You are on page 1of 13

Strengths: Good Leadership CEO Steven Jobs was the visionary of the company when Apple Computers was

formed. He saw that the personal computers could be sold to the public and money could be made. Being a visionary leader in the company is what helps keep Apple Inc. on top today. One of the remarkable qualities that Mr. Jobs has is his ability to continue looking forward and not focus on the past(Markoff). Another thing that makes Apple a success is that Jobs continues to recruit people in to the company who strive to be the best. As stated in an article on CNNmoney.com, The decade coincides exactly with the return of Jobs as Apple's maestro, bringing his particular mix of genius and obsession, as well as a tendency to play by his own rules. His utter dedication to discovery and excellence has created a culture that has made Apple a symbol of innovation(Morris). The article goes on to talk about the passion that these employees have for their jobs. Collaboration is key. So is a degree of perfectionism. Apple hires people who are never satisfied. A designer has to be a borderline fanatic(Morris). Brand recognition Brand recognition also plays a big role in the success of Apple. Apple is one of the most established and healthy IT brands in the World, and has a very loyal set of enthusiastic customers that favor the brand. Apple recently won the top recognition for technology and was also named the grand prizewinner in the American Brand Excellence Awards. The criteria used to select the American Brand Excellence Award winners include "easy to do business with," "industry leader," "forward thinking," "for growing companies," "behaves ethically," "growing in popularity" and "has a good price for what you get." More than 200 business brands were rated in the nationwide study(bizjournals.com). Good support system Apple has a very good support system for customer service. Support is only as far away as a click of a mouse on your computer. If you go to the Apple website there is all kind of support recourses to help you fix your problem. Locally, if you are a consumer that likes face-to-face service, Apple has retail stores that offer a genius bar to get hands on technical support. Apple also offers a 1-800 number for support. Good customer service helps build brand loyalty by making the consumer feel valued. Tech-savvy design Tech-savvy design of Apple products help to push them out in front of other technology companies. Appearance is important to the consumer, people like to have the best things and they want things that give them a good image. Apple uses design to transform their offerings in every way: from integrating consistent actions across hardware, software, and environment, to dematerializing every milligram of unnecessary material (thereby making their products less expensive, stronger, and more sustainable), to material selection that substantially reduces manufacturing costs and eliminates extraneous materials (many of which are toxic), to offering services that competitors can't match and only "see" once they're introduced by Apple (such as their approach to the retail experience)( designmba.org).

Strengths

Apples audience provides the company with direct price competition.

Apple uses media sources to expand product awareness and sales.

Simple, easy-to-use software with eye-catching designs.

Apple has current $76 million in cash and marketable securities with minimal debt.

Strengths top brand names in technology Apple is a company, which manufactures a variety of products including computers, operational software, mobile phones, portable digital music and related accessories. The brand is well known for high quality products, which help differentiate them from competitors. The company owns one of the top brand names in technology worldwide with 54% of their profits coming from foreign markets (Apple Annual Report, 2006).

As highlighted by Everett M. Rogers, customers are always interested in trying the latest and up to date pieces of technology. By understanding customers and knowing how to fulfill their wants, Apples products are created with a unique design with hi-tech capabilities, attracting the attention of their target audience. As a result, market share is continually increasing.

The company operates on the purpose of developing new products which offer an easier and more efficient way of using technology. The final products always appear at the most convenient and easy to use in the market.

worldwide leader Apple is a worldwide leader in harnessing a portfolio of product diversification. With its product lines, the company targets a wide ranging audience in almost every technological market. Moreover, with such a large customer base, the company has a large network of corporate and commercial buyers who are loyal to the brand, even though sometimes the price paid is higher than alternatives in the market.

does not have any debts The Apple Annual Report, 2007, announced a profit of $1.58 billion during its fiscal first quarter. Apple sold 2.3 million Macs and 22.1 million iPods during the holiday shopping season. For the quarter ended December 31, Apple reported a profit of $1.76 a share on revenue of $9.6 billion. Apples quarterly earnings beat the estimates of Wall Street analysts. According to Thomson Financial, analysts expected Apple to earn $1.62 a share on sales of $9.47 billion.

