Strategic management, Apple Inc.
Strategic management: A case study of Apple Inc.
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Description: A guide on how to write a strategic management paper taking a case study of Apple Inc.
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TABLE OF CONTENTS PAGE
Introduction…………………………………………………………….. 3
Environment Analysis of apple ……………………………………….4
2.1 Apple’s Inc Macro environment………………………….………..4-5
2.2 Swot analysis Of Apple Inc.……………………………………..6
2.3 Apple’s Inc Micro environment………………………………….7-8
2.4 Porter’s parameters of Apple Inc………………….….…………9
3.0 Apple’s Company Profile………………………………………………..10-11
4.0 Apple’s Inc business line………………………………………………..11-12
5.0 Apple’s Inc Market share……………………………………………..12-13
6.0 Apple’s Inc Performance…………………………………….……….13-14
7.0 Apple Inc Industrial competitors……………………………………..15-16
8.0 Apple’s Inc Financial reports…………………………………………16
9.0 Apple’s Inc Organizational structure………………………….………18-20
10.0 Hard ball strategies……………………………………………………20
11.0 Recommendations for Improvement of Apple Company…………….22-23
12.0 Conclusion…………………………………………………..……….23-24
13.0 References……………………………………………………………25-27
Strategic management: Apple Inc.
Introduction
Apple Inc is a company that deals with the manufacture of a number of consumer electronic products. This may deal with a variety of software and Hardware. The Company exists in a competitive environment; it is in constant competition with IBM, Intel and other Information technology companies, it is therefore necessary to understand the environment in which the company thrives that is the micro and macro environment.
The performance of the company has been great as a result of the quality of products they release into the market. This has uplifted the stocks related to information technology companies thus being of benefit to other companies. The company has seen its market share improve over the years as evidenced by reports and other types of data. Apple Company exists in an evolving environment. The company therefore has to continually change its mode of operations in order to remain competitive. This is done through continually evaluating the micro and macro environment.
The decision making structure of the Company is key to its development and expansion. The structure adapted by the company offers the lower levels managers a chance to analyze their needs in relation to their various zones thus making the appropriate decisions. The company faces various challenges in form of industrial competition. The competitors include IBM and Intel. The relationship between Apple Inc and Its Competitors is vital to its survival. The Company has always adapted recommendations that have been put in place by various task forces.
.Environment Analysis of Apple
2.1. Apple’s Inc Macro environment
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.
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. 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.
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 (12-47).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 is associated with the company. Any changes that are exhibited in the technological environment will have an impact on the smooth operation of Apple Company.
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.
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. 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.
2.2 The SWOT analysis of Apple Company
The strengths of the apple company include the huge profits that have arisen from the sales of the I pods, 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” (Collett, 1999).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.
2.3. Apple’s Inc Micro environment
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.
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. 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.
The management of Apple Company is an important micro environment that is necessary in order to achieve the success that it needs. The Chief executive officer of Apple who is the President is responsible for overall policy work relating to the company; under him are general managers who direct and coordinate functions that relate to the organization Departmental heads also form part of the management of the organization. “It is necessary to integrate management functions into the overall performance of the organization” (Ramanathon & Hegstad, 1982, pp. 23-56)
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).
2.4 Porter’s parameter analysis of Apple Inc
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. 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.
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.
Porter portrays that the customer is an important aspect of the micro environment, the bargaining power of customers puts the Apple firm under a lot of pressure this is due to the fact that customers are more sensitive to changes in the price. The bargaining power of customers brings into focus the buyer concentration ratio. The apple company has established that buyers are more concentrated around urban areas especially in places outside the country and the aspect of dependency on the prevalent existing channels of distribution. The consumers of Apple Product purchase them Marjory from local stores; buyer volume is properly documented in this case clearly showing the number of buyers and buyer information availability.
