Case Study Analysis 3: Apple Inc.

Apple Inc.
Ayanna Rocker
MGMT 340-01
12/3/15

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Introduction

Two driven young men by the names of Steve Jobs and Steve Wozniak had singlehandedly designed and created their own personal computers in 1976. When it occurred to them
that people may actually want to purchase their computers, the two quickly established their
company, naming it Apple, and sales began to take place straight out of Jobs garage. Since then
Apple has faced countless obstacles, yet has still managed to triumph their way into being one of
the top competitors in the personal computer industry. Apple does a tremendous job at serving
customers primarily within the education market, seeking attractive and easy to use personal
computers. They fulfill their customers needs by proving reliable computers that are both
visually appealing and user-friendly, both of which assets that havent been exemplified in most
computer operating systems.
External Analysis
Analysis of the 1980s
The computer industry has changed remarkably over the span of 30 years and is nothing
like when Apple first entered the market. In the 1980s when Apple first started to be a
competitor in the personal computer industry, it was still in the embryonic stage so many of their
end buyers were the innovators and early adopters, who werent particularly price sensitive. This
gave Apple the advantage of pricing power since consumers merely wanted to be the first to have
this new gadget, and would pay anything just to own it. Their immediate buyers however were
third party retailers such as Best Buy, that sold Apple computers through their retail stores.
There are a number of suppliers Apple must go through in order to produce their final
products, most of which are the manufacturers of computer parts. Apple had many well-educated
members in their company, as well as the capability to raise capital. If they wanted to start
manufacturing their own computer parts, it would have been extremely feasible. Due to the
extended amount of resources available to Apple, suppliers have fairly low pricing power. In
addition to computer parts, Apple also has to go through other suppliers in order to obtain the
equipment and machinery needed to assembly the computers, and buildings where they can
operate their manufacturing.
The barriers to enter the personal computer industry were relatively high during this time.
It took a great deal of expertise to understand how to build computers and get them to run

Case Study Analysis 3: Apple Inc.

successfully, which is obviously something not everyone is capable of accomplishing.

Additionally, one needs a substantial amount of capital because this particular industry requires
many expensive computer parts, facilities and labor. It would be easier for companies who are
already in related industries to enter this market through various integration techniques because it
would be less costly for them. An example of this strategy can be seen while observing IBM, a
company that pioneered many technological machines. When Apple was proving themselves to
be successful in the personal computer industry, that put pressure on IBM to speed up their
development to enter the market as well. This had several implications for Apple, one of course
being more rivalry in the industry.
There were no other substitutes for personal computers during the 1980s because this
was still a new product being introduced in society. Before this time, computers were known for
being more like toys that technological savvy people played with, and were rarely seen being
used by others demographic groups.
Although there was rivalry within the computer industry, it still happened to be young
and in the embryonic stage, therefore competing companies didnt have to fight over market
shares. Instead, competitors were able to earn enough profit without taking shares from others,
which ultimately benefitted everyone.
What increased rivalry most was the complements, more specifically software and
applications. Various third party software and application developers created these products in
order to add value to the computers, by giving computers the capabilities to perform more
functions. Implications started to arise with the development of software because third parties
had to design the software so it would be compatible with specific computers. Because IBM was
so successful and had took control over the market leadership, software developers wrote
programs that would only run on the IBM PC, causing competing companies to clone their
operating systems. Apple chose to run a different operating system, putting them at a
disadvantage to have any software and applications built for their computers. As a result, Apple
had to develop their own software that would be compatible with their operating systems.
Analysis of the 2010s
Fast forwarding 30 years into 2010, we can see how the computer industry had changed
over time, and the implications those changes had in respect to Apple. The industry was now
well established, and had been in the maturity stage for quite a few years, which is the main

