A STRATEGIC ANALYSIS OF APPLE CORPORATION
PREFACE The primary objective of this report is to provide the readers the insight into the success of apple industry. I hope that the report has made the text interesting and lucid. In writing this report, I have benefited immensely by referring to many publications and articles. I express my gratitude to all such authors and publishers. Any suggestions to improve this report in contents or in style are always welcome and will be appreciated and acknowledged.
TABLE OF CONTENTS Executive
PAGE NO.
Summary
iii
Origin Of the report
05
Purpose of the report
05
Scope of the report
05
Limitation of the report
06
Introduction
07
Vision
08
Mission
08
Long term objectives
09
Industry Analysis Using Porter¶s Five Forces Model
09
SWOT Analysis
11
Recommendations
15
Conclusion
16
Bibliography
17
Executive Summary Apple Computer¶s 30-year history is full of highs and lows, which is what we would expect in a highly innovative company. They evolved throughout the years into an organization that is very much a representation of its leader, Steven Jobs. Apple made several hugely successful product introductions over the years. They have also completely fallen on their face on several occasions. They struggled mightily while Jobs was not a part of the organization. Apple reached a point where many thought they would not survive. When asked in late 1997what Jobs should do as head of Apple, Dell Inc.'s (DELL) then-CEO Michael S. Dell said at an investor conference:"I'd shut it down and give the money back to the shareholders.´ (Burrows, Grover, and Green) Well, times changed. Less than 10 years later, Business
Week ranked
Apple as the top performer
in its 2006 Business Week 50.Apple attributes their recent success to robust sales of iPod music players (32 million in 2005).They are optimistic about the economies of scope with media giants, such as Disney and Pixar. (Business Week) Apple rarely introduces a new type of product. Thus, instead of being the pioneer, they are an expert ³second mover´ by refining existing products. Portable music players and notebook computers are examples. Apple increases the appeal of these products by making them stylish and more functional. They now appear poised to make significant strides in the home computer market and to creating a total digital lifestyle whereby the home is a multimedia hub.
Origin of the report The Honorable course instructor assigned me to prepare a report on Strategic Business Planning of highly globalized company. Here I choose Apple Inc as it is a renowned globalized corporation around the world and it has gone through a radical change in the passage of time.
Purpose of the report I am very much passionate to be an executive of the coming days. So, I have to gather more experience beside my study. I do not want to concentrate my lessons only in classroom but to implement it in my practical life that will help my in professional life. The purposes of preparing of this report arey
To relate our theoretical report writing knowledge with the practical working experience.
y
To know about the leadership and change management of Apple Inc. and also try to get idea about the relationship among them and their productivity.
y
I choose Apple Inc. to relate the implementation of the Strategic Business Planning.
y
To provide suggestions for the probable identified problems.
y
To illustrate the overview and the feature of the organization.
Scope of the report I have mainly tried to cover all the information needed to know their overall communication process both inside and outside the organization. Their worldwide business, activities their strategy, goals etc., I have also identified some basic problems of them.
Limitation of the report I am very lucky to get the chance to prepare this report but unfortunately I have faced some difficulties when preparing this report. I have tried to overcome the difficulties and gave my best effort. When preparing this report, two main difficulties I have faced:
Shortage of Time
To make a longer version of report needs too much time. But I had to prepare this report within a very short span of time. Because of their time constraint I didn¶t collect enough information to prepare my report. To get touch with them was very difficult for me. In this case I had to collect data from their Wikipedia and tried my best to prepare my report perfectly.
Difficulty in Collecting Data
It was a very hard job to make understand about my object. In collecting data I face lots of problems. Again due to their management limitations they don¶t persist to provide information.
