Strategic

Management
Team Project
Case Analysis
Apple Inc.

Presented by:
Esraa Elseidy &
Mariham Helal

Apple Inc. Case Study

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

Competitive Situation Analysis

Five Forces Model of

Competition
..17
Competitor's Strategies
Analysis
.25

Past and Present

Mission and
Strategies
37
Identification of
Strategic Options

Firm's Self Analysis

SWOT
Analysis
...27
Competitive Strength
Assessment
..33
Firm's Strategic Issues and
Problem
..34

Apple Inc. Case Study

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

Apple Inc. Case Study

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 continues to work on providing innovative products for its customers

but marketing to such as small market has caused some problems. Its market
share has been reduced to below 5% and its operating system differs
considerably from the Wintel operating system used my dominant Microsoft.
Costs of maintaining this difference have increased in comparison to those
utilizing the competitive operating system. Software designers are not as
enthused about writing programs to support Apple's operating system
because of limited potential sales. The advantages that seem to come into
Apple's laps are quickly removed because competitors are able to copy, steal,
and share them.
The one advantage that Apple possesses is its operating system but it has
failed to convince the world of its superiority. The operating system in
possession has not encountered the problems that Microsoft and its fellow
operating systems have encountered. Microsoft upgrades have been plagued
with virus and other programming problems, including the ability of hackers
breaking into the system and accessing ones computer from another remote
spot.

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.

This case study is to begin with a situational analysis that will

encompass the industry structure, competitive situational analysis
and the firm's self-analysis. Through which the external and internal
analysis of the Apple incorporation will be mentioned.
It will cover Porter's five forces and provide insight of the
opportunities and threats that Apple faces. The industry structure

will be dismantled so that market size, distribution channels,

strongest and weakest competitors, and anticipated strategic moves
of rivals is captured.
Economies of scale and key success factors will be listed along with
financials so that a direction can be logically surmised. An internal
analysis will also be included so that Apple's mission, vision, and
financial objectives are understood. Products and services will be
dissected, as will its corporate culture, values, and morals. The core
competencies will be noted together with value chain analysis so
that Apple can better define it true advantages for continued
successful operation in the future.
Recommendations will be provided, listing the pros and cons of
each, so that Apple management can consider implementation for
strengthening their position within the computer and digital music
industries.
Finally it will include the past and present strategic options used by
the company as well as our recommended strategies with their
anticipated positive and negative outcomes.
The recommended strategies implementation process will be
encountered in the analysis with the control and evaluation ways for
best strategies outcomes.

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.

After considering Apple's strategic war chest; the firm's core

competencies, key resources, and capabilities and given its current situation
within the industry and the compounding factors in the form of trends from
the general environment, it is clear Apple stands to create considerable
value through continued related diversification iPhone provide sufficient
evidence that it is well-equipped to continue its path of innovation, by
creating a digital lifestyle convergence device that bridges users on-the-go
digital lives and their at-home digitals lives. The proposed device will be
powerful and feature packed, while leveraging the Apple system of seamless
integration to create a compelling user experience, presented in an elegant
package showcasing the firm's industry-leading industrial design
capabilities, to create the next must- have consumer electronics product.

Industries' dominant economic features

The versatility of the computer industry allows a few dominant economic
features to stand out. The market size mentioned above is one of these
dominant features. It has increased to a range between $890 million to $2
billion. The competitive rivalry is another dominant feature. The national and
global levels are in the early maturity stage, which is nice considering that,
the local and regional markets a completely saturated. A third dominant
economic feature is the technological innovations that continually surface
from the many competitors.
Innovations such as software advancements, 32 bit and 64 bit chips,
networking expansions, and improved design technologies. Each has a direct
link to the economic structures of the company and its competitors.

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.

Strategic Group Map of Apple Inc.

As learned in Chapter 4 (p.144); for better understanding of
the market, it is useful to categorize the firms of the same
industry in strategic groups for better understanding of the
competitive environment. Here we compared quality versus
price to differentiate between several smartphone market
players.

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

High quality products

Premium prices
Focus is mainly upon valuing customers by providing exceptional
quality products, repairs and expert advice.
Well known for its passionate and dedicated customer base thus it
enables Apple to charge premium prices.

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:

1) Industry growth rate (short or long-term)

The computer industry has been slow for the past number of
affected by a weak economy and less disposable income
households due to layoffs and outsourcing of jobs outside of
States. Upgrades have not been technologically advanced

years. It is
within the
the United
enough to

warrant constant change so many consumers wait until a few upgrades

are offered before purchasing one.
The industry has usually been supported by big business and since the slowdown big business has not been expanding so need for additional computer
and software is not required. Apple has to face another hurdle when viewing
this because big business is more Wintel operating system driven and with
the cost of cloned PCs, they are just more affordable.

2) Changes in who buys the product and how it is used

3) Changes in society - different concerns, attitudes, and
lifestyles
The people purchasing computer have been become accustom to using
Windows operating systems. The population growth has increased and all of
those individuals that come into computer using modes are being subjected
to the Windows environment. Many are not knowledgeable of the Apple
operating system and have only heard of Macintosh computers.

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.

4) Product innovation and technological change

Microprocessors, semiconductors, memory storage, and speeds of
computers is ever changing and as the technology improves so must
Apple. Many products strength innovations are being driven in the areas of
miniaturization. Companies are spending millions of dollars to provide
themselves a position in being the one to make the next innovative
improvement. Customers have a desire to possess the latest and greatest
so the combination of the companies trying to create the new and the
customers desire to be first 'on the block' with the new certainly creates a
major driving force.

5) Firms - entering, exiting or mergers

Much of the computer hardware industry has defined players and market
share percentages allotted with a few shuffles taking place among them.
Niche companies are being merged or bought out by the larger companies so
the larger ones make some small gains from time to time. The music industry
is different since it does not require the capital outlay that would be incurred
if entering a hardware market. The same applies to the software developers.

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.

