Strategic Management, A case study of Apple
Strategic Management: A case study of Apple
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Introduction
Apple Company is an American multinational Company which designs and manufactures Consumer electronics and software products. The products include Macintosh computers, pod and the iphone, Pro line laptops, desktops, consumer line laptops, servers, Apple TV and software.
The Company was started by Steve Jobs, Steve Wozniak and Ronaly Wayne in 1976. The Company was initially called Apple Computer Inc but the word Computer was dropped thus reflected the ongoing expansion at the company. Apple has about 35000 employees spread across the world it had sales amounting to over thirty two billion for the period ending September. One of the milestones of the company is the sell of 6.9 million iphones in the first quarter of 2008 (Earnshawon, 2009, pp. 14-20).
The Mission of Apple is to provide guidance to upcoming companies so that they can gain prominence in the Markets and therefore helping the customers realize the success of the company. The Vision of Apple entails the merging of the expertise team of managers with an emphasis on the companies operative structure to foster an increased in its growth and more financial gains (Benner, 2001).
Apple Company has partnered with a number of other companies including Intel this is in the form of Intel based Mac computers this was in the year 2006. It has also boot camp which helps users to install programs that are Windows based. Apple Company exhibits strong cultures in the way that they enhance performance of duties within the organization, these cultures relate to the corporate affairs of the institution, the consumers, suppliers and stakeholders of Apple have also established a culture of acceptance of the company’s product (Wright & Crimp, 2002).
Macro-environment analysis
The Macro environment of the Apple Company hinges around a variety of factors. It is necessary to understand this factors and how they may influence the performance of Apple. One of the factors is political which may influence taxation policies especially on high level companies such as Apple. The issue of taxation is purely government controlled and it may depend with the policies of a political party that is in power. The increase of taxation may reduce the profit margin of a company on the contrary tax cuts may enable the company to realize higher profits (Marr, 2006, pp. 44-49). The policies that influence the actions of Apple Company are formulated, implemented and evaluated by the government especially through the congress and the Presidency. Trade restrictions tend to limit the expansion of the Company’s customers network thus reducing the profit margins that are likely to be achieved. Tariffs are the result of government directives; higher tariffs are disadvantageous to performance of Apple Company (Ramanathon & Hegstad, 2000).
The economic environment relates to the percentage of economic growth either a decline or an incline. The US economy has seen better days and it couldn’t be said to be on the incline, this greatly affects the performance of Apple Company as its products are not readily purchased by consumers. Economic growth will determine the amount of goods and services that are available for use to an individual and the country at large; this therefore affects the consumer base of Apple Company (Marr, 2006, pp. 50).
The Market exchange rate is an economic factor that influences the availability of products at different markets and the cost of purchase this applies to both the local markets and the international markets (Steffens & Ventures, 2009). Inflation refers to the increase in the cost of acquiring certain goods and services in a given period of time while deflation refers to the decrease in the average price of acquiring goods or services, these factors will influence the number of Apples products that can be purchased. In the case of inflation there will be a decline in the amount of purchased goods and vice versa (Benner, 2001).
The social environment of the Apple group basically refers to the type of consumers that the company offers its goods or services and the likelihood of this being altered. In foreign markets especially the emerging economies the users of Apple company products are the elite community; this is not the case in the US and other developed nations. The Consumer base of Apple group in terms of age is averagely. The profits raised in this age group surpasses all other ages (Marr, 2006, pp. 54).
The technological environment refers to the availability of material resources that aid development of appropriate methods to run the programs of Apple. This possibly will include the ipods software’s and other products (Stone, Bigelow & Crittenden, 1999, pp.208-230). The technological know how that is needed to efficiently run the programs that are associated with the company. Any changes that are exhibited in the technological environment will have an impact on the smooth operation of Apple Company (Benner, 2001).
There is need for every company to ensure that their services and goods do not pollute the environment. Global warming is here with us, the way the Apple Company disposes off its waste is of Importance to the whole organization and the country at large (Philip, 2009, pp.12-41). This is the physical aspect of the environment, for Apple to be prosperous there is need to address the issue of electronic waste disposal that goes in line with ensuring environmental sustainability (Bigelow & Crittenden, 2003).
The legal aspect of the macro environment is critical in the attainment of contracts and the advancement of other agendas of Apple Company. Legal disputes are likely to occur and that is where representation for the Apple Company comes in (Ramanathon & Hegstad, 2000). Legal interpretation of aspects relating to Apple Company usually comes up. It is therefore necessary to ensure that the company gets the real picture in order to avoid losses. The Company has been sued a number of times for various reason and it is important hat it adapts to the legal environment (Lawley, 2007: p. 46).
