A STRATEGIC ANALYSIS OF APPLE CORPORATION

PREFACE

The primary objective of this report is to provide the readers the insight into the success of apple

industry.

I hope that the report has made the text interesting and lucid. In writing this report, I have

benefited immensely by referring to many publications and articles. I express my gratitude to all

such authors and publishers.

Any suggestions to improve this report in contents or in style are always welcome and will be

appreciated and acknowledged.

TABLE OF CONTENTS PAGE NO.

Executive Summary iii

Origin Of the report 05

Purpose of the report 05

Scope of the report 05

Limitation of the report 06

Introduction 07

Vision 08

Mission 08

Long term objectives 09

Industry Analysis Using Porter’s Five Forces Model 09

SWOT Analysis 11

Recommendations 15

Conclusion 16

Bibliography 17

Executive Summary

Apple Computer’s 30-year history is full of highs and lows, which is what we would expect in a

highly innovative company. They evolved throughout the years into an organization that is very

much a representation of its leader, Steven Jobs. Apple made several hugely successful product

introductions over the years. They have also completely fallen on their face on several occasions.

They struggled mightily while Jobs was not a part of the organization. Apple reached a point

where many thought they would not survive. When asked in late 1997what Jobs should do as

head of Apple, Dell Inc.'s (DELL) then-CEO Michael S. Dell said at an investor conference:"I'd

shut it down and give the money back to the shareholders.” (Burrows, Grover, and Green)

Well, times changed. Less than 10 years later, Business Week ranked Apple as the top performer

in its 2006 Business Week 50.Apple attributes their recent success to robust sales of iPod music

players (32 million in 2005).They are optimistic about the economies of scope with media giants,

such as Disney and Pixar. (Business Week)

Apple rarely introduces a new type of product. Thus, instead of being the pioneer, they are an

expert “second mover” by refining existing products. Portable music players and notebook

computers are examples. Apple increases the appeal of these products by making them stylish

and more functional. They now appear poised to make significant strides in the home computer

market and to creating a total digital lifestyle whereby the home is a multimedia hub.

Origin of the report

The Honorable course instructor assigned me to prepare a report on Strategic Business Planning

of highly globalized company. Here I choose Apple Inc as it is a renowned globalized

corporation around the world and it has gone through a radical change in the passage of time.

Purpose of the report

I am very much passionate to be an executive of the coming days. So, I have to gather more

experience beside my study. I do not want to concentrate my lessons only in classroom but to

implement it in my practical life that will help my in professional life. The purposes of preparing

of this report are-

To relate our theoretical report writing knowledge with the practical working experience.

To know about the leadership and change management of Apple Inc. and also try to get

idea about the relationship among them and their productivity.

I choose Apple Inc. to relate the implementation of the Strategic Business Planning.

To provide suggestions for the probable identified problems.

To illustrate the overview and the feature of the organization.

Scope of the report

I have mainly tried to cover all the information needed to know their overall communication

process both inside and outside the organization. Their worldwide business, activities their

strategy, goals etc., I have also identified some basic problems of them.

Limitation of the report

I am very lucky to get the chance to prepare this report but unfortunately I have faced some

difficulties when preparing this report. I have tried to overcome the difficulties and gave my best

effort. When preparing this report, two main difficulties I have faced:

Shortage of Time

To make a longer version of report needs too much time. But I had to prepare this report within a

very short span of time. Because of their time constraint I didn’t collect enough information to

prepare my report. To get touch with them was very difficult for me. In this case I had to collect

data from their Wikipedia and tried my best to prepare my report perfectly.

Difficulty in Collecting Data

It was a very hard job to make understand about my object. In collecting data I face lots of

problems. Again due to their management limitations they don’t persist to provide information.

Introduction

Company Background:

Apple Inc. is an American multinational corporation, established on April 1, 1976 in Cupertino,

California, and incorporated in 3rd January 1977. The company was previously named Apple

Computer, Inc. for its first 30 years, but removed the word "Computer" on 9th January 2007, in

order to reflect the company's ongoing expansion into the consumer electronics market in

addition to its traditional focus on personal computers. It is Public Ltd company that designs and

markets consumer electronics, computer software, and personal computers. The company's best-

known hardware products include the Macintosh computers, the iPod, the iPhone, and the iPad.

