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CASE STUDY – APPLE INC

Steve Jobs
1955- 2011
Mission Statement
Apple Inc. is committed to protecting the environment, health and safety of
our employees, customers and the global communities where we operate.
We recognize that by integrating sound environmental, health and safety
management practices into all aspects of our business, we can offer
technologically innovative products and services while conserving and
enhancing resources for future generations.

__________________________________________________________

February 2011
Doctor cleared his throat and said Mr. Jobs you do not have much time to live. At
best I think may be six months. We have tried our best but the resurgence of cancer
is too strong it is taken over your entire body. I understand the sensitivity of the
issue if you want we will keep it secret from the media.CEO of Apple Inc. Steve Jobs
got up from his chair and slowly moved out of the cancer treatment facility thinking
about his family and the company Apple Inc. where he has been the major force and
in just 13 years transformed Apple from bankruptcy to number 1 company of the
world.
Apple Inc. in 2011
On Wednesday March 2, 2011 Apple Inc. launched iPad 2 amid great attention from
the media and customers. CEO Steve Jobs who had taken medical leave from his
work took the central stage by officially launching iPad 2 despite his extremely weak
health condition he gave stunning presentation on this product and shocked the
digital world. He was given standing ovation by the audience, during his
presentation he stated, it is just not technology his company innovations are
combination of business, humanities, art and engineering. I work on new product
development with passion and love, we do not give attention to marketing research,
I have never hired any consultants, and I just work on making the products better
and try to provide more value to the customers. Even the “The Economist
“displayed the release of iPad on its magazine cover page and declared Steve Jobs
as the entrepreneur of the century.
According to the top 100 global brands report released in May 2011 by the most
respected brand researchers MillwardBrown, Apple Inc. was declared number 1
global brand of the entire world.

John Scully was appointed Chief Executive and Steve Jobs became the head of research and product development. John Scully convinced the Board members and Steve Jobs was fired. However the Mac’s slow processor speed and lack of compatible software limited sales. “Mike” Markkula. but they also emerged as the new standard for the industry. selling more than 100. The IBM PC.. After spending some time in the company John Scully concluded that there is nothing wrong with the company it is Steve Jobs who is ruining and destroying the company by his rash and centralized style of management. Job’s mission was to bring an easy to use computer to market. Jr. Within several months they had made 200 units and taken on a new partner – A. Working out of the Jobs family’s garage in Los Altos. It relied on own proprietary designs and refused to license its hardware to third parties. In December 1980. 1976. price of iPad 2 was fixed 20% higher than USA. . industrial design and technical elegance. California.On the occasion of launching iPad 2 in China April 2011. Apple’s net income fell by 62% between 1981 and 1984 sending the company into crises.000 Apple -2 by the end of 1980. which used Microsoft’s operating system and CPU from Intel was a relatively open system that other producers could copy. a pair of 20 something college dropouts founded Apple Computer on April fool’s Day. which led to the release of Apple 2 in April 1978. Apple quickly became the industry leader. who was instrumental in attracting venture capital as the experienced businessman on the team. long queues of customers were witnessed outside Apple sales centers and several people landed in jails because of fighting which erupted because of jumping lines. Apple responded by introducing Macintosh in 1984. The Mac marked a breakthrough in ease of use. Jobs was asked to sell his shares and leave the company immediately. IBM PCs not only gained more market share. Steve Jobs recruited the Chief Executive of Pepsi Cola John Scully to turn around the company by using his marketing and management skills. Apple launched a successful issuance of common stocks for public. they built a computer circuit board that they named the Apple 1. Apple’s competitive position changed fundamentally in 1981 when IBM entered the PC market. Apple on the hand practiced horizontal and vertical integration. One man is reported to sell his kidney to finance the purchase of iPad 2 Apple’s History Steve Jobs and Steve Wozniak.C. It sparked a computing revolution that drove the PC industry to $ 1 billion in annual sales in less than 3 years.

