Case: Apple Inc.

​STRATEGIC MANAGEMENT
MBA 703
FEU-Manila

Submitted by:
Georgette Ann Marie D. Gales

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Case Background
Founded in the year 1976 by Steve Jobs, Steve Wozniak, and Ronald
Wayne, Apple was incorporated in the year 1977 as Apple Computer Inc. and
later, in the year 2007 renamed as Apple Inc. The company is an American
multinational corporation headquartered in Cupertino, California that is involved
in designing, manufacturing, distributing and marketing of a wide range of mobile
communication and multi-media devices, personal computers and computing
products and portable digital music players, as well as a variety of software,
services, networking solutions and third-party hardware and
software products that run on their hardware products. Apple Inc.’s main products
and services are iPhone series, iPad series, Mac series, iPod series, Apple TV, a
number of consumer and business software applications, the iOS and OS X
operating systems, and iCloud, the iTunes media browser, the Safari web browser,
and the iLife and iWork creativity and productivity suites.
As at the end of the year 2014, Apple was the second largest information
technology company after Samsung Electronics measured by revenue and the
third largest mobile phone manufacturer globally. In addition, Apple became the
largest publicly traded company in the world by market capitalization valued at
over 700Billion US Dollars. Apple has slightly over 72,000 employees and
operates over 430 retail stores in fifteen countries that act as their primary
distribution channel. In addition, they operate the online Apple Store and iTunes
in addition to using appointed resellers and distributors of their products
globally.

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Vision and Mission Statement
Apple does not have a formal vision statement, but some publications
provide the following as the company’s vision statement. Apple ignited the
personal computer revolution in the 1970s with the apple ii and reinvented the
personal computer in the 1980s with the Macintosh.
“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.”
Apple also does not have a formal mission statement, but the common
theme seems to be the following statement, with nominal variations: “Apple
computer is committed to protecting the environment, health, and safety of our
employees, customers, and the global communities where we operate. We
recognize that by integrating sound environmental, health, and safety
management practices into all aspects of our business, we can offer
technologically innovative products and services while conserving and enhancing
recourses for future generations. apple strives for continuous improvement in our
environmental, health, and safety management systems and in the environmental
quality of our products, processes, and services. “(Source: company documents.)

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Organizational Structure

Apple has no presidents of divisions and no SBUs. The company is

organized functionally with financially reportable segments being the americas
(north and South), europe (including the Middle east and africa), Japan,
asia-Pacific, and retail (U.S. and international markets). Tim Cook is the
company’s ceO. apple’s organizational structure.

Products
Apple offers a wide range of products. These include iPads, iPods,
iPhones, itunes, Pcs, and more. apple is perhaps the best-known “first mover”
company ever, as the firm has a 35-year history of being the first to introduce
blockbuster, successful new products.

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Marketing

Apple markets its products many ways, such as through its own retail
stores, online, and some retail channels. It also sells direct to small and mid-sized
businesses, educational institutions, enterprises, governments, and creative
organizations. Apple had over 317 retail stores (233 stores in the United States
and 84 stores internationally). Apple invests heavily in marketing and
promotional campaigns but believes providing direct contact with its targeted
customers is the best way to demonstrate the advantages of its products over those
of its competitors.

Competitors

Microsoft develops, manufactures, licenses, and supports a range of

software products and services for various computing devices worldwide. Its
popular products are Windows operating system and Microsoft Office. Most
computers run on Windows operating system applications, whereas apple’s
computers run on its own operating system applications. Many consider John
Sculley’s decision not to license the Macintosh operating system to Bill gates as
one of the great miscalculations in business.

On the other hand, with its innovative and unique technologically

advanced products and software, consider Mac’s operating system far superior to
Windows, even though Mac software has a very nominal share of the market.

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Porter’s Five Forces
Porter's Five Forces Model is a very powerful tool to understand the core
of the power in a business or in a company.

Competitive Rivalry

● Windows OS and media player for playing music and video

● Competition to MAC OS
● Alternate sources of computer hardware (Dell, HP, Lenovo)
● Small stylish MP# players (Creative, Samsung, Sony)
● Online music stores are similar to iTunes stores.

Threats of New Entrants

● Streaming audio and video with v-cast (Verizon)

● On demand online services (similar to i-tunes)
● New entrants with disruptive technology (The “next google”)

Bargaining Power of Suppliers

● Suppliers of processors and computer memory (Motorola, IBM, Intel)

● Strategic alliance/supplier of Mac (Microsoft)
● Supplier of TV and movies (Disney, ABC, Fox, Sony)
● Sources of music (BMG, Sony, Warner, Universal)

Bargaining Power of Customers

● Customers share music peer to peer networks without paying for music
(Ares, Limewire)
● Retailers may pressure for lower prices or better terms (Distributors)

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 ● Consumers/Business may reduce spending on computers if they fear
economic downturns (Consumer Attitudes and Behaviors)

Threats from Substitute

● Satellite radio for music (XM, Sirius)

● Entertainment media, media and music (XBOX, PS2)
● Alternative means to acquire music (Music CD’s and DVD’s)
● Alternative sources for videos (Cable, Broadcast, Theatres)

