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Appleinc 150508115940 Lva1 App6892
Appleinc 150508115940 Lva1 App6892
Appleinc 150508115940 Lva1 App6892
Management
Team Project
Case Analysis
Apple Inc.
Presented by:
Esraa Elseidy &
Mariham Helal
Page 1
Table of contents:
Executive
Summary
.3
Financial Position
Analysis
Situation
Analysis
.4
Industry
Structure
....4
Strategic group
Mapping
....6
Driving
Forces
..7
Key Success
Factors
10
Industry Strategic
Issues
..12
Industry
attractiveness
..16
SWOT
Analysis
...27
Competitive Strength
Assessment
..33
Firm's Strategic Issues and
Problem
..34
Page 2
Profitability
Ratios
..35
Liquidity
Ratios
36
Leverage
ratios
36
Activity
Ratios
..37
Industry
Analysis
.40
Recommendation
s
Long
Menu
..42
Short
Menu
..42
Expected Outcomes of selected
strategies
47
Strategy
Implementation
47
Company
Culture
...49
Control and
Evaluation
Page 3
..50
My
Opinion
..53
References
..54
Executive Summary
Apple Computers started the movement into the personal computing arena in
1977 but through changes in management and differences of opinion
together with missed opportunities it lost its competitive advantage to
companies like Microsoft, Dell, and Gateway. Apple operates in various lines
of the computer and music industry today and its operations include not only
the designing but also the manufacturing of its computers and software.
Apple continues to pursue the personal computer market but not as intently
as in the years before. It has opted to change directions a little by venturing
into the music world through the marketing of iPod, a digital music player,
and iTunes. The opening of 65 new retail outlets, including one in Japan, has
precipitated its move into this new world.
Apple has not capitalized on these problems. It has gained a few customers
but nothing in the numbers required to turn the company upwards in
reclaiming considerable market share. Apple customers are a devoted group
that understand the superiority that they possess but convincing the other
95% of the world because a rather large task.
Situational Analysis
Industry Structure
Apple Inc. (Apple) has managed to create substantial value in the highly
competitive personal computer industry, by innovating and forging a path
considerably different from those of the largest competitors in the industry,
successfully differentiating its products from those of the competition by
choosing to focus on quality, design elegance, and superior customer service,
while outsourcing actual manufacturing to trusted original equipment
manufacturers.
Yet, despite the advantages Apple has created for itself, the stiff competition
within the industry and other external factors present formidable challenges
to the firm.
The personal computer/notebook market is becoming increasingly
commoditized, leading to intense rivalry among competitors within the
industry, driving prices down and creating potentially destructive price wars.
Utilizing key resources and capabilities including industry-leading design
teams, talented software and hardware engineers, backed by a sizeable
research and development budget, which is responsible for a portfolio of
thousands of patents, and under the strategically brilliant stewardship of
CEO Steve Jobs, Apple has successfully innovated its way to a comfortable
market position commanding premium prices. Unfortunately, Apple cannot
rest on its laurels.
The position is not permanent and Apple must continually find new
ways to maintain profits and create value for customers and shareholders.
The maturing personal computer market is becoming saturated, leaving
fewer new buyers and more replacement buyers. To continue to grow, Apple
must also look to new and expanding markets as sources of revenue.
Distribution channels
The distribution channels for PCs have been changing considerably in the
past couple of years. The changes are being driven by price declines and the
'mature product' phase of the computer life cycle.
Many of the expansions involve channels that already carry PCs or other
sources not previously used. A few examples of those not previously used are
cable TV firms, telephone companies, and bookstores.
Smartphones SGM
10
8
6
Price
4
2
0
0.5
1.5
2.5
Quality
High
Appl
e Inc.
Micros
oft
Price
Google
's
Low
Low
Quali
ty
High
3.5
Relation
between
organizational focus:
Apple's
Strategic
Group
&
its
Driving forces
Driving forces are part of the external analysis and provide the company with
insight on opportunity and threats that it must contend with. Some of the
driving forces for Apple Inc. are:
years. It is
within the
the United
enough to
The younger generations are coming to know of Apple with the onset of
iTunes, iSync, and iPods. This is bringing a younger generation into Apple's
marketing world but Apple has yet to convince them that the computer
systems provide the quality and ease of use just as the music materials that
Apple is able to supply for them.