Introduction Company Background: Apple Inc. is an American multinational corporation, established on April 1, 1976 in Cupertino,
California, and incorporated in 3rd January 1977. The company was previously named Apple th
Computer, Inc. for its first 30 years, but removed the word "Computer" on 9 January 2007, in
order to reflect the company's ongoing expansion into the consumer electronics market in addition to its traditional focus on personal computers. It is Public Ltd company that designs and markets consumer electronics, computer software, and personal computers. The company's bestknown hardware products include the Macintosh computers, the iPod, the iPhone, and the iPad. Apple software includes the Mac OS X operating system; the iTunes media browser; the life suite of multimedia and creativity software; the work suite of productivity software; Aperture, a professional photography package; Final Cut Studio, a suite of professional audio and filmindustry software products; and Logic Studio, a suite of audio tools. The company operates 284 retail stores in ten countries as of January 2010 and an online store where hardware and software products are sold. As of September 26, 2009, Apple had 34,300 full time employees and 2,500 temporary full time employees worldwide and had worldwide annual sales of $42.91 billion in its fiscal year ending September 26, 2009. Without Wayne, Apple was incorporated in 3rd January 1977, who sold his share of the company back to Jobs and Wozniak for $800. Multi-millionaire Mike Marcela provided essential business expertise and funding of $250,000 during the incorporation of Apple. By the end of the 1970s, Apple had a staff of computer designers and a production line. The company introduced the illfated Apple III in May 1980 in an attempt to compete with IBM and Microsoft in the business and corporate computing market. Steve Jobs began working on the Apple Lisa in 1978 but due to infighting, and took over Jeff Ruskin¶s low-cost-computer project, the Macintosh; in 1982 he was pushed from the Lisa team. A turf war broke out between Lisa's "corporate shirts" and Jobs' "pirates" over which product would ship first and save Apple. Lisa won the race in 1983 and became the first personal computer sold to the public with a GUI. But due to its high price tag and limited software titles there was a commercial failure.
And then from 1986-1993 it went through rise and fall continuously. After 1993 they gave a lot of emphasize on its reinvention practice. From 1994-1997 they developing their alternative plans, reinvention practices. From 1998-2005 they return to its profitability.
VISION
The four pillars of their vision set out the long term direction for the company ± where they want to go and how they are going to get there: y
We work to create a better future every day
y
We help people feel good, look good, and get more out of life with brands and services that are good for them and good for others.
y
We will inspire people to take small everyday actions that can add up to a big difference for the world.
y
We will develop new ways of doing business with the aim of doubling the size of our company while reducing our environmental impact.
They've always believed in the power of their brands to improve the quality of people¶s lives and in doing the right thing. As its business grows, so do its responsibilities. They recognize that global challenges such as climate change concern. Considering the wider impact of its actions is embedded in its values and is a fundamental part of who they are.
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."
Long Term Objective
APPLE is a publicly traded company with responsibilities to all shareholders
By becoming a more ³socially responsible´ corporation we hope to attract a new type of investor while retaining our current stockholders. KFC hopes to achieve this by becoming synonymous with hospice.
Industry Analysis Using Porter¶s Five Forces Model Apple operates in two primary industries: Computing - Hardware and Software Delivery of Entertainment and Media Apple has always been under intense competition within the computer, software, and entertainment industries.³ Looking to 2005...Every time that Apple had jumped into the lead in product category during the past two decades, it had had difficulty in sustaining its leadership position.´ (Office) We use Porter¶s Five Forces Model to understand why Apple¶s industries are so competitive.
The total industry threat for the industry space that Apple occupies (computer equipment and distribution of entertainment) is a high threat industry . Apple must continue to pursue product differentiation (i.e. the style and ease-of-use of an iPod) and economies of scope (i.e. offering ABC television shows on iTunes) to maintain their sustained competitive advantage in this industry.
Which External Threats are Most Significant
Computer Hardware and Software: Open Source software such as the Linux Operating System and Open Office applications threaten both Apple and Microsoft. The low (often, free) cost of the software may allow it to overtake Apple and Microsoft, especially in developing markets such as China.