Figure 1: Apple Inc Revenues and Projections

In the personal computer industry, the company has one of the highest stock prices. Apple is financed mostly by its equity; the company does not have any debts, as a result investors would be at less risk by holding Apples stocks. The company is loaded with extra cash that is ready to acquire any firm that could help enhance the value of the company. The company cash flow went up rapidly from $90 million to $2,220 in four years from 2002-2006 which ensure a healthy financial performance as well as abilities for future expansion and growing plan.

strengths

great innovation Apple launched iPod music player which is a great innovation and also it surprised the people. Apple iPod not only increase the company sales but also influence the people to get experience of Apple notebook and operating system.

well reputed brands Brand create perception of product in the customers mind. Apple has been amongst the well reputed brands in the industry of information technology. It also stood up to its name by introducing new products such as iPod, iPad and laptops in the market to impress customers with its innovation, portable and attractive designs.

Apple products have strong design, this attribute attract lots of people to buy apple products despite of high prices.

It have strong and reliable eco-system.

Apple computers are well known for its quality hardware and softwares.

iTunes is the online service for providing music to customers at minimum price. Exploiting the opportunity of online business work for apple and now they are generating good revenues from this source.

It had signed partnership with agreement with few IT giants such as Intel.

Apple come up with the innovative products, it only because of strong research and development department,

Weaknesses: Program compatibility Program compatibility is one of the weaknesses of Apple. Although they have progressed by leaps and bounds there are still some issues in this area. However most of the compatibility problems that exist today are not Apples fault but those of other companies that have not brought themselves to be Apple compatible. For example, disc that come with some textbooks or other products are not Mac OS compatible. This can be very frustrating for Apple users but it is not Apples fault.

Less diversity Another weakness is the fact that Apple Inc. has few strategic alliances and tends to keep most things in house, such as technical design. This is not a bad thing necessarily, it allows them to hire and develop highly creative people who bring great ideas to the company. However, by keeping most projects in house it there is less diversity in new ideas.

Leadership weakness Leadership has been an issue for Apple in the past years. When Jobs left in 1985, Apple was in the hands of John Sculley. Things were not bad for the first part of his rein; however in 1990 Apple began seeing a turn for the worse. Prices were falling, costs were rising and thing were looking bleak. In 1994, Apple replaced Sculley with Michael Spindler who only lasted a year and was replaced by Gilbert Amelio. Things continued to slip and by 1998 market shares dipped to 3%, during the years of 1996 and 97 the company showed a loss of 1142 million. Amelio was fired in 97 and Jobs was returned to the CEO position (Hill). Although Jobs is a big strength for Apple as he brought them out of the disastrous track they were on, he is somewhat of a weakness for them. The New York Times says this about him, The statement was quintessential Jobs: arrogant, frank, insightful and perhaps more than half right, though brutally overstated. Those same traits were both his strength and his weakness at Apple(Lohr).

Apples PC market has not been a strong point of the company. Although they are seeing an increase of the market share Apple is still lagging behind the leaders Dell and HP. In 2007, Apple had only 5% of the market where Dell and HP had 27.9 and 25.7 percent respectively (Moskalyuck).

Here are other things that Apple do differently

Apple does not do market research- because everything Apple designs is based on Jobs and his teams perceptions of what they think is cool

Has a very small team who designs their major products

Owns their entire system

Focuses on a select group of products

Has a maniacal focus on perfection

Weaknesses

Weak presence in the business field.

Revenues depend too much on the launch of new products and services.

Slow turn around on high demand products.

New product releases are occurring too quickly.

Weaknesses high replacement costs It has been documented that Apple has had some problems with its product quality control; for example, at the beginning of the iPod era, there were problems with the faulty battery, after that there has been reported screen faults with the iPod Nano. The company has accrued high replacement costs because of the need to replace faulty items.

Not highly advanced product With its most recent and highly advanced product: The iPhone, there are still disadvantages such as the device not being 3G compatible. The phone is also inaccessible in countries such as Japan and Korea. Several product features of the iPhone are also not particularly impressive when compared to market alternatives. These include a camera which has a meagre capacity of two mega-pixels as well as its immovable memory. Moreover, the iPhone is priced at around 300 with a limited choice of distribution channels, this high cost and lack of choice has been met with strong scepticism by segments of the market.

