Apple Inc.

2015
Group members
Ahmed Moon A
Ammar Shahab D
Bakhtiar Gohri E
Danya Shahid B
Momina Khalil C
Sir Abu Huraira
7/11/2017
Table of Contents
1 Synopsis .................................................................................................................................. 3
2 Introduction ............................................................................................................................. 4
3 Background ............................................................................................................................. 4
4 One Major Problem................................................................................................................. 4
5 Minor problem ........................................................................................................................ 5
6 Apple Inc. Mission .................................................................................................................. 5
6.1 Vision ............................................................................................................................... 5
6.2 Objectives ......................................................................................................................... 5
6.3 Strategies .......................................................................................................................... 6
6.3.1 Differentiation strategy: ............................................................................................ 6
6.3.2 Integration Strategy................................................................................................... 6
6.3.3 Pricing Strategy......................................................................................................... 6
7 Revised Mission Statement ..................................................................................................... 6
8 Strategic Group Analysis ........................................................................................................ 7
9 Competitive profile matrix .................................................................................................... 10
10 PESTEL Analysis ................................................................................................................. 10
10.1 Political Forces ............................................................................................................... 10
10.2 Economic Forces ............................................................................................................ 10
10.3 Socio cultural Forces ...................................................................................................... 11
10.4 Technological Forces ..................................................................................................... 11
10.5 Environmental Forces .................................................................................................... 12
10.6 Legal Forces ................................................................................................................... 12
11 Porter’s Five Forces Model ................................................................................................... 13
11.1 Competition in Industry: ................................................................................................ 13
11.2 Bargaining Power of Buyers: ......................................................................................... 13
11.3 Bargaining Power of suppliers ....................................................................................... 14
11.4 Threat of New Entrants to the Market Place: ................................................................. 14
11.5 Threat of Buyers Opting for Substitute Products: .......................................................... 14
12 External Factor Evaluation (EFE) Matrix ............................................................................. 15
13 Internal Factor Evaluation (IFE) Matrix. .............................................................................. 16
14 Ratio Analysis ....................................................................................................................... 17
15 Strategic Position and Action Evaluation (SPACE) Matrix ................................................. 18
16 Boston Consulting Group (BCG) Matrix .............................................................................. 18
17 Internal-External (IE) Matrix ................................................................................................ 20
18 Grand Strategy Matrix (GSM) .............................................................................................. 20
19 Quantitative Strategic Planning Matrix (QSPM) .................................................................. 22
20 Recommendations: ................................................................................................................ 24
1 Synopsis

Apple Inc. is an American multinational corporation which deals in designing and

manufacturing of hardware and software, including Macintosh computers, iPod and the
iPhone. Software’s include the Mac OS X operating system, the iTunes media browser, the
company operates more than 250 retail outlets in nine countries and an online store for
hardware and software products. Apple as a first mover was a first successful personal
computer company and became popular in the graphical user interface. Headquarter of
apple is located in Cupertino, California.

After the tragic death of Steve jobs the current CEO of apple is Time Cook who on March
9. 2015 announced the Apple Watch. This product is his first strategic initiate. Jobs played
a vital role in making apple the most profitable company, he brought apple out from the
bankruptcy. Apple have largest quarterly profits of $18 billion in corporate history. IPhone
6 Stimulated sales records, by selling 74, 5 million units in 2014.

As the company grows it’s also facing challenges from competitors like China. Low-cost
competitors (Xiaomi) are offering same quality in low price which leads to threat. On the
other hand apple – iPod sales are also declining for straight 7 years. Apple was increasingly
dependent on the iPhone – 69% of its revenue.

