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CASE STUDY OF APPLE INC.

STRATEGIC MANAGEMENT

MODULE DMG 5033

THENMOLEY A/P R.RAMKUMAR


MATRIC NO. 012017091649

MBA
GRADUATE SCHOOL OF MANAGEMENT (GSM)
MANAGEMENT & SCIENCE UNIVERSITY

December 2017
Executive Summary

The objective of this case study is to identify the strength, weakness, opportunity and
treats that exist in the industrial environment that Apple Inc. operates in. Even though
Apple has be recognized as market leader in innovation of electronics devices it
constantly has been challenged by its competitors especially Samsung. The
competition has grown stronger in recent years that it had affected the sales of Apple
and its products. For instance Apple was pioneer in iPhone mobile services with its
recently launched enhanced iPhone 8 and 8puls. However this has been challenged
with the emergence of Samsung Galaxy S8 which operated with Android services
with almost half of Apple’s iPhone 8 local market selling price. Beside Apple’s
competition from rival, the company is also faced with challenges of bad reputation
due to its suppliers non-compliance of work ethics against its employees, IP
infringement of its products, tax scandals, high cost of legal suits, unrecoverable
court awards, incompetent iOS system that pushes customers to switch hand phone
are the many types of threats that Apple endured last few years. The researcher in her
attempt to this case study analyzed all the factors that contributed to Apple’s growth
by conducting SWOT & PESTEL analysis, IFE & EFE evaluation, CPM comparison
(Level 1) and IE Matrix, Grand Strategy Matrix, BCG Matrix (Level 2) and finally
concluded with QSPM (Level 3) in order to formulate analytical framework to
recommend strategies for future planning. Notwithstanding it was found Apple Inc.’s
internal and external positioning is positively vibrant based on its ratings (IFE - 2.97)
and (EFE - 3.04) hence it is noted that the company has strong internal and external
position in place to meet or exceed the industrial demand and expectation. In addition
the CPM matrix depicts Apple’s score is at 3.5 compared to 2.5 - Samsung and 2.2
for Lenovo respectively. In a nutshell eventhough Apple’s performance is better than
its competitors, the company should device few integrative and intensive strategies to
address the threats and weakness that it recently faced with. At the end of this report
the researcher had proposed few recommendations with justifications on how and
what need to be addressed by Apple lawmakers and stakeholders to strategies
themselves to face its rivals competition in their pursuit to “stay ahead” and perserve
their “crown jewel”.

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Table of Content

Executive Summary 2
Table of Contents 3

Chapter 1 Introduction
1.1 Introduction to Case Study 4
1.2 Problem Statement 4
1.3 Research Question 5
1.4 Objective of Study 5
1.5 Scope of Study 5

Chapter 2 Methodology and Past Findings


2.1 Research Methodology 6
2.2 Theoretical Framework 6

Chapter 3 Analysis of Study


3.1 About Apple Inc. 7
3.2 Highlights of Main Issues 8
3.3 Analysis of Apple Inc. 9
3.4 SWOT Analysis of Apple Inc. 9
3.5 PESTEL Analysis of Apple Inc. 12
3.6 IFE of Apple Inc. 19
3.7 EFE of Apple Inc. 20
3.8 CPM for Apple Inc. 21
3.9 IE Matrix for Apple Inc. 21
3.10 Grand Strategy Matrix 22
3.11 BCG Matric 23
3.12 QSPM Matrix 24

Chapter 4 Conclusion and Recommendation


4.1 Interpretation of Analysis 25
4.2 Conclusion 26
4.3 Recommendation 28

Reference 29

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CHAPTER 1

INTRODUCTION

1.1 Introduction to Case Study

The new landscape of business today is faced with a turbulent environment which is
dynamic and competitive. Firms of 21st century are now faced with more challenges
than ever before as a result of hyper competition, technological revolution and
globalization. Business owners and strategist are at pain in finding a perfect solutions
to keep their organization relevant to customer needs. Therefore, the need for firms to
develop strategies that would foster competitive advantages and sustainability over
rival firms are crucial. In present competitive and dynamic business environment,
possessing or acquiring new technologies through research and development has
become the fundamental objective to corporations like Apple Inc. Strategy is no
longer just a broad vision but a particular configuration of activities Apple adopts
compared to its rival. In analyzing its potential business opportunities and sources of
competitive advantages within Apple Inc. the method researcher applied are SWOT
analysis analysis to identify its Internal Factor Evaluation (IFE) and PESTEL analysis
to identify the External Factor Evaluation (EFE) that contributed to Competitive
Profile Matrix (CPM) to compare Apple’s positioning against its major competitors.

