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This is to certify that this is a project report on A STRATEGIC ANALYSIS OF APPLE CORPORATION submitted by Kiran Adhikari, Eliza Gautam, Suman Oli, Nischal Poudyal as a part of the curriculum for the Seventh semester. The work has been undertaken and completed under the guidance of Mr. Bibhu R Tuladhar

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EXECUTIVE SUMMARY Apple Computers 30-year history is full of highs and lows, which is what we would expect in a highly innovative company. They evolved throughout the years into an organization that is very much a representation of its leader, Steven Jobs. Apple made several hugely successful product introductions over the years. They have also completely fallen on their face on several occasions. They struggled mightily while Jobs was not a part of the organization. Apple reached a point where many thought they would not survive. When asked in late 1997 what Jobs should do as head of Apple, Dell Inc.'s (DELL) then-CEO Michael S. Dell said at an investor conference: "I'd shut it down and give the money back to the shareholders. (Burrows, Grover, and Green) Well, times changed. Less than 10 years later, Business Week ranked Apple as the top performer in its 2006 Business Week 50. Apple attributes their recent success to robust sales of iPod music players (32 million in 2005). They are optimistic about the economies of scope with media giants, such as Disney and Pixar. (Business Week) Apple rarely introduces a new type of product. Thus, instead of being the pioneer, they are an expert second mover by refining existing products. Portable music players and notebook computers are examples. Apple increases the appeal of these products by making them stylish and more functional. They now appear poised to make significant strides in the home computer market and to creating a total digital lifestyle whereby the home is a multimedia hub.

HISTORY OF APPLE Steve Jobs and Steve Wozniak founded Apple on April 1, 1976. The two Steves, Jobs and Woz (as he is commonly referred to), have personalities that persist throughout Apples products, even today. Jobs was the consummate salesperson and visionary while Woz was the inquisitive technical genius. Woz developed his own homemade computer and Jobs saw its commercial potential. After selling 50 Apple I computer kits to Paul Terrells Byte Shop in Mountain View, CA, Jobs and Woz sought financing to sell their improved version, the Apple II. (Linzmayer, 7-9)

Explanation of vision Apple lives this vision through the technologies it develops for consumers and corporations. It strives to make its customers masters of the products they have bought. Apple doesn't simply make a statement. It lives it by ensuring that its employees understand the vision and strive to reach it. It has put systems in place to enable smooth customer interaction. It has put objectives in place to continuously move forward; implemented strategies to fulfil these objectives; and ensured that the right marketing, financial and operational structures are in place to apply the strategies.

Mission statement "Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and internet offerings." The Online Music Industry While Apple clearly dominates the online music industry, the battle for domination is not over. Although digital music sales are growing rapidly, the Recording Industry Association of America (RIAA) states that digital sales account for only 4% of all music sales. Analysts at Forrester (Bartiromo) and Gartner (Bruno) validate this. Apples sales are between 66% and 75% of downloads and 80% of music players. Apple is part to a suit alleging monopolistic practices concerning their market share dominance of players and downloads. The other players in the download market are (the revised) Napster, Yahoo Music, Rhapsody, and illegitimate file-sharing services. Portable music players competing with the iPod include those made by Creative, Samsung, iRiver, and Sony. Organizational Structure

Products Mac and accessories o Mac mini o iMac o Mac Pro o MacBook Pro o MacBook Air iPad iPod iPhone Apple TV

Structure of Current Business Model

Software Engineering. The most successful software companies write product for both platforms. As an independent developer, Apple Software would want to sell as many copies of its Operating System and iApplications as possible, which means it would target Windows on White boxes. From the software perspective, the opportunity is not to put Intel chips in an Apple box, but rather to put Apple OS in an Intel White box. Apple OS running as an upgrade to many of the established PC installations generates a huge worldwide market share overnight. Instead of trying to get users to Switch when buying new equipment, users could instead Choose their OS, and use the equipment they already own. An approach like this would put Apple market share and profits through the roof.

Hardware Manufacturing. Even PC lovers love Apple hardware. Cool, sleek and innovative, Apple hardware anticipates both the user needs now and future technologies. But more often than not, Apple creates and abandons a new form factor far too quickly. The cube for example, was discontinued before many had a chance to buy one, and others still want the cool-looking clamshell iBook. If the grumblings of Mac users are any indication, PC users must be interested in buying Mac styled hardware running an Intel chip. Because Apple currently focuses on selling the whole package, it misses the opportunity to manufacturer more product. The success of the Windows iPod clearly shows the opportunity for profit and market penetration by creating PC based hardware. An independent hardware unit would push these advantages, and bring its style to both the PC and Mac worlds. Rather than competing strictly on price

head-to-head with the Dells of the world, Apple could be offering a premium PC box, with all the elegance of an Apple. An iMac, an iBook and a PowerBook for PC users would all be huge sellers.

