Executive Summary

In 1976, Steve Jobs and Steve Wozniak co founded Apple Computers with the invention
of the Apple I computer. After working on several different projects Jobs went on to change
Apple Computers to Apple Inc. He then focused on products outside of PCs such as music and
mobile phones with portable electronics. Since then Apple Inc has revolutionized the way people
use technology today by producing user-friendly products with a huge focus on aesthetics as well
as engineering. This includes partnerships such as the purchasing of Fingerworks touchscreen
displays that attracted Apple by its fine features not found in other devices. Apple has been
challenged on the unique look and functionality of their products through patent infringements
from Samsung and Motorola, but has proven to be original through its court victories. Apple now
has a huge focus on growing its business through improving their ethical standards by enforcing
their Supplier Code of Conduct internationally and by deploying their firm strategy:
1.Differentiating through innovation. 2. Controlling the uncontrollable. And 3. Its Economies of
Scales.

Introduction
According to the New York Times, Apple Inc. is a corporation that is involved in the designing,
manufacturing & marketing of electronic media. Apples main headquarters are located in
Cupertino, California close to the San Francisco Bay area (Apple Info). Yahoo! Finance reports
that, Apple is categorized to be in the Technology sector and in the industry of personal
computers. As of September 24, 2011 there were a total of 357 retail stores which consisted of
245 stores located in the United States and 112 stores internationally with around 60,400 full-

time employees (Apple Inc.). Apple manufactures a wide range of products such as: desktop
computers, laptops, portable media players, mobile phones, various software, etc. Some of the
more popular products sold by Apple are the: Mac, Macbook, iPhone, iPad, & Apple TV. Along
with having these products come having their own operating systems, software (iOS, Mac OS X,
& iCloud) and online media stores for apps, music, television shows, movies and books (Apple
Incorporated). Apple also produces and sells accessories to third-party retailers for the iPhone,
iPad and Mac products. The primary consumers of Apples products consist of small and midsized businesses, educational facilities, enterprises, retail stores, and third-party cell phone
carriers (Apple Inc.).
Apple was not always known as one of the most innovative companies within the technology
market. Once Apple started implementing popular applications and smaller products from
smaller companies they acquired, it helped boost them to being a forerunner in the market. Not
only did smart acquisitions help their product become so popular, but their strong firm strategy
also aided in their rise to the top. Apples strategy is to stay on top of the innovation game, keep
beta models and ideas within the developers, and control the economies of scale. The growing
popularity from the public caused Apple to have many legal issues regarding patent infringement
from their big competition, Google (Andriod). In many of these patent infringement cases Apple
has been victorious both in the United States and internationally. Internationally there have been
many issues of injuries in assembly plants as a result of overworking from the demand of mass
production of their products.

SWOT Analysis
1.
Strengths
Apple has been around for several years, it only became extremely popular when they first
produced the iPod. Since then Apple has been a company that is widely recognized by almost
anyone from its logo down to its trademark message sound. The next strength Apple possesses is
their strong financial performance throughout the years. The demand for their products has gone
up and so have their expenses, but their revenues have shot up; therefore resulting in a higher
profit. After making a similar product for so long, even with their technological advances, Apple
has improved on the assembly process which cut down on their costs, and helped boost revenues.
2.

Weaknesses

As Apple has continued to become more and more innovative, they came across other companies
trying to ride on their coat-tail of success. The rival operating system, Android, has been found
guilty of patent infringement on many accounts in the courts. Also recently there were several
product recalls on the iPhone 4. Back in 2010 when the iPhone 4 was released there were many
complaints about reception issues. Apple tried to combat the recall by giving away free cases that
were supposed to help reverse the antenna problem.
3.

Opportunities

As technology continues to become more advanced, people are turning to smartphones. Now-adays smartphones have a lot of the same capabilities that laptops and desktops can do. If Apple
continues to improve and innovate within the market, more of the population will continue to
turn to their products.
4.

Threats

Apple has one main threat within the smartphone industry, and that is the Android OS. Many
people often decide to be loyal to only one or the other, which results in either a gain or loss in

revenue. Another threat that Apple is facing is that they are in the technology industry, and with
that comes intense competition. Every company dreams to become popular in an increasingly
dependent technological world, and Apple being one of the leaders in innovation comes many
companies using their ideas to create similar products.