Apple has achieved huge success after number of ups and downs since it was found (1976).
With the help of innovative products like Macintosh computers, operating system, the iPad,
iPhone, apple achieved the remarkable distinction of being U.S. first ever company who
attain $700 billion of market capitalization
2 Introduction

Apple was founded by 2 college dropouts – Steve jobs and Wozniak on April fool’s day,
1976. They started their work from jobs garage in Los Altos, California and their very first
product was computer circuit board named Apple I. After some time an experienced
business man joined them named mike Markkula Munior. Jobs’ mission was to bring easy
to use computers in the industry which lead to Apple II. And that’s how they brought
revolution in the computing market.

3 Background

Steve Jobs the CEO of the Apple is also known as the architect of major apple products.
Apple products are the high end products with the premium pricing strategy, having loyal
customers.

Apple started in 1976 as a computer company. And now apple has established a strong
brand name known for various innovative products in the market. Apple’s success story
started when they revolutionized the traditional music industry and gained first mover
advantage by bringing a unique product named iPod.

Apple started to manufacture iPhone in 2007. It was first of its kind providing features like
iPod, emailing and touch interface all in one device

4 One Major Problem

After almost 2 decades of bad performance, Apple thrived under Steve Jobs. The burning
question is whether Cook will be able to maintain the premium position of Apple as of
today and how? What will be the strategy applied to stand tall and distinctive among its
competitors.
5 Minor problem

How to remove its dependence on iPhone.

6 Apple Inc. 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 offering.

6.1 Vision
Apple’s current vision statement was introduced by CEO Tim Cook, who stated, “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 allow us to innovate in a way that others cannot. And
frankly, we don’t settle for anything less than excellence in every group in the 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.”

6.2 Objectives
 Continue to create groundbreaking products. Apple from the start is trend setter by
introducing new and innovative products.
 Expansion of apple stores globally
 Availability of products in every other retail outlets
 Entre and sustain premium pricing and gain more market share
6.3 Strategies
Apple is focusing on 3 different strategies which are discussed below

6.3.1 Differentiation strategy:

Apple is using product differentiation strategy to stay unique from his competitors. Some
of its innovative products are “Macintosh”, “iPod”, and “iPhone”. Having premium prices,
unique features and superior quality with innovation.

6.3.2 Integration Strategy

Apple is vertically integrated, all the critical parts of chain is use to make and sell product
is controlled by apple. It builds high quality of hardware and software with different web
services like iTunes and iCloud.

6.3.3 Pricing Strategy

Apple is using premium pricing strategy. Its prices represents its products and also meeting
consumer expectations. Apples premium pricing strategy helps them to maintain high-end
image of company and its products.

7 Revised Mission Statement

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

educators, creative professionals and consumers around the world through its innovative
hardware and software while being environmentally responsible, offering a diverse
working environment and earning reasonable profits.
8 Strategic Group Analysis

 Software
Below is the perceptual map for Apple in the software industry.
 Smartphones
Below is the perceptual map for Apple in th Smartphone Industry.
 PC industry
Below is the perceptual map and rating table for Apple’s position in the PC Industry.
9 Competitive profile matrix
Apple Samsung Lenovo

Critical Success Factors Weight Rating Score Rating Score Rating Score
Advertising 0.04 2 0.08 4 0.16 3 0.12
Market Penetration 0.07 2 0.14 4 0.28 3 0.21
Customer Service 0.08 3 0.24 4 0.32 2 0.16
Supply Chain 0.07 2 0.14 4 0.28 3 0.21
R&D 0.10 3 0.30 4 0.40 2 0.20
Innovation 0.09 3 0.27 4 0.36 2 0.18
Financial Profit 0.08 4 0.32 3 0.24 2 0.16
Customer Loyalty 0.10 4 0.40 3 0.30 2 0.20
Market Share 0.11 3 0.33 4 0.44 2 0.22
Product Quality 0.09 4 0.36 2 0.18 3 0.27
OS 0.09 4 0.36 1 0.09 2 0.18
Price Competitiveness 0.08 2 0.16 4 0.32 3 0.24
Totals 1.00 3.10 3.37 2.35