1.2 Problem Statement

Apple Inc. is faced with intense competition from its rival like Samsung, Lenovo,
Google Android and therefore there is a need to develop strategies that will give
Apple the competitive advantages. VCA better known as value chain analysis is one
such strategic tool that can be used to analyze resources within an organization
relative to competitors to attain competitive advantage. In this case study the
researcher at first attempt to analyze Apple’s Internal Factor Evaluation(IFE) through
SWOT analysis to determine its Strength and Weakness.

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Secondly, the External Factor Evaluation (EFE) was conducted through PESTEL
analysis to determine its external Opportunities and Threats. At final stage the CPM
is created to identify Apple major competitors and their particular strength and
weakness in relation to its competitors strategic position.

1.3 Research Question

This case analysis sought to determine how IFE,EFE,CPM, SWOT and PESTEL
analysis can be adopted to determine the types of strategies that can be adopted to
provide better effects on competitive advantages at Apple Inc. to outperform its
competitors.

1.4 Objective of Study

This report sought to propose 3 years strategic plan to be adopted by Apple Inc. that
will enable it to continue to compete with its rivals like Samsung, Lenovo and
Google Android.

1.5 Scope of Study

It is hoped this study will help Apple Inc. management and stakeholders in the
manufacturing and service industries to make decision on the applications and
trade-off of the value chain within their activities to create competitive advantages.
The policy makers have in-depth knowledge to enable them to create favorable
strategies for the growth and sustainability of Apple Inc.

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CHAPTER 2

METHODOLOGY AND PAST FINDINGS

2.1 Research Methodology

Two approaches to this case analysis are quantitative and qualitative research. Three
methods applied in this research are exploratory, descriptive and explanatory. Sources
for information include secondary data collected from journals, book, study draws
materials, previous research from universities and website that are closely related to
this case study. The sources of data includes both primary and secondary which was
obtained from the Apple Inc. records and achieve files. Types of information include
qualitative and quantitative data obtained through research from internet and Apple’s
public information centers or library.

2.2 Theoretical Framework

SWOT analysis is the most popular tool used in Strategic Planning and
Organizational Problem Solving. Haberberg (2000) notes that Harvard Business
School academics used the concept of SWOT analysis in the 1960s. SWOT is used
widely to gain insight into a firm’s internal system, position and developing a
“bottom-top” / “top-bottom” shared vision for an organization by providing input for
the development of strategic plans.

On the other hand PESTEL analysis framework is used to support the identification
of political, economic, social, technological, legal and environmental issues. This
PESTEL analysis has been feed into SWOT analysis to help determine the threats and
opportunities represented by macro environment forces that Apple Inc. may / may not
have control over.

Zimmerer, Scarborough & Wilson (2008) define CPM as a tool which helps the
companies to assess themselves against their competitors using the critical success
factors for that industry. In this instance, Apple will be assessed against Samsung and
Lenovo as they are the immediate rivals to Apple Inc.

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CHAPTER 3

ANALYSIS OF STUDY

3.1 Apple Inc.

Apple Inc. began its humble beginning by designing and selling personal computers,
consumer electronics and computer software. The iPod, iPad, Macintosh range of
personal computers and iPhone’s are among the company’s popular products. There
are also a number of software Apple produces such as iTune, media browser, video
and music production known as Final cut studio, Mac X operating system,
professional photography software known as Aperture, music production called Logic
studio, among others. Apple also known globally as third biggest handset production
company. The corporation is the largest information technology company in terms of
its revenue. Established in 14 states with over 400 retail stores as it also has online
stores for music and software application for its devices. With market capitalization
of US547.20 billion as of May 2014, the corporation is the biggest publicly traded
company in the world as reported by Reuters in 2014. Apple’s success is due to its
dynamic and constant evolving business strategic plans that it undertook. Apple’s
management ability to change the company’s business plan has resulted in the
introduction of many different products. Beginning with Final Cut Pro release, Apple
went on to experiment with music players (mp3), iPhones and iPads.

In addition, Apple has few information technology companies that have created their
own retail shops that proved to be a big turning point for the corporation. This
initiative of establishing its own retail outlets was commenced when Apple realized
that conventional retail outlets are not providing the deserved returns. This move has
given Apple the needed push in succeeding in the mobile industry. Beside this, Apple
has established businesses in many parts of Africa, and Asia. This has consequently
created new employment opportunities for developers of iPhone application in those
continents. Additionally, the corporation has hired individuals from diverse fields, for
instance employed artists, historians, musicians among others which enabled the
company to acquire an unique and different perspective from such individuals. In
2014, Apple ventured into different areas in order to spur growth.