Political and Legal

As of right now Apple has over 30 lawsuits spanning 4 continents with industry
competitors like Samsung and Motorola. A company's liable for patent infringement under Title
35 of the US Code, Section 271, for making, using or selling a patented invention in the US
without authority from the patent owner.(Engadget) Apple is accusing Samsungs US
subsidiaries of being direct infringers.
Apple is building its patent portfolios of technology to battle over IP. Recently Apple has
been involved in a number of lawsuits stemming from critical issues it faces with its main
competitors regarding intellectual property and design features of many of its products ranging
from the Ipad to the Iphone. Currently Apple has high profile lawsuits with South Korea based
Samsung and Google owned Motorola. Apple is claiming that "trade dress" is being simulated in
a way that Samsung is trying to confuse the consumers into thinking that their products are the
same as Apple's. Trade dress "is a means of protecting a business's image and overall appearance
and how that image is perceived by consumers." For example to explain, the shape and design of
the Coca-Cola bottle; people recognize the bottle and associate it with Coke. The court had to
determine if Apple had a protectable trade dress and they ruled that their designs were famous
enough to have their value diluted by Samsung's devices. Many analysts are claiming that there

is a fear of Androids growing market share prompting all the litigation.

The most high profile case took place in a U.S. court in California. In February Apple
claimed that 17 patents were being infringed. Apples biggest victory was with the 381 bounce
back patent and jurors found all 21 samsung devices guilty of infringing. In this precedent setting
case, the court ruled in favor of Apple and awarded them 1.05 billion dollars in damages. Not
only did Samsung take a fiscal hit, due to the infringement they could be forced to removed
many devices on US shelves. Samsung counter suited to the ITC or International Trade
Commission over patented technology in the Iphone and Ipad tablet. Samsung is claiming that
Apple is copying patents from data transmission and device features. The court again sided in
favor of Apple stating that Apple did not violate Samsung's patent rights. The judge determined
that Samsung had not proven it had a domestic industry that used the patents, which is a
requirement that is unique to the ITC. Apple also has its own ITC complaint pending against
Samsung and the findings are expected to be released October 19th.
This September following their victory against Samsung, Apple won against Google
owned Motorola in a German court. The court found that Motorola was infringing the User
Interface patent. Citing that the "rubber banding" or overscroll bounce was being simulated and
incorporated in Motorola's phones as well. This loss could potentially be devastating for Google,
Apple has the opportunity to bring in a Germany wide injunction by depositing a $25 million
bond. For 10 million more euros Apple can also obligate Motorola to destroy all infringing
material and for an additional 10 million more euros they can mandate a recall of the phones.
This was their third victory, they also won cases regarding the slide to unlock feature and photo
gallery page interface. An interesting fact is that Samsung actually makes the microprocessors
for the Iphones, Apple's largest component supplier, creating a conflict of interests for them now

as the string of lawsuits continues.

Mergers and Acquisitions

In Professor Peng's book, Global, he defines acquisitions as "the transfer of the control of
operations and management from one firm to another, the former becoming a unit of the latter.
(Global). For Apple all of their acquisitions have been their growth strategy, which is evident
when examining Apple's success when integrating aspects from the acquired companies. There
have been several popular acquisitions by Apple, and they are: Siri Inc., Emagic, NeXT, and
Fingerworks. All of these acquisitions have been added to their operating system and software,
and some are the cornerstone highlights of Apples products in todays market.
One of the most popular features of Apple products is a built-in voice command
application which is called Siri (Apple Buys Everything). Siri was originally developed by Siri
Inc. in 2010 specifically for Apples app store, and became popular very quickly. Siris
popularity drew attention from the developers at Apple, and they decided they wanted to
integrate the application directly into their software. Siri is only available on the iPhone 4, 4s,
and future models. Jane Duffy from PC Mag reported that Siri has the ability to recognize speech
input, and also has the ability for speech output. This means that when Siri is activated you can
speak when the application is prompted, and Siri will follow your command or find an answer to
your question (What is Siri?). One of the highlights of Siri is that it is highly customizable. The
voice output can be changed from male or female and it is even compatible with multiple
languages and accents. Since Apple integrated this highly advanced technology into their
products, no other companys voice software has gone toe-to-toe with Siri (Apple Buys
Everything).
Brittany Fliet wrote an article for Mac Life about Apples top 5 acquisitions, and Emagic