6) Increased globalization of industry

Companies are surfacing in the global markets. Many companies in
other countries are driven by their desire to capture a large market
share on their side of the world or by governments pushing them to
enter into the global systems

7) Changes in cost and efficiency

The product life cycles have become shorter as technology advances and
consumer whimsical purchasing changes. The mode forces increases in need
for being innovative. Innovation and competitiveness cost the companies a
considerable amount of money that has a direct effect on the profits. Matters
worsen as competitors cut costs when providing their products to market.
Apple moved into the retail world by opening 65 stores so costs increased
considerably but it will take time to learn if the efficiency of their sales
increased proportionately.

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.

8) Regulatory influence and policy changes

Government regulations will continue to change domestically and abroad.
Environmental issues have been part of Apple's proactive approach to being
environmental stewards. This cost must be absorbed into the products being
manufactured. Money spent on cleaning up or providing cleaner operations
does not add to the value of the product production so it is a negative
affecting cost that must be incurred.
The choice of not being a good environmental steward could backfire and be
far more costly than the amount being spent to do it up front.

9) Changes in degree of risk and uncertainty

Apple components and products are ordered before manufacturing begins so
forecasted sales dictate how much should be ordered. If the sales do not
occur then the orders may have been more plentiful than required and excess

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.

Key success factors

As learned in Chapter (4) (p.147); Key success factors are the

variables that significantly affect the overall competitive
positions of companies within a particular industry through the
economic and technological characteristics of the industry as
well as the company's competencies.

Apple Stores Retail Locations

The introduction of Apple stores has provided the company with an

important physicalpresence to act as both a sales location and an
advertisement. The stores allow Apple to tightly control the image
of the brand and provide excellent customer service. This resource
is of incredible value to Apple and a success that is a relative rarity
in the industry. Matching success and impact like the Apple store
model is difficult for other firms to achieve.

Relationship with OEMs

Apple has outsourced all of its manufacturing processes to OEM

partners in China, like Foxconn and Hon Hai Precision Industry while
focusing on design internally. The relationships between Apple and
their OEM partners are very close to provide Apple with excellent
service and high quality products. Mutually beneficial business
relationships are time-consuming and difficult to develop and maintain
is of considerable value to Apple and puts them ahead of other
manufacturers who may decide to outsource some production.

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

Apple subcontracts it's manufacturing to third parties so it can focus on its

core competencies of testing and developing software. It can also
concentrate on ensuring that what is manufactured meets required
specifications so quality remains a top focus.

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

Companies engaged in manufacturing electronic computers are listed under

SIC code 3571 and/or NAICS code 334111. Electronic computers are
machines that
1) Store processing programs and data necessary for program execution,
2) Can be freely programmed to user requirements
3) Perform arithmetic computations and
4) Execute processing programs that requires modification of execution by
logical decision without human intervention. Personal computers fall into this
category.
The electronic computer industry has been struggling since early 2000 when
the economy weakened. The US Census Bureau reported a decrease in
computer shipments from 1999 $64.7 billion to 62.9 billion in 2000 and
continued downward to $49.3 billion in 2001. Unit shipments also declined
from 27.2 million (2000) to 22.7 million in 2001.
Rising unemployment and anticipated war with Iraq assisted in reducing the
number of computer purchases. The terrorist attack on the Pentagon and the
Twin Towers in New York City also added to the decrease. Much equipment
was available at reduced costs due to the bankruptcy of many Internet
companies in the early 2000s. IDC also reported in 2001 that Dell, Compaq,
Hewlett-Packard, and IBM controlled over 40 percent of the world PC
shipments. Hewlett-Packard purchased Compaq and became a formidable
power competitor for Dell. The control of this large a portion of market share
is something Apple would have to contend with each step of the way.

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.

34 % Management, professional, and related occupations

36% Sales and office occupations
16% Service occupations
13% Production, transportation, and material moving
occupations
10% Construction, extraction, and maintenance occupations
The world population estimation for 2005 is 6,449,000,000
people and for 2010 it is 6,812,000,000.
The computer industry will be required to support the increases. The
computer industry is growing rapidly in the Asian market and number
indicates that a majority of the population growth will be concentrated into
that area.

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

the environmental issues that constrain manufacturing and disposal of the

units.
Environmental concerns are issues that directly affect each computer
manufacturer. The Environmental Protection Agency updated EPA/310-R-95002 "Profile of the Electronics and Computer Industry Code in the September
1995. This document provides directives that must be adhered to by
companies manufacturing computer components (EPA site, 2004). Apple has
willfully promoted the buyback and proper disposal of computer parts in
effort to promote product stewardship from the environmental perspective)

Apple Environmental Programs :

All Apple manufacturing sites ISO 14001 certified worldwide, signifying that
Apple has a structured environmental management system (EMS) in place to
manage the environmental impact of our operations

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

Product take-back solutions implemented in U.S. and Japan

Roll-out of Apple's global Regulated Substances Specification

Signatory of European Union Code of Conduct on Power Supplies, created to
encourage manufacturers to design power supplies that minimize energy
consumption in off mode
Founding member of U.S. Federal Energy Management Program (FEMP),
which introduced energy efficiency requirements for the off mode of
computer products
2003
The global market differs in its segmentation depending upon which country
is involved. Different countries impose varied restrictions on the equipment
components and its use once it is operational. China can be used to simplify
explanation of some issues. China began allowing computers into its borders
in the early 1990s but still places restrictions on its use. It also controls
whom, how, and what negotiations take place between foreign companies
and local Chinese companies. It limits citizen Internet activity once machines
are operational. High tariffs combined with government regulations to

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.

Adapting to the differences in culture is not very easy and some

manufacturers are trying to build value into their company name. This is
being done in hopes that branding will eventually equate with honesty,
integrity, quality, and good service so that storefronts will not be as
necessary as they presenting are. Apple computer began opening storefronts
in the United States in effort to compete against the PC based companies.
Their thought is that by having it available for the customers some will
eventually make the switch away from the PC-based systems.

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.

Many of today's technology driven innovations that are being developed

affect the microprocessors, semiconductor, memory storage, and speed
capabilities of the computer units. Miniaturization is definitely on top of the
required changes for the future. Everything seems to be getting smaller and
with the decrease in size comes integration of multiple technologies. Phone,
PDA, and Internet modules are being combined into one piece of equipment.
Telephones, video players, answering machines, and televisions sets are
being intermeshed. The future of technology seems endless.

