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RUNNING HEAD: APPLE CASE ANALYSIS

Apple Case Analysis: Strategic Management Stephen Rudolph Kaplan University Professor: Andrew Klein, Ph.D. GB520-01N: Strategic Human Resource Management April 29, 2012

Author Note Correspondence concerning this article should be addressed to Stephen Rudolph. E-mail: steverudolph@student.kaplan.edu

APPLE CASE ANALYSIS

Introduction Any organization which hopes to be successful must understand and practice strategic management. According to the Management Study Guide (2012), Strategic Management is all about identification and description of the strategies that managers can carry so as to achieve better performance and a competitive advantage for their organization. As a successful organization, Apple, Inc. is no different than any other organization in that they must strategically manage their organization for optimal production and profitability. This analysis seeks to look closely at Apple, Inc. and how they have managed their organization as they have navigated the at-times-rough seas of growth, and continue to succeed, in spite of some missteps along the way. Background By the summer of 2008, Apple, Inc. (formerly Apple Computer) was a world-renowned, iconic brand, associated with simplicity and quality. However, even though the company had experienced success with sales of its Mac computers in recent years, it still had less than 5% of the worldwide pc market. In fact, Apple had experienced a turbulent history, and the question now facing the company and its co-founder and CEO, Steve Jobs, was whether or not the company would continue to experience wild swings of success followed by faltering, or, whether the companys direction had finally stabilized, and it would continue to experience increasing levels of success based upon the current management strategy implemented by Mr. Jobs and the other senior leaders at Apple. Key Issues and Alternatives Since bringing Mr. Jobs back into the fold at Apple in 1997, the company had been restructured, and a focus was placed upon outsourcing of product and entry into new markets. However, while Mr. Jobs refocused Apple, there were still issues that needed to be addressed; issues, which were vital to not only the continued viability of the company, but which were also vital to its continued existence. Among these issues were Apples image; success in the PC market; technology issues-switching microprocessor manufacturers and the need for a new operating system; and, creating new markets with new products. A closer examination of these issues and what changes were made in these areas follows.

APPLE CASE ANALYSIS

Apples Image One successful strategy implemented by Mr. Jobs in his second stint at Apple was the makeover of the companys image. According to Yoffie & Slind (2008), another priority for Jobs was to re-energize Apples image. The company began promoting itself as a hip alternative to other computer brands. For Jobs, Apple was not just a technology company; it was a cultural force (p. 4). To those familiar with the brand, one of the driving forces behind the makeover of the brand into a successful company was the desire of Mr. Jobs for simplicity. Apples products were designed to be simple, yet elegant in the way they operated. This was never more evident than in the design of the iPhone, with its single button on the bottom of the face of the phone. Of course, there were other things such as marketing campaigns for example, which also led to the turnaround of Apples image; however, the groundwork had been laid years earlier with the release of the MacIntosh. It is not readily apparent that an alternative course of action could have been undertaken with regard to Apples brand image. Jobs was very good at using a multi-pronged strategy to continue to build the Apple brand. Under Jobss reign as CEO, Apple continued to price its products at a premium compared to other products. Additionally, Apple already had a core group of brand loyalists that it tapped into to reinvigorate the brand. Some other strategies such as letting the public know how new products would help them and continuing to look for unfilled market niches were additional ways that Apples branding strategy was very successful. Success in the PC Market Another issue facing Apple was the level of success that they had yet to achieve in the PC market. After the departures of Jobs and Sculley, and experimentation with a strategy of trying to strengthen their core markets such as education, Apple continued to experience losses of profits and market share. Eventually, after cutting payroll expenses and R&D expenditures, Apple turned to one of their Directors, Gilbert Amelio to lead them back to profitability. According to Yoffie & Slind (2008), Amelio led the company through three reorganizations and several deep payroll cuts. Despite these austerity cuts, Apple lost $1.6 billion on his watch, and its worldwide market share dropped from 6% to 3% (p. 4). This led to the rehiring of Steve Jobs, who enacted a multitude of changes in an attempt to gain market share. After Jobs was brought back into the fold he began to make changes to Apples product lines. One of the changes that was successful, and enabled the company to continue to grow was streamlining the product offerings. As a result, the company launched the Mac, which eventually led to the companys expanding its PC product line, resulting in additional sales. While many may not consider eliminating a majority of a companys product offerings as a way to facilitate future growth; that is indeed what occurred with the implementation of this strategy. Alternate courses of action by many could have included cutting more costs and jobs in an effort to effect stabilization. Additional courses of action that could have been undertaken would have

APPLE CASE ANALYSIS

included moving production overseas to cheaper labor markets, which did occur, and a strategy of looking for a white knight to purchase the company-which did not happen.