Retail. The Apple Stores are unlike any other computer store. Flashy, boutique-like, with trained staff and plenty of opportunity to touch, test and try. But do eight people in black t-shirts wandering around a boutique and giving free training presentations translate to market share? A computer store is more than just customer attention and sales of new hardware, it needs to be a resource and a solution for day to day computing problems. With high visibility, high rent, and few SKU's, the Apple Store is hardly the formula for a franchise. More often than not, the need for a card, an adaptor, on-site network installation, custom configuration or programming will be referred to a local Apple reseller or a web warehouse. Without any value-added services, furniture, accessories, and full service solutions, the stores only meet the needs of the beginner users. The Apple Stores can only continue if the platform adoption rate continues to expand. With any bump in the road, the stores will take the first hit. Once the novelty wears off, it is unlikely that power users will be attracted to the Apple Store formula in the long run. Obviously, Apple as a PC hardware vendor misses the whole point of the Macintosh Revolution. And nowhere in the last twenty years was there either a technological opportunity or a will to merge the software onto both platforms. Still, a market share of 5% after twenty years is hardly an electoral success. People have voted with their dollars consistently for the brute on the large TV screen. The hammer left only a ding.

Sales Strategy Another component of the Apple business model is to never pre-announce a product, the strategy being that every new product release becomes a newsworthy event. This free press comes at an enormous cost. First, it positions the product as a spectator sport. Is it news or entertainment? For most, it appears as a futuristic scientific breakthrough, like living on Mars. It is product info about a product many have never seen, delivered in such a way that they cannot be expected to act upon it. People want computing to be as complex as plugging in a toaster. Despite a software that delivers this plug and play simplicity, the newscycle advertising only whets the appetite of power Windows users, not potential buyers. The vast majority of computer owners and news watchers are not power users, and do not understand any significance of a product release, assuming any significant new features were mentioned at all. Free press is a poor substitute for advertising, and the efforts to keep things under wraps to serve this strategy is a waste of resources and goodwill. Computers are just the toasters of the information age. People expect to walk into the local store, buy a computer and take it home. While the Apple Store does deliver this much, they are too spread out to make much of a long-term impact either

nationally or globally. And there is no reason at all for a large manufacturer to spend its time and resources in training low end users. The Challenge Apple has two problems. Not only is its sales and marketing structure less effective than it could be, but as it increases its success, it increases the burden on the support infrastructure that Apple provides for its users. At a time when even governments are outsourcing, Apple is providing ever more services directly to end users with .Mac, AppleCare, PowerSchool, a yet to be revealed Music Service and free instore training. Even direct sales of Xserves to enterprise customers does not always make sense. Businesses operating at the cutting edge expect direct manufacturer support, but they don't necessarily want or need sales exclusivity. Local resellers can provide more products, offer a broader unbiased view of the marketplace, and cover more physical ground than any one corporation can hope to accomplish. A manufacturer who cannot find success using resellers needs to look at itself to find the problem. Resellers choose to support the manufacturers that support them and demonstrate a competence and understanding of reseller challenges. The more Apple goes it alone, the weaker its long-term success will be. Apple's reseller strategy has revealed a desire to land big box retailers only. This is a strategy where one pursues hitting a grand slam, but never takes the time to load the bases. Big retailers and small resellers are in a constant tug-of-war between offering great service versus lower prices, competence versus convenience. I love the Apple Stores, but in many ways they combine the worst of both worlds. It would be a much better use of employees and financial resources to support dealers and resellers. The extra margin that is earned by selling direct is nothing compared to the multitude of lost opportunities at the local resellers store. Sales through a dedicated high rent vehicle like the mall stores simply transfers any extra direct sale profit margin through to the landlord. Trying to grow market share with the Apple Store comes at the expense of profits and simply antagonizes and stresses the existing small loyal reseller network. All business is about relationships. Apple, to its credit, wants to keep a close relationship with its customers. Undoubtedly, these close relationships help it to understand the needs and wants of users. But in the long term, Apple must let go of the end users and support the resellers. That is in the best interest of both Apple and the end users. Distribution must be based on a pyramid. The world wide web is strong, and has changed the world in many ways, but the method of delivery for all goods, just like an assembly line, is through a pyramid shape distribution system. No revolution can challenge common sense.