Poor operations and retail strategy Being able to achieve and retain market leadership in a fast changing industry, Apple has to concentrate a large amount of its resources on product research and development, which means its unable to remain competitive in areas such as operations and retail strategy. The corporate strategy of continuous innovation means Apple has to invest an increasing amount of revenue every year, for its research and development purposes.

lack of debt According to Apples revenue for 2007, the company seem to be strong financially; its lack of debt may also be considered a weakness. Apple is very vulnerable to major stock acquisitions by other companies. In addition to the debt/equity issue, Apple has not issued any dividends to its shareholders for many years, which may eventually lead investors to lose their confidence in the company, should it encounter the same downfall it went through in the early 90s.

Weaknesses

high prices of products Most visible weakness of Apple are high prices of products. Apple has to do some work to reduce the prices.

Apple operating system support limited software which push the people to use Microsoft Windows to run different applications.

Limited hardware upgrading option in Apple laptops.

Opportunity: Advertising Advertising is a great tool for Apple to gain market shares. Advertising through television, magazines and other vehicles is one-way Apple reaches its consumers. Apple's ads are powerful in part because they all reinforce the same branding message. Apple prides itself on appealing to the discerning customer, the person who, as one slogan famously had it, thought differently. And that message--of creativity, counterculture and good taste--is one that Apple has portrayed consistently in its advertising for the past 30 years. "The quality of Apple's advertising is consistently above average," said Allen Adamson, managing director of the New York offices of brand consultancy Landor Associates. "And more often than not, it's world class (Hoffmann). Intel The Intel chip has brought Apple back into the competitive field of IT. The Intel chip allows Mac users to use Microsoft Windows. This helps reduce switching costs for traditional PC users and may persuade some people to switch to Mac because of its ability to run both Windows and Mac OS X.

Music The music industry has been a big boost for Apple and continues to grow today. Apples iTunes is a digital media application that allows the consumer to download music for a low fee. iTunes is on all Mac OS and allows you to organize your music with playlists and listen to the radio. iTunes service accounts for almost 80% of digital music sales worldwide. Apple is working on a deal now that is supposed to offer unlimited music downloads to their iPod and iPhone customers for a subscription. Just seven years after Apple unveiled the first iPod, fully half of Apple's revenues come from music and iPods(Morris). Innovativeness Probably one of the major opportunities of Apple is its innovativeness. Apple has demonstrated how to create real, breathtaking growth by dreaming up products so new and ingenious that they have upended one industry after another: consumer electronics, the record industry, the movie industry, video and music production(Morris). One thing that Apple is doing is teaming up with Nike to push the iPod into the gym. Nike offers shoes and clothing that have special pockets that fit with iPod.

Opportunities

Customers who are brand loyal.

Sales on the internet for computers and other devices are on the rise.

Development of new software and devices.

Laptops and MP3 players are highly marketable products.

Opportunities Joint ventures Apple is well known for its innovative thinking, they have developed a product line that offers good functionality and attractiveness. Joint ventures, such as the operation with Nike, where both companies are working on a project that combines an iPod with Nike running shoes is an indicator of Apples drive to do whatever it takes to create an innovative product. Podcasts Podcasts are downloadable radio shows that can be downloaded from the Internet, and then played back on iPods and other MP3 devices at the convenience of the listener. The listener can subscribe to Podcasts for free, and ultimately revenue could be generated from paid for subscriptions or through revenue generated from sales of other downloads.

In the purpose of providing a better computing experience for the customer with the iPhone, Apple tries to

combine both powerful computing as well as entertainment. People have also noted that the Mac OS applications for the desktop can be seamlessly adapted for the iPhone. This is the first step towards an Internet Protocol-based network. The emergence of Wi-Fi networks is pushing for there to be visitor fees instead of having a provider which locks-in its users. It is very likely that the device fees and pay-per-view system will take flight, eliminating monthly subscription fees.

Opportunities

Increase the support of applications.

Allows easy hardware and software upgrades in laptops.

