2012 Case Study Apple Inc

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April
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STRATEGIC MANAGEMENT AND BUSINESS POLICY CASE ANALYSIS
By Steven Goncalves, Joshua Kim, Matthew McDonagh, Michael Natale, Richard Ragusa, & Harpreet
Singh
Case Study:
Apple Inc.
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S T R AT E G I C M A N A G E M E N T A N D B U S I N E S S P O L I C Y A N A LY S I S
Business Profile: APPLE INC.
Template Credits:
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Apple Inc. Logo Credit:

http://www.walkersands.com/Blog/apple-apple-droid/apple-logo-small/
Table of Contents
Section 1 – Current Evaluation of Apple, Inc.
Financial Indicators…………………………………………………………...1
Business-Level Strategies…………………………………………………...3
Corporate-Level Strategies…………………………………………………..4
Corporate Governance and Culture………………………………………...6
Section 2 – Environmental Analysis

Political Analysis………………………………………………………………8
Economic Analysis……………………………………………………………9
Societal Analysis……………………………………………………………...9
Technological Analysis……………………………………………………….9
Task Analysis………………………………………………………………..10
Potential Opportunities……………………………………………………...12
Potential Threats…………………………………………………………….13
Section 3 – Organizational Analysis

Value Chain………………………………………………………………….15
Distinct Value Chain Competencies……………………………………….17
Potential Strengths………………………………………………………….18
Potential Weaknesses………………………………………………………19
Section 4 – SWOT Analysis

Fitness of Current Strategies………………………………………………21
Strengths to Capitalize Opportunity……………………………………….22
Strengths to Avoid Threat…………………………………………………..22
Opportunities to Overcome Weakness……………………………………22
Minimize Weaknesses to Avoid Threat…………………………………...23
Recommended Alternatives………………………………………………..23
Implementing New Strategies……………………………………………...24
Concluding Thoughts……………………………………………………….27
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Section
S E C T I O N 1 – C U R R E N T E V A L U A T I O N
Current Evaluation of
Apple Inc.
A detailed overview of the company’s current performance, strategies, and system of
governance
S ince its inception back in the 1970s, Apple Inc., like any company, has had its distinguishable ups
and downs. Today, it breeds success in nearly everything it does and the company is often admired i
as one of the strongestii, most valuableiii firms in existence. Through a brief study of the corporation,
it quickly becomes evident that Apple Inc. has and still continues to work hard at maintaining healthy
positioning within its industry. Through a further in-depth analysis of internal and external factors
affecting Apple Inc., this report aims to uncover whether the company’s high confidence level is
indeed warranted, why that is the case, and what further actions should be taken by the company
moving into the immediate future.
Financial Performance iv
When people hear Apple Inc., they think of phenomenal electronic devices, such as the iPod, iPhone,
MacBook, and iPad. These phenomenal products have translated to extraordinary financial performance. In
its most recent fiscal year, Apple’s Sales, EBITDA, and Net Income have all increased, growing by
65.96%, 83.41%, and 84.99%, respectively. Apple’s EBITDA, operating profit, and profit margins came
in at 32.89%, 31.22%, and 23.95%, respectively. A few more ratios that highlight Apple’s profitability are
Return on Invested Capital, Return on Assets, and Return on Equity. In FY 2011, Apple was able to deliver
a ROIC, ROA, and ROE of 38.56%, 27.07%, and 41.67%, respectively.
However, looking at these profitability metrics in isolation does not tell much of a story and, in order to add
some context, cross-sectional analysis should be used to compare Apple to its industry peers. Looking at
the chart below, Apple’s dominant financial performance becomes increasingly apparent, with all of its
metrics being above the industry average. As shown below, Apple’s financial performance is not simply
above average; the company is clearly leading its peer group.
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Apple’s
astonishing
financial
performance
can also be
seen through
time-series
analysis.
The charts
below show
the main components of Apple’s statement of operations and key margins over a five-year period.
As is evidenced quite clearly

from the diagrams, Apple
Inc. has been able to translate its products directly into high sales and growth, mainly due to the firm’s
strategic marketing. It is also important to point out that Apple has been able to effectively sell its products
at premium pricing to match its high-tech, high quality image, while still reducing production and operation
costs. These margins create a greatly increasing profitability, especially as has been the case over the past
five years, wherein Apple has managed to increase its bottom line profit margin by nearly ten percent.
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In viewing excerpts from Apple’s statement of financial position, one may notice that the company has
more than enough total cash in reserves to pay off its total current liabilities, something of grave rarity
among all kinds of businesses. Further, Apple Inc. even has greater current assets than total liabilities.
Overall, it can be comfortably stated that Apple’s financials are quite healthy, matching the status of the
firm’s brand image, both of which the company has worked hard at strategically building and continues to
do.
Business-Level Strategies
As with any given company, Apple’s reason for existence and motivation for future practices lies in its
mission statement. Where Apple’s mission differs from those of many other firms is in the manner with
which it is stated. For this reason, it may be considered unconventional, and below is the statement as it
appears on the Apple Inc. official website:
Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and
professional software. Apple leads the digital music revolution with its iPods and iTunes online
store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is
defining the future of mobile media and computing devices with iPad.v
One may interpret this mission statement as arrogant compared to its industry competitors. Regardless, the
fact of the matter is that the statement is constructed with a declarative, matter-of-fact nature, pointing to the
company’s ongoing accomplishments at the forefront of the industry.
What makes Apple extremely competitive and successful these days is its strategy of leveraging its
exclusive proprietary ability to design and develop operating systems, hardware, software, and services for
its customers, with innovative and fully integrated ease of use. Because of the nature of its high-tech,
innovative products and services, Apple Inc. implements and strongly adheres to its strategy of dumping
heavy and continual investment into its research and development endeavors, as well as its advertisement
campaigns.vi
Rather than going the route of lower cost strategy, because of its heavy technological breakthroughs and
strong marketing of its new devices and developments, Apple Inc. makes splendid use of differentiation
strategy to secure competitive positioning within its industry. The conceptual actions of its offerings is
highly imitable by nature, but what is highly inimitable is the exact ways in which Apple’s products are
designed – Apple products are often imitated, but never quite duplicated by competitors, making it
extremely difficult to dethrone Apple Inc. as an industry leader.
The company works hard on many fronts to design, manufacture, and market mobile communication and
media devices, personal computers, and portable digital music players, and to sell a variety of related
software, services, peripherals, networking solutions, and third-party digital content and applications.
Selling to consumers, small and mid-sized businesses, and education systems, enterprises, and government
agencies, Apple Inc. offers iPhones, iPads, iPods, Macs, Apple TV, consumer and professional software
applications, iOS and Mac OS X operating systems, iCloud, as well as a broad range of accessories,
services, and support.vii Moreover, Apple quite effectively broadens its competitive scope with each new
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product and with each new development within those product lines, taking full advantage of any target
market it is able and willing to tap into.
That being said, it is necessary to bring attention to the pricing strategy Apple Inc. is just recently trending
towards. Although it does not follow a pricing model that offers its products for cheap, the company has
been coming out with new versions of its product offerings that have only slight variations to their
predecessors, which then allows Apple to continue sales on older versions at slashed prices. Apple has
done this with its iPhone and iPad lines, most notably, and by doing so, has been able to effectively
compete with lower-cost rival competitors.viii
Corporate-Level Strategies
From Apple’s humble beginnings as a garage-headquartered startup, it has been in the genetic makeup of
the company to be user-friendly. Correspondingly, a large portion of Apple Inc’s corporate strategy
revolves around the use of its resources to produce and integrate both hardware and software placed into its
product offerings. In the consumer electronics industry, this is a major difference between Apple and its
competitors, since many competing firms build products using other firms’ hardware or software in its
devices, driving profit margins downward. Because Apple can focus on pairing all self-produced hardware
and software components in its offerings, it is able to eliminate the higher costs and poorer quality of third-
party companies’ programming.
Quality is, of course, a huge focus for Apple in its corporate-level strategy, allocating many resources to the
upkeep of its distinguishingly high-quality goods and services. Apple has continued to produce
technologically advanced goods that are also designed to be extremely sleek and ahead of their times. The
innovative design planning, whether the products are proven successful or not by sales, give way to further
progress and trendsetting, eventually translating directly to higher profit margins. Apple’s strategy is to
target those consumers willing to spend enough for its products, all of which fall into the upper echelon of
the industry in terms of quality, price, and, occasionally, the midrange price level. It is by these methods
that Apple effectively captures customers and profit margins, and keeps a long-run grasp on both.ix
There are three general directional strategies a company can take: growth, stability, and retrenchment.
Apple Inc. is clearly moving in the direction of a growth strategy as it looks to continually expand its
product lines, thereby dominating the consumer electronics market, especially in terms of mobile
electronics. Once the company selects this grand directional strategy, it must decide which specific sub-
strategy it needs to implement in order to indeed move in the direction of continued growth. Within its
growth strategy, Apple has chosen concentration methods, through both vertical and horizontal growth, as a
means to achieving that end.
Apple Inc. has been increasing its direct involvement in the operation of its value chain by both backward
integration and continuing forward integration. In the 1980s, Apple’s involvement in the front-end of its
value chain came to an end with the closing of all its retail stores, as mass merchandisers, such as Sears and
Circuit City, emerged and prospered. However, by May 2001, Jobs revitalized, restructured, and re-
implemented forward integration within Apple Inc. once again. Jobs’ return saw the reopening Apple
Retail Stores in places of heavy traffic by individuals of the company’s target market, and the company
continues to do so today, as can be seen by the increase in average stores from 288 in 2010 to 326 in 2011.
This strategy has worked extremely well for Apple.
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There are two common ways in which a firm achieves horizontal growth. One is to expand operations
geographically in order to penetrate new markets, and the other is to expand product and service offerings
to markets already penetrated. What is great about Apple Inc. is that it has and currently continues to do
both. In fiscal 2011, the company distributed its iPhone to 105 countries worldwide through 228 mobile
carriers, as opposed to only 89 countries through a mere 166 carriers in fiscal 2010. In just a year’s time,
Apple has made notable progress in its geographic expansion, entering many new markets around the
world. Apple Inc. has also increased its product range and services by introducing altogether new products,
like 2010’s third quarter introduction of the iPad, as well as 2011’s fourth quarter introduction of Apple’s
iCloud.x
Apple has even made some reasonable progress in the way of environmental sustainability and turning the
company more “green”. Although not directly affecting consumers, the company has undergone a strong
series of changes to its corporate-level strategy with the implementation of new environmentally conscious
manufacturing and shipping practices. Apple Inc. designs its products to now use less material, and it
packages and ships them in less material as well. The company strives to build its products to be as energy
efficient and recyclable as possible, even insofar as entirely ridding its product lines of harmful substances
its industry is scrutinized for such as arsenic, brominated flame retardants (BFRs), mercury, phthalates, and
polyvinyl chloride (PVC). Apple has recognized problems within its industry, relating to harm done to the
environment, and has effectively made changes in an attempt to minimize the affect its continual growth
has on the ecosystem.xi
Corporate Governance and Culture

