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I. Current Strategic Position a. Introduction
i. Apple Inc. began as the brainchild of intrepid businessman Steven Jobs
and tech guru Steve Wozniak. The business started in the early days of the computer revolution as a hobby selling custom-built machines to technology enthusiasts. Incorporated in January of 1977 (Apple, 1), the firm has grown from a garage business into one of the world’s leading suppliers of personal computers, portable digital music players, and mobile communication devices [also selling] a variety of related software, services, peripherals, and networking solutions (Apple, 1). Apple Inc. is a unique case in the business world worthy of study due to their curious knack for producing extremely well received products to their risky, yet highly successful business strategies. (John) b. Current Mission and Need for Change i. Under the investor relations portion of their website, Apple lists the following as their mission statement:
“Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market with its revolutionary iPhone. (Apple, 2)”
Though the mission statement is poor- indicating neither a direction nor a purpose, it does not reflect the condition of the firm itself. Despite the recent recession, Apple Inc. has turned a substantial profit for the past five years and is consistently one of the top performing firms in the Fortune 500. In order to maintain their success streak, Apple must maintain their strategic practices with nominal changes. (John) II. Evaluation of the External Environment a. Top Opportunities Macro Environment
Technological Innovation- (T) (9) Global Modernization- (T) (10) Increased Computer Use- (T/S) (9)
Microsoft Compatibility- (7) “Green” Products- (7) Expanding Markets- (8)
Innovation Opportunity- (9) Mobile Media Usage- (8) Growing Counterculture- (7)
i. All the opportunities listed above are open doors for Apple Inc. Global modernization and increased computer usage worldwide mean fresh markets for new Apple computer users. Technological innovations on the macro and competitive level hold as yet unforeseen competitive advantages for a firm that makes its name by creating the next best product. “Green” products, mobile media usage, and a growing counterculture represent ideals, needs, and personalities to which Apple
(6) Product Poaching. Apple must battle product substitution from the legions of other computer manufacturers. the market is rife with dangerous threats as well.can cater.45 (John) .22 Threats = 7.(E) (9) Credit Crisis. From the industrial environment.(E) (10) SEC Intervention. Competing against the Microsoft Empire while trying to keep other firms from riding on the coattails of Apple’s technological innovations and marketing an expensive product in an industry saturated with cheap alternatives could challenge the businesses future success. The current recession is the foremost threat facing Apple.(8) “Green” Legislation.77 O-T Score = +. Despite the ample opportunities available to Apple. Top Threats Macro Environment Recession. Competition is a continuing threat facing the firm. Increased materials prices. as well as tighter scrutiny from the SEC cloud the future with uncertainty.(6) New Viruses. Opportunities-Threats Score i.(E) (9) Industrial Environment Product Substitution.(7) Competitive Environment Microsoft Monopoly. These many and varied opportunities present unique business opportunities for a firm that has nowhere to go but up. (John) c. difficulty in finding financing and credit. Opportunities = 8.(7) i. (John) b. The possibility of “green” legislation requiring stricter environmental practices could complicate Apple’s business as well as emerging OSX viruses targeted at Apple’s operating system.(8) Cheaper Competition.