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reason these modifications had occurred. The buyers of Apple were still people within the
education market, but instead of the innovators adopting this product, it was now being bought
by both the early and late majority. Apple had built such a desirable product that was both
attractive and of high quality, that the company could charge high prices for their product
knowing consumers were going to pay it because the overall value of the product was worth it.
Steve Jobs, CEO at the time made the decision to open a retail store so they could sell their
products directly to customers, and cut out the middle man retail stores.
A few changes occurred as a result of the industry being more mature and well
established. More suppliers were producing the parts needed to manufacture the computers since
there was a higher demand for them in the industry. With more suppliers, Apple has more of a
choice on where to buy their supplies from based on who offers a better deal, which ultimately
decreases supplier power. Not to mention, Apple still has the means to produce their own
supplies, thus decreasing the supplier power even further. There was one major supplier however,
Intel, that had tremendous power with their product. Apple had switched from using the
PowerPC chip line produced by IBM to the microprocessors being sold by Intel because they
were the industry standard and proven to be faster with a lower power consumption. Because
there is high demand for this product, Intel is able to charge very high prices for their product,
knowing that others will be unable to replicate this demanded product.
The barriers to enter the personal computer industry are still very high. As stated earlier,
this is an expensive industry to enter and it takes large amounts of money and resources to
become a small company, not to mention a top competitor in the industry. In addition to raising
capital, a company would need sufficient knowledge about how to manufacture computers, and
how to go about manufacturing them in an efficient way. At this point in the industry lifecycle, it
is very unlikely that new companies will try to enter the market.
There had been several advancements in technology since the early 1980s, such as the
smartphone and other new devices. Due to this shift in the way society views technology, there
are now a few substitutes to personal computers. Various smartphones and tablets are being used
in place of computers because they offer many of the same functions and can sometimes do more
things that one is unable to do on a computer. These substitutes have slightly caused the demand
for computers to decline, however it isnt a substantial impact. In fact, some customers purchase

Case Study Analysis 3: Apple Inc.

these substitutes in conjunction with their computer, due to new synchronizing features such as
iCloud.
Now that the personal computer industry has reached maturity, there has been a
significant increase in rivalry among competitors. Because the number of market shares is fixed,
competing companies must fight with each other over who will have the most market shares in
the industry. The only way for companies to stand out from other companies is by differentiating
themselves in a way that makes customers desire their products most. Because Google and
Microsoft are two of the main competitors that offer inherently the same products as Apple,
Apple tries to maintain their technological lead by periodically releasing new products and
features.
Aside from obvious complements like computer chargers and accessories, Apples
biggest complements were still software and applications. It was crucial that computer
companies perform well in the industry to ensure that third parties would be willing to make
applications that were compatible with specific operating systems. An implication arose when
Adobe refused to develop a video-editing program that would run on Mac computers. Furious by
this issue, Jobs required that Apple had to start developing their own applications and the birth
of applications including iMovie, iPhoto, and Garage Band were developed.
Key Success Factors and How They Changed Over Time
Success factors in the 1980s
Apple was immediately successful in the personal computer industry because that had
changed societies views on computers, and technology altogether. As stated earlier, prior to
Apple computers were commonly used by technological savvy people and was a very rare
product that wouldnt be found easily unless someone did extensive research on where to obtain
them. Most computers were sold by individuals who manufactured them straight out of their
homes. The success of Apple mainly raised due to the creation of machine that was both use to
use, and visual appealing to the eye because screws and bolts were no longer apparent. Besides
being the only computer company to utilize GUI giving them the advantage over MS-DOS based
PCs, Apple was also the first company to incorporate a disk drive. Having a disk drive enabled
third party developers to write software programs that could be loaded onto the Apple II

Case Study Analysis 3: Apple Inc.

