Table of Contents

Table of Contents ....................................................................................................................... 1 Introduction ................................................................................................................................ 2 Company Background ............................................................................................................... 3 Apples mission statement ..................................................................................................... 4 Corporate goals and objectives .................................................................................................. 4 PEST Analysis: .......................................................................................................................... 9 Porter's five force analysis ....................................................................................................... 13 The Apple Brand .................................................................................................................. 13 Rivalry .............................................................................................................................. 14 KSF .......................................................................................................................................... 17 SWOT Analysis ....................................................................................................................... 20 Corporate Culture..................................................................................................................... 23 Corporate Structure .................................................................................................................. 26 Key Resources & Capabilities ................................................................................................. 28 VRIO Framework .................................................................................................................... 32 Corporate Level Strategy ......................................................................................................... 34 BCG Matrix ............................................................................................................................. 37 Business level strategy ............................................................................................................. 42 Corporate Value Chain ............................................................................................................ 44 Strategic Effectiveness ............................................................................................................. 52 TOWS Matrix .......................................................................................................................... 54 References ................................................................................................................................ 55

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Introduction
The aim of this paper is to examine business policies and conduct a strategic analysis of the company Apple Incorporated. Apple is an American multinational company operating in the computer software, personal computer and consumer electronics market and is one of the largest corporations in America and all over the world. In the year 2007, the company changed its name from Apple Computers Inc. to Apple Inc. to reflect their foray into the consumer electronics market. Apple Inc. has been ranked number one on Fortune magazines Most Admired Companies list since 2008 and was also voted the number one global brand in the year 2011. Currently ranking number 35 on the Fortune 500 list, this company is expected to keep growing further and face tremendous success in the future. In this paper we will examine the company from a strategic viewpoint, scrutinizing the external macro and micro environment as well as the internal dynamics. Apart from the entire Apple brand, we will also be further discussing external aspects of the popular Apple product the iPhone. The iPhone is chosen, since in 2011 this product generated the most revenue for the company and also faced the most sales per unit making it Apples most successful product of the year 2011. To understand the external Macro environment Apple operates in, we have conducted a PEST analysis of the US economy, where Apple primarily operates. The Micro environment has been assessed using Porters 5 + 1 model, for both the overall Apple brand and for the iPhone. Key success factors of both the technology industry and Smartphone industry have also been identified. The corporate level strategies, business level strategies and company structure/culture have also been further analyzed to understand Apple completely from a strategic viewpoint.

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Company Background
Information Technology is a widely used generic term used to explain any innovative creation. Apple Inc however brought a whole new meaning to it. This company based in Cupertino, California and incorporated early in 1997 was not only an innovator, but the best in their industry. The infamous i used as an initial for all its brands, Apple has been basking in the glory of its success in revolutionary technology over the years.

The company started its story as an early developer of personal computers from Steve Jobs garage. Their product was a great success and sales increased from $7.8 million in 1978 to $117 million in 1980 (Hoovers Inc). This allowed the company to go public and start a successful corporation that was focused on creativity and innovation. Apple first launched their exclusive personal computing device called Macintosh. One of their biggest threats in the external environment was and still is Microsoft. Apples sales were affected greatly by the launch of Windows by this tough competitor. This was mainly due to the fact that Microsoft was better able to understand what consumers wanted and also because their corporate goal was to standardize Microsoft as a necessity in every household. The fact that Jobs left the company was also another problem because he was the guidance behind Apples philosophy and this has been reflected in their corporate culture all along.

However, this streak didnt last for long and the acquisition of NeXT (an application development company also established by Jobs) in 1997 put him back on the board. Apple then went on to revolutionize the industry with the launch of a series of innovative products within different subsets of the information technology industry over the next 10 years. They ventured into smart phones (iPhone), tablets (iPad) and music devices and softwares (iPod

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and iTunes) just to name a few. This diversification in their activities has been reflected by the fact that the company changed its name from Apple Computers Inc to just Apple Inc in 2007.

Apples mission statement

The mission statement as quoted on the FAQ section of their website is: Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork, and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple reinvented the mobile phone with its revolutionary iPhone and App Store, and has recently introduced its magical iPad which is defining the future of mobile media and computing devices. Apple which had established itself initially as a computer developer has now broadened its scope of operations and diversified into computer hardwares, softwares, electronics and the music industry to name a few. In fact we can quite confidently sum this all up through their vision statement An Apple computer on every desk Steve Jobs This therefore means, that its mission statement emphasizes on achieving success in all of these product lines through innovation and leading edge technology. And these ideologies define their current goals and objectives.

Corporate goals and objectives

1) The Company is committed to bringing the best user experience to its customers through

its innovative hardware, software, peripherals, and services. (Apple 10k, 2011, p. 26)
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2) The Companys strategy also includes expanding its distribution network to effectively reach more customers and provide them with a high-quality sales and post-sales support experience. (Apple Inc 10k, 2011, p. 26) 3) Apple Inc. plans to keep creating and releasing computers and consumer electronics that are more user-friendly. (Training and Development Program for Apple Inc., p. 7) 4) Apple Inc. will focus on opening more stores even on international locations to help increase in sales (Training and Development Program for Apple Inc., p. 7) 5) Another Objective of Apple is innovation. Steve Jobs in one of his famous quotes said: "Pretty much, us and Dell are the only ones in this industry making money. They make it by being Wal-Mart. We make it by innovation." (Jobs: Flat-panel iMacs on the way, 2002)

Board of Directors
These are the current board of directors at Apple inc. Their profiles and compensation has been retrieved through Forbes People profiles. 1) Arthur D. Levinson, Ph.D. Levinson has served as co-lead director of Apples board since 2005 and has also been a member of all the board subcommittees. He is also a former scientist at Genentech, Inc where he had served as chief executive officer and chairman between 1995 and 2009. His compensation as Apples board member for 2010 has been $849,583. 2) William V. Campbell Campbell has been a member of Apples board since 1997. He is also a member of the audit committee. Apart from that he has also been a director at Intuit, Inc since 1994 and chairman of its board since 1998. His total compensation at Apple as its board for the year 2010 has been $873,684.
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3) Tim Cook (CEO) Cook officially took the position as CEO of Apple on August 24, 2011 following Steve Jobs resignation. He has also served on the board of Nike and has vast experience at a managerial position in Compaq and IBM. His total earnings for 2010 is $59,092,572 and has been rated as number 58 on the list of powerful people by Forbes. 4) Millard S. Drexler Drexler is a member of Apples board and is also a part of the compensation and nominating and corporate governance committee of Apple. He is also on the board of J. Crew as chief executive officer and chairman since 2003. Before that he was the CEO of Gap Inc. His total compensation as director of Apple for 2010 has been $1,076,258. 5) Albert Gore, Jr. Mr. Gore who has been the former vice president of USA during Clintons administration has also been a part of Apples board and its compensation and nomination and corporate governance sub committees. His compensation for 2010 as Apples board has been $1,278,431. 6) Robert A. Iger Iger has been a board member at Apple since November 2011. He is the chairman and CEO at The Walt Disney Companys board. 7) Andrea Jung Jung is the only female board member at Apple. She has been the CEO and chairman at Avon Products, Inc since 2001. Her compensation at Apple for 2010 has been $52,214. 8) Ronald D. Sugar, Ph.D. (Former Chairman and CEO) Sugar has been the chairman at Northrop Grumman Corporation from 2003 to 2010. He is also a board member at Apple and Chevron Corporation.