10 PESTEL Analysis

10.1 Political Forces

 Some countries place restrictions on importing of goods from particular
countries. China, for example, restricts the entrance of foreign companies to
promote its local companies amongst the countrymen. Apple, therefore, has
a limited market in China.
 The US government’s wrongdoings to other countries have an impact on the
business relationships among countries as well

10.2 Economic Forces

 Apple is dependent on the economic conditions of the countries it outsources
its operations to.
  To compete in the price department Apple has outsourced its operations to
Asian countries. If there’s a rise in labor costs in those countries, Apple will
suffer.
 Due to more dual-income families, purchasing power of people has increased
giving more opportunity to Apple.
 Communication around the globe has become easier which has made the
business faster and easier. i.e., People can directly purchase from website;
larger market.

10.3 Socio cultural Forces

 Apple is considered a symbol of social status
 Different cultures have different approaches towards technology and its
usage.
 Innovation also entails changes in attitudes and behavior of people. This
change is needed to adapt to new technology coming in, many people still
are not open to changes and it’s difficult to make them switch from their
current lifestyle. Example: Apple Watch
 Being a global company, Apple has to make sure it does not directly hurt any
socio-cultural segment’s sentiments. This requires a good understanding of
the cultures and norms of countries around the world.
 Labor is becoming more aware of their rights, so any attempt to exploit cheap
labor can result in damage.

10.4 Technological Forces

 There is fierce competition in Information Technology industry
 Apple’s competitors are offering everything it offers and that too at a lower
cost, Apple has to maintain its legacy of being the first mover and premium
priced brand to remain the brand Steve Jobs made it.
  As technology becomes common, the hacking and stealing of intangible
assets have also arisen. Apple must make sure its product remains unmatched
and secured, out of the reach of competitors.

10.5 Environmental Forces

 Growing depletion of resources, pollution etc. require companies to be more
responsible than ever. Apple has done Environmental programs in past and
should continue to do so.
 Green Technology’s concept is gaining popularity
 Climatic and environmental condition of Apple’s third party countries is also
deteriorating.

10.6 Legal Forces

 Legal regulations related to environment are being made compulsory to
follow
 Legal suits are becoming common in tech industry due to similarity of
features etc., therefore care must be taken in obtaining copyrights, patents
etc.
11 Porter’s Five Forces Model

Threat of
Substitute
Product

Competitive
Gargaining Rivalry Bargaining
Power of Power of
Suppliers within an Customers
Industry

Threat of
New
Entrants

11.1 Competition in Industry:

Apple faces direct competition with different brands for e.g. Hewlett-Packard, Samsung,
Dell, Google, and Amazon. All these companies are focusing on same areas like Apple i.e.
increasing investment in Research and development (R&D) and marketing. Low switching
cost is making this industry highly competitive, the power is in buyer’s hands, if they don’t
like the product they can easily resell and switch to other product. The threat of
marketplace competition is a key consideration for Apple, which it has been fighting with
its unique and innovative products.

11.2 Bargaining Power of Buyers:

As discussed above the element of low switching cost gives power to the buyers which
Apple should consider. Apple is more affected by collective buying power as compare to
individual buying power, because it’s a weak force for Apple as losing one customer is
relatively insignificant as opposed to losing many. In this area R&D is important which
enables Apples to keep developing new and innovative products and because of which
Apple has established a strong, die-hard and loyal customer base who are willing to pay a
premium price for the value, charm and status Apple products offer.

11.3 Bargaining Power of suppliers

Apple has been a vertically integrated company since the beginning until recently when it
outsourced some of its operations to Asian countries in order to cut down costs. Since the
competition is fierce in this industry and demand for cheap labor strong, the bargaining
power of large suppliers looms as a threat in the face of Apple.

11.4 Threat of New Entrants to the Market Place:

The threat of new entrants for Apple to the marketplace is reasonably low due to two major
factors i.e. a new company needs extremely high cost to establish within the industry and
time and efforts needed for creating brand recognition that matches Apple. This industry is
already full of established competitors with massive amount of capital to spend on R&D.
A new entrant in the market place need huge amount of capital to spend on R&D and to
develop a complete new range of products to generate revenue. New entrant will face
severe competition from a number of smaller brands before coming head to head with the
like of Samsung and Apple.