Looking at Apple’s business-level strategies more closely related to corporate governance and culture, one
can see another integral reason for the success of Apple Inc. Apple currently sits towards the top of the list
of corporations with low corporate governance risk, a great statistic considering how much distaste there
exists for Boards of Directors. A major criticism of a Board of Directors is that many top executives from
within the company, whom the Board is meant to keep in check and govern, may themselves also hold a
director position on the Board. This leads directly to risk in the area of governance, since there may be too
much leniency for C-level executives or reluctance on the part of the Board to handle true issues, due to the
imbalance of power that such a situation brings about.xii
Apple, Inc. has worked to effectively eliminate such governance risks by assembling a Board of Directors,
which contains only one internal member, the reigning CEO of Apple, Tim Cook, who quite notably does
not fill the role of Chairman, as many CEOs in corporate America do. Of the remaining external directors,
each comes from a long history in industries other than technology. This may play a large part in the
success of Apple Inc.’s corporate governance as well, since its Board members are multi-dimensional in
their lines of thought and execution due to their varying backgrounds and experience. xiii It is also important
to mention that Apple has recently changed its policy dealing with the election of directors to the Board.
Apple is no longer using the old process of selection by simply plurality. Now, Apple has implemented
selection by majority, a direct response to the explicit sentiment of its shareholders, who wanted more
power over such decisions.xiv Due to this move, Apple’s governance was commended greatly and received
an especially “ringing endorsement” from its shareowners, who where quite happy to be granted a voice in
the election process.xv
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Apple also has eliminated such risk by implementing other policies to which executives and directors must
firmly adhere. For instance, the Board of Directors is expected to hold meetings at least four times each
year wherein there are to be no internal management Board members present (CEO Tim Cook, in this
case).xvi The company also subjects its Board members and C-level executives to certain periods of
“blackout,” wherein those individuals are by no means allowed to trade stock, even further helping to lower
governance risk within Apple, Inc.xvii In fact, according to the Institutional Shareholder Services (ISS),
Apple Inc. currently has a Governance Risk Indicator (GRI) of “low concern” in its audit, board, and
shareholder rights categories, with only a “moderate concern” status in its compensation category. xviii These
ratings serve as an indicator that Apple’s current corporate governance is well situated and reasonably
effective.
In terms of overall corporate governance and culture, however, one might argue that above all, it is the
company’s Business Conduct Policy that effectively sums up the character Apple Inc. strives to embody.
This policy is meant to regulate the everyday actions of all Apple Inc. employees worldwide,
unconditionally, which may be the most recognizably effective tool within the company’s repertoire of
governing tactics. Among the many operative instructions and cultural guidelines, the document mandates
that all Apple employees place emphasis on ethics, honesty, and full compliance with laws and regulations
whenever business decisions are to be made, across all areas of the company worldwide. Specifically, the
four principles that the company uses to define the manner in which it does business worldwide are
honesty, respect, confidentiality, and compliance. As the Business Conduct Policy states, Apple’s success
is not only “based on creating innovative, high-quality products and services,” but also “on demonstrating
integrity in every business interaction,” from the top down.xix
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S E C T I O N 2 – E N V I R O N M E N T A L A N A L Y S I S
2
Section
Environmental Analysis of
External Factors
A detailed overview of the factors outside of Apple Inc., and how the
environment in which the company operates may pose threats or
weaknesses
A pple Inc., like all other companies out there, falls victim to the
environment in which it operates. At some point, to some degree, the
outside environment becomes a governing agent that, in the very least,
dictates the boundaries to which companies are confined. Although Apple has done
notoriously well with respect to ever-expanding its reach within its industry despite
all kinds of adversity, it must not ever fail to recognize that there are nevertheless
potential threats and weaknesses that arise as a result of environmental factors
outside of the organization.
Political Analysis
Sole-sourced outsourcing partners located in the United States, Asia and
Europe manufacture and provide the supply of Apple products. The
outsourcing partners in Asia are primarily responsible for the final assembly of
Apple’s products. As a result, the disruption of manufacturing or logistics that
is caused by political issues in these locations can detrimentally tarnish the
Apple Inc. brand image and adversely affect its financial condition and
operating results.xx For example, on March 29, 2012, Apple’s auditors found
“significant issues with working conditions at three factories in China operated
by Apple’s major supplier Foxconn,” a direct violation of Chinese labor rules to
which the contracting company was required to adhere to. xxi In consequence,
Apple is proactively overturning these issues and plans to institute closer
monitoring of factories in order to ensure safe and positive working conditions
are indeed upheld.xxii Additionally, Apple is currently subject to many legal
proceedings and claims, and necessarily engages in litigation in its normal
course of business due to patent infringements and other violations of
intellectual property rights called into question. For instance, Apple litigation
involvement includes the iPod, iTunes antitrust litigation and the more recent
Federal eBook price-fixing claims.xxiii
Economic Analysis
According to the Wall Street Journal, the moderate recovery of the global
economy is becoming more “self-sustaining” despite continuing blowbacks
from the European sovereign debt crisis and the loosening of Asian political
monetary policies. As a result, on a global scale, inflation remains relatively
high, while consumer incomes remain relatively stagnant.xxiv High
unemployment rates across all corners of the world continue to inhibit
consumer spending on “luxury goods.” However, historically, demand for
Apple Inc. products and services amongst consumers has shown rise in the
emerging markets’ technology sector, as well as resilience against the frail
global economy, through unique product developments and foreign currency
hedges against the weak U.S. dollar.
On that note, Apple makes good utilization of derivative instruments, such as

