1.

0 Introduction

Apple Inc. Apple Inc., formerly known as Apple Computer, Inc., is an American multinational corporation headquartered in Cupertino, California. Apple Inc. has experienced many challenges throughout its business history. In 199 Apple!s share price was "#.#$. In %$11 its share price had risen to "##9.& . 'or the past four years, Apple has earned first place among Fortune maga(ine!s )orld!s *ost Admired Companies. +o millions of consumers, the Apple brand embodies quality, prestige, and inno,ation. +he brand is ,alued at more than "1-# billion, making it the most ,aluable brand worldwide. Apple is the world.s second/largest information technology company by re,enue after 0amsung 1lectronics and the world.s third/largest mobile phone maker after 0amsung and 2okia. 3n 0eptember #$, %$1#, Apple surpassed Coca/Cola to become the world.s most ,aluable brand in the 3mnicom 4roup.s 56est 4lobal 6rands5 report. 7owe,er, the company has recei,ed criticism for its contractors. labour practices, and for Apple.s own en,ironmental and business practices. Although companies ha,e tried to copy the Apple business model, none has been able to disco,er what it is that makes Apple so unique. *any belie,e that Apple!s success stems from a combination of se,eral factors, including the remarkable leadership skills of C13 0te,e 8obs, a corporate culture of enthusiasm and inno,ation, and the high/tech products for which Apple is known. +hese combining qualities ha,e allowed Apple to re,olutioni(e the technology and retail industries.

Apple Inc.s History Apple!s first product, the Apple I, was ,ery much different from the Apple products of today. +his first handmade computer kit was constructed by Apple co/founder 0te,e )o(niak. It lacked a graphic user interface 94:I;, and buyers had to add their own keyboard and display. Co/founder 0te,e 8obs con,inced )o(niak that it could be sold as a commercial product. In 19 < the Apple I was un,eiled at the 7ome 6rew Computer Club and put on sale for "<<<.<<. 8obs and )o(niak continued to create inno,ati,e products. 0oon their new company, Apple Computer Inc., had surpassed "1 million in sales. 7owe,er, the mid/19&$s saw some difficult times for Apple. In 19&# the company introduced the Apple =isa for "1$,$$$. +he product flopped. In 19&- 0te,e 8obs was ousted after internal conflicts with the Apple C13. Its computer products the *ac I and the 2ewton were not successful, and the company underwent se,eral C13 changes. )ith declining stock prices, the future of Apple was in >eopardy. 0te,e 8obs returned to Apple in 199 to try and sa,e the struggling company. +he return of 8obs introduced a new era for Apple. 8obs immediately began to change the company!s corporate culture. 6efore 8obs! return, employees were more open about Apple pro>ects. After he returned, 8obs instituted a ?closed door@ policy. +oday Apple continues to remain cautious in protecting its technology and ensuring that information remains proprietary. 8obs also created a more flattened organi(ational structure. Aather than going through layers of management to address employees, he addressed them directly. Berhaps one of the most noticeable changes, howe,er, was Apple!s expansion into new product lines within the electronics industry. In %$$1, Apple launched the iBod, a portable music player that fore,er changed the music industry. +he company also introduced i+unes, a type of >ukebox software that allowed users to upload songs from CCs onto their *acs and then organi(e and manage their personali(ed song libraries. +wo years later Apple introduced the i+unes 0tore, in which users could download millions of their fa,ourite songs for "$.99 each online.

In %$$ 8obs announced that Apple Computer, Inc. would be re/named as Apple Inc. +his signified that Apple was no longer >ust a computer manufacturer but also a dri,er in consumer electronics. 0ome saw this as a shift away from computers toward consumer electronics such as Apple +D, iBods, i+unes, iBhones, and iBads. 7owe,er, it may be more accurate to say that Apple is rein,enting computers. )ith the introduction of tablet computers such as the iBad, Apple has begun to take market share away from its top competitors in the computer industry. 0ales of desktops, laptops, and netbooks began to decline after tablet computers were introduced. Analysts belie,e that tablet computers will continue to grow at a rapid rate.