Apple software includes the Mac OS X operating system; the iTunes media browser; the life

suite of multimedia and creativity software; the work suite of productivity software; Aperture, a

professional photography package; Final Cut Studio, a suite of professional audio and film-

industry software products; and Logic Studio, a suite of audio tools. The company operates 284

retail stores in ten countries as of January 2010 and an online store where hardware and software

products are sold. As of September 26, 2009, Apple had 34,300 full time employees and 2,500

temporary full time employees worldwide and had worldwide annual sales of $42.91 billion in its

fiscal year ending September 26, 2009.

Without Wayne, Apple was incorporated in 3rd January 1977, who sold his share of the company

back to Jobs and Wozniak for $800. Multi-millionaire Mike Marcela provided essential business

expertise and funding of $250,000 during the incorporation of Apple. By the end of the 1970s,

Apple had a staff of computer designers and a production line. The company introduced the ill-

fated Apple III in May 1980 in an attempt to compete with IBM and Microsoft in the business

and corporate computing market. Steve Jobs began working on the Apple Lisa in 1978 but due to

infighting, and took over Jeff Ruskin’s low-cost-computer project, the Macintosh; in 1982 he

was pushed from the Lisa team. A turf war broke out between Lisa's "corporate shirts" and Jobs'

"pirates" over which product would ship first and save Apple. Lisa won the race in 1983 and

became the first personal computer sold to the public with a GUI. But due to its high price tag

and limited software titles there was a commercial failure.

And then from 1986-1993 it went through rise and fall continuously. After 1993 they gave a lot

of emphasize on its reinvention practice. From 1994-1997 they developing their alternative

plans, reinvention practices. From 1998-2005 they return to its profitability.

VISION

The four pillars of their vision set out the long term direction for the company – where they want

to go and how they are going to get there:

We work to create a better future every day

We help people feel good, look good, and get more out of life with brands and services

that are good for them and good for others.

We will inspire people to take small everyday actions that can add up to a big difference

for the world.

We will develop new ways of doing business with the aim of doubling the size of our

company while reducing our environmental impact.

They've always believed in the power of their brands to improve the quality of people’s lives and

in doing the right thing. As its business grows, so do its responsibilities. They recognize that

global challenges such as climate change concern. Considering the wider impact of its actions is

embedded in its values and is a fundamental part of who they are.

MISSION

"Apple is committed to bringing the best personal computing experience to students, educators,

creative professionals, and consumers around the world through its innovative hardware,

software, and internet offerings."

Long Term Objective

APPLE is a publicly traded company with responsibilities to all shareholders

• By becoming a more “socially responsible” corporation we hope to attract a new type of

investor while retaining our current stockholders. KFC hopes to achieve this by becoming

synonymous with hospice.

Industry Analysis Using Porter’s Five Forces Model

Apple operates in two primary industries:

• Computing - Hardware and Software

• Delivery of Entertainment and Media

Apple has always been under intense competition within the computer, software, and

entertainment industries.“ Looking to 2005...Every time that Apple had jumped into the lead in

product category during the past two decades, it had had difficulty in sustaining its leadership

position.” (Office) We use Porter’s Five Forces Model to understand why Apple’s industries are

so competitive.

The total industry threat for the industry space that Apple occupies (computer equipment and

distribution of entertainment) is a high threat industry. Apple must continue to pursue product

differentiation (i.e. the style and ease-of-use of an iPod) and economies of scope (i.e. offering

ABC television shows on iTunes) to maintain their sustained competitive advantage in this

industry.

Which External Threats are Most Significant

• Computer Hardware and Software: Open Source software such as the Linux Operating

System and Open Office applications threaten both Apple and Microsoft. The low (often,

free) cost of the software may allow it to overtake Apple and Microsoft, especially in

developing markets such as China.