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Apples Board of Directors is very well organized and structured. It comprises of a total of 8 board members of which Tim Cook, the CEO is an insider and the rest 7 are outsiders. This allows flexibility and efficiency in decision making. It also allows an independence of the management from the board which deals with the issues of agency problems arising.

Apples board of directors also has three sub committees who handle some of their major corporate decisions. The committees and their members are as follows The Audit and Finance Committee Ronald D. Sugar, Ph.D. (Chairperson), Robert A. Iger, and Arthur D. Levinson, Ph.D. The Compensation Committee Andrea Jung (Chairperson), William V. Campbell, Millard S. Drexler, and Albert Gore, Jr. The Nominating and Corporate Governance Committee William V. Campbell (Chairperson), Millard S. Drexler, and Albert Gore, Jr. Corporate Governance Looking at the composition of the board, some of the attributes of the board and committee that we can acknowledge include: The competencies of the board members where most of the members are either serving or have served in corporate governing positions in the past (one of them was also the vice president of USA). Responsibilities are fairly divided where the CEO of the company is not part of any of the committees that decide the fate of the management. The structure promotes fulfillment of the fiduciary responsibilities this is possible because voting on any decision would be fair and having just 1 insider means that the board is more informed and yet still powerful to influence decisions for the benefits of the stakeholders.

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 And finally all of this leads to value maximization, because the decision making body cannot be biased due to any one members personal motive, allowing greater efficiency. Apple Inc. places great emphasis on corporate governance and how they do business worldwide. They have a well-placed conduct policy that is strictly followed by all employees and directors. Some of the issues they focus on include Kickbacks Side-deals/businesses Confidentiality Safeguarding of consumer and third party information

Apple also expects directors to function ethically. They have an entire document detailing guidelines on how to deal with issues relating to the directors conflict of interests which may lead to principle-agency problems. These issues may arise due to the availability of asymmetric information where not all stakeholders are equally informed. Apples own definition of how a conflict of interest arises is highlighted in one of their official documents called the conflict of interest guidelines where they state that

A conflict of interest is any activity that is inconsistent with or opposed to the Corporations best interests or that gives the appearance of impropriety or divided loyalty.

Apple deals with this situation by having a neutral party called the corporations general counsel who survey each director annually to analyze and determine whether they do have any potential conflict of interest situation. This counsel then provides a solution by having an

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outside adviser to provide assistance as deemed necessary. The director may also be stopped from voting on instances where their vote would lead to such unfavorable conditions arising.

PEST Analysis:
Organizations are often affected by the environment they function in, therefore, it is necessary to analyze and understand the macro conditions surrounding the firm in order to ensure that the firms health is not negatively affected by its external environment. PEST Analysis is often used to analyze the external environment in terms of Political, Economical, Socio-cultural and Technological elements.

Political

Considering that Apple is a firm located in USA, it is directly affected by the political conditions of the country. Post 9\11 USA has faced a lot of political instability. It has been observed that the foreign relations of USA with other countries have been at their worst in the past decade. Considering that Apple like many other of its competitors outsources its manufacturing processes to countries like Koreas, Czech Republic and so on, one might fear that a political change in terms of foreign policies may negatively affect Apple. The components are outsourced and if any sanctions or laws prohibiting trade or affecting import and export are levied by the US government, they are bound to affect the company negatively (Apple, 2010). As the company functions both in US and internationally, it continuously required to meet the laws and regulations all around the world. In US it is necessary comply with tax laws and any change in tax due to change in political conditions will directly affect apples financial health.
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Subsequently, apples entry into the telecommunication world also makes it vulnerable to the laws of the telecommunication companies. As a firm in order to ensure its financial is secure from negative impact of any of the laws in all the industry and geographical locations it serves, it is necessary to have efficient legal and compliance methods in place.

Economic
Apples 39% of net sales come from US and a weakening economic conditions are bound to mar Apples financial health (Apple 2010). Post 2008 debt crisis US is still struggling to come out of recession. The unemployment rate as of October 2011 was as high as 9%, even though the rate went down to 8.6% in November, the negative perception with respect to unemployment rates in US is very high(BLS, 2011). Moreover, consumer spending has also decreased greatly An excerpt from Pew Charitable Trusts (2010) shows: ...the recession has led to a new frugality in Americans' spending and borrowing habits; a diminished set of expectations about their retirements and their children's future; and a concern that it will take several years, at a minimum, for their family finances and house values to recover. Since Apple relies on customers that are willing to pay premium prices for a state of the art product there is a reasonable chance of apple being hit by the slow economic growth due to recession. Though Apples presence in the international market may help apple shield itself from the negative impact of US recession to some extent. Like for example: a weakening dollar may help Apple to gain more due to exchange rate differences.

Socio-cultural

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Apple focuses on market that consists mainly of people of the age 20-30 years and is educated and well off. They focus on customers with disposable income and people who willing to pay premium prices for a high personal user experience. A survey conducted by Pew Charitable Trust (2011) shows that there is a rapid increase in cellphone texting and it is the new phenomenon all around the wealthy countries of the globe including US. This trend may be an advantage to Apple and its phone products. However on the same hand research also shows that people in US have been drastically hit by the recession and are moving in together along with cutting spending. This trend towards sharing resources and frugality may negatively affect Apples financial health. Even though recession seems to have hurt the households in the US strongly it can be seen form Apples financial health remains strong. However it is necessary for Apple to have a contingency plan, in case the numbers show a decline.

Technological:

Technological industry is one of the most dynamic industries in the world. Firms in this industry are continuously innovating; the product life cycle is relatively short and the firms need to ensure that the profits from the product are generated quickly. Considering that Apple is a firm that continuously innovates and pays a lot of attention to research and Development it is ahead of its competitor most of the time, therefore technological advancement should not be a threat to it. However if at all they fail to produce products that are innovative and weaken their secrecy pertaining to their intellectual property it is very liable that apple will lose the place it holds, of a successful technology giant, in the silicon valley. An example of Apple being ahead of its time in terms of innovation would be the new Apple Television. With Apple television, Apple wants to take its former product

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iTunes to a whole new level and provide its customers with a customized television experience. They aim to provide live TV and personalized internet channel subscription that will allow the user to pick and choose each and every channel, he\she wishes to watch (Hughes, 2011). Moreover the TV sets will use microchips that have been used in the Apple iPhones and iPads, which in turn will allow the users to sync their Apple products together and enjoy the wholesome entertainment experience at the touch of their fingers (Oliver, 2011). Another issue that poses a threat to firms in the technology industry is that of violation of technology patents. Because IT firms are constantly developing new technologies, companies face a risk of violating them if their products and software is too similar to the patented technology. Fortunately for Apple, it possesses multiple technology based patents that form its legal arsenal. As per research, iPhone alone has 200+ patents filed on the basis of state of the art technology that it provides the market with (Campbell, 2011). Apple recently sued HTC for violating their patented technology, and won the case. They are currently also suing Android for violating its intellectual property rights. Market experts believe that even if Apple settles the case outside of court, the Android smartphone manufacturer will still end up paying Apple 5$ per smart phone it has sold to the market (Apple Insider Staff,2011). This shows that Apple is one of the few firms that know how to survive in an industry that is continuously changing and where imitation can prove to be very costly. However, one must not forget that every case requires Apple to spend on the legal proceedings, which may be detrimental to the firms financial health.

