.05


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Score

Threats (contd). . .

3. Different countries have different

re s and infrastructure for PCs0.05 1 0.05

4. Palm & PDA becoming substitutes 0.05 3 0.15

.

experienced PC workers. .

6. Birth rate in U.S. declining annually 0.05 3 0.15


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EFE Gateway Computers (2003) (contd)

Key External FactorsWeight Rating

Wtd

Score

7. U.s. consumers and businesses

0.05 2 0.108. PC firms diversifying into consumerelectronics

0.05 3 0.15

Total 1.00 2.40


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Industry Analysis EFE

o a we g e score o . Organization response is outstanding to threats

Total weighted score of 1.0

or avoiding threats

I d t A l i C tit i P fil


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Industry Analysis: Competit ive Profile

Matrix (CPM)

Identifies firms ma or com etitorsand their strengths & weaknesses

strategic positions


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Gateway Apple Dell

CSFs Wt Rating Wtd Ratin Wtd Rating Wtd

Market share 0.15 3 0.45 2 0.30 4 0.60Inventor s s 0.08 2 0.16 2 0.16 4 0.32

Fin position 0.10 2 0.20 3 0.30 3 0.30

Prod. Quality 0.08 3 0.24 4 0.32 3 0.24Cons. Loyalty 0.02 3 0.06 3 0.06 4 0.08

Sales Distr 0.10 3 0.30 2 0.20 3 0.30

o a xp. . . . .

Org. Structure 0.05 3 0.15 3 0.15 3 0.15


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Gateway Apple Dell

CSFs (contd) Wt Rating Wtd Ratin Wtd Rating Wtd

Prod. Capacity 0.04 3 0.12 3 0.12 3 0.12E-commerce 0.10 3 0.30 3 0.30 3 0.30

Customer Serv 0.10 3 0.30 2 0.20 4 0.40

Pricecompetitive . . . .

Mgt.ex erience

0.01 2 0.02 4 0.04 2 0.02

Total 1.00 2.83 2.47 3.49


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STRATEGIC MANAGEMENTThe Internal Assessment

N t f I t l A dit


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Nature of an Internal Audit

Internal strengths/weaknesses

Clear statement of mission

I t l A dit


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Internal Audit

Parallels rocess of external audit

Information from:Management

Marketing

Finance/accounting

Production/operations

esearc eve opmen

Management information Systems

Reso rce Based Vie (RBV)


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Resource Based View (RBV)

A roach to Com etitive Advanta e

Internal resources are more importantthan external factors



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3 All Encom assin Cate ories

1. Physical resources

2. Human resources3. Organizational resources



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Em irical Indicators

Rare

Hard to imitate Not easily substitutable

Integrating Strategy & Culture


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Organizational Culture

organization as it learns to cope with its

internal integrationis considered valid



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Values

Le ends Beliefs

CulturalProducts

Heroes Rites

Symbols RitualsMyths

Management


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g

Stage When MostImportantFunction

PlanningStrategy Formulation

Organizing Strategy Implementation

o va ng Strategy Implementation

Controlling

Strategy Evaluation

Marketing


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Marketing

Customer Needs/Wants for Products/Services

1. Defining

2. Anticipating

.

4. Fulfilling

Marketing


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Marketing

Marketing Functions

1. Customer analysis

2. Selling products/services

3. Product & service planning

.

5. Distribution

. ar e ng researc

7. Opportunity analysis

Finance/Accounting


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Finance/Accounting

Finance/Accounting Functions

. nves men ec s on ap a u ge ng

2. Financing decision

3. Dividend decision



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Production/Operations Functions

Process

Capacity

Inventor Workforce

Research & Development


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Research & Development

Research & Development Functions

Development of new products beforecompetitors

Improving product quality

Improving manufacturing processes toreduce costs

Management Information


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a age e o a o

Systems

Information Systems

CIO/CTO

Security

- E-commerce

IFE Gateway Computers (2003)


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y p ( )

Key Internal Factors Weight RatingWtd

Score

Strengths

1. Several new senior executive with world-c ass s s an ea ers p exper ence

. .