Nonetheless, it’s possible for a new entrant – for eg; Chinese firm- to compete with Apple
by taking financial help from their government.

11.5 Threat of Buyers Opting for Substitute Products:

Substitutes are not directly competitive products but they can be possible substitute. For
Apple products different substitutes are available such as

iPhone: landline, letters

iPod: CD players, music library

Switching cost from Apple to different substitute is very high because user will not be able
to use the apps and different software because of compatibility issues. Apple faces price
competitiveness with its competitors because they can offer similar or unique features at
reduced prices.

12 External Factor Evaluation (EFE) Matrix

Opportunities Weight Rating Weighted Score

1 Growing technological adaptation in emerging economies 0.08 3 0.24
2 Trends of wearable devices expected to rise by 35% in next 5 years 0.09 4 0.36
3 Increase in sales of laptop by 20% 0.06 2 0.12
4 High demand for cloud storage 0.06 2 0.12
5 Declince in samsung share from 31.5% to 24% (2014-15) 0.09 2 0.18
6 0 0.00 0 0
7 0 0.00 0 0
8 0 0.00 0 0
9 0 0.00 0 0
10 0 0.00 0 0

Threats Weight Rating Weighted Score

1 90% of the PCs running on Microsoft 0.06 2 0.12
2 Declining sales of PCs each year (2.1% in 2014) 0.08 2 0.16
3 Threat of Piracy/Jailbreaking 0.09 4 0.36
4 Easy accesibility on Android for users and programmers 0.08 2 0.16
5 Cheaper phones of competitors 0.05 1 0.05
6 Increasing share of Chinese brands (Lenovo: By 2.9%, Huawei: By
0.05 2
0.9%) 0.10
7 Increasing downloads from play store (60% higher than Apple) 0.04 2 0.08
8 Online music stores like Amazon and Napster selling individual songs
0.09 2
at competitive prices 0.18
9 Network locked phones have a potential impact on sales 0.08 4 0.32
10 0 0.00 0 0.00
Total EFE Score 1.00 2.55
13 Internal Factor Evaluation (IFE) Matrix.

Strengths Weight Rating Weighted Score

1 2nd largest market share in Smartphones (14.8%) 0.07 4 0.28
2 Uniqeuness of design and OS 0.09 4 0.36
3 Brand recognized throughout the world 0.09 4 0.36
4 Diversified product range (iWatch, iPhone, iPad, Mac etc.) 0.06 3 0.18
5 Loyal customer base 0.10 4 0.40
6 Least vulnerability against virus 0.08 4 0.32
7 First mover in industry for various innovations (retina display,
0.05 4
eliminating usb port, apple pay, etc.) 0.20
8 0 0.00 0 0.00
9 0 0.00 0 0.00
10 0 0.00 0 0.00

Weaknesses Weight Rating Weighted Score

1 Limitations of OS 0.07 2 0.14
2 Lowest share of Apple in PC Market (6.4%) 0.07 1 0.07
3 iPad sales faced 22% decline in 2013 0.05 1 0.05
4 Heavy dependence on iPhone sales (69% of total sales) 0.08 1 0.08
5 Dependence on Steve Jobs' ideas 0.04 2 0.08
6 Relies on 3rd party for its components 0.05 2 0.10
7 iPod sales declined in past 7 years 0.05 1 0.05
8 13% decline in sales of iTunes 2014 0.05 1 0.05
9 0 0.00 0 0.00
10 0 0.00 0 0.00
Total IFE Score 1.00 2.72
14 Ratio Analysis