New software developers can infiltrate the industry and music related
equipment providers can easily provider newer systems or a different avenue
for accessing the music clips.
The need to remain competitive on both fronts keeps everyone moving
forward. The differentiation in the Apple operating system can hinder the
amount of software being created but this works against the company
because few products are available to use on their computers.
Competitors that can affect the direction of the company can easily copy the
iPod and iTunes sectors.
Apple's different operating system also incurs addition costs in the selling and
administrative costing realms. Apple must provide consumers with superior
or value added equivalents to justify the higher prices for their products.
inventory could adversely affect the company. New innovative product may
be presented to the consumer and make the present inventory obsolete so
the company again stands to incur all the risk and face uncertainty of the
future.
Apple's control of those that do produce components for them is limited and
subject to much risk and uncertainty.
1. Technology related
The first Macintosh computers were equipped with a physical chip on the
logic board because RAM and HD space were costly and ROM contained
routines required for computer startup and other higher-level Mac OS code.
The iMac release divided ROM into boot ROM and Mac OS ROM. The startup
and higher-level code routines were separated. The Mac OS ROM no longer
needed to be in a chip form but instead is now an image file inside of the
MacOS system folder. This change updates with the use of firmware feasible
for both ROMs. Each Mac also had a unique machine identification number
Apple also offers a better-integrated computer operating system than its
competitors. It is also not easily copied so Apple could offer a superior
computing solution free of any troubled operating system.
Apple has put audio, print spooler, bridging, and Ethernet into one small
package call AirPort Express. The system works with any Wi-Fi device and
supports streaming music through analog and digital audio jacks and USB
printer spooling through USB ports on Mac OS X and Windows XP and 2000.
The introduction of AirPort Express raises the bar on these combined
features.
2. Manufacturing related
3. Distribution related
Apple operates some of its facilities round the clock and after manufacturing
they are automatically feed to a system though a case taper where it is
prioritized and sorted prior to being palletized. This system can divert the
product for shipment or audit before it is released from the warehouse.
Apple's use of this system minimizes the intervention and monitoring time
cycles. It even has the capability of paging a maintenance mechanic when
problems occur within the system
Apple not only contends with the physical distribution of its computers but it
must also address distribution of its music and iTunes software products. The
AirPort Express system is one of Apple's new methods of staying on top of the
distribution of its innovations.
4. Marketing related
Apple had survived rather well through the use of its aesthetics and userfriendly systems but the computer's position changing to a commodity
eliminates much of the differentiation. Its opening of the retail stores has also
assisted with marketing of product since more people can readily see the
name on company storefronts. Branding and logo help keep the name fresh
in people's minds and Apple has designed some very creative commercials
that help this.
The differentiation is not easily copied by competitors and can provide Apple
user with a superior computing solution. It can offer a trouble free operation,
rapid response to technological change, and a direct link to customer
concerns. Apple differentiation offers a clean, simple product line with a
single controlling company dedicated to the production of quality products.
5. Skills related
Apple has spent much of its hiring practices dealing with upper level
managers, computer technologists and specialists, programmers, engineers,
and R&D scientists. They have gain a reasonable understanding of the skills
required to sustain a competitive advantage in their areas of expertise. Apple
has chosen to follow other companies in employing engineers as business
managers and they have seen the fallout from having done so just as other
companies have also seen.
Apple's expansion into the retail store business has been a change to what
they are accustomed to hiring. The storefronts use three key employee levels
for selling product and providing expert support for customers. The three
levels include the store manager, 'genius' position, and 'keyholder'.
Industry Analysis
Industry Wide Strategic issues
External Analysis
General environment analysis
Demographic segment
This is an increase of 13 million people in just a little over four years since
2004. Increases in population combined with the advances in technology will
continue to drive increased sales in future computer markets.
The same Census bureau report broke down the ages into the groups listed in
the Table01 below. Americans begin using computers in the early years.