computer via floppy disks. Two of these softwares included EasyWriter, a basic word processing
program, and VisiValc, a program used for financial planning and accounting.
Success factors in the 2010s
In 2001, the company opened the first retail store which was definitely vital in regards to
their long term success because it immediately reduced costs and cut out any third parties; it also
gave Apple the chance to develop a more intimate relationship with customers while
implementing techniques like the genius bar that provided them the hands-on help they needed
from technical experts. Ultimately, Apple stores have been exceptional and maintained several
ways to thrive since. iPhone unit sales nearly doubled from 2009 to 2010 and were in the midst
of developing thousands of applications used in the app store. In 2011, Apple ended its inclusive
relationship with AT&T when Verizon offered the iPhone which resulted in a substantially higher
service coverage; this generated an increase in revenues from iPhone sales thus allowing the
iPhone to blossom into Apples most successful product. 72% of all Apples profits came from
sales worldwide, indicating that the collaboration with Verizon was undoubtable a strategic move
that paid off.
Apples Initial Missteps in Leading the Industry
Apple experienced several initial missteps when it came to leading the personal computer
industry. After the implementation of the Apple II computer, sales skyrocketed and Apple was
earning an outstanding amount of profit, which ultimately made Apple the primary leader in the
industry. The future of Apple looked promising, however in 1981 the development of the IBM
PC became an instant success and customers became to purchase their computers more than any
other computer company, allowing IBM to seize the market leadership from Apple. The ease and
efficiency of IBMs operating system is what attracted competitors most to adopt their specific
operating system, formally known as PC-DOS. As many competing companies started to use the
IBM operating system to develop their own computers, Apple decided to developed their own.
Apple did so because they wanted to use the differentiation approach to distinguish themselves
from competing companies in the market. In addition to using a different operating system than
the industry standard developed by IBM, Apple was the only company in the industry that
utilized a graphical user interface (GUI). Although the GUI would later become central to
personal computers, it wasnt a standard during this time. Apple incorporate all of these tactics

Case Study Analysis 3: Apple Inc.

into their company to reiterate the fact that they were different, and more valuable that
competitors. However, their differentiation strategy back fired on them because now they were
far different from the industry stands, which ultimately turned them into a niche player in the
market. It was crucial for Apple to get out of this position that they had inherently put themselves
in if they wanted to be a competing company in the industry.
Internal Analysis
Strengths and Weaknesses between 1976-1990
During the early stages of Apples lifecycle, the company had an immense number of
advantages. Upon meeting Mike Markkula, a millionaire known for being business savvy and
popular in the technological world, Apple was able to raise $250,000 worth of capital that would
cover the start-up costs needed to run their company. The development of the Apple II computer,
was also an advantage for Apple because that particular product turned out to be a success that
sold approximately 100,000 units within a few months of being released. Apple was able to
generate $200 million in sales because of this product, allowing the company to have a net
revenue at the end of the year. Sales flourished partly because the Apple II computer was well
known for the ease of use, which was an attraction to many consumers.
Although the company had many strengths, there was also some weaknesses being
demonstrated within Apple. From the very beginning it was clear that Jobs and Wozniak lacked
experience in running a company, so it was necessary to hire Michael Scott for additional help.
Another weakness transpired after the release of the Apple III when the company rushed the
product into the market before it was ready. This caused the computers to be filled with bugs, and
constantly crashing on customers. In comparison to IBM, Apple suffered a great deal when it
came to selling their product in corporate America, because Apple simply didnt have the ability
to do so as well as IBM.
Strengths and Weaknesses between 1990-2013
The biggest strength Apple had during this time came about in 1998, when Steve Jobs
returned as CEO. Jobs was the true definition of a visionary, and the plans he had for Apple was
going to be the turning point that would get them flourishing again. Immediately after the release
of the iMac and iBook, Apple started to become profitable again after years of having a net loss.
In 2001, Apple created a new operating system called the OS X, which was more stable, and had

Case Study Analysis 3: Apple Inc.

