APPLE CASE STUDY

Apple Overview : Apple Overview Who is

Jonathan Schwartz? What about Larry Ellison,
Olli-Pekka Kallasvuo, Steve Ballmer or Eric E
Schmidt? Perhaps you’ve heard of Steven Jobs?

Apple Overview : Apple Overview Steven P.

Jobs - CEO and co-founder of Apple Computer Inc
(with Steve Wozniak) in 1976 (Jobs and Woz)
2007 name changed to Apple Inc. Steve Jobs
132nd on Forbes Rich List ($5.7 billion) What is it
about Steve Jobs and Apple that has this man
and his company trumpeted as the technology
industry’s answer to the Terminator?

Apple Origins : Apple Origins

Apple’s Origins: : Apple’s Origins: Jobs and

Woz - 20 something college drop outs, founded
Apple Computer on April Fools Day 1976.
Worked out of Jobs’ garage and built computer
circuit board named Apple I Sales reached 200 in
first few months Formal business plan sets goal
to increase sales to $500 million in 10 years.
(REASONS FOR EXPANSION: INCREASE SALES)

Apple’s Origins: : Apple’s Origins: New partner

- Mike Markkula Jr (millionaire recently retired
from Intel) Attracted venture capital Woz - tech
genius Jobs - visionary seeking to “change the
world through technology” Apple moves from
Jobs' garage to a building in Cupertino Calif
(current global HQ in Silicon Valley)

Apple’s Global Expansion : Apple’s Global

Expansion

Apple’s Global Expansion : Apple’s Global

Expansion Apple II launched in 1977. In only its
second year, sales increased tenfold Dealer
network grown to over 300. Unveiling at first
West Coast Computer Fair (largest booth and
projection). Markkula walks floor to sign up
dealers. 1979 Apple employs 250 people working
in 4 buildings

Apple’s Global Expansion : Apple’s Global

Expansion By December 1980, Apple was the
industry leader. Apple II’s business ready
platform containing “VisiCalc” contributed to its
success Apple launched a successful IPO (Initial
Public Offering). IPO generated more money than
any IPO since Ford Motor Company in 1956
Apple facilities occupy more than half a million
square feet in the US and Europe. Apple
employee count breaks 1000 800 independent
retailers in US + Canada, plus 1000 abroad.

Apple’s Falling Market Share : Apple’s Falling

Market Share IBM entered PC market in 1981,
fundamentally changing Apple’s position. IBMs
were able to be cloned by other producers and
used DOS operating system (OS) IBM = open
system Apple = private and closed Interestingly,
Apple experienced sharp fall in market share
(6.2% in 1982) Yet Apple’s revenue continued to
grow in 1982 (a “billion dollar (sales) party was
thrown for employees in 1982)

Introducing the Apple Macintosh :

Introducing the Apple Macintosh The Macintosh
was hailed a breakthrough PC in terms of ease of
use, industrial design and technical elegance.
This was greatly needed as the company was in
crisis in 1983-84, with net income falling 17%.
Apple became a household name in the third
quarter of SuperBowl XVIII when it aired the
enormously popular 1984 ad promoting the
upcoming release of the Macintosh Click on
image

Introducing the Apple Macintosh :

Introducing the Apple Macintosh Steve Jobs was
responsible for developing the Mac (and Lisa)
computers Production was based on the
VERTICAL INTEGRATION model Apple facilitates
all aspects of its hardware and creates its own
operating system that is pre-installed on all
Macs. This is in contrast to IBM PC compatibles
First PC to feature mouse and graphical user
interface.

Job’s NeXT Step : Job’s NeXT Step Macintosh

not entirely successful Net income was down by
17%, despite launch of the Macintosh and Lisa (a
disaster and eventually discontinued in 1985) in
PCs in January 1984.

Jobs’ NeXT Step : Jobs’ NeXT Step Jobs’

leadership at the Macintosh project was short-
lived. After an internal power struggle with new
CEO John Sculley (ex Pepsi man), Jobs angrily
resigned from Apple in 1985, went on to found
NeXT, another computer company, and did not
return until 1997.