HP was also the world largest technology company diversifying into services. In June 1993 Scully was replaced by the President of the Board as the company’s margin was continuously falling. Industry leader HP had staged an impressive comeback following a rough period with the acquisition of Compaq computers in 2002.In 1985 Steve Jobs left the company with tears in his eyes. Apple launched a website to set up direct sales for the first time.desk tops and portables for consumers and professionals.6 billion under Amelio and the worldwide market share tumbled to around 3%. In 1996 a board member Amelio was made the Chief executive who was fan and admirer of Steve Jobs. servers and storage. Apple lost $ 1. PC Manufacturers The four top PC vendors –Hewlett-Packard (HP). Dell. HP also had a strong retail presence through 110. Amelio told the Board that the only hope of reviving the company is to get the man who created it. Internally. Apple posted a $ 309 million in 1998 fiscal year. Apple promoted itself as a high end alternative to other computer brands. Acer and Lenovo accounted for 55% of worldwide shipments. Jobs focused on reinvigorate innovation. Apple slashed its inventory and increased its spending on R & D. he was forced out of the company which he created and the man he hired John Scully to change the culture of the Apple conspired for his exit. Around two thirds of HP’s PCs were sold outside the US. He hired Taiwanese contract assemblers to manufacture Mac products and revamped Apple’s distribution system from smaller outlets to national chains. Following Job’s return. reversing the previous year‘s $ 1 billion loss.000 worldwide outlets. Dell on the other hand stumbled. He was also aware that Steve Jobs new company Pixar (3D animation company) was making huge profit with Toy Story and he had long term plans with Disney world. Apple ads were placed in popular and fashion magazines. In September 1997 Steve Jobs became the company’s interim CEO Steve Jobs and the Apple Turnaround Steve Jobs moved quickly to reshape Apple. Jobs first real coup came with iMac in August 1998. Apple 15 product lines were slashed to just four categories. Jobs wanted to change the image of the company and Apple to be a cultural force. This was a window based machine with eggshell design. its distinct combination of direct sales and build to order .

” In 2007 marked the official repositioning of the company. These product lines set Apple on a path toward becoming a full fledge digital convergence company. Apple has been charging of $ 75 to $100 higher than the competition. Acer also acquired Packard Bell a PC maker with strong presence in Europe. Some 50 million iPod Touch devices have been sold in 2010.manufacturing was a hit in the corporate market. Apple’s shift towards digital hub strategy was initiated by the debut of the iPod in 2001. Samsung and Toshiba to ensure uninterrupted supplies of flash memory. 3. The change in the name from ‘Apple Computer’ to “Apple Inc. disk drives. followed by the iPhone in 2007. and key boards) come from many sources and those that made products notably micro-processor and operating systems –that had just few sources. Acer and Lenovo. Thanks to the sleek design. The biggest cost component for the Nano was flash memory. Apple agreed to pay $ 500 million up front in 2005 to Intel. reentered retail distribution and pushed for international expansion.5 inch screen and a multi touch graphical interface. The iPod Nano for example had gross margins of 40%. Competitors like Creative. Founder Michael Dell returned as CEO in January 2007 and emphasized computer friendly products. Yet Dell was late to catch the consumer boom. it was the iPod that set Apple on the explosive growth path. Suppliers to the PC industry fell into two categories. Samsung all were struggling in front of iPod . then the iPad in 2010. Still Dell struggled with cost controls and poor margins. Products in the second category are supplied by two firms Intel and Microsoft. China based Lenovo came into front ranks of PC vendors in 2005 when it acquired IBM money loosing PC business for $ 1.75 billion. active in emerging markets both benefitted from acquisitions of high profile US PC brands. The first iPod stored up to 1000 songs the other MP3 players could only store one hour of music. In 2009 Dell was the only top PC manufacturer to lose its worldwide market share. In 2007 Taiwan based Acer bought Gateway a leading US PC brand and became the third largest PC vendor in the world. The iPod Sensation While the prospects of for the PC Macintosh improved. simple user interface and large storage it soon became the icon of the digital age. Those that made products such as (memory chips. Released in 2007 the Touch was the first iPod that built in Wi-Fi. (For More details see Exhibit 1& 2) From Apple Computers to Apple Inc. The iPod was initially one of the many portable digital music players based on the MP3 standard. SanDisk. Lenovo’s greatest strength was its dominant position in China where it commanded 33% of the market.

