Case Development on APPLE INC

Case Development on

APPLE INC.

Introduction about the Apple Inc.

April 1st,1976 - Founded

January 3rd,1977 - Incorporated

Headquarters - Cupertino, California

Co-founders - Steve Jobs, Steve Wojniak

CEO - Steve jobs

Industry - Computer software, computer hardware, consumer electronics.

Products and Figures

Hardware - Mac(personal computer series),Apple Remote Desktop

Software - Mac OS X, Mac OS X Server ,Quick Time, i Life, i Work, Logic pro,

Cinema Display etc.

Consumer Electronics - i pod, i pod Wi-Fi, i phone, Apple TV, i-pad.

Employees - 19,787 full-time ; 3,399 temporary (March 31,2007)

Retail stores - 183( 1st in Manhattan, New York)

Competitors - HP, IBM, DELL

Step 1: Strategic Intent

Vision and Mission

Vision:

“Man is the creator of change in this world. As such he should be above systems

and structures, and not subordinate to them.”

Mission:

“Apple is committed to bringing the best personal computing experience to students,

educators, creative professionals and consumers around the world through its innovative

hardware, software and internet offerings.”

Objective:

To make as much profit as possible in coming years.

To increase business reputation all over the world.

To increase the market share and business globalisation.

Step 2: Environmental Scanning

(a.) SWOT Analysis

STRENGTHS

One of the oldest hardware manufacturers.

Control over the product.

High quality product.

Easy to carry products

Huge consumer base loyal to apple

Product diversification.

Apple products typically have a simple and appealing design as against competitor’s

overcomplicated solutions

Apple’s geographic location gives it a strategic advantage and thus is a strength

WEAKNESSES

Focusing on internal engg. more than marketing

High price

Consumer faced problems with faulty batteries

Had difficulties on some of its products’ quality control

Although a succession is planned, what can be deemed as a potential weakness is the

company’s dependence on Steve Jobs’ involvement and vision. His absence has

affected company performance and thus investor confidence in the past.

Apple’s capital structure is NOT optimized. They are not leveraged and thus their

reliance on equity is an innate weakness. Though this is an industry trend, it still

makes apple vulnerable to a stock acquisition, despite any poison pills or other

defenses they may have developed.

OPPORTUNITIES

Less expensive new product lines with quality.

Product line is functional and attractive.

Flexibility to its users.

iPod’s are able to communicate.

New car models with iPod connectivity.

THREATS

Pressure from competitors.

Substitution effect

Technology changes at a rapid rate.

Forced to develop new products.

Despite recent efforts, Apple has been unable to create an image of seriousness about

its products (iPhone for pushing emails and higher end MACs for office use) The

brand has a perceptual map which associates it with fun, cool and hip but not

dependent; thereby unable to cater to the office audience.

(b.) PEST Analysis

Political Factors

In 2000, the US federal debt was $5.6 trillion. George W declared as

winner of the 200 presidential elections. His priority was pushing tax-cuts

right away.

The 911 attack puts US in war mode. The war in Afghanistan follows

which costs US hundreds of billions of dollars.

Three major tax cuts were passed by 2003

May 1, 2003:federal debt rises to $6.5 trillion

Nov 3, 2004: Bush wins re-election



2004:federal debt rises to $7.5 trillion




In 2008, the federal budget spent $610 billion on social security, $330

billion on Medicare, $204 billion on Medicaid, $607 billion on military, a

whopping $244 billion as interest on national debt and a collective $936

billion on everything else; a small fraction of which was stimulus to sectors

like education and infrastructure development which would further

stimulate demand for computers.

Economic Factors

The National Debt has steadily increased from 2000 to 2008

There was huge rise in unemployment rate in USA. Though the

unemployment rate in the first half of this decade was steadily declining

until the economic meltdown in late 2007.

Inflation has risen from around 2% in 2000 to 3.5% in 2009. Inflation

directly affects the operations of any capital intensive company like

Apple due to a rise in transportation, raw materials and therefore

inbound logistics of the company.