foreign currency forward and option contracts, to efficiently hedge against
certain exposures to fluctuations in foreign currency exchange rates against the
US dollar. Apple is able to then minimize the economic effects of inflation on
its products, and benefits from US dollar depreciation in the international
marketplace.xxv
Societal Analysis
Apple’s socio-cultural forces revolve around the life style changes, population
growth rate, and age distribution of consumers, especially those whom may be
considered potential customers. The brand image of Apple Inc. portrays the
modern individual’s everyday lifestyle, combining functionality with design,
and leading to elevated brand identification and loyalty among its clientele.
Furthermore, age distribution can play a significant role in encouraging or
discouraging people to want the higher quality products Apple offers that are
more tailored to meet their needs. For example, the simplistic nature of the
iPad allows older generations to interact with younger generations through the
audio and video connection of the FaceTime application.
Technological Analysis
The technology industry for consumer electronics is continuously evolving
everyday due to the increase in competition within the market. Thus, product
lifecycles have been shortened from several years to merely months due to the
perpetual increase in capital injections into the “Research and Product
Development” area of the business. Historically, Apple Inc. has been able to
dominate the technology industry because of its lavish spending in research and
development. Additionally, due to economies of scale, Apple has been able to
produce its products while incurring low costs and while selling at a high
premium to consumers. As a result, the company’s leading innovative
development of new and perceptibly irresistible products has paved a path for
competitors to follow.
Additionally, with the revolutionary introduction of cloud computing, Apple

Inc. has dedicated many of its resources to working towards the creation and
advancement of seamless integration among all of its product lines. xxvi
Task Analysis
Michael Porter, who is considered an authority on business strategy
development, maintains there are five key forces that drive industry
competition: (1) threat of new entrants; (2) rivalry among existing firms; (3)
threat of substitute products or services; (4) bargaining power of buyers; and
(5) bargaining power of suppliers.xxvii These forces compose the intensity of
competition in a given industry, which Porter believes is a corporation’s biggest
concern.xxviii Porter’s five forces play a vital role in every industry, particularly
the technology industry in which Apple Inc. operates.
The threat of new entrants is a low force in the technology industry due to the
industry’s high barriers to entry. The technology industry is dominated by
several large firms – Apple, Microsoft, IBM, and HP, to name a few – all of
which benefit from economies of scale (large scale production and selling to
the masses). In addition, these large, established firms have access to
distribution channels that smaller technology companies would have difficulty
obtaining because they cannot afford the cost that large retailers charge for
shelf space as well as advertising costs associated with generating high
customer demand.xxix Apple has one of the biggest distribution channels when
compared to its competitors because not only are Apple products sold in
retailers such as Best Buy, Apple also created its own distribution channel by
opening up its own stores where consumers can receive a firsthand experience
of every Apple product. Furthermore, hardware technology companies such as
Apple, HP, and Sony stand to benefit from product differentiation. By offering
many well designed, high quality products, Apple has created a strong brand
image and achieved strong customer loyalty, which would make it very hard for
a new company to take away some of Apple’s market share. Moreover,
technology companies require huge financial investments in resources as well
as research and development, which serve as another barrier to entry due to
high capital requirements. In addition, technology companies protect their
developments by filing for patents, which makes it effectively impossible for
new companies to emulate certain product offerings. Cloud computing
technologies are newer developments that have allowed companies like Apple
Inc. to benefit even further from barriers to entry. Data and applications are
stored on one’s Apple account and can be accessed on all Apple products. This
creates a bigger incentive for consumers to choose Apple over another brand.
Despite the high barriers to entry in the technology industry that make it very
difficult for new competitors to enter the market, there is intense rivalry among
the several large firms that do already dominate the industry. Most of the firms
are comparable in terms of size and capability, which contributes all the more
to intensified rivalry among firms.xxx Furthermore, most technology retail
companies have a diversified product line, with each product having multiple
competing products. For example, Apple endures fierce competition from
Google, Microsoft, and Research In Motion (RIM) with respect to its
smartphone software.xxxi In regards to its smartphone hardware, Apple faces
intense competition from RIM, Samsung, HTC, and Motorola. xxxii For the iPad,
Apple receives competition from Amazon, Barnes and Noble, Microsoft,
Samsung, and HP. The company competes with different competitors for each
line of business. Nonetheless, Apple Inc. must be aware of the strides each
company is taking in an attempt to strip market share from it, so that Apple can
come up with the appropriate response to prevent that from happening.
Technology companies not only enter existing markets; they create new
markets. For example, before Apple introduced its iPad, the tablet industry was
virtually nonexistent. Therefore, due to the innovative culture in the
technology industry, technology companies always have to be cognizant of the
threat of substitute or imitation products and services. However, smartphones
are rapidly becoming a staple of American life and most people consider
owning one to be a necessity. For this reason, the threat of substitute products
for smartphones is relatively low. This is important for Apple because iPhone
sales account for Apple’s largest source of revenue. xxxiii On the other hand, the
tablet industry is still in its early stages and it is unclear whether consumers will
continue to consider tablets a necessary device to own, so the threat of
substitute products for tablets is of medium strength. Nonetheless, the
substitute products for tablets are smartphones and laptops, both of which
Apple produces to be seamlessly integrated with one another. It is conceivable
that if iPad sales decrease, Apple could make up for that lost revenue with an
increase in iPhone and Macbook sales.
Companies within the technology sector benefit from Porter’s force of

bargaining power among buyers, making it a low force in the industry. As a
result of the industry landscape, buyers receive bargaining power over their
suppliers because a single buyer’s purchases will likely make up a relatively
large portion of a supplier’s sales.xxxiv Moreover, technology companies have a
lot of money and power and could take advantage of backward integration if
necessary. In addition, technology retail companies have large global supply
chains in which suppliers are not concentrated. However, companies in the
industry have unique and technologically advanced products, which would
make a transition from one supplier to another a seemingly daunting task.