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Porter's five force analysis

The Apple Brand
Threat of new entrants
The technological market is one that requires high investment, especially in developing competitive R&D capabilities. Comparing that with apple's superior technological capabilities, it would be extremely difficult for a new entrant to come into the industry and compete with Apple on this basis. Also, if a competitor tried to compete on the basis of cost, there are several players in the industry who do so already. This would not affect Apple materially due to their strategy of differentiation. Apple retains its customers based on brand loyalty, not low costs. Also in the technology industry, consumers prefer a well-known brand over new ones, as these products are generally more expensive than commodity items. Unless a new entrant develops a truly revolutionary product, which would in turn require high investments, the threat of new entrants remains low due to the high entry barriers into the industry.

Threat of substitutes
In terms of substitutes, some of apples products are under this threat. A major product is the iPod. With devices being increasingly integrated, cellphones and tablets come integrated with a music player. This even holds true for apples own products. Apples own products can sometimes be substitutes for each other. Apart from that, its iTunes software is under the greatest threat because there are various other options than paying for media, and no one would pay for music and videos if they are able to obtain them for free.

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Bargaining power of buyers

Buyers in the technology industry have a variety of options when making decisions. There are products in the market that compete on cost, and products that charge a premium price on the basis of differentiation. Since apple employs a differentiation strategy, it is largely immune to this power. However, apple's prices are only slightly above the industry's, due to an increasingly price sensitive environment during the recession. Because of this, even its loyal customers would not be able to afford its products if they were priced above a certain premium.

Bargaining power of suppliers

In the case of Apple, which is currently the most valuable brand in the world (Telegraph, 2011); suppliers are eager to count Apple among its customers. Therefore, there are not suppliers strong enough to pose a threat to Apple. Apple has two kinds of suppliers. For its standard products, Apple purchases components from a variety of suppliers. This puts them in direct competition with each other to offer the best prices for a customer as valuable as Apple. For its custom products, Apple either creates strong relationships or partnerships with its key suppliers. Since apple focuses on high quality products, even if the supplies are expensive, they are able to absorb these costs into the price of the product. Thus, Apple is not greatly affected by the power of suppliers.

Rivalry
This threat is a major one in the technology industry. There are several players in the industry, who compete both on the basis of cost and differentiation, and directly with each of Apple's products. Big industry names such as Microsoft, Google and RIM all have strong

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brand names, and this is threatening to the Apple brand on the whole. An example of the intensity of competition can be seen as Apple overtook Google this year as the most valuable brand in the world (Telegraph, 2011). With Google being at the second position, Apple can expect to face stiff competition as they fight to regain the number one spot.

The Smartphone industry

Threat of new entrants
Apple's iphone employs the use of superior technology, and with each new update makes sure that it stays on top of the game in terms of technology. With the use of software such as Siri and iCloud, it would be extremely difficult for a new entrant into the industry to compete with the iPhone in terms of its technologically advanced features. If it competes on the basis of cost, it will find itself in competition with previous industry leaders such as Nokia, who, despite being an established and reliable brand; have lost out to the iPhone. A new firm stands a slim chance of being a threat, unless it comes up with something revolutionary, which would require high R&D costs.

Threat of substitutes
With cellphones being a necessity in todays society, no other product would directly be able to substitute it. However, with the iphone, there are several other products that could eliminate the need for having a phone packed with such features. For example, the increased popularity of tablets means that people could have the same features, but on devices that are easier to use and enhance the experience of the features. Therefore, they might not need these

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features

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Bargaining power of buyers

Since the phone industry is extremely competitive, buyers do have power due to the increased choices present in the market. However, because of apples strong brand name, loyal customers continue to buy iphones despite its premium prices and the variety of phones available. But, to sustain this advantage apple needs to continue its innovation or this force could prove to be a bigger threat than it is currently.

Bargaining power of suppliers

The bargaining power of suppliers in terms of the iPhone is the same as that of the overall brand. This is because Apple largely uses the same suppliers and the same strategy in its dealings with them for all its products. An example of the low threat of suppliers is the recent announcement of Apples partner and producer of Apple products, Foxconn, to double its production of the iPhone to meet rising demand (AppleInsider, 2011).

Rivalry
The iPhone faces increasing amounts of rivalry from other industry giants. Google has its android software which it is selling to major phone companies and which is technologically competitive when compared the apple iOS. Nokia, RIM and several other companies are coming up with touchscreen phones with more features than the iPhone. Where they fall short is the Appstore, where they cannot yet compete. But in a few years, their respective applications pool will increase and this threat will get larger.

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KSF
The Key success factors look at success opportunities for a company in the external environment based on what customers want and competitors.

The Apple Brand

Constant innovation & advancement.

Constant innovations in this sector of the industry forces all players to cater to current customer needs and also be responsive to changes in customer wants. In a matter of years top technology firms can become obsolete due to not adapting to changes in consumer needs and this causes all companies especially Apple to always keep coming up with new ideas and concepts to stimulate customer interest. Constant advancement and innovation is a constant need for customers in the technology industry. Easy to use & creative devices.

Customers have extremely high expectation from companies in the technology sector. Not only are they looking for the product with the best features but also an ease of use, through which they get a functionality that no other product offers with a simplistic touch. Organizations such as Apple need to ensure that this primary need of customers to have a creative device which is the best in the market is met. This is essential for the success of any firm in the technological trade. Increased financial resources.

Due to the high expected growth of this industry, numerous firms and individuals are investing to be able to profit from the potentialexpansion. This benefits Apples and numerous other similar companies in the industry as it gives them the much needed
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capital for research and development, through which they can cater to the fast changing needs of the customer. Different product arenas to be explored

There are numerous arenas through which companies in the technology sector can diversify in order to explore other available opportunities. Through this companies can benefit from advantages of related-linked diversification. This increase in the product range can in turn lead to the growth of the company and increase of revenues as well. Increasing differentiation

Companies belonging to this sector of the industry need to have advertisements and differentiation strategies in place to attract consumers to their products. Customers do not generally go for technological goods of the cheapest price but instead one of the best quality, features and differentiators. For Apple to be able to continue to successfully be one of the best companies in this industry it is essential to create a unique image and one of the factors for their success could be the increasing differentiation potential. Creative and unique distribution networks

Conventionally, technology product manufacturers sent their finished goods to retailers who they proceeded to sell it to the final consumer. However, recent times have seen a change in this trend with manufacturers now taking part in forward integrations activities. The future years will provide increasing opportunities for these product makers to be able to market and distribute their product to consumers such as online stores or company retail stores.

KSF Apple iPhone

Product innovation.
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Product innovation is a constant process in any industry including the Smartphone one. In the recent years this industry has gone through rapid change through the increasing technology processes with the introduction of things like application stores, music players and increasing storage memory. Over the following years this industry is expected to keep growing and there are expectations of constant innovative features being added to Smartphones giving companies added opportunities to differentiate their phone from other competitors. Third party application developers.

The industry in recent times has seen an increase of strategic alliances between Smartphone manufacturers and application providers and the coming few years will also see this trend increase, providing success opportunities to players in this industry. Extensive Research and Development

The increase in R & D activities in the Smartphone industry have contributed to creative new technologies such as the touch screen function being developed and further research into the industry can lead a way to develop even better products that will attract consumers while contributing to the success of a company. Increasing functionality and customer dependence

With the increase in the features and functions that Smartphones offer, more and more cell phone users are converting into Smartphone ones, with the ones that do use it being extremely dependant on them. This increase in functionality will continue to lead to customer dependence, making it such that a consumer will not be able to function without owning a Smartphone leading to a growth in this particular industry which high chances of future profitability. Increased financial resources.
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Just like in the technology industry, the Smartphone industry too has an inflow of cash coming in that allows organizations to invest in activities that will allow them to cater to customers wants and gain sustainable competitive advantage to outperform rivals in the industry.

