Lester D.

Mojado
BSTM – 2nd Yr.

Introduction

Apple Incorporation was formed in 1976 as a computer company by Steve Jobs.

However, in the past decade, Apple has grown into a very complicated business unit
that is more than just a computer business. Apple after launching its iPod became the
market leader in the music players. Yoffie and Rossano in 2012 mentioned that, Apple
Inc. entered in the phone industry in 2007and launched the first iPhone that was
followed with a big success. As Apple lies in consumer electronics industry so to
evaluate the value of the company requires a good understanding with consumers and
its products. As Apple has diversified its business therefore it is difficult for it to compete
in all segments. The sole distinguishing thing about Apple is that it has a very strong
customer base, which is the main thing in understanding the company.

Facts:

 Apple is producing innovative, quality and easy to use products. The innovation
made Apple such a powerful company. This is obvious if we look its past:
 1970-2001-Apple was making changes only to its computers (face-lift),
 end of 2001-Apple introduced iPod, June 2008- Apple introduced the cinema
displays,
 March 2007- Apple developed Apple TV,
 June 2007- Apple entered the Mobile Market with iPhone,
 2010- Apple introduced iPad.
 Every year Apple spent around $1.5 billion for the development of new products
in order to keep the existing customers satisfied and recruit more new ones. [3]
 Apple has a very powerful brand loyalty. As it is one of the most profitable and
healthy companies in the World, it managed to adopt a large amount of loyal
customers.
 This happened because Apple periodically, provides updates to all its application
and operating systems not only for the Mac computers but for Iphone, Ipad etc.
With this way Apple keep the customers satisfied and willing to buy its new
products.
 The key success for Apple is its dedicated personnel and more specifically the
CEO team. This team includes all the executive team( Steve Jobs, Andrea Jung,
Arthur D. Levinson, Millard S. Drexler) and the employees in technical, marketing
and staff positions.
 Steve Jobs, the Chief Executive Officer and Co-founder of Apple Inc. plays a vital
role inside the company. During his absence (1985-1996) Apple experienced
many financial problems. However, when Steve Jobs came back to the company
in 1996, he focused on developing new ideas and in 2001 he introduced iPod
which is making a lot of profit to the company.
  Apple developed a partnership with Intel® microprocessors in June 2005. This
was very useful for Apple because it is addressed in a wider market.
Furthermore, as Steve Jobs specified ‘Intel is the strongest processor roadmap’.
Therefore from then until now, Apple computers is much stronger and more
stable.
 Apple has managed to adopt loyal customers through its stable and reliable
products. Therefore, in order to make some profit in the introduction phase of its
product, it announces a pre-order technique in order for the innovators to pre-
order the product and pre-pay it. With this technique Apple gain a large amount
of money and invest them in other areas.

Issues:

 Apple’s hardware and software products and services are very complex and high
technology that most of the times contain defects such as ‘bugs’.

 In the US, Apple has made a contract with a specific carrier for selling and
promoting iPhone. If this carrier cannot compete with others in the U.S. market
concerning the quality, coverage and pricing or if he cannot promote iPhone
correctly into the market so as for the customers to buy it, then this will have a
negative impact on the sales and the profit for the company as it will not sell
enough units.

 Furthermore, as Apple decided to make a contract with one carrier, it will lose the
loyal customers from other carriers

 When Apple announced in June 2005 that is going to leave from IBM and to
switch to Intel, some specialists commented that it might lose the loyal IBM
customers because the swap would confuse them.

