CASE STUDY

OF
APPLE

Gelo M. Pasicaran

Neil John I. Tiongzon

Charles Zedric F. Quijano

John Alyson B. Ribo

Nelberto B. Oliveros Jr.

Executive Summary

Since Apple was established in mid 1970s, its popularity has become immense especially in computer technology
industry. Its full potential was realised when it shifted its focus from marketing and promotion of computer
products to development of innovative industrial design in modern electronics, unique hardwares, operation
system and application softwares and services. It provides customers with new products and solutions that are
easy to use and seamless integration.

The relevant competitive models chosen for this assessment includes the Michael Porte’s five forces such as entry
of competition, threats to substitutes, bargaining power, power of suppliers and rivalry, SWOT and Industrial
analysis as well as micro analysis in order to assess Apple Inc. strategic capabilities and suggest future directions for
the business. Apple assessment also analyses the results of a study presented to examine how it utilises customer
satisfaction data obtained from formal feedback mechanism.

Introduction

Company background

Apple was founded in 1970s by Steven Jobs who then became the company CEO. Apple first started as a computer
company in 1976 and was fast recognised for its intuitive adaptation approach of graphical user interface that saw
the adoption of the first mouse and first onscreen windows.

Steven Job innovative approach focused more on specialised products and by 2001, its full inventions came into
play with the introduction of iPod, a product that ranked top in the market leader in music players. Eventually,
iPhone came into play in 2008, followed by iMac, iPad and iTunes which have also been widely successful. This
meant that electronic products combined with eminent good customer support throughout its product base were
slowly becoming the company’s primary objectives.
Summary of Macro Analysis

Macro analysis also known as PESTLE is an analysis of the external macro environment in which a business
operates. PESTEL analysis includes factors such as political, economic, social, technological, legal and
environmental issues. For a detailed analysis, the following table illustrates the macro environment of Apple Inc:

FACTOR IMPLEMENTATION

Political factor Apple’s operations in the United States were not

affected by political regimes as the government was
open to technological advancements. The company also
tried to apart from politics & dealt with business
operations only.

Economic The Apple’s 2007 strategy to change its name from

Apple Computer to Apple Inc. did not have direct
impact to the company’s sales but signified company’s
long term strategy, clarified marketing messages and
enabled investors to compare its products to other
consumer electronic firms broadly that just computer
makers

The availability iTune software downloadable on any

computer platform enabled Apple to sell million of
copies online. It moved from 200,000 songs to 500,000
a day and iPod was the only music player in the market
that could play iTune music

Social Apple has the network of cooperative suppliers & the

base of loyal customers that support the company for
the high quality of goods it offers

Technological Apple keeps its customers updated in both the

technology solutions it offers & software development

Apple was honoured in BusinessWeek’s among the top

innovative companies in the united States. The
company has progressively improved in product
innovation since 2004 and distinguished itself in
revenues and margins. It was also reported that since
2007, Apple consistently recorded gross margins of 30%
(Hesseldahl 2009).

Legal Apple Inc. is a legal organization that pays taxes & is

responsible for the quality of the goods & services it
offers.
 Environmental Apple production process is harmless to the
environment. Moreover, the company supports the
environmental initiatives in all the countries it operates
in.

Apple Case Analysis

Apple ranged top in customer satisfaction with phone-based technical support, feedback, face-to-face
communication, email communication, and information exchange in the American Consumer Satisfaction index
(ASCI) in the second quarter of 2009. These companies were credited for offering the best technical customer
satisfaction service within the Personal Computers category with a base score of 77 on a 100 point scale and
earned 83 points in the second quarter of 2006.

Business analysts have argued that the companies’ ability to focus on product innovation and customer satisfaction
has won the company loyal customers compared to other PC vendors. Quality of customer service is always the
determining factor for success of any company and not its products, and the three companies for this case have
gained tremendously from such strategy.

Van Amburg, the managing director of the American Customer Satisfaction Index (ACSI) argues that customers
from other service providers were very frustrated with company’s customer service despite the quality of its PC
hence loss of loyal customers and the services continued to deteriorate as years went by (Moore & Knight 2010;
Keizer 2009).