Profitability Ratios

Profit Margin 22%

Gross Profit Margin 39%

Operating Profit Margin 29%

ROA 19%

ROE 35%

Liquidity Ratio

Current Ratio 1.08

Quick Ratio 1.05

Leverage Ratios

Debt to Asset Ratio 40%

Debt Ratio 52%

Activity Ratio

Inventory Turnover 86.59

Fixed Asset Turnover 8.86

Total Asset Turnover 0.90

15 Strategic Position and Action Evaluation (SPACE) Matrix

Internal Analysis: External Analysis:

Financial Position (FP) Stability Position (SP)
Gross Profit Margin 6 Rate of Inflation -3
Leverage 3 Technological Changes -3
Liquidity 5 Price Elasticity of Demand -2
Working Capital 6 Competitive Pressure -3
Total Asset Turonver 4 Barriers to Entry into Market -2
Financial Position (FP) Average 4.8 Stability Position (SP) Average -2.6

Internal Analysis: External Analysis:

Competitive Position (CP) Industry Position (IP)
Market Share -3 Growth Potential 4
Product Quality -1 Financial Stability 6
Customer Loyalty -1 Ease of Entry into Market 2
Technological know-how -2 Resource Utilization 5
Control over Suppliers and Distributors -3 Profit Potential 7
Competitive Position (CP) Average -2.0 Industry Position (IP) Average 4.8

16 Boston Consulting Group (BCG) Matrix

 Top Firm in Division
Your Firm's Industry Market Relative
Enter in division names below (If less than 5, leave the other spaces blank and no circles will appear) Division Division Growth Rate Market Share
Revenues Revenues (Step 4) Position

Iphone 101,991 168,836 0.14 0.60

Mac 24,079 72,237 -0.05 0.33
Ipod 2,286 2,286 -0.20 1.00
Ipad 30,238 30,238 -0.05 1.00
#DIV/0!
17 Internal-External (IE) Matrix

Enter The Name Of Your Firm

Apple Inc.

Your Firm's
Enter in division names below. If less than 5, leave the other spaces blank and no circles will appear. Remember you Estimated Estimated
Division
could use divisions by geographic region for the BCG and by product/service type for the IE (or vice versa). IFE Score EFE Score
Revenues

182,795 2.72 2.55

18 Grand Strategy Matrix (GSM)

 Rapid Market Growth

Quadrant II Quadrant I

iPhone

Weak Competitive Strong Competitive

Mac
Position

iPad

iPod

Quadrant III Quadrant IV

Slow Market Growth

The Grand Strategy Matrix allows for entry of your firm and up to 5 divisions
GRAND
Rank the X axis from 1 (Extremely Weak Competitive Position) to 9 (Extremely Strong Competitive Position)

X-axis
Rank the Y axis from 1 (Extremely Slow Market Growth) to 9 (Extremely Rapid Market Growth) Y-axis score
score

Apple Inc.
iPhone 9 8
Mac 3 5
iPod 7 2
iPad 7 3
19 Quantitative Strategic Planning Matrix (QSPM)

After doing all the above analyses, the two strategies that were chosen to be evaluated in
QSPM were market penetration strategy and product development strategy.

Market Peneration Product Development

Strengths Weight AS TAS AS TAS

1 2nd largest market share in Smartphones (14.8%) 0.07 3 0.21 2 0.14
2 Uniqeuness of design and OS 0.09 3 0.27 1 0.09
3 Brand recognized throughout the world 0.09 1 0.09 3 0.27
4 Diversified product range (iWatch, iPhone, iPad, Mac etc.) 0.06 3 0.18 4 0.24
5 Loyal customer base 0.10 2 0.20 3 0.30
6 Least vulnerability against virus 0.08 3 0.24 1 0.08
First mover in industry for various innovations (retina display,
0.05 2 0.10 3 0.15
7 eliminating usb port, apple pay, etc.)
8 0 0.00 0 0.00 0 0.00
9 0 0.00 0 0.00 0 0.00
10 0 0.00 0 0.00 0 0.00