2.0 Problems Identification

2.1 Death of Steve obs 8obs passed away on 3ctober -, %$11 from pancreatic cancer. 8ust prior to his death, he had resigned from his role as C13 in August %$11, passing on his responsibility to current Apple C13 +im Cook. 8obs first left +im Cook in charge of Apple.s day/to/ day operations in early August %$$E, when he took a short lea,e to ha,e a pancreatic cancer tumor remo,ed. 7e returned to Apple that 0eptember, as expected. In %$$9, he took a second medical lea,e of absence from Apple, saying that his health problems were 5more complex5 than pre,iously thought, it was later re,ealed that he had recei,ed a li,er transplant around three months later. Cook was again in charge during 8obs. absence. Apple still thri,es on the products 8obs created, but since his death industry experts ha,e wondered whether Apple would be able to maintain its lead without his foresight and inno,ation. 0te,e 8obs! showmanship was unmatched and he introduced new products unlike any other. 1,en if he was announcing a small update to a product, his passion and presentation style made people feel that it was much more than that. +he absence of 8obs meant that Apple.s launch e,ents were no longer spectacular. )ith 8obs gone, Apple lost its one of a kind and one of the best leaders in the world to lead the company in the future, Apple seems to be ,ery ,ulnerable, causing all the other companies to become bolder to attack Apple, one example will be the Apple/ 0amsung legal war. Another thing that Apple will miss about 0te,e 8obs is his ama(ing ,ision and his ability to create and anticipate the mo,ements of consumer technology.

2.2 !isin" pay levels for #o$conn %or&ers It was announced on *ay, %$1% that the base salary in Apple!s largest supplier, 'oxconn Chinese manufacturing bases will be lifted to A*6 E,E$$ 9" $$; per month

by the end of %$1#, from current A*6 %,%$$ 9"#-$; per month. 'oxconn!s current base salary 9"#-$; per month is already higher than the A*6 1,-$$ 9"%E$; statutory minimum wage per month in the city of 0hen(hen. +he rise in the workers! salaries means that Apple has to pay 'oxconn more money to produce the products. A rise in production cost means lower re,enues for Apple. +he upshot of the wage increases may be an ine,itable rise in the price of Apple!s products, as the money has to come from somewhere. An ethically moti,ated self/ owned company may choose to take the hit from its profits, but the shareholders of a big commercial company almost certainly will choose to line their own pockets in preference to this option. If Apple increases its prices to pay its Chinese manufacturers more may well see its sales drop, as the a,erage consumers, will not be willing to pay more for their new gadgets.

2.' Price pressure from Samsun" over &ey components All of Apple!s application processors for the iBhone, iBad and iBod touch are made by 0amsung. 3n 2o,ember, %$1%, 0amsung asked Apple for a %$F price raise in the application processors. Apple first disappro,ed it, but finding no replacement suppliers, it accepted the increase. )ith the price increase, 0amsung is expected to pocket a healthy amount of profit. 1stimates suggests that Apple ordered 1#$ million processors in %$11, with the figure set to exceed %$$ million in %$1% and %$1# due to the launch of the iBhone -, iBad E and iBad *ini.

2.( Patent %ars %ith other smartphone manufacturers +he patent war is an ongoing business battle by smartphone manufacturers including 0ony, 4oogle, Apple Inc., 0amsung, *icrosoft, 2okia, *otorola and 7+C. +o secure and increase their market share, companies sue each other to pre,ent them from using the same patents or designs. 0ince %$1$, the number of lawsuits, counter/suits and trade complaints has increase significantly.

+he ongoing lawsuits between Apple Inc. and 0amsung 1lectronics regarding the design of smartphones and tablet computers ha,e affected both companies with billions of dollars in damages claimed between them. In %$11, Apple began litigating against 0amsung in patent infringement suits, while Apple and *otorola *obility were already engaged in a patent war on se,eral fronts. 6y 8uly %$1%, Apple and 0amsung were still embroiled in more than -$ lawsuits around the world. Apple has also been in,ol,ed in a number of lawsuit cases with other companies. In 8anuary %$$ , Cisco 0ystems filed a lawsuit against Apple, alleging Apple!s iBhone name infringed on Cisco!s iBhone trademark. In %$11, Apple filed suit against Ama(on.com alleging trademark infringement, unfair competition and dilution o,er Ama(on!s use of the ?App 0tore@ phrase. +here were also patent lawsuits against 2okia in 3ctober %$$9, Godak in 8anuary %$1$ and 7+C in *arch %$1$. Apple cannot afford to fight with too many competitors at once as it will strongly affect its performance.

