Apple Case Presentation

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5 Star GroupConsultant Team: Lianne Petty Monica Lee Evan Campbell Ruchita Shah

Yazmin Briseno

APPLE CASE PRESENTATIONManagement 449

AGENDA

Company Background

Vision & Mission

Goals, Objectives & Strategies

Business Model

Company Performance

Management Characteristics

SWOT & Analysis of Core

Competencies and Capabilities

Industry and Competitor Analysis

Major Issues/Problems

SARS Analysis

Recommendation & Implementation Plan

iPod is developed

Macintosh is introduced

Apple II is launched

1976 1978 1979 1984 1991 1998 1999 2001 2003

Apple was founded–

introducing Apple I

Apple Lisa is developed

PowerBook is released

iBook is released

iTunes is created

HISTORY & MILESTONES

iMac is released

MP3 Player Industry

Personal Computer Industry

HISTORY & MILESTONESMARKET SHARE (2007)

Smartphone Industry

73%

27%

LOCATIONS

North Americaand Canada

South America and Africa

Japan and the Middle East

Italy, United Kingdom, and other parts of

Europe

Products

iMac and Macbook

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BUSINESS DESCRIPTION

iPod

iPhoneiTunes &

Other Services

Providing consumer electronics, including personal and portable computers, mp3 music players, and cellular phones; services such as iTunes and software applications.

PRODUCT & SERVICE LINE

Products

Vission Statement

“Introducing innovative, high-quality consumer

electronics to the masses” and “impressive

performance and leadership in innovation into the

future”

Mission Statement

Apple’s “business strategy leverages its ability, through the design and development of its

own operating system, hardware, and many software applications and technologies, to bring to its

customers around the world compelling new products and

solutions with superior ease-of-use, seamless integration, and innovative industrial design.”

VISSION & MISSION

Source: Thompson, Strickland & Gamble. (2010). Crafting and Executing Strategy.

Take market share from competitors such as Dell

and Hewlett-Packard

Attain double-digit growth in terms of unit

shipments through 2010 and then high single-digit growth

through 2012

Introduce innovative products at competitive prices to the market to convince investors and consumers that Apple

offers a unique product over the competition.

Synchronize the digital electronics and computer

market

Resolve MobileMe Web application failures to 0%

by 2009

Ease of compatibility between the iPod, iPhone

and iTunes via the App Store

Achieve superior technological innovation

Maintain funds allocated to the R&D budget while

establishing a $0 long-term liability balance

Pour large amount of operating budget into research

& development▪ Closely guard secrets behind

company’s technology.

GOALS, OBJECTIVES & STRATEGIES

Objectives StrategiesGoals

DISTRIBUTION

ONLINE STORES

BY PHONE

PARTNERSHIPS

MICROSOFT WINDOW USERS

(iTUNES)AT&T (iPHONE)

INTERNATIONAL DISTRIBUTION

NORTH AMERICA

RETAIL DIVISION- APPLE OWNED

STORES

JAPAN

EUROPE

MIDDLE EAST

AFRICA

SOUTH AMERICA

JAPAN

U.S.

ITALY

CANADA

UNITED KINGDOM

MANUFACTURINGSUPPLIERS

CUSTOMERSCUSTOMERS

OPERATION

REVENUE

BUSINESS MODEL

MANAGEMENT VALUE PROPOSITION

Values Customer Benefits

Top management leadership built on the founders’ “spirit

and standards”

“A business discipline the younger Jobs had”

Superior value through diversified and innovative products

Exceptional quality in each product

Customer satisfaction and ease-of-use for each purchase

Friendly and knowledgeable retail sales team

Source: Thompson, Strickland & Gamble. (2010). Crafting and Executing Strategy.

