CASE STUDY APPLE INC

Steve Jobs
1955- 2011
Mission Statement
Apple Inc. is committed to protecting the environment, health and safety of our employees,
customers and the global communities where we operate. We recognize that by integrating
sound environmental, health and safety management practices into all aspects of our business,
we can offer technologically innovative products and services while conserving and enhancing
resources for future generations.
__________________________________________________________

February 2011
Doctor cleared his throat and said Mr. Jobs you do not have much time to live. At best I think may be six
months. We have tried our best but the resurgence of cancer is too strong it is taken over your entire
body. I understand the sensitivity of the issue if you want we will keep it secret from the media.CEO of
Apple Inc. Steve Jobs got up from his chair and slowly moved out of the cancer treatment facility
thinking about his family and the company Apple Inc. where he has been the major force and in just 13
years transformed Apple from bankruptcy to number 1 company of the world.
Apple Inc. in 2011
On Wednesday March 2, 2011 Apple Inc. launched iPad 2 amid great attention from the media and
customers. CEO Steve Jobs who had taken medical leave from his work took the central stage by
officially launching iPad 2 despite his extremely weak health condition he gave stunning presentation on
this product and shocked the digital world. He was given standing ovation by the audience, during his
presentation he stated, it is just not technology his company innovations are combination of business,
humanities, art