Technology Issues Partly as a result of earlier financial issues facing the company, Apple also experienced issues regarding its chip technology. When John Sculley was in charge at Apple, he had entered into partnerships hoping to leverage the resulting cost savings and merging of technology into a new operating system. One result of this was Apple switching chip makers and forging a new partnership with IBM. With increasing sales of portable computers on the horizon, Jobs ended Apples relationship with IBM and forged a new one with Intel. This enabled Apple to build laptops with batteries that would last longer, and, which would run additional applications, such as the Windows operating system. Apple had needed a boost in the operating system area, as part of its previous problems had been closed architecture and a reluctance to allow other applications to run on its operating systems. Thus, Apple also developed new operating systems during this period. Called Mac OS X and based on UNIX, the new operating system offered a more stable environment than previous Mac platforms. In October 2007, it launched its sixth major OS X release, called Leopard. Just two months later, Jobs called Leopard the most successful release ever: With sales totaling 4 million copies, it had already reached 20% of the Macintosh installed base (Yoffie & Slind, 2008, p. 5). When Steve Jobs came back to Apple, it is apparent that he inherently understood what the issues facing Apple were, and more importantly, how to fix them. Alternative courses of action with regard to the primary technology issues facing the company, primarily the chip technology which was preventing Apple to grow its laptop business, and its operating system which was still hostile to other applications were not many. The company was going to have to find a new supplier for its chips, and at the time, with its dual-core technology, Intel was the premier player in this space. This essentially all but forced Apple to join forces with them, as it looked for both the quality and the ability to improve in the key areas holding its laptop products back in the marketplace-the heat and the battery-life issues. There was also not a true alternative with regard to the operating system. It was well-known (and even still somewhat true today) that Apples proprietary stance with regard to protecting its operating systems was almost downright hostile towards allowing other applications, such as Windows-based applications to run on its operating systems. While this helped cement Apples reputation as being impervious to viruses, it hurt it the marketplace, where consumers (especially business consumers) would not even consider Apple products, as they would not be able to run peripherals. Thus, the only true alternative was to spend the necessary funds to create a new operating system which was friendlier towards other applications; particularly the Windows operating system.

APPLE CASE ANALYSIS

Creating New Markets with New Products Prior to rehiring Steve Jobs, Apple had continued to create new products, but many of those products were not providing Apple with increased market share. According to Di Muro (2009), increased competition, a lack of innovative products, as well as falling hardware and software prices all combined to reduce Apples worldwide market share from 11 percent in the mid-1980s to 5.3 percent in the mid-1990s (p. 3). Declining market share is a major problem for any manufacturer, and was a major problem for Apple heading into the middle of the 1990s. This was one of the reasons why Steve Jobs was brought back to Apple. Jobs had always believed that simple design and good engineering were two of the primary aspects of building products. After returning to Apple, Jobs oversaw the release of the iMac, which ignited a renaissance of sorts and a torrent of new products from Apple. These new products included further releases of iMacs; the creation of iTunes, which led to the creation of iPods, which further led to the creation of iPhones (a blending of i-pod and phone), and finally, the less wellknown and less commercially successful Apple TV. Thus, Steve Jobs oversaw this aforementioned renaissance of sorts, and in the process, not only created new products, he created new markets for the products Apple created, as no one previously had known that there was a need for such things as digital i-pods and smartphones such as a i-phone. Could there have been better alternative solutions proposed and/or enacted by Apple at the beginning of this product and market renaissance? When one takes a closer look at how these products and thus, new markets came into existence, there almost is a logical flow of product creation based partly (in some cases) upon an unforeseen consumer need. For example, the creation of i-Tunes, which according to some started it all, was Apples initial foray into digital music. It is only logical to surmise that in creating the i-Pod, Apple saw a way to drive customers and thus profits, to its i-Tunes website by providing customers a way to listen to the songs they purchased online. In this regard, one would be hard-pressed to come up with an alternative that could have driven the companys profitability further and faster upward than the products and strategies commenced upon by Apple with the creation of these one unique and now ubiquitous products. Decisions and Recommendations Any decisions or recommendations must first be viewed through the prism of strategic management. According to the Management Study Guide (2012), Strategic Management is all about identification and description of the strategies that managers can carry so as to achieve better performance and a competitive advantage for their organization. Thus, the key issues faced by Apple, as well as the decisions made to resolve those issues must be viewed from a strategic management perspective. Any competent manager should always be aware of their organizations place in its greater environment, and should conduct a SWOT analysis to determine how best to proceed. According to the Management Study Guide (2012), a SWOT analysis analyzes an organizations strengths, weaknesses, opportunities, and threats; i.e., they