Suppliers also make up the microenvironment, they supply the raw materials to the Apple Company, and these may include computer chips, connection wires and other materials. They also provide labor and expert services. Suppliers in a number of cases have refused to work with the Apple Company in order to blackmail them into higher rates of service; this has made the Apple Company search for other sources of the requirements. The Key aspects of supplies that need to be looked into according to porter are supplier concentration to firm concentration ratio, employee solidarity (e.g. labor unions).
Apple’s Company Profile
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, software.
The Company was started by Steve Jobs, Steve Wozniak and Ronaly Wayne. This was in the year 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.
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.
The culture owned by the apple company tends to enables the control of the organization as it establishes the norms and conduct of employees within the organization. Apple labor practices have evolved over a long period of time, there is a time when the company had 200,000 workers who lived and worked in the factory, the workers regularly doing more than 60 hours in a week making 100 dollars per month, this has considerably changed and the workers are more satisfied with their pay. The living conditions have also improved. The strategies that Apple has applied in order to deal with the developments in the new world are numerous; they include rigorous advertisement in line with constant consumer education and enlighten. This clearly shows the effort that has been made by the company in improving its performance.
Apple’s Company business lines
Apple Company has a variety of business lines, the most successful being SBU with direct consumer products in the environment. Apple also provides SBUs in line with its objectives and goals to the consumer. Its SBU has become an important commodity in the market, The Apple Advantage SBU as it is commonly known is dedicated to offering sales, technical and product management resources. Apple line SBU enables efficiency in Apple products and also provides access to hardware, software and service offerings. The SBU ensures professional audio/video installations and key aspects of the health care system
The Apple base SBU recruits additional vendor business partners to ensure that those who resale the products required to sustain the latest most profitable Apple based solutions.
The Apple SBU makes it possible for the distribution of Apple products which entail desktops, notebooks, storage, ipods, accessories and software. The company ensures the efficiency of this strategy through training of the people and institutions that need to use the facility. (Jay, 2001, pp 31-36).
The current products of the Apple Company in more detailed analysis include the Mac and its accessories which are the Macmini, iMac ,Mac Pro,workstation,Macbook,MacBook Pro and Mac Book Air. The Apple TV is a good innovation from the Apple Company. It is a set top video device planned to overpass the sale of the content from the itunes. The device syncs either a wifi or a wired network, with ones computer’s I tunes library.
5.0 Apple’s Inc Market share
The market share for the iphones has grown tremendously from 5.3% in the first quarter of 2008 to 10.8% in the first quarter of 2009. “In terms of unit sales, Apple moved from 1.7Million in the first quarter of 2008 to 3.9 million during the same period in 2009.Its blackberry market share rose from 13.3% in the first quarter of 2008 to 19.9% in 2009.The company’s unit sales grew from 4.3 million to 7.2 million over the same period” (Steffens & Ventures , 2009, pp. 47-57).
Apples Macintosh market shares latest news shows that Apple shares have soared to 16% this has been facilitated by the ever increasing shipments of Macintosh computers; Apple has quieted its Intel transition detractors by posting double-digit market share increases.
The Operating systems that are used by Apple have seen net climbing; this has been good news to its users throughout the world. Reports indicate that Apple has a 9.93% share of OS users for January of 2009 up from 9.63% the previous month. Windows OS market shares measured 88.26% in January, dropping slightly from 88.7% in December .The organizational structure of Apple ranges from the CEO.This is the top most level of management; it is then followed by the worldwide product marketing manager then the SVP ipod division, software engineering, Design, Applications and General Counsel. The vice president in charge of various regions is also present. “National accounts manger follows then Market source program manager, National programs manager and then the Account executive” (Earnshawon, 2009, pp. 14-20). The Apple online sore manger follows suit then the telesales director. The other unmapped individuals are also present.