2. Continuous decline in operating costsand cost of goods sold

0.05 3 0.15

3. Well-known brand name 0.05 3 0.15

4. Consumer Reports (Sept 2002)recommended Gateway 500X as #1

. .

5. As a direct seller, Gateway holds highbrand recognition

0.05 3 0.15



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y p ( )


Score

Strengths (contd)

6. Gateway is diversifying into non-PCpro uc s

. .

7. Good relationship with its suppliers. 0.05 4 0.20

. conom es o sca e, t e argestmaker I the world

0.05 4 0.20

9. Gatewa retails stores excellent 0.05 3 0.15



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y p ( )


Score

Weaknesses

1. High operating expense (22% of revenuevs. or e

. .

2. Almost no budget for R&D vs. Dells 18%of revenue

0.10 1 0.05

3. Low return on assets ratio 0.025 1 0.10

4. No niche market 0.025 2 0.05



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Score

Weaknesses (contd)

5. Shortage of cash due to successiveosses

. .

6. Limited number Gateway stores 0.05 2 0.10

7. Weak performance in overseas market 0.10 2 0.20

TOTAL 1.00 2.85


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Strategies in Action

Long-Term Objectives


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--

Measurable

ea s c

Understandable

Challenging



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--

Hierarchical

Obtainable

Congruent

Time-line



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Varying Performance Measuresy rgan za ona eve

Organizational Basis for Annual Bonus/Merit Pa

Corporate75% on long-term objectives

Division50% on long-term objectives

Function 25% on long-term objectives

Financial vs. Strategic


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Objectives

Growth in revenues

Growth in earnings

Higher profit margins

Improved cash flow

Types of Strategies


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CorpLevel

Division Level

unct ona eve

Operational Level

The Balanced Scorecard


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--

Strategy evaluation & control technique

Balance financial measures with non-financialmeasures

Balance shareholder objectives with customeropera ona o ec ves

Types of Strategies


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ForwardIntegration

VerticalIntegrationStrategies

BackwardIntegration

HorizontalIntegration

Types of Strategies


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MarketPenetration

IntensiveStrategies

MarketDevelopment

ProductDevelopment

Types of Strategies


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ConcentricDiversification

DiversificationStrategies

ConglomerateDiversification

HorizontalDiversification

Types of Strategies


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DefensiveStrategies

Divestiture


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ForwardDoll maker & mail order firm,

Integration .,

store in Manhattan

BackwardIntegration

McDonalds recently acquired apaper cup producer

Horizontal Callawa Golf recentl ac uired

Integration Top-Flite Golf Company


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MarketSABMiller Plc spent $500

Penetration

Miller brands of beer

MarketDevelopment

JetBlue is adding dozens ofnew routes

GM developing hydrogen

Development

developing a new antismokingpill


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ConcentricMicrosoft launched its first

Diversification

as entertainment centers

ConglomerateDiversification

Blockbuster may acquire theDVD and music direct-marketing f irm Columbia House

Diversification

Central, from AOL


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America West Airlines closing,

laying off 390 employees

Divestiture

Circle K convenience storechain to Alimentation Couche-Tard, a Canadian firm

Liquidation -

hosting division

Michael Porters Generic Strategies


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Cost Leadership Strategies

Differentiation Strategies

ocus trateg es


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Acquiring Firm Acquired Firm

a ona o ware orp

Yahoo Inktomi CorpU.S. Steel National Steel Corp

Pfizer Pharmacia

Krispy KremeDoughnuts

Montana Mills

Oracle People Soft

Palm Handspring

Nike Converse


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Benefits a firm ma achieve b enterin anew market or developing a new productor service prior to rival firms.


