NCRD Sterling Institute of Managemnt & Studies

Strategic Management Report on Apple Inc.

submitted by:

Deepak R Gorad Sandeep Ramraje Sachin Thete Ganesh Shirsat Girish Suvarna

submitted to: prof. Seema Laddha

CONTENTS Introduction Strategic Analysis Vision and Mission Statement Apple Value Current and Past Strategies Culture PESTEL Analysis SWOT Analysis Strategic Challenge and Issue Strategic Challenge and Future Strategy Implementation and Change Factors References

APPLE Inc. I. Introduction Apple Inc. was previously known as Apple Computers Inc. is an American based multinational company. It designs and manufactures software products. The founders of Apple were Steve Jobs, Stephen Wozniak and Ronald Wayne. This giant American conglomerate was established in Cupertino, California in the middle of the Silicon Valley on April 1st, 1976 and incorporated on January 3; 1977.This organization is among the Fortune 500 companies. (Young&Simon, 2005) The nature and scope of this organization is to create innovative and tech savvy hardware and software which are unique, stylish and very functional at the same time. The companys best known hardware products are Macintosh computers, ipod and the latest one iphone. In software segment MAC OS X operating system, itunes media, ilife a suite of multimedia and creativity software, Final cut studio for audio and film industry. It has more than 200 retail stores in eight countries and an online store where all apple hardware and software are sold online. (Cruikshank, 2005) This project on Apple Inc is highlighting the founders, foundation, products of the company, Its PESTEL and SWOT analysis and some other. It will show the success of this company and about its strategies adapted to overcome tough competition.

II. STRATEGIC ANALYSIS 1. Vision and Mission statement In real sense apple has no real vision and mission statement but there are certain commitments which they make like At Apple they believe in there Responsibility to minimize the environmental impacts of our operations andproducts. There are some authors who have compiled a mission statement for apple like 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. (Freiberger&Swaine, 2000) 2. Apple value =>Empathy for customers and users, =>Achievement and aggressiveness, =>Positive social contribution, =>Innovation and vision, =>Individual performance, =>Team spirit, =>Quality and excellence, =>Individual reward and =>Good management. (Wozniak, Smith, 2006)

CULTURE Apple has a tradition of felicitating scientists and mathematicians. There logo of a half bitten apple. Apple logo is for giving respect to Sir Isaac Newton for inventing the law of gravity and the half bitten apple is for the mathematicians Alan Turing who committed suicide by eating an apple which he had laced it with cyanide. He was regarded as on of the fathers of computers. The companys attire is very casual enabling employees to work in a fun environment. There culture is to be unique and to be innovative with sleek and stylish design and very functional. This culture has gained global acceptance. 5. PESTEL Analysis Political Apple Inc started as a start up by Steve Jobs and Steve Wozniak initially so they had to face a lot of problems regarding there company registration and other paper works. Today Apple lists at NASDAQ as APPL and this firm has strong rivalry partners like Microsoft, IBM and Google so there share prices clash against each other (The New York Times, May, 2007) the heavy taxes at US and UK are a major block age. Initially apple launched its much awaited iphone and then Google launched an iphone too. In political aspect apple had a lot of financial turmoil so the founder Steve Jobs was asked to resign and later on again in late 1997 was asked to rejoin as the CEO to handle the company and it was under Steve Jobs reign that Apple Inc was joined in the Fortune 500 companies lobby. Apple had to face a lot of problems while entering Indian market specially with there iphone as there was lot of hurdles while selecting the telecom company with the union broadcasting minister of India for entering as a company providing handsets. Then they joined hands with Vodafone Essar and Bharti Airtel later on. (Wozniak and Smith, 2006) Economic Apple products are a bit priced higher than its competitors. The economic condition stands strong at present at the stock markets and it enjoys an overwhelming trust over its CEO Steve Jobs but due to long illness of Pancreatic Cancer has made its investors fear. By 2002 its major chunk of revenue was generated by its desktops and others by notebooks, ipods and other products. But by 2005 it has shifted its revenue generating portfolio by its diversified products which was covered in same proportion by desktops, notebooks, ipods and others but in recent times iphone has taken a major chunk of it and trying to compete with its rivalry Google with there iphone and some new rivalry like NokiaN96, Blackberry Bold, Samsung Omnia. (The Wall Street Journal, November, 2008) Social Socially Apple has made many social gatherings to attract its customer as it made an extensive advertisement at the Beijing Olympics Games, 2008 and they set up many kiosks where they allowed customers to experience the apple products. Recently at the Wall Street Job Fair last year they made a booth of there own as a publicity stunt and hire employees and it was a first time online job fair where some other major companies too participated.