SWOT Analysis
Strengths
Strengths Apples financial position is its greatest strength. Stocks for Apple inc were traded at $529, the highest compared to the previous quarters and industry averages (S&P 500 and Dow Jones). Apple products are marketed globally. Apple has operations in America, Europe, Japan and Asia-pacific. Fortune Magazine has rated Apple as the most well liked corporation in 2008 as well as internationally for three consecutive years i.e. 2008-2010. Apple has established a well recognized reputation as being an innovator and industry leader. Apples goodwill in 2010 was $741 million as compared to the previous year where it was $206 million. Apples brand is considered very strong, with strong product lines that includes desktops, portables, Mac, ipod, ipad, other musical related products and services, peripherals and hardwares and softwares. This also makes apple a well diversified company with various product lines in various geographic segments.
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Apple products are well integrated with each other i.e. all their products connect and work with each other.

Apple is an expert in developing their products and services and establishes new markets for new products.

They have a strong corporate culture that induces innovation and creativity.

Weakness
Apples brand are considered expensive compared to its close competitors. High research and development costs i.e. $1.8 billion, $1.3 billion and $1.1 billion in 2010, 2009 and 2008. Apples ipodnano developed a very negative image for having faulty screens and batteries. Apple relies too much on hardwares and components from other companies. This brings external pressures. Apples image is directly linked to Steve Jobs due to his great influence. His death negatively affected the perception of Apples future towards the stakeholders. Apple may find it hard in developing an effective business plan for its target market because their products are highly priced yet aimed towards the younger generations (who are not a part of the working population). Apples product are considered to have a closed eco-system i.e. there isnt a scope for system customization which consumers usually look for in tech related products.

Opportunities
Apple can integrate vertically backwards and forwards to optimize costs.

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The company is based in a technology industry which is very dynamic and allows for greater opportunities to innovate.

Apple can tie-up and collaborate with companies that actually provide value in its corporate value chain. They were able to do it previously by collaborating with IBM for microchips.

They can try to develop their international markets further. This can be possible by targeting the new emerging markets in India and China through both distribution and manufacturing operations availing of the lower costs.

Apple can try a cost focused differentiation approach. This will allow them to develop newer product lines targeting the group of low income potential consumers who form a greater part of the entire technology product consumer market.

Threats
Apples biggest threat is its competitors (first movers) who can develop similar products to theirs. These include Samsungs galaxy tab or Amazons Kindle for the ipad. Apple also has competitors on the corporate level which includes companies like Microsoft, Dell and IBM that develop a somewhat similar product range within the same arena. Product substitution is a potential threat for Apple. They were able to replace previous formats of IT related technology products e.g. the ipod for CD players. This history can repeat itself to Apples disadvantage if they cannot maintain their innovation. Product switching due to elasticity in demand being high is a threat. Even though a great proportion of Apples current customers are brand loyal, changing economic

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conditions discussed in the PEST analysis may affect market share due to entry of cost differentiators.

Corporate Culture
Sanchez (2004) defines corporate culture as a set of shared values, goals and a unique set of human traits that differentiate one organization from another. Corporate culture, the author believes is best defined by the phrase: this is the way we do things around here. It is fostered by the management and is one of the key element by which the management ensures that the actions, goals and vision of themselves and their employees are in sync with the companys mission and purpose.

Apples Corporate culture

Founded and co-founded by Steve jobs and Steven Woznaik respectively, Apple has been known to be a company lead by extremely passionate and bright leaders who believed in doings things their own way. The co-founder invented a computer well suited to his needs and then marketed a simpler version of the machine to its customers as Apple II, the first Apple product to be launched in market. There onwards it was a norm at Apple to produce products that its leaders felt would work and was required by the market. Apple was house to Silicon Valleys brightest engineers and just like all the firms in Silicon Valley possessed the free spirited, innovation fostering environment (O Connor, 1996). During the early days engineers were perceived as heroes inside Apple and anyone could pick and choose the project they wished to work on. The authority was decentralized and the employees were strongly empowered. The founders, specifically Steve Jobs, was clear about

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the fact that they not only wanted to rule the world of technology but also wanted to change the way it functioned by providing products that no one could have ever imagined to invent. This ambitious vision lead to the birth of Macintosh a machine that did change the way the computing world functioned. Macintosh was a product invented by a team of engineers lead by Steve Jobs and was built in complete secrecy- a trait that later became a trademark of Apple Inc. However the failure of Macintosh to gain enough profits for the firm in the long run and a power fight between the CEO of the firm John Sculley and Steve Jobs lead to Steve Jobs finally leaving the firm (O Connor, 1996). Up until this point Apple was a firm where every employee was smart, driven and perfectionist, much like the founder Steve Jobs, and had a corporate culture that valued innovation, individuality and risk taking, strongly. As Steve Jobs exited the board room, the decline of Apple Inc. was triggered. Over the years, Apple began to lose its market share to its rivals IBM and Microsoft and the corporate culture that was built on the basis of innovation and risk taking was lost in transition. In recent 20th century with the return of, late Steve Jobs as interim CEO, Apple regained its place as one of the most successful technology giants. Steve Jobs turned the company around and played an integral role in building its current corporate culture. Steve Jobs had a clear vision of what he wanted and constantly worked to share his vision and to control the surroundings in the way that his vision was turned into reality (Reisinger, 2010). Steve Jobs perceived the company to be an entrepreneurial venture rather than the technology giant that it is (Merchant, 2010). He was often described as an autocratic leader who defined and controlled how things needed to be done. At the very outset he divested a lot of companys businesses and refocused its strategy to what he believed was suited best for Apple (Reisinger, 2010). Steve Jobs made it a point to make his employees realize that Apple

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was a company that would thrive on innovation, creativity and getting things correct in one go. He as a person was secretive and his personal secretive nature became one of the key traits of Apples corporate culture. Steve Jobs maintained strong secrecy with respect to Apples intellectual and creative information and interaction of every employee in terms of blog, press releases etc was strictly controlled in terms of information related to Apple (Stone & Vance, 2009). No one could clearly define how Apple worked and what was brewing

inside 1 Infinite Loop. Steve Jobs was like the Willy Wonka of Silicon Valley that dictated how one of the largest company functioned. He was the creative brain behind every project and marketing strategy the company has ever produced. He controlled each every minutest development that took place inside the firm. As time progressed Steve Jobs deteriorating health forced him institutionalize his method of working. He wanted to instill traits of secrecy, perfection and responsibility in all his employees (Lashinsky & Burke, 2011). An excerpt from Lashinsky and Burkes (2011) article clearly defines how Steve Jobs passed his traits and values over to his employees: Jobs indoctrinates a culture of responsibility by hosting a series of weekly meetings that are the metronome that sets the beat for the entire company. On Mondays he meets with his executive management team to discuss results and strategy as well as to review nearly every important project in the company. On Wednesdays he holds a marketing and communications meeting. Simplicity breeds clarity, as Jobs himself explained in a 2008 interview with Fortune. "Every Monday we review the whole business," he said. "We look at every single product under development. I put out an agenda. Eighty percent is the same as it was the last week, and we just walk down it every single week. We don't have a lot of process at Apple, but that's one of the few things we do

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just to all stay on the same page." It's one thing when the leader describes the process. It's another thing altogether when the troops candidly parrot back the impact it has on them. "From a design perspective, having every junior- level designer getting direct executive-level feedback is killer," says Andrew Borovsky, a former Apple designer who now runs 80/20, a New York design shop. "On a regular basis you either get positive feedback or are told to stop doing stupid shit."