1985-1997 : 1985-1997 Sculley (1985-1993)

Desktop publishing and education Apple into the
corporate world Desktop publishing (Aldus
Pagemaker) Networking and connectivity 1990
market share stabilised at 8% Education market
actually 50% market share Apple customers
“love their Macs”vs IBM users “put up with” their
machines Apple and IBM formed a JOINT
VENTURE to create a new OS and other software.

1985-1997 : 1985-1997 M Spindler and G

Amelio (1993-1997) Reinvigorate core markets
(education K-12 and desktop publishing) as
market share was 60% and 80% Scrapped
Sculley’s plan to put Mac OS on Intel chips ($500
mill) Apple would LICENSE a handful of
companies to make Mac clones ($50 per copy of
a MacOS license) Spindler lost momentum (140
corporate buyers would not consider buying a
Mac) $69 mill loss and more layoffs Amelio lost
$1.6 billion, worldwide market share went from
6-3%

The second coming of Steve Jobs (1997-

present) : The second coming of Steve Jobs
(1997-present) Yes the allusion to Jesus is
deliberate!

The Apple Turnaround : The Apple

Turnaround Jobs Ended licensing plan to an
abrupt end (clones were 20% of Mac sales, and
value of Mac fell 11%) Focus on Microsoft Office
for the Mac iMac launched 1998 (plug and play
peripherals) - sold 6 million in 3 years (300
million PCs sold in same time) Re-energize
Apple’s image (Jobs retained role as CEO of his
company Pixar to this end)

Apple’s Turnaround : Apple’s Turnaround

Shortly after Mr. Jobs returned to Apple in 1997
as part of the company's acquisition of
NeXT,Dell's founder and chairman, Michael Dell,
was asked at a technology conference what
might be done to fix Apple, then deeply troubled
financially. (Michael Dell - pictured)

Apple’s Turnaround : Apple’s Turnaround

"What would I do?" Mr. Dell said to an audience
of several thousand information technology
managers. "I'd shut it down and give the money
back to the shareholders."

Steve Jobs’ Email : Steve Jobs’ Email Mr. Jobs

sent a brief e-mail message to Apple employees,
soon after, which read: "Team, it turned out that
Michael Dell wasn't perfect at predicting the
future. Based on today's stock market close,
Apple is worth more than Dell. Stocks go up and
down, and things may be different tomorrow, but
I thought it was worth a moment of reflection
today. Steve."

Lessons from Apple’s Marketing : Lessons

from Apple’s Marketing Interbrand Study (2008)
Ranks Apple's Brand as 24th most valuable in
the world. Coca - Cola remained the #1 global
brand. IBM traded places with Microsoft to rise
from #3 to #2. Nokia (#5), Intel (#7), Google
(#10), HP (#12), Cisco (#17), Samsung (#21),
and Oracle (#23) are the other tech companies
ahead of Apple in the rankings.

Perceptions of Apple : Perceptions of Apple

Apple has enjoyed since founding in 1976 a
prominence out of proportion to its modest share
of the PC market Leaders have cultivated the
image that Apple is hip, stylish and humane -
“the computer for the rest of us” 1984 ad
promised a machine that would liberate mankind
from the tyranny of large, impersonal computer
companies

Perceptions of Apple : Perceptions of Apple

“We started out to get a computer in the hands
of everyday people, and we succeeded beyond
our wildest dreams.”—Steve Jobs

Apple’s Marketing Lessons : Apple’s

Marketing Lessons Make the product king Quality
products that offer customers exceptional value.
Macintosh has a significantly longer life-span
than PC's is testament to Apple's commitment to
quality Quality and innovation waned after the
departure of Jobs and Woz for a decade Apple's
turnaround is largely owing to the return of
innovative products like the iMac and iPod.

Apple’s Marketing Lessons : Apple’s

Marketing Lessons Make the customer king
Apple customers have tremendous brand loyalty.
Mac users (Mac Marines) would protest to
journalists who wrote derogatory articles about
the iPod’s shorter than expected battery life that
many journalists would avoid writing about
Apple's struggles altogether. Mac User Groups
were vocal in their attempt to keep Apple
executives focused on quality when they
perceived the company was lowering its
standards. Apple patrons feel as if they are part
of a community - the result of the "us against
them" mentality. Customers are loyal and have a
sense of independence and an anti-
establishment perspective.