Industry analysis
The strengths of the apple company include the huge profits that have arisen from the sales of the ipods, Macintosh computers and its notebooks. This has raised a considerable amount of money to the tune of 320 million dollars (Philip, 2009, pp.12-41). The brand of a company is the most distinguishing factor in its identity. Apple is branded as the most established and healthy IT organizations in the world. This relates to economic and social environment. The strengths of Apple distinguish it from other Firms.
The weakness that are associated with Apple Company are its faulty screens that crumble under pressure however efforts have been made to correct this anomaly and compensation issued to the affected customers. Early ipods had faulty batteries which could not store power for a long period of time (Derrich, 2007). The company charges less for its music and this is perceived as a commercial weakness in its part as it gives in to music producers. The broken relationship between Apple and IBM has confused Apples consumers as it was said that they were about to switch to Intel. These relates to the stakeholders as at January 2002. The opportunities that are available to Apple are numerous it has the ability to develop its iTunes and music players into a mobile phone format. The high product substitution of electronic products in the market is critical for the technological environment (Benner, 2001).
Internal analysis
Apples Micro environment consists of a number of factors. These are the stakeholders, it is important to value the stakeholders because they provide what you need at the right time, this refers to the products that are needed in the market this also applies to the services, the competitors that are available, and the discontinuities that are in the environment. Identification of stakeholders of Apple’s stakeholders is an important process it helps in the identification of their value proposition more accurately (Lawley, 2007: p. 46).
The most identifiable stake holders are the consumers of the Apples products especially the much younger age which use the ipods, iphones and notebooks. The local community is a key stakeholder and their value proposition should be in tandem to the inputs they have placed in the Company. The Regulator of markets also performs necessary stakeholder functions. Pressure groups can also perform stockholder’s functions as they put across their agenda. Apples company macro environment includes the political, economic, social, technological, environmental and legal aspect (Steffens & Ventures, 2009). The consumers of the products of Apple Company are a part of the micro environment. The consumers of their services include the buyers of their ipods, notebooks and McIntosh computers. Customers also download music from their sites into their music gadgets, it is necessary to therefore understand the needs of different kind of consumers and the challenges they face in the access of the various products. Consumer satisfaction is necessary and should be a top priority for the Apple Company (Lawley, 2007: p. 46).
The suppliers of material resources to the company also form a part of the microenvironment. The materials supplied may be intellectual or physical. The smooth operation of the company is dependent on the timely delivery of these resources making it necessary to maintain good relations with the suppliers (Earnshawon, 2009, pp. 14-20).
Identification of gaps from the analyses
Porter’s framework of analysis basically looks at the threat of substitute products .This directly affects consumers of Apple’s products and services, as alternatives to their products are made available especially by Intel and IBM (Coulson, 2006). The aspects of Porters framework that is evident in Apple include the buyer’s likelihood of settling for the substitute products, other companies offering products similar to the ipod and other products at a cheaper price have actually altered the consumer base of Apple. The threat of entry of new competitors into the market pioneered by Apple has been an issue the management and stakeholders have considered; this will decrease the profitability of Apple. Porter’s framework looks at this aspect in detail and Apple Company has responded to this in a number of ways (Steffens & Ventures, 2009).
It may sound crude but Apple has in a number of times tried to block the entry of competitors into the field by imposing imaginary barriers which may include patent and rights through colluding with authorities. New entrants to the market also have to consider other factors such as economies of product differences, brand equity, capital requirements, absolute cost advantages, learning curve advantages, expected retaliation by incumbents and government policies (Marr, 2006, pp. 47-49). The intensity of competitive rivalry in Apple and other Companies has led to growth of the industry in innovation and marketing. This has made Apple to come up with a variety of new services including the down loading of music into ipods for its users.
Consideration of current strategyThe comparison between the model of The Apple Company with strategy models needs the analysis of certain aspects and how they relate to the decision making process in the organization (Kurtz, 2008). The strategy model advocates for vision, missions and goals, it is upon this that decisions are realized. Apple has all these aspects within its structure, it is therefore necessary to draw this comparison. The resource Based View strategic model has in one way or another been used by the Apple Company. It tends to establish the firms monetary sources and abilities to fund its operations. It also establishes the company property, plants and equipment which have been achieved in the report (Steffen Steffens & Ventures, 2009, pp. 47-57).