This excerpt also proves the fact that Steve Jobs highly autocratic. The authors further mentioned how for every project there was a DRI an abbreviation for directly responsible individual. Holding people directly responsible for tasks was Steve Jobs way of instilling a sense of responsibility in his employees.

Apple went through a period of bleakness this year when its founder and mentor lost his life due to pancreatic cancer. However, Steve Jobs lives in form of every Apple employee that has been trained to function the way Steve Jobs did. Apple Inc., currently a huge technology firm whose corporate culture now is based Steve Jobs personality traits. Each and every employee just like him values: secrecy, perfection, attention to detail, feedback and constant innovation.

Corporate Structure
Even though Steve Jobs treated Apple as entrepreneurial venture in terms of control and implementation, Apple Inc. is one of the largest tech firms in the world with over employees and functions of multiple geographic locations.

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In terms of its operating structure, it has a divisional structure based on the geographical locations, which include Europe, Japan, America, and others (Apple, 2010). Apple values a customers educated buy and therefore believes, all the sales representative should have complete knowledge of the its products and should provide customers with an extraordinary customer service pre and post sales; in order to ensure this high level of customer service is achieved Apple has a division focused solely on retail. The geographical divisions allow Apple to respond to each geographical need with speed and efficiency. Moreover, it allows Apple to understand the local market better in terms of market needs and demogrpahics. The purpose of retail division is also to provide customers with extra ordinary customer service that allows Apple to provide its customer with a wholesome shopping experience and ensures that Apples differentiation business level strategy remains effective. In order to maintain efficient operations and high productivity levels Apple Inc. uses a functional structure at each divisional level. Functional structure groups functionally similar tasks together allowing the firm to avoid redundancy in terms of work, exploit economies of scale, and promote learning and capability and cut operating costs. Even though the at a functional level the authority is decentralized to ensure high response rate towards customers and change in business environment, the low layers of hierarchy allows the CEO and managers to control and mange each every functional unit efficiently (Grant,2008). Apples corporate culture is rooted in innovation and creativity, while at the same time, it has been observed that the CEO of the company has high control over the day to day functioning of the firm. Using divisional and functional structure is best to Apples corporate culture because the decentralization at each level at Apple allows innovation and creativity to foster and also allows the company to respond quickly to their customer. While the low layers of hierarchy allows the CEO to maintain a certain amount of control required to ensure that all

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divisions and functional units are in sync with companys mission and objectives (Iliev et. al, 2004).

Key Resources & Capabilities

Tangible Resources
Readily available capital

According to Apples 10k statement, as of September 2012, Apple had 81,464 Million in cash and marketable securities. A company that has liquid assets in such abundance gives positive signs for the future to its stakeholders. Having this kind of readily available capital also means that the firm has the resources it needs to invest in research and development, as well as marketing and sales. Evidence of this can be seen with Apple, for which these two activities are its core competencies.

Retail stores

One major aspect of the way Apple does business that sets it apart from its rivals, is the fact that Apple even takes retailing into the companys hands, for a large part. Competitors of the iPhone usually sell their products to retailers, who shelf these products generically. In Apples retail stores however, the whole ambience is created in a way to reflect the Apple brand. The store itself plays a major part in the marketing of its products. These stores are also equipped with friendly, knowledgeable staff. These aesthetics encourage consumers to pay the premium prices at which Apple products are usually sold. Apple also selects certain third-party resellers and provides them with the resources necessary to market Apple products

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in their stores. This helps differentiate Apple products from its competitors, even in thirdparty retail stores.

Intangible Resources
Appstore

Apple recently announced that their Appstore has passed the 500,000 applications mark. The Appstore is one of the key reasons for the success of Apple products. The only company which has come close to competing with Apple is the Android Market with around 100,000 applications. However there are certain factors which ensure that Apple can sustain their competitive advantage over Google. For one thing, Apple developers have to follow stringent development guides, and even then it takes Apple around 4 days to approve an application. Google is more lenient in this case, and it takes developers around 10 minutes to get their application in the Market. This could mean the presence of low quality applications as Google rushes to increase their application base to compete with Apple. Also, the Android works differently on different devices, which makes it harder to develop applications which can work across formats. Apples integrated strategy between its products works its magic again in this case, as most applications developed for the Appstore can work across all Apple devices.

Apple iOS

The Apple iOS is one of the most user-friendly operating systems in the market. It has also been developed in a way that it can work across all Apple devices. And to keep it working effectively, Apple releases software updates every few months. However, the iOS faces stiff competition from the recently developed Google Android OS. This is because the iOS fails to incorporate several types of software that is highly demanded by consumers. One major example is their continuous rejection of any type of Flash player. This is one of the major deterrents of the iOS software, as most applications, games and websites on the internet
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feature flash content. So, while the current user-friendly iOS is definitely one of the contributors to the success of Apple products, it will not be able to sustain its success if it does not incorporate essential technology needed to compete with Googles highly appealing Android.

Human Resources
Steve Jobs

The importance of this one man behind the success of Apple is evidenced by the drastic changes of fortune the company went through when he was fired and then again when he was brought back. When Steve Jobs returned to Apple, the company was spiraling downwards rapidly. He not only turned it around, he made the Apple brand one of the most influential brands in the world.

Key personnel

From Apples co-founder Steve Wozniak to its head of design Jonathan Ives, Apple has the best minds of silicon oasis working for the company. Wozniak was the innovator behind the first personal computer in the world. He came up with the first Mac computer, and since then has been the innovative force behind the company, while his partner Jobs made sure that his innovations appealed to the public. Jonathan Ives, who heads the Design department of Apple, was the man behind the hugely popular design of the Apple iPod. The rectangular device with the circular buttons is one of Apples most recognizable products. And the results of his work can be seen in the aesthetically pleasing designs of every new technology that Apple comes up with. Because

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the design of its products plays a huge part in the success of Apple products, this man is one of the many key human assets that the company possesses.

Highly effective R&D department

The strength of Apples Research and Development department is incomparable to its rivals. It was Apple that came up with the first personal computer with its Mac. The iPod was the first mp3 player in the market. When the iPad was unveiled, it was a revolutionary product. Now, every competitor in the PC and Smartphone industry has modeled a tablet PC of their own. The iPhone broke new ground on the amount and type of features a phone could possibly have. It brought in the Smartphone era. Which is why it is no surprise that Apple spends large amounts of money to ensure that its R&D department is equipped with all the resources it needs to flourish. Apples R&D expenses in the last three years were $2.4 billion, $1.8 billion and $1.3 billion in 2011, 2010 and 2009, respectively (Apple 10k, 2011).

Capabilities
- Strong relationships with key suppliers

In a move that only Apple could perfect, the company not only mitigated the threat posed by suppliers in terms of bargaining power, but they turned it into a key capability of the company. Apple enjoys strong relationships with its main suppliers. While for standard supplies they have a range of suppliers with only the bare minimum contact that is necessary, with suppliers who produce custom products for Apple, the company has built a close relationship. For example, Apple has a partnership withFoxconn, one of its key manufacturers of the iPhone. Foxconn has now doubled its production of the iPhone, to fulfill its increased demand in the market (AppleInsider, 2011).
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Strong relationships with third party application developers

The success of Apple products depends largely on the Apple Appstore. And the success of the Appstore depends on the third-party developers which supply it with a steady stream of new applications. From the world phenomenon of Angry Birds and Fruit Ninja, to social networking websites developing applications for the Appstore, to newspapers and magazines that hav ecreated applications of their published works, there is no dearth of third-party suppliers trying to cash in on the benefits that the Appstore provides. While these developers give Apple customers a range of new applications almost daily, Apple gives them access to these customers so that they can reach them in new ways. For example, with Apples new application Newsstand magazines and newspapers have found a way to exploit the new online market of readers, as sales of traditional printed publications decline.