Business strateg

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FY 2007 FY 2007 FY2007 FY2007

IndicatorsIndustry Average

Apple (AAPL)

SanDisk (SNDK)

Microsoft (MSFT)

Dell (DELL)

Debt to Equity 0.08 0.00 0.25 0.00 0.17

Return on Stockholder's Equity

34.70% 24.06% 3.95% 45.23% 58.19%

Net Profit Margin 19.80% 14.56% 5.03% 27.51% 4.50%

Current Ratio 1.90 2.36 3.61 1.69 1.12

FINANCIAL PERFORMANCE

Source: Google Finance

• A customer survey by PC Magazine concluded that Apple iPods ranked significantly higher than other brands in terms of overall quality, sound quality, ease of use, and overall reliability.

• The Industrial Designers Society of America presented gold awards to the iPhone, MacBook Air, and Apple Wireless keyboard while it gave the iMac a silver award.

• In 2007, the iPhone was named theTime Magazine invention of the year.

• Apple Inc.’s continues to expand into geographic segments including North America, South America, Europe, Africa, the middle east, and Japan.

• Excellence in providing both “profitability and power values” to target users

STRATEGIC PERFORMANCE

Source: PC Magazine customer survey, October 31, 2007, www.pcmag.com.

MP3 PlayersIndustry Average

Apple (AAPL)

SanDisk (SNDK)

Microsoft (MSFT)

Apple 8.3 8.7 8.6 8.3

Microsoft 8.1 8.7 8.3 8.2

SanDisk 7.5 8.0 7.5 7.9

Toshiba 7.6 8.5 8.1 8.0

CUSTOMER SATISFACTION SCORES (MP3 PLAYERS) - PC MAGAZINE READER SURVEY

MANAGEMENT BACKGROUND

Mike Markkula became president

and CEO 1981

Michael Scott resigned as

president; became vice chairman of

the board.

Steven Jobs became chairman of the board

1983John Sculley replaced

Mike Markkula as Apple’s president &

CEO

1993Michael Spindler

replaced John Sculley

1996

2000

Steven Jobs announces himself to be the

permanent CEO of Apple

Gil Amelio became CEO

Culture & Values

MANAGEMENT CHARACTERISTICS

Encourage teamwork in technological change by fostering

imagination

A stylish product appeal and ease- of- use takes center stage

Flexibility in meeting increasing customer demands

Philosophy

Steve Jobs’ vision to become an employee’s own

Company growth can only be maintained by pushing for better

product designs

All strategies to emphasize a customer view point

QUALIFICATIONS OF TMT

Qualifications of TMT

Chief Executive Officer (CEO) Oversees entire operation

Implements board decisions and crafts strategy

Chief Financial Officer (CFO)Supervises, analyzes, and reviews financial data and

performancePrepares budgets and monitors expenditures and

costs

Chief Operations Officer (COO)Manages supply chain, sales activities, service and