This method makes the company achieve control of their resources. The Apple Company has been able to achieve the control of its resources especially the intellectual property that is capable of innovations. This creates a certain effect of a competitive environment in an organization. The resources available at Apple are unique, this is because they are considered difficult to imitate and difficult to substitute, this makes the work of competitors quite difficult. The resource based view has provided Apple with the Competitive advantage that offers the firm above average performance for a long period of time (Asce & Otoyo, 2003: p 25).
The Stakeholder View strategic model takes a critical look at the groups both inside and outside an organization that have clear interest in the decisions made by the company in order to clearly manage stake holders as a means of enhancing strategic management and also carrying out stakeholder analysis (Steffens & Ventures , 2009, pp. 47-57).
Stakeholder analysis involves identification of stakeholders and then evaluating their needs, wants and ideas and also gauging their contribution to the success of an organization. There is need for firms to evaluate the impacts of their actions on stakeholders (Steffens, 2009).
The risks return factors Paradox is an important factor to consider in the study of strategies especially relating to Apple. The expected results between risk and positive outcome is difficult to come across, this is because it is difficult to measure the outcome. This is one of the factors regarding risks in Companies that need to be analyzed. Apple Company has spread it risks in a variety of products thus ensuring that a positive outcome is always achieved (Steffens & Ventures, 2009, pp. 47-57).
There is need to maintain good relations with stakeholders, this can be achieved through enhancing proper communication, negotiations and contracting (Ramanathon & Hegstad, 2000). There is also need for stakeholders to be constantly and properly motivated in order to be eventually beneficial in the performance of the firm. Good relations between a Company and Stakeholders has led to reduced risks for the organization thus, a competitive advantage is acquired by the organization over its competitors (John, 2006, pp.37-48). The clarity that needs to be achieved in making, communicating and understanding of decisions is based on the basic design dimensions of an organization, the strategy model looks at the centralizations, formulization, integration and span of control that organize the human resources of an organization all this are critical for proper dissemination of information. The Apple method is a decentralized kind of procedure thus making it easier for decisions to be made (Coulson, 2006).
System thinking is necessary for the effective performance of a company, it is important the various branches of Apple coordinate in an effective manner in order to make sure that they achieve their goals especially in a complimentary manner, when one system of an a Company fails it tends to bring down the other sections of the organization, the discipline of the various parts therefore comes in handy (Jerry, 2008, pp. 2-14). This is one of the factors regarding risks in Companies that need to be analyzed. Apple Company has spread it risks in a variety of products thus ensuring that a positive outcome is always achieved (Kurtz, 2008).
Synthesis of findings into overall recommendations for the future of Apple
There is need for the Apple Company to secure its future in the business world thus the formation of a future focus strategy. The formation of this strategy begins with the competencies both in the personnel and the products capability. There is need to establish a strategic architecture which basically ensures that the customer satisfaction is achieved in the view of providing the necessary requirements (Duncan & Tarcy, 2000, pp. 22-27).
It is important to emphasize the qualities that go in line with successful strategic management especially among managers in Apple organization. These qualities need constant education and enlightment in line with the changes that are perceived in the environment it is therefore important that the managers and Apple company share a bond and exhibit certain types of characteristics, if not then it will mean that one of the above mentioned to compromise his or her values (Asce, Otoyo 2003, pp. 39-47). There will be need for a manger to reflect the same value as an organization
The strategies that are employed by Apple group need to be flexible; this is because the world that we are currently living in is bound to changes either in the macro environment or the micro environment (Duncan & Tracy, 2000, pp. 24-26). The Vision of Apple therefore has to be broadened to adapt to conditions. There is need for Apple Company to form new roles and relationships among suppliers, customers, business partners and allies in order to produce innovative ideas. Apple Company can completely outperform their rivals only when it is determined by their clients and customers that it can preserve, this therefore calls for strategic positioning of the company. This is based on the customer’s needs, customer accessibility in relation to the products that are offered by the Apple Company (Sunder, 2004).
Indicators provide information to the company on the progress of it products to the market. Financial indicators need to be properly structured in order to show the effects of the economic status in the united status on the purchase and usage of Apple’s company’s products, these will point out the reasons behind poor performance or good performance of a company’s product in the local and international scene (Jay, 2001, p.33-39). Social indicators show the levels of acceptability of Apples product among a certain social group be it in terms of age, financial capability and level of education (Kurtz, 2008). In emerging markets especially in Asia and Africa it is noted that the use of the Apple products is common among the educated and financially empowered. This fact can make Apple improve its usage among all social groups as they can offer cheaper products for the lower market. Indicators therefore need to be properly established as they offer guidance to the Company (Asce & Otoyo, 2003: p 25).