Survey of the numbers easily points out that a majority of the American
population is of age to readily use a computer in some form or fashion. Even
some of the older generations are experimenting with computer use. USA
Today back in September 1997 published an article that claimed that 10% of
seniors own a PC and that 25% of those have Internet access.
The domestic populace included 84 percent of people 25 years and over who
had at least graduated from high school and 27 percent had a bachelor's
degree or higher. The group also included approximately 8 percent dropout
rate of the 16 to 19 year old group. Enrollment for 2003 was 75.1 million
students. The median income was $43,564 of which 80 percent of the
households received earnings and 17 percent received retire income other
than Social Security. Thirteen percent of the population was considered to be
living in poverty.
The group's occupational status was broken down into the following
categories by percentage.
Economic segment
Computer requirements are increasing across the globe. Data collected has
all but 4 countries increasing the number of computers being used per 1000
individuals within each respective country. The data was not restricted to PC
type computers but listed computer use in general so Apple computers were
included within the data gathered even though it is undergoing a market
share loss of computer sales.
Exports felled from $9.6 billion in 2000 to $8.8 billion in 2001 with Canada
being the largest regional market for US computer sales (23% of U.S.
exports). Asia and Europe accounted for two-thirds of the total exports.
Imports of computers dropped from $13.6 billion in 2000 to $12.2 billion, a 15
percent drop. Most of the imports are from Asian sources with Latin America
and Europe serving as secondary sources
Political/legal segment
Apple faces political/legal segment issues both domestically and abroad.
Domestically the Federal and State government continues to tighten up on
2001
Apple's complete product portfolio meets applicable ENERGY STAR
requirements (also in 2002/2003)
Started voluntary phase-out of tetrabisphenol A (TBBA) in all plastic enclosure
parts> 25 grams
2002
prohibit foreign companies from trading directly with the Chinese companies
(Kraemer, 2004).
Foreign companies often favor the local companies over the foreigners trying
to manufacture within their borders. In many cases additional tariffs are
imposed on foreign competitors. International trade regulations also differ
between countries with some being lucrative initially but changing in favor of
the local company as time progresses. Apple faces the battle of overcoming
the market dominance of the PC based computers but does have tremendous
opportunity present in the iPod and music associated industry.
Apple and fellow computer companies have recognized that pirating and
copying is more easily done in some countries than in others. The laws are in
effect in both places but one is more apt to prosecute than the other. This
illegal activity directly affects the bottom line for every company involved.
Socio-cultural segment
Cultures are restrictive and the restrictions have effects on company
profitability. China Internet traffic increased by 71% from 1997 to 1998 and
continues to do so as we approach 2005. Some technological changes are
more readily accepted than others. Chinese people still have trouble
accepting credit card transactions since the initial cost of computerization is
high. Internet sales in many overseas countries are not as successful as in
the United States and Europe because many of the customers prefer to view
the products they are purchasing. The same applies to other parts of the
world so the computer companies have to adjust according to the cultural
differences being encountered within the different countries in which they
chose to market and sell.
The largest socio-cultural hurdle for companies such as Apple is the lower
educational standards of many countries. While many are making great
progress, they are limited in number. Those that are progressing can take
advantage of the outsourcing that is being done by American companies.
Technological segment
The governmental has always favored the computer industry's research and
development and it has shown favor by the amount of funding that is made
available. This trend has held true since the Cold War. It was just recently that
any significant cutbacks occurred and the industry has been unable to make
up the difference. Most computer companies began to cut back the amounts
of R&D funding in the early to mid-1990s and also began to focus on the
short term. Product life cycles have been shortened and the computer has
become an everyday commodity.
Industry Attractiveness
Overall Attractiveness of the Industry
The overall attractiveness of the PC manufacturing business is
affected by several factors. These include general macroeconomic
conditions as well as industry specific factors such as the unique
economic features of the industry, competitive forces, forces of
change, the market position and expected behavior of the various
competitors already in the industry, and the industrys key success
factors.