Technological In terms of technology apple has stayed always a step ahead against others. As in reinventing and tying up with rivalry like IBM and Microsoft. Technological up gradation has always been a target of apple. Ipod has been reinvented several times with latest players to make it consumer friendly. Environmental Apple Inc has done in the past and is currently also contributing to save the environment. They had announced that by the end of 2008 they will eliminate Polyvinyl Chloride and brominated flames retardants in its products, and arsenic in all glass flat panel display. In June 2007 Apple upgraded the MacBook Pro, replacing cold cathode lamps with mercury-free LEDs and arsenic-free LCD glass,] and has since done this for all notebooks. Apple has also phased out BFRs and PVCs from various internal components. Apple also offers detailed information about the emissions, materials, and electrical usage of each product. Apple has also begun to advertise how environmentally friendly their new laptops are including television spots and magazine ads, in addition to touting these facts on their website. Lawful Apple Inc does all its operations under the US Trade Legislation guidelines. In 1986 the companies wasnt enjoying a good time due to many legislative failures. Then in 1993 the company was loosing acceptance for which in 1997 Steve Jobs the founder was asked to join as the CEO of the company. There were many break downs in the corporate affairs of the company with many cases filed against the company as they refused to accept and adopt the new standards set for manufacturing software and hardware as they were creating there own products.(Simon,2007)

SWOT Analysis Strength One of the oldest and reputed hardware companies. They have a control over there products as they usually interlink all there products. All the products run via software developed by apple so as to enable the users to buy apple products. They have a store dedicated to only apple products as apple products lover can browse through the stores and are restricted to buying apple products only. Apple launches its products in a very stylish and hippy manner as launching at schools and universities and making a fun interactive launch parties. It has a reputation of delivering some of the highest quality products which are stylish, sleek and very portable and especially the half bitten logo of the fruit apple attracts a lot of customers. Its present CEO Steve Jobs has a good reputation among its investors and very well renowned man in this industry. They only deal with best players in the industry like for there iphone for there networking purpose they are working with AT&T which is the best wireless service provider in United States and the world. Opening of online stores for downloading itunes and games was a major hit for them as this has lowered the distribution cost and made it possible to profit on games that are sold for a few dollars and by this

apple keeps 30% of the proceeds of software sales through its online store. Consistency is another key factor as each product is linked with there upcoming product via software or other source. (Deutchman, 2000) Weakness Apple as a giant conglomerate has few drawbacks. The major weak point is the high price of the products and the software which runs the products are only apple friendly product as almost all there products are interlinked to each other disabling users using different brands not to shift there brands. They focus a lot on the engineering of the product rather than marketing of the product as apple Inc products usually are marketed in form of viral marketing or via mouth word Selling which strength but it reaches only to section of people who uses internet and attend colleges or work in MNC as they are the only type of people who are educated about the new products. So in this way they are keeping themselves aloof from a very huge chunk of market. There strategy went wrong in Indian market with there iphone as there marketing communication to the sales and distribution model went wrong and most importantly pricing of the product was too high for the Indian masses. (Lance&Woll, 2006) Opportunity Apple has a tradition of putting up entry products with low cost as bringing ipod and iphone at 199$ at US to attract a pool of customers and then they have ample of opportunity to retain them back with there interlinked and consistent product line. It creates opportunities for themselves and later on work upon it. In recent times apple has created market in other countries as well like African countries, India, Middle East and some other undisclosed countries. Podcasts are downloadable from radio and later on formatted to be listened in ipod and a subscription charge to be paid and this will generate revenue for the company. Flexibility to its users is an opportunity on which apple banks a lot it hooks back the customers by keeping on innovating and changing the product line in there every launch each year customers eagerly wait for the next apple launch. (Kunkel, 1997) Threats Pressure form Competitors is the biggest threat, IBM, Microsoft, Google all these giant IT firms are also lined up with same sort of product portfolio. Apple launched its iphone so did Google also came up its version iphone. Marketing strategy went wrong in India with there iphone due many factors primarily with the high price tag. Since technology is changing at a rapid pace so apple needs to keep on changing its products so to meet up to its users needs. The changing Environment is forcing apple to develop new products to keep it different. Bad health condition of CEO and founder Steve Jobs due to cancer is making its trust worthy investors fear as Steve Jobs has a good reputation over its investors. One of the biggest threat is its high price in compare to other companies offering same sort of product like NokiaN96, Samsung Omnia, Blackberry Bold phone by RIM (Research in Motion) are offering the same service in iphone category with Google iphone also and in ipod segment many other companies have also come up with same type of models like Sony, Philips, Trandscend, Sandisk and others. The other biggest threat is its software sharing relationship with other companies

as apple is very much particular with the software sharing with others disabling users to play music or open files in other operating system so this doesnt make it a user friendly product so users.(Hertzfeld, 2004) FINANCIAL ANAYSIS

INDUSTRY RATIO COMPARISON:

SWOT ANALYSIS

PORTER FIVE FORCES

SUSTAINABLE PRODUCT DIFFERETATION

RELATIVE SALES GROWTH

Net CASH FROM SALES

ASSET TURNOVER

INVENTORY TURNOEVR

NET PROFIT MARGIN

Strategic Challenge and Issue The biggest strategic challenge and issue is cut throat competition from its rivalry partners, IBM, Microsoft, Google, Sony, HP and Dell in terms of producing the same product and apple has the highest price among all. Google has also launched there version of iphone called as G-Phone which features Android operating system. The apple iphone in India was a failure. Manufactured by HTC. Apple being a big player in US but failed to mark a strong position in the Asian market where it had many strong contenders like Sony of Japan, Philips, LG. All these companies manufacture the same products which apple manufactures and that too with low price in compared to apples high price. Apple has recently issues software 2.2 for ipod touch and iphone to solve multiple problems which could lead to leak of sensitive information as the same was with RIMs Blackberry where the encryption code was impossible to be tracked. There are some more areas where apple need to safeguard there hidden secrets as apple is bloogers favorites topic so they go for that extra mile to find confidential facts as recently 19 year Harvard student leaked some facts of the apple for which apple later on prosecuted the student. Since apple is a very big IT giant so it attracts tough competition for others so apple spends millions on marketing of the products and as it comes with a high price so if the economic condition of the market falters then it will severely affect consumers purchasing power. (Lyons, 2007) Apple needs to work on its unlocking procedures strictly as in Singapore many stores illegally were unlocking the iphones at a very cheap rate with no notification to the apple company. So Orange has been selected to distribute it. Early in 2005 when apple switched from IBM as a chip supplier to Intel, so that time industry specialists thought the swap of apple could lead to consumers getting confused so this type of shift should be done carefully. (Linzmayer, 2006)

V. Strategic Options and Future Strategy For overcoming all these strategy there need to be a future strategy. The strategy applied by apple in India was a failure due to many reasons like pricing kept too high so the pricing to be kept low by cutting down unnecessary expenses. They got everything wrong from pricing, marketing communication to the sales and distribution model. There need to be a strong link as far consumer confidence is concerned. India being the worlds second largest and fastest growing telecom and handsets market by Standards and Poors survey and also by Reuters. In this way apple has lost the trust of Indian consumers by the poor failure of marketing of it s iphone and gave more space to rivals Nokia, Samsung and Blackberry. The marketing should have been done on a grand scale to make itself known to Indian masses too other than the educated people, though it was higher segment of class but it failed on deaf ears. Other than its CEO Steve Jobs made a global announcement that the iphone would be charged at 199$ globally. This built a false hope in the mind of consumers who wanted to buy it and turned away those Who could have actually bought it? Apple will aim to become the hub of the

digital home, offering eight key products and services to connect PCs and digital content to the HDTV-stereo audio-visual infrastructure in consumers' homes. To fulfill this strategy, we predict that Apple will launch new products, re-engineer the Apple Store, and expand into in-home installation services. (Gownder, Quivey, 2008) In terms of environment keeping free apple should adopt healthy practices of keeping there products from emitting heat thus reducing the heat level to the atmosphere. Though they are doing such works but can do more like Dell computers have went further of recycling free including pickup from anywhere. 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. Apple should fear the shift of ipod towards mobile phones as they can also play music files and videos, so careful marketing up gradation of the product is necessity for the long run where consumers are shifting the taste quiet often. (Kahney, 2008) Apple software can be made accessible in certain cases as there are many other online itune stores too like Napster. If a subscriber is paying for downloading a song or game which can be easily accessed via other free downloading sites then why will a user go to apple online store? So the online store should charge a very nominal charge or a one time payment of registering themselves and then use as in todays stiff competition scenario apple has no more monopoly in the market where many other companies have come out with the same sort of product with less price tag, so this demands innovation at regular intervals. VI. Implementation and Change Factors Implementation of the strategies and changes are to be made. Pricing strategy to be worked upon again for the Indian market and re-launch it in a slow skimming strategy. The online store to be made more accessible as making it low entry cost for downloading and setting up apple store at other places also other than US and other developed nations. Change is demand of time so change management to be handled perfectly as if a company do not change itself then they wont able to survive in the long run in this fast changing environment. (Smith, 2007) Though apple is good in innovating products but being a market leader it has to increase its R&D practices in a more high level to stay afloat in this tough market and keep its market share intact and keep on growing. Apple should further work upon its marketing strategies to sell more and more products

REFRENCES Cruikshank, J.L.2005.The apple way: 12 management lessons from the worlds most innovative company.U.S.A: Mc Graw hill companies. Deutschman, A.2000.The second coming of Steve Jobs. New York: Broadway Books. Douglas, P. 2007.How apple got it strategy wrong. The Wall Street Journal, November 10, p.9. Freiberger, P.,Swaine, M.2000:Fire in the valley:The making of personal computers.Boston: Mc Graw-Hill Companies. Wozniak, S., Smith, G.2006.IWOZ: Computer geek to cult icon.San.Fransisco: W.W. Norton and company, Inc. Young, J.S and S, W.L.2005. ICON Steve Jobs: the second act in the history of business. U.S.A: John Wiley Sons, Inc. SCRIBD.COM