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For instance, it has taken initiatives to cash on a number of different services through
buying other companies. The acquisition of these smaller companies is meant to avail
relevant technologies necessary for Apple to venture into areas of its interest. Apple
acquisition of PrimeSense in 2013 resulted in its working on a 3 dimension based
products. Further, the company has continued to increase its presence in Asia, in
2014.

Apple made an agreement with China Mobile, one of the biggest mobile carriers in
the world. The firm has also join ventured with a number of high profile retail store
chains for service of mobile payment. A mobile payment solution that Apple branded
directly integrates into the company’s iOS devices, allowing individuals to utilize
their iPhone smart phones or other devices in making purchases for physical goods
both on retail stores as well as on the web. iTunes customers can currently utilize
their accounts to purchase items on Apple stores and iTunes, Apple expanded this
feature to third party retailers. This new initiative with retailers aims to solve the
problems behind creating a unified service of payment to be utilized with several
retail outlets. The company is also encouraging the adoption of its Bluetooth based
iBeacons for retailers with the intention of utilizing it as part of the payment service.

3.2 Highlight of main issues

The intention of the this case study is to analyze the strategy applied by Apple Inc,
and propose three year strategic plan for the company based on the findings of this
case study analysis. Although Apple Inc has remained highly successful, it has
continued to face stiff competition from rival technology companies like Lenovo and
Samsung. Some of the main problems the company faces include a declining in its
market share, weakening of its brand name and business image and increased
competition from other information technology companies. Consistent with the
strategic plan, the company will be able to grow and succeed for the next three years
if it intensifies on corporate social responsibility, expanding its operations to
developing nations, ensures product customization and ventures into the developing
nations markets in order to boost its sales revenue.

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3.3 Analysis for Apple Inc.

This case study is conducted to assess Apple’s high performance linked to the
external and internal factors. This study reveals the macro and micro environmental
factors that this corporation must consider to continue with its success. For the
purpose of this study, the data is collected from various published sources and
different case studies conducted on Apple. Two methods of analysis have been used
to review Apple’s business framework. SWOT analysis and internal value chain
analysis and PESTLE to evaluate the factors that affect the company externally.

3.4 SWOT Analysis of Apple Inc.

Strengths

i. Leading innovators among electronics brands


ii. Terrific sales growth with each passing year

2011 2012 2013 2014 2015 2016


Sales Revenue 108.6 155.97 170.87 183.24 231.28 214.23
Cost of Good Sold 64.08 87.92 107.24 112.55 142.26 131.51
Gross Income 44.52 68.06 63.63 70.69 89.03 82.72
Nett Income 25.92 41.73 37.04 39.51 53.39 45.68
Table 3.1 - Annual Financial Report of Apple Inc.
Fiscal Year October – September, all values are given in USD Billion

iii. High brand recognition


iv. Strong and effective marketing team
v. High-quality customer experience

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Weaknesses
i. High price

Apple IOS11/4G iPhone 8, 8Plus Cost £892/$1200


Samsung Galaxy S8 with 64GB micro SD cared Cost £482/$648
Table 3.2 Comparative price for Apple iPhone and Samsung Android Phone

ii. Unsuccessful anticipation


iii. Incompatibility of different OS
iv. Apple iPhone market shares are declining due to defect in its new product
v. Over dependence on iPad and iPhone

Opportunities
i. High demand of products
ii. Growth in communication devices market

Period Apple

2012 Q2 16.6%

2013 Q2 12.9%

2014 Q2 11.6%

2015 Q2 13.9%

2016 Q2 11.7%

Table 3.2 - Worldwide SmartPhone Market Share of Apple

iii. A vast unexplored market in Commonwealth countries


iv. Increased Cloud-based services

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Threats
i. The evolving environment of electronic communication
ii. Reputation damage due to tax scandal
iii. Infringement of intellectual property (IP) rights
iv. Android OS growth

Operating System 2015 Units 2015 Market Share (%) 2016 Units 2016 Market Share (%)

Android 271,010 68.5 243,484 75.6

iOS 48,086 20.2 35,345 18.9

Windows 8,198 9.9 8,9095 4.9

Others 1,229.0 1.4 1,416.8 0.6

Table 3.3 - Worldwide Smartphone Sales to End Users by Operating System in 2015
(Thousands of Units)

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3.5 PESTLE Analysis of Apple Inc.