Competitors found themselves facing a major disadvantage with the emergence of iTunes store. Within three years. In the US market a handset manufacturer is usually dependent on the operator to provide a subsidy which could lower the price of new handset by as much as $ 150 or more. Before the launch of iTunes store Apple sold on average 113. The iTunes was the first legal site that allowed music down loads on pay as per song basis. An Apple exclusive digital protection software ensured copy rights by limiting down load of one song to five computers by one user. A revolutionary 3. iPhone revenues exploded to $ 25 billion by the end of 2010. The estimated development cost was around $ 150 million. guarded under intense secrecy even within the company‘s own employees.000 units per quarter and exploded thereafter. The iPhone. ITunes: Two features which dramatically differentiated Apple iPods were its iTunes desktop software which synchronized iPods with computers and its iTunes Music store. The first generation iPhone sold about six million units over five quarters. Two and half years of development efforts had been devoted to the phone.even Microsoft’s Zune line of music player could not create any impact in the market. including radio technology where Apple had little experience. By February 2010. iPod sales shot up to 733. Then smart phones rose to prominence with internet browsing. In terms of global . the iPhone went from zero to 38% of Apples total revenue. Over 8000 movies titles could be rented or downloaded by iPod Touch owners.000 iPods per quarter. In addition the products were characterized by short life cycles. After iTunes launch. multimedia functions. Nokia was dominating the market with attractive hard ware designs and user friendly interfaces. The first model was priced at $ 499 for an 8GB model. Motorola and Samsung with 60% market share.5 inch touch screen interface placed commands at the touch of user’s fingertips without a physical keyboard. however changed the rules in the industry. The iPhone Hailed as Time Magazines “Invention of the Year” the iPhone represented Apple’ bid to reinvent the phone. iTunes has sold 10 billion songs and featured the world largest catalog. Entry into mobile phones was considered risky by market analyst. With the 3G model. The launch of iTunes store had a tremendous impact on the sales of iPod. The industry was dominated by Nokia. At that time other mobiles from competitors were costing $ 300. emails and media players.

7 inch screen for reading books. The computer tablet featured a 9. Panasonic. Between 2008 and 2010 Jobs bought two microprocessor designs for about $ 400 million. This OS can be a potential threat to iPhone. and the Challenges Apple’s evolution from a PC manufacturer company to a mobile communication company has been a spectacular success. China and Pakistan. The iPad became the first product of Apple to run on its microprocessor. Computer tablets prior to iPad’s launch accounted for less than 1% of the market. At least dozen companies have started producing these computer tablets. Samsung . Google’s free Android OS is an open platform that allowed mobile users to use it for free Android had gained 4% market share. it was an attempt by Apple to bring digital video content directly into the living rooms. The leader in smart phones was Nokia. HP. Sales were extremely slow and probably the only failure product approved by Steve Jobs. Indian IT minister announced that we will be launching a computer tablet copy of iPad in 2012 at $ 35 so all students can afford it. Chinese companies have also launched computer tablets at half the cost. the iPad was priced at $ 499 to & 829. Limitations of the iPhone: Complaints included customers wanted a physical key board. the iPhone was the biggest growth story capturing more than 26% of the market Competitors: Apple has two main competitors in smart phone category.smart phones sales. One Failure: Apple TV was announced in 2007. RIM’s black berry smart phones delivered one of the best e-mail experiences and was a popular chance among corporate consumers. Apple Inc. especially people handling high volume of e-mails. According to Job the iPad would kill the note book. Most of the credit goes to one man .000 iPads were sold during its first week on the market. watching movies and some business productivity applications. Battery life of iPad is 10 hours. The battery life was weak. Customers were supposed to download contents from iTunes store and view on Apple TV. The iPhone did not support flash technology which meant that the device video could not be played on some platforms. The hype over iPad had produced an immediate competitive response. The iPad The launch of the iPad in 2010 was yet another bold move by Jobs to redefine an industry positioned between smart phone and laptop. More than 450. The company strength lied in Europe and emerging markets such as India. Toshiba have already launched tablets in the market. LG .