Consumers also expect technological products to be of very high quality, and a
buyer may be concerned that switching suppliers may sacrifice that quality. xxxv
When a company uses a supplier for a long time, it starts to develop a
dependence on that supplier. For these reasons, the bargaining power of
suppliers in the technology industry is a medium force, and it is important for
buyers to develop good relationships with suppliers, so buyers can be assured
that their high quality products will be produced and delivered on time at a
good price.
Potential Opportunities
Based on the analysis of the societal and task environments, Apple faces the
following major opportunities: strong growth in iPad revenue; growth in
revenue from emerging markets; a largely untapped SMB and Enterprise
market; and a further adoption of cloud computing, specifically in relation to
the Apple TV.
Through the first quarter of fiscal 2012, iPad shipments exceeded analyst
expectations and will continue to be a large catalyst of growth for the firm in
both the short term and long term. By the end of fiscal 2012, Apple Inc. is
expected to sell 56 million iPads, which would generate over $33 billion in
revenue.xxxvi This increase in demand for iPads is due to the new release of the
iPad 3 and subsequent price cuts for the already coveted iPad 2. The tablet
market is still in its early stages and there are strong indications that it will
continue to grow. Contributing directly to that notion, tablet sales increased
155% in the fourth quarter of fiscal 2011 compared to that of fiscal 2010, with
Apple Inc. commanding a strong 65% of the market. xxxvii By deploying more
resources and focusing more heavily on the iPad, Apple has the opportunity to
increase its already market-leading position in a fast growing, high margin
industry. As discussed in the analysis of Porter’s five forces, new competitors
entering the market do not threaten Apple’s growth in iPad revenues, and the
company has a major advantage over its current competitors due to the
consumer perception that the iPad is the best tablet.
Robust growth in emerging markets, specifically China, will be the most
significant growth factor for Apple moving forward. Its iPhone revenue in
developed countries is very strong, but growth in these markets has noticeably
tapered. China, on the other hand, is experiencing rapid growth and is expected
to account for 20.7% of the global smartphone market by the end of 2012. xxxviii
China has recently overtaken the US as the largest smartphone market by
volume, despite having a population that is more than four times bigger.xxxix
However, unlike the US, the China market is dominated by Google’s Android,
which accounts for 70% of China’s market.xl China represents an enormous
growth opportunity for Apple Inc. In 2011, Apple generated $13 billion in
revenue from China, and CEO Tim Cook says the company has only “scratched
the surface.” xli Furthermore, back in 2007, Apple recorded revenues of $1.7
billion from emerging markets in Asia, Latin America, India, and the Middle
East. In 2011, revenues from those same areas grew to $22 billion.xlii
Other than graphic designers and the occasional doctor who, for aesthetic
reasons, puts a Mac in front of his/her receptionist, the small to midsize
business owner, and especially enterprises, have been a slowly growing yet
unexploited market for Apple Inc. This may be due to Jobs’ focus on the
consumer, but if Tim Cook develops a good strategy, he may be able to
establish a position within this SMB and Enterprise market. Cook, having been
an operations-minded executive for some time now, is indeed capable of
pulling off such a movement. In addition, there is no better time than now for
Cook to attack this market, as HP and RIM have both stumbled in the PC and
smartphone industry, respectively.
As described in the Technology section of the PEST analysis, a recent trend in the
technology industry is the emergence of cloud computing. Cloud computing is the
ability to share resources, data, and information with multiple devices over a
network. It benefits Apple Inc. because it allows consumers to access their photos,
applications, emails, contacts, music, and more on each of the Apple products they
own, without going through the hassle of transferring everything to each device
manually. More importantly, cloud computing has enabled Apple to further
develop Apple TV, a digital media receiver that allows one to play anything from
his/her Apple account directly on a television. Apple TV also streams Netflix,
YouTube, Flickr, MobileMe, MLB.tv, NBA League Pass, and NHL GameCenter.
There are rumors that Apple will expand upon this device and develop a 42-inch
HDTV with the Siri software built in, eliminating the need for a remote. Apple has
an innate ability to revolutionize markets, so this could be a major opportunity for
Apple.
Potential Threats
Due to the seemingly undaunted nature of Apple Inc.’s ability to perform, it
does not seem too farfetched to believe the company may actually be immune
to potential threats altogether. With that being said, Apple’s most serious
potential for threat is through heavy competition in the mobile platform and
tablet market. In the mobile platform market, Apple’s largest competitors are
Google Android and Microsoft. As of February 2012, Android captures 50-
percent of the smart phone market by heavily subsidizing its platform to major
smart phone players such as Samsung, Motorola, and HTC. xliii As a result,
Samsung, Motorola, and HTC are capturing consumers through a
comparatively inexpensive pricing model. This same situation is also being
replicated in the tablet market. Currently, the iPad dominates the tablet market
over the Android Xoom and newly released Amazon Kindle Fire.
Imitation products are another threat for Apple, especially now that many of the
features that Apple was distinguishably known for have been replicated, at least
in some form, by competitors. For instance, late 2011 saw Google’s
introduction of a new version of its Andriod, which sough to replicate a similar
user experience as Apple across its tablet devices and mobile phones with
similar syncing features.xliv Another example is the Evi application, which was
released this past year, and which was a direct competitor to Siri, the
proprietary virtual assistant built into Apple’s iPhone 4S. As a result, Evi, the
$0.99 “speech-based search-and-lookup” imitation product was removed by
Apple from its App Store shortly after it had been purchased by 200,000 users,
a move aimed to prevent people from simply downloading Evi on their older
iPhone 4’s and to instead push them to buy a new iPhone 4S.
Due to this competition and imitation of products, consumers may view the
differentiation of Apples products as less attractive. Furthermore, consumer
tastes could change drastically, for whatever reason, and differentiation can
become irrelevant altogether in the consumer electronics industry, thus losing
Apple Inc. its premium place among technological firms in consumer
electronics.
S E C T I O N 3 – O R G A N I Z A T I O N A L A N A L Y S I S
3
Section
Organizational Analysis of
Internal Factors
A detailed overview of the factors within Apple Inc., and how the
company’s internal environment translates into strengths and
opportunities
T echnically, Apple Inc. is a consumer electronics firm. However, the

truth may be that it is more of a marketing firm than a technology
company. This evolution into a marketing machine was brought by the
experiences of the company throughout the years by learning from its
mistakesxlv and by trying to expand to create excitement in addition to meeting
and exceeding consumer expectations. It is precisely the organizational
environment within Apple Inc. that gives the company its backbone. This
value chain analysis highlights Apple’s activities that led to a transformative
and wickedly profitable company that consistently outwits its competitors at
every turn. The major factors within Apple directly converge to form a recipe
of strengths and weaknesses the company must handle in its everyday
operations.
Value Chain
The primary activities that forms Apple Inc.’s value chain includes its inbound
logistics, marketing and sales, operations, procurement, human resources, and of
course, technology. Each operational aspect carries with it an importance with
respect to the value-added at Apple.
One major player in the value chain of Apple Inc. is the company’s general
management and administration. Apple is in a tremendous position thanks to its
leadership. The firm maintains over $100 Billion in cash and cash equivalents. xlvi
This affords Apple the ability to pursue innumerable opportunities for growth and
expansion with little to no cost of capital. In a world where margins are becoming
increasingly more important to stakeholders, the ability to self-finance mergers and
acquisitions activity is a massive advantage.
Human capital is also crucial in Apple’s value chain. The “Genius Bar” is the most
obvious example of Apple’s emphasis on creating the most knowledgeable and
helpful corporate culture. Apple seeks out and finds tremendously talented
engineers, designers, sales people and executives. Throughout Walter Isaacson’s
biography of Steve Jobs, Steve repeatedly references only bringing in “A-players”
to work at Apple. He clearly believed that a firm is the sum of its parts and that is
why he insisted on hiring the best (and firing the worst). Talent acquisition is only
half the battle, however. Apple is also an industry leader in employee benefits and
compensation, which helps retain the human capital it works so hard to build.
Technological superiority is probably the link in the value chain that most people
would say is synonymous with the Apple brand name. Apple Inc. simply builds
better products. This superiority comes as a direct result of the firm’s heavy (and
ever-growing) commitment to research and development projects. The period that
saw the birth of the iPhone and the conception of the iPad (2007-2009) coincided
with a 66% increase in R&D spending.xlvii Developing new technologies is clearly
crucial to Apple’s success, but protecting these newly developed technologies
through the use of patents is also critical. Apple holds over 16,000 patents globally,
with 313 being connected to recently deceased Apple Co-Founder Steve Jobs
alone.xlviii
Procurement has had difficulty lately, as Apple has come under fire as of late for the
working conditions in some of its east-Asian facilities, as discussed in the previous
section. The reality of the situation is that Apple maintains a rigorous “Supplier
Code of Conduct”xlix and is a member in good standing of the Electronic Industry
Citizen Coalition (or EICC as it is commonly referred). Due to Apple’s sheer size
and limited product portfolio, it receives preferential treatment from most (if not all)
of its suppliers.
Apple’s new CEO Tim Cook is widely considered to be a master of supply chains.
This is clearly evident in Apple’s logistical input process. Apple utilizes a number
of systems that serve to dramatically reduce facility footprints and save space.
Once such system is an automated receiving system that can streamline immensely,
as evidenced by this quote: “If you receive less-than-pallet quantities, installing a
sortation system to automate receiving can help minimize travel time and reduce
staging space. The sortation system can facilitate crossdocking, or enable you to
receive and route cartons to where they’ll be put away.” l
Similarly, the manner in which the output of Apple’s manufacturing process is