Apple’s Marketing Lessons : Apple’s

Marketing Lessons Break the marketing mould
Company motto Jobs did away with “Big Box”
stores Opened 1st retail store in Virginia in 2001
June 2008 - 215 stores Global chains (Australia,
Canada, China, Italy, Japan, UK) Retail strategy a
huge success - the “Nordstrom of technology”
1997 Macworld Expo Conference that Apple
would be selling Microsoft 5% of the company for
a $150 million, and be working with their
archrival on new projects (Microsoft)

Apple’s Marketing Lessons : Apple’s

Marketing Lessons Other observed features of
Apple’s marketing: Product Placement (Sex in
the City) Celebrity endorsement (U2, Madonna,
Seinfeld is rumoured to be next big celebrity in
“Get a Mac” advert) High level of secrecy/active
rumour mill No “hard sell” - the products sell
themselves, emphasis on experiencing Apple
products Pivotal role of Apple Stores
STANDARDISED Zen look and feel of stores
(stainless steel, granite, wood)

Apple’s Marketing Lessons : Apple’s

Marketing Lessons Other observed features of
Apple’s marketing - the Apple Store Glass
staircase suspended from roof Genius Bar - son-
in-law for hire Training/classes All amounting to
the attractive Apple design factors (Designs that
turn heads), ease of use (it just works), security
(114000 viruses - not on a Mac), high quality
bundled software (awesome out of the box)

iPod and iPhone halo effect : iPod and iPhone

halo effect The halo effect is disputed, though
there is strong evidence for its existence. iPhone
and iPod are many consumers first exposure to
Apple, leading them to purchase other Apple
products Technology debuts in Oceania before
USA It’s a great test market - as Australians are
early adopters 98% of population has access to
3G network In the USA it’s more like 20% (NY,
Boston, LA and San Francisco are the major 3G
hubs)

Appstore : Appstore Originally, Apple had

planned on establishing a Venture Capital fund
to promote iPhone Apps Taken off guard by a
hundred thousand or so downloads of the kit on
Day 1 Surprised that there were 15000 for sale
by the time iPhone was launched. Must deliver
customer value I am Rich - Ruby picture pulled
($999.99) 70% revenue to Apple Developers,
30% to Apple Examples Shazam, Mi Do Mi
Employment Relations : Employment
Relations 1981 - Loan- to Loan Program for
employees (each Apple employee can borrow an
Apple II to use at home, then after a year was
theirs to keep) - provides an insight into the
Apple philosophy Apple (an anti-establishment
company) nurtures talents so that great things
could be accomplished. Rules were things meant
to be broken, as symbolized by the pirate flag
Jobs raised before team meetings. In retrospect,
Apple's mistake wasn't bringing on a new CEO in
1983 to help manage the company's growth..
.the mistake was bringing in a CEO who wasn't a
good fit with the company culture.

Employment Relations : Employment

Relations Apple is really “Apple-centric” in its
staffing. Approx 50% of Apple store staff come
from pre-exiting stores (such as the US and UK
for the Sydney store) Positions at the Apple store
are part time initially In retrospect, Apple's
mistake wasn't bringing on a new CEO in 1983 to
help manage the company's growth.. .the
mistake was bringing in a CEO who wasn't a
good fit with the company culture. 21,600
employees work at Apple Talented senior
executives and product managers who share a
common vision for what the company is about.
One of Jobs' talents is hiring and grooming
talented people who are committed to executing
that vision.

Employment Relations : Employment

Relations The majority of Apple's employees
have been located in the United States but Apple
has substantial manufacturing, sales, marketing,
and support organisations worldwide, and some
engineering operations in Paris and Tokyo.
Training for Apple stores occurs at Cupertino HQ
Apple celebrates diverse experience and
backgrounds - focuses on finding the best talent
Apple seeks certain personality types and those
enthusiastic about technology Daily and
quarterly staff briefings

Employment Relations : Employment

Relations Cupertino HQ employs in the following
areas: Engineering Marketing Sales Legal HR
AppleCare

Employment Relations : Employment

Relations Marketing advertises as follows:
“prompting the competition to emulate us. As
the only company that designs the hardware, the
software, and the operating system, we stand
alone in our ability to innovate beyond the status
quo.” Part of what drives this innovation is our
challenging and creative environment and the
fierce dedication and talent of our team. In
marketing, you have the unique opportunity to
work on revolutionary products from concept to
launch with the best creative minds in the
industry.