made it on her list. Emagic is another acquisition Apple made in 2002, and it is now known as
Apples popular Garage Band and Logic Pro. Emagic was a music software company who in
1992 created the Notator Logic, which was a version of their software that was compatible with
Atari, Mac, and Windows. Apple renamed the music software Garage Band, because they
wanted to target amateurs in the music industry as well. Thus widening the products appeal to
garage bands and professionals, allowing them to compose and record their homemade music
(Apple Buys Everything).
A writer for Mashable.com, Stan Schroeder, wrote an article about one of Steve Jobs's
other companies, NeXt, and how it has been integrated into Apple after he came back from
retirement. In 1985 Steve Jobs retired from Apple because there was an internal power struggle.
During his temporary leave from Apple, he created a computer company, NeXT, that was aimed
at creating power computers for businesses and universities. NeXT wasnt very successful and
only ended up selling around fifty thousand computers. In 1997 Jobs sold NeXT to Apple for
$429 million which was split between $1.5 million Apple shares going to Jobs and the rest to
other investors. Even though NeXT was not very successful, it had good software components,
and today pieces of that operating system still lives on in the Mac OS X (Steve Jobs Other
Amazing Companies).
Mrs. Fliet also wrote about the acquisition of Fingerworks. Fingerworks was a company
that created touch-screen products called the iGesture Pad and TouchScreen Keyboard.
Fingerworks first made these products for their consumers who had carpal tunnel issues from the
same repetitive movements. The thing that attracted Apple the most was the ability to zoom,
scroll, and other features. Apple offered and undisclosed buy-out to Fingerworks to allow them
to incorporate this new age technology into their iPods, iPhones, and iPads (Apple Buys

Everything).

Firm Strategy
1. Differentiation through Innovation.
Apples the first strategy would be an innovation. Apple has become well known for an
innovation company. Definition of innovation in Business is a good or service for which people
will pay, and it must satisfy a specific need to customers. In her article Apple Remains
Americas Most Innovative Company, Christina points out that For the sixth consecutive year,
Apple ranked number one in BusinessWeeks 50 Most Innovative Companies report. When you
consider that BusinessWeek only started this ranking system in 2005, that statistic becomes even
more impressive (Warren, 2010). Ipod, iPhone, and Mac have been recognized the most
innovative product in their markets as it is launched.
There have been several ways that Apple Company innovates its product. In his case
study, Al-Rubaie states that Apple takes calculated risks and boldly enter new markets. For
example, iPod, iPhone change the playing field by creating new business models (Al-Rubaie).
Apple introduced the first iPhone generation in January 2007. When Apple introduced iPhone at
first time, no one has expected such innovative cell phones, and it allowed Apple to take a big
portion of market. The first generation of iPhone combined mp3 player, an Internet
communicator, and a mobile phone all together. Therefore, an innovation is one of the most
outstanding strategies that Apple has. Here are some innovative messages from Apple. 1) Do
what you love, 2)Sell dreams, not products, 3)Say no to 1,000 things, and 4)Create insanely
different experiences. As you could recognize, Apple actually set an innovation as a top priority

for their business.

2. Control the uncontrollable

Apple has controlled almost of its business strategy. They have controlled their product
development, supplier lists, distribution, sales, and so forth more than any other technology
companies. And their secrecy actually brought a huge success to them. In his article, Andrew
points out that a skillful secrecy that has defined the company for the past decade and helped
make it such an astounding success(Loose lips sink ships: Why has Tim Cooks Apple sprung a
leak?).
The secrecy strategy has actually affected to the Apple Company. Every time when they
introduce their new product, the effects of keeping secret were tremendous. Customer would
have been able to guess what features are going to be on the product, but theyve never been
sure, and it brought customers attentions to new products. Steve Jobs, who was CEO at Apple
for a long time, used to give engineers very limited information about a project. So even an
engineer who actually involved in developing a certain semi part product didnt know what the
product is using for and how the product is connecting to other products. Steve Jobs had not
showed his employees a forest, but only a tree.