VRIO Framework

Resources/ Valuable Capabilities Rare

Costly to Imitate

Organization

Source of Sustainable Advantage

Steve Jobs YES YES YES YES

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Key personnel YES NO YES YES

Financial strength

YES

NO

YES

YES

Retail Locations

YES

NO

NO

YES

Research & Development capabilities

YES

NO

YES

YES

Resources/ Valuable Capabilities Rare

Costly to Imitate

Organization

Source of Sustainable Advantage

Large base of thirdparty application developers

YES

NO

YES

YES

Apple Appstore YES NO YES YES

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Ability to innovate

YES

YES

YES

YES

Ability to attract best talent

YES

YES

YES

YES

Product Design

YES

NO

NO

YES

Relationship with key suppliers

YES

NO

YES

YES

Corporate Level Strategy

Related constrained
Apple has a diverse portfolio of products in different industries: - The computer industry, and as an extension of that, the tablet pc segment. - The cell phone industry - The mp3 players and music industry

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- Operating systems - Other hardware Its product portfolio consists of: iPhone iPad Mac Hardware Products iPod iTunes Mac App Store iCloud Software Products and Computer Technologies iOS Mac OS X iLife iWork Other Application Software Displays & Peripheral Products Apple TV

Hardware components and supplier sharing

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While all of these are different industries, they come under the broad umbrella of the IT industry. This is why, several of the hardware components and their suppliers are common between these products.

Apple iOS sharing

Also, one of Apples main strengths is its advanced operating system. One of the reasons it is so successful is that, no matter which Apple product you buy, the same operating system is integrated into these products with slight modifications so that it is compatible with the respective hardware. This is not only a strength in terms of co-ordination between its devices, but it also helps Apple reduce costs by saving the expenses of coming up with different types of software for its products. This iOS is its core competency, and Apple produces products with enable it to be used and transferred between its different products.

Shared marketing strategy

Whenever a new Apple product is launched into the market- be it a smartphone or a tablet PC- the reason Millions of people rush out to buy these products is not because they know much about the product themselves; rather, it is the brand that they are purchasing. The Apple brand is synonymous with the latest technology, the sleekest design and the most innovative of products. Therefore, when Apple decided to foray into the smartphone market, consumers did not wait to see whether Apple could meet the needs of the market. They were confident that if it were an Apple product, it would be up to the mark. This just goes to show the strength of Apples centralized marketing strategy, which covers all its products under one central theme, which represents the overall brand. Apple has integrated all of its products to provide the highest levels of compatibility between them. With products such as Apple TV,
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where you can stream videos directly from your Mac, iPod, iPhone or iPad, to other accessories designed specifically for Apple users, the brand promotes an entire lifestyle around its range of products.

BCG Matrix
A BCQ Matrix looks at different product portfolios of a company relative to the growth rate and the market share of that unit. The matrix has two dimensions, the growth rate of the industry and relative position the product has in the market, which determines if the product fits into one of four categories: Star, Cash Cow, Question mark and Dog. Stars are products that have a high industry growth with a high market share while questions marks too have a high growth rate but a lower market share. Cash cows on the other hand face lower industry growth rate with high market share while dogs have a lower market share and growth.

Apple has a very strong product portfolio and the categories of products from Apple Inc. that will be described using the BCG Matrix are as follows: Computers, Smartphones, Music, Software and Tablets. Computers include Apple desktops, laptops and related products while
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Smartphone includes the iPhone range and related products and services. The music section includes the iPod series, the iTunes service and music related offerings. The Tablet category includes the iPad range with related products and services.

Star

iPhone

The iPhone was introduced by Apple on January 9, 2007 and changed the face of the Smartphone industry. Hundreds of people queued outside Apple retail and AT&T stores days before the device was actually launched with the phone selling out in a matter of a couple of hours. The latest addition to their Smartphone division, the iPhone 4S sold three million units in the first 3 days of its launch: the most ever for any phone and more than double of what the iPhone 4 sold during the same time period. While Smartphones had been available in the market since before the iPhone, the launch of this innovative and creative phone led to the rapid growth and change of this industry. In the year 2011, the Smartphone industry is expected to grow by 55%, a very high industry growth rate. (IDC, 2011). The Apple iPhone is the market leader in this Smartphone manufacturer industry with a 28% share of the market, while being the second largest share holder in the Smartphone software industry due to Googles android running on a number of different phones, while the Apple iOS runs just on Apple devices. 1(Nielsen News, 2011). This high growth pooled with a high market share makes the iPhone one of Apples star products and is the leading revenue contributor compared to all of the other numerous Apple products, contributing approximately 44% of all of Apples revenues.
1

Figures up till September 2011 (Q3).

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iPad

The famous tablet range from Apple was launched on January 27, 2010 by Apples former CEO and co-founder Steve Jobs. The iPad sold 3 million devices in eighty days after release, with the total unit sales in 2010 coming up to 14.8 million, capturing almost 90% of the market share in this industry. The latest addition, the iPad 2 was released in March 2011 and till date has sold more units than all other tablet PCs combined! In the year 2011, the Tablet PC industry is estimated to grow by 190% from 17 million in 2010 to 49 million in 2011, according to IC insights. It is not surprising that in 2011 the Tablet industry is completely Apple dominated as well. Apple had a market share of 68.3% 2 in this year, which has reduced from last year due to the emergence of numerous Tablet devices. (IDC, 2011). However despite increase in competition, the iPad still holds the top spot not only due to being the first product of its kind but also because of its unmatchable innovative

Figures as of June 2011 (Q2).

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features and quality. This makes it another one of Apples star products which will lead to revenue increases for the company in the future due to the high growth rate estimates.

Cash cow

Music

Apples music division includes their physical portable music devices and the iTunes software which is used to download music, movies and videos. The portable music device industry though robust in the early portion of the 2000s has now slowed down considerably due to most mobile phones consisting of music players, thus eliminating the need to buy a separate one. While there are innovative products being released to try and rejuvenate this market on a whole the market growth has been decreasing steadily from 2008 onwards. The iPod range by Apple was released in the year 2001 and took the world by storm. Initially the music players were only compatible on Apple Macintosh systems but in 2003 Apple changed things by ensuring it would work on different operating systems which led to an increase in sales, market share and industry growth. In 2003 Apple also released their wildly successful digital music downloader iTunes which provided a viable alternative to illegal music downloads. However the product has from 2008 come down from its Star position to that of a Cash cow due to slow industry growth. The iPod range still dominates in the market share of MP3 players by having a 70% stake, while iTunes has a high share of 25% in the digital music industry as well. While there has been a drop in sales due to the reduction in purchases of iPods and increasing competitors for iTunes over the years, the segment still generates significant levels of cash that are used to fund research and development for improvement of star products and innovation of the question mark devices. (Megrund, 2011).

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Computers

This includes Apples desktops, laptops and notebooks range. With a relatively low growth in the Industry their computer range brings in revenue and sales to the company putting it in the Cash cow category.

