(Solution) Strategic Management - Assignment

TASK PERFORMANCE
IN
STRATEGIC MANAGEMENT
Submitted By
Bolanos, Ehya
Espejo, Regine
Lisano, Aliyssa
Maupoy, Abegail
Tasin, Yvan
Submitted To:
Honey Christine Rose Enrique

APPLE INC.
I. Company Background
a. Current performance
Strong financial results for its fiscal 2010 first quarter; no debt.
• Best quarter ever, recorded $15.68 Billion in revenue
• Reported $3.38 billion net revenue .
• 283 retail stores in 10 countries.
b. Strategic posture
A. The company designed, manufactured, and marketed a ranged of
personal computers, mobile communication and media devices, and
portable digital music players, and sold a variety of related software,
services, peripherals, networking solutions, and third-party digital content
and applications.
B. the company was committed to bringing the best user experience to
its customers through its innovative hardware, software, peripherals,
services, and internet offerings.
C. the company participated in several highly competitive markets,
including personal computers with its Mac computers; mobile
communications and media devices with its iPhones, iPads, and iPods
product families.

Mission:
A mission statement globally defines what business an organization is
in now and objectives of the organization. It is the fundamental factor
of a strategic plan. A mission statement can verbalize the beliefs and
the directions in which a visionary manager wants to lead an
organization. In general, mission statement address issues more
explicitly, and can also serve to identify what is unique about the
character of the organization.
Vision:
Over the past, Apple has recorded a recommendable performance
through invention and reinventions. The company is committed in
providing best computing experience to the users including educators,
creative professionals, students as well as the other consumers from all
over the world (Brainmass 2004). The company has managed to realize
this by providing high quality software, hardware, and internet offerings.
Objectives:
 To have good profit building with the help of maximizing profit.
 To become the world's admired and first company.

 To increase the market price and share of the company.
 To becomes the leading business organization in mobile and
computer market with the help
of Research and Technology, Administration of the company and
from the support of the
consumer.
 To be called as a unique brand in the world.
 To invent new technology this has all latest and useful software for
the benefit for the
 customer all over the world.
 To produce user friendly product for the customer so that they
cannot find difficulty to
 operate.
 To start more selling with the help of distributing channels.

 To widen the market and start to diversify into new market of
Automobiles.
 To give better quality product to the customer.
 To focus on the group of people who has never used Apple
products before.
 Always compete and sustain in the market from the competitors.
II. External Environment
a. Porter’s five forces
Threat of new entrants - The technological market is one that requires
high investment, especially in developing competitive R&D capabilities.
Comparing that with apple's superior technological capabilities, it would be
extremely difficult for a new entrant to come into the industry and compete
with Apple on this basis. Also, if a competitor tried to compete on the basis
of cost, there are several players in the industry who do so already. This
would not affect Apple materially due to their strategy of differentiation.
Apple retains its customers based on brand loyalty, not low costs. Also in
the technology industry, consumers prefer a well-known brand over new
ones, as these products are generally more expensive than commodity

items. Unless a new entrant develops a truly revolutionary product, which
would in turn require high investments, the threat of new entrants remains
low due to the high entry barriers into the industry.
Threat of substitutes - In terms of substitutes, some of apples products
are under this threat. A major product is the iPod. With devices being
increasingly integrated, cellphones and tablets come integrated with a
music player. This even holds true for apples own products. Apple‟s own
products can sometimes be substitutes for each other. Apart from that, its
iTunes software is under the greatest threat because there are various
other options than paying for media, and no one would pay for music and
videos if they are able to obtain them for free.
Bargaining power of buyers- Buyers in the technology industry have a
variety of options when making decisions. There are products in the
market that compete on cost, and products that charge a premium price
on the basis of differentiation. Since apple employs a differentiation
strategy, it is largely immune to this power. However, apple's prices are
only slightly above the industry's, due to an increasingly price sensitive
environment during the recession. Because of this, even its loyal
customers would not be able to afford its products if they were priced
above a certain premium.

