APPLE Inc Case Study 2011

Company History

Apple Computers, Inc. was founded on April 1, 1976, by college dropouts Steve
Jobs and Steve Wozniak, who brought to the new company a vision of changing
the way people viewed computers. Jobs and Wozniak wanted to make computers
small enough for people to have them in their homes or offices. Simply put, they
wanted a computer that was user-friendly.1

Jobs and Wozniak started out building the Apple I in Jobs' garage and sold them
without a monitor, keyboard, or casing (which they decided to add on in 1977).
The Apple II revolutionized the computer industry with the introduction of the first-
ever color graphics.1 Sales jumped from $7.8 million in 1978 to $117 million in
1980, the year Apple went public.

Wozniak left Apple in 1983 due to a diminishing interest in the day-to-day running
of Apple Computers. Jobs then hired PepsiCo's John Sculley to be president.
However, this move backfired and after much controversy with Sculley, Jobs left
in 1985 and went on to new and bigger things. He founded his own company
NeXT Software and he also bought Pixar from George Lucas, which would later
become a huge success in computer animation of such movies as Toy Story, A
Bug's Life, Monsters, Inc., and Finding Nemo.

Through the rest of the 1980s, Apple was still doing well and in 1990 it posted its
highest profits yet. This was, however, mostly due to the plans that Jobs had
already set in motion before he left, most notably his deal with a tiny company by
the name of Adobe, creator of the Adobe Portable Document Format (PDF).
Together the two companies created the phenomenon known as desktop
publishing.
Back in 1985 Sculley turned down an appeal from Microsoft founder Bill Gates to
license its software. This decision would later come back to haunt him because
Microsoft, whose Windows operating system (OS) featured a graphical interface
similar to Apple's, became their toughest competition in the late 1980s and
throughout the 1990s.

Over the course of a few years, Apple's market share suffered slowly after its
peak in 1990 and by 1996, experts believed the company to be doomed. It was
not until 1997, when Apple was desperately in need of an operating system, that it
bought out NeXT Software (Jobs' company) and the board of directors decided to
ask for some help from an old friend: Steve Jobs. Jobs became an interim CEO,
or iCEO as he called himself (Jobs was not officially the CEO until 2000). Jobs
decided to make some changes around Apple. He forged an alliance with
Microsoft to create a Mac version of its popular office software.

Not long after this decision was the turning point for the company. Jobs revamped
the computers and introduced the iBook (a personal laptop). He also started
branching out into mp3 players (iPod) and media player software (iTunes). This
was Jobs' best move yet. While computers are still an important part of Apple, its
music related products (i.e. iPod and iTunes) have become the company's most
profitable sector. Apple has also recently released the iPhone, a cellular phone,
and the Apple TV. While Steve Jobs died October 5, 2011, Apple continues on
with his legacy.

Apple Inc. has pioneered its way through the computer industry—not once, but
multiple times throughout its existence. It believes in pushing the limits of
creativity in order to produce interesting and valuable products for society. After
more than 30 years, it is undeniable that Apple "has had a profound impact on
technology, innovating and influencing not only how we use computers but the
activities for which what we use them."
ORGANIZATIONAL CHART
PRODUCTS OF APPLE INC AND ITS TIMELINE

Source: Wikipedia

THE FIVE-FORCES MODEL COMPETITION

PESTEL ANALYSIS

POLITICAL
Fiscal policies of the United States and Europe are evolving towards stricter
taxation of multinationals. The Chinese government exerts ever greater control
over Apple’s digital content in China (the Apple book and movie online platform is
blocked). Apple is making efforts to obtain favors from the Chinese government
(e.g. construction of R&D centers in Beijing and Shenzhen), but it is becoming
increasingly dependent upon China, since it is the largest contributor to its
turnover. The growing bond between Apple and the Chinese government could
harm the image of the brand, especially in Europe and the United States. Donald
Trump wants Apple to manufacture its products in the United States.