Culture
Corporate Apple was one of several highly successful companies founded in the 1970s that bucked the traditional notions of what a corporate culture should look like in organizational hierarchy (flat versus tall, casual

versus formal attire, etc.). Other highly successful firms with similar cultural aspects from the same period include Southwest Airlines and Microsoft. Originally, the company stood in opposition to staid competitors like IBM by default, thanks to the influence of its founders; Steve Jobs often walked around the office barefoot even after Apple was a Fortune 500 company. By the time of the "1984" TV ad, this trait had become a key way the company attempted to differentiate itself from its competitors. As the company has grown and been led by a series of chief executives, each with his own idea of what Apple should be, some of its original character has arguably been lost, but Apple still has a reputation for fostering individuality and excellence that reliably draws talented people into its employ, especially after Jobs' return. To recognize the best of its employees, Apple created the Apple Fellows program, awarding individuals who made extraordinary technical or leadership contributions to personal computing while at the company. The Apple Fellowship has so far been awarded to a few individuals including Bill Atkinson, Steve Capps, Rod Holt, Alan Kay, Guy Kawasaki, Al Alcorn, Don Norman, Rich Page, and Steve Wozniak. Numerous employees of Apple have cited that projects without Jobs' involvement often take longer than projects with his involvement. Another presents the image of Jobs "wandering the hall with a flame thrower in hand, asking random people 'do you work on MobileMe?'". At Apple, employees are specialists who are not exposed to functions outside their area of expertise. Jobs saw this as a means of having best-in-class employees in every role. For instance, Ron Johnson who was Senior Vice President of Retail Operations until November 1, 2011, was responsible for site selection, in-store service, and store layout, yet he had no control the inventory in his stores (which is done company wide by then-COO and now CEO Tim Cook who has a background in supply-chain management). This is the opposite of General Electric's corporate culture which has created wellrounded managers. Under the leadership of Tim Cook who joined the company in 1998 and ascended to his present position as CEO, Apple has developed an extremely efficient and effective supply chain which has been ranked as the world's best for the past four years (20072010). The company's manufacturing, procurement and logistics enables it to execute massive product launches without having to maintain large, profit-sapping inventories; Apple's profit margins have been 40 percent compared with 1020 percent for most other hardware companies in 2011. Cook's catchphrase to describe his focus on the company's operational edge is Nobody wants to buy sour milk. The company previously advertised its products as being made in America up to the late 1990s, however as a result of outsourcing initiatives in the 2000s almost all of its manufacturing is now done abroad. According to a report by the New York Times, Apple insiders "believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that Made in the U.S.A. is no longer a viable option for most Apple products". Users Apple aficionados wait in line around an Apple retail store in anticipation of a new product. This branch is located on Fifth Avenue in New York City, with a glass cube housing a cylindrical elevator and a spiral

staircase that lead into the subterranean store."The scenes I witnessed at the opening of the new Apple store in London's Covent Garden were more like an evangelical prayer meeting than a chance to buy a phone or a laptop. " Apple's brand's loyalty is considered unusual for any product. At one time, Apple evangelists were actively engaged by the company, but this was after the phenomenon was already firmly established. Apple evangelist Guy Kawasaki has called the brand fanaticism "something that was stumbled upon".Apple has, however, supported the continuing existence of a network of Mac User Groups in most major and many minor centers of population where Mac computers are available. Mac users would meet at the European Apple Expo and the San Francisco Macworld Conference & Expo trade shows where Apple traditionally introduced new products each year to the industry and public until Apple pulled out of both events. While the conferences continue, Apple does not have official representation there. Mac developers, in turn, continue to gather at the annual Apple Worldwide Developers Conference. Apple Store openings can draw crowds of thousands, with some waiting in line as much as a day before the opening or flying in from other countries for the event. The New York City Fifth Avenue "Cube" store had a line as long as half a mile; a few Mac fans took the opportunity of the setting to propose marriage. The Ginza opening in Tokyo was estimated in the thousands with a line exceeding eight city blocks. Research in 2002 by NetRatings indicate that the average Apple consumer was usually more affluent and better educated than other PC company consumers. The research indicated that this correlation could stem from the fact that on average Apple Inc. products are more expensive than other PC products.