• Music Products: Major online retailers such as Amazon are considering entry into the

online music market. With a wide internet presence and a household name, Amazon

could present a formidable challenge to Apple. If the major record labels (Universal,

Sony BMG, EMI, and Warner) negotiate better terms with new competitors to iTunes,

Apple may be unable to provide some of the music content that they currently offer. The

major music labels dislike Apple’s dollar per song pricing. They would prefer to earn

higher profits with “variable pricing.” (Winfield) With variable pricing, the most popular

songs would be greater than $1, and less popular songs would be less than $1.Although

the labels recently renewed their contracts with Apple, there may be provisions that allow

future changes in the pricing model. (Winfield and Smith)

• Suppliers: The recent shift to Intel processors could present a significant threat to Apple.

With only two companies (Intel and AMD) producing Intel-compatible processors, there

is a strong potential for tacit collusion and oligopoly power between these suppliers.

Apple purchasing must now directly compete with HP, Lenovo, and Dell. If shortages or

exclusive agreements materialize; Apple could face problems with obtaining

rawmaterials. Apple should consider additional sources such as Advanced Micro Devices

(AMD).

Additional External Threats

Security

Apple software, like all large software products, has security vulnerabilities that hackers may

exploit. A significant exploitation in the future could damage many businesses and households

using Apple computers. This would affect future customer purchasing decisions. Apple enjoys a

competitive advantage, because their OS X is mature and stable due to its basis on BSD Unix. In

fact, “computer security folks back at FBI HQ use Macs running OS X.” (Grandma)

However, the increased use of Apple computers is prompting hackers to target the platform. In

February 2006, there was documentation of the first known Apple OS X worm. By using iChat

instant messaging, it spreads to other users and deletes files from their Mac computers. (Sophos)

If Mac OS X becomes as wide of a target as Windows, Apple’s perceived differentiation as the

more secure platform may disappear.

Vertical Integration of Competitors

Sony is an example of a competitor with a unique position against Apple. Sony Music supplies

Apple with many of the songs for iTunes. Sony also creates a version of the Walkman portable

music player that is a direct competitor to the iPod. (Hall)

Sony is attempting to vertically integrate forward directly to the music buyer. Sonyintegrated

their music system (Mora) into the Sony Walkman. Sony is exclusively distributing certain songs

on Mora. (Hall) Mora currently targets Japanese consumers. If Sony can gain additional

momentum (such as collaborating with other record labels), their service could present

formidable challenge to iTunes in additional markets.

SWOT Analysis

Although participation in such activities may add value, they may not be a source of competitive

advantage. Ultimately, the value, rarity, inimitability, and/or organization (VRIO) of an activity

or resource determine its sustainability as a source of competitive advantage. Within this context,

we can identify a firm’s strengths, weaknesses, opportunities, and threats (SWOT).

Strengths

Technical savvy – Product lines are easy to use and stable. Recent integration with

Microsoft products lines and Intel processors demonstrate ability and willingness to adapt to a

diverse customer base. (Mossberg) Such innovation, however, would not be sustainable without

a learning environment tolerant of mistakes. While the pure technical expertise alone is not a

valuable or rare resource, it becomes very costly to imitate when it exists within the socially

complex, entrepreneurial culture of Apple.

Financial vitality – Cash reserves remained robust and stable despite stagnant market

share growth in the computer hardware and software arenas. Apple exploited this by resisting

market pressures to reduce costs, tightly integrating product packages, and forming strategic

alliances (i.e. securing the backing of all major music distributors in the support of iTunes).

Brand loyalty – The only way that Apple could maintain the financial vitality described

above is via a fanatical, almost cult-like, affair with its customer base. Such brand loyalty is

extremely costly and time-consuming to imitate.

Steve Jobs – As discussed earlier, Jobs proved to be a vital component to Apple’s

success. During his absence (1985-1996), Apple experienced the most turbulent (financial and

innovative) timeline in its history. Immediately upon his return, he replaced most of the Board of

Directors, pruned and focused the new product ideas, and delivered seven

consecutive quarters of positive earnings to shareholders. (Linzmayer, 289-99) As such,

Jobs are certainly a valuable, rare, and hard to imitate resource that Apple fully exploits.