Although declining GDP numbers have a negative impact on the sales of

personal computers through 2007-2008, 2009 and onwards there was

GDP healing and sales recovery for the industry. This may be attributed

to recent economic policies declared by the Obama administration such

as stimulus packages.

Social Factors

Average Personal Saving has dropped over the past decade. In general,

people have become more dependent on credit. In addition to high

levels of debt, Americans tend to save very little, with rates of savings

actually dipping into negative numbers in recent years for periods of

time unseen since the Great Depression.

When Apple Inc. launched its online store selling 'applications' for the

iPhone device this summer, many people dismissed it as a niche sales

channel for techno geeks. But chief executive Steve Jobs recently

revealed that in its first month, users downloaded more than 60

million programs and the business sold in excess of $1m (pound

500m) in applications each day. Jobs told the Wall Street Journal that

applications could "crest half a billion soon".

Now companies in every sector are tapping into 'application culture'

but now things are changing, partly because the industry is maturing,

and partly because of the recession. Suddenly there is much more

interest in products that apply the flip side of Moore's law: instead of

providing ever-increasing performance at a particular price, they

provide a particular level of performance at an ever-lower price. The

most visible manifestation of this trend is the rise of the netbook, or

small, low-cost laptop.

Age demographic accepting internet as a medium of life has

dramatically increased in the past decade.

Technology Factors

Exponential increase in availability of Wireless Internet Access

Computing taken to a higher level with the invention of

nanotechnology

Advances in technology gave easier and cheaper access to global

positioning systems

Commercial use of Biometric Technology made possible measuring of

physical characteristics for security and identification

(c.) Value Chain Analysis

Inbound Logistics:

Innovation

CEO’s vision and passion

Investing in higher quality raw material and components relative to

competitors

Operations:

Superior R&D

Developing important strategic alliances (Intel, AT&T)

Vertical system Integration

Diversification of product portfolio

Hiring the right people for the right job

Outbound Logistics:

Timely market entry of products

Price Leader

Marketing and Sales:

Effective and superior Marketing Campaigns

Unparallel shopping experience to end customer

Training customer reps for in-store sales

Effective Promotion of online sales

After sales service:

Unparallel and unquestionable service

(d.) Porter Five Forces Model

Existing Rivalry

Windows OS and media player for playing music and video ( Microsoft)

Competition to Mac OS X (Linux)

Alternate sources of computer hardware (Dell, HP, Lenovo)

Small stylish MP3 players (Creative, Samsung)

Online music stores similar to iTunes stores (Napster)

Threat of New Entrants

Streaming audio and video with v-cast (Verizon)

On demand online services (similar to i-tunes)

New entrants with disruptive technology (The “next Google”)

Bargaining Power of Suppliers

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

Strategic alliance/supplier of Mac (Microsoft)

Supplier of TV and movies (Disney, ABC, Fox, Sony)

Sources of music (BMG, Sony, Warner, Universal)

Bargaining Power of Customers

Customers share music using peer-to-peer networks without paying for

music (Ares, LimeWire)

Retailers may pressure for lower prices or better terms (Distributors)

Consumers/Businesses may reduce spending on computers if they fear

economic downturns (Consumer Attitudes & Behaviors)

Consumer Refresh Cycles

Threat from Substitutes

Satellite radio for music (XM, Sirius)

Entertainment media, media and music (XBOX, PS2)

Alternative means to acquire music (Music CDs, DVDs)

Alternative sources for videos (Cable, Broadcast, Theatres)

Step 3: Various Strategies adopted by Apple Inc.

A Store Just for Apple: Apple has historically been troubled by big-box sales

staffers, who are ill-informed about its products, a problem that made it difficult

for Apple to set its very different products apart from the rest of the computing

crowd. By creating a store strictly devoted to Apple products, the company has not

only eliminated this problem but has made an excellent customer-loyalty move.