Marketing is a tool that ensures that people especially the consumers are familiarized with a product. Apple Company has arm twisted a number of agencies by providing them with lower rates of pay especially in ensuring that trade shows are successful. Decisions made at the executive level can not be challenged, as much as they may not be favorable to the growth of the company, this has made life difficult and this is a typical method of playing hard ball with the management of the company (Wrenn, et al. 2007). Personnel discipline is a key to the performance of an industry; Apple plays hardball with its workers through its strict ethics and cultures that do not give room to development of personnel through corrections. In the event of 3 disciplinary hitches an individual is dismissed from service. The company has played hard ball with its suppliers, personnel and competitors. This strategy has however led to growth of the Company’s consumer base.
Conclusion
Apple Company has achieved a rare fit in the technology arena; it has been flexible in its management procedure to a level of allowing creativity and innovation, this has resulted to the development of a culture that tends to distance itself from authoritarian kind of leadership.
Apple Company has existed and improved its services and products as a result of the huge profits that they obtain that make them more competitive than other information technology companies. Apple Company has strived to create a brand that is recognized not only in America but the rest of the world; new markets are emerging in Africa and Asia.
The weaknesses of Apple Company have been a source of continuous research on the ways to turn them into profitable methods. The company has endeared itself to its customers especially when they replaced faulty machines free of charge .This has made the company as the most established and healthy IT organizations in the world. The company has contributed to the overall growth of the United Sates economy and the world at large. It has provided jobs to designers, engineers and community development workers. The environmental campaign run by the company has been instrumental in the reduction of the adverse effects of global warming. It has also laid out policies that have attracted admiration especially on electronic waste management and disposal.
References
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AppendicesAppendix 1: Macro-Environment Analysis of Apple
Factor Issue Impact Growth Effect
Political / Legal The issue of taxation reduces the profit margin of Apple.
Trade restrictions tend to limit the expansion of the Company’s customers network thus reducing the profit margins that are likely to be achieved.
Higher tariffs are disadvantageous to performance of Apple Company.
Taxation
Trade protection. –
–
–
–
+ Negative
Economic US product (affects the performance of Apple Company).
Economic growth (determine the amount of goods and services that are available for use to an individual and the country at large, this therefore affects the consumer base of Apple Company).
Market exchange rate (influences the availability of products)
Inflation/ deflation
Interest Rates
Globalization
Global Financial Crisis (GFC)
Competition –
–
+
-/+
–
–
–
– Negative
Socio-Cultural Legal disputes
Workforce attitudes
Management and leadership
Work place relations –
+
+
+ Positive
Technological Alternative products
Production systems/methods
Materials and Compounds
Durability and strength
Globalization
E-commerce
Technology advancements –
+
+
+
–
+
– Positive
Environmental Accessibility of some places
Import cost
Trading environment
–
–
– Negative
SWOT analysis
Strengths a). Technical know-how (made possible by the company when it displays its skills and enthusiasm to different potential customers)
b). Financial vitality (funds are always stable and strong regardless of whether the market is dormant or not).
c). Brand loyalty (the company brings in unique brands to the customer base thus making it extremely difficult for other companies to imitate its brands).
d). Extensive promotional strategies (have enabled the firm to acquire a strong foundation on the levels of its brand awareness)
Weaknesses a). Market share (the company experiences external pressures and challenges which in due course forces the company to utilize a lot of cash trying to reach the market demands).
b). Steve jobs
c). Slow expansion
d). Small market coverage
e). Small range of products
f). Very fragile relationship of Apple with the major technology providers such as Intel and Microsoft.
g). Early ipods had faulty batteries which could not store power for a long period of time.
Opportunities a).Consumer electronics (Company engaged its customer electronics market by enlarging its tunes notion to aspects which can be downloaded)
PC hardware.
b).Achievement of steadiness and loyalty in their business functions is a good opportunity, an effort that the original company fell short of.
Threats a).Legal risks (The joining of operating systems and software correspondences makes it easy for other companies to do imitations hence possible lawsuits can not be prevented).
b)Competition
c).Technology advancements
d).Introduction of fresh products into the market
e).Globalization
f).Variety of internet enabled websites which offer downloading of music, images and video footages for free.