 Apple has very high prices in its products, so it addresses in a low market- share
and not to all customers.
 August 2, 2018. Apple’s valuation hits $1 trillion after years of ever-increasing
record revenues and profit, which began when Steve Jobs returned to the
company to save it from oblivion.
 September 12, 2018. Apple introduces the new iPhone XS, XS Max, and XR,
phones that are priced higher than their predecessors and offer irrelevant new
features over the previous generation, which was already the epitome of fluff
over function.
 November 2, 2018. Huawei solidifies its No. 2 spot in global smartphone market
share, leaving Apple behind once again for the third quarter of 2018.
 November 2, 2018. Apple announces that it will stop reporting iPhone unit sales
after years of bragging about record sales. Investors get nervous and think sales
are on the decline.
  November 15, 2018. Apple’s facial recognition sensor supplier AMS cuts sales
forecasts, citing “recent demand changes from a major customer.”
 November 19, 2018. The Wall Street Journal confirms iPhone production cuts
following lower-than-expected demand.
 November 23, 2018. Apple cuts iPhone XR prices in Japan amid reported poor
sales in the country. The Wall Street Journal report says that Apple will resume
production of the iPhone X to meet contractual obligations to its OLED screen
provider, Samsung.
 November 26, 2018. Microsoft surpasses Apple’s valuation for the first time in
eight years.
 December 4, 2018. Apple reportedly gets into panic mode, slashing prices
through promotional deals and trade-in offers worldwide.
 December 9, 2018. iPhone XR LCD panel supplier Japan Display cuts
production citing Apple sales slump.
 January 2, 2019. Tim Cook announces a revised guidance for Apple’s fiscal first
quarter 2019: $84 billion revenue versus its previous $93 billion forecast,
confirming worse-than-expected iPhone sales. That’s $6 billion and change less
than first quarter 2018. Cook cited a lot of reasons, like iPhone sales, a strong
U.S. dollar, too many new products, and bad economy in emerging markets. He
also said that Apple’s $29 battery upgrade program which the company
introduced to avoid a scandal for its rogue speed throttling of old phones hurt the
upgrade cycle, further confirming that Apple depends on people feeling their
current phones are too slow in order for them to upgrade. It also confirms that its
new phones do not offer any compelling feature for most consumers
 January 2, 2019. Netflix pulls out of iTunes’s subscription billing system, making
new and lapsed users pay through its own website. The move, which the
company tested in the summer, will not only curb a big chunk of Apple’s iTunes
revenue an estimated $256 million last month but sends a clear message to
other media companies and software developers: You don’t need Apple for
subscriptions. And this comes exactly as Apple is trying to make third parties hike
prices and use iTunes’s subscription system, a move that it hopes will make it
less dependent on its suffering iPhone sales.
 Unstable strategy due to the change of executive teams
 Unclear vision about selling OS licenses, which would put the company in
competition with Windows operating system
 Large number of failed products (such as Newton PDA) and few successful ones
(such as PowerBook)
 Products not unique in the market
 Confusion and uncertainty among Apple consumers, resulting from this strategy

How Apple Bounced Back?

When Steve Jobs took the reins at Apple in 1997, the company was in tough shape. It
had a bewildering array of products, no clear strategy, and was losing tens of millions of
dollars every quarter.
Jobs acted decisively. He cancelled 70 percent of Apple's products and laid off more
than 3000 people, turning a $1 billion loss in 1997 into a $300 million profit in 1998.
Then he started work building products that became Silicon Valley legends:

 In 1998, Jobs unveiled the iMac. It sported a colorful, curvy look and was one of
the most affordable computers Apple had ever made.
 In 2001, Apple released the iPod music player. Customers loved its elegant
click-wheel interface. More importantly, the iPod worked seamlessly with iTunes,
Apple's jukebox software for the Mac, making it easy to get music from CDs (and,
later, from the iTunes music store) onto their iPods. By the end of the decade,
Apple had sold more than 200 million iPods.
 Jobs announced the iPhone in 2007. It sported a revolutionary touchscreen
interface that transformed mobile phones in much the same way the Macintosh
had transformed personal computers 23 years earlier. Apple has sold 500 million
iPhones.
 Apple expanded on the iPhone's success in 2010 with the iPad, a tablet
computer based on the same software. Apple has sold 200 million iPads.

Steve Jobs died of pancreatic cancer in 2011. Since then, Apple has been run by Jobs's
longtime deputy, Tim Cook. Before he died, Jobs warned Cook against trying to run
Apple by asking how Jobs would have handled each decision. "Just do what’s right,"
Jobs said. Cook appears to have taken that advice to heart.

Jobs ran Apple as if it were a small, founder-owned startup. All significant decisions
flowed through Jobs. Often, if Jobs wasn't personally interested in a particular task,
Apple just wouldn't do it.

Tim Cook has taken a more conventional approach to managing Apple. Fewer
decisions flow through Cook directly, which makes it possible for Apple to handle more
tasks in parallel. One of Cook's first moves after taking over at Apple was to establish a
matching-gifts program. He also expanded Apple's mergers and acquisitions
department, giving the company the ability to consider several deals simultaneously
without involving Cook in the details. Since taking over at Apple, Tim Cook has tried to
capitalize on Apple's status as the only technology company that is also a luxury brand.
In 2013, Apple paid $73 million to recruit Angela Ahrendts, CEO of the luxury brand
Burberry, to run Apple's retail operation. The same year Apple also hired Paul Deneve,
CEO of Yves Saint Laurent.

In 2014, Apple purchased Beats, a company that makes high-priced headphones as

well as a streaming music service. The acquisition cost $3 billion, much more than Jobs
had ever spent on an acquisition. And rather than folding Beats into Apple, as Jobs
would likely have done, Cook will allow it to continue operating as an independent
subsidiary.

Then in 2015 Apple released the Apple Watch line, which ranges from $350 for the
entry-level Sport model to $17,000 for the most expensive Apple Watch Edition.
Charging $17,000 for a gadget is extremely unusual for consumer electronics business,
but it's commonplace in the luxury watch market.