Apple stores are a friendly place where Mac and PC users alike are encouraged to

play with and explore the technology that the company offers. This is a space

where Macheads can not only get service but also hang out with others who enjoy

Apple products just as much as they do. By creating this space, Apple encourages

current and new customers to get excited about what it has to offer.

Complete Solutions: Apple's products complement and complete each other. Buy

an iPod, and you can download music via iTunes. For the average user, most Mac

programs are produced by Apple. This sort of control over the entire user process,

from hardware to software, strengthens customer loyalty. Apple users generally

don't have to stray to find products and solutions they want.

Are You a Mac?: Apple is a hip brand. It pushes a strong identification with

everything young, up-to-the-minute and smart. Consider Apple's I'm a

Mac campaign. The Mac guy is smooth and confident, while PC appears uptight

and old. Once you've become smooth, would you want to go back to uptight?

Varied Products: Many consumers may not be ready to buy an Apple computer,

but they're willing to give gadgets like the iPod or iPhone a try. By selling

products with lower entry costs, it creates an opportunity for new users to be

introduced to Apple. If these users enjoy their gadgets, they're more likely to

consider buying an Apple computer in the future.

Media Fodder: Media outlets, especially bloggers, love to write about Apple.

Why? Because Apple makes it so easy. With leaked rumors about new

developments, its very own expo and mysterious shutdowns of its online store,

Apple gift wraps news stories that are just begging for speculation and hype. By

perpetuating this cycle of media frenzy, Apple keeps its customers excited about

buying new Apple products now and in the future.

Education Sales: By selling its products to schools and universities, Apple turns

classrooms into showrooms. If students go through school using Apple products,

they become comfortable with the interface and familiar with the superior

performance the brand offers. By creating this early exposure, Apple captures

customers before they even know that they are customers.

Products That Deliver: Apple carefully considers what consumers are looking

for, so its products are a result of both extensive research and strong design. This

meticulous planning is a large contributor to Apple's high customer-satisfaction

rates. It's plain and simple: Robust and easy-to-use products not only make your

customers happy, but also make them want to buy more products from you in the

future.

Outsourcing Unpleasantness: With Apple products, the average consumer's

interaction with the company is likely to be low. Unless something goes wrong,

you don't have any reason to speak with an Apple customer-service representative.

Of course, the iPhone presented an opportunity that could have made Apple much

more involved, similar to administering iTunes for the iPod. With a phone,

interaction becomes multifaceted. You have to consider billing errors, quality of

wireless service, contracts and a number of other factors that often lead to

customer frustration. With the iPhone, Apple was wise to stick with building a

good product and letting AT&T handle the service.

Consistency: All of Apple's products have the same basic architecture. Because of

this consistency, customers who already own Apple products have a good idea of

what they'll be getting before they make a purchase. They know that it will be easy

to adapt to new hardware, and this makes them more open to making a repeat

purchase.

New Innovations: Although the architecture of Apple products is consistent, its

portfolio is not. The company offers consumers a number of different ways to

enjoy its products. By giving customers an opportunity to employ Apple in their

living rooms, pockets and offices, Apple makes it easy to stay loyal to a brand they

already like.

Attractiveness: From packaging to aesthetic design to user-interface experience,

Apple makes its products accessible and attractive. Bright colours, a smiling icon

and slick-looking hardware remind customers every time they use Apple products

that what Apple offers is appealing.

Step 4: A Strategic Roadmap for Apple:

Lowering the cost of products and maintaining the same quality standards

Apple should decrease the price of the products so that it can do volume sales.

Though Apple is leader in revenue generation but when it comes to volume it

lags behind.

Can form joint – ventures

Apple can have joint ventures with its suppliers so that the cost of procuring

the raw material decreases.

Knowledge Management

More number of retail stores for easy access.

Apple should open up new and more stores so that the individuals who want to

buy apple products can have easy access to it.

Continuous innovation to expand

Case Development on APPLE INC

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