a faster speed than the old system. Another strength was Apples ability to develop their own
applications, and later in 2008 opening an entire online store dedicated to selling third party
applications as well as applications of their own.
Weaknesses began to occur after other competitors began to excel over Apple, based on
several different innovations they made in order to continue to compete in the industry. For
instance, Apple was the only company to sell machines that used a GUI and generated the most
costumers in that regard. In 1990 however, Microsoft introduced Windows 3.1 which
consequently transcended Apple's computer machines. Consumers were much more enthusiastic
about Microsoft's new product thus resulting in Apples reduced revenue. Furthermore, Apple
also had a high cost structure which meant that they spent more on R&D than any other
competitors. Because of it's small market share, the company naturally had difficulties in
developing a new operating system - both appealing and exceptional to customers. Therefore,
they repeatedly lost millions of dollars with each year until they were finally able to pull it
together.
Apples Performance Against the Building Blocks of Competitive Advantage
Apple was able to demonstrate high performance as a result of their efficiency levels. The
company built a strong relationship with Asian partners overseas, and together they reevaluated
Apples manufacturing system that would inhibit them to produce as many computers as possible
using the least amount of resources. This improved Apples efficiency a great deal because they
were able to allocate their resources so much so that by 1998 they were able to produce a million
computers within a given year. Furthermore, Apple was able to cut their costs dramatically as a
result of a much higher efficiency.
Several innovations had been made throughout the span of Apples lifecycle. There has
been an abundant amount of product innovations, each developed with the intent to fix consumer
difficulties with old problems, while at the same time updating products based on technological
advances. For example, the iMac was constantly being updated with faster processors, more
memory, and bigger hard drives. Aside from product innovation, Apple has innovated their
operating system countless times, and innovated their manufacturing systems in ways that would
enable Apple to be more efficient.

Case Study Analysis 3: Apple Inc.

With every innovation, quality of the products was also being increased. Apple had used
the best products available to manufacture their computers and phones. Apple went from using
plastic as the shell of their computers, to using titanium casings. Additionally, Apple enhanced
the camera resolution, battery life, and durability of several of their products which was a direct
correlation to their improvement of quality.
With the implementation of the genius bar in their retail stores, Apple was able to
provide excellent customer service. The genius bar was a feature within stores that provided
customers with technical assistance through one on one services aimed to fix customers
individual problems. Apple employees were excessively friendly and always greeted customers
with a smile as they walked into their stores, which prompted a welcoming atmosphere.
Sustainability of Apples Competitive Advantage
Apple had an abundant amount of resources and capabilities which enable it to sustain a
competitive advantage. When looking at their tangible resources, the largest facet that stands out
is their unique OS X operating system. Because Apple chose to develop their own operating
system, it differs from all others in the industry, adding value to the company through
differentiation. By using the VIRO framework to evaluate their operating system, its clear that
the system was valuable, rare in the sense that not everyone was using it, inimitable because it
was hard for competitors to replicate the exact operating system. Additionally, it was organized
for success because the OS X had proven to be more stable than the older system. Other tangible
resources included all of Apples products such as the various computers, iPhones, iPods and
App Store. Although their products were very valuable and organized for success, they lacked
the components of being rare and inimitable. Competing companies such as Microsoft and
Android were able to mimic all of these products, making them less rare in the market.
In addition to Apples tangible assets, the company had several intangible resources. By
far their biggest intangible resource came from Steve Jobs, which was his incredible brilliancy
that sparked many of the product innovations within Apple. Jobs creativity is what got Apple out
of their declining period in the mid 1990s, and because of the development of iMac and iBook,
Apple was finally able to see profits again. It is without a doubt that Jobs brilliance meets all of
the requirements in the VIRO framework.