Political factors
Major sales contribution to Apple Inc. comes from outside US amounting to more
than $113.8 billion whereas the revenue from the home country is $68.8 billion. So
any political insurgence in these countries can affect Apple’s position negatively.

i. Suicide cases against Apple’s biggest Taiwanese supplier


Apple underwent a political pressure as suicides cases were registered against one of
the biggest Apple’s supplier, Foxconn (a Taiwanese company). In May 2010, suicide
cases were filed against Foxcoon holding it responsible for forcing employees to
work for long hours. Two of their workers committed suicide. In another incident, 16
others were injured in an explosion in one of Apple’s supplier facilities.

ii. Political unrest in China


Apple is immensely dependent on the lower labor cost from China. But the unsettled
political environment in China disrupts its manufacturing now and then. As a result,
the manufacturing costs increases. Additionally, there is also an imposed restriction
on Chinese imports in US in order to enhance the manufacturing in America. The
political bonds with the Chinese government have immensely affected this US-based
company. If the company tries to find an alternative for China, it will cost Apple more
and this will lead to increased in prices for Apple products. Due to growing
nationalism in China, Apple could become a potential target for anti-Americanism in
China resulting in reduced market share.

iii. Chances of terrorist attack


Despite the fact that United Kingdom boasts a stable government, there is always a
risk of terrorist attacks. It can leave a negative impact on the company. The current
political challenges in UK and US that Apple might counter may increase the
tensions in the ruling coalition and sagging government popularity.

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iv. Ban on Tim Cook in Russia
A lawmaker in Russia, who is noted for his harsh approach towards gay propaganda,
has made a suggestion to ban Apple CEO Tim Cook from visiting Russia due to his
public acknowledgment of his homosexuality in October 2015.

Economic factors
Recessions and economic crises can affect the company’s revenues negatively to a
greater extent compared to other businesses due to the choice of premium pricing
policies.

i. Impact of global recession


At the time of global recession, Apple had witnessed slow economic growth in 2013
and 2014. Apple has been affected by global recession immensely.

Country 2011 – 2012 2012-2013

US 50% 9%

Europe 31% 4%

China 78% 13%

Table 3.4 - The decrease in sales growth due to global recession.

ii. Europe’s economic difficulties


A change in European economy has directly affected Apple Inc. which has resulted in
decreased revenue by 16% in the third quarter of 2012 compared to the same period
in the previous year (2011).

iii. Increased rate of inflation in US


At the time of increased rate of inflation in US, Apple was affected as it reserved a
large amount of cash. However, hedge fund billionaire David Einhorn sued the
company to force payments of dividends of $137 billion. The cash was used to dole
out the dividend.

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iv. Increasing labor cost in China
China was known to be the hub of the manufacturing factories for Apple, but now the
labor cost in China is rising. The Chinese government decides the minimum wages in
China. It varies from region to region with benefits including housing, food and
overtime pay. But official figures released by Trading Economies reflected that wages
in some areas of Northern Hebei Province increased by 22% last year, while southern
Gaungdong city recorded increment of 5%-17% in wage. The increased labor cost is
directly affecting the cost of Apple products. Notwithstanding, if Apple Inc. decides
for other alternative, it will be an expensive decision to shift its operation else where.

v. Rising value of US dollar


Due to the rising value of US dollar, the exchange rates are increasing. The increased
exchange rates directly affect the cost of Apple products. The difference of between
the US dollar and other currencies like Euro and Yuan makes it more expensive for
Apple to do business in key markets such as Europe and China. Apple’s revenue
could have been 800 points higher. In other words, Apple would report revenue of
$52.8 billion if there is no increase in value of dollars, but it reported acquiring
revenue of $49.6 in 2015.

Social factors
Globalization, has increased the usage of the virtual world and the current lifestyle
are the few factors that leave an enormous impact on Apple.

i. An accessory of high-status lifestyle


Apple is one of the leading company in the world. It is all about brand, it is the name
that people around the world want to carry. This has nothing to do with iPhone and
iMac. The uniqueness, innovation in design, simple marketing of the products and
high price of the products makes Apple products more desirable to its consumers. It is
gradually became a symbol of social status mainly because of its extremely high
prices that only who are higher in class can afford it.

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ii. Potential market place in third world country
Apple can see growth in consumer spending in the coming decades in third world and
Asia countries like Africa and India where people are not aware of Apple products.
The company can penetrate the unexplored market and can harbor new possibilities
of acquiring revenues.

iii. Moral factors of manufacturing in China


Many would not consider this brand based on the social-conscious ground because it
is farming out its manufacturing operations in China, whereas the company can
create some job opportunities in the home country. It is choosing China for its
low-cost labor factor. This could limit the product’s appeal to some extent.
iv. Brand acquisition in many countries
In order to satisfy and fulfill customer’s needs, Apple brand has been making some
acquisitions such as Embark Prime Sense and Topsy and alliances with Sony,
Motorola, Philips, and AT&T. The social background of different brands plays a vital
role in this Apple’s operations.