Technology and Product Design This component represents the true core (no pun intended) of Apples capability. From being the first platform to run an electronic spreadsheet (VisiCalc on the Apple II Plus) to the first to establish a digital lifestyle hub (the Macintosh product lines), Apples history is rich with cutting-edge technology development. Apple drives to be the best, no simply the first. The Apple operating system is universally regarded as more stable and reliable than Windows, while the desktop publishing software bundles (iMovie, iPhoto, iTunes, etc.) are the most comprehensive available to end users. Ives best summarizes the entrepreneurial culture within Apple by saying that its very easy to be different, but very difficult to be better.

Strategies Apple Uses to Create Loyal Customers

A Store Just for Apple : Apple has historically been troubled by big-box sales staffers who are illinformed about its products, a problem that made it difficult for Apple to set its very different products apart from the rest of the computing crowd. By creating a store strictly devoted to Apple products, the company has not only eliminated this problem but has made an excellent customer-loyalty move. Apple stores are a friendly place where Mac and PC users alike are encouraged to play with and explore the technology that the company offers. This is a space where Macheads can not only get service but also hang out with others who enjoy Apple products just as much as they do. By creating this space, Apple encourages current and new customers to get excited about what it has to offer. Complete Solutions : Apple's products complement and complete each other. Buy an iPod, and you can download music via iTunes. For the average user, most Mac programs are produced by Apple. This sort of control over the entire user process, from hardware to software, strengthens customer loyalty. Apple users generally don't have to stray to find products and solutions they want. Are You a Mac? : Let's face it, Apple is a hip brand. It pushes a strong identification with everything young, up-to-the-minute and smart. Consider Apple's I'm a Mac campaign. The Mac guy is smooth and confident, while PC appears uptight and old. Once you've become smooth, would you want to go back to uptight? Varied Products : Many consumers may not be ready to buy an Apple computer, but they're willing to give gadgets like the iPod or iPhone a try. By selling products with lower entry costs, it creates an opportunity for new users to be introduced to Apple. If these users enjoy their gadgets, they're more likely to consider buying an Apple computer in the future. Media Fodder : Media outlets, especially bloggers, love to write about Apple. Why? Because Apple makes it so easy. With leaked rumors about new developments, its very own expo and mysterious shutdowns of its online store, Apple gift wraps news stories that are just begging for speculation and hype. By perpetuating this cycle of media frenzy, Apple keeps its customers excited about buying new Apple products now and in the future. Education Sales : By selling its products to schools and universities, Apple turns classrooms into showrooms. If students go through school using Apple products, they become comfortable with the interface and familiar with the superior performance the brand offers. By creating this early exposure, Apple captures customers before they even know that they are customers. Products That Deliver : Apple carefully considers what consumers are looking for, so its products are a result of both extensive research and strong design. This meticulous planning is a large contributor to Apple's high customer-satisfaction rates. It's plain and simple: Robust and easyto-use products not only make your customers happy, but also make them want to buy more products from you in the future. Outsourcing Unpleasantness : With Apple products, the average consumer's interaction with the company is likely to be low. Unless something goes wrong, you don't have any reason to speak with an Apple customer-service representative. Of course, the iPhone presented an opportunity that could have made Apple much more involved, similar to administering iTunes for the iPod.

With a phone, interaction becomes multifaceted. You have to consider billing errors, quality of wireless service, contracts and a number of other factors that often lead to customer frustration. With the iPhone, Apple was wise to stick with building a good product and letting AT&T handle the service. Consistency : All of Apple's products have the same basic architecture. Because of this consistency, customers who already own Apple products have a good idea of what they'll be getting before they make a purchase. They know that it will be easy to adapt to new hardware, and this makes them more open to making a repeat purchase. New Innovations : Although the architecture of Apple products is consistent, its portfolio is not. The company offers consumers a number of different ways to enjoy its products. By giving customers an opportunity to employ Apple in their living rooms, pockets and offices, Apple makes it easy to stay loyal to a brand they already like. Attractiveness : From packaging to aesthetic design to user-interface experience, Apple makes its products accessible and attractive. Bright colors, a smiling icon and slick-looking hardware remind customers every time they use Apple products that what Apple offers is appealing.