Bargaining power of suppliers- In the case of Apple, which is currently
the most valuable brand in the world (Telegraph, 2011); suppliers are
eager to count Apple among its customers. Therefore, there are not
suppliers strong enough to pose a threat to Apple. Apple has two kinds of
suppliers. For its standard products, Apple purchases components from a
variety of suppliers. This puts them in direct competition with each other to
offer the best prices for a customer as valuable as Apple. For its custom
products, Apple either creates strong relationships or partnerships with its
key suppliers. Since apple focuses on high quality products, even if the
supplies are expensive, they are able to absorb these costs into the price
of the product. Thus, Apple is not greatly affected by the power of
suppliers.
Rivalry- This threat is a major one in the technology industry. There are
several players in the industry, who compete both on the basis of cost and
differentiation, and directly with each of Apple's products. Big industry
names such as Microsoft, Google and RIM all have brand names, and this
is threatening to the Apple brand on the whole. An example of the intensity
of competition can be seen as Apple overtook Google this year as the
most valuable brand in the world (Telegraph, 2011). With Google being at

the second position, Apple can expect to face stiff competition as they
fight to regain the number one spot.
III. Internal Environment
1. Marketing, 4Ps
a. Products Former CEO Steve Jobs of Apple has always maintained that
the first and most important of the Apple is creating innovative and
attractive products that are outstanding the customer’s expectation. Apple
always understood that the product is most important factor in the 4 Ps.
Apple's iPhone is revolution in mobile technology. Apple’s iPhone is
combination of working and multimedia entertainment. Besides, iPhone
allow customers to surf the Internet and push e-mails... So, iPhone is
collection the necessary features and advance technology in order to fulfill
anything that customers need. iPhones aim to enhance the interaction by
using a touchscreen interface. Everything is controlled by a touch screen.
In addition, Apple's iPhone was designed very clearly and beautifully.
Considered that iPhone is the perfect combination of design and
technology.
b. Promotion Television commercial, online ads and print advertisements
campaigns have been successful in promoting the Apple’s products and
services. Apple has a branding strategy that is emotions’ focused,

humorous and simplicity. The ads theme is about lifestyle; innovation,
imagination and aspiration. In addition, Apple has a secretive strategy
concerning new products or services in order to create suspension and
curiosity. Apple usually organizes press conferences to unveil the new
products. However, before the press conferences, they do many different
things to catch the special attention of customers. Actually, it is observed
that every new coming model always appear scandals before their official
introduction. Last but not least, the sales force at Apple Stores is trained
well so that they can increase the customer experiences, therefore
gaining more customers.
c. Place Apple has expanded the reach of the consumer in the form of
hundreds of new retail stores that it owns and operates all over the world
in the past ten years. It also has put everything from the iPhone and in
any shops selling electronic devices these days. Apple also apply the dual
distribution method, in which they create Apple Stores to offer products to
customers. Apple Stores are designed uniquely and professionally that
they can enhance the customer experiences when they come to see the
products.

d. Price The price was never one of the competitive advantages of Apple.
Prices of iPhones range from $549 to $749 for world edition. The price is
worth what the iPhones’ values bring to customers, including nice-design,
simplicity and convenience.
e. Findings:
The most important factor deciding the success of Apple’s marketing mix
is their products. Their products are perceived as the number one
smartphones in the world. The well-designed, simple, efficient with “best
of the best” innovative technology iPhones contributes to the great icon of
smartphone. In addition, advertising and using sale forces effectively help
promote iPhones to customers. Apple knows exactly how to raise curiosity
of customers before introducing the new products. This create good effect
for the promotional strategy Besides, the successful chain of Apple Stores
is also one of the parts supporting the success of Apple. The high
focused- customer service and well-design, spacious Stores increase the
customer experiences when customers come to visit the stores. Finally,
prices are not the key indicator of Apple’s iPhones. Thanks to the perfect
combination of functionality and designs, Apple charge a little high.
2. Operation
One thing that is absolutely takes part in the success of Apple is its
efficient operating system. Apple implemented operational management

as a competitive weapon. Therefore, Deep analysis about Apple’s value
chain will give some better understanding about the company’s operation
management.
a. Technological Development
Apple spends a really big amount of money on its Research and
Development in order to push innovation further then stay ahead of
competition. According to figures published in Apple’s 2012 annual
report, R&D expenditure hits 3.4 billion US dollars which is nearly
40% increase than 2011 (apple case study 14). Apple as well
protects its invention and innovation worldwide by filling patent.
b. Inbound Logistics
Apple has a partnership with OEM in order to reduce development
time, production, material and manufacturing costs. However,
Apple supervises the entire process to control its quality.
c. Production
Apple outsourced to various Chinese manufacturers with strict
requirements so that they can reduce the labor cost and eliminate
the burden of production management. Apple, also, cooperate with
other companies including HP and Samsung. Furthermore, Apple
designs its products in-house to eliminate production cost.
d. Outbound Logistics