Technological factors
The stakes of information technology stays higher compared to other industries when
it comes to earning revenues. The companies who innovated with time, earned well
and Apple Inc. is no doubt one of them.

i. The advantage of 760 China Mobile Subscriber


In 2013, Apple unveiled a deal with China Mobile to bring iPhone to customers in a
market dominated by low-cost android smartphones.
The deal gave Apple a bigger entry to the Chinese market and China Mobile’s 760
subscribers. Under the agreement Apple products iPhone 5, iPhone 5S are available at
China Mobile and Apple retail stores in China.

ii. Assessing the consumer’s minds


In 2015, Apple reportedly spent $8.07 billion for R&D that accounted for about 3%
of the company’s net sales. These researches are conducted in order to assess the
customer mind-set considering the short product life cycle of the industry.

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iii. Preferences to screen size
Apple is known for its stunning concept design. It has created some of the finest and
most attractive contemplating designs that cannot be match with other brands such as
Samsung, Nokia or Lenovo. But gradually consumers are giving preferences to larger
screens. Whereas, Apple’s last product iPhone 6 has only 4.7” display, and iPhone 6
Plus has 5.5” screen size.

iv. Competitors offering the same


Apple’s direct competitors Samsung and Google are now offering the products and
services that were once Apple’s signature product. It took Google less than a year to
build payment app Google Pay just like Apple Pay so it is no more a unique product
of Apple. Apple’s competitors showed the ability to replicate its products and services
that can threaten Apple’s brand as a whole.

v. Limited market for new products


The number of consumer products Apple can launch is limited. Moreover, these
consumer products like Apple TV has a very restricted customer base.

vi. The growing menace of cyber crimes


The increasing number of cyber crimes makes Apple systems vulnerable and less
secure for consumers. It actually takes away the most competitive advantage which is
a high reputation for security and safety.

Legal factors
The company operates globally which makes it vulnerable to many legal factors and
litigation in across boarders.

i. Domestic legal stress


Apple is going under a legal stress in its homeland, America. As in previous year, the
company restored the imports of some of its parts used in iPhone that was earlier
banned by US government.

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ii. Offering financial services by Apple Pay
Apple has introduced financial services through Apple Pay. It recently entered the
highly regulated financial sector that could lead to increased level of regulation.
Apple may face increased level of litigation for offering financial services.

iii. Breach of IP laws


Apple produces a variety of brands that are covered by intellectual property laws
such as software and music. Software produced by apple consumes a big part of its
income that makes the company vulnerable to both piracy and litigation.

iv. Entering automobile industry


Apple is making all preparation to enter automobile industry and pushing its team to
begin production of electric vehicles as soon as 2020. This multinational company
has invested $6.04 billion in R&D past years, and CEO Tim Cook is facing immense
pressure to return the money to its shareholders. A lawsuit filed against Apple Inc.
says, ‘Apple has started the campaign of hiring best minds for battery making,
despite the company who is starting from scratch needs more than 10 years to launch
its products. Apple is planning to launch its electric vehicle by 2020’.

Environmental factors
Various environmental factors like disposal can influence Apple’s revenues and
brands.

i. Disposal of used or non-working electronic devices


Apple is countering a massive problem of discarding the electronic junk that is used
or disposal items. The company is facing a huge problem of discarding the
electronics that has lithium batteries in it. It would cost the company some huge
expenses. Apple is forced to incur the expenses associated with the environmental
factor.

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ii. Pollution concern in China
The manufacturing facilities in China are growing concern for Apple because of the
pollution and environmental side effects. To minimize the environmental issues in the
facilities, Apple has to fork out more money and this leads to huge expenses.

iii. Attempt to cut greenhouse effect increases cost in China


China has taken the initiative to reduce greenhouse gasses and limit the fossil fuel
use. This attempt of China could increase the electricity rates in the country.
As a result, it could potentially raise the manufacturing costs for Apple.

iv. Global warming


Due to increasing rate of global warming, Apple could face the problem of
transoceanic shipping that is the core part of Apple chain supply.

v. Increased electricity costs


Apple is vulnerable to increased rates of electricity because of its dependence on data
centers and other internet infrastructure. The company has to shell out more expenses
in its manufacturing facilities.

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3.6 IFE (Internal Factor Evaluation) of Apple Inc.