QUESTION MARK

Software

This is the software available on Mac computers, iPhones, iPads, iPods and available for sale to the public and other organizations. While the product shows high growth due to having to continuously develop and modify it to changing customer needs it has a relatively low market share. In the year 2011 the Mac software showed a growth rate of 15% (as of September 24, 2011) while its market share in the operating systems market in the same month was only 6.04%, much less that its growth rate. Additionally their market share was significantly lower than their main competitor in this industry: the Windows operating system by Microsoft which had an 86.57% share. (Net Market Share, 2011). Having, such a comparatively small share in market, while a higher growth rate should suggest that the company divest off its software section of the business and focus more on the products in the star category. However, this software creates market synergies due to being available not only on its computer but smartphones and tablets (with minor modifications) as well, allowing customers
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to integrate the usage of these products. This integration of software is one of the key features in differentiating Apple from its competitors. Divesting this product would only hurt the successful devices in the Star and Cash Cow category. The best thing to do in this situation would be to continue investing in its growth so that it does not degrade down into the Dog section and at the same time provides valuable support to other successful products.

Dog

No product of the company Apple Inc. actually provides negative profitability for the money invested in it. While there is a chance of the product mentioned in the question mark coming down in this section; it is highly unlikely.

Business level strategy

According to Grant (2008), business level strategy defines how the firm will compete within a given industry or market. It is developed using the key success factors and is defined in order to align the firms internal resources and capabilities in a manner that allows the firm to gain a competitive advantage.

Apples Business Level Strategy

Keeping in mind Apples mission to provide its customers with state of the art innovative products, Apple uses a differentiation business level strategy. It focuses on a niche market
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and provides its customers with highly differentiated products at premium prices. While the other competitors like Dell provide PCs and laptops that are produced for a mass market like a commodity, Apple produces state of the art, feel good, look good products that customers are willing to pay high prices for. Apple PCs are known specifically for state of the art graphics and are ultimate favorites of companies and people who are in the business of graphic designing and so on. Apple realizes the fascination of its customers with its products and is therefore continually working on providing them with better technology and ensuring long term customer loyalty (Ilievet al.,2004). Apple has not only been an innovative computer company but has also revolutionized the music and smart phone industries. It has built a whole new base of customers by providing a new range of products like iTunes, iPods and iPhones. Apple charges higher prices than its competitors like Dell, Sony and other mobile manufacturers, but at the same time provides customers with a product they tend to fall in love with. Apple meets its customers desires rather than only fulfilling their needs. Strategic Analytics Inc.(2007) a global research company reveals the results of a research carried to show how much the customers liked iPhone: "An overwhelming 90 percent of respondents gave the iPhone higher marks than their own handset and over 40 percent of respondents rated the iPhone much better across key functional categories-- including music player, web browsing, voice mail, and phone call management--indicating real innovation in designing a user experience," Apple not only sells innovative products that are friendly and have software and hardware that are seamlessly integrated, it ties up with distribution channels or owns retail outlets via which it provides its customer with both pre-sale and post sales

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customer service. It understands the value of an educated salesperson and ensures that all the customer representative are well aware of its products and it feature ensuring that the customer has no reason to doubt his/her buy (Apple, 2010). Even though the research shows that Apple has a strong base of customers who are early adopters and are willing to pay premium prices, it is still necessary for it to maintain a reasonably low costs in order to ensure that their profit margins are high and they can cover up the costs via selling their products to the relative smaller niche market (Iliev et al., 2004).

Corporate Value Chain

The corporate value chain or Porters value chain focuses on activities that add substantial value to a firm. Organizational activities are typically split into primary and support, with firms usually choosing one or a few of them, to focus and specialize on so that they can add value to the corporation. Apple too places emphasis on certain aspects of the value chain to be able to add value to the company and the Apple brand, while ensuring a smooth flow in

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other areas of operations within the chain. Apples activities and operations performed in the different areas of the corporate value chain are as follows:

Inbound Logistics
Apple Incs inbound logistic practices are formulated keeping inventory efficiency and environmental friendliness in mind. The products of the company are made to order, as per what is required from retailers, because of which Apple only keeps in store three days of inventory for most components and equipment ensuring minimum warehousing cost. The parts are only procured when they are needed for the final product, reducing Apples inventory storage costs while increasing the efficiency of the inventory system and operations. For Apple to successfully assemble its vast range of products it requires raw materials from different suppliers and since they do not hold a lot of inventory they need to maintain good relations with these suppliers so that they provide them with the parts needed at a short notice.The company uses a Just In Time and sequencing inventory system; thus making it essential to coordinate with suppliers to support the requirements of the manufacturing process. They have in place a refined automated system which not only reduces the time for the inbound logistics process but also decreases organization footprint and storage space necessities. The items procured for production are then subjected to quality checks to ensure no faulty supplies have been received and that they are of the highest standards which will live up to the quality expected by customers when they buy the finished product. Apple closely works with its Original Equipment Manufacturer (OEM) to increase efficiency of the raw material acquisition process by delegating the procurement while providing supervision for quality control. Through this process of inbound logistics they are able to prioritize demand for products to coordinate with inventory and transportation. (Modi,
Patali & Dandapanthula, 2010)

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Operations

The operations at Apple Inc. focus on two main aspects: the design and conceptualization of the product and the outsourcing of production. The design of future products and amendments to current products is done at the Apple headquarters in California. Here the features, look, capabilities and other aspects of the products are conceptualized by using techniques, teams and engineers that are the best in the entire industry. The internal systems of each creation is designed and produced by Apple itself such as the microprocessors and software. Apple also produces its own disk drives; monitors and chips, however a substantial part of the assembling activities are outsourced to countries like China for assembly of the final product. Apple prefers to outsource the final manufacturing of its products to be able to benefit from economies of scale their OEM partners enjoy. This way they are able to assemble products at a cheap price which increases their profitability margin as well as allows them to be free from the burden of production management. (Masi, 2009).

Outbound Logistics

Apple has been able to develop a clear and efficient system base which allows it to choose carriers that maximize service with the help of advanced information systems. Moreover Apple also has its own Apple Stores where they sell only their products, which helps the company establish the right image for their products while also being a form of advertisement since these stores allow the public to come and use the Apple products firsthand. The stores are arranged in a manner where most of Apples products are on display and can be used by customers so that they are aware of not only the features it contains but exactly how to perform those features. Moreover, these stores have now become a place for

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people to go and spend large amounts of time in, just using these products which instills brand loyalty and encourages purchasing. Apple also carefully selects its authorized dealers to be able to build on their distinctive image. Additionally, Apple builds packages that are not only attractive but also take up less physical room and weigh less. This reduces the costs of shipping while also attracting customers. The organization, in terms of outbound logistics also has a website which products can be ordered from. When a customer places an order, it is directly shipped to them from the companies storage facility based in China which in itself reduces storage costs due to not having warehouse located in the much more expensive environment of the United States. (Modi, Patali
& Dandapanthula, 2010).

Marketing and Sales

One of the primary aims of the marketing department at Apple is to build a distinct brand image for the company and its product lines. An Apple product is given an image of being unique and better than any other competitors product. This requires the usage of branding techniques and advertisements that will make customers feel that it is indeed distinctive and worth paying a price premium for. To achieve this Apple had successfully implemented the Get a Mac ads which compared its products with that of other competitors, showing the Mac as a more user friendly lifestyle product while other computers were just not as good.