Apple’s products are being delivered directly to its retail stores
around the world to minimize inventory cost. To trim down shipping
costs, Apple’s designing team developed packages that are slim
and light yet productive
3. Apple Financial Analysis
a. Ratio Analysis
 Profitability:
The gross profit margin was maintained stably, which was around
40%. Apple acquired the biggest GPM in comparison its
competitors (Samsung 32%). Thanks to the efficiency in cost
management as well as the stable growth in sales, ROE of Apple
were healthy and kept increasing from 29.3% in 2010 to 33.8% in
2011. Apple’s ROE is medium in comparison with its competitors
(HTC was around 60%).
 Efficiency: Inventory turnover was much improved from 52.51 in
2010 to 70.53. The increase in efficiency ratio, going together with
the strong increase in sales shows the much efficiency in inventory
management of Apple. Also, the increase in asset turnover from
1.06 in 2010 to 1.13 in 2011 shows the improved effectiveness of
Apple in generating revenue over its total assets.
 Liquidity:

Apple showed that they were one of the best companies in liquidity
through the outstanding current ratios 2.01 in 2010. However, this
number decreased slightly to 1.61 in 2011. Apple’s performance in
quick ratio was also impressive. Quick ratio was 1.72 in 2010 and
1.35 in 2011.
 Leverage:
Apple is the company which has no debt in their report. Therefore,
the debt/ equity ratio is 0. Most of their liabilities are Current liability,
which includes Account payable, Accrued expenses and Deferred
revenue. The total current liability was $27,970 in 2011.
b. Common-sized analysis
2010 2011
Revenue 100% 100%
COGS 60.62 59.52
Gross Margin 39.38 40.48
SG&A 8.46 7.02
R&D 2.73 2.24
Other - -
Operating margin 28.19 31.22
Net income 0.24 0.38
EBT margin 28.42 31.6

The operating expenses were kept efficient and stable. The operating
expenses took
about 10% of net sales. This shows the efficiency of Apple management in
controlling
costs. However, the R&D expense increased significantly about 36% to
$2.4 billion in
2011 compared to 2010. This investment shows Apple really focused on
the innovation
of products.
IV. Corporate level Strategies
Apple has a diverse portfolio of products in different industries:
- The computer industry, and as an extension of that, the tablet pc segment.
- The cell phone industry
- The mp3 players and music
- Operating systems
- Other hardware
Its product portfolio consists of:
- iPhonE
- iPad

- Mac Hardware Products
- iPod
- iTunes
- Mac App Store
- iCloud
- Software Products and Computer Technologies
- iOS
- Mac OS X
- iLife
- iWork
- Other Application Software
- Displays & Peripheral Products
- Apple TV
Hardware components and supplier sharing – While all of these are different
industries, they come under the broad umbrella of the IT industry. This is why,
several of the hardware components and their suppliers are common between
these products.
Apple iOS sharing- Also, one of Apple‟s main strengths is its advanced
operating system. One of the reasons it is so successful is that, no matter which
Apple product you buy, the same operating system is integrated into these
products with slight modifications so that it is compatible with the respective

hardware. This is not only a strength in terms of co-ordination between its
devices, but it also helps Apple reduce costs by saving the expenses of coming
up with different types of software for its products. This iOS is its core
competency, and Apple produces products with enable it to be used and
transferred between its different products.
Shared marketing strategy- Whenever a new Apple product is launched into
the market- be it a smartphone or a tablet PC- the reason Millions of people rush
out to buy these products is not because they know much about the product
themselves; rather, it is the brand that they are purchasing. The Apple brand is
synonymous with the latest technology, the sleekest design and the most
innovative of products. Therefore, when Apple decided to foray into the
smartphone market, consumers did not wait to see whether Apple could meet the
needs of the market. They were confident that if it were an Apple product, it
would be up to the mark. This just goes to show the strength of Apple‟s
centralized marketing strategy, which covers all its products under one central
theme, which represents the overall brand. Apple has integrated all of its
products to provide the highest levels of compatibility between them. With
products such as Apple TV, where you can stream videos directly from your Mac,
iPod, iPhone or iPad, to other accessories designed specifically for Apple users,
the brand promotes an entire lifestyle around its range of products.

V. Analysis of strategic factors
a. SWOT ANALYSIS
Strengths
According to (Wharton, 2012) The first and foremost strength of Apple Inc. is
its technological edge over its competitors. IPhone have turned out to be a
great success and has been associated with status in many of the countries.
ITunes has turned out to be a wonderful revenue generating source and since
it also sells with its own tool i.e. the iPod, thus, revenue has multiplied for
Apple Inc. Another strength for the organization is that for every software that
Apple Inc. produces, it introduces its hardware with it too, which leads to its
expertise in both the industries. Apple Inc. products are classified as luxury
items, thus its products provide enough room for it, so that the competitor
products are no longer a competition. The another strikingly advantage over
competitor’s products, is the design of the Apple products, and which are also
simple to use. The brand loyalty of its product and its super dedicated
research and development department are also its major strengths.
Weaknesses
Weaknesses are the disadvantages that are hindrance in obtaining the
business goals for the organization. The poor relationship with the market
than Microsoft is surely a disadvantage to Apple Inc. Another point could be
that the products introduced by Apple Inc. have very short life cycle, which