Reduce the prices to increase market share.

Improve the warranty plan for their products.

Demand of online music is increasing. Apple can market iTunes to attract more customers.

Threats: competition One of the threats that face Apple is the ever-growing competition in technology. Their major competition is with Microsoft, Dell, and HP. There are a lot of companies out there that are trying to make an MP3 player that will compete with the iPod but they have a long way to go to come close.

Product substitution is another threat for Apple. A lot of IT companies are trying to mock Apple by offering consumers similar items for less money. Apple still has the leading edge on these consumers by offering brand recognition and great quality. Economic conditions Economic conditions can be a major threat to Apple. With the U.S. economy in a near recession level, consumers may become more price conscience on what they spend their money on. Having business in foreign countries Apple must keep a close on the exchange rates. Changes in the exchange rates could cause a shift in the supply and demand. They do not seem to be too concerned about the economy though, Answering a question early in the call

about consumer demand and whether Apple was figuring a recession into its guidance, Apple CFO Peter Oppenheimer said it was confident in achieving its guidance targets. In terms of the economy, we will leave the economic forecasting to others and we are focused on managing our business.(Morganstern). Lawsuits Lawsuits are a concern of any business. In this day and age people are out to make a quick buck and our courtrooms are full of cases where someone didnt get what he thought he should have and is suing over it. Apple is not above this. There are many lawsuits pending against the company. With operating systems and support software packages continuing to converge and remain relatively easy to imitate, present and future lawsuits are inevitable. Apple does not comment on any of the pending lawsuits against them.

Threats

Sales have decrease due to higher prices of their product or services.

Apple products, such as the iPhone, are much more expensive compared to their competitors.

Apple computers need to focus more on developing new models to better satisfy the needs of customers.

Windows launch of the operating system, Windows 7.

Threats major competitors In the desktop computer market, Apple faces a great threat from its major competitors which include Dell and Hewlett Packard (HP). By offering low cost personal computers, Dell has secured themselves as a company with the largest market share. According to the available data, HP leads the industry with gross revenue of 88.89 billion USD but Dell has the highest net income. Even though Apples stock price is higher than both Dell and HP, the difference in market share and revenues are far behind them.

In the mobile phone market, the majority of threats come from other companies including Nokia and Sony with their respective products. Smart phones are one popular example that stands to compete against the iPhone. The fact that these phones run on the 3G network also puts iPhone behind in the capability race.

exchange rates Although the US economy is no longer in its volatile stages, the release of the iPhone is still in a time where people are cautious of spending money.

Another threat for Apple would be the exchange rates which can cause changes in supply and demand. Since Apple

has a huge international market, their revenues from foreign countries are directly related to exchange rates. The depreciation of the US dollar could cause a decrease in their net receivables. On the other hand, an appreciation in the US dollar would increase net receivables but decrease future demand since prices would increase.

Threats

Fierce competition with the IT companies such as Dell, Microsoft, HP, IBM, Sony and Toshiba.

Increasing piracy may reduce the revenues of iTunes.

Microsoft launched Windows 7 with attractive user interface as well as rich features. Mac users may think to switch to Windows 7.

Economic crises in most part of the World will have a negative impact on Apples sales because people dont want to spend too much in critical situation.

Bookmark It

Porters Five Forces:

Threat of new entry is low to moderate. This is due to government regulations that are put on the technology industry. Also the expertise and high cost may deter new companies from entering the technology field. Apple product differentiation helps to make a low level of new entry because of brand loyalty by its users.

Competitive rivalry is high for Apple because of the competition of Dell and HP and other computer companies. Also all the competition in the other areas of Apple such as the iPod and iPhone with Napster, Rhapsody, and others. Although Apple has a higher quality product the rivalry is still high.

Buying power is moderate to high. The number of consumers may go down because of music being illegally shared with out paying for it. Other companies can force Apple to lower their prices. Consumers may also cut back on spending with the low economy.

Supplier power is low. One reason for this is because Apples use of the Intel chip that allows Mac users to use

Windows as well as Mac OS. There are also many suppliers in the music industry.