Market Peneration Product Development

Weaknesses Weight AS TAS AS TAS

1 Limitations of OS 0.07 2 0.14 1 0.07
2 Lowest share of Apple in PC Market (6.4%) 0.07 2 0.14 3 0.21
3 iPad sales faced 22% decline in 2013 0.05 4 0.20 2 0.10
4 Heavy dependence on iPhone sales (69% of total sales) 0.08 2 0.16 4 0.32
5 Dependence on Steve Jobs' ideas 0.04 2 0.08 3 0.12
6 Relies on 3rd party for its components 0.05 1 0.05 1 0.05
7 iPod sales declined in past 7 years 0.05 2 0.10 1 0.05
8 13% decline in sales of iTunes 2014 0.05 2 0.10 1 0.05
9 0 0.00 0 0.00 0 0.00
10 0 0.00 0 0.00 0 0.00
 Market Peneration Product Development

Opportunities Weight AS TAS AS TAS

1 Growing technological adaptation in emerging economies 0.08 4 0.32 3 0.24
2 Trends of wearable devices expected to rise by 35% in next 5 years 0.09 3 0.27 4 0.36
3 Increase in sales of laptop by 20% 0.06 4 0.24 3 0.18
4 High demand for cloud storage 0.06 4 0.24 1 0.06
5 Declince in samsung share from 31.5% to 24% (2014-15) 0.09 4 0.36 3 0.27
6 0 0.00 0 0.00 0 0.00
7 0 0.00 0 0.00 0 0.00
8 0 0.00 0 0.00 0 0.00
9 0 0.00 0 0.00 0 0.00
10 0 0.00 0 0.00 0 0.00

Market Peneration Product Development

Threats Weight AS TAS AS TAS

1 90% of the PCs running on Microsoft 0.06 4 0.24 3 0.18
2 Declining sales of PCs each year (2.1% in 2014) 0.08 2 0.16 3 0.24
3 Threat of Piracy/Jailbreaking 0.09 1 0.09 2 0.18
4 Easy accesibility on Android for users and programmers 0.08 3 0.24 1 0.08
5 Cheaper phones of competitors 0.05 2 0.10 4 0.20
Increasing share of Chinese brands (Lenovo: By 2.9%, Huawei: By
0.05 3 0.15 4 0.20
6 0.9%)
7 Increasing downloads from play store (60% higher than Apple) 0.04 2 0.08 1 0.04
Online music stores like Amazon and Napster selling individual
0.09 1 0.09 2 0.18
8 songs at competitive prices
9 Network locked phones have a potential impact on sales 0.08 2 0.16 1 0.08
10 0 0.00 0 0.00 0 0.00
TOTALS 5.00 3.86

Final Strategy Chosen: Market Penetration

20 Recommendations:

 To continue growing with its previous momentum, Apple needs to apply a Market
Penetration strategy extensively.
 Since third party contractors have made its way to Apple as well, here is a need of
having a close relationship with suppliers in the tech industry as the nature of the
components is sensitive and the prices must also be not so subjective to changes.
This will also aid in penetrating the markets where the labor is hired through cheaper
prices.
 Gain more control over third party contractors to have more advantage over
competitors and more favorable business deals.
 Opening of stores in emerging markets like China and others where there is market
potential. This here is another example of how relationships with suppliers can open
gates for Apple in emerging markets.
 It must continue to market itself as a lifestyle brand maintaining distinction from
Dell and HP, for which Apple needs to advertise more to create more awareness for
status consciousness amongst emerging economies of the world which have
growing disposable income per person.
 Increase overall advertising campaigns, highlight their past innovations and
achievements, utilizing sentimental element of loyal users or ex users to make them
love the brand more or again.
 Apple should utilize its edge of being apart from all those Android phones out there
and capitalize on its unique iOS by paying heed to the less affluent customers of
Easter world i.e., by launching more second tier sets like iPhone c which would
capture a great market share for Apple.
 If the connectivity limitation of iOS are resolved, it’d result in even greater
penetration.