3.

Economies of Scales
Apple has been able to accomplish its competitive advantage to its rivals by using

economies of scales. When taking a look at Apples products, it is noticeable that Apple makes
only a certain product across all product lines. For six years, Apple has launched only 7 cell
phone models. Meanwhile, Samsung, who is the most competitor of Apple, has launched at least
100 different models. What the economies of scales enables Apple is that Apple has been able to

become one of the most profitable companies. Minimizing product variations has a couple of big
advantages. First, the company is able to gain a high bargaining power. For example, when
Apple orders some components for their products, Apple would order a bunch of quantity of it,
and it gets Apple a lower price than its competitors. Then, Apple literally saves a big money out
of ordering a bunch of quantity sizes. In addition, with the economies of scales, Apple reduces
its operating cost, thus yielding a very high operating profit. For example, when Samsung had to
set a new assembly line at their manufacturing factories for their Galaxy series, from Galaxy
Vibrant, Galaxy S, Galaxy S2, and Galaxy S3, Apple had to set a new line only for iPhone 5,
saving at least a couple of millions dollars. Not only did economies of scales get Apple a low
price of their components, but also it provides Apple with a high profit margin. Therefore,
economies of scales is also another Apples successful strategy.

Corporate Social Responsibilities

Apple prides themselves on having high standards regarding their social responsibility to
the law, people, and environment worldwide. They claim to protect labor and human rights,
ensure worker health and safety, and especially maintain a minimal impact on the environment
(Apple.com). However, Apple was criticized for working with suppliers in China who were not
following the same ethical standards which in turn led to employee suicides and environmental
hazards.
In 2010, Apple faced a slew of issues involving the use of child labor, forced student
workers, and employees working excessive overtime for little pay. According to a Forbes article,
hundreds of students at a school in Huaian, China was forced by their teachers to work on
assembly lines at a Foxconn plant to make up for worker shortages. It also stated that if these
students did not continue working in the plants, they will not be allowed to graduate. Some

schools even went to the extent of closing down for a period of time so students could work in
the plants; their shifts lasted about 12 hours a day. This was normal compared to other
employees working for Foxconn, which worked on average from 100-130 hours of overtime a
month; the legal overtime an employee can work in China is only 36 hours (The Telegraph).
Some employees worked for such long hours that their legs and feet were so swollen, they could
hardly walk. Not only were these workers working long, hard hours on their feet, they were also
forced to work under close scrutiny of plant supervisors, who disciplined tired employees that
are falling asleep by making them stand in a corner like young disobedient school children
(Adams). These excessive hours of work was compensated with only four dollars an hour.
Also in the same year, 137 workers were injured after being ordered to use a poisonous
chemical called N-Hexane to clean iPhone screens. This toxin is known by Foxconns executives
to be dangerous for a persons health and could cause nerve damages or paralysis (Black). The
reasoning for using this harsh chemical is because it evaporates three times faster than rubbing
alcohol; therefore, the average worker could clean the screens at an even faster pace. A year later
in 2011, two explosions occurred at Apple factories in China that killed four people and injured
another 77 (Duhigg & Barboza). Aside from dangerous chemicals and life-threatening
occurrences, employees are also dealing with unhealthy living quarters provided by Apples
suppliers. A reporter who went undercover as an employee of Foxconn reported that worker
dormitories were filthy and smells of garbage, every room is infested with cockroaches, and
beddings were covered in dirt and ash (Adams). Majority of these workers come from faraway
towns and villages, and needed to work for Foxconn and similar companies to survive have
nowhere else to go, therefore, they must remain in the dirty dormitories. It is reported that there
are generally twelve people assigned to each room. Possibly for all these reasons, thirteen

employees of Apples supplier companies have committed suicide in 2010.