The above table compares the balance sheet of Apple Inc to that of the industry and the firm’s two major competitors.347 % 27.561 Inventories Total Current Assets Equipment Total Assets Industry $ 6. Apple is assured the resources to pay off their debts. Apple is the only one to keep a higher level of equity in relation to their liabilities.699 9% 7% 9% 100 % 44% 6% Total Current Liabilities Long Term Debt Total Liabilities 65% 43% 86% 57% Total Equity Total Liab.496 $ 106. of the four data sets above.514 $ 49.514 4% 72% 17% 100 % 67% 1% HPQ $ 8. Stored inventory is an expense to a firm so Apple keeps their capital invested in assets that perform rather than loiter. & Equity 35% 100 % 57% 100 % 14% 100 % 43% 100 % i.again keeping their capital in actively performing liability structures. Financial Data (Apple.561 46% 6% $ 9.342 $ 7.997 $ 50.465 $ 69.732 $ 3.III. Apple keeps a very low level of inventory. Identification of the Internal Environments a.173 $ 38.526 $ 362 $ 23. This .522 $ 6.956 19.180 68% $ 87% $ 21.339 $ 37. Also. In doing so.880 12% $ 11% $ 2. the firm carries no long term debt.699 $ 39.260 $ 4.033 $ 6.798 $ 88. From this information we can glean some of the financial strategy Apple employs.347 37% 0% $ 18.829 $ 27. In addition.175 $ 106. Compared to the industry and Dell and HP.815 $ 14.532 $ 25.295 $ 12.841 4.614 100 $ 100 $ % 25.299 $ $ 10.526 $ 88. 1) Comparative Balance Sheet in millions of dollars AAPL DELL 6% $ 1% $ 346 1.759 $ 72.
29 $ 31. Apple does have a high percentage for income tax.286.00 $ 102. This comparative income statement for Apple.180.but it is a much smaller firm. Exp. displays why Apple is such a top performing firm.1% 1.264. the industry.00 $ 599. This could indicate that whereas Apple products are typically more expensive than those of HP or Dell. Apple’s cost of goods sold is relatively lower than the industry and individual competitors.428. but an indication that the company is making money. Depreciatio n Interest Income Tax Net Income 100 % 80.00 $ 1.22 $ 3.0 0 $ 76. They experience enough risk in being the prospector of the industry so they choose not to take extra chances when it comes to financial strategy.8 % 15.568.0% 6.8% 0.00 $ 284.00 % 61.6 % 1.6% 0.683.00 $ 2.00 $ 3.00 $ 7.0% HPQ $ 104.9 % 1. the firm has devised a way to produce them cheaply.913. Compared to Dell and HP.3% 4.indicates that.76 100% 73.00 $ 7.6 % 0.00 $ 4.26 $ 3. Apple’s sales do not look that impressive.893.4 % 2.33 Sales COGS Admin.133.745.896.3% 14.94 69.0 % 12.3 % 21.0% EPS ii.480. (John) Comparative Income Statement in millions of dollars Industry AAPL DELL $ 100 $ 100 $ 147.00 $ 45.5% 1.00 $ 531.52 % 24.91 $ 2.00 $ 15.9 % 15.00 $ 2.00 $ 1.4% $ 15. Surprisingly.00 $ 2.52 $ 240.512.04 64.18 $ 7.2% 2.00 $ 880.a necessary evil. Lastly. in financial terms.00 $ 3.837.193.947.8% 7.343. the earnings per . Apple is a more conservative company than the rest of the industry.2 % 2.4% 4.2% $ 48.578.00 $ $ 1. and two major competitors.006.9% 0.987.496.
00) 2003 $ 289.00 127.00 522. primarily short-term investments.00 2.00 2.535. Their major expense comes from investing activities.00 $ 828.220.00) 357.144.00 $ 1.00) $ $ $ $ 739.488. This five year statement of cash flows indicates that Apple is maintaining a positive cash flow.00 (2.556. the fact that the majority of Apple’s cash inflow comes from operating activities suggests that capital is reinvested into the company instead of outside financial instruments.00 $ 27.which follows with their strategy of minimizing long-term debt.901.00 934.share is well above the industry and the two competitors which speaks to the strength of the firm.00 (427. (John) b.00 Operating Activities Investing Activities Financing Activities Cash Change iii.960. (John) Apple 5 Year Cash Flows Statement in Millions of Dollars 2007 2006 2005 2004 $ $ $ $ 5. Also.00 324.00 $ $ $ $ (3.00 2.00) (1. This indicates that management believes the firm is in a strong position to grow.00 $ $ $ $ 2. Marketing Position .00 543.470.249.
but Apple is growing faster because of their innovative strategy.Apple Growth Rate: 8. (Danelle) ii.1060 .1310 Apple .4572 Dell iii.4841 .1000 . Currently Apple is growing faster than the industry.0534 . Apple has created a niche for themselves with the younger generation.4144 . The industry itself is strong.4651 .6938 .51% Industry Growth Rate: 5. The company’s current market position is strong.0537 . Market Share Year 2003 2004 2005 2006 2007 .33% i. They have come out .