Attractiveness of External Environment
The external environment of the technology sector has become
highly competitive and barriers to entry have naturally developed
over the years of growth some companies and the industry in
general have attained. The attractiveness of this sector of business
is still quite favorable but has been tough for new companies to try
to enter and compete. Some of the other forces involved signaling
industry attractiveness includes:
Consumers still demanding new high tech products
Natural move to a higher tech more service based economy
Economic conditions have started to improve
Dominant Economic Features
The market for PCs in the home as reached its maximum and growth
has largely stagnated.
Analysis shows that the market is highly concentrated with
most of the revenue (90%) coming from half of the
approximately 1,500 companies. Further analysis identifies
only five major players (Dell, Hewlett-Packard, Acer, Apple
and Lenovo) accounting for the lions share of the market.
The fact that there are so few large competitors with the
remaining market share divided by over 1,000 other
companies indicates that anyone can enter, but few can
grow. This has negative implications for the
attractiveness of this market.
The number of buyers in this market is relatively stable and
growing only with population. The market is fully penetrated
with every one of the estimated 111 million households
already fully served. This is also reflected above in the
analysis of market growth rate. Also as noted earlier, the
replacement market is driven by technological change. This
has very negative implications for this attractiveness
of this market.
This industry is strongly affected by both experience curve
effects and large economies of scale. Companies entering this
industry would require significant experience in large-scale
electronics manufacturing in order to have a chance at
competing. This has negative implications for the
attractiveness of this market to most companies.
From a financial perspective, standard measures of company
performance, such as profitability and liquidity ratios, as well
as economic efficiency measures such as ROA, are low for the
major players in this market. It seems that in order to achieve
a large market share a company must compete primarily on
the basis of price and efficiency. This has extremely
negative implications for the attractiveness of this
market.
Every market including the financial industry can be evaluated through the
use of Porter's five-force theory. Porter's uses the five forces, supplier power,
and barriers to entry, threat of substitutes, buyer power, and the degree of
rivalry, as tools that help analyze a company's position against its
competitors.
Economies of Scale
Product Differentiation
Capital Requirements
Switching Costs
Access to Distribution Channels
Cost Disadvantage Independent of Scale
Government Policy
Expected Retaliation
1. Economies of Scale
Apples economies of scale give it a clear advantage over its competitors
in the same industry
But it does change, how this occurs is based on what industry the new
competitor is emerging from. If it is coming from a similar background to
technology the switching costs are not big.
It may be more challenging if the switch is from a completely different
industry.
If different, the former low cost industry company may find challenges in
adapting to the high cost tech industry.
The reasons behind classifying this factor as lower barriers are as
follows:
Company already works in a high cost industry
Switching costs may be worth the future returns
Lower regulations present in the tech industry
Benefits outweigh switching costs
5. Access to Distribution Channels - High barriers to entry
Another high barrier to entry due to bigger companies already locking
down the major suppliers in the region, this occurs due to:
More mature companies present
Companies like Apple and Microsoft forming contracts with big suppliers
Not being able to match what other companies currently pay
Higher costs associated with premium suppliers
6. Cost disadvantages independent of Scale - High barriers to
entry
As mentioned before these costs deal with the learning curve.
Other reasons companies already present in the industry have an
advantage over potential entrants are as follows:
Learning curve
Lower costs per product
Favorable government support or subsidies
Connections with suppliers providing favorable prices
Locations better suited for business than what the entrant may be able
to obtain
Historical advantage- matured companies
7. Government Policy - High/Low barriers to entry
This factor is varied by specific industry.
The reason for a high/low rank is due to constant changes governments
can implement and make.
Government policies can make entry completely impossible or
favorable.
Limits to raw material suppliers could also be put into place to protect
the industry.
8. Expected Retaliation - High barriers to entry
Due to companies that are large and experienced high barriers to new
entrants are expected to come, they take the form of:
Large companies with excess cash flow can hinder new companies.
Distribution channel leverage of present companies.
Excess capacity to produce more goods
Higher market share
If truly threatened, buyouts early on could emerge.
Differentiated products
Since differentiated you cant get close substitutes
5. Threat of backward integration
Due to the big MNE Apple is there is not much of a chance this can
happen.