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.

The Five Forces Model of Competition

As learned in chapter 4 (p.138); using porter's approach
for industry analysis:-

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.

1. Threat of New Entrants/Barriers to Entry

2. Bargaining Power of Suppliers
3. Bargaining Power of Buyers
4. Threat of Substitute Products
5. Intensity of Rivalry: Among Competitors

1-Threat of New Entrants

1.
2.
3.
4.
5.
6.
7.
8.

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

These advantages can be broken down into external or internal

economies of scale
Internal and External Economies of Scale
Apples internal economies of scale were established through its learning
curve and volume of production
Apple has been in the industry for a while to have a leg up on
competitors like Samsung by figuring out how to lower their production
costs and analyzing their market better
Apples external economies of scale give them an advantage because of
where they are located
California is the mecca for the computer industry in the U.S. as such,
suppliers naturally flock their and computer workers can easily share their
ideas and build off of another
Therefore, Apple gains a significant advantage of lower supply costs and
a more intelligent labor pool
High barriers of entry
Apples economies of scale give it a clear competitive advantage of their
competitors
They know their market, have access to reduced input prices, and
figured out production processes to lower costs in producing their goods
As such it will be extremely hard for competitors to enter the computer
industry market given the advantages Apple has created for itself
2. Product Differentiation - High barriers to entry
The technology sector is a tough market to enter regarding product
differentiation because of the innovative powerhouses currently there,
such as:
Apple
Google
Microsoft
When you have companies currently present that have already matured
and gone through the learning curve it is hard to match their prices, and
all their expenses are much lower compared to yours.
These high barriers give the companies like Apple a advantage and form
of protection against new up and coming companies who try to compete.
Trying to beat the innovative nature of companies releasing the iPhone,
iTV, Android, and other highly differentiated products is a tough task.
3. Capital Requirements - High barriers to entry
Most capital requirements needed to start a new business or compete in
a particular sector are normally fairly high, but it is especially high in the
technology sector.
There is need for a lot of capital because:
Technological products are not cheap
Human capital is additionally needed
This human capital needs to be highly skilled
High R&D costs to innovate
4. Switching Costs - Low barriers to entry
Compared to other factors regarding potential new entrants this factor
is much lower.

 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.

2- Bargaining Power of Suppliers

1. No Satisfactory Substitutes
2. Industry Firms not Significant Customer to Supplier Group
3. Suppliers Goods are Critical to Buyers Success
4. High Switching Costs Due to Effectiveness of Suppliers
Products
5. Threat of Forward Integration
1. No Satisfactory Substitutes
If you take a look at the big time companies such as Apple, Google, and
Microsoft you will find that they have a lot of exposure to the worldwide
supply market.
This fact gives suppliers to these big tech industry leaders very low if
any bargaining power. The reasons why includes:
Many other potential suppliers
Conduct business with big global market leaders
Not well leveraged
These are the reasons why they have no power in this respect, the big
conglomerates have many substitutes.
2. Industry Firms not Significant Customer to Supplier Group
For smaller firms the supplier may have more leverage and power here,
but when doing business with big multinational companies it is most likely
not.
The reason is quite simple; market leaders in the tech sector are just
about as big as they come.
They have some of the largest market caps/market shares/consumer
appeal.
This is why suppliers cannot bargain with these companies, for most of
them they make up most of their business.
3. Supplier Goods Critical to Success
It all comes back to control the buyers possess over the suppliers.
In a sense the answer is yes that the suppliers goods are critical to their
success, except there are a few other factors that work against them,
some are:
Buyer market share
Multiple potential business partners
Everyone wants to be a supplier to a company like Apple
4. High Switching Costs Due to Supplier Effectiveness
Switching costs are not such a big expense to firms such as Apple.
The reason these expenses do not break the bank is due to their large
amounts of cash and market presence.
Another reason suppliers do not have much say is because there are a
lot of suppliers who are effective and can minimize these costs for their
buyers.
5. Threat of Forward Integration
Apple has many different suppliers.
They have multiple semiconductors who specialize in different forms of
tech, holding companies, and electrical companies.

 Some of Apples suppliers include:

Analog Devices Inc.
Amperex Technology Ltd.
Arvato Digital
Asahi Glass
These are just four of a long list of suppliers that work for Apple.
The reason for labeling some of these companies is to show their size
and power vs. the powerhouse buyers.
A lot of these companies is very small, and because of this the threat of
forward integration is low. While it is possible to use this method it is not
practical and smart.
The lost profits suppliers would lose from using this method would be
huge, and Apple knows this.
That is why there is no bargaining power here.

3- Bargaining Power of Buyers

1.
2.
3.
4.
5.

Purchase large portion of industrys output

Product sales accounts for significant seller annual revenue
Low switching costs
Industry products are undifferentiated or standardized
Threat of backward integration

1. Purchase large portion of industrys output

Apple is a MNE and has substantial ties worldwide.
Due to the fact that they are present in multiple markets and have a
wide variety of customers it is safe to say that the companys product
output is fairly distributed across many buyers.
This lower amount of bargaining power among buyers is common in
these attractive industries.
2. Product sales accounts for significant seller annual revenue
With the amount of product sales; comes the sellers annual revenue
they make off these products. Apple is a large company and very
profitable due to highly differentiated products.
When a company has this advantage and many buyers it results in lower
bargaining power for the buyers.
3. Low switching costs
The reason for this yes/no explanation is due to the fact that a part of
this issue is dependent on different consumer behavior.
Some buyers do not mind switching from an iPhone to a
Google Android because they do not see the switching costs as
substantial.
But other customers may see these costs as big enough to decide not to
switch. Switching costs would include the new phone/plan, new charger,
apps that will not transfer, and possible cancellation fees.
4. Industry products are undifferentiated or standardized
Due to the type of industry and company that Apple is there is no
contention when determining their products as not being standardized.
The ways this gives buyers no power is:

 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.