2.) Apples *aps application defects :pon the release of the new *aps app on 0eptember 19, %$1%, many users and commentators were critical of the app for a ,ariety of reasons ranging from improper labelling of places to unmapped roads. A large number of users complained about the errors it contained. +his included showing the wrong location of the Apple 0tore in 0ydney, Australia, marking an entire city as a hospital, misclassifying a nursery as an airport and identifying the nearest gas station to be as far as < miles away from the user!s location. #C ,iews appearing in *aps were also completely distorted in most cases, with iconic constructions like the 6rooklyn 6ridge seeming to be collapsed or impossibly built. Apple *aps was named one of the +op 1$ technology fails of %$1% by C22 in Cecember %$1%. In Cecember %$1%, Dictoria Bolice in Australia ad,ised tra,ellers against using the application to get directions to the remote town of *ildura. +he app placed *ildura $ km from its correct location. Bolice noted that se,eral motorists required rescuing after following incorrect directions off the highway. +his issue caused the *aps app <

to be regarded as a potentially life threatening issue. In 0eptember %$1#, it was reported that Apple!s *aps was directing dri,ers heading to 'airbanks International Airport in Alaska to dri,e onto an airport runway, which is used by aircraft on a regular basis.

'.0 Sun +is Art of ,ar -heory

Problem 1 #.E9 7e 9the general; who is capable and does not ha,e to contend with interference by the ruler will win.

Problem 2 %.#1 'or the troops to plunder the resources of the enemy, they must be moti,ated by material rewards.

Problem ' 11.&& 3n focal ground, the general must strengthen his alliances with neighbouring states.

Problem ( 11.&9 3n serious ground, a general must ensure a continuous supply of food and pro,isions.

Problem ) &.1# +hus, the general who knows how to ,ary and adapt to changing situations so as to gain ad,antages is one who is skilful in applying the art of war.

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(.0 Discussion

(.1 Apple turns to -im .oo& to replace Steve obs +im Cook grew up in Aobertsdale, Alabama and attended Auburn :ni,ersity, where he recei,ed a degree in Industrial 1ngineering in 19&%, followed by an *6A from Cuke in 19&&. Brior to >oining Apple, Cook spent 1% years at I6* before being hired by Compaq as a ,ice president. 7is stint at Compaq lasted >ust six short months before Cook >oined Apple in 199&, hired personally by 0te,e 8obs. Cook is no stranger to the spotlight. 7e has handled the day/to/day C13 duties at Apple since 8obs took a medical lea,e of absence in 8anuary. +hat marked the third time Cook has o,erseen the company. 7e was also interim C13 in %$$E as 8obs underwent treatment for pancreatic cancer and again for the first half of %$$9 as 8obs dealt with more health issues. 0te,e 8obs is brilliant at product design but he showed little interest in handing with Apple partners or in,estors. 6y contrast, Apple from the outside has appeared more open under Cook, thanks to a number of meetings and trips meant to appeal to the consumers, in,estors and politicians that are interested in the world.s leading tech company. In *ay, Cook went to )ashington to meet with congressional leaders to open lines of communication that were mostly blocked in pre,ious years. Apple was no stranger to lobbying, but sending Cook was a way of letting politicians knows that Apple was ready to grow its relationship and that the company might take a stronger interest in policy issues in the future. Apple also has worked harder in )all 0treet. +here was a bus tour of in,estors that stopped at Apple headquarters in Cupertino, California, where they were treated to cookies and a presentation by Apple.s chief financial officer. A more si(able act of goodwill was the cash di,idend Apple paid out to in,estors, the first in 1 years. 3n a

call with in,estors in 'ebruary, Cook answered questions, cracked >okes and was generally open and friendly. Although shares of Apple ha,e struggled to sustain gains since Cook was named C13, down # percent since August %$11, and %- percent in %$1% to %$1# but the company should ha,e faith in Cook and gi,e him more time to do his >ob as the 0un Hi theory has statedI ?#.E9 7e 9the general; who is capable and does not ha,e to contend with interference by the ruler will win@. 7e!s credited with rein,enting Apple!s approach to in,entory supply chains, keeping in/demand products in stock, and managing the carefully/timed release of new ones. +im Cook is known as the yin to 8ob!s yang and Apple should gi,e him more chances to pro,e that he is the right man for the >ob with his experiences.