Apple enjoys the below advantages in relation to this idea:
Economies of scale
Great reputation
Access to major distributors
These are the reasons that if buyers try and backward integrate the
strategy will most likely fail.
Each product has their own unique designs yet they all accomplish the
same tasks
Benchmark tests could be used as a measure but they are unreliable
because companies can inflate the results to make their products seem
more applying
Therefore, the true performance of a product depends on the needs of
the user and how much they are willing to pay for a few extra RAMs or
memory space
Competitors' Analysis
Apple is taking 93% of the profits in the smartphone industry now
Apple is basically the only company making money from smartphones
.anymore
Every quarter, the analyst Michael Walkley takes a look at the state of the
profits of smartphone companies. This quarter, it is found Apple had a record
.breaking 93% of the industry's profits
Apple is always the leader, but for a short while, it looked like Samsung was
going to catch Apple. Those days are long gone. Apple has blasted away from
.the pack
Samsung's share of the industry's profits is down to 9%, its lowest point since
2008 as its profits crater. Samsung is under attack from Apple at the high end
.with the iPhone 6 and 6 Plus, which both have big screens
Apple sold 74.5 million iPhones last quarter, generating roughly $12.6-$13.5
.billion in profits
Another side of competition is the music side that Apple is presently doing
well in. Samsung and Napster 2.0 have teamed up to release a new
service/hardware combination that is intended to compete directly with
iTunes Music Store and iPod. The scheduled release is to offer unlimited
downloads and services that the iTunes Music Stores offer.
Economies of scale
Expense of software creation was be extremely expensive and but once it has
been refined the cost of producing copies for sale is minimized. The
difference in expense between Apple and Microsoft is the systems put into
place. Apple chose to go with a closed system that not have any others assist
with programming, testing, and bugging as did Microsoft. Microsoft gobbled
other companies that had made sustainable improvements to their operating
system up. This reduced some of Microsoft up front costs and multiplied the
progress.
SWOT Analysis
Strengths
1- Product differentiation
When Apple first hit the market in the early 1980s it had a product that
differentiated it from all other computer products on the market but it failed
to capitalize on what it had. The system continues to be strength for the
company since its closed operating system is not subject to the computer
viruses and hacking that affects the Microsoft Windows operating system. The
small market share controlled by Apple can be increased every time Microsoft
encounters problems.
Apple's system for graphic and architectural production and design is far
superior to any Windows application and this strength should receive
considerable advertising to capture more of that niche market. Apple cannot
continue to make the mistakes it has made in the past when it could have
countered the Windows upgrades as they occurred.
The Macintosh's high-resolution graphics and ease of advantage over MS-DOS
had made it a natural for software developers who created the "desktop
publishing" segment, which was widely credited as saving Apple and the
Macintosh.
The iPod and iTunes markets are strengths but they can be easily copied by
competitors and are subject to the control of third parties.
At present it does control the market but without pursuit of a core
competency that cannot be easily imitated by others it will fall off of the
strength category.
Apple does manufacture both hardware and software for its computers so it
has the ability of controlling design so that it appeals to the functional uses
and aesthetics required by consumers. Some of Apple's clients are web
designers and its computers provide the specific hardware and software
needs to accommodate them. Output is found to be impressive both for
customers and their clients. Apple is providing the most affordable 64-bit
technology and a new operating system OS X in effort to position itself in the
scientific and academic high performance computing tasks.
4- Diversified markets
Apple has built an alliance with Sony and Ericsson with aims at capitalizing on
the broadband wireless market in the future. Apple's launch of iSync software
in 2003 allows synchronizing of personal information management
applications and devices such as mobile phones and hand-held computers
(PDAs) (Barker, 2003).
Weaknesses
1- Economic and political uncertainty
Apple's operating performance is affected by the economic and political
uncertainty that shadows the United States. Education entities have
postponed purchases due to budget cutbacks and shortfalls. Businesses are
not expanding and employment reductions in force have provided less
disposable income reducing sales. Failure to improve could continue to affect
the company and its suppliers negatively. The entire tech market has been
Apple relies on third parties for music and for manufacturing. This can affect
the costs being relayed to the consumer. The music sales have been
profitable for Apple but they have to contend with the fact that the material is
in the control of third party representatives.