ECONOMIC

Labor costs are increasing in China. The increase in value of the dollar makes it
more costly to develop international markets, especially in key markets like
Europe and China. The emergence of a middle class in many developing
countries makes it possible to foster greater demand for premium products such
as the Apple products.

SOCIAL

Apple has greatly enhanced its image as a socially responsible corporation. Tim
Cook has taken a committed position on the subject:
• Involvement in the Fair Labor Association;
• A high profile op-ed in the Wall Street Journal in 2013 stating Apple support for
workplace equality and urging Congress to support the Employment
Nondiscrimination Act;
• Resistance to demands from the FBI that it should create backdoors to its own
encrypted software.
TECHNOLOGICAL DEVELOPMENT

Competitors like Samsung and Google are showing great abilities to emulate
Apple products. Many Apple products, like Apple TV for example, cater to a
limited market.

ENVIRONMENTAL

Apple has successfully developed a more eco-friendly image, particularly through

efforts to bring renewable energy power to its plants. As of 2014, 100% of Apple
operations in the United States and 87% of global operations are powered by
renewable energy. Tim Cook made a strong statement by hiring Lisa Jackson,
after she stepped down as the head of the US Environmental Protection Agency.

LEGAL

Apple’s European tax scheme, with profits accrued to a practically untaxed head
office, was fiercely denounced by the European Commission. Apple is
increasingly being attacked on issues related to patents and branding and is also
targeted by class actions that tarnish its image and that of its products.
COMPETITIVE PROFILE MATRIX

INTERNAL FACTOR MATRIX (IFE)

EXTERNAL FACTOR MATRIX (EFE)

SWOT ANALYSIS

Strengths
1. First mover of innovative products.
2. No long-term debt.
3. Superior operating system, not as vulnerable to virus attack.
4. Strong quarterly revenue growth of 82.7% exceeding industry’s average
of 24.3%.
5. Procure deals with major music labels.
6. Store formats adapt to the demand in that specific market.
7. Employed knowledge workers to provide prod advice, service and training.
Weaknesses

1. Its operating system is only available in Apple products.

2. Mac software has limited share of the market.
3. Products are limited to technology hardware and software.
4. Low sales volume via website.

Opportunities

1. Greater sales growth percentage in America compare to Europe.

2. Greater profit in Europe compare to America.
3. Highest revenue generating product is the iPhone.
4. Microsoft OS is more vulnerable to virus.
5. Annual growth in revenue in Europe and Asia Pacific more than 50%.
6. Increasing number of users using the internet.

Threats

1. Dell utilizes JIT, internet, advantage in quality control, use direct sales.
2. Microsoft OS is available in all computers, provides consulting services
and business application.
3. Financial risks of being a first mover.
4. Replication of products/ illegal file sharing sites.
5. Virus threats.
6. Low demand for fee-based music services/uncertainties in demands of
new products.
TOWS ANALYSIS
SO Strategies:
 Stock new products to Europe and Asia the same time as in America
(S1 O6)
 Constant R&D to protect OS from viruses (S3 O4)

WO Strategies:
 Priced at competitive prices in its top market (W2 O6)

ST Strategies:
 Release new products to Europe and Asia Pacific the same time it is
released in America (S1 T1)
 Develop products for business application and test it out (S1 T2)
 Conduct market research to mitigate financial risks (S2 T3)
 Introduce legal department to collect damages in infringed on patents
(S1 T4)
 Provide good after-sale services to entertain customer complaints (S1
T6)

WT Strategies
 Create accessibility to stores
POSITIONING MAP
SPACE MATRIX

Conclusion:
Directional Vector coordinates:
Y Axis = FP + SP = 5.50 + (-3.00) = 2.50
X Axis = CP + IP = (4.00) + 5.50 = 1.50
Financial Statements

BALANCE SHEET
CASH FLOW
Profitability
Growth

Cash Flow Ratios

Financial Health

Efficiency
Recommendation:

 Apple’s products are of high quality and high price, the company needs to
continually innovate and come up with new products to defeat its competitors.
 The company needs to improve its website sale system to create convenience
for its customers.
 Apple has the fast mover advantage, hence they need to continue with that
spirit.