53 $1 $ 14. 46 $ 1. some of Apples top competitors. Cook .56M Sr. Apple has come out with new products over the years. Apple dropped off for a while. while Apple has just recently become a large player in the industry. Jobs . They have created a strong name for themselves and proven to have quality products. VP of Applications i. Sina Tamaddon . He makes his salary based on how well he is running the . 48 $ 898.85M Chief Financial Officer and Sr. 48 N/A N/A Chief Operating Officer Mr. and almost everyone has been a hit. (Danelle) c.00 and then a share of the company’s profits. Chief Exec. VP Mr. The only fall back that Apple currently has is relying so much on innovation.with great marketing techniques and have become the new trend for young adults down to kids. Dell and Hewlett Packard. have created a strong name for themselves over many years.64M Co-Founder. Management Position Key Executives Pay Exercised Mr. VP of Mac Hardware Engineering Mr. Steve Jobs salary is $1. 52 N/A N/A Sr. Peter Oppenheimer . but has come back strong and taken the industry by storm. These new innovations have resulted in high annual profits and a strong stock price as well as a healthy company.20M $ 55. We think that Apple has a good ethical compensation package to their top executives.00K $ 13. Steven P. Timothy D. Officer Mr. Robert Mansfield .
But. Like many other stocks. (Danelle) ii. Ethically the key executives of Apple could be getting paid a lot more. Apples stock is very reliant on current news and new products hitting the stores. It is currently $164. they could probably increase their market share. We have talked about many other companies that are not performing as well in the current economic situation. but are keeping their salaries reasonable. when negative news hits the media about Apple. so if Apple penetrated their markets like they have the United States. and every product they create is a hit with the younger generation. and are still paying their key executives excessive bonuses. The vision statement of Apple in the upper level management is to continue innovation. Some of Apples future plans would be to go international and market to their younger generations like they have in the United States. their stock prices have fallen in the past. One of the main concerns on everyone’s mind is . Apple’s stock is very strong. Apple has not really broken through the international barrier and taken any other countries by storm.54 per share and positive (Yahoo). Many country’s youth like to replicate American youth. Their strategic plan is not very strong if they are solely relying on innovation. Apples products are mainly seen in Europe and Japan. (Danelle) iii. but so far it has not failed them. but have not really gone international. When Apple is releasing a new product into stores their stock prices are way up and stay pretty steady.company. Currently Apple is one of the most dominant companies in innovation. they are a thriving company.
this is one that we have created: “Through continued innovation and commitment to quality products and services. Apple needs a . (Danelle) v.” We think this mission statement is stronger because it has a direction and a purpose and is more to the point of what they want to do. but with the recent events and Steve Jobs health issues. (Danelle) iv.Steve Jobs health. as to not affect their stock. their stock has been depending on his condition. Since we don’t think that Apples mission statement is strong enough. but doesn’t have any direction. Apple will attain a 20% market share in 20 years. As part of Apples future strategic plan they should revise their mission statement to have more of a direction and a purpose to let consumers know where they would like to go. Because he is such a key aspect and innovator for Apple. such as cancer. For the time being that strategy is alright. it has not direction or purpose. Apple’s current mission statement just states the things they have accomplished in the past. Apple needs to have a new plan set in place. Apple is very good at keeping his health issues private. They need to make sure that they have more people on their management team with the same passion and drive for the company as Steve Jobs. Apple has been successful thus far because they have had Steve Jobs who has built Apple up to what it is today. Currently Apple is successful because of their CEO Steve Jobs.