4-Threat of Substitute Products

1. Switching costs - high/low
2. Price comparison
3. Equal quality/performance
Substitute Product Examples
iPhone alternatives:
Walkie Talkie
Letters
IPod alternatives:
Basic CDs
Music Library
Macintosh alternatives:
Typewriter
Telegraph
1. Switching costs - high/low
The costs associated with switching from Apple products to one of its
competitors is very high
1) Apple products, like the iPhone, run on their own operating system
called iOS
This means iCloud, iPhoto, and all the other apps will not be compatible
with other competitor's operating system
This increases the customers perceived costs of switching products
because of the hassle of not being able to use their favorite apps
Also, the more Apple devices a consumer has the likelihood these
switching costs will increase
2. Price comparison (Intensity: High)
Apple is a market leader, thus many competitors will emulate them by
offering similar products at reduced prices or with unique features
This competition can get so heated that Apple will sue its competitors for
copyright infringement to protect its products and market share
In Apple v. Samsung, Samsung had to pay Apple $1 billion dollars for
copyright infringement on its iPhone
3. Equal quality/performance (Intensity: N/A)
In the technology world assessing the performance of two similar
products can be difficult to achieve

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

5- Intensity of Rivalry among Competitors

1.
2.
3.
4.
5.
6.
7.

Numerous or equally balanced competitors

Slow industry growth
High fixed or storage costs
Low differentiation
Low switching costs
High strategic stakes
High exit barriers

1. Numerous or Equally Balanced Competitors

A. Intensity: High
Apple produces a variety of products to penetrate many markets, which
creates many different competitors
Apples top competitors are Microsoft, Google, and Samsung
These three companies contain the technology, supply chain and funds
to be equally balanced with Apple
One reason why Apple is ahead is because they were the first
to revolutionize the consumer markets with their products
This helped them establish a large share of the markets early on and
create loyal consumers
2. Slow industry growth
B. Intensity: Moderate
In developed economies the industry growth for smartphones has slowed
down considerable
However, emerging economies are compensating for this slow growth
by exhibiting high volume of sales
This is important because Apples iPhone sales were 52% of their total
revenue from their last fourth quarter
Therefore, if Apple wants to continue its growth they must focus on
penetrating other countries markets besides the U.S.
3. High fixed or Storage Costs
C. Intensity: High
Apples fixed costs for producing its products are relatively high because
of the numerous individual parts it has to create to make one whole
product
In addition, Apple is currently building a campus in California
This project costs about $5 billion dollars, which will significantly raise its
fixed costs
4. Low differentiation
D. Intensity: High

 Apple is a highly innovative company that produces unique products

that revolutionize their target markets
As a result, competitors copy Apple's products and designs to reduce
the differentiation status they hold over them
This forces Apple to come up with more innovative ideas to remain
ahead of their competitors and retain their market share
As such, Apple holds a high product differentiation in their markets until
technology diffusion makes their products available to their competitors to
copy
5. Low switching costs
E. Intensity: Low
The overall intensity for switching costs is relatively high because each
competitor has introduced numerous of products that offer unique features
compared to their competitors and previous models
These features entice consumers to buy the new more expensive
models, which raise the level of switching costs in the industry
In addition, accessories change to only be compatible to with newer
models to further the switch
For example, phone chargers, cases, and services
6. High strategic stakes
F. Intensity: High
Competitive rivalry in Apples chosen markets have become so fierce
that Apple has to look elsewhere to continue growing
This is brought on by Apples competitors gaining ground and selling
more units in the domestic market
Therefore, Apple has the potential for great gains within the global
market by focusing on emerging economies such as China
7. High exit barriers
G. Intensity: High
Apple has recently been investing huge amounts of money into their
supply chain management
Over the next year they plan to invest $10.5 billion in supply chain
robots and machinery
Last year they spent about $7billion on related expenditures and
custom built machines
These high investment costs contribute to high exit barriers because it
places such a high costs on abandoning its products that use this supply
chain system

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

Competitors: strongest - weakest

The focus on the strongest competitor extends beyond Microsoft but that will
become clearer in a few sentences. Microsoft's control of the PC market
speaks for itself so they can easily been seen as the strongest competitor.
Apple will eventually have to tackle trying to take away market share but a
head-on battle may not be the best approach (Machanick, 1998).

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.

Rivals anticipated strategic moves

Apple's strategy has not gone unnoticed. Its rivalry has created an air of 'bad
blood' between itself and digital rival RealNetworks.
Apple management was quoted as stating: "We are stunned that
RealNetworks has adopted the tactics and ethics of a hacker to break into the
iPod, and we are investigating the implications of their actions under the
DMCA and other laws."
The move has prompted Apple to consider restricting iPod software updates
so that Real's Harmony technology would no longer be supported
Speculation has surfaced that video conferencing functionality may be added
to iChat (Geek.com, 2002). The move has been seen as being gutsy.

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.

2- Brand name and image

Branding of products helps in keeping consumers abreast of the company
products. Whenever a company established a popular brand name or image it
can reap some benefits. Some of the benefits associated with the name
recognition is the ability to reduce advertising from the recognition
perspective. Apple computers got its name from Steve Job's favorite fruit. He
has run three months late in filing for a name for his company and threatened
his colleagues that he would call the company Apple Computers if they were
unable to come up with something better by 5:00 pm that day. His friends
didn't so the name stuck. The brand has some to be known for its superior
quality and aesthetics. It is valued in the graphic world for having an
operating system superior to any Windel platform. The innovations in the
music industry have been linked with Apple's brand name and its quality
products and services.
3- Manufacturing both hardware and software
Steve Jobs is pursuing the combination of hardware and software
manufacturing and does not intend to lay off any of his employees since they
are what make Apple successful. Apple will continue to run lean while
management pursues the business of making machines and applications that
even their most stringent critics regard as some of the best in the business.

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

weakened by the economic and political uncertainty as well as other

constraints.

2- Research and development costs higher than competitors

The market requires that participants continually provide innovations and
competitive products and technologies. Apple has been working extremely
hard to accomplish this and in doing so is spending more money for research
and development that its competitors. This increased spending negatively
affects its profit margin and with competitors cutting prices on their products
it makes it difficult to compete on the same playing field.