packaged and distributed is simply amazing as well. The creation of the Apple
stores around the world allows the firm to maintain control of its brand image. It
also insures that there is a personal point of contact between Apple and the
consumer. One of the most amazing things is actually the packaging, due to its
minimalistic nature by design. The packaging utilized is extremely minimalistic for
two reasons. The smaller/lighter packing reduces shipping costs dramatically.
Apple is conservatively projected to sell between 80-100 million iPhones this year
alone.li If Apple shaves just 1 oz. from each package, it saves itself from having to
ship approximately 6 million pounds per year (and this is only one product line, so
one might imagine the added impact of iPad and Mac boxes, too). The second
reason for such packaging is the minimalist packaging does not distract from what
the recipient should really be focused on – the product.
Whereas some companies can become bogged down by the gravity of their own
size, Apple Inc. efficiently and effectively uses its sheer size to its advantage,
especially in the way of its general operational activities. By utilizing economies of
scale Apple is able to produce its products at much lower price points. Apple also
has become very adept at focusing on doing what it does best, while outsourcing
other work around which Apple does not have a comparative advantage. It uses
third party original equipment manufacturers (OEM) to mass-produce certain
pieces. Moreover, as a final operations point, Apple is best of breed when it comes
to having mechanical and electrical engineers work together for the benefit of the
product. Walter Isaacson’s biography on Jobs has an entire segment dedicated to
this phenomenon. In most other firms, the internals (cpu, power source, graphics
components, etc) are designed and then another team of designers fabricates a
casing based upon the size and design of the internals. This is not the case at Apple
Inc. There, both sides work collaboratively from the onset to design near-flawless
pieces of ingenuity.
The last piece of Apple’s value chain rests at the company’s sales and marketing
forces. Apple’s retail stores were touched on briefly already, with respect to
outbound logistics, but they deserve another mention here in terms of sales and
marketing segment, since the stores serve as an effective launching point for selling
product offerings. In addition to this, the stores themselves serve to increase brand
awareness in the high-trafficked areas of the general public domain, with the clean
white space, organic wood and stone, and members of the Genius team walking
around fielding questions from potential buyers. Another effective marketing
technique is the manner in which Apple unveils its product to the world. Steve Jobs
mastered the product presentation. His signature “oh, and one more thing…” line
just before a major release became synonymous with creativity and excitement.
Something that Apple subsequently became known for, and for which the company
was expected to deliver its consumers.
Distinct Value Chain Competencies

Apple’s distinctive competence is a combination of procurement, input & output
logistics. Essentially, the distinctive competence is its overall supply chain
management. While it is true that technological innovation under Steve Jobs was
extremely impressive, it was not until the supply chain guru Tim Cook took the
helm at Apple Inc. that the company became the largest (in terms of market
capitalization) and most successful company in the world.
Apple thrives on its ability to deliver the highest quality product in as efficient and
effective a manner as possible. This competency originates with the incredibly
concentrated product lineup (Iphone, Ipad, Ipod, Mac & Apple TV). Apple’s small
product line allows it to really develop close-knit relationships with its suppliers.
Here is a quote from a Jeffries research report that highlights how Tim Cook’s
control of the supply chain has made Apple a nearly unstoppable force in the
corporate world:
Even with the unfortunate events in Japan around the time of the iPad 2
release, Tim Cook was able to double or sometimes triple source
component suppliers. To date, no competitor has been able to gain
meaningful share in the tablet market; and, in our view, Cook’s leadership
during the introduction was critical to this.lii
Clearly Apple’s dominance will continue as long as it can maintain its highly
efficient and extremely admirable supply chain.
Potential Strengths
Through time, users of Apple’s products have witnessed that the company has
revolutionized the way it does business. The innovative mindset of Apple’s
management has led to the introduction of products that are viewed as cool,
intuitive, and simple to use, and most importantly, as ones that provide an amazing
user experience. Steve Jobs’ “Think Different” mindset has created a company that
focuses on bringing people great products that will change their lives, rather than
profits. The simplicity behind this culture provides the master plan for all the
products the company develops. The creative minds at Apple changed the playing
field by creating new business models that involved taking risks and boldly entering
new markets.liii
Apple’s solid profit margins and return on equity are a result of a variety of factors.
For starters, the company’s innovative product designs result in tremendous amount
of demand from consumers all over the world. This strong demand coupled with
significant premiums over competitors’ products results in strong margins. In terms
of making its products, Apple’s choice in outsourcing the production of its products
has resulted in a more efficient and effective use of its resources. Its strong brand
loyalty is also a tremendous factor when it comes to selling its products.
The Apple brand carries a charm that arouses excitement, devotion, enthusiasm, and
even an obsession to some extent in its loyal fan base.liv The company’s unique and
non-traditional approach to marketing seems to win over many customers in the
technology sector. By creating user-friendly and cutting edge innovative devices,
Apple always seems to know ahead of time the desires, wants, and needs of the end
users. According to a recent brand loyalty survey, Apple emerged as the victor over
other well-known brand names such as Coca-Cola Co., Google Inc., and
Amazon.com Inc. Survey respondents listed quality as the main driver of loyalty,
followed by customer service. Overall, Apple retains its customers by knowing
who they are, what they want, and how they feel about its products. This focus of
the company has been critical in the success of the company since more than half of
consumers using its products do not even consider buying another brand. lv An
important factor behind Apple’s brand loyalty success has been the fact that Apple’s
products complement and complete each other.lvi For example, one’s iTunes
content can be accessed across all the user’s Apple devices such as an iPod, iPhone,
iPad, or a Mac through the capabilities of iCloud. This sort of integration between a
user’s technology gadgets strengthens customer loyalty leading to a high retention
rate of customers.
Apple’s well-diversified product mix aids the company in terms of increasing its
revenues and profit margins. Recent dominance in the tablet and mobile phone
industries has made Apple the world’s biggest company in terms of market
capitalization.lvii In the most recently released quarterly earnings, Apple sold a
record 27.04 million iPhones along with a record 15.43 million iPads. The
phenomenal growth in these two segments, coupled with strong sales in the Mac
and iPod lines, resulted in net income of $13.6 billion on revenue of $46.33
billion.lviii In addition to these amazing sales in its current product mix, Tim Cook,
Apple’s chief executive, promised new products in the pipeline would continue to
drive the company’s success.
Potential Weaknesses
One aspect of Apple Inc. that has a potential to be a weakness of the firm is its
limited internal backward vertical integration. Apple’s dependence on foreign
suppliers as well as manufacturers poses an internal weakness to the company. Due
to recent flooding in several regions of Thailand, a number of Apple’s suppliers
may face downtime due to the damage to infrastructure, housing and factories.
According to the company’s current assessment on the situation, the event is
believed to have no material impact on Apple’s operations in the first quarter of
fiscal 2012. However, because the situation is still evolving, uncertainty still
remains regarding the ultimate impact of the event on the company.lix
Apple’s iPhone success has been grounded on the company’s ability to lure mobile
carriers into subsidizing the cost of the device. Most consumers cannot afford the
iPhone without a contract and Apple is already using most of the major wireless
carriers in the world. Thus, this poses as an internal weakness of the company at
the moment and the company will need to either attract more carriers or reduce the
price of its mobile device as sold without a contract.
Steve Jobs’ death has put a considerable dent in the management of Apple. Jobs,
the visionary leader of Apple from the roots of the company, had a profound impact
on the gadget market. His knack for simple, yet futuristic designs won over the
hearts of many. Since he was involved in bringing Apple to new heights through
the introduction of wildly successful products, many people believe the company
will not be the same without his brilliance as a product visionary and a super-
salesman.lx At the helm of Apple now is Tim Cook, appointed by Jobs himself.
Cook, the former operations chief, has been handling the company pretty well. In
fact, Apple has reached to even bigger heights than ever before. However, only
time will tell if this continues, as investors and consumers will demand more
innovative products from the company in the future. It is anybody’s guess if Apple
will continue to change the world like it did under Jobs in the past few decades.
Apple is currently under pressure from shareholders and others in the under
utilization of the massive $100 billion cash the company has amassed over time on
its balance sheet. Recently, the company announced to pay its first dividend in 17
years and buyback $10 billion in stock. lxi The planned move will cost Apple
approximately $45 billion over the next three years. According to Cook, some of
the cash has been used to make great investments in the business through increased
research and development, acquisitions, new retail store openings, strategic
prepayments and capital expenditures in the supply chain, and building out
infrastructural needs.lxii He also claimed that the company is able to maintain a good
amount of cash for these strategic opportunities as well as have enough cash to run
the business.
S E C T I O N 4 – S W O T A N A L Y S I S
4
Section
SWOT Analysis of Internal