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Business-process outsourcing

Companies taking over the functionaloperations of other firms


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Strategy Analysis & Choice

Ch 6 -95

Strate Anal sis & Choice


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-- - e e ve

-- Generating alternative strategies

---- Best alternative - achieve mission & objectives

Ch 6 -96

Comprehensive Strategy-Formulation

Framework


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Framework

Stage 1:The Input Stage

Stage 2:The Matching Stage

Stage 3:The Decision Stage

Ch 6 -97

Strategy-Formulation Analyticalramewor


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Internal Factor EvaluationMatrix (IFE)

External Factor EvaluationMatrix (EFE)

Stage 1:The Input Stage

Com etit ive Profile Matrix(CPM)

Ch 6 -98


SWOT Matrix


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SPACE Matrix

BCG MatrixStage 2:The Matching Stage

IE Matrix

Grand Strategy Matrix

Ch 6 -99

SWOT Matrix


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reng s- ppor un es

Weaknesses-Opportunities (WO)

Strengths-Threats (ST)

-

Ch 6 -100


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Use a firmsStrengthsWeaknessesinternal strengthsto take advantage

of externalSO

OpportunitiesThreats

oppor un esStrategiesSWOT

Ch 6 -101


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Improving internalStrengths

Weaknessesweaknesses by

taking advantageof externalWO


oppor un esStrategiesSWOT

Ch 6 -102


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Use a firmsStrengths

Weaknessesto avoid or

reduce the impactof externalST


threatsStrategiesSWOT

Ch 6 -103


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Defensive tactics

aimed at reducingStrengths

Weaknesses weaknesses &

avoidingenvironmentalWT


threatsStrategiesSWOT

Ch 6 -104

Strengths S Weaknesses W


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Strengths S Weaknesses W

List Strengths List Weaknesses

Opportunities O SO Strategies

Use strengths to take

WO Strategies

Overcoming weaknesses

advantage ofopportunities

by taking advantage ofopportunities

Threats T ST Strategies WT Strategies

List Threats Use strengths to avoidthreatsMinimize weaknesses and

avoid threats

Ch 6 -105

Ke Internal Factor Ke External Factor Resultant Strate

Matching Key Factors to Formulate Alternative Strategies

20% annual growth in


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Acquire Cellfone, Inc.=20% annual growth inthe cell phone industry+

Excess working capacity

(opportunity)

ursue or zon a n egra onby buying competitor'sfacilities

=x o wo ma or ore gn

competitors form theindustry (opportunity)

+Insufficient capacity(weakness)

Develop new products forolder adults

=Decreasing numbers ofyoung adults (threat)

+Strong R&D (strength)

Develop a newemployee benefitspackage

=Strong unionactivity (threat)

+Poor employee morale(weakness)

Ch 6 -106

SPACE Factors

External Strategic Posit ionInternal Strategic Posit ion


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gg

nv ronmen a a y

Technological changes

nanc a reng

Rate of inflation

Demand variability

Leverage

Liquidity

Barriers to entry

Competitive pressure

or ng cap aCash flow

r ce e as c y o eman

Ease of exit from marketRisk involved in business

Ch 6 -107

SPACE Factors

External Strategic Posit ionInternal Strategic Position


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Growth otential

Market share

Profit potential

Financial stability

Product quality

Product life cycle

-Resource utilization

Ease of entry into market

Competitions capacity utilization

Technological know-how

Productivity, capacity utilizationControl over suppliers & distributors

Ch 6 -108

SPACE Matrix

+6

5

Conservative Aggressive


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+5

+

+3

+2

+1

CA IS

-3

-2

-1- - - - - -

-5

-4

Defensive Com etitive

Ch 6 -109

-6

ES

BCG Matrixe a ve ar e are os on

High1.0

Medium.50

Low0.0


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Question MarksStarsRate

+20

III

Growt

Medium

DogsCash CowstrySale 0

IVIIIIndu

Low

Ch 6 -110

-20

RAPID MARKET GROWTH

Quadrant I

1. Market development

M k t t ti

Quadrant II

1. Market development

M k t t ti


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2. Market penetration2. Market penetration

3. Product development

4. Forward integration

5. Backward integration

3. Product development

4. Horizontal integration

5. Divestiture

6. Horizontal integration

7. Concentric diversification

6. Liquidation

WEAKCOMPETITIVE

STRONGCOMPETITIVE


2. Horizontal diversification

1. Retrenchment


POSITION

. diversification

4. Joint ventures

.