Apple has created recycling centers for electronic waste. Apples prides themselves at being environmentally sound and helping everyone to a greener way of life. and have removed toxic chemicals from the manufacturing of their products. Apple feels it is important to have an innovative way to report their carbon emissions to their customers. they have created their products more energy efficient. a partnership of fifteen of California’s most prominent energy buyers to achieve far reaching environmental goals. 3). reduce exposure to volatile electricity prices and support new technologies in renewable energy generation as an integral part of doing business in California. Apple is an active member of the World Resources Institute California Green Power Group. They recognize the environment impact on the work they do and the products they create.” (Carbon) . so their customers can make informed decisions about their carbon footprint. (Danelle) vi.stronger management strategy and figure out the right way to implement the plan to keep Apple on the road to success. Apple strives at reducing their carbon footprint. “Apple has been active in the development of global industry standards and quality measures. Apples environment team has created a carbon emission test to let their customers know how much CO2 is created by the use of their products (Apple. They have found the best way to do that is to make energy efficient products. Apple is joining the “Green” movement and taking responsibility as a global citizen. According to the Carbon Disclosure Project.
and fashionable products. Apple is on the forefront of the information age. which allows them to react to changes in the market as soon as new information is made available. it really suffers. Apple is incredibly integrated in the internet and computer technology. Apple has done a great job at reducing their carbon footprint and making sure that they are energy efficient and leaving as little waste as possible. Being the industry innovator is another great advantage for the firm. Apple relies heavily upon their competitive advantages to survive. In an industry of vicious competition and price wars. The greatest competitive advantage Apple possesses is the differentiation of their products. Competitive Advantages i. It has become so relevant and important to consumers that if a company is not green. A lot of innovations in technology are coming from this firm which makes them as information ready as anyone. The price tag on these products is high but the consumer knows that they are purchasing quality. Apple always gives customers state of the art. Assessment of Capabilities i. reliable.Going “Green” is such an important aspect to a company. (Danelle) d. Strategic Position a. Though the position carries with it a measure of risk. cutting edge products that are not available . (Danelle) IV. Apple computers and digital accessories set the standard for quality and innovation.
Steve Jobs is their most valuable asset. In the marketing environment. In the management realm. these Apple enthusiasts present the company with a unique competitive advantage as they have significant influence on what the world views as trendy.(10) i. Apple has managed to create legions of fiercely brand loyal consumers. their use of celebrity advertising as well as popular guerilla tactics for marketing their products makes the brand memorable in the consumers mind.(8) High R&D. The above table lists some of the top strengths that Apple possesses. These consumers who subscribe to the “Apple culture” stand by their purchases with pride and commitment. (John) b. High devotion to research and development keeps the Apple innovation system working at full capacity. Top Strengths Financial Low Debt. Apple has managed to create a very strong brand image for themselvesone that espouses quality and reliability.(9) Marketing Strong Image.(9) Celebrity.(8) Guerilla Marketing(8) Management Steve Jobs (10) Multi-Divisional. His commitment and drive has created a strong and vibrant firm that would not be where it is now .anywhere else. ensuring Apple access to the latest technology. Also. Their financial policy of keeping long-term debt to a minimum keeps their capital free for other uses. Additionally.(7) Technological Innovation. Whether their motivation is quality or simply buying a computer that is not Windows based.(8) Secrecy.
actually creating what would be considered state-ofthe-art. Tight lips keep Apple’s innovations from being pirated by rival firms. Apple mainly targets young consumers instead of a broad spectrum plus they do not highlight their efforts towards social responsibility.(6) Social Responsibility(6) i. They are on the forefront of the computer technology.without him. therefore it is an acceptable risk.(7) Marketing One Cohort. and new gadgets in development.(6) Ill CEO. (John) c. Apple would not be able to innovate without using this strategy. In their marketing efforts. Apple does have weaknesses that need addressing.(6) High R&D. Yet another management strength is Apple’s commitment to secrecy when it comes to their products.(8) Management Technological Steve Jobs.something . Nonetheless.(9) Secrecy. Also. Top Weaknesses Financial High Beta. This could be perceived as a risky company because of the beta and the fact that so much is devoted to R&D instead of some other aspect of the infrastructure. the use of a multi-divisional structure keeps the various portions of the company working at what they do best rather than stretching top management too thin.(8) Recalls. The company’s stock has a high beta and they spend a great deal of money on research and development. Despite all the strengths of the firm.(10) Incompatibility. software. Innovation is the strongest trait in Apple’s technological environment.