APPLE CASE ANALYSIS

should make the best possible utilization of strengths, minimize the organizational weaknesses, make use of arising opportunities from the business environment and shouldnt ignore the threats. Thus, in using these aforementioned strategic management principles to determine a course forward for Apple, it is recommended that Apple do the following: Strengths Apple is in a unique position in that it is already in a position of strength in almost every space in which it operates. Additional strengths include: Brand Image-Apples brand image is one of a hip and in-tune producer of wellengineered and quality products. From 1997-2007, Apples Gross Profit Margin of 35 percent far exceeded that of its closest competitor, Hewlett-Packard at 24 percent (Yoffie & Slind, 2008, p. 20). Innovator-Apple is widely viewed as an innovator and has created products that either did not exist or were viewed as being for niche markets High Share Price-Apples high share price of almost $584.00 per share, with a market capitalization of $546 billion indicates that it is a very valuable company and has access to large amounts of capital Ability to command high prices for its products Built-in loyal following of the brand Weaknesses While Apple has significant and enviable strengths, it also does have some weaknesses of which its managers need to be cognizant and find ways to overcome. Negative press-Apple continually receives negative press with regard to the working conditions at its plants in China. The negative reports stress poor working conditions, low pay, and such harsh treatment that workers are committing suicide in large enough numbers to warrant nets being placed under apartment building windows. Weak worldwide economy-Apples products are priced at a premium. With a continued poor worldwide economic outlook, and recent reports of a double-dip recession in some European nations, premium products such as those produced by Apple could see reduced sales. Passing of Steve Jobs-With the recent passing of Steve Jobs, Apple must rely upon its new CEO, Tim Cook to continue to lead and innovate.

APPLE CASE ANALYSIS

Opportunities While Apple has established a dominant position in the majority of its market spaces, there are still opportunities to continue to evolve. Passing of Steve Jobs-while this is a weakness, it is also an opportunity for Tim Cook to implement his own leadership style. Weak worldwide economy-this is also a weakness and an opportunity. A weak economy may provide Apple with the opportunity to create some products slotted at lower price points than their current offerings. Such a strategy could enable them to pick-up market share from those who perhaps would not have previously purchased Apple products due to cost concerns. Marketing-In the past Apple has had some unique and successful marketing campaigns. With the passing of Steve Jobs, there is an opportunity for new leadership to implement new and creative marketing campaigns to drive both continuing and conquest sales. Working conditions-With a high share price and market capitalization, Apple has an opportunity to improve its marketing conditions, and even perhaps to bring some jobs back to the U.S. This would create enormous goodwill and drive sales higher. Threats Competition-An ever-present threat is that posed by competition. Longtime rival Microsoft is still trying to break into new markets by creating new products. Additional competition could also come from revamped competitors such as HewlettPackard and Dell, as well as from Asian competitors buying competitors and entering new markets. Weak worldwide economic conditions-A weak worldwide economy is also a threat, as there is less discretionary income to purchase Apples premium-priced products. Political-With all of the negative press garnered by Apples Chinese plants, as well as the attempts by the company to put a stop to counterfeit Apple stores in China, Apple could fact political backlash by the Chinese government, or other foreign governments. Domestic political-Much more increased focus on Apples extensive overseas operations could shine an unwanted spotlight on the fact that they are not building their products in the U.S. High Share Price/Market Capitalization-Apples high share price/market capitalization could also hinder the company if it starts to lose focus on what brought the company to such heights, and it places too much focus on maintaining the high share price/market capitalization.,

APPLE CASE ANALYSIS

Conclusion In conclusion, Apple has seen its share of success and failures. Not all of its strategies or products have been successful, but a majority of them have and this is what has brought Apple to the lofty heights that it enjoys today. Apple is a company with a reputation for quality and innovative design, and has used logic and great marketing to continue to create products that no one knew they needed until Apple created them. In creating the iMac, iTunes, iPod, iPad, iPhone, and even Apple TV; Apple has continued to innovate and must continue to do so moving forward. Bringing back Steve Jobs to run the company he co-founded was a brilliant move. One cannot imagine that Jobs did not look at Apple from afar and see exactly what the company was truly capable of, and what needed to be done to right the ship. That was exactly what Mr. Jobs did when he returned, and he set Apple on course for previously unimaginable heights of success. With the passing of Mr. Jobs, who was arguably Apples heart and soul, the company now finds itself at a crossroads. While the winds of change have blown into Cupertino, Apples new CEO, Tim Cook must continue to lead and innovate at Apple. With recognition of the companys Strengths, Weaknesses, Opportunities, and Threats (SWOT), as well continued innovation, the company is poised to continue its successful run.

APPLE CASE ANALYSIS

References

Management Study Guide. (2012). Strategic Management-An Introduction. Retrieved from:


http://www.managementstudyguide.com/strategic-management.htm

Yoffie, D. B., & Slind, M. (2008). Apple, Inc. 2008. Harvard Business School. 9-708-480, 1-32. Retrieved from: http://cb.hbsp.harvard.edu/cb/web/he/product_view.seam?R=708480-PDFENG&T=EDC&C=PURCHASED_MATERIALS&CD=11550884&CS=61a624a4f5967818be7e1ba1ae7271c3

Di Muro, F. (2009). Strategic Planning at Apple, Inc. Richard Ivey School of Business. 909A26, 1-12. Retrieved from: http://memberfiles.freewebs.com/94/45/80124594/documents/52049958-StrategicPlanning-At-Apple-Inc.pdf