In ensuring quality satisfaction in information collection, Apple launched Consumer Privacy Policy that ensured the
collection, use and disclosure of personal information regarding customer issues are kept at optimum security. The
company pledges to safeguard personal information collected when visiting the company’s website, purchase of
products and services and when a customer calls the sales team or support associates.

Personal information collected here is aimed at helping the company deliver higher customer service and provide
convenient access to company’s products and services. Information collected from customer’s reviews also helps
the company implement and post the latest product announcement on special offers, software and events (Apple
2010; Levitan 2004; Prasaad 2009).

Summary of Industry Analysis

Porter’s analysis focuses on the threat of new entrants, bargaining power of suppliers and buyers, power of
substitutes and rivals on profitability in an industry.
The following table presents Porter’s five forces analysis of the micro environment of Apple Inc.

FACTOR IMPLEMENTATIONS

Rivalry When Macintosh was first introduced in the markets it

quickly became people’s favourite with large graphics
but had slow performance and could not be integrated
with many softwares in the markets. NeXT Computer
introduced after Macintosh proved costly and did not
yield the company any profits

Apple’s personal computers were not compatible with

other softwares that pushed customers to other PC
providers

Bargaining power of buyer Apple is a balanced organization. Its operations are

equally customer & product oriented and produces
excellent graphics capabilities.

Apple was able to gain best margins due to its ability to

invent simpler and cheaper product lines. In 2008,
Apple was able to rank top on AMR Researcher’s Supply
Chain beating HP, Dell, IBM, Nokia, Sony Erickson
among others.

Threat of new substitute products For Our company this factor is rather important as far
as computer technologies develop rather quickly & the
market is constantly updated by the new solutions
presented either by Microsoft or Google.

Apple has strategically paid attention to research and

development increasing its R&D investment year after
year. In 2008, for example, Apple spends about $1.1
billion in R&D, a 42 percent increase in from previous
years spending.

Bargaining power of suppliers Our company cooperates with the a number of

suppliers but the power of final decisions as for
production capacities & volumes is taken by the
company’s governance based on the fact that Apple
develops the final products using its own intellectual &
human resources.

Industry Competition As far as competition is concerned, Apple competition

with Dell& IBM is rather strong. Industry competition
influences the position of the company in the market &
 determines its strategic objectives in development.

Apple engaged in a head to head competition with Dell

in the computer markets with company CEO Steve Jobs
claiming that market shares weren’t everything. This
statement is in itself contradictory since company’s
engage in business activities for profits. Dell was able to
dominate the markets due to its efficient supply chain
management, although Apple outperformed it in
inventions and other metrics.

The industry analysis of our company in the market displays strong competition in the computer technologies and
electronics. Apple maintained its competitive edge by progressively innovating product designs and operational
execution.

Its product lines were also diversified and supplied its products to retail stores and eliminated third-party retailers.
The company also opened up to 247 stores including 19 internal locations averaging to $29.9 million in sales
revenues. The company has numbers of loyal, & the customer base reports the permanent growth (Keizer 2009).

Suppliers have helped Apple diversify their products. Apple entered into a multi year agreement requiring its major
key components that included dynamic random access memory DRAM, LCD displays, NAND flash memory and
microprocessors that included partners such as Hynix Semi-conductor, Intel Corporation, Samsung, Micron
Technology and Toshiba Corporation. It also partnered with other corporations internationally to ensure final
assembly of its products are concentrated on quality issues (Keizer 2009).

On market research aspect, Apple was reported to collect personal information on various occasions for market
research purposes. This information is aimed at gaining better understanding of customers needs, improve
products and determine how best to provide useful information (Apple 2010; Hewlett-Packard Development
Company 2010).

Apple partnered with other service vendors such as MobileMe and iTunes stores to help in collection of
information by requiring customers to customer’s to create an “phone company ID” before purchase of products.

The ID is strategy is designed to help customers have easier access to web services and saves them time since they
don’t have to give their personal information when requesting for services. The procedure requires creation of
personal profiles by adding the name, phone number, email address or credit card number together with a suitable
password that will be used to access the profile.
Once the signing up procedure is completed, the customer is allocated personal ID and a password that the system
generates automatically. Therefore next time the customer enters the website to re-purchases products is
welcomed by personal greetings by mentioning his name and is able to access up to date information regarding the
product purchased which can be used wherever the client goes (Apple 2010).