support in all markets and countries

CEOSteve Jobs

CEOSteve Jobs

CFOPeter Oppenheimer

CFOPeter Oppenheimer

Board of Directors

Board of Directors

COOTimothy Cook

COOTimothy Cook

iOSSoftware

iOSSoftware HardwareHardware

DesignDesign

LegalLegalRetailRetail

ProductMarketing

ProductMarketing

GlobalCommunication

GlobalCommunication

SoftwareEngineering

SoftwareEngineering

OperationsOperations

America & Asia Regions

America & Asia Regions EducationEducation Consumer & Pro

ApplicationConsumer & Pro

ApplicationInternet ServicesInternet Services

Mac OSEngineering

Mac OSEngineering

AppleOnline Store

AppleOnline Store

iPhone & iPodMarketing

iPhone & iPodMarketing

ORGANIZATION STRUCTURE

SWOT ANALYSIS

Strengths Weaknesses Opportunities Threats• Innovative technology &

industrial design• High quality

consumer products• Superior ease-of-use•Seamless integration• Competitive prices

• Global sales & distribution

• Battery life (iPods)• 1st generation product quality

• Inability to meet product demand

• Concern with health of Steve Jobs

•Overloaded servers on cellular networks•Excessive bargaining

power of suppliers•Lack of product

variety

•Product “halo” effect•Expanding consumer

demand for stylish products

• Increasing younger generation and

corporate need for portable and easy-to-

use products• Increasing

worldwide cell phone growth rate

• Consumer preference for more

customization

• Cutbacks in back-to-school spending

• Struggling U.S. economy

• Maturing U.S. cell phone market

• Purchasing power less in developing

markets

SWOT EVALUATION & CORE COMPETENCIES AND CAPABILITIES

In Favor

Brand loyalty and repeat customers

Progressive technological change offers more potential to set

market trends

Internal strengths offset weaknesses

Product awareness heightens market share potential

Core Competencies

Being the industry leader in introducing products with a unique

concept

Offering seamless integration

Offering a complete entertainment experience

Offering something beyond quality: style

INDUSTRY ANALYSIS

Dominant Economic Features

Rapid pace of technological change

Large market size with increasing market growth rate

Demand-supply conditions

Apple Inc. is in the personal computer industry.

Source: SIC Code 357101, Computers-Electronic-Manufacturers; NAICS Code 334111, Electronic Computer Manufacturing

INDUSTRY ANALYSIS

Driving Forces

Diffusion of technological know-how across more

companies

Changes in who buys the products and how they use it

Changes in cost and efficiency

Globalization of operations

Source: Worlds United Online Community http://www.worldsunited.net Technology News http://www.tgdaily.com

INDUSTRY ANALYSIS

Key Success Factors

Strong network of retailers

Manufacturing capability to meet demand

Product variety to meet varying consumer needs

Price/quality excellence


INDUSTRY ANALYSIS

Industry Trends

Blu-ray disc compatibility

High definition quality

Quad-core processors

Unlimited storage space


FIVE FORCES ANALYSIS

Buyers

Substitute Products

Suppliers

Rival Firms

New Entrants

Scale: 1 (least favorable) – 5 (most favorable)

3

5

2

2

5

Overall Industry Ranking

3.4

Source: Laptoping. http://laptoping.com/pda-vs-laptop.html

STRATEGIC GROUP ANALYSIS

Low

High

Product VarietyFew Many

DellHP

Apple

Acer

Toshiba

Pric

e/Q

ualit

y

WEIGHTED COMPETITIVE STRENGTH ASSESSMENT

(Rating Scale: 1 = very weak; 10 = very strong)

Apple Dell HP Acer Toshiba

Key Success Factors/ Strength Measure

Importance Weight

Strength Rating Score





Manufacturing capability to meet demand

0.1 7 0.7 8 0.8 8 0.8 8 0.8 5 0.5 Technological know-how 0.2 8 1.6 7 1.4 7 1.4 6 1.2 5 1

Product variety to meet varying consumer needs 0.3 4 1.2 7 2.1 6 1.8 5 1.5 5 1.5

Strong network of retailers

0.15 9 1.35 8 1.2 8 1.2 5 0.75 6 0.9 Financial resources 0.1 5 0.5 4 0.4 8 0.8 9 0.9 4 0.4

Price/quality Excellence 0.15 8 1.2 6 0.9 5 0.75 4 0.6 4 0.6

Sum of importance weights 1.00

Weighted overall strength rating

41 6.55 40 6.8 42 5.75 37 5.75 29 4.9

GENERIC STRATEGY ANALYSIS

A Broad Cross-Section of Buyers

A Narrow Buyer Segment (or Market Niche)

ToshibaAcer

DurabookAlienwarePeewee PC

Apple

Lower Cost Differentiation

DellHP

Type of Competitive Advantage Being PursuedM

arke

t Tar

get

Cause Deteriorating health of Steve Jobs

Instability of top management and concerns over a successor CEO

A new vision, relatively inexperienced leadership, and loss of innovative edge

Issue

Impact

Impact

STRATEGIC ISSUE 1

Cause Product excellence concentrated in few products

Lack of product variety

Loss of sales to competitors and inability to meet consumer preferences more effectively

Issue

Cause

Impact

Inability to acccelerate pursuit of innovation

STRATEGIC ISSUE 2

STRATEGIC ISSUE 1—ALTERNATIVE 1

Steve Jobs to still perform oversight of strategic operations

Steve Jobs to still pursue his vision and guide the new CEO in doing so.