3- Selling, general, and administrative costs are higher than

competitors
Expansion into the retail 'bricks and click' world has increased Apple's costs.
Marketing fees for advertising its unique operating system and new
equipment again affects the bottom line, even though they are necessary
expenditures. Competitors are able to enjoy the luxury of utilizing operating
systems, in Windows users case, that controls a considerable amount of
market share so they do not have to spend anywhere near as much to
promote their operating system. Apple has to focus on creating more
awareness not only of its products but also of its operating system. It must
continue to develop innovative products that offset the expenditures of these
group costs.

4- Component order placement places company at risk

Components and products are ordered before the computers are
manufactured so if something occurs that represses sales the company is
vulnerable because of the high priced inventory that it retains.
This occurs because pricing competition is ever going so to purchases of
components and products at present day cost would usually be lower than
prices paid for what is presently in inventory. The worst-case scenario is
having inventory become obsolete and then having to be written off of the
financials. Cancellations of orders usually result in cancellation fees that still
affect the companies' financial position.

The process of production requires that a company forecast possible sales so

that they can order the products and components necessary for being able to
manufacture a desired output. The risk is in making incorrect forecasts. Apple
components may not be as plentiful from vendors since their market share is
smaller and the operating systems are different. This puts the companies
with the Windows operating systems at an advantage since Apple could run
into a problem procuring a sufficient supply of components.

5- Apple relies on third parties

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

order to achieve greater perceived functional and design advantages over

competing platforms.
Various computer worms and other hacker anomalies that provide a grand
opportunity for Apple to take advantage and garnish some small sectors of
this frustrated market. With such a widespread system the vulnerability
increases and fixes are not easy to make in short time periods. Micro-soft
bashers love to point out that Linux or Apple's OS X are not vulnerable to
whatever the exploit du jour is on the Microsoft platform (Bradley, 2004).The
Apple Mac OS X is seen as a stable, reliable, and secure system that is also
very easy to use.

2- Apple's pursuit of music industry

Apple's pursuit of the music industry through its iTunes also provides a good
opportunity to increase Apple's bottom line and also increase brand
awareness. The launching of the iTunes Music Store resulted in over 2 million
downloads in only 16 days. Knowing that all of the downloads were done on
Macintosh computers. Apple's opening of its music store worldwide will be a
great opportunity.

3- Microsoft upgrade costs versus benefit

Microsoft users are finding it less feasible to continually upgrade software
packages unless they can truly see a benefit for the money being spent. The
last few Microsoft upgrades have been plagued with glitches that provide
another grand opportunity that Apple can use to its advantage so long as it
doesn't make the same mistake with its issues of upgrades. The customer will
continue to look for value when money is spent.

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.

2- Competitor's copying programs

Companies such as Future Power USA copied Apples Imac and have been
selling it. These copies pose a major threat to Apple sales. The copies look
identical to the iMac even to the point of making the colors the same but
under different names. These copycat computers can even be considered as

substitutes for an iMac. Website www.lowendmac.com states that many other

companies are copying the iMac either because they are too lazy to come up
with a different design or because the iMac is such a great idea everyone
wants to copy it.
Competitors are quickly mimicking the unique presentations of digital music
products. Entry into these markets is costly but unfortunately for Apple the
competitors have an abundant supply of funding to address marketing,
manufacturing, and technical resource requirements that may arise.
Consolidation of major players has made for larger and potentially stronger
competitors. Competitors are even promoting free peer-to-peer services.

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.

6- Aggressive pricing practices

Competition in this highly competitive market faces overcoming aggressive
pricing practices, frequent new product introductions, shortened product life
cycles, new industry standards, continuous product improvements, rapid
technological changes, consumer price sensitivity and abundance of
competitors. Each section is intense and staying on top of each is difficult for
any company to manage. Those with considerable market share continue to
battle to prevent relinquishing any while those with little push with the items
above to take any amount of market share they can get.

Competitive Strength Assessment

The chief elements of Apples overall competitive strategy are based
on product differentiation, sustainable competitive strategy, product
innovation & vertical integration. Product differentiation based on
manufacturing its own personal computers and software. Apple has
done a great job through effective innovation with its three core
products, computers, personal media, and mobile phones. The
company designs, manufactures and markets a range of personal
computers (PCs), mobile communication and media devices, and
portable digital music players. Apple also sells a variety of related
software, services, peripherals, networking solutions, and third-party
digital content and applications. In addition, the company sells a
variety of third-party Mac, iPhone, iPad and iPod compatible
products, including application software, printers, storage devices,
speakers, headphones and various other accessories and
peripherals. Apple sells its products worldwide through its retail

stores, online stores, direct sales force, third-party cellular network

carriers, wholesalers, retailers, and value-added resellers
Apples sustainable competitive strategy focus on building strong
customer loyalty by meeting their customer needs more effectively
with their products innovations, and unique designs. This
competitive strategy has advantaged Apple apart from rivals and
has kept them in front of the competition in new products
introduction and on the updates of existing ones. Apple has followed
a vertical integration strategy to build a formidable competitive
advantage. Apples business strategy controls its unique ability to
design and develop its own operating systems, hardware,
application software, and services. . Apple on the other hand
practiced horizontal and vertical integration which gave it the dual
advantage of significant reduction in costs as well as its creating its
own proprietary designs. The vertical integration provides control
over the entire user and provides lock in. Apples sustainability
market share successfully connect its devices from each other or
process from hardware to software which facilitates higher customer
loyalty. Apple builds sustainable competitive advantages that are
hard to replicate.
A key piece of their strategy involves converting physical products
and turning them virtually to exploit the network knowledge in a
way no one has done it. As technology evolves, Apple main focus is
on the computer industry on taking digital media plus constants
evolutions, digitized knowledge, and combined it to feed the global
consumers. This along with Apples entry into the mobile industry
with its iPhone and tablet computer industry with its IPad are
evidence of continue innovation.

