Apple Case Study Essay Example for Free

Apple Case Study Essay Apple Inc. (previously Apple Computer, Inc. ) is an American multinational corporation that designs and markets consumer electronics, computer software and personal computers. Apple currently has 246 retail stores located in 44 states that employs over 27,000 retail employees. Apple also employs over 304,000 U. S. individuals from development to transportations. As of September 11, 2012, Apple is the largest publicly traded company ever. Apple has established a unique reputation in the consumer electronics industry. This includes a customer base that is devoted to the company and its brand, particularly in the United States. Fortune magazine named Apple the most admired company in the United States in 2008 and in the world in 2008, 2009, 2010 and2011. This case study will not only highlight Apple’s strengths, it will also discuss its weaknesses and past failures that have laid the foundation to become one the most powerful companies in the world. As the story famously goes, â€Å"two Steves† started one of the biggest computer companies ever in a garage after quitting their day jobs. Steve Jobs worked at Atari, a computer and gaming company and Steve â€Å"Woz† Wozniak worked at Hewlett-Packard. A friend introduced the two seeing their mutual interest in electronics. Woz had built a computer in his spare time as a hobby. According to Charles Hill and Gareth Jones (2012), authors of Essentials of Strategic Management, â€Å"That is what people did in 1976,† (p. C13). Jobs realized that people might want to buy such a machine and persuaded Woz to set up a company to make and market it. Headquarters: Jobs’ garage in California. Thus Apple Computers was born. A total of 200 units were sold at a price of $666 each; the product rolled out on April Fool’s Day in 1976 at a local electronics store. The company went on to see great successes and some failures, and the two Steves are heralded as revolutionizing the personal computer industry. After improving on the garage computer, named Apple I, with better graphics, more data storage and a simpler looking machine, Apple introduced the Apple II in 1977. This personal computer that was user friendly to non-computer using consumers soon made the two twenty somethings into millionaires. Throughout the years, subsequent models that improved on the speed and design of the Apple II were released. With these improvements came additional products: software, external drives and printers, to name a few. By 1983, the Apple IIe was introduced, which would become Apple’s most popular and best-selling of all models. In the ‘80s and ‘90s, Apple computers became computing standard for elementary schools. By the time the Apple II line became defunct, more than 2 million Apple IIs had been sold and home computers were gaining popularity. Apple Computers also changed its name simply to Apple to reflect its diversity of products. During this general timeframe, Woz was piloting a plane that stalled and crashed; he suffered some memory loss. He returned to Apple sporadically throughout the ensuing years but formally ended his full-time association with the company in 1987. Two new engineers were brought on board for two new project ideas: Jeff Raskin for the Macintosh computer model and Bill Atkinson for the more business-oriented Lisa computer. The Macintosh became a success; the Lisa did not. In 1991 Apple continued to build on its founders’ guiding principle—that the individual, not the mainframe, should be at the center of the computing universe (â€Å"Silicon Valley,† 2012). The company introduced a portable Mac, which was the predecessor of the modern laptop. In 1993 it launched the Newton, a personal digital assistant which let consumers compute without sitting at a desk. The end of the 1990s brought yet another breakthrough Apple computer—the iMac, which touted power, ease of use and esthetics. The iPod, a digital music player and the iPhone, a phone with Internet capabilities, are two of Apple’s newest immensely popular products. Steve Jobs died of cancer in October of 2011 after working and leading on and off at Apple throughout the years; Woz is 62 and currently spends his time as a writer, speaker, researcher and philanthropist. Tim Cook is the current CEO of Apple. On August 20, Apple officially became the most valuable company in history in terms of market capitalization (â€Å"Forbes,† 2012). Heading into the final hour of trading on the NASDAQ, the stock had risen more than two percent, giving the company a market cap of over $620 billion with shared trading over $662 apiece. The reason—speculation over its newest product release—the iPhone 5. Identification of the company’s internal strengths and weaknesses Strengths: †¢Product development. Doesnt invent the market, but its products set high standards for the market †¢Design and utility. Sleek, not clunky. For instance, the desktop computer is part of the screen, not a separate box with wires; the iPhone has very few buttons and feels nice in the hand. Products are easy