Threat of Substitution is moderate especially in the music industry for Apple because of the alternate means to acquire music and videos. The threat of substitution for Apple brand names would be low because of the level of quality that Apple offers.

Porters Five Forces analysis shows us that Apple is in a good place in the industry. They are innovative and differentiated enough to stay on top. Their name brand and high quality of goods makes them a leader.

Recommendations:

First it is recommended that Apple Inc. continue to improve the PC to be competitive with the likes of Dell and HP. Apple has made a tremendous advance in this area but it is essential that they continue improving.

Second, Apple must maintain their spot at the top of the music industry. They do however need to make sure they do not become a monopoly in their iPod industry. Monopolies can end up hurting them.

Lastly, Apple must keep being innovative by using their talent pool to be creative. Product differentiation is a big plus for Apple and they need to continue to offer the highest quality to its consumers.

Problems/Opportunities/Challenges

One major problem for Apple was the fact that Steve Jobs took medical leave. He had been the face and motivating force behind the company. And his departure had a major affect on the company, stock prices dropped and questions about the companys future success and innovate edge came up. One thing that IBM and Microsoft had on Apple were their convenient prices. More people could afford their prices compared to Apple computers which keep them in competition. A challenge that Apple faces is finding a new leader. Someone who can keep the company moving in a positive direction, stay innovative and relevant, but also bring something new to the company. As a company the research & development was way above industry averages coming in at 9%. One opportunity for Apple may come from the gaming industry. With the technology the company uses for the iPod and iPhone applied to a gaming device would be profitable. And this would also open up more uses for the App Store as well. I also think being able to keep creating new, innovative products as a challenge for the company. Will the company be able to keep that competitive edge over the competition or will Apple finally be dethroned?

Alternatives

One alternative Apple can consider is lowering the cost of their personal computers. If more consumers are able to purchase a high quality product for around the same price as the competitors from Apple, then profits would

increase for the company. Better R&D strategies are essential for the companys profit. If the company find a way to conduct R&D for less but keep the same innovative advantages it would save the company a significant amount of money. And creating a succession policy to help the company move forward during leadership changes should be implemented.

Recommendations

First, I suggest Apple lowers their prices on personal computers. Having a personal computer that most people can afford but with the Mac brand would increase sales. Continuing to venture out into new markets and industries can prove to be very profitable for this company. Taking into very close consideration about the gaming industry. With Apples innovative corporate culture Im sure they could bring major changes to that industry. And finding a more cost efficient R&D method is a must for the company. Staying innovative and creative is a very important part of the companys culture. But saving money and increasing profits are all ways on the top of any companys to-do list.

Action Plan & Recommendations

Apples strong financial position allows it to implement any changes to its strategy while backing it with its extensive amount of discretionary cash. The action that Apple should undertake is to increase its high demand products production since the demand exceeds the supply. This is the very reason why Apple should not enter the low end customer market, because, despite the high cost, the consumers are willing to pay for Apples products differentiation, and the company remains very profitable yet their supply is still lagging behind. The typical life cycle of Apples products is one year or less, so Apple has a very limited timeframe in which to recoup all the costs, especially the R&D. (Bradley)

Maximizing the supply, and thus, the profit, can be accomplished through acquisition or the purchase of the majority of the stock of some of its outsourced suppliers. This would not only eliminate the possible future competition, such as from Chinas SMIC, but it would also allow the company to instill its ethical values and protect its reputation by short-circuiting issues, such as unfair labor practices or environmental pollution, that can be encountered in the foreign environments. In 2011, Apple brand has succeeded Google to the #1 position on the Brandz Top 100 Most valuable Global Brands. Its value is approximately $153 billion and this image should not be tarnished but needs to be protected to justify to consumers that the high profit margins match Apples dedication to social responsibility. (Wolfe, 2011) The company also should:

Lower the costs throughout its value chain while never compromising the quality

Form joint ventures with companies to strengthen its presence in the business arena

Continue to pursue innovative products

Expand into more global markets

Increase its brand awareness and market appearance, while acquiring experienced salespeople and a loyal customer database, by purchasing local Apple dealers and upgrading them to Apple stores

Emphasize social responsibility and ethical conduct