Weaknesses

Market share – Apple has historically been strongest in the US geographical and

educational vertical markets. With the educational market facing tightening budget constraints

and the US approaching a PC saturation point, Apple may need to burn cash more quickly and

succumb to market cost pressures on its products without a strategic innovation, integration, or

divesture.

Steve Jobs – For virtually the same reasons Jobs are strength, he is simultaneously a

weakness. The aggressive drive to bring innovative visions to life was noticeably absent and

painfully felt (especially by shareholders) during his departure. The apparent absence of

succession planning coupled with a lust for the limelight positioned Jobs as Apple’s single

consciousness in the eyes of consumers and shareholders.

Opportunities

Consumer electronics – With the startling success of the iPod and iTunes, Apple entered

the consumer electronics market. By expanding the iTunes concept to downloadable mobile

phone features and movies (podcasts), the door is now open to develop new and potentially

profitable strategic alliances with peripheral component manufacturers(speaker, home stereo,

etc.) and media transmission giants (Disney, TBS, Verizon, etc.).

PC hardware and software market growth – With cross-licensing of operating system

platforms in place, Apple entered the high-volume business environment traditionally dominated

by Windows-based PCs. The introduction of Intel-based processors prompted

businesses to replace PCs with iMacs. They did this to gain a level of stability and reliability in

their business applications that PCs failed to provide. An example is Japan’s Aozora Bank Ltd.,

who is replacing 2,300 PCs with iMacs. (Wingfield) Apple must establish themselves as a

credible player in business desktop applications to overcome the “desktop publishing”

stereotype.

Threats

Legal risks – In a market that literally changes at the speed of thought, patent, and

copyright infringement risks remain high. As long as operating systems and support software

packages continue to converge and remain relatively easy to imitate, present and future lawsuits

are inevitable. The Apple records claim against iTunes remains unresolved.

Competition – This threat occurs primarily on two fronts: PC hardware/software and

consumer electronics. For the same reasons discussed in the opportunities section, the threat of

limitability (cloning, pirating, etc.) increases. As relative newcomers to the consumer electronics

arena, will Apple retain a competitive advantage as they diversify their offerings (speakers, home

entertainment systems, etc.)?

RECOMMENDATIONS

FOR COMPANY:

Lowering the cost of products and maintaining the same quality standards

Can form joint – ventures

Knowledge Management

More number of retail stores for easy access

Continuous innovation to expand

FOR OTHERS:

Do not compromises on price for quality

Choose the products based on individual needs

Be unique and different

CONCLUSION

I feel that Apple must focus on several key aspects to continue to grow and succeed. They must

continue a stable commitment to licensing, push for economies of scope between media and

computers, and become a learning organization.

Apple apparently made a commitment to licensing. Although it should continue, Apple may

want to consider other forms of strategic alliances. An equity strategic alliance may offer Apple

the opportunity to obtain additional competencies. An effective way for a company like Apple to

accomplish this would be in the form of a joint venture.

Apple should continue pushing the new line of media-centric products. Meanwhile, Apple should

not lose focus on its computers. Macintosh computers were 39% of Apple’s sales in 2005.

(Burrows) This very innovative company exploits its second-mover position. In the future, they

will need to continue innovating to expand the boundaries of both media and computers.

One persistent element of both competitive advantage and risk is Steve Jobs. He is both

synonymous with Apple’s success and has a large equity interest in Apple and Disney. If he were

to divest his leadership position, the reaction of both the market and consumers would be

uncertain. Given his position within the organization as well as the history of the company when

he was gone, Apple must find a way to learn as an organization. This will allow the company to

withstand a departure by Jobs.

Based on the actions of the organization, we feel that the mid-term performance of Apple will be

strong. This period allows Apple time to overcome their challenges if they move swiftly. For this

reason, we feel that they will continue to succeed and will continue to outperform their peers.

BIBLOGRAPHY

http://www.apple.com/

http://www.apple.com/pr/library/2004/jan/08hp.html

http://en.wikipedia.org/wiki/Apple_Inc.

http://obamafellows.org/mf/948-External%20Ananlysis%20-%20Apple%20Corporation.html