to use, almost intuitive †¢Marketing. Clever and takes advantages of peoples frustrations with other hardware †¢Brand name †¢ Globally recognized †¢Rapid growth and high profits †¢ Pioneer of innovative and high-tech quality products such as iPod, iPhone and iPad †¢Strong Research Development department (9% of sales devoted to RD) †¢ Having the control of both its own hardware and software †¢ Having had a visionary, charismatic and innovative CEO like Steve Jobs †¢ Apple retail store experience allowing customers to use and experience Apple’s products †¢ Having a large segment of loyal customers †¢Sales of add-on products Highlighting of its products as the world’s greenest line-up of notebooks Weaknesses: †¢Very proprietary and controlling. Wont open the operating system to outsiders to develop hardware to work with the products, keeping hardware sales to itself. While this keeps design control inside and up to standards, it has hurt wide adaptation of its hardware, especially computers, where it has a relatively small market share. Apple has veto power over Apps sold †¢ The death of Steve Jobs and the absence of his leadership will be a weakness for Apple as they find ways to match his innovation †¢Not shareholder-friendly. Has abused option granting in the past and refuses to pay a dividend despite a huge (and growing) cash level, no debt, and plentiful free cash flow †¢The battery life of the products are seen as weak †¢ Failure of two products; First Apple TV launch and Mac Mini †¢ Decision to restrict the iPhone to a single network †¢ The lack of QWERTY keyboard in products like iPad and iPhone †¢ Low market share in comparison with HP, Dell, Acer, Lenova and Toshiba †¢ Apple products are highly priced, so it is hard to suit their target market Opportunities: †¢Loyal customer base which has expanded beyond the Mac-heads of the 1990s with the iPod and the iPhone. The iPad has had a very successful launch. This seems to be leading to more sales of computers. †¢Has a well-deserved reputation for high-quality products that work smoothly. New products are generally well-received and have a built in purchasing base. †¢Move into other computer or media product spaces that are not served well. Can continue to design the standard-setter for those spaces. †¢A new version of Apple TV could take advantage of todays more highly developed Web. Threats: †¢Big ideas are easy to copy. Microsoft copied the graphical user interface, and even Linux has a version. The touchscreen interface is being used in other phones (e. g. Android). Apps are being developed for other smart phones and devices. †¢High-priced products. Apple priced itself out of the personal computer market, and that remains a problem. Other smartphones that look and behave similarly to the iPhone are less expensive. †¢Google is moving into Apples smartphone space by giving away the operating system, and it has announced that it will also be moving into the TV space. Both companies are well-funded, so any battle between the two could be long and ugly. Nature of external environment surrounding the company The industry grows and changes at an alarming pace. Every day there are new products that flood the market. New technology changes cell phones, laptops and new products are advertised every week. The major companies in the industry are Apple, Acer, Dell, and ‘Hewlett Packard’. In order for new companies to break into this market, they need to have a high entry barrier as well as a differentiated strategy from the existing companies. There is also a high learning curve with the customers getting accustomed to the new products. The existing brand names make the entry barrier very difficult to break into. Apple seems to be financially stable and healthy with weaknesses and threats that Apple has overcome and conquered in its past. The strengths show Apple’s foundation built upon a long line of unique products and branding, powerful research and development along with commanding marketing gurus that make Apple the powerhouse it has become today. Financially, the financial papers seem to be responsible and accountable with much thought put into Apple’s strategy. According to YCharts (June 30, 2012), Apple’s current ratio is 1. 71, which is slightly above book value. When you have a current ratio of 1, it means that your current assets are exactly the same as your current liabilities. â€Å"The current ratio measures a companys ability to pay short-term debts and other current liabilities by comparing current assets to current liabilities† (YCharts, 2007-2012, para. 1). Apple’s gross profit margin (sales-cost of goods sold/revenue) is 42. 