6.0 Apple’s Inc Performance
Apple performance in the last few years has been very good; this is in relation to the industry sector growth and the competition that comes there hence. In the 3 years prior to 2007 ipod had been out of circulation but it came back with such authority in the market, it was prior to this described as a fad. In the last quarter Apple shipped more than 21 million ipods, this made everyone want to have one. In the US market the ipod grew at 31%versus market growth of 3%.Apple success can be attributed to its approach in doing business, this approach is more candid and loyal, this is in contrast with other companies which deals with the direct company method. “The amount of resources that have been spent by Apple in Research and development is quite considerable; Apple spent 491 million dollars on market research. Apple spent a considerable amount of money in the development of a product line up” (Molten, 2007).
The rise of Apple’s has been critical in its success especially in the United States. In September 24, the US stocks gained and this was led by the Apple Company. Apple gained $1.49 to $149.15; this made the city analyst Richard Gardner raise his 2008 and 2009 profit estimates and boosted his share price forecast to $185 from$160 rating on the stock. This clearly shows the extent of Apples performance on the market (Steffens & Ventures, 2009, pp. 47-57).
Apple Company on a number of times has given the chip sector a boost, the market watch reports that technology stocks gained in one of the Tuesday this is because of a boosted run up in semiconductors from the Apple group. Apple shares were trading up 3.6% at$126.91.This made the price target on the stock to be raised to $180 from $105.The activity of Apple brought about benefits to the rest of the sector including NASDAQ Composite Index which was up by 0.8% and Morgan Stanley High Tech Index (MSH) rose nearly by 1%.This indicates the “success exhibited by Apple and the resultant effect on other technological companies” (Gallagher, 2009).
The performance of Apple Company can be gauged by the performance of the ipod touch gadget, the sales have doubled over the last 12 months from this year April, and this is because it has attractive game titles and other features. Apple offered data that clearly indicates the success of its gadget due to enormous sales, its important to note that Apple normally does not produce these details in view of the competitors. A t the end of 2008 there were 30 million multitouch users.
7.0 Apple’s Inc Industrial competitors
The Competitors of Apple Company have played a critical role in keeping the company on its source in order to make it achieve its objectives in the modern world. “The analysis of competitors in the market is a necessary tool for the development of Apple Company” (Gallagher 2009). 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 00COMPUTER HARDWARE (US) RANKED BY SALES
COMPUTER HARDWARE (US) RANKED BY SALES
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
This table has been retrieved from Apple Inc.AAPL site ( HYPERLINK “http://finance.yahoo.com/q/co?s=aapl”http://finance.yahoo.com/q/co?s=aapl)
8.0 Apple’s Inc Financial reports
The financial reports that have been released by Apple on the month of April 22nd indicate that the$8.16 billion revenue was posted and a net quarterly profit of$1.21 billion, or $1.33 per diluted share. The Gross margin was 36.4% it had rose up from 32.8% in the year ago quarterly. The sales outside the United States of America constituted almost half of the sales recorded by the company. The decline of the sales of the Macintosh computers reduced by a small percentage and this is attributed to the slump in the US economy that has led to the workers shying away from the purchase of the products. The Company however sold more ipods than the ones that had been sold the previous year. The quarterly iphone sold were 3.79 million representing a considerable amount of growth. (Press release dated 22nd April 2009)
9.0. Apple’s Inc Organizational structure
The Apple decision making system of the Apple Company has its highest level in the board that basically ratifies all the decisions that the company makes. The decision making structure at Apple is more decentralized. The President makes the overall decisions regarding implementation and evaluation of policies that have been recommended by the various teams.
The vice presidents who are in charge of the various locations around the world only receive general guidelines for policy implementation within their region which they implement.
There exist a number of functionalities and departments at the Apple Company; these are headed by their respective managers, “it is therefore necessary to understand the roles that are played by the various heads of the departments especially relating to efficiency within the organization” (Steffens & Ventures, 2009, pp. 47-57). The mangers worldwide product marketing manager makes decision relating to creation of awareness in the market this may include aggressive advertisement and promotion. The leader of the ipod division makes the necessary decisions concerning structural division of his area. The managers in other areas perform critical functions relating to their area.
The 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. 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.
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).
Stake holder 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 com