Apples Strategic Issues and Problems

Cloud Services. We never hear much about this issue now that theyve .1
launched iCloud and its worked reasonably well so far. There was the
initial launch of it which marred with issues but they seemed to work their
way around them. Today, most people think that, just because they built
some big server farm in North Carolina. The question is does Apple
have enough cloud talent inside the company to continue to grow and
develop iCloud? Its debatable. There was a reason that they tried to buy
Dropbox. That deal would have made enormous sense for Apple not just
for tagging on to Dropboxs momentum but for bringing in that domainspecific knowledge into Apple. Such a deal would still make a lot of sense.
Very few people know that, when iCloud launched, it relied heavily on
Amazon (AMZN) Web Services and Microsoft (MSFT) to deliver their first
cloud functionality. As Facebook (FB) and Google (GOOG) continue to
develop these services, they have a lot of in house knowledge on scaling
.these up. Apple at present does not
Internet Services. This has received some attention quite a bit over .2
the last few months on blogs and in the press and it deserves to. As the
battle between mobile IOSs continues to heat up over the coming years,
rolling out amazing Internet Services will become more important, not
less. Apple is again taking a go slow and grinds it out approach to these.
Well learn from that. Apple Maps didnt work. Well learn from that. The
thinking seems to be internally: we dont need to be first to market with
great services; we just need to get to market. Sadly though, consumers
seem to be getting more and more impatient in waiting around for Apple.
Google was never perfect out of the blocks with their Internet Services
but they do seem to be on a roll lately. Apple does need more external
talent with these skills injected into the organization. Yahoo could be a
great fit and Marissa Mayer would be an ideal head of Apple mobile
Internet Services. Mail, Flickr, and their core properties would fit very well
into prominent positioning in iOS. As Mayer has been saying of late, the
Yahoo properties map on very well to the top 10 list of activities of what
.people do most on mobile
Social. Apple has to be social but that doesnt mean it has to own a .3
social network. From an internal skill set perspective, its not obvious that
Apple can understand social and take advantage of its evolution from
here, without having a lot of internal talent who live and breathe social.
Twitter has been often talked about as a great way of Apple to inject
social into its lifeblood if they were to acquire it. Im in favor of this
approach as well. The two companies have been working closely since
first deeply integrating Twitter into iOS 5. However, the biggest concern
among Valley insiders I discussed this idea with last week was: the big
differences in culture between the two companies. How do you keep

whats special at Twitter if its swallowed up by Apple? And that leads to

.the next point
Apple outside acquisitions
As studied in chapter 7 (p. .4
226&227) That global expansion isn't always a successful path to
expansion. Apple hasnt done any big multi-billion dollar acquisitions of
outside companies. The Quattro Wireless deal was unsuccessful. The
founders are gone. Apple didn't really get everything they could have out
of it. Siri is also an interesting case study. Apple has made it a major focus
and selling point for the new iPhones starting last year. But the Siri
founders are also out of the company now. Even if Apple were to buy
Twitter (or Foursquare), a study should be made for the progress of these
properties be a year from now. Apple needs real technology transfer of
core cloud, internet services, and social skills into the company. And this
.leads to the last problem

Financial Position Analysis

Profitability Ratios
Ratio
Profitability Ratios
Gross Profit Margin

2010

2009

2008

Comment

39.30
%

40.10
%

35.20
%

Operating Profit Margin

28.20
%

27.30
%

22.20
%

Net Profit Margin

21.50
%

19.20
%

16.30
%

Assets 18.60
%

17.33
%

15.40
%

Gross profit margin increased in

2009 compared to 2008,slightly
decreased in 2010. It indicates the
margin
available
to
cover
operation expenses and generate
profits
OPM improved throughout the
years indicating profitability from
operatins regardless og interest
NPM improved throughout the
years indicating good profitability
and pricing strategies
ROA improved through the year
reflecting
good
return
on
investment or the ability of assets
to generate return
ROE slightly declined in 2009
compared to 2008, but again it
increased in 2010 reflecting the
improved return on stockholders
investments in the co.
EPS improved in 2009 compared
to 2010 and improved dramatically
in 2010 thus owners are well paid
off

Return
( ROA)

on

Total

Return on Equity (ROE)

29.30
%

26%

29%

Earnings per share

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

Decreased liquidity ratio but

still good in 2010, it indicates
that every 1$ of current
liabilities is covered by 2.01$
of current assets
1.96
2.7
2.42
Decreased quick ratio but still
good in 2010, it indicates that
every 1$ of current liabilities
is covered by 1.96 $ of current
assets, without the need to
sell inventory
5.01% 2.27% 2.47% Inventory
increased
drastically in 2010 compared
to 2009 & 2008, yet still
represents 5.01% from the
working capital

Leverage Ratios
Leverage Ratios
Debt-to-Asset ratio

36.40% 33.40% 46.80% Improved debt ratio in

2009 compared to 2008 ,
and slight increase in
2010.
yet
the
ratio
indicates that the co.
tends to lower financing
its assets through debt
Debt-to-Equity ratio
57.30% 50%
88.20% Improved debt to equity
ratio in 2009 compared to
2008 , and slight increase
in 2010. yet the ratio
indicates that the co.
tends to increase self or
equity
finance
and
decrease external debts
Long term debt to Equity ratio 13.90% 13.70% 21%
Improved long term debt
ratio in 2009 compared to
2008 , and slight increase
in 2010. yet the ratio
indicates that the co.
tends to lower depts
financing its long term
capital structure

Activity Ratios
Activity Ratios
Inventory turn Over

62

94

Fixed Assts Turn Over ( FATO)

2.0
8

3.0
8

Total Assets Turn Over ( TATO)

0.8
7

0.9

73.6 Inventory turn over increased in 2009

compared tp 2008 then decreased in
2010 to 62 times, this might indicate
accumulation of finished goods
inventory , or mmay be the company
metigates the risk of supply through
increasing stock of raw materials
12.7 FATO is decreasing through the
years of comparison, indicating mis
management of fixed assets to
generate sales, or that the company
maintains too much fixed assets that
are not much productive
0.94 TATO decreased slightly throughout
the years of comparison, the
decrease might indicate inefficiency
of total assets o generate sales , but
it should be compared to industry
average to determine clear analysis

Past and Present Mission, Strategic Objectives,

Strategies and Competitive Advantages Resulting
from these strategies
As learned in chapter6 p.202 that an organization's mission
statement and objectives must be made before alternative
strategies can be generated and evaluated. The optimum result is
to have choices that are clearly matching our objectives and
mission statement and to avoid the gaps that occur between
planned and achieved objectives.