Key Internal Factors Weight Rating Weight Score

Strengths

1. Leading innovator 0.15 4 0.6

2. Constant sales growth 0.10 4 0.4

3. Brand recognition 0.07 3 0.21

4. Effective marketing 0.10 4 0.4

5. Strong management team 0.05 4 0.2

6. Cloud based services 0.03 3 0.09

7. Quality customer service 0.02 3 0.06

8. Hardware & software creator 0.05 3 0.15

9. Life style fulfillment 0.05 3 0.15

10. New technology application 0.06 4 0.24

Weakness

1. High price 0.03 2 0.06

2. Unsuccessful anticipation 0.03 2 0.06

3. Incompatibility OS 0.05 2 0.1

4. Declining market shares 0.03 1 0.03

5. Competitors treats 0.02 1 0.02

6. New Product Defect 0.12 1 0.12

7. iPad & iPhone over dependence 0.02 2 0.04

8. Higher spending in R&D 0.02 2 0.04

Total 1.00 2.97

Table 3.6 - IFE of Apple Inc.


The IFE Matrix result of 2.97 suggests that Apple is responding above average to the
internal environment for maximising its strengths and to overcome weakness.

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3.7 EFE (External Factor Evaluation) of Apple Inc.

Key Internal Factors Weight Rating Weight


Score

Opportunities

1. Higher demand for product in growing 0.1 4 0.4


country

2. Growth in market 0.1 4 0.4

3. Unexplored market 0.08 4 0.32

4. Cloud based services 0.1 4 0.4

5. Constant R&D 0.2 4 0.4

6. Leader in electronic industry 0.2 4 0.8

Treats

1. Evolving electronic communication 0.1 2 0.2

2. Damage to image 0.0 2 0.0

3. Infringement of IP rights 0.0 2 0.0

4. Growing Android 0.1 1 0.1

5. Competitors treats 0.01 1 0.01

6. Legal Suits 0.01 1 0.01

Total 1.00 3.04

Table 3.7 - EFE of Apple Inc


The EFE Matrix result of 3.04 suggests that Apple is responding above average to the
environment for exploiting opportunities and to overcome threats.

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3.8 CPM for Apple Inc.

Apple Samsung Lenovo


Critical Success Factor Weight Rating Score Rating Score Rating Score
Marketing Strategy 0.20 1 0.20 4 0.80 3 0.60
Product Quality 0.10 4 0.40 3 0.30 2 0.20
Price Competitiveness 0.10 3 0.30 2 0.20 1 0.10
Management 0.10 4 0.40 3 0.20 1 0.10
Financial Position 0.15 4 0.60 2 0.30 3 0.45
Customer Loyalty 0.10 4 0.40 3 0.30 2 0.20
Global Expansion 0.20 4 0.80 1 0.20 2 0.40
Market Share 0.05 1 0.05 4 0.20 3 0.15
Total 1.00 3.15 2.50 2.20

Table 3.8 - Competitive Profile Matrix

3.9 IE Matrix of Apple Inc.

THE IFE TOTAL WEIGHTED SCORE

3.0 2.0 1.0


THE EFE TOTAL WEIGHTED

4.0

3.0
SCORE

2.0

1.0

Figure 3.9 - IFE Matrix

This is the best region for divisions, given their high IFE and EFE scores. The region
that Apple fall under can be described as grow and build, hence the strategy proposed
would be grow and build. Intensive market penetration, market development and
product development or integrative (backward integration, forward integration and
horizontal intergration are strategies can be most appropriate for these division.

Firm Revenue 2017 IFE Score EFE Score

Apple Inc. $269 Billion in cash 2.97 3.04

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3.10 Grand Strategy Matrix for Apple Inc.

Figure 3.10 - Grand Strategy Matrix

Based on above Grand Strategy Matrix, Apple lies under quadrat II which is slow
market growth. For this, Apple should adopt market development strategies and to
hold its existing market share in other markets, it should adopt market penetration
and product development strategies. Some competitive mergers can be very helpful in
establishing the business in the Asian market by using horizontal integration strategy.
Apple is no way at the position of adopting divestiture and liquidation strategies.

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3.11 BCG Matrix of Apple Inc.

Figure 3.11 Boston Consulting Group Matrix for Apple’s products

The above figure is the BCG matrix of product portfolio of Apple divided into four
parts.

1. The Cash cows are products which are existing since ages and which cannot
be challenged in the current market conditions and have a majority market
share when the global data is referred – These are Macintosh, Iphone, Iwatch
(50% market share in 2015) and Itunes (a solid support service to all Apple
products)
2. The Stars are Ipad and Ibooks where there is a lot of competition and Apple
has to invest a lot to keep these businesses on top.
3. The question mark is Apple TV which has low market share in an industry
which is showing great potential and might grow at a rapid pace in the future.
4. The dog is Ipod because although it has a high market share, the industry
itself is rapidly degrowing because Smartphones have replaced Ipods.