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Having the technological lead over competing companies in the industry is a crucial
capability that was established by Apple. While John Sculley, former CEO of Apple, was in
power, he made it his mission to ensure Apple would release hit products every year in order to
maintain their technological lead. In doing so, Apple was able to release products with new
updates based on customer demand. For example, as applications started to become popular,
Apple created an online store that exclusively sold applications. When competitors saw how
successful Apple was in the application business, they began to replicate Apples store. For
instance, Google established their own app store, naming it Google Play. Although the App Store
achieved the framework for being value and organized for success, it is very easy to copy and
therefore not rare. To see additional resources and capabilities, refer to exhibit A in the appendix.
Evaluation of Scullys Strategy for Apple
John Scully implemented several strategies for Apple while he was CEO. In 1980 Apple
was developing two projects: Lisa and the Macintosh. Immediately after Jobs left Apple, with
Scully now in power he shut down the Lisa project and made the development team fix the
problems with the Macintosh. By 1986 problems with the Macintosh were finally fixed, and the
release of the Mac Plus had entered the market, inhibiting growth in sales.
Scully also wanted to license the Mac operating system to other companies, in particular
Microsoft, so companies in the industry could make Mac clones. Apple eventually voted for this
licensing agreement not to take place, however they ultimately ended up licensing their visual
displays to Microsoft after being threatened that Microsoft would stop developing crucial
applications for the Mac.
Apple began to find themselves as a niche player in the personal computer market due to
the dramatic increase of the PC market. In hopes to get out of this situation, Apple released the
Mac Classic, which was a low cost computer that could complete with IBM PC clones.
Additionally, he needed to significantly cut costs by firing the workforce, implementing pay cuts,
and subcontracting their manufacturing.
Although Scully did everything he could to get Apple seeing signs of profitability, his
efforts were not enough and market shares were in a rapid decline. The best strategy Scully had
enforced was the need to maintain technological lead by bring out hit products every year, which
will be seen in later years to come.

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Evaluation of Jobs Strategy for Apple

Apple was soon to see signs of growth again when Steve Jobs returned at CEO in 1998.
Upon his return, Jobs made a deal with Microsoft in which Microsoft agreed to invest $150
million into Apple, and produce Office for the Mac. Jobs also killed many of the slow selling
products, reducing the product line from 60 to 4. In that same year, the iMac started to emerge,
which would soon be a popular product that would earn Apple plenty of sales and profits.
Apple continued to invest in the development of a new operating system based on the
technology acquired from NeXT, the computer company Jobs started after leaving Apple in
1985. After 3 years of diligent work performed by nearly 1,000 software engineers, and a cost of
$1 billion, Apple was finally ready to introduce their new operating system know as OS X. This
was by far one of the biggest success Apple had accomplished. As a way to gain new customers,
Apple immediately started working on their own applications, without having to worry about
relying on third party companies. Each computer came preinstalled with various applications
including iMovie, iPhoto, Garage Band, and even Apples own web browser, Safari.
Additionally, new changes in the design of products came about when Jobs wanted the
computers to eye-catching to the customers. Designers chose to implement titanium shells, with
elegant widescreen flat panel displays. All in all, the efforts put forth by Jobs had proven to be
successful for the company, despite them still receiving a profit loss at the end of 2001. The work
Jobs had done was going to be the bases for all future projects that were about to arise, which
would eventually get Apple earning profit at exponential rates.
Apples Business Level Strategy
When Apple was first established in the early 1980s, they were operating using a focus
differentiation business level strategy. Just to reiterate, the personal computer industry was still in
the embryonic stage, so at the time seeing a typical consumer in the U.S. owning a computer was
uncommon. Computers were just starting to get exposed in society as a machine that everyone
could use, not just those who were savvy with technology. Apples initial customers would have
been a focused group of people, primarily those interested in technology and was eager to
purchase a new gadget. As time elapsed, and more and more people began to adopt personal
computers in their everyday lives, Apple started to use the broad differentiation business level