The fees for having access to these materials can be extremely expensive.
Another concern is being outbid or restricted from being able to provide the
contents previously provided. Most of the licensing agreements are shortterm and do not come with a guarantee that the materials will be licensed in
the future. Some music industry parties have announced that consolidation of
their distribution might occur in the future. A move such as this would restrict
availability of material for Apple's iTunes Music Store and drive costs upward
so that they might not be as attractive as they are now. iPod sales could
decrease rapidly if material restrictions occurred and Apple would remain at
the mercy of these third-party controllers.
The music coming from third parties is not the only thing that Apple should
be concerned with. It also has third parties manufacture it products. The
company also out sources much of its transportation and logistics
management. Outsourcing does lower the fixed operating costs but this is at
risk of not having any or at most restricted control.
Quantity output and quality of manufacturing are in the control of the third
party supplier/manufacturer. The company is ultimately held responsible in
the end, especially when defects or other liabilities surface. This is another
risk that Apple must contend with.
Apple is also reliant on Motorola and IBM for processor chips so if these
companies run short or increase the price on the chips Apple must either
absorb the cost or pass it along to consumers. Either of the two scenarios is
highly likely especially when the tech market is recessed.
Apple is faced with multiple weaknesses that it cannot control. Each of them
or a group of them could affect its operations in a negative direction and
Apple will be faced with more hardships than what it encountered in the past.
Management must look at how these weaknesses can either be bridged in
effort to minimize risk or turned into strengths.
Opportunities
1- Apple's different operating system
Apple can take advantage of its operating system differences by turning it
into an opportunity to develop improvements to the Macintosh platform in
Threats
1- Very competitive industry
The market for design, manufacturing, and sales are all extremely
competitively aggressive in Apple's business. The rapid technological
advances made by competitors in the hardware and software segments has
increased the number products offered in shorter time spans. Price
competition, including sellers with computers with other operating systems,
has been very intense as the battles for increased market share rise. All of
these affect gross margin, especially when combined with increased reliance
on the Internet and the miniaturization of components that decrease prices
since they are smaller and simpler.
3- Microsoft dominance
Microsoft Windows continues to dominate the market. More than 90% of the
world's computers use the Microsoft operating system. Apple needs to work
on convincing the world that its system is better than Microsoft. This
dominance and need to overcome the world's mental state of thought about
Windows operating systems is a major threat to Apple.
Windows based PCs have cut prices and lowered product margins to maintain
market share since demand has been declining during the past few years.
This pattern does not seem any brighter in the near future so these practices
are very likely to continue. PC technological advances in software and
hardware, and miniaturization of parts, together with a more reliant Internet
movement make the competition for market share even hotter.
Apple's operating system has lost some of its market share during the past
few years but is working to regain its losses. The introduction of the G5 has
helped with sales, as have the Powerbook portables.
Apple's operating system has provided graphics and creative designers with a
useful tool that is not comparable to Windows operating system applications.
This difference must be managed with continued improvements that allow
the public to perceive design and functional advantages over the
competitors' operating system platforms. Failure to compete effectively could
cause a negative affect on Apple's financial and operating results.
4- Software Piracy
Software piracy has been a problem for software and operating systems
producing companies. As the technology advances the more susceptible the
companies become to additional piracy. The piracy issue has grown to global
proportions and stopping unlawful copying and distribution of copyrighted
software does not seem to have a remedy for prevention in the future.
5- Global competition increases
Competition continues to increase worldwide. Other countries are getting into
the manufacturing as the expansions of existing companies occur. Cheap
labor and parts manufacturing in less privileged countries provide
opportunities for larger companies with extra capital to spare for expansion.
Pursuit of savings drives them into the other countries and with labor and
parts costing less they utilize that as a means for cutting costs making them
more competitive.
The amount of product introductions hitting the market requires that each
company continue pursuing more innovative products in a shorter period of
time. Lack of newly enhanced product will reduce customer demand even
more than what is being affected by the weakened economy.