Past and present company mission

Apple Past Mission:
To bring the best personal computer experience to consumers
around the world through its innovative hardware and software
At that time, Apple Inc. was involved in the computer business only which
explains their mission statement that is mainly oriented to computer
business.
Current 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 offerings"

Mission Statement Analysis for APPLE Inc.:

Apple is mainly focusing at the following components of mission
statement:
1. Apple may not be important to elaborate on its concern for its
employees or to thoroughly outline its customers and targeted market.
Apple is a trendy technology company which prides its self in providing
easy to use electronics and efficiently run software systems. Because of
this it is most important for Apples mission statement to focus on
components like company philosophy, self-concepts, and current
technologies. These aspects of Apple are what make it popular and
successful today.
2. Apple ignited the personal computer revolution in the 1970s with the
Apple II and reinvented the personal computer in the 1980s with the
Macintosh. Today, Apple continues to lead the industry in innovation with
its award-winning desktop and notebook computers, OS X operating
system, and iLife and professional applications. Apple is also spearheading
the digital music revolution with its iPod portable music players and iTunes
online music store.

Apples mission statement only includes descriptions of

products & services and past & present technologies.
Apple Strategic Objectives
Apple Past Strategies

High- growth at personal computer industry

The leader of the industry 1976-1982.

Introducing New business lines:

1- Mobile phones.
2- Consumer electronics.

Past strategies adopted by the company:

Corporate Level and Business level:
-

The company follows consistent

Full integration : company designs , develop its own operating

systems, hardware, applications and services
Company depends on a limited number of suppliers for its
components
Company adopts Differentiation strategy
Company invents heavily in R& D
Expanded distribution network and third parties Apple Prime
Resellers
Successful alliances such as that with Disney
No clear succession planning
Expanding range of products with a focus on I-phone and I-pad
I- Tune successful third party programs was a good source of profits

Strategies adopted by Apple Inc. at corporate level and business level

Corporate
Strategy
Growth is the main corporate strategy with the following
integration models

Horizontal Integration: Via New Products and new areas of creativity.

Also via hitting new regions and countries.

Vertical Integration: Via direct contacting with the end customer

either online through the online Apple Store (iTunes) or through the
300+ Retail Apple store which introduce a very luxuries customer
care & support.

Apple

Retail

stores

world

wide

Business Strategy

Apple Is Competitive to the Edge.

Apple Competes with Microsoft in Operating systems and software.

Apple Competes with IBM, DELL and HP in Personal Computers and

Laptops

Apple Competes with Adobe in Multimedia Software Applications.

Apple Competes with HTC, Nokia, Samsung, Sony and Google in Smart
Phones and Small Personal Computers (I PAD).

Apple Competes with Retails Stores as well as Online Multimedia

contents resellers.

Apple is Maintaining the Specialty in the highest level of it while its

products is in a high cost average.

Main difference between past and present strategic

objectives is that Apple is more focusing on the
smartphones development (Iphone)
Based on, the company name was changed from Apple
computers Inc. to Apple Inc.

Identification of Strategic Options

Apple is an undiversified company focusing on the electronics
industry only.
Apple has always produced some of the most fascinating gadgets.
Between the revolutionary iPhone, beautiful laptops and industrychanging MP3 Players, Apple truly produces a treasure trove of
creative and reliable products.

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

Which Cycle Apples In

A. Fast-Cycle Environment- International and Domestic
The technology sector is characterized as a fast cycle industry.
With all the high flying competitors and the innovative products it is
virtually impossible to hold a competitive advantage.
There are also a wide range of substitutes that threaten Apple.
This is why Apple and the tech industry reside in this industry
environment.

Apple's Inc. position in the Electronics Industry- Market

Leader
The main business of Apple Inc. is designing, production and the
marketing of the mobile communication and other media devices,
computers and digital and portable music players, the company also sells
a variety of software that are related to their products, solutions of
networking and digital content.
Basically the products and services of the company includes iPhone, iPad,
Mac, iPod, Apple TV, a portfolio of consumer and professional software
applications, the iOS and OS X operating systems, iCloud, and a variety of
accessory, service and support offerings iPhone is the Companys line of
smart phones that combines a phone, music player, and internet device in
one product, and is based on Apples iOS Multi-Touch operating system.
IPad and iPad mini are the Companys line of multi-purpose tablets
based on Apples iOS Multi-Touch operating system. iPad has an integrated
photo and video camera and photo library app, and on qualifying devices,
also includes Siri.

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.

B) Revised Company Mission and Objectives.

Mission statement of Apple lacks the definition of customer market and
costumer needs. As the specifications of a good mission statement, it
should be able to answer the following questions as learned throughout
the strategic management course:
1. What do they do?
2. How do they do it?
3. Whom do they do it for?

Apple is committed to bringing the 1)best personal computing

experience to 3)students, educators, creative professionals and
consumers around the world through its 2)innovative hardware,
software and Internet offerings

But, what we can see in the mission statement of Apple is more

like covering all the characteristics of a reliable mission
statement.
Apple strategic objectives are perfectly fitting the future goals
that will drive apple to a sustainable market leading position.

Recommendations
Long Menu
Options for competing in a mature industry

Develop close relationships with suppliers: Because there are few

suppliers of key components required in PC manufacturing developing

close relationships with suppliers is of utmost importance. Rather than
searching for the supplier of lowest cost, maintaining a collaborative
and exclusive business relationship will help mitigate the power of
suppliers and help to lock in attractive component prices.
Franchising of stores
Seek exclusivity arrangements with OEM partners ( Third parties):
Continue to build relationships with OEM partners and enter into
exclusivity arrangements to lock out competitors and gain favorable
business deals.

Options for a leading company

Focus on differentiated lifestyle branding: Apple has successfully

developed a differentiated lifestyle brand and must continue to
build on this foundation while resisting pressure to move to the
middle to directly compete with Dell and HP.