In order to survive in the competitive environment, company’s have to device a number strategies to beat their
competitors like changing the price of the product-which is in fact a temporary solution, improving product
features- key to success, creatively using channels of distribution and exploiting relationship with suppliers. When
we look at these examples, brand recognition seemed to cut down costs of advertisements.

On this perspective, Apple diversified to digital consumer electronics such as iPod, iPhone, iMac among others
widened its product markets. Apple dominated computer markets introducing itself a premier provider of
technology solutions for educators, web designers and graphic artists, to digital entrainment company. The
software iPod was later integrated into windows version of iTunes making it easier for everyone one to purchase
and use (Keizer 2009).

Apple introduction of feedback system and outreach programs enabled customers to report on defective machines
and the company to attend to problems before they occur. For example, one of the Company’s products “iMac”
was widely reported for to be giving clients problems and the company responded by giving 15% refund bonuses
to all faulty 27 inch iMac in the UK and was also reported to extend $300 apologies to all its aggrieved customers in
the US.

year after year. Apple’s products were distributed all over US retail stores where customers could easily access and
report of defective devices (Mank & Nystrom 2000, p.504).

Summary of Internal Analysis

Internal Analysis also known as SWOT analysis determines company’s competitors and develops sales & marketing
strategies for the company that allow it to achieve its marketing & strategic objectives.

The SWOT Analysis of the Apple Inc. position in the market is necessary for the development of the marketing plan.

STRENGTHS

Products offered by Apple Inc. are unique:

based on original technologies developed by Apple & unknown to its competitors;

are of the highest quality according to customer satisfaction surveys;

Lack of competition that would facilitate the development of company’s goods & services to higher levels of
quality

Apple was known to guard secrets behind its technology that made Microsoft unable to avail softwares that
would work with its computer platform

Strong current market position

Excellent graphics capabilities

Managed its business on geographical basis

Apple has always refused to compete on prices and relied instead on design elegance, ease-of-use and
reliability and integrated features to win its customers.

Apple personal computers were not compatible with other softwares, a strategy that would have boosted its
sales revenues

Loyal customer base

In 2008, Apple expanded its iPhone products to operate on AT& T’s 3G network hence the introduction of
iPod touch and Wi-Fi Internet devices

OPPORTUNITIES

Uniqueness of goods & services offered might facilitate the further strengthening of market position

Lack of competition to weaken the company

Further international expansion is beneficial for the customer base development & market segmentation
with the products that include iPhone, iPhone, MacBook and recognition software programs, among others

Inability to adjust to socio-economic & demographic changes to undermine its market position

Further innovations in electronics and software partnership with leading computer company’s such as
Samsung Electronics and Microsoft to promote the company internationally

Apple App stores were opened to all users and were able to purchase applications written by third parties for
iPhone, iPod Touch and games

Resources Analysis

Amidst the financial crisis, Apple continued to introduce strongest products lines, with most talented employees
and best customers with sales revenue totalling to $10 billion in quarterly revenue of 2009 and $25 billion in cash
safety bank with zero debt. Demographic & socio-economical factors like population distribution changes &
increase/decrease in income levels of social group also affected the company to a considerable extent (Apple
reports 2008; Hesseldahl 2009).

Dynamic Capability Analysis

Dynamic analysis refers to the innovative strategies a firm employs to gain competitive advantage over its
competitors. In other words, what Apple is doing different that sets it apart from other companies. For instance,
the company has progressively applied technological advancement and business diversification over the years.

Apple continues to diversify its product line from PCs inventions, to iPods, iPhones, iTunes and other peripherals.
Also, the 2007 smart phone technology that saw the integration of wireless phone, music player, video player as
well as internet browsing demonstrated how the company continues to diversify in our markets (Apple reports
2008).

Strategic Capability Analysis

Apple’s strategy to integrate Intel-based iMac desktop and the MacBook Pro portable softwares increased its
company’s market share. Also, the introduction of feedback system and outreach programs that enabled
customers to report on defective machines seemed to have gained the company a competitive edge over its
competitors. The company also introduced support centre strategically designed to attend to software problems
before they occur (Apple reports 2008).

Measuring Capability Performance

Apple’s recent merger with software developers and leading voice-entry technology providers demonstrated its
strong command and reputation in information technology. However, Apple should take adequate time in testing
its products before rushing to introduce them to the markets like case for MacBook Air that left many customers
disappointed (Apple reports 2008).