concludes that the research and development department has to be
constantly maintained, which requires huge capital. Apple Inc. has very low
presence in the advertisements, and also it has very small market occupation
as compared to its main rival Microsoft. Thus, all this leads to the fact that
Apple Inc. gets very less business from its home country US, and major of its
business is from outside the US.
Opportunities
According to (Marketing teacher, 2012).Opportunities can affect both the
present as well as the future condition of an organization. Apple Inc.
opportunities are the introduction of more and more PC viruses, on which
Apple Inc. can capitalize on. The second opportunity is the population of the
world is growing at a rapid pace and thus, this opens the front for many new
markets, also the purchasing power of a common man has increased
drastically, who can be pursued or impressed to buy the luxury Apple
products. The online sales of the organization are increasing and also, the
bonds and the partnership with the other organizations have been on the rise
in the past few years. Products such as iPhone have create a new set of
potential customers altogether which can be targeted in the future i.e. the
young population who have a craze for any new technology gadget
(MarketingTeacher.com 2012).

Threats
In the past few years, many competitors have come up for Apple Inc.,
especially in the field of laptops, like Dell, Sony, HP, and Toshiba. Another
threat could be that many of the customers have started downloading the
music for free instead of purchasing at iTunes. The product expensiveness is
itself a threat to the product, as substitutes at a lower price are always
available. Long lasting recession could also be a threat to its products.
Windows 7 software is gaining more market place after vista flopped and last
but not the least, the technological advances that have been taking place
every single day, is a big threat to Apple Inc.
VI. Strategic alternatives and recommendation strategy
Apple’s generic strategy of broad differentiation adds competitive advantage
by making the business stand out. Differentiation in product function and
design supports the firm’s goal of leading the market through technological
innovation. Innovation is at the heart of Apple Inc.’s business. However, to
improve its application of this generic strategy for competitive advantage, the
company must aggressively penetrate markets. This recommendation is
especially applicable in developing countries where the corporation has
limited market reach for its information technology goods and services.

Apple Inc.’s main intensive growth strategy is product development. Market
penetration and market development have lower priority in this technology
enterprise. These intensive growth strategies agree with and support Apple’s
generic strategy. The company is strong in product development through
innovation. However, to improve performance, Apple needs to emphasize
more on market penetration and market development. These two intensive
growth strategies can improve the company’s resilience against aggressive
competitors like Samsung. Also, Apple Inc.’s operations management can
optimize the effectiveness of these growth strategies and the broad
differentiation generic strategy for competitive advantage.
VII. Management lesson learned
In the future, Apple should keep the current broad differentiation strategy, which
means to make the products with higher quality, outstanding. In order to do that,
because of the limit of resources, it is strongly recommended that Apple should
focus on the first two strategic alternatives. This means Apple should invest more
in their core competency to make it easier to reach the potential opportunities.
There are a number of reasons for this. First, in this case, the rivalry of
competition in this industry is really high. Firms will have to compete mostly by
the new technology innovation. Technology innovation is also one of the most
important factors that are changing the industry. Therefore, successful built up
competitive advantage of innovation is considered valuable in this industry. This

will somehow help Apple to be really competitive. In addition, Apple’s
weaknesses also happen in their technology perspective, which is about their
operating system. Therefore, spending money to improve this weakness will also
turn it to the strength of the company. In this situation, the big potential
customers in developing markets seem to be attractive enough for Apple to
invest their money to improve the weakness. This is really helpful for customers
to find it easier to use their operating system. This will somehow enhance the
relationship with loyal customers and give these kinds of customers a bigger
reason to stay with Apple. Besides, all other resources and functions at Apple
has already been established and worked really well. All the functions coordinate
with each other consistently. Therefore, investing in these functions, of course,
will be much less risky. This means, the chance of successfully implementing the
strategy focused on them is much bigger than the chance of trying other
strategies.
VIII. bibliography
file:///C:/Users/user/Downloads/toaz.info-apple-inc-case-study-mgt-
pr_49e0780b9839566c5ddc52aa9362ace1.pdf
http://panmore.com/apple-inc-generic-strategy-intensive-growth-strategies
https://www.bartleby.com/essay/Apple-Strategic-Audit-F3E7C2KTC

file:///C:/Users/user/Downloads/strategic__edited_.docx.pdf
https://ivypanda.com/essays/strategic-management-apple-company/