81%, gross profit margin represents the percentage of each dollar of a companys revenue that is available to cover fixed costs after paying for the goods or services that were sold. With Apple seizing new opportunities every day, Apple will continue to dominate its markets for a long time to come and will remain fiscally responsible while continuing to make large profits, making it a wise decision to invest in the Apple organization. SWOT analysis It cannot be debated that Apple has many strengths. They should not, however, become complacent with their success and in order to maintain its competitive advantage, the company must constantly evaluate their internal and external operations and address its weaknesses and threats, as well as assess its strengths and use them appropriately. One of Apple’s current strengths is its brand recognition and strong brand image. Apple has effectively used this strength through product development. As Apple took the market by storm and was gaining momentum, it expanded its product offering. With each new product such as the iPhone and the iPad, consumers expected the same quality and ease of use as Apple’s preceding products as they had already established that position in the consumer mind. Apple also has an enviable position in the market place and in the minds of the financial world. Apple’s robust financial performance is strength as the growth in capital allows for continued growth. While reviewing the strengths, one must also consider the weaknesses. For example, Apple’s weaknesses can be demonstrated with the release of the iPhone 4 and the concerns over the antenna on the product and how it could affect the performance of the device. Product recalls can result in a damaged image and reputation which will affect sales. Recalls also result in warranty and other expenses. It is clear that Apple views the iPhone as a major opportunity. The iPhone leads the company in percentage of sales, and with he new release of the 4s, combined with additional service providers supporting the device, will continue to do so. The expanding tablet market and demand for mobile technology also makes the iPad market a big opportunity for Apple. Expanding in international markets is also a big opportunity for Apple. Despite its strengths and opportunities, Apple faces many threats. One major threat to the company’s iPhone growth is the rising popularity of Google’s Android. Critics and users alike have stated that the Android is comparable, if not superior, to the iPhone technology. This fierce competitor is sure to affect Apple’s market share. In conclusion, an overview of Apple’s SWOT allows us to break down current strengths, as well as weaknesses, opportunities and threats. This allows us to further analyze the company as a whole and is imperative when devising a corporate strategy. The kind of corporate level strategy the company is pursuing Apple’s corporate strategy is to focus on making the industries’ best products. They are a company that focuses on innovation, and also improvements on their existing products. They use the focused differentiation strategy, by making products that are exclusive, and fairly expensive. Not everyone can afford an Apple product. They focus on aligning their business strategy and their marketing strategy with product development. This is something that they do much better than their competitors, and this is a huge advantage for them. Apples target market is people who are willing to pay more for products with better user experience, people who like to have fun with technology, music enthusiasts and people who work with media and design professionals. They have done a good job by finding out which customer needs to satisfy. They have found out that these customers want a nice, beautiful and simple design and user input, and they have focused on programs that help photograph and edit both pictures and videos, as well as good music programs to both listen to and make music. To make these programs, they have to have to focus on innovation, and have programmers and designers that can make programs like thisthat are easy to use, beautiful to look at, and do what you expect them to do. The nature of the company’s business-level strategy Apple’s fundamental business model has not changed since it first began business in the late 1980s. Apple’s organizational strategy â€Å"think different† is to control the development and design of the hardware and software for all of its products. The company is focused on providing innovative products and solutions to consumers. Apple has a simple strategy of providing customers with the best products and experiences possible. Another strategy is offering exclusiveness of their products to certain providers and companies. This not only builds a strong working relationship, but also builds a strong want by consumers for Apple products. I think the most important strategy is their branding strategy. This includes making new products that supports a â€Å"digital hub† strategy. This is a concept where the products that Apple produces will function as a hub for digital devices such digital cameras, cell phones, etc. Apple focuses on the lifestyle of the customer which includes imagination, hopes, dreams, and many more attributes. They are committed to the customer (Apples branding strategy, 2011). Mission Statement Apple mission statement is as follows, â€Å"Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork, and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple reinvented the mobile phone with its revolutionary iPhone and App Store, and has recently introduced its magical iPad which is defining the future of mobile media and computing devices (Investor relations, 2011). † Steve Jobs stated that Apple’s â€Å"core value that the company believes, is people with passion can change the world for the better. † He stressed that value at its core is something that should never change despite the world changing around it. The company’s structure and control systems and how they match its strategy Apple’s first product, the Apple I, was vastly different from the Apple products of today. This first handmade computer kit was constructed by Apple co-founder Steve Wozniak. It lacked a graphic user interface (GUI), and buyers had to add their own keyboard and display. Co-founder Steve Jobs convinced Wozniak that it could be sold as a commercial product. In 1976 the Apple I was unveiled at the Home Brew Computer Club and put on sale for $666. 66. Jobs and Wozniak continued to create innovative products. Soon their new company, Apple Computer Inc. , had surpassed $1 million in sales. However, the mid-1980s saw some difficult times for Apple. In 1983 the company introduced the Apple Lisa for $10,000. The product flopped. In 1985 Steve Jobs was ousted after internal conflicts with the Apple CEO. Its computer products the Mac I and the Newton were not successful, and the company underwent several CEO changes. With declining stock prices, the future of Apple was in jeopardy. Steve Jobs returned to Apple in 1997 to try and save the struggling company. The return of Jobs introduced a new era for Apple. Jobs immediately began to change the company’s corporate culture. Before Jobs’ return, employees were more open about Apple projects. After he returned, Jobs instituted a â€Å"closed door† policy. Today Apple continues to remain vigilant in protecting its technology and ensuring that information remains proprietary. Jobs also created a more flattened organizational structure; rather than go through layers of management to address employees, he addressed them directly. Perhaps one of the most noticeable changes, however, was Apple’s expansion into new product lines within the electronics industry. In 2001 Apple launched the iPod—a portable music player that forever changed the music industry. The company also introduced iTunes, a type of â€Å"jukebox† software that allowed users to upload songs from CDs onto their Macs and then organize and manage their personalized song libraries. Two years later Apple introduced the iTunes Store, in which users could download millions of their favorite songs for $0. 99 each online. In 2007 Jobs announced that Apple Computer, Inc. would be re-named Apple Inc. This signified that Apple was no longer just a computer manufacturer but also a driver in consumer electronics. Some saw this as a shift away from computers toward consumer electronics such as Apple TV, iPods, iTunes, iPhones, and iPads. However, it may be more accurate to say that Apple is reinventing computers. With the introduction of tablet computers such as the iPad, Apple has begun to take market share away from its top competitors in the computer industry. Sales of desktops, laptops, and netbooks began to decline after tablet computers were introduced. Analysts believe that tablet computers will continue to grow at a rapid rate. Apple’s transition from a computer to a consumer electronics company is unprecedented—and hard to replicate. Although many can only speculate about why Apple succeeded so well, they tend to credit Steve Jobs’ remarkable leadership abilities, Apple’s highly skilled employees, and its strong corporate culture. Conclusion Today, Apple continues to lead the industry with their outstanding and ‘ award winning’ products and services. Apple is also credited with leading the digital media revolution with their iPod portable music and video players and iTunes online media store, creating the first sustainable music-downloading business model in history (Gershon, 2009, p. 367). The company has also entered the mobile phone industry with an altogether different business strategy known as† value innovation† with the iPhone. Value innovation focuses on making the competition irrelevant by opening up new and untapped markets, creating a leap in value for consumers. The iPhone is yet another product that has changed the way the industry defines new product standards and possibilities. With growing demand for high-quality, powerful, user-friendly, and cost effective products, Apple is undoubtedly the leader in terms of bringing these ideas to life. The company realizes that rather than publicly announcing product development plans years in advance, products are better received with an â€Å"awe† response if they are simply released when they’re finished as opposed to providing â€Å"beta† or â€Å"demo† versions to the public. This is an excellent strategy when the goal is to keep consumers eager for the latest products and asking, â€Å"What could they possibly improve next? †