and External Factors
A detailed overview of all the factors inside and outside of Apple Inc.,
how the company is currently handling those factors, and what Apple
should do moving forward
T hough it may be difficult for one to conceptualize exactly how Apple Inc.
might be able to improve its functioning, an analysis of recent findings
suggests otherwise. The remaining portion will aim to bring closure to the
topic at hand, stating once and for all whether Apple is truly in as good a position as
publicly viewed to be, and what changes the company should implement moving
forward.
Fitness of Current Strategies

Through the examination of Apple Inc.’s current strategies, it is evident that the
company is indeed on to something, given the monumental success it has seen in
recent years. Apple Inc. has been increasing its direct involvement in the operation
of its value chain by both backward integration and continuing forward integration.
In terms of backward integration, Apple has an unrivaled supply chain, which has
contributed significantly to Apple’s coveted margins, but much of it is outsourced.
Thus far it has been successful. Due to recent events in Asia, Apple has looked to
begin in-housing certain integral aspects of its supply chain. For example, Apple
has been, for a few years now, acquiring companies with flash storage solutions,
such as Anobit Technologies Ltd, which is a key component in their devices. lxiii This
has also been successful in creating stronger offerings for consumers.
Strengths to Capitalize Opportunity

One of the biggest, if not the biggest, opportunity for Apple to grow its revenue is to
focus on emerging market countries. As discussed above, China presents an
enormous growth opportunity for Apple with a large smartphone market that is
experiencing rapid growth, but is still underdeveloped and currently dominated by
Android. By relying on its strengths of strong brand loyalty and a well-diversified
product line, Apple could eventually grow its business in China to its biggest
revenue generator by country.
Apple’s strengths of strong brand loyalty, innovative corporate culture, and well-
diversified product line could also enable Apple to pursue the opportunity of the
SMB and Enterprise market. Apple could adjust its product offerings to better
satisfy the needs of the small to medium sized business market.
Strengths to Avoid Threat

Apple strong brand loyalty can be used to avoid the threat of its competitors from
producing Apple’s highly imitable product line. Through Apple’s unique marketing
campaign and stylish technology, Apple is able to retain a larger majority of its
customers from product generation to product generation. For example, Apple’s
proprietary technology entices the consumer into a unique user experience with
seamless integration from Apple product to Apple product through the use of cloud
computing. As a result, the unique integration and product exclusivity disables
complimentary competitor products to be deemed obsolete by the Apple consumer.
Opportunities to Overcome Weakness

As discussed in the internal environment analysis, Steve Jobs’ death is a
significant weakness in the company. Although it is nearly impossible to
replace such leadership, the current management can prove itself by launching a
product that will revolutionize the industry it aims to change like Jobs had
changed the music, mobile, and tablet industries.
Through the use of Apple’s new iCloud service, the company can penetrate the
television industry through the introduction of a television set with a built-in
Apple TV, as discussed in the analysis of the task and societal environments.
The built-in features of this device will most likely appeal to the masses due to
their uniqueness. Considering the huge success of the iPhone and iPad, Apple
will probably once again change the way people do things, this time with
television. In fact, pursuing this idea would be in Apple’s best interest since
the market for advanced televisions such as this one is underdeveloped and if
Apple can introduce this product soon, it can once again capture a dominant
share in the market just like it did with the smartphone and tablet markets.
Minimize Weakness to Avoid Threat

Apple should work hard to minimize its weakness of limited vertical integration.
As referred to in the threats section, product imitation is a threat to Apple, as
companies try to replicate market-leading products (namely iPhones and iPads) and
sell them at a lower cost. Moreover, there is some crossover with Apple and other
companies in terms of suppliers used by each company. By Apple taking
advantage of vertical integration, the company will be able to develop a more
unique product that is more difficult to imitate due to little to no synergies in regards
to suppliers.
Recommended Alternatives
After carefully considering the strategic alternatives in the section above, Apple
should pursue the following opportunities: increasing its presence in China,
particularly in the smartphone market; increasing its presence in the SMB and
Enterprise market; and the development of a widescreen television.
As discussed in the strengths section, Apple has one of the most popular brands
in the world and has strong brand loyalty due to its high quality products and
superior customer service. Apple’s strong brand loyalty will enable its iPhone
to prevail against the Android in China because the company is now
subsidizing phones in the country and can compete with lower cost phones that
use the Android operating system. Each individual that buys an iPhone
becomes a potential lifelong customer to Apple because of its high customer
retention rate and the integration properties. In addition, Apple is able to easily
attract consumers due to its strong brand appeal. As these two trends persist,
Apple will continue to steal market share from Android and eventually become
the market leader in China as well. Furthermore, Apple’s increase in iPhone
sales in China due to its strong brand loyalty will complement its strength of
having a well-diversified product line that is seamlessly and easily integrated
with other Apple products. This will likely increase demand for Apple’s other
products as well.
Although Apple does not have an issue in this regard, consumers tend to be
more fickle and therefore swing towards the trendiest products available.
However, businesses make purchases and investments that will generate future
economic benefits and are a much more reliable customer base. In addition,
business spending in technology services, particularly for software applications
used in mobile computing and communication devices, continues to rise even
in a sluggish economy, while other business service activity remains flat. lxiv For
these reasons, the SMB and Enterprise markets present a more consistent,
major revenue-generating opportunity for Apple Inc.
Apple currently enjoys healthy revenues from three of its primary products – its
iPhone, its iPad, and its Macbook series. With a high market share in developed
countries and strong growth in emerging markets, the company has a strong
foundation for long-term financial success. There is then, presumably, no severe
pressure for the company to release any new products. However, now that Apple
has revolutionized three different markets with innovative products, and is
considered one of the premier innovation companies in the world, producing game-
changing products is now an expectation of the firm. Fittingly, Apple should enter
the smart television market and produce its own Apple TV. It already has the
groundwork for such a smart TV, and the company can include the technology used
in its Apple TV digital receiver together with its latest operating system already
used in its iPhones and iPads. This would therefore include its acclaimed Siri voice
command technology, to make a smart TV that does not require a remote. If Apple
so chooses, it can use the design of the iPad as well, in essence creating a 42-inch
iPad that serves as a television and much more.
Apple has such a strong brand and very loyal customers that many consumers are
willing to buy anything that has the Apple logo, and understanding this, the
company has a very large marketing division that it will surely be able to generate
intense demand. In addition, Apple has a special ability to innovate and has
experienced enormous success in every industry it has entered. Apple Inc. has the
production and technological capabilities to undertake such a project, and many of
its existing products will likely help Apple with the Smart TV’s production in terms
of built-in technologies (OS X, Siri) and raw materials. Furthermore, the “smart
TV” market is still underdeveloped and if Apple enters it sooner than its
competitors it can capture a huge portion of the market and maintain that market
share in the long run.
Additionally, following the death of Steve Jobs, there are doubts about whether
Apple’s management team can sustain the innovation capabilities the company has
demonstrated in the past. Some investors have accordingly expressed concern
about the future prospects of the company. A successful launch of an Apple Smart
TV would erase all doubts and concerns and send a strong message to the
marketplace that Apple will continue its industry dominance in the future. It is
therefore strongly recommended that Apple Inc. move forward with this conceptual
product, bringing it to life, and more importantly, to consumers everywhere.
Implementing New Strategies