Companies must hope that the product introductions will be well received by
the consumers. If the product is well received then the company must be in a
position to ramp up production in short order but not enough to be
overwhelmed by large inventories when the sales regress. This need for
judging demand is critical and must be determined as accurately as possible
because over supply will lead to dead inventory and not enough supply will
lead to unhappy customers.
Finding the balance is very difficult. Innovations within the operating systems
must continue to support the existing systems at the risk of losing customers
should this not occur.
2010
2009
2008
Comment
39.30
%
40.10
%
35.20
%
28.20
%
27.30
%
22.20
%
21.50
%
19.20
%
16.30
%
Assets 18.60
%
17.33
%
15.40
%
Return
( ROA)
on
Total
29.30
%
26%
29%
15.15
%
9.08%
6.78%
Liquidity Ratios
Liquidity Ratios
Current Ratio
2.01
Quick Ratio
Inventory
capital
to
net
working
2.74
2.46
Leverage Ratios
Leverage Ratios
Debt-to-Asset ratio
Activity Ratios
Activity Ratios
Inventory turn Over
62
94
2.0
8
3.0
8
0.8
7
0.9
Corporate
Strategy
Growth is the main corporate strategy with the following
integration models
Apple
Retail
stores
world
wide
Business Strategy
Apple Competes with HTC, Nokia, Samsung, Sony and Google in Smart
Phones and Small Personal Computers (I PAD).
Industry Analysis
Consumer Electronic Industry Life Cycle
1. International- Growth Stage
For the international markets Apples market is in its growth stage cycle.
Firms are focusing on emerging markets such as China to continue their
growth and expand operations.
This involves high capital costs and low competition because the emerging
markets have been uncharted territory before this point
2-Domestic- Mature Stage
Apples domestic market of the U.S. is currently in itsmature stage of the
industry life cycle
Growth within this industry has substantially slowed down due to
saturation and intense competition
Within the U.S. the biggest firms of this industry have been founded or
based within its borders
Companies like Microsoft, Samsung, Sony, HP, Gateway and many others
have saturated the market with good sand dominate the industry
Domestic- Mature Stage
Apples domestic market of the U.S. is currently in its mature stage of the
industry life cycle
Growth within this industry has substantially slowed down due to
saturation and intense competition
Within the U.S. the biggest firms of this industry have been founded or
based within its borders
Companies like Microsoft, Samsung, Sony, HP, Gateway and many others
have saturated the market with goods and dominate the industry
iPad works with the iTunes Store, the iBooks Store, and the App Store for
purchasing and playing music, movies, TV shows, podcasts, books, and
apps. This segment contributes 53.5% in total sales. Mac is the
Companys line of desktop and portable personal computers. Macs feature
Intel microprocessors, the OS X operating system and include Mail, Safari
web browser, Messages, Calendars, Reminders, Contacts and the iLifesuite
of software apps. This segment contributes 18.7%.
The Companys iPod line of portable digital music and media players
includes iPod touch, iPod nano, iPod shuffle and iPod classic. This segment
contributes 12.5%. ITunes is integrated with the iTunes Store, the App
Store and the iBooks Store. The iTunes Store facilitates the users to buy
and download music and TV shows and to buy or rent movies. The iTunes
Store also includes hundreds of thousands of free Podcasts on a multitude
of subjects. This segment contributes 2.58%. Accessories including Final
Cut Pro, Logic Studio, Logic Pro, and its FileMaker Pro database software.
Apple also produces Apple LED Cinema Display and Thunderbolt Display.
Intense Competition
Computer industry seems to be more intense for Apple as it
can gain only 8.5% of the total market shares. While Dell Inc
gets 23.4& and HP gets 16.8&.
Apple is used to be just in the computers and software
industry then it has expanded its business to the digital music
players (iPod) industry occupying 71% of the total market
shares. While SanDisk has 11%, Microsoft has 4% and Creative
has 2% which shows significant revenue upon Apple Inc.
contribution.
Recommendations
Long Menu
Options for competing in a mature industry
Generic strategies
Defensive strategies
Apple should consider infiltration of the business sector with an Enterprise
Resource Planning (ERP) system merger.