Music Products: Major online retailers such as Amazon are considering entry into the online music market. With a wide internet presence and a household name, Amazon could present a formidable challenge to Apple. If the major record labels (Universal, Sony BMG,
EMI,
and Warner) negotiate better terms with new competitors to iTunes,
Apple may be unable to provide some of the music content that they currently offer. The major music labels dislike Apple¶s dollar per song pricing. They would prefer to earn higher profits with ³variable pricing.´ (Winfield) With variable pricing, the most popular songs would be greater than $1, and less popular songs would be less than $1.Although the labels recently renewed their contracts with Apple, there may be provisions that allow future changes in the pricing model. (Winfield and Smith)
Suppliers: The recent shift to Intel processors could present a significant threat to Apple. With only two companies (Intel and AMD) producing Intel-compatible processors, there is a strong potential for tacit collusion and oligopoly power between these suppliers. Apple purchasing must now directly compete with HP, Lenovo, and Dell. If shortages or exclusive agreements materialize; Apple could face problems with obtaining rawmaterials. Apple should consider additional sources such as Advanced Micro Devices (AMD).
Additional External Threats Security
Apple software, like all large software products, has security vulnerabilities that hackers may exploit. A significant exploitation in the future could damage many businesses and households using Apple computers. This would affect future customer purchasing decisions. Apple enjoys a competitive advantage, because their OS X is mature and stable due to its basis on BSD Unix. In fact, ³computer security folks back at FBI HQ use Macs running OS X.´ (Grandma) However, the increased use of Apple computers is prompting hackers to target the platform. In February 2006, there was documentation of the first known Apple OS X worm. By using iChat instant messaging, it spreads to other users and deletes files from their Mac computers. (Sophos) If Mac OS X becomes as wide of a target as Windows, Apple¶s perceived differentiation as the more secure platform may disappear.
Vertical
Integration of Competitors
Sony is an example of a competitor with a unique position against Apple. Sony Music supplies Apple with many of the songs for iTunes. Sony also creates a version of the Walkman portable music player that is a direct competitor to the iPod. (Hall) Sony is attempting to vertically integrate forward directly to the music buyer. Sonyintegrated their music system (Mora) into the So ny Walkman. Sony is exclusively distributing certain so ngs on Mora. (Hall) Mora currently targets Japanese consumers. If Sony can gain additional momentum (such as collaborating with other record labels), their service could present formidable challenge to iTunes in additional markets.
SWOT Analysis
Although participation in such activities may add value, they may not be a source of competitive advantage. Ultimately, the value, rarity, inimitability, and/or organization (VRIO) of an activity or resource determine its sustainability as a source of competitive advantage. Within this context, we can identify a firm¶s strengths, weaknesses, opportunities, and threats (SWOT).
Strengths
Technical savvy ± Product lines are easy to use and stable. Recent integration with
Microsoft products lines and Intel processors demonstrate ability and willingness to adapt to a diverse customer base. (Mossberg) Such innovation, however, would not be sustainable without a learning environment tolerant of mistakes. While the pure technical expertise alone is not a valuable or rare resource, it becomes very costly to imitate when it exists within the socially complex, entrepreneurial culture of Apple.
Financial vitality ± Cash reserves remained robust and stable despite stagnant market
share growth in the computer hardware and software arenas. Apple exploited this by resisting market pressures to reduce costs, tightly integrating product packages, and forming strategic alliances (i.e. securing the backing of all major music distributors in the support of iTunes).
Brand loyalty ± The only way that Apple could maintain the financial vitality described
above is via a fanatical, almost cult-like, affair with its customer base. Such brand loyalty is extremely costly and time-consuming to imitate.
Steve Jobs ± As discussed earlier, Jobs proved to be a vital component to Apple¶s
success. During his absence (1985-1996), Apple experienced the most turbulent (financial and innovative) timeline in its history. Immediately upon his return, he replaced most of the Board of Directors, pruned and focused the new product ideas, and delivered seven consecutive quarters of positive earnings to shareholders. (Linzmayer, 289-99) As such, Jobs are certainly a valuable, rare, and hard to imitate resource that Apple fully exploits.