Apple can increase its presence in China in several ways. The first is to partner
with China Mobile, China’s largest mobile phone carrier. China Mobile has
over 650 million subscribers, more than double the amount of China Telecom
and China Unicom combined, the two Chinese mobile phone carriers that carry
iPhones.lxv Apple would essentially double its market in China by reaching an
agreement with China Mobile. A deal would be contingent on Apple making
specially crafted phones for China Mobile because its current phones are not
compatible with China’s 3G network, and also on Apple giving China Mobile a
share in App Store revenue upon the company’s request.lxvi Apple refuses to do
both of these, which is why it is missing out on the largest mobile phone
service provider in the world, with six times the amount of users as Verizon and
AT&T.lxvii However, Qualcomm recently announced that it developed a chip that
is compatible with 4G TD-LTE and China Mobile’s 3G network, which would
solve the first issue.lxviii With one issue of revenue sharing standing in the way
of Apple Inc. partnering with the world’s largest mobile phone service
provider, Apple must aggressively seek a compromise, even if it involves
allowing China Mobile to share in some of its App Store revenue. One way the
company can do this is by offering China Mobile a percentage of revenue up to
a certain amount. As discussed in previous sections, there is tremendous upside
in the Chinese smartphone market, which will continue to undergo significant
growth, making it virtually impossible to put a ceiling on the full potential of
this market.
Apple is losing out to Android due to the cost of the iPhone and limited
carriers. By partnering with China Mobile, Apple can offer subsidized phones
at a lower cost and achieve the same customer reach as Android. After that,
Apple’s strong brand image and high quality phones will enable the company
to further grow its market share in a rapidly growing country on a continued
basis. Apple has a very successful business model for smartphones and
benefits from operational efficiency, so it should do its best to replicate this
model in China in terms of structure and control. However, due to the various
socio-cultural differences between China and the US, Apple may want to
modify its distribution methods a bit. For example, in the US, Apple products
are only sold at Apple stores and a few other retailers. It may be more
beneficial in China to have many retailers sell Apple products. Furthermore,
Apple should implement a new policy for its products insofar as all new
products should have the same release date worldwide. Apple currently
releases products earlier in the US than it does in China, and these products
somehow make it to China early, spoiling the release date in China and
lessening the products’ anticipation there. By releasing products on the same
date throughout all markets, anticipation for the product would increase
uniformly, and Apple Inc. would send a message to other markets that the
company focuses on them just as much as it does that of the US, which would
foster strengthening the company’s already strong brand image.
Another way Apple can further increase its presence in China is to infiltrate the
Chinese education system. Schools are generally slower to adapt to
technological improvements due to budget restrictions, difficult
implementation, and administrative resistance, just to name a few factors.
However, education is so very important to continued growth and technological
advancement in China, and products such as the iPad emphasize their unique
abilities as learning devices. Perhaps the Chinese government would be more
eager to partner with Apple if its primary and secondary educational institutions
would be supplied with Apple products. For example, instead of issuing each
student multiple textbooks at the beginning of each semester, issue each student
an iPad with all of the textbooks pre-installed on the device. This idea is not
limited to the Chinese market, as it can be applied to multiple developed
countries. While this would be a fantastic opportunity for Apple, it would
require the company to make several organizational changes. First, the
company should create a separate team or division to manage the new
educational retail business. This division would be responsible for working
with each partner country’s education system as well as for soliciting new
education systems to participate. In addition, Apple should modify its products
that would be used by students, insofar as increasing their durability, battery
lives, and relevance over more extended period of time. This can be at the
expense of some of the aesthetic features that are less important for educational
purposes, focusing solely on functionality.
In order for Apple to make any advancement into the SMB and Enterprise
markets, it needs not do anything beyond what it does best – ask the right
questions and then execute on its findings. Apple has this uncanny aptitude of
taking consumer feedback and using it to create a new product that exceeds
imaginable expectations. The firm needs to take its ability to please the
consumer and apply it to the small business owner and corporate executive. In
addition to this general recommendation, Apple can make two specific changes
to better address the SMB and Enterprise markets. First, the company needs to
make its retail stores more business friendly. Perhaps it would benefit Apple to
try and open business-specific Apple retail stores within metropolitan branches
of major corporate chains with which they may be able to partner. Second, it
needs to create a more business-oriented software, which businesses would find
not only comparable but also better than competitors’ products. In terms of
Apple’s retail stores, the company has generally created a store environment
geared towards giving the consumer an experience, but this has left the store
over-crowded with groups of folks, like teenagers, who simply visit the
locations to play with hip Apple products. Business owners simply do not have
time for this. Apple has confronted this issue by introducing dedicated business
sales teams with some success, but in order to further their efforts, it could hold
information seminars in the evening or hold lunch-and-learns around mid-day.
As for creating a business-oriented software, Apple has done it before and it

can do it again. For example, there are usually high switching costs associated
with a change in technology, but PC users have switched, in large numbers, to
the Mac, most notably when iPhoto, iMovie, iDVD, Garageband, and other
more advanced media software applications were introduced on Apple’s
systems. If Apple creates a stellar business software lineup, the company can
undoubtedly create a similar "business envy" among corporate consumers.lxix
Changing focus, the implementation of the Apple Smart TV should require a

few steps. Like Apple does with its other products, the company will need to
create a separate division that is devoted solely to the development of the TV.
This product has a strong potential to make a large impact on the television
market and also the cable and satellite provider market. Apple can work with
cable providers and eliminate the need for cable hardware; instead, the cable
providers’ services can be accessed through an App on the television because
the TV will contain an operating system similar to that of Apple’s other iPhone
and iPad products. This would require Apple to work closely with cable
providers to develop the technology capable of streaming high definition