certain key components including but not limited to microprocessors. He also stated that just a rumor of his heart attack pulled down the share value by 10% last week and any negative report about his health may bring the share value down dramatically. He stated that iPod sales are stagnant in 2010 & 2011 on the other hand Microsoft has introduced Window 7. Although most components essential to the Apples business are generally available from multiple sources. where most of the Company’s key personnel are located. Cook thought that he would like to reduce the risk in this area . Job stated ‘I am not satisfied with our PC market share which is only 5%’ Timothy D. Cook sitting in his office next morning thought about the risks and challenges which he faces in case of Steve Jobs permanent disappearance from the company. services and technologies. Cook realized it would be difficult to bridge the gap which Steve Jobs absence will create. enhance existing products and services. Jobs told him to conduct the share holders meeting in 2011 as he will not be attending the annual meeting with the shareholders this time because of his deteriorating health condition and asked him to put his name for election in the Board so the market should not get wrong signals. and effectively stimulate customer demand for new and upgraded products just like Steve Jobs. which led to resurgence in PC sales. certain optical drives. Influence of Steve Job in product development and innovation was huge. Cook. his heir apparent. Steve Jobs continued and started discussing the challenges faced by Apple Inc. Market understands this fact and without Jobs at the top. and application-specific integrated circuits (“ASICs”) are currently obtained by the Company from single or limited sources. enclosures.“Steve Jobs”. especially in the Silicon Valley. Steve Job style of management has been centralized he would communicate with 100 people and would personally approve and supervise all the innovations. which subjects the Company to significant supply and pricing risks. Cook was also worried that Steve Jobs had the ability to hire talented people and retain them on long term basis. and Chief Operating officer of Apple Inc. No one use to complain because most of the time Job was right. Cook was worried due to the highly volatile and competitive nature of the industries in which the Apple Inc. company may struggle to maintain its number 1 position in the world. certain liquid crystal displays (“LCDs”). he must continually introduce new products. competes. he was always the smartest man in the room. Because of Jobs absence it would be difficult to retain key personnel. Fully aware of this fact Steve Jobs came to his home and called Timothy D. Experienced personnel in the technology industry are in high demand and competition for their talents is intense.

just a different kind of star from Steve. can become bad apple” "Cook is a star. if you look at working capital management. "He's arguably one of the best supply chain managers in the world.Suddenly his phone started ringing there was somebody from the stock market who wanted to know about the health condition of Steve Jobs. Apple Board has been criticized many times by the press for lacking in corporate governance as Steve Jobs was always reluctant in asking independent non executive directors to sit in the Board. The man responded “without Steve Jobs Apple Inc. Steve Job was also very critical that he took CEO of Google as independent external director on the Board but he is trying to copy the success of iPhone and leading Google towards smart phone industry after becoming aware of what Apple Inc. announced on October 7. and cash conversion cycles -. cash-flow management." said New York-based business analyst." He has done tremendous work in Apple and the gap left by Steve Jobs can be filled by Cook. Steve Jobs died on October 5.all those great metrics. Board of Directors of Apple Inc. was doing. Cook will replace the legendry chief executive of Apple Inc. who recommends buying Apple shares and doesn't own any himself. 2011 (End of Case Study) Appendix: Selected Financial Data Selected Financial Data of Apple Inc . 2011 that Timothy D. He handled the company in a professional manner during the absence of Steve jobs for six months in 2007 for liver transplant operation. Cook replied “No Comments”.

$116. . . $ 39.171 7 Total liabilities . . .05 Total assets . . . .22 $ 75.The information set forth below for the five years ended September 24.531 $ 47.119 Earnings per common share: Basic . . . . . . .615 22.013 $ 8. .878 $ 15.297 $ 14. .491 Net income . 2011.640 $ (a) The Company did not have any long-term debt during the five years ended September 24.183 $ 47. . .501 $ 27. . $ 76. $ 4. .225 $ 42. $ 25.371 $ 24.04 $ 28.249 $ 24. Long-term obligations exclude non-current deferred revenue (b) The company ‘s financial strength is considered to best in the entire industry of America . . .922 $ 3.94 $ 36. is not necessarily indicative of future financial results Appendix 1 US Dollars in Millions 2011 2010 2009 2008 2007 Net sales .392 $ 15. .347 $ 13. . . $108. . . . . .791 $ 31. . 2011.874 Total shareholders’ Equity . .235 $ 6. .756 $ 10. . .578 $ 65. .861 $ 6.905 $ 37. .495 $ 14. . . . . . . .41 $ 9. .