SWOT Analysis
Although participation in such activities may add value, they may not be a source of competitive advantage. Ultimately, the value, rarity, inimitability, and/or organization (VRIO) of an activity or resource determine its sustainability as a source of competitive advantage. Within this context, we can identify a firms strengths, weaknesses, opportunities, and threats (SWOT). Strengths Technical savvy Product lines are easy to use and stable. Recent integration with Microsoft products lines and Intel processors demonstrate ability and willingness to adapt to a diverse customer base. (Mossberg) Such innovation, however, would not be sustainable without a learning environment tolerant of mistakes. While the pure technical expertise alone is not a valuable or rare resource, it becomes very costly to imitate when it exists within the socially complex, entrepreneurial culture of Apple. Financial vitality Cash reserves remained robust and stable despite stagnant market share growth in the computer hardware and software arenas. Apple exploited this by resisting market pressures to reduce costs, tightly integrating product packages, and forming strategic alliances (i.e. securing the backing of all major music distributors in the support of iTunes). Brand loyalty The only way that Apple could maintain the financial vitality described above is via a fanatical, almost cult-like, affair with its customer base. Such brand loyalty is extremely costly and time-consuming to imitate. Steve Jobs As discussed earlier, Jobs proved to be a vital component to Apples success. During his absence (1985-1996), Apple experienced the most turbulent (financial and innovative) timeline in its history. Immediately upon his return, he replaced most of the Board of Directors,

pruned and focused the new product ideas, and delivered seven consecutive quarters of positive earnings to shareholders. As such, Jobs is certainly a valuable, rare, and hard to imitate resource that Apple fully exploits. Weaknesses Market share Apple has historically been strongest in the US geographical and educational vertical markets. With the educational market facing tightening budget constraints and the US approaching a PC saturation point, Apple may need to burn cash more quickly and succumb to market cost pressures on its products without a strategic innovation, integration, or divesture. Steve Jobs For virtually the same reasons Jobs is a strength, he is simultaneously a weakness. The aggressive drive to bring innovative visions to life was noticeably absent and painfully felt (especially by shareholders) during his departure. The apparent absence of succession planning coupled with a lust for the limelight positioned Jobs as Apples single consciousness in the eyes of consumers and shareholders.

Opportunities Consumer electronics With the startling success of the iPod and iTunes, Apple entered the consumer electronics market. By expanding the iTunes concept to downloadable mobile phone features and movies (podcasts), the door is now open to develop new and potentially profitable strategic alliances with peripheral component manufacturers (speaker, home stereo, etc.) and media transmission giants (Disney, TBS, Verizon, etc.). PC hardware and software market growth With cross-licensing of operating system platforms in place, Apple entered the high-volume business environment traditionally dominated by Windows-based PCs. The introduction of Intel-based processors prompted businesses to replace PCs with iMacs. They did this to gain a level of stability and reliability in their business applications that PCs failed to provide. An example is Japans Aozora Bank Ltd., who is replacing 2,300 PCs with iMacs. (Wingfield) Apple must establish themselves as a credible player in business desktop applications to overcome the desktop publishing stereotype.

Threats Legal risks In a market that literally changes at the speed of thought, patent and copyright infringement risks remain high. As long as operating systems and support software packages continue to converge and remain relatively easy to imitate, present and future lawsuits are inevitable. The Apple records claim against iTunes remains unresolved. Competition This threat occurs primarily on two fronts: PC hardware/software and consumer electronics. For the same reasons discussed in the opportunities section, the threat of imitability (cloning, pirating, etc.) increases. As relative newcomers to the consumer electronics arena, will Apple retain a competitive advantage as they diversify their offerings (speakers, home entertainment systems, etc.).

Apples Mac Challenges MIS to Cope In the heart of large companies, data center managers are wearingly warding off a second band of corporate renegades. The renegades are trying to break down mainframe walls and build new applications replete with icons and pretty pictures. After finally coming to terms with the IBM microcomputer revolution, MIS departments are now being asked to assimilate a second microcomputer standard, the Macintosh from Apple Computer Inc. of Cupertino, Calif.When the machine was introduced in the mid-1980s, most managers viewed it as a small business system or a home computer.Despite the tag, Macintoshes have wormed their way into many large corporations. Conglomerates, such as E.I. du Pont de Nemours & Co., Northern Telecom Inc., General Electric Co., Martin Marietta Corp. and Electronic Data Systems Corp., have all blessed the Macintosh. John Wardley, a senior analyst at International Data Corp., a market research firm in Framingham, Mass., said, "Macintoshes were initially purchased to address a specific niche. For example, a corporate advertising department may have used the microcomputer to produce graphic presentations."Once other department saw the machine's output, interest spread. Right now, Macintosh usage is rapidly growing in many large corporations," he said. Use of the computer has progressed well beyond the test phase and a few corporations have installed thousands of Macintoshes. "Right now, our users are purchasing more Macintoshes than IBM microcomputers," said Michael Pearson, the director of technical operations at the New York Daily News in New York.