Gap analysis and assessment of current strategy

Gap analysis is a methodology that helps a company identify gaps and decide upon marketing strategies and
tactics. The company has moved beyond personal computer industry to music, videos, movies, and television.
Diversification is in it itself a good marketing strategy, but the company should concentrate on development of
quality products to cut down on increased numbers of defective products and recalls.
Apples hiring John Sculley from PepsiCo spearheaded marketing and operations of the company while Steven Job
focused on technology that lead to the introduction of more creative products like Macintosh in 1984. The new
CEO enabled breakthrough in electronic products in terms of elegant design and easy use. The company should
employ the same strategy in future to in employing competent workforce that will turn boost company sales
revenues.

How does strategy match the macro environment?

For Apple, there is a large gap between product strategy and socio-economic and demographic changes. Keeping
in pace with technology helped the company gain competitive advantage over its competitors and the uniqueness
of goods and services offered facilitated the further strengthening of market position. However, its inability to
adjust to socio-economic and demographic changes might undermine its market position in future.

How does strategy match the industry environment?

Apple engaged in a head to head competition with Dell in the computer markets with company CEO Steve Jobs
claiming that market shares weren’t everything. This statement is in itself contradictory since company’s engage in
business activities for profits. Dell was able to dominate the markets due to its efficient supply chain management
although Apple outperformed it in inventions and other metrics. Apple should look into fixing sufficient price
flexibility and adjustment to socio-economic changes.

Options, Recommendations and Implementations

Since compatible software were introduced in the markets, IBM prices dropped and Apples costs for R&D were
higher industry costs since the company spend a considerable amount of its sales revenue on R&D. Scully
innovative efforts were not enough to sustain the company’s poor performance. Apple could have taken time to
study its markets demands before heavily investing in unprofitable deals. Since Michael Spindler came into play in
1993 introducing PowerMac, Apple moved to price-performance edge.

The new CEO’s strategy was to let other companies manufacture Mac clones, a strategy that saw many clones
stealing 20% of the Macintosh unit sales. For this case, Apple should be seeking a CEO that upholds their key
capabilities and strengths, whilst being able to improve in other areas that are deficient (Mank & Nystrom 2000,
p.501).
Apple’s current strategy of launching more new products to expand the markets should be sustained. However,
the company should also try to promote its products through media advertising and offering products at
discounted price to increase the satisfaction level of the customers. Apple never seemed to experience intense
competition since it had strong market power and had the ability to introduce new products.

Its strategies to beat the markets severely stretched its budgets that amounted to further losses. For example,
when Macintosh was first introduced in the markets quickly became people’s favourite with large graphics but had
slow performance and could not be integrated with many softwares in the markets. NeXT Computer introduced
after Macintosh proved costly and did not yield the company any profits. For this case, Apple should incorporate
through market analysis to avoid sipping in market shares.

List of References

Apple., 2010, ‘Apple Customer Privacy Policy’. Web.

Apple reports fourth quarter results, 2008. Quarterly results. Web.

Hesseldahl, A., 2009. Apple’s impressive quarterly numbers. BusinessWeek. Web.

Hewlett-Packard Development Company, 2010. Overcoming the no. 1 challenge in data center transformation.
Web.

Keizer, G., 2009. Apple still can strive, sans Job. Computer World, 56 (2), pp.1-4.
Levitan, B., 2004. Improving customer loyalty through proactive communication. Consumer Interaction Solution.
Web.

Mank, D. & Nystrom, H., 2000. The relationship between R&D spending and shareholder returns in the computer
industry. Management of Society Proceeding, 20, pp.501-504.

Moore, C. & Knight, D., 2010. Apple Retains Lead in Customer Satisfaction, iMac Screen Problem Resolved, 64 GB
for Mac Pro and More. Web.

O’Reilly, C. & Anderson, J., 1980. Trust and the Communication of Performance Appraisal Information: The Effect of
Feedback on Performance and Satisfaction. Human Communication Research, 6, pp.290-298.

Prasaad, S., 2009. Establishing successful customer relationships through effective communication: An Indian
perspective. Marketing and Management Communication, 64, pp.1-71.

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