Options for competing in international markets

Continue the expansion of Apple stores: The stores

represent an important source of revenue for Apple and
serve as an interactive advertisement for the Apple

brand. Their success has been unmatched by any other

industry player.
Emphasize the integrated system in advertisements:
Apple's integrated system holds a significant advantage
over other industry systems relying on Microsoft
Windows, yet some customers have not experienced the
seamless interoperability of all Apple products. This
marketing angle will result in cross selling of more
products to new and existing customers.
Apple should continue to support the educational and creative
professional markets

Generic strategies

Design innovation: Put additional emphasis on

design development with internal resource allocation
to continue to lead the industry in design.
Research user interface possibilities: As a mode of setting
Mac computers apart from other PCs Apple must continue to
innovate in user interface focusing on easy-of-use and intuitive
menu functions
Consumer electronics diversification: While the PC market
has grown increasingly crowded with competitors and
customers saturated other areas of consumer electronics
continue to grow. Developing complementary products in other
categories provides broader sources of revenue by accessing
more customers in markets with less intense competition.
Apple should consider all work related to its operations in the
iPod, iTunes, iSync, and iChat sectors.

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

Alternative Functional Strategic Options

Marketing:
Recommendation 1
Franchising of stores
Pros:
It will help costs to Apple to be reduced. They could still control sales and
system operation without the excessive cost outlay. A franchisee will work
harder at promoting the product since their livelihood is tied to the success
more closely than an employee. Apple already has data accumulated that
shows employees obtain so much training and then 'abandon ship' for better
paying positions elsewhere. Franchisees would not just leave since they have
a vested interest in the success of the store.
Cons:
Being so wrapped up in opening stores that management does not want to
admit failure if profits start dropping off. Each store opening should be viewed
economically so that the law of diminishing returns is applied overall. When
the numbers show that the company is approaching the even mark or goes
negative then it must consider whether to continue support of the existing
stores or cutback of the less profitable.
Management evaluation is needed in this area for sure.
Apple should aggressively promote hardware, software, and peripheral
products through its retail outlets. Market awareness might help increase
market share.

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 :

They should also focus on producing new products to be ahead of their

competitors and not to fall back.
For example :
Ifridge , ioven, iwasher and to link all those home equipment in to one system
that can be controlled and monitored by your iphone or ipad.

New markets (target different demographics ) :

The company should promote the products in new markets as they are
missing opportunities in many regions

New customer segments :

Apple price is known to be above average in the industry. The company is

using a differentiation strategy and focuses more on innovation, and quality.
This strategy is justifying their premium prices.
Lately their new technology and their high cash flow allowed them to lower
their price and to offer more discount to certain markets .
We recommend to focus more on penetrating new customer segments by
trying to produce products with high value and lower prices

Research and Development

Apple should consider infiltration of the business sector with an Enterprise
Resource Planning (ERP) system merger.

Pros:

Loss of data, either through a system crash or invasion by hacker's programs,

is detrimental to any business operation. Apple has the ability of producing
and controlling its hardware and software. A merger of operations with
PeopleSoft, Oracle, or SAP could provide a positive financial influx that will
provide continued life to Apple's operating system platform.
Apple provides an easy to use operating system and user friendly operations
that can be taught to even the smallest children so older computer-illiterate
employees can easily learn to operate quickly. This lessens the computer
intimidation and allows for focusing on learning the ERP program that will be
modified to fit the same easy to use formatting. This would be a big plus for
the employer and employee.

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

Human Resources Management:

Continue training and development programs for employees (iCare)

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

Function Strategy : Increase Franchise outlets

Expected Outcomes of selected strategies :

Strategy
Growth Strategy

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:

Current organizational structure is categorized by business lines a,

functions and regions.

This structure fits with the recommended strategies, as growth with new
products or business lines could be easily added , same for markets.

Resources should be allocated to fit the strategies through more budgets

for Research and Development to develop new products.
Staff should be trained to be more efficient
The recommended strategies are implemented as follows:

Build long term organizational strength by implementing a clearly

thought out leadership development and selection programmer
that will be able to develop the special leadership required for
Apple.

Future leaders should be technically brilliant, innovative pioneers

with strong team working skills and high levels of ethics.

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.

Make productive use of strong cash reserves

Recommended strategy supportive policies:

Human Resources structured training programs
Rewarding plan for innovative ideas
Reward scheme for staff to increase their loyalty
Effective performance Management
Career planning and development

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.

Control and Evaluation:

The final stage in strategic management is strategy evaluation and
control. All strategies are subject to future modification because
internal and external factors are constantly changing. In the
strategy evaluation and control process managers determine
whether the chosen strategy is achieving the organization's
objectives. The fundamental strategy evaluation and control
activities are: reviewing internal and external factors that are the
bases for current strategies, measuring performance, and taking
corrective actions.
To measure performance there should be determined KPIs ( Key
performance indicators) among which could be :

Sales volume for each product

Action plan matching with strategic objectives
Action plans:

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

In order to measure performance the company can apply the following:

Output controls- specify what is to be accomplished by focusing on

the end result

Behavior controls specify how something is done through policies,

rules, standard operating procedures and orders from supervisors

Input controls emphasize resources

Activity based costing- allocates indirect and direct costs to

individual product lines based on value-added activities going into
that product

Allows accountants to charge costs more accurately since it

allocates overhead more precisely

Primary Measures of Corporate Performance

Return on Investment (ROI)

Earnings per share (EPS)

Return on equity (ROE)

Operating cash flow and Free cash flow

Shareholder Value- the present value of the anticipated future

streams of cash flows from the business plus the value of the
company if liquidated

Economic Value Added (EVA)- measures the difference between

the pre-strategy and post-strategy values for the business

EVA=After tax income-total annual cost of capital

Market Value Added (MVA)

Balanced score card combines financial measures that tell

results of actions already taken with operational measures on
customer satisfaction, internal processes and the corporations
innovation and improvement activities

Financial

Customer

Internal business perspective

Innovation and learning

Benchmarking- the continual process of measuring products,

services and practices against the toughest competitors or those
companies recognized as industry leaders

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.

The work system and management process require that communications

lines be effective and Apple's was not. Trust and communication were
extremely low in the Apple world. Lack of lower management involvement
made it more difficult to solve problems. .

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