4. Conglomeratediversification

Ch 6 -111

.SLOW MARKET GROWTH



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Stage 3:The Decision Stage

Planning Matrix

(QSPM)

Ch 6 -112

QSPM Strategic Alternatives

Strategy 3Strategy 2Strategy 1WeightKey External Factors

Economy

Political/Legal/Governmental


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Political/Legal/Governmental

Social/Cultural/Demographic/Environmental

Technological

Key Internal Factors

Management

Competitive

Marketing

Finance/Accounting


Research and Development

Computer InformationSystems

Ch 6 -113

Cor orate Governance Issues

Business Weeks principles of good governance


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1. No more than 2 directors current or former company executives2. No directors do business with the company3. Audit, compensation, and nominating committees made up

of outside directors4. Each director attends at lest 75% of all meetings5. Audit committee meets at least four times a year

6. CEO is not also the Chairperson of the Board7. Shareholders have considerable power and information to

choose & replace directors.

9. No interlocking directorships

Ch 6 -114


Implementing Strategies:Management & Operations Issues


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Management & Operations Issues

Ch 7-115

Nature of Strategy Implementation


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u v .

Formulation focuses on effectiveness

Implementation focuses on efficiency

Ch 7-116

Nature of Strategy Implementation


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Shift in responsibility

v

Division or

FunctionalManagers

Strategists

Ch 7-117


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Annual Objectives

Policies

ManagementResources

Issues Organizational structure

Rewards/Incentives

Ch 7-118


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Resistance to Change

Natural Environment

ManagementSupport ive Culture

Issues Production/Operations

Ch 7-119

Management Issues

Purpose of Annual Objectives --


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Basis for resource allocationMechanism for management evaluation

-objectives

, ,

& departmental)

Ch 7-120

Management Issues


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. nanc a resources

2. Physical resources

3. Human resources

.

Ch 7-121

Management Issues


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Conflict not alwa s bad

No conflict may signal apathy

Can energize opposing groups toaction

May help managers identify problems

Ch 7-122

Chandlers Strategy-Structure Relationship


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New administrativeNew strategy Organizationalproblems emergeIs formulated

declines

OrganizationalNew or anizational

per ormanceimproves

structure is established

Ch 7-123

Management Issues


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unc ona ruc ure

Divisional Structure

Strategic Business Unit Structure (SBU)

Ch 7-124

Management Issues


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Downsizing

g s z ngDela erin

Ch 7-125

Management Issues


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Process management

rocess nnova onProcess redesi n

Ch 7-126

Tests for Performance-Pay Plans

Does the plan capture attention?


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Do employees understand the plan?

Is the plan improving communication?

Does the plan pay out when it should?

Is the company or unit performing better?

Ch 7-127

Management Issues


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-- Production processes typicallyconstitute more than 70% of firms totalassets

Ch 7-128

Management Issues

Production/Operations Decisions


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Plant sizeInventory/Inventory control

ua ty contro

Technological innovation

Ch 7-129

Management Issues

Human Resource Strategic Responsibilities


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Assessing staffing needs/costsDeveloping performance incentives

s

-

Work-life balance issues

Ch 7-130

Women CEOs in U.S. 2004 (examples)

C l Fi i H l tt P k d 49 ld


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Carly Fiorina Hewlett-Packard 49 yrs old

Meg Whitman eBay 47 yrs oldAndrea Jung Avon Products 45 yrs old

Anne Mulcahy Xerox 50 yrs old

Marjorie Magner Citigroup 54 yrs old

Betsy Holden Kraft Foods 47 yrs old

Mary Sammons Rite Aid 57 yrs old

Ch 7-131

STRATEGIC MANAGEMENTOVERVIEW


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Prof nadzw. dr inz. Waldemar Karwowski

[email protected]

WSIZ 2010/2011

Documents

Apple Very Good Strategic Analysis