Operations : Operations AMR Research

released its fifth-annual "Supply Chain Top 25"
list, and leading the supply chain pack this year
is Apple. "Apple is No. 1 in 2008, signifying an
epic shift away from the 20th-century
production-efficiency mentality to a new era of
value based on ideas, design and content," notes
the AMR Research report. The iconic iPod and
iPhone maker took the top spot due to "an
intoxicating mix of brilliant industrial design,
transcendent software interfaces and
consumable goods that are purely digital," write
AMR's Tony Friscia, Kevin O’Marah, Debra
Hofman and Joe Souza in the report.

Operations : Operations "The mechanical and

financial benefits of this approach include
extremely high inventory turns, minimal material
or capacity limitations to growth, and excellent
margins." Apple’s "outstanding" financials
proved impressive in all the categories AMR used
to calculate the Top 25 rankings. AMR
determines the top supply chains by analyzing a
combination of corporate financial measures,
inventory data, and peer company and AMR
analyst opinion.

Accounting and Finance : Accounting and

Finance Apple is deliberately vague and
conservative when talking about their financials,
so revealing this info is rather extraordinary.
Analysts and pundits have constantly criticised
Apple for poor corporate governance by not
breaking out their revenue streams more clearly.
For example, how many Mac Pros Apple sells? No
one knows, and Apple won't tell. There is a lot of
info on iPhone deferred sales and income
however, due to GAAP (Generally Accepted
Accounting Principles) rules. All Apple’s pricing is
set in Cupertino and remains same until new
release. Takes into account exchange rates, size
in market, potential sales
Accounting and Finance : Accounting and
Finance The non-GAAP financial results are truly
stunning. By eliminating subscription (of
iPhones) accounting, adjusted sales for the
quarter were $11.68 billion, 48% higher than the
reported revenue of $7.9 billion, while adjusted
income was $2.44 billion, 115% higher than the
reported income; Jobs - “If this isn’t stunning, I
don’t know what is — all due to the incredible
success of the iPhone 3G.” 2008 revenues at
Apple Inc. totaled $32.5B, while annual earnings
equaled $5.36 per share. Quarter 1 2009, Apple
reports $1.78 a share in earnings, beating
analysts forecasts.
iTunes store : iTunes store Free download of
iTunes system for Mac and PC (loss leader) Key
element of the iPod system Launched in April
2003 From 99cents/song 5 major record labels -
guards INTELLECTUAL PROPERTY of artists By
mid-2007, users had downloaded 500 mill copies
of the Windows version of iTunes By June 2008,
sold 5 billion songs - a galvanic impact on iPod
sales

Legal Issues : Legal Issues VBST in BC Canada

- trademark dispute with Apple Matter is on-
going Click here to see more about the issue

Legal Issues : Legal Issues Beatles owns Apple

Music Apple Inc. has reached an agreement with
Apple Corps Ltd., the record label started by The
Beatles in 1968, concerning the use of the name
"Apple" and related logos.
iPhone - Regulation Issues in China : iPhone
- Regulation Issues in China “The two big ones
we just didn’t have a chance to get closed were
Russia and China… and I think you’ll see those
happen later this year… we have to get through
the regulatory bodies in China, which we’re in
the process of doing, and I think later on this
year you’ll hear some announcements. 70
countries is a lot of countries and we’re
launching 22 of the biggest on July 11th 2008” -
Jobs 2007

Environment/Green Apple :
Environment/Green Apple Apple has unveiled the
Green MacBoook The new MacBook family
embodies Apple’s continuing environmental
commitment. Each new MacBook is designed
with the following features to reduce its
environmental footprint:

Environment/Green Apple :
Environment/Green Apple Arsenic-free glass
Mercury-free LED-backlit display Brominated
flame retardant-free internal components PVC-
free internal cables Highly recyclable aluminium
and glass enclosure Up to 41 percent smaller
packaging See Greenpeace’s criticisms of Apple