(John) Long-Term Strategies 1) Maintain position as industry innovator 2) Vertical Integration . it has also gotten them into trouble with the SEC regarding sensitive information that should have been released to stock holders. Though the secrecy culture protects Apple’s golden ideas.that may be important to consumers. Should such a key figure in the firm fail to perform. which is a risky tactic. (John) d. In the technology sector. Apple could be in dire straits. Steve Jobs is a weakness for Apple too. Long-Term Strategic Options i. Conclusion a. but concerns have been raised about his health.22 (John) V. Strengths-Weaknesses Score i.55 Weaknesses = 7. Not only that. Apple’s incompatibility with Windows platforms poses a very slight risk and the company has faced a few recalls due to poor battery performance but nothing too worrisome. Apple relies too much on Steve Jobs. The best course for the firm to follow in order to maintain their current position is to continue following the strategies in place with only a few minor changes. As well as being one of their greatest strengths.33 O-T Score = +1. Strengths = 8.
3) Concentric Diversification 4) New CEO 5) International expansion b. Short-Term Strategic Options i. d. Differentiation keeps Apple alive in an industry sated with cheap alternatives.Porter Differentiation ii. The prospector strategy is what Apple has employed since their first computer. (John) c. SBU-Level Strategies SBU Strategy. There are no suggestions for short-term strategic options for Apple. The best possible suggestion of a Porter strategy for Apple to subscribe to is again the one they have been using all along. (John) SBU Strategy.Miles & Snow Prospector i. Innovation is what gave them their name and reputation and it is the best suggestion for SBU-level strategy for the future. Recommendations for Long-Term Survival . Apple does a very good job at maintaining high perceived quality which makes their higher than average prices acceptable to the consumer. The continued use of this strategy will help the firm survive.
These smaller companies draw revenue away from Apple as they offer the same products or services at greatly reduced prices. a number of firms have popped up to sell accessory products or services similar to what Apple offers. With the success of all the Apple products. Apple will be prepared . Most all the vertical integration Apple should consider would be backwards in the value chain. if the strategy works. innovation has set Apple apart from the rest of the industry and propelled them into the success they are today. Unfortunately.i. Apple should start the process of searching for a new CEO with the same drive and ambitions but keep Jobs on in an advisory role so that Apple may still benefit from his singular talents. Apple has already begun the process of vertical integration with the purchase of a microprocessor supplier. Steve Jobs is an integral part of Apple’s success. his failing health has made him a liability to the future of the company. Should Apple buy out these competitors they could reclaim lost revenue and exact a measure of quality control to protect their brand image from imitators. In doing so. Throughout the history of the firm. opening the doors to saving money for the firm. Maintaining their position as the industry innovator means that Apple will continue to reap the rewards of having the latest and greatest new gadget. keep on using it. If they can gain control of their suppliers they will have more power over their cost structure. Therefore.
Dell and Hewlett Packard. Most teens in foreign countries are interested in immolating the younger American generation. Apple has not be a big player in the international or business market. Apple is the leader in innovation and currently one of the leaders in the consumer market. Apple could be very successful in the foreign market and grow to an even stronger company. (Danelle) . For Apple to continue to grow and stay competitive they need to expand to the international market. (John) Currently Apple is not present in many foreign markets besides Europe and Japan. If Apple used the same marketing strategies that they have captured the American youth with. are both sold throughout the world.should Jobs be unable to perform his duties and continue business as usual. We think that the international market would increase their market share. Recommendations for Environmental Fit i. If Apple follows our recommendations then they will become a bigger player in the industry. so if they tweaked their strategic plan to include these areas it would really help them grow in profits and as a company. Apples competitors. (Danelle) e. If Apple implemented some of our recommendations hopefully they could increase their market share and expand into other thriving markets.