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3.12 The Quantitative Strategic Planning Matrix

Strategy 1 Strategy 2
Integrative Intensive
Strategy Strategy

Horizontal, Market
Forward & Penetration
Backward Market &
Intergration Product
thru Development
Strategic thru
Alliance R&D
Key Factors Weight AS TAS AS TAS
Opportunities
1. Higher demand for product in growing country 0.1 4 0.4 4 0.8

2. Growth in market 0.1 3 0.3 4 0.40


3. Unexplored market 0.08 4 0.32 4 0.32
4. Cloud based services 0.1 4 0.4 3 0.30
5. Constant R&D 0.2 4 0.8
6. Leader in electronic industry 0.2 4 0.8
Threats
1. Evolving electronic communication 0.1 3 0.3 4 0.6
2. Damage to image 0.0 3 0 2 0.16
3. Infringement of IP rights 0.0 3 0 2 0.18
4. Growing Android 0.1 3 0.3 - -
5. Competitors treats 0.01 4 0.04
6. Legal Suits 0.01 2 0.02 - -
Total 1.0
Strength
1. Leading innovator 0.15 4 0.6 4 0.6
2. Constant sales growth 0.10 4 0.4 4 0.4
3. Brand recognition 0.07 4 0.28 4 0.28
4. Effective marketing 0.10 3 0.3 - -
5. Strong management team 0.05 4 0.2 - -
6. Cloud based services 0.03 4 0.12 - -
7. Quality customer service 0.02 4 0.08 - -
8. Hardware & software creator 0.05 4 0.2 - -
9. Life style fulfillment 0.05 3 0.15 4 0.2
10. New technology application 0.06 4 0.24 4 0.24
Weakness
1. High price 0.03 4 0.12 1 0.03
2. Unsuccessful anticipation 0.03 2 0.06 2 0.06
3. Incompatibility OS 0.05 3 0.15 3 0.15
4. Declining market shares 0.03 3 0.09 4 0.12
5. Competitors treats 0.02 3 0.06 - -
6. New Product Defect 0.12 2 0.24 3 0.36
7. iPad & iPhone over dependence 0.02 2 0.04 4 0.08
8. Higher spending in R&D 0.02 4 0.08 4 0.08
Grand Total (STAS) 1.0 7.09 5.36

Table 3.12 - QSPM for Apple Inc.

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CHAPTER 4

CONCLUSION AND RECOMMENDATION

4.1 Interpretation of Analysis

After assessing all the factors in SWOT,PESTEL,IFE,EFE and CPM analysis, it can
be seen that Apple has more opportunities and strengths compared to threats and
weaknesses. Given the company’s current leadership in the industry, Apple is in a
position to enjoy these opportunities. But the company should devise few strategies
to address effectively the threats and weaknesses that it recently developed or has
chances of developing.

On the basis of PESTLE analysis, Apple should be able to thrive in electronic device
industry in the next three years in spite of the challenges because it demonstrates an
impressive ability to adopt to a challenging environment. The uniqueness in its design
gives the company a competitive advantage which reflects in their sales and revenues.
Below is the report by John Voorhees, MacStories on Nov 3, 2017 - Apple Q4 2017
Results: $52.6 Billion revenue generated through 46.7 Million in iPhones sales and
10.3 Million in iPads sold.

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Notes from the Earnings Call

 iPhone 8 and 8Plus are 2 most popular iPhone models since its launch in Q4,
2017.
 Services are the size of a Fortune 100 company.
 Highest Mac revenue in history.
 Over 50% unit growth for Apple Watch for third straight quarter.
 Chicago's Michigan Avenue store is the first store that brings together Apple's
vision for Apple retail.
 Revenue in China up 12% year-over-year
 iPhones up 3% over last year with many markets in double digits.
 Apple Pay transactions are up 300%
 Apple Music subscriptions are up 75% with increasing conversions from free
to paid.
 Mac sales driven by MacBook Pro.
 iPad unit and revenue growth are up world-wide.
 Quarter ended with $269 billion in cash.
 iPhone, iPad, and Mac market share increased during 4th quarter in China.
 Tim Cook is excited about AR because it amplifies human performance
instead of isolation and it's mainstream.

As can be seen above, Apple continues to create a very strong overall marketing
strategy for its new products such as iPhone 8, 8Plus, Apple Watch, MacBook Pro
and Apple Pay. The company’s CEO is now excited with his new invention and
mission to India such as Apple Maps, Apple AR improved kit with 4G connectivity
with the rise of Reliance Jio which anticipate to create 7,500,000 iOS developers

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ecosystem-related jobs in India. Tim Cook pointed out that Apple is intrigued by the
concept of ‘sharing economy’ with companies in transportation and accommodation
in India. Another important aspect Tim Cook emphasized was that Apple is working
to improve localization with its upcoming iOS 11. These efforts includes the addition
of Hindi to the operating system along with the introduction of Cricket to its Siri.