(.2 Dealin" %ith risin" pay levels of #o$conn %or&ers After an outcry o,er working conditions at the factories of Apple!s manufacturing partner, 'oxconn in China, Apple took swift action to deal with it. Apple sent +im Cook to China and toured a 'oxconn plant in person. Apple also allowed the 'air =abor Association to do a thorough audit of conditions at the China factories and Apple promised to impro,e pay and hours. Although the impro,ed pay le,els for the workers made their li,es better but it affected Apple in terms of re,enues earned due to the increase in production cost. +o deal with the problem, Apple searched for another manufacturer to assemble some of the gadgets for Apple. Apple di,ided the manufacturing weight more equally with a relati,ely unknown supplier so that Apple will ha,e a greater supply/chain balance. +he supplier is known as Begatron Corp., named after the flying horse Begasus. Begatron had signed with Apple to be the primary assembler of the low/cost iBhone -C that were released a month ago. 'oxconn!s smaller ri,al across town has already became a minor producer of iBhones in %$11 and began making iBad *ini tablet computers in %$1%. Begatron!s rise means an end to the monopoly that 'oxconn has held o,er the production of Apple!s mobile 1$

products because of its renown of being the world!s largest electronics contract manufacturer. +he partnership with Begatron does not means that the deal with 'oxconn has fallen through and there is no guarantees that both of the suppliers will not ask for a pay hike in the future, 'oxconn has only lost some of its monopoly powers. Apple may not be able to pay the continuous pay rise from both suppliers in the future, so Apple are suggested to try some different approaches to deal with the problem. If Apple simply cannot afford to offer pay rises in the future, it could be worth in,estigating more cost/effecti,e rewards and benefits to maintain staff morale. As stated in the Art of )arI ?%.#1 'or the troops to plunder the resources of the enemy, they must be moti,ated by material rewards@. 'or example, offering flexible working, training and de,elopment, staff e,ents or J1mployee of the *onth! awards can all work to make a happier workforce during difficult times. In addition, one time bonus payments can also be a way to reward an employee for his performance without committing to an ongoing expenditure. Alternati,ely, pro,iding a bonus with less immediate fiscal impact may also be sufficient, such as additional days of ,acation or a co,eted parking space.

(.' Shiftin" from Samsun" to other &ey components suppliers Apple is one of 0amsung.s biggest customers for processors and memory chips. 6ut the two firms compete directly in the mobile/phone market and ha,e spent the better part of the past two years suing and countersuing o,er the look, feel and features of their gadgets. Apple and 0amsung were ideal partners a decade ago, when they did not really compete. +hen 0amsung started selling smartphones that today affected the iBhone in units shipped. In the past year, Apple has expressed concern that its dependence on 0amsung limits Apple.s ability to control its destiny by constricting Apple.s negotiating power and ability to use different technologies. Apple has cut back on some purchases from 0amsung. It no longer buys iBhone screens from 0amsung and has reduced iBad/screen purchases. Apple has also been buying more flash/memory chips from other makers. 6ut Apple remains critically 11

dependent on 0amsung. +he microprocessor brains that control iBods, iBhones and iBads are 0amsung/built. And some new iBads still use 0amsung screens. After years of technical delays, Apple finally signs a deal with +aiwan 0emiconductor *anufacturing Co. 9+0*C; handle more of the manufacturing of the A& processor in %$1E, rather than gi,ing all the work to 0amsung. Apple was also said to be ordering more memory chips from 0outh Gorea based 0G 7ynix Inc. 7owe,er, 0amsung will still be the primary supplier for Apple through next year. Apple can only stop its reliance on other suppliers if it starts to ,enture in manufacturing processors and other key components on its own. 6ut in the near future, Apple will not be able to do so, Apple has to >oin hands with other parties in order to o,ercome 0amsung. As stated in +he Art of )arI ?11.&& 3n focal ground, the general must strengthen his alliances with neighbouring states@.