television over the Internet with no lagging. Therefore, the division would
have to be well structured and organized into production, sales, research &
development, etc.
Apple could also go a different route and work directly with the networks and
allow consumers to purchase individual networks to be viewed on their Smart
TV. For an individual who only watches a few channels, this would be very
enticing. This would also be a major threat to cable and satellite providers.
Furthermore, the Smart TV would eliminate the need for DVDs and DVD
players, as consumers can buy and rent movies on any Apple product and also
access them on any Apple product through iCloud services. The product would
certainly need to meet Apple’s high standards and level of innovativeness, but
by taking a look at its well-diversified product line, it becomes clear that Apple
has the necessary production capabilities to develop such a device.
As discussed in the previous section, Apple is well known for its strategic
introduction of new products, and the Apple Smart TV would certainly need to
be implemented in a unique way. The company has had enormous success
generating a high level of anticipation prior to its products’ releases. The
company does this by leaking rumors to the public to create a buzz, and then
introducing the product at an official conference. Apple should then adopt
similar policies for the TV as it does with its other products, in terms of
periodically releasing new versions of the product.
In addition to these three suggestions, Apple Inc. should implement a new informal,
corporate-wide program designated to driving further innovation. The program
would reward innovative thoughts and suggestions at every level of the
organization. Whereas Steve Jobs, in the past, was personally responsible for much
of the innovative thought leadership, a much more organizational approach, in
terms of engagement and involvement, will be warranted and practically necessary
to replace his innovative genius. Therefore, a comprehensive and holistic
innovative think tank that permeates through the entire company needs to be
created. A way of accomplishing that is by creating an internal social network
dedicated to innovation, where associates can offer suggestions, comment on other
suggestions, create teams to pursue specific ideas, and receive monetary and human
resource capital to bring the best ideas to life.
Concluding Thoughts
After an evaluation of Apple’s current performance, an Environmental and Internal
Analysis, and a full SWOT analysis, the conclusion has been reached that Apple
should pursue several opportunities. Firstly, it should implement a strategy to
increase its presence in China due to China’s large population and strong growth in
the smartphone market. Apple can increase its presence by reaching an agreement
with China Mobile to include iPhones in its mobile phone service and partnering
with the Chinese government to include Apple products in schools. Secondly,
Apple can use feedback from small and midsized businesses to develop products
more consistent to their needs and take advantage of the opportunity that market
presents. Thirdly, Apple has the innovative skills and production capacity to enter
the underdeveloped market of Smart TVs and add a fourth primary product to its
portfolio and revolutionize yet another industry. Fourthly, in an effort to sustain the
level of innovation Apple is used to achieving, the company should introduce a
corporation-wide social network that facilitates the free flow of innovative ideas,
building on an already strong corporate conduct policy requisite in place.
After all, one of the reasons Apple is such a successful company is because of its
ability to take on multiple projects at the same time and generate success in all of its
endeavors. These suggestions are not mutually exclusive, and they can all be
worked on simultaneously. If all of these suggestions are adopted, there is no doubt
that Apple’s stock price will soon be over $1,000 per share with a market
capitalization of over $1 Trillion.
NOTES
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Scott DeCarlo, “The World’s Most Valuable Companies: Apple Is Now On Top,” Forbes.com, August 11, 2011
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11, 2012).
iv
Charts displayed from Bloomberg Terminal
v
Apple Inc., “Investor Relations: Frequently Asked Questions,” Apple Inc., 2012 <http://investor.apple.com/faq.cfm?FaqSetID=6>
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vi
Apple Inc. (2011). Form 10-K for the fiscal year ended September 24, 2011. Retrieved from
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vii
Apple Inc. (2011). Form 10-K., 1,6.
viii
Garett Sloane, "Tablet tactics New iPad pricing strategy targets cheaper rivals," The New York Post, March 8, 2012, LexisNexis
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ix
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x
Apple Inc. (2011). Form 10-K., 31.
xi
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xii
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xiii
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xiv
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xv
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xvi
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xvii
Apple Inc. (2012). EX-14 for the Form 10-K for the fiscal year ended September 24, 2011. Retrieved from
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xviii
Yahoo! Finance, “Apple Inc. (APPL),” Yahoo!-ABC News Network, 2012 <http://finance.yahoo.com/q/pr?s=aapl> (accessed April 12,
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xix
Apple Inc. (2012). EX-14 for the Form 10-K, 1.
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xxi
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xxii
Freeman, Kate. "Apple’s Auditor Finds ‘Significant Issues’ at Foxconn Factories." Mashable, Inc., 29 Mar. 2012. Web. 15 Apr. 2012.
<http://mashable.com/2012/03/29/fair-labor-auditor-apples-factories-in-china-breaking/>.
xxiii
Forden, Sara, and Jeff Bliss. "U.S. Sues Apple For EBook Pricing as Three Firms Settle." Bloomberg Businessweek. BLOOMBERG
L.P., 12 Apr. 2012. Web. 15 Apr. 2012. <http://www.businessweek.com/news/2012-04-11/apple-publishers-sued-over-e-book-
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xxiv
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xxv
Apple Inc. (2011). Form 10-K, 18.
xxvi
xxvii
Strategic Management and Business Policy: 110
xxviii
110
xxix
111
xxx
112
xxxi
Daniel Ionescu, “iPhone 4S vs. The Competition: Spec Showdown Chart,” PCWorld.com, October 5, 2011
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xxxii
Daniel Ionescu, “iPhone 4S vs. The Competition: Spec Showdown Chart,” PCWorld.com, October 5, 2011
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xxxiii
Apple Inc. (2011). Form 10-K, 31.
xxxiv
Strategic Management and Business Policy: 113
xxxv
113
xxxvi
Gartner Research Report
xxxvii
“Tablet Market Finishes Strong 2011 with 155 Percent Growth, IDC says,” Lenovo, March 14, 2012
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April 12, 2012).
xxxviii
Suzanne Choney, “China overtakes US as largest smartphone market,” MSNBC.com
< http://www.technolog.msnbc.msn.com/technology/technolog/china-overtakes-us-largest-smartphone-market-118874>
xxxix
Suzanne Choney, “China overtakes US as largest smartphone market,” MSNBC.com
< http://www.technolog.msnbc.msn.com/technology/technolog/china-overtakes-us-largest-smartphone-market-118874>
xl
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<http://www.androidpit.com/en/android/blog/404227/android-market-share> (accessed April 13, 2012).
xli
Rip Empson, “Tim Cook: Sales In China Were $13B Last Year,” TechCrunch.com, February 14, 2012
<http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&ved=0CEUQFjAD&url=http%3A%2F
%2Ftechcrunch.com%2F2012%2F02%2F14%2Ftim-cook-sales-in-china-were-13b-last-year
%2F&ei=nO2MT8usNcfl0QGjyOnaDw&usg=AFQjCNH_AUecPQVlRIjR5TMj0gKhEtAhYg> (accessed April 13,
2012).
xlii
Rip Empson, “Tim Cook: Sales In China Were $13B Last Year,” TechCrunch.com, February 14, 2012
<http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&ved=0CEUQFjAD&url=http%3A%2F
%2Ftechcrunch.com%2F2012%2F02%2F14%2Ftim-cook-sales-in-china-were-13b-last-year
%2F&ei=nO2MT8usNcfl0QGjyOnaDw&usg=AFQjCNH_AUecPQVlRIjR5TMj0gKhEtAhYg> (accessed April 13,
2012).
xliii
Efrati, Amir. "Android, Apple Move to the Office." Wall Street Journal. 29 Feb. 2012. Web. 15 Apr. 2012.
<http://blogs.wsj.com/digits/2012/02/29/android-apple-move-to-the-office/>.
xliv
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xlv
Learning From Failure: Apple's Most Notorious Flops; Accessed April 2012
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xlvi
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xlvii
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xlviii
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xlix
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l
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li
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lii
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liii
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liv
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lvi
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lvii
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lviii
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lix
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lx
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lxi
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lxii
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lxiii
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lxiv
lxv
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china-unicom-china-mobile
lxvi
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lxvii
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lxviii
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lxix
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ml> (accessed April 14, 2012).

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1

Business Profile: APPLE INC.

Apple Inc. Logo Credit:

Section 2 – Environmental Analysis

Section 3 – Organizational Analysis

Section 4 – SWOT Analysis

As is evidenced quite clearly

Corporate Governance and Culture

On that note, Apple makes good utilization of derivative instruments, such as

Additionally, with the revolutionary introduction of cloud computing, Apple

Companies within the technology sector benefit from Porter’s force of

make a transition from one supplier to another a seemingly daunting task.

T echnically, Apple Inc. is a consumer electronics firm. However, the

Similarly, the manner in which the output of Apple’s manufacturing process is

Distinct Value Chain Competencies

SWOT Analysis of Internal

Fitness of Current Strategies

Strengths to Capitalize Opportunity

Strengths to Avoid Threat

Opportunities to Overcome Weakness

Minimize Weakness to Avoid Threat

Implementing New Strategies

As for creating a business-oriented software, Apple has done it before and it

Changing focus, the implementation of the Apple Smart TV should require a

providers to develop the technology capable of streaming high definition

Apple Inc., (2012), “Apple Supplier Code of Conduct,” Apple Inc.,

<http://images.apple.com/supplierresponsibility/pdf/Supplier_Code_of_Conduct_V3_1.pdf> (accessed April 13, 2012).

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