This has proven Apple is able to develop a unique product which is tech savvy that
consumers are interested with in a combination of smart phone-music player and
make those customers aware of their product through well managed marketing efforts
and strong publicity. In addition to satisfying consumers with great product, Apple
built a powerful partnership through alliances with other giant companies and
conferred benefits to overseas suppliers of parts and manufacturers. All of these
efforts boosted Apple’s stock price considerably and further solidified Apple’s image
as a leader in consumer electronic gadgetry.

4.2 Conclusion

Ideologically as seen in the findings above, we can summarize that Apple Inc. is an
operating system and user interface company first, hardware company second. Apple
hardware is simply a vehicle for delivering its other creations like user interfaces,
apps and services. Together these components forms a power rich cross platform
experiences that allow Apple users to keep their myriad devices in sync and up to
date while meeting and exceeding the lifestyle of the upper class.

4.3 Recommendations

After reviewing the above analysis, it is clear that Apple has strengths in its
capabilities and resources. It also has a highly talented design teams, many patents,
gifted design engineers and an innovation driven approach.

Conversely, the company operates within an industry subject to rapid changes as key
competitors are constantly introducing new and innovative products that integrate
new designs and technology. In order for Apple to grow and compete effectively in
the next three years, the following strategies based on the key findings of the analysis

27
must be included and implemented in its strategic plan. Some of the areas in the
analysis that must be addressed include Apple’s competitors, infringement of its IP,
decreasing market share and the company’s weakening reputation and image
due to legal suits and tarnishing publicity.

In order to combat competition, Apple must start customizing its products.


Consumers often buy products that appear to match their wants and needs
(Bensoussan & Fleisher, 2012). The most effective means of satisfying a customer
need is by allowing customers to come up with their own product based on their
needs. Through Apple online store, Apple can provide such services where consumers
decide on the specifications of their products, for instance, their desired size of hard
disk for their devices, color and specific applications to be installed on their devices.
Dell and Hewlett Packard companies have adopted similar strategies for their devices
and the idea has been highly successful. Beside customizing its products Apple
should emphasis to its patent rights for all its innovation on productes and services.
This can establish a blueprint and gives way to Apple’s intellectual property rights.

Decreasing market share is another problem that Apple is facing. As noted, Apple has
more than 400 retail stores in 14 states. However, many of these stores are situated in
developed nations with the largest proportion of these stores being in the US (Apple
Inc, 2014). There is a great need for Apple to establish retail stores in developing
and middle-income countries in order to sustain its sales and ensure its market share
does not further deteriorate. Samsung mobile company which is among the main
competitors for Apple in both tablets and smart phones market currently has
established a number of retail stores in developing and developed states. This strategy
has assisted the Apple competitor in becoming the largest mobile seller. In addition,
this strategy has also assisted Samsung in enhancing its position as the leading smart
phone seller in developing countries, as the sales of Samsung’s Galaxy smart phones
have outstripped Apple’s smart phones by around 10 million units in 2014.

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With regard to strengthening its brand name and improving its reputation and image,
Apple should intensify on corporate social responsibility. Corporate social
responsibility are measures adopted by organizations in order to decrease their
adverse impact on the environment and to ensure stakeholder needs are met while
contributing to the improvement of a positive image and a strong brand for the
company (Charles, 2012). Although Apple already has existing schemes of corporate
social responsibility in place, there is need for the corporation to become more
involved in CSR. Some of the activities that the company can get involved in
include building of schools in developing states, developing cheaper Apple Mac
computer models for schools in poor states and donating unsold stocks to developing
countries learning institutions.

The successful implementation of the above strategic plan will be evaluated by


primarily monitoring progress or advancement against the main priorities in the plan.
This strategic plan will be successful if Apple sales volumes and revenues improve as
a result of establishment of retail shops in developing and middle-income countries.
Further, the improvement of Apple image and strengthening of the brand name will
indicate that Apple corporate social responsibility initiatives are successful,
additionally the number of projects established under its CSR initiatives will also be
utilized in gauging this success.

Finally, this strategic plans has to enhance the position of Apple in the tablet and
smart phones market, the achievement of this will be measured by comparing its sales
volumes against its main competitor like Samsung. The leadership of Apple devices
especially in developing countries will indicate the success of this strategic plan.

So it can be said that Apple will continue to be the leader in the electronic industry in
3 years to come if the above strategic plans are adopted by Apple Inc.

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