(.( /sin" different approaches to overcome Apples competitors Apple has been ha,ing ongoing lawsuits between 0amsung, 4oogle, 2okia, *otorola, 7+C and some other smaller companies. +he most talked about or the biggest battle is between Apple and 0amsung, the two current giants in the smartphone market. Although Apple is ha,ing the upper ground of the battle but it cannot the legal battles are seriously damaging its sales. In contrary, 0amsung 0martphone shipments increased %%#.#F starting from K# %$1$, accounting for %$F of the o,erall market. Apple has an extensi,e patent portfolio. 7owe,er, Apple cannot afford to sue anyone from de,eloping things such as a rectangular product shape with all four corners uniformly rounded. Apple has been trying to sue anyone who are or may be copying its patent designs in the past few years. +hese lawsuits ha,e caused Apple great damages as well. Apple should consider trying different approaches to win o,er its competitors. 3ne of them is to fight o,er supply chains. 0upply chains or manufacturers of key components for smartphones ha,e become increasingly in demand for technology giants in the market. 0amsung understands this and it has reached out to some of Apple!s key supply chains such as Kualcomm, 0harp, +oshiba and 0ony for 1%

additional components. Apple has to understand that relying on a few companies for their components can result in delays due to production shortages or other supply chain problems. Apple has act swiftly in acquiring more suppliers so that they could stand a better chance against other companies. )hoe,er that wins access to the best performing components in class in large quantity will be the winner in the market. As stated in the Art of )arI ?11.&9 3n serious ground, a general must ensure a continuous supply of food and pro,isions@.

(.) Handlin" Apples *aps app defects Apple will not ha,e the chance to remo,e its admittedly/imperfect *aps app from i30 <, so it should be focusing on fixes and damage control. +im Cook published a letter on the company!s website where he apologises for falling short on deli,ering the best experience possible with *aps to the customers. Apple also dismissed or forced its employee, 0cott 'orstall, who was in charge of the *aps application software to lea,e the company in 3ctober %$1% after refusing to apologise for *aps. In an effort to impro,e its widely/critici(ed i30 *aps app, Apple is also in talks with 'oursquare about partnering to share maps data. 'oursquare lets users 5check in5 to locations, get recommendations about businesses from pre,ious ,isitors and e,en write their own re,iews. )ith the partnership, Apple will be able to integrate the location/based social network.s data and ser,ices to help Apple *aps users find locations and business listings. In addition, Apple also updated its App 0tores with a special section on the 'eatured page, which offers a list of alternati,e maps applications for users to choose from as Apple engineers fix its contro,ersial *aps app behind the scenes. In the new App 0tore section called 5'ind maps for your iBhone,5 Apple has chosen a number of popular maps applications, a number of which were mentioned by Cook in his open letter, including )a(e, *apKuest, and 6ing. Apple is willing to change and apologise for its failures and mistakes as to sol,e the problems as stated in the Art of )arI ?&.1# +hus, the general who knows how to ,ary and adapt to changing situations so as to gain ad,antages is one who is skilful in applying the art of war@.

1#

).0 .onclusion

In summary, there are se,eral important themes de,eloped by 0un +(u as they can be applied to portfolio management and risk management challenges. According to the Art of )ar, conflict is an ine,itable part of life, but e,erything necessary to deal with conflict wisely, honourably, ,ictoriously, is already present within us. Compiled more than two thousand years ago, +he Art of )ar is still perhaps the most influential book of strategy in the world. As a study of the anatomy of organi(ations in conflict, +he Art of )ar applies to competition and conflict in general, on e,ery le,el from the interpersonal to the international. Its aim is in,incibility, ,ictory without battle, and unassailable strength through understanding the physics, politics, and psychology of conflict. Apple is or may be applying the Art of )ar theories as well in its daily operations. 3ne clear example is that it is willing to change in order to deal with its mistakes or failures such as the *aps application defects. +he competition among smartphone giants is getting tenser as days go by, we can expect to see more from Apple as well as other companies to o,ercome each other in terms of sales or share prices.

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