Weaknesses
Market share ± Apple has historically been strongest in the US geographical and
educational vertical markets. With the educational market facing tightening budget constraints and the US approaching a PC saturation point, Apple may need to burn cash more quickly and succumb to market cost pressures on its products without a strategic innovation, integration, or divesture.
Steve Jobs ± For virtually the same reasons Jobs are strength, he is simultaneously a
weakness. The aggressive drive to bring innovative visions to life was noticeably absent and painfully felt (especially by shareholders) during his departure. The apparent absence of succession planning coupled with a lust for the limelight positioned Jobs as Apple¶s single consciousness in the eyes of consumers and shareholders.
Opportunities
Consumer electronics ± With the startling success of the iPod and iTunes, Apple entered
the consumer electronics market. By expanding the iTunes concept to downloadable mobile phone features and movies (podcasts), the door is now open to develop new and potentially profitable strategic alliances with peripheral component manufacturers(speaker, home stereo, etc.) and media transmission giants (Disney, TBS, Verizon, etc.).
PC hardware and software market growth ± With cross-licensing of operating system
platforms in place, Apple entered the high-volume business environment traditionally dominated by Windows-based PCs. The introduction of Intel-based processors prompted businesses to replace PCs with iMacs. They did this to gain a level of stability and reliability in their business applications that PCs failed to provide. An example is Japan¶s Aozora Bank Ltd., who is replacing 2,300 PCs with iMacs. (Wingfield) Apple must establish themselves as a credible player in business desktop applications to overcome the ³desktop publishing´ stereotype.
Threats
Legal risks ± In a market that literally changes at the speed of thought, patent, and
copyright infringement risks remain high. As long as operating systems and support software packages continue to converge and remain relatively easy to imitate, present and future lawsuits are inevitable. The Apple records claim against iTunes remains unresolved.
Competition ± This threat occurs primarily on two fronts: PC hardware/software and
consumer electronics. For the same reasons discussed in the opportunities section, the threat of limitability (cloning, pirating, etc.) increases. As relative newcomers to the consumer electronics arena, will Apple retain a co mpetitive advantage as they diversify their offerings (speakers, home entertainment systems, etc.)?
RECOMMENDATIONS
FOR COMPANY:
Lowering the cost of products and maintaining the same quality standards Can form joint ± ventures Knowledge Management More number of retail stores for easy access Continuous innovation to expand
FOR OTHERS:
Do not compromises on price for quality Choose the products based on individual needs Be unique and different
CONCLUSION I feel that Apple must focus on several key aspects to continue to grow and succeed. They must continue a stable commitment to licensing, push for economies of scope between media and computers, and become a learning organization.
Apple apparently made a commitment to licensing. Although it should continue, Apple may want to consider other forms of strategic alliances. An equity strategic alliance may offer Apple the opportunity to obtain additional competencies. An effective way for a company like Apple to accomplish this would be in the form of a joint venture.
Apple should continue pushing the new line of media-centric products. Meanwhile, Apple sho uld not lose focus on its computers. Macintosh computers were 39% of Apple¶s sales in 2005. (Burrows) This very innovative company exploits its second-mover position. In the future, they will need to continue innovating to expand the boundaries of both media and computers. One persistent element of both competitive advantage and risk is Steve Jobs. He is both synonymous with Apple¶s success and has a large equity interest in Apple and Disney. If he were to divest his leadership position, the reaction of both the market and consumers would be uncertain. Given his position within the organization as well as the history of the company when he was gone, Apple must find a way to learn as an organization. This will allow the company to withstand a departure by Jobs.
Based on the actions of the organization, we feel that the mid-term performance of Apple will be strong. This period allows Apple time to overcome their challenges if they move swiftly. For this reason, we feel that they will continue to succeed and will continue to outperform their peers.
BIBLOGRAPHY
http://www.apple.com/ http://www.apple.com/pr/library/2004/jan/08hp.html http://en.wikipedia.org/wiki/Apple_Inc. http://obamafellows.org/mf/948-External%20Ananlysis%20-%20Apple%20Corporation.html