Competitors Competition Mode Effects Effects o Apple’s Product’s marketing
Microsoft Lower priced computers and also similar product to Apple Inc. The two companies proved great menaces for Apple that it had to redefine its strategies as far as market competition is concerned. They offered similar products as Apple thus introducing what is called atomistic competition. This kind of competition had a resultant reduction in the prices of products simply because the customers now had alternatives and that they could not rely on one producer monopolizing the market. Negative
IBM Similar products as Apple company Negative
Competitors’ analysis
Competitor Financial performance Market position Technological performance Service performance
Microsoft Good Good Good Better
IBM Good Good Poor Good
Other Companies n/a Average Poor n/a
Competitors’ analysis
The following table indicates the performance of these companies in comparison to those of Apple Company. The table looks at the various aspects of the competition such as the market capital, the number of employees that are working for a certain company, the net returns, gross margin and other factors relating to the competition.
SHAPE 00AAPL DELL HPQ MSFT Industry
Market Cap 116.39B 21.77B 82.88B 181.69B 21.17B
Employees 32,000 76,500 321,000 91,000 32.00K
Qtrly Rev Growth 8.70% -16.00% -3.20% -5.60% 6.50%
Revenue 33.69B 61.10B 117.79B 61.18B 33.69B
Gross Margin 35.15% 18.17% 23.37% 79.67% 22.83%
EBITDA 7.21B 4.24B 14.96B 26.21B 4.24B
Oper Margins 19.67% 5.69% 9.13% 38.78% 5.59%
Net Income 5.02B 2.48B 7.71B 15.82B N/A
EPS 5.555 1.248 3.097 1.737 1.25
P/E 23.49 8.94 11.18 11.75 22.05
PEG (5 yr expected): 1.29 0.9 0.83 1.12 1.29
P/S 3.24 0.35 0.69 2.87 1.48
AAPL DELL HPQ MSFT Industry
Market Cap 116.39B 21.77B 82.88B 181.69B 21.17B
Employees 32,000 76,500 321,000 91,000 32.00K
Qtrly Rev Growth 8.70% -16.00% -3.20% -5.60% 6.50%
Revenue 33.69B 61.10B 117.79B 61.18B 33.69B
Gross Margin 35.15% 18.17% 23.37% 79.67% 22.83%
EBITDA 7.21B 4.24B 14.96B 26.21B 4.24B
Oper Margins 19.67% 5.69% 9.13% 38.78% 5.59%
Net Income 5.02B 2.48B 7.71B 15.82B N/A
EPS 5.555 1.248 3.097 1.737 1.25
P/E 23.49 8.94 11.18 11.75 22.05
PEG (5 yr expected): 1.29 0.9 0.83 1.12 1.29
P/S 3.24 0.35 0.69 2.87 1.48
DELL = Dell Inc.
HPQ = Hewlett-Packard Company
MSFT = Microsoft Corporation
Industry = Personal Computers
SHAPE 00Company Symbol Price Change Market Cap P/E
International Business Machines Corp. IBM 105.52 3.56% 139.43B 11.71
Hewlett-Packard Company HPQ 34.62 1.41% 82.88B 11.18
Dell Inc. DELL 11.16 2.86% 21.77B 8.94
Cisco Systems, Inc. CSCO 18.55 3.63% 107.68B 15.52
Xerox Corp. XRX 6.95 2.51% 6.01B 11.94
Sun Microsystems Inc. JAVA 9.04 0.44% 6.75B N/A
Seagate Technology STX 8.73 3.44% 4.29B N/A
Apple Inc. AAPL 130.47 6.51% 116.39B 23.49
NCR Corp. NCR 10.75 2.38% 1.70B 10.65
EMC Corporation EMC 12.0201 3.53% 24.20B 19.29
Company Symbol Price Change Market Cap P/E
International Business Machines Corp. IBM 105.52 3.56% 139.43B 11.71
Hewlett-Packard Company HPQ 34.62 1.41% 82.88B 11.18
Dell Inc. DELL 11.16 2.86% 21.77B 8.94
Cisco Systems, Inc. CSCO 18.55 3.63% 107.68B 15.52
Xerox Corp. XRX 6.95 2.51% 6.01B 11.94
Sun Microsystems Inc. JAVA 9.04 0.44% 6.75B N/A
Seagate Technology STX 8.73 3.44% 4.29B N/A
Apple Inc. AAPL 130.47 6.51% 116.39B 23.49
NCR Corp. NCR 10.75 2.38% 1.70B 10.65
EMC Corporation EMC 12.0201 3.53% 24.20B 19.29
Power of buyers Reason Marketing effects EFFECT MAGNITUDE and Recommendations
Variety products There are numerous products produced by Apple and hence bigger market share has been maintained. + LOW
Should further increase number of prod