An internal company member who is already aware of the corporate

culture

Steve Jobs‘ presence will continue to enhance Apple‘s reputation

Prevents a major organization change

Pros

Alternative 1: Steve Jobs should return to his prior position as Chairman of the Board, with the current Chairman of the Board to succeed as the new CEO.

Cons

A new and less powerful vision

Lack of a powerful visionary and role model

Weaker corporate discipline

Steve Jobs‘ health may continue to detiorate

Apple‘s stock might suffer due to uncertainty

Issue 1: Instability of top management and concerns over a successor CEO


Pros

Alternative 2: Steve Jobs should step down and appoint an experienced executive from the Asia market to serve as the new CEO.

Cons

Apple’s response to globalization to become more explicit

Expand presence and increase sales in Asia

New vision and strategic plan

Better international supplier relations

Better ability to control demand

Better profit margins and operating results

New vision could be inconsistent with existing corporate values

Extensive training to familiarize new CEO with corporate culture

Aggressive moves by competitors to move supplier favor towards them

An operational perspective may lose sight of an overall strategic approach

Issue 1: Instability of top management and concerns over a successor CEO

STRATEGIC ISSUE 2: ALTERNATIVE 1

Pros Cons

Technological know-how would require large amounts of investment in R&D

Financial resources to invest in new plants and production facilities

Increase in supplier bargaining power

Increase in payroll costs due to the hiring of more employees

A more competitive product line

An appeal to a broader customer base

New customers can produce sales in other product lines via the “halo” effect

Provides ease-of-use depending upon the skill of the user

The quantity demanded can be met more effectively

Alternative 1: Divide PC product line by consumer type (student, instructor, corporate, professional) and provide at least 4 PCs per product line.

Issue 2: Lack of product variety


Pros ConsLarge initial start-up costs for R&D

R&D may not result in a broad and successful range of features to be

offered

Inability to manage costs and offer competitive prices

Restructuring of manufacturing process to enhance assembly efficiency

Increased supplier bargaining power

More avenues to explore innovation

An enhanced product line to adapt to changing consumer preferences

Increased strength of competitive advantage based on differentiation

Increased profits for higher-priced orders

Opportunity to move towards a best-cost strategy

Alternative 1: Customers should be allowed to order personal computers that fit their lifestyle, application needs and budget.

Issue 2: Lack of product variety

TRADEOFF ANALYSIS

4 3 5

Profitability Supplier Relations Reputation

Problem 1: Concerns over Steve Jobs’ health

Alternative 1: Switch Steve Jobs, CEO, with Chairman of

the Board

(50%) (20%) (30%)

Problem 2: Lack of Product Variety

Alternative 2: New CEO from Asia to be appointed 5 4 4

3 2 4

5 3 5

Alternative 1: Divide product line by consumer type and increase product offerings

Alternative 2: Custom orders

Total Weighted Score

4.1

4.5

3.1

4.6

Recommendation

Recommendation

Scale: 1 (least favorable) – 5 (most favorable)

RECOMMENDATIONS

Short-Run Long-Run

Steve Jobs to continue close supervision of Apple by mentoring the former CEO

Market the new CEO as the face of Apple

Revamp supply chain by using Just-in-Time (JIT) and lean systems to assemble and ship

computers on a timely basis

Monitoring long-term profitability by manage costs from an operational perspective

Offering value-added features unmatched by competitors

Discussion among the Board of Directors to propose and approve a major management

change

A press release to inform stakeholders and maintain market reputation

Research and development to accommodate various demand preferences

Production and marketing of the new products

IMPLEMENTATION PLAN

2008

December

2009

Board of Directors meeting and appointment of new CEO; investment in R&D

Network with suppliers from the Asian market

Advertise customization features availability

CEO to formally establish a new vision

January

June

January

Begin shipment of orders to establish market share

Prepare sales budgets and use ABC accounting to price products

2010Monitor financial and strategic performance

Continue R&D to offer features that keep up with industry trends

Continue to partner with suppliers

June

January

June

Appoint a new Chairman of the Board should Steve Jobs’ health continues to worsen

Documents

Apple Case Presentation