According to the New York Times, Apple is also criticized for unethical behaviors
because 27 of their suppliers in China are not complying with government regulations regarding
environmental safety (Duhigg & Barboza). These companies are allowing the discharge of
polluted wastes and toxic metals into surrounding areas and thus threatening the publics health.
Neighboring cities and communities are experiencing an increase in the number of cancer cases
due to the release of these toxic gases and metal sludge.
Although there have been a few ethical problems that arose in the midst of Apples
continuing success, the company has been able to preserve their ethical standards by enforcing
their Supplier Code of Conduct. To remain a good company in the eyes of its consumers, Apple
is motivated by the positive and instrumental views of ethics. They truly care for their employees
and the environment around them, and for that reason the public will continue using Apple
products.

Conclusion
Apple has become a pillar in the consumer electronics arena. They have manufactured
products that people didnt know they wanted and introduced products that have changed
technology forever. Success however, has come with a price. Apple has had to deal with
expensive and time-consuming litigation to defend their products from competitors who want a
share of the billions of dollars Apple has made in profits over the last few years. Apple has also
had to deal with sub par work conditions and accusations of low employee morale at the plants,
which manufacture its products. Yet all this has done nothing to deter Apple from creating
innovative products and it has done nothing to deter people from anxiously waiting for their new

products to launch. Apple has created a business where what the company says goes and at times
rules with an iron fist. It has a say starting from production lines all the way to the retailers who
sell their products. Apple has changed the technology landscape forever, less than twenty years
after almost going bankrupt. By bringing in founder Steve Jobs in the late nineties, Apple got a
second chance to turn things around with the company once again at its helm. Steve Jobs made
very strategic acquisitions and sought out companies that would help him build products that
exemplified what the company envisioned, to create products that deliver insanely different
experiences. With the launch of the iPhone 4s Apple introduced a voice assistant program called
Siri, which Apple had acquired because of the intuitive software it had and originality that Apple
needed to set it apart from the rest of the pack. Rarely does a company develop an almost cult
following; yet Apple has been able to become a staple in most of our homes and society as a
whole. Whether its people lining up days in advance for the upcoming iPhone 5 launch or a
family purchasing a Mac to have everything Apple, no other company in recent memory has
been able to drive the masses from every corner of the globe to make peoples wants into a need
with its products.

Recommendations
1.

Continue to pursue competitors that are trying to imitate their unique products. Apple has

done an exceptional job of instilling value into their product lines that have garnered a high level
of brand loyalty and repeat business. It is this value that has given them a competitive advantage
and led to their growth in the technology industry. It would be in the best interest of the company
to continue to defend their intellectual property and superior design features from competitors.

2.

It is true that Apple has come up with many successful business strategies, making the

company one of the biggest companies in the world. One of factors that Apple could become
such a big company was an innovation. But it seems they are little bit slowing down the
innovation as it can be seen on iPhone 5, the most recent model. Therefore, developing the
innovation more and more on their products would be the most needed recommendation for
Apple Company today.

3.

Continue to grow and improve the company by investing in other areas of the technology

sector. For example, on the new operating system, iOS 6, Apple is officially dropping Google
Maps and will now be using an Apple specific mapping system. If Apple were to acquire a
company such as Garmin, it would both increase their sales as well as their map technology in
their products.

4.

We recommend that Apple make some more international acquisitions because 3 out of the

4 acquisitions that were talked about are based in the United States. More acquisitions outside of
the United States could lead to a more international perspective on what the consumer wants
based on the geographical location, and could thus improve their technology and innovation to
help keep them ahead of the curve.

5. Continue to monitor and conduct annual audits on the suppliers they are working with. After
the issues concerning ethics arose in China, Apple established their own Code of Conduct in
which they expect all suppliers to follow in order to continue doing business. They enforces the
code by having regular factory audits led by Apple. Violations are met with corrective action
plans and confirmation that the actions are fixed, otherwise Apple will choose to terminate the
relationship with the violating suppliers (Apple.com). The company also joined the Fair Labor
Association (FLA) and allowed themselves to be transparent to the public through audits
performed by the FLA. We also recommend that Apple find new ways to speed up their

production without using harmful chemicals and products to ensure employee safety.

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