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These ads were not created as a way to inform the public about the Macs features but instead used humor to develop the firms image as one completely different from its rivals. The Think Different and This Changes Everything ad campaigns also aimed to create a very unique brand image for Apple products. While Apple was not necessarily the first mover in most of its target markets, like the Smartphone, it brought about something completely new and innovative to that product and that is what its advertising campaigns tried to convey. Apart from print, online and media advertising the company also used their retail stores to build on brand image and encourage purchases. Their flagship store on 5th Avenue New York attracted visitors due to its novelty which then converted to sales. (Modi, Patali &
Dandapanthula, 2010).

The total sales in the year 2011 (Apple had a fiscal year end at September 24 2011) was $108,249,000,000; a $43 billion or 66% increase compared to the year 2010. Approximately 43% of the sales were contributed by the iPhone and related products and services, the largest sales generator. It sold 72,293,000,000 units in the year 2011, an 87% increase from last year. In terms of operation segments, the largest sales were generated in the US Markets followed by Europe. Apples continued focus on advertising and marketing has led it to become the number one global brand in the year 2011 with a brand value of $153.5 billion, beating its competitor Googles four year run in the number one spot. (Apple 10-K, 2011).

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Service

As part of Apples differentiation strategy it aims to provide consumers with excellent customer service. The Apple stores have a specific space called the Apple Genius Bar where consumers can speak to technical experts known as Geniuses about issues and questions pertaining to their Apple device. This gives the company an opportunity to help the customers by themselves, face to face avoiding the issues faced by having to deal with customers through phone service centers. Moreover, all products have a ninety day warranty incase of any problems and defects, and the option of purchasing an extended warranty through Apple Care. Even without warranty customers can bring in their device for a free consultation without any need for commitments and can know what is wrong with their product and how to fix it, having the option of doing what they choose with it further. (Modi,
Patali & Dandapanthula, 2010).

Procurement

Apple Inc. maintains a positive healthy relationship with its suppliers to ensure and effective and efficient procurement of supplies. Most of the components required for operations are available from multiple sources. However, certain parts are only available from single or
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limited sources which can create risks of pricing and supply. Apple currently has entered into numerous agreements with different suppliers for the procurement of components and thus has developed by itself a supplier code of conduct to be able to govern supplier action. It is also a part of the Electronic Industry Citizenship Coalition, which works to ensure fair treatments of workers in OEM factories. These actions lead to building of positive relationship with its suppliers. (Masi, 2009)

Technology Development

Apple competes in the technology industry which is always rapidly changing and involves constant innovation to be able to sustain long term profitability. For Apple to be able to successful compete with other players in this industry it is essential to have a constant flow of innovative products, services and technologies brought to the market. To achieve these high levels of innovation it is essential for Apple to spend on research and development to find new innovative forms of technology. Apple continuously tries to find new technologies to enhance their current products, while also trying to come up with completely new products. This is done through research and development the company performs as well as licensing of intellectual property and acquisition of third-party businesses and technology. In the year 2011 (year ended September 24 2011) the company spent $2.4 billion on its R&D programs, 36% higher than the year 2010. Apple firmly believes that proper investments in R&D are extremely essential for its future growth and competitive position and will continue making these to be able to remain competitive. The company also holds several thousand patents as it believes in the importance of protecting their intellectual capital. These allow Apple devices to have certain features which other competitors will not, helping their differentiation strategy. (Masi, 2009)

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Human Resource Management

As of September 24, 2011 the organization has approximately employed around 60,400 full time employees and 2,900 full time temporary employees and contractors. Apple uses an extremely selective hiring technique which only includes the most talented people who will be able to add value to the company through their actions. The company conducts its recruiting and training procedures in house or in store to ensure they have selected the most talented individuals and trained them in the most appropriate ways, so they can benefit the company. These employees once selected benefit from numerous worker benefits as well as enjoy high direct wages. These benefits are provided to be able to motive the workforce to do their best as well as to retain the industry leading talented individuals. (Apple 10-K, 2011)

Firm Infrastructure

Apple follows a divisional corporate structure with divisions being based on geographic locations. The different geographic areas the structure of Apple focuses on are: America, Europe, Japan, Retail and Other. Retail section is considered separate from the other geographic divisions as it is not relevant to the main activity of Apple which is producing technological products.

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Strategic Effectiveness
Apples strategic effectiveness can be understood by looking at their role towards their stakeholders and particularly towards their shareholders, customers and society as a whole.

Some of the information we can use for analyzing Apples effectiveness towards their stakeholders can be determined by looking at the changes in its sales, income and earnings per share (EPS) over a 5 year period as provided in the 10k for 2011

Apple grew in all these aspects over the 5 years period reflecting a positive strategy in operation. However this result could be confirmed even more by comparing it with its competitors in the industry through observing the average industry standards (also provided in the 10k for 2011)

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Looking at these results we can confirm our hypothesis that Apples current strategy is really successful. This is because of the four fold growth in its share price from $100 in 2006 to $495 in 2011, while the growth in the industry (S&P Computer hardware and Dow Jones US Technology) was insignificant in comparison. Apples customers and society as a whole are also satisfied by some of the strategies they use to be attractive. Apple has specific dedicated stores this is 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. (11 effective strategies Apple uses to create loyal customers) Apple provides education about technology by selling its product to schools and universities. They have bloggers who love to write about Apple products which keeps their customers informed. Apples products complement each other. For e.g. a person who purchases an ipod can download music via iTunes. They provide the complete solution. They have the element of attractiveness incorporated in the aesthetics of every product. This has helped them to create an image where Apple users views themselves as being smooth and confident. Apple introduced a new feature in their music software iTunes. Apple Genius is an intelligence technology that enables the system to identify a persons music interests and then find similar matches of songs in their system to make better use of it. (How clever is Apple's Genius?, 2008)

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Using this strategic effectiveness strategy, Apple would be able to understand the impact of its internal and external environment on its current strategy, and can easily edit its current strategys framework to maintain its efficiency.

TOWS Matrix

TOWS Matrix for Apple Inc

Internal Factors Strengths (S) - Strong financial position. - Global operations. - Innovative industry leader. - Brand loyalty. - Various product lines. - Products integrated with each other. - Strong corporate culture which induces creativity. Weaknesses (W) - High R&D costs. - Ipod nano developed a negative image. - High reliance on external suppliers for hardwares & components. - Products cannot be customized by 3rd parties.

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Opportunities (O) - Capability to integrate vertically. - Dynamic industry positive response to creativity. - Ability to collaborate with value providing companies in industry. - International emerging markets (India & China). External Factors Threats (T) - First movers who can imitate. - Tough competition in all product lines by similar firms (e.g. Dell, Microsoft). - Threat of product substitution in industry (e.g. CD players with mp3). - Product switching due to high elasticity of demand.

SO Strategies

WO Strategies

Can come up with a variety of iPhone models to exploit the growing smart phone industry. Scout and headhunt for qualified and educated engineers from around the world who are creative and innovative from emerging countries. Tap into foreign markets where competitors have less control.
Be the leader in innovation, so that there is always a new replacement product ready to launch when previous product lifecycle reaches maturity or gets imitated.

Incorporate essential technologies such as flash players. Implement a cost benefit analysis approach before investing huge sums of money on R&D to make better use of resources.

ST Strategies

WT Strategies

Ensure that they minimize the risk of faulty products. Use a combination of cost and differentiation focused strategy for the products that can be switched and substituted. E.g. the iPod. Stay away from those product lines that require time and investment for R&D and can be easily imitated. Rather focus on differentiation through innovation.

References
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