Short Menu
Option One: Franchising of stores
Option Two: Growth Strategy through new products and new
market opportunities
Option Three: Vertical Integration
Growth Strategy
Market Development Strategy: to increase a large market share through
market penetration Apple Explores New Territory
Product Development Strategy: to upgrade its current products and produce
new versions and at the same time produce new products
New products :
The company should promote the products in new markets as they are
missing opportunities in many regions
Pros:
Cons:
Apple's might lose control of some of its operation when merging with an
ERP company. Management might not be willing to share operating platform
information with this ERP Company making it difficult to perfect such a
blending of operational systems.
Recommendation 2
Pros:
Guarantee quality of service provided for clients all over the world
Succession planning
Cons:
High Cost
Selected Strategies:
Corporate Strategy : Growth Strategy
Business Strategy : Vertical Integration
Positives
Negatives
-New Markets and business- Lack of Focus
opportunities
- Implementation & Control
- Increased profits
might be affected
Vertical Integration
-Avoid risk of suppliers
-Increased investment cost
- Lower cost
As this industry is rapidly
changing, vertical integration
might be risky
Increase Franchise outlets- Expansion of Distribution- Need more control
channels
- Quality of service might be
- Low Cost
affected
Strategy Implementation:
Organization Structure:
This structure fits with the recommended strategies, as growth with new
products or business lines could be easily added , same for markets.
Build specific products of high quality, but lesser prices, for the
huge populations of India and China that are passionate about
computers, mobile phones and music.
Continue and intensify the search for innovative, stylish and useful
products in its existing area of operations.
Company Culture:
Apple is a pretty divided mix of typical corporate red tape and
politics mixed in with startup level urgency when the direction
comes from Steve. If you have a project that Steve is not involved
in, it will take months of meetings to move things forward. If Steve
wants it done, it's done faster than anyone thinks is humanly
possible. The best way to get any cross departmental work done
was to say its for Steve and you'd probably have it the same day.
This reflects a culture where charismatic leader plays a great role.
The culture in Apple is still friendly and achieving objectives is the
core value at all levels in the organization.
The culture as well values innovation and novelty, which fits
perfectly with the recommended strategies.
Producing an action plan can be beneficial not only for individual basis
but also for businesses. For example, it allows project managers or any
member of a group to monitor their progress and take each task step-bystep, therefore allowing them to handle the project efficiently. The
advantage of doing this is, it allows you to execute a structured plan for
the end goal you intend to achieve. Furthermore, it provides the team
with appropriate foundations, therefore prioritizing the amount of time
you spend on each task. This will then prevent any sidetracking that may
occur. Lastly it creates a bond within a team, as each member is aware of
their individual role, as well as providing necessary information to ensure
success of the project
Financial
Customer
My opinion
Regarding marketing key success factors
Apple's product differentiation in the iPod and iTunes sector will be short-lived
since it has a dependency on third parties and also because competitors can
easily enter the market. Apple must position itself as the only competitor in
the market with stem-to-stern computing solutions.
Skills related
As Apple transitioned into team building in the late 1990s they soon found
that they management staff was lacking in managerial skills required to lead
cross-functional teams. As before many of them were engineers with little to
no business management experience or academic background.
Organizational capabilities
Evaluating
Apple's
organizational
capabilities
requires
reviewing
environmental/strategy, work system, management process, principles and
values, human resources system, and the leadership team. Apple also lacked
a work system of cross-functional product development teams and needed
business-oriented managers with leadership skills to lead teams that could
agree on new businesses. This put Apple in a position of not being able to
fulfill its requirements for:
1) Defining its environment and understanding its strategy,
2) Lacking a work system,
3) Needed a management process for specifying workable goals and
objectives, and
4) Lacked leadership teams to provide direction.
Employees were not sure of the company's strategic directions and were
receiving different priorities from R&D and marketing. This again came from
lack of functional leadership team cohesiveness in setting one direction for
the company. Managers did not want to lose control of their power and
moving into cross-functional business teams meant just that plus not having
an effective leadership retarded any efforts in that direction.
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