Apple profit makes huge rise due to iPod success In the first quarter of 2007, more than five million iPod music players were sold. Apple's quarterly income has increased six-fold largely due to the success of the device. The firm's net income raised by a massive 530% to $290m compared to 46 over the same period in 2008. Revenues rose 70% to $3.24bn after good growth in all product categories. A number of approximately 5.3 million iPods were sold over the period, which is an increase of 550% in the same period in 2008. Sales of PCs also rose to over a million (43% rise) following the success of the new Mac mini and new PowerBook notebook computers. Steve Jobs was delighted with the figures for the first quarter. "Apple is firing on all cylinders and we have some incredible new products in the pipeline for the coming year," he said. 40% of the sales made were over seas, which showed the popularity of the iPod in Europe and Asia. However, Apple said it expected earnings per share to be lower in the third quarter, at $28 per share as against $34 per share over the latest period and also expects revenues to remain largely flat at $3.25bn.

Apple Beats Competitors at Inventory Turn Over Despite a weakening economy and a need to meet customer demand, Apple has been able to maintain a fast inventory turnover rate. The Mac and iPhone maker is sitting at five days worth of inventory on any given day, beating Dell's seven days worth of inventory, according to data from UBS. Other PC

makers are having even more trouble matching Apple's inventory efficiency. Lenovo, for example, is averaging 15 days of inventory, and HP is sitting at 32 days. Intel, however, is showing a much slower inventory turnover rate at 89 days, and D-Link is sitting on a staggering 131 days worth of inventory. Apple's quick turnover rate may have been due in part to preparing for its just announced iMac , Mac mini and Mac Pro updates. The company released new desktop computer models on March 3, and keeping inventory low helped assure that there would be fewer of the previous model machines sitting on store shelves. While maintaining a higher inventory level can help a company cope with sudden increases in demand, it can also show a company's inability to adequately gauge market interest in their products. For now, it looks like Apple is managing inventory better than its competition.

Recommendations

For Company Lowering the cost of products and maintaining the same quality standards. Can form joint ventures. Knowledge Management. More number of retail stores for easy access. Continuous innovation to expand.

For Others Do not compromise on price for quality. Choose the products based on individual needs. Be unique and different.

Conclusion
We feel that Apple must focus on several key aspects to continue to grow and succeed. They must continue a stable commitment to licensing, push for economies of scope between media and computers, and become a learning organization. Apple apparently made a commitment to licensing. Although it should continue, Apple may want to consider other forms of strategic alliances. An equity strategic alliance may offer Apple the opportunity to obtain additional competencies. An effective way for a company like Apple to accomplish this would be in the form of a joint venture.Apple should continue pushing the new line of media-centric products. Meanwhile, Apple should not lose focus on its computers. Macintosh computers were 39% of Apples sales in 2005. (Burrows) This very innovative company exploits its second-mover position. In the future, they will need to continue innovating to expand the boundaries of both media and computers.One persistent element of both competitive advantage and risk is Steve Jobs. He is both synonymous with Apples success and has a large equity interest in Apple and Disney. If he were to divest his leadership position, the reaction of both the market and consumers would be uncertain. Given his position within the organization as well as the history of the company when he was gone, Apple must find a way to learn as an organization. This will allow the company to withstand a departure by Jobs. Based on the actions of the organization, we feel that the mid-term performance of Apple will be strong. This period allows Apple time to overcome their challenges if they move swiftly. For this reason, we feel that they will continue to succeed and will continue to outperform their peers. If you look at the history of Apple, you'll see that instead of rising to competition, they often ignore it, or try to use legal means, or bundling clout, to erase it. When challenged by a larger market force, as with the IBM PC and its clones in the early 80s, and with Windows 3.0, 95 and then NT 4.0 in the 90s, they miss obvious marketing opportunities, ways to make their products stronger by participating in markets that others develop. This is an art that Microsoft has mastered, there's no reason Apple couldn't have learned the same lessons, but they didn't. And when dealing with smaller competitors, Apple routinely and often unconsciously forced them out of business by bundling, or declaring that they will bundle a competitive offering. When the Internet happened, Apple struggled against it instead of embracing it, preferring to invest in technologies that eventually ended up on the scrap heap. A wasted lead in content development, developers going to Windows, a poor Java implementation on the Mac. The bottom line, the strategy of avoiding competition has been disastrous for Apple. But they want to do it again.