asp?id=897 .yahoo.net/companyhomepage2. 2009.net/phoenix. from Carbon Disclosure Web site: http://www. 2009. from Apple Web site: http://www.apple. 2009. Retrieved July 31.corporate-ir.zhtml? c=107357&p=irol-faq 3. 2009. from Apple Web site: http://phx. Retrieved July 31. Retrieved July 31. from Yahoo Web site: http://finance.net/phoenix.com/environment/ 4. Retrieved July 31.zhtml? c=107357&p=irolSECText&TEXT=aHR0cDovL2NjYm4uMTBrd2l6YXJkLmNvbS94bWwvZmlsaW5nLnhtbD9yZXBvPX RlbmsmaXBhZ2U9NTk1NjYzOCZhdHRhY2g9T04mc1hCUkw9MQ%3d%3d 2. 2009. Retrieved July 31. from Apple Web site: http://phx.com/q?s=aapl 5.cdproject.References 1.corporate-ir.
076.134.0 0 $5.Appendix Apple Inc.33% .081.10 $5.688.42 $12.283.967.38 $7.194.55 $15.491.24 $13.61 $12. 14 $82.8 5 $98.05 $14.87 Industry Sales $65.279.96 $9.757.428.118.82 $4.54 $10.615.472.418.104.22.168 0 $7. AAPL Sales $7.0 0 $5. 74 $147.79 $11.324.63 $9.081.81 $12.315.937.375.639.84 $8.35 $9.51% 5.39 $7.772.0 0 $6.363.953.251.98 $10.00 $8.24 $10. 00 $19.623.242.035.564. 52 0.911.0 0 $8.922.625.351.26 $11.1 8 $77.896.334.209. 00 Sales Comparisons (All figures in Millions) AAPL Normalized Regression Industry $3.65 $12.994.8 2 $131.053.429.159.983.459.178.941.931.840.93 $14.1080010 41 Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 8.43 Industry Regression $7.16 $9.0 3 $100.10 $13.0 0 $13.53 $11.67 $8.5 9 $107.742.740. 38 $115. 26 $89.53 $8.0 0 $6.16 $10.0 0 $5.
0247589 77 10 t Stat 2.9832 47 Intercept X Variable 1 SUMMARY OUTPUT Regression Statistics 0.97 22 1911.19 11761677 . 4 Standard Error 756102.746420 613 2.78 F 7.757794 396 Upper 95% 332999.983 247 P-value 0. 65 170.433 5 377.698110 Multiple R 252 0. 309 1041.284 848 SS 89452616.024758 977 Lower 95.025197 918 0.423277 Square 664 3429.6 46 170.9 722 1911.0% 332999.5864 498 Lower 95% 3820150.1 9 94093422.605429 931 Significanc eF 0.2 1 183546038.58644 98 Upper 95.806176 Multiple R 743 .530 Standard Error 256 Observations ANOVA df Regression Residual Total 1 8 9 Coefficien ts 2076575.578854 3 MS 89452616 .0% 3820150.487357 R Square 924 Adjusted R 0.SUMMARY OUTPUT Regression Statistics 0.
151 163 10 Significanc eF 0.85 2870148.85198 096 t Stat 3.931 075 P-value 0.824438 6 3.519904 3 MS 42627385 .R Square Adjusted R Square Standard Error Observations ANOVA 0.6997 345 Lower 95% 2289760.0% 2289760.3 65588571. 162 F 14.9310 75 Intercept X Variable 1 .1 63 288.0048511 53 df Regression Residual Total 1 8 9 Coefficien ts 1428452.1 5 Standard Error 373506. 647 718.8154 047 SS 42627385.606161 058 1694.0% 567145.005057 716 0.492 5 186.13 16 1148.1 316 1148.69973 45 Upper 95.649920 941 0.8 5 22961185.004851 153 Lower 95. 16 288.853826 794 Upper 95% 567145.
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