External Factor Evaluation (EFE) Matrix

Weighted
Key External Factors Weight Rating
Score
Opportunities
1. Growth of distribution network for technology
products 0.07 3 0.21
2. Customer Growth 0.10 4 0.4
3. Increase of internet penetration to other
regions/countries 0.03 2 0.06
4. Increasing Technological Dependency 0.02 2 0.04
5. Technological Advancement 0.12 4 0.48
6. Growth of high-tech gadgets technological
industry 0.09 4 0.36
7. Growth of social media market 0.02 1 0.02
8. Increasing demand for Cloud based system and
services 0.05 3 0.15
Threats
1. Aggressive competition 0.08 4 0.32

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2. Imitation 0.10 4 0.4
3. Rising labor cost in various countries 0.02 1 0.02
4. Economic fluctuations 0.02 1 0.02
5. Regulatory pressures 0.03 2 0.06
6. Competitors offer lower prices 0.13 4 0.52
7. Microsoft may consider not to provide license
for Macintosh operating system 0.07 3 0.21
8. Global shipments of PCs fell 3.2 percent on the
first quarter of 2011 0.05 3 0.15
TOTAL 1.00 3.42

Internal Factor Evaluation (IFE) Matrix

Weighted
Key Internal Factors Weight Rating
Score
Strengths 0.09 4 0.36
1. Strong brand image 0.10 4 0.40
2. High profit margins 0.05 3 0.15
3. Large and loyal customer base 0.07 4 0.28
4. Offers wide range of products 0.06 4 0.24
5. Best known “first mover” company 0.12 4 0.48
6. Invests heavily in marketing and promotional
campaign 0.02 3 0.06
7. Runs own operating system applications 0.03 3 0.09
8. Operates 317 stores internationally and within
United States 0.02 3 0.06
9. Known for being the world’s most valuable
technology company 0.05 3 0.15
10. Signed deals with major record companies 0.01 3 0.03

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11. High sales for Iphone and Ipad 0.02 3 0.06
Weakness
1. Limited distribution network 0.04 2 0.08
2. High selling prices 0.10 1 0.10
3. Dependence of sales on high-sales products 0.05 2 0.10
4. Incompatibility with Other Software 0.07 1 0.07
5. Fluctuating sales of iPod 0.03 2 0.06
6. Low sales for desktop and portables 0.05 2 0.10
7. No presidents of divisions and no SBUs 0.02 2 0.04
TOTAL 1.00 2.91

SWOT and TOWS Analysis

SWOT analysis stands For Strength, Weakness, Opportunity and Threat
for a particular organization which can help in formulating a strategy for its
business and can also help in analyzing its internal environment Strengths,
weakness and for external environment Opportunities and Threats

Strengths Opportunities
1. Growth of distribution network for
1. Strong brand image
technology products
2. High profit margins 2. Customer Growth
3. Increase of internet penetration to
3. Large and loyal customer base
other regions/countries
4. Increasing Technological
4. Offers wide range of products
Dependency
5. Best known “first mover” company 5. Technological Advancement
6. Invests heavily in marketing and 6. Growth of high-tech gadgets
promotional campaign technological industry
7. Runs own operating system applications 7. Growth of social media market
8. Operates 317 stores internationally and 8. Increasing demand for Cloud based

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within United States system and services
9. Known for being the world’s most valuable
Threats
technology company
10. Signed deals with major record companies 1. Aggressive competition
11. High sales for Iphone and Ipad 2. Imitation
Weakness 3. Rising labor cost in various countries
1. Limited distribution network 4. Economic fluctuations
2. High selling prices 5. Regulatory pressures
3. Dependence of sales on high-sales products 6. Competitors offer lower prices
7. Microsoft may consider not to
4. Incompatibility with Other Software provide license for Macintosh operating
system
8. Global shipments of PCs fell 3.2
5. Fluctuating sales of iPod
percent on the first quarter of 2011
6. Low sales for desktop and portables
7. No presidents of divisions and no SBUs

Recommendation
Market Development and Market Penetratio​n
Advantages
◈ Increase in number of customers
◈ Increase in sales
◈ Increased Visibility for the brand.
Disadvantages
◈ Need to comply with each country's rules regarding products imported from
other countries.
◈ Need to customize your product or service to each culture.

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◈ Need to invest a huge amount of money.
◈ Products may not be patronized due to high prices.
Partnership with other firms
Advantages
◈ Additional profits
◈ Lessen competition
◈ Free of licensing restrictions
Disadvantages
◈ Additional costs
◈ Risk of disagreements and friction among partners and management
Backward Integration
Advantages
◈ Greater level of cost efficiency
◈ Wider customer reach
◈ More efficient marketing
Disadvantages
◈ Loss of communication control
◈ Loss of product importance
◈ Retailers carry multiple products including competitors’ products

Conclusion

It is concluded that apple possesses competitive advantages when it comes

to innovating and the highest quality of products. The firm has a strong financial

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performance showing its strong brand reputation and large and loyal customer
base. However, because of the high-priced products, there is low turnover in some
inventories such as desktops and portables. Other competitors of the firm offer
low priced products. Hence, Apple should invest a lot in R&D to support being
proactive to compete with its competitors in the industry. This time, they must
focus on creating low-cost versions of products to supply the demand of other
customer segments. Apple is known for its innovation and excellence when it
comes to producing technological products. Thus they should also address the
weakness of high-priced products and focus on customer preferences of
affordable products by not distorting the quality much.

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