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strategy. Apple targets a large number of consumers, not just a specific market segment, so its
necessary for them to create products that the average consumer will purchase. Throughout
Apples entire company lifecycle, their objective has always been to focus on differentiation as
opposed to low cost. In fact, for years Apples prices were much higher than those in the
industry. Apple worked hard to ensure their computer operating system was different, as well as
its software, power supply and monitors, all of which would add value to the company. By
creating value through differentiation, Apple was able to sell their products at higher prices and
be certain that customers would be wiling to pay that price. Furthermore, Apple wanted to
position many of their products in a way so that customers knew they were easy to use, visually
appealing, and a reliably piece of machinery.
Functional Level Strategies Alignment with its Position in the Market
In hopes of turning Apple into a profitable company as it once was, in 1998 Steve Jobs
suggested developing a new product that would be far different from what was ever seen,
resulting in the creation of the iMac. With this project, Jobs wanted to differentiate the iMac
from rivals by changing the design of the computer. Having visually appealing computers, with
no visible screws and bolts was something that was always valued by Apple. During the
development stage, a team of designers visited a candy factory and observed the process of
making jellybeans as a way to understand how Apple could make a plastic computer shell look
attractive to consumers. Those designers also redesigned internal electronics to ensure they were
visually appealing through the thick shell as well. The research and development team did
extensive research on which type of products were being purchased the most, and if those
products were being purchased by first time Apple buyers or not. They discovered that during the
release of the iMac, one-third of purchased were made by first time buyers. After realizing that
sales would increase even more if customers could personalize their products, Apple started
implementing various colors options of computers to their customers. Apple had also worked
with a team of Asian partners for several months, to ensure they were manufacturing their
computers in the most efficient way, allowing Apple to produce millions of iMac in a given year.
How Apples Corporate Strategy Creates Value

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Apple pursues a corporate-level strategy of vertical integration, more specifically of

forward integration, by moving into the retail industry as a way to expand their operations. Prior
to implementing this strategy, Apple relied on third party retailers to sell their product. However,
in 2001, Apple opened their first retail store because they believed they could have more power
over the amount of sales obtained if they offered a retail presence. They no longer had to rely on
multiple companies to add value to their product because it was now easily accessible to
customers in their own retail store, along with customer service and support. This in essence,
enabled Apple to lower its cost structure, thus increasing its profitability. In the long run, this
calculated move ended up being one of the best decisions they made in terms of their wide range
of success because relying on other computer retailers had simply become a primary issue.
How the iPad and iPhone are Changing the Industry
The iPad and iPhone are modifying the industry in nearly every facet conceivable, from
the way people utilize their smartphone to essentially revolutionizing its appearance in the
market. The majority of smartphones were originally plastic and contained bulky keyboards and
comparatively small screens; that changed when it eventually became a form of glass and
implemented a larger touch screen to illustrate its particular elegance. The iPhone is widely
accepted as a device that is not only a phone, but an operating system and a fashion ornament all
in its entirety. Among several accomplishments, one extremely prominent innovation Apple
gained immediate attention upon releasing was the App store, which essentially enabled
consumers to download applications through their iTunes account. This feature wasnt exactly
acknowledged with other competitors which surely presented Apple the opportunity to really set
itself apart and take off respectively. By 2012 Apple had an astonishing 700,000 applications
available in the App store. Due to its stunning achievement, Apple was able to connect with
multiple service providers, including but not limited to Verizon which helped surge oversea sales.
Subsequently, Apple made 80.5 billion in revenues from the iPhone which was significantly
higher than any other one of Apples products. Eventually the iPhone prompted Android to make
some dramatic changes to sustain relevancy. By 2010 Android toped Apple in becoming the most
globally used smartphone platform in the world. This illustrates Apples significance in the
industry and the effect it has on other competitors. Their race to be the most dominant company

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has led to many different ramifications and illustrates how healthy competition is always
beneficial for consumers because there will always be new innovations and products.
Appendix
Exhibit A
Resources
Tangible:
- Money
- Investors
- Inventory (iMac, iPhone, iCloud)
- Equipment
- The OS X operating system
- Steve Jobs
- Intels microprocessor
- Retail stores
Intangible:
- Genius bar
- Jobs creativity and vision
- Excellent customer service
- Popularity within the industry

Capabilities
- Has the-know-how to produce the
most efficient computer
- Having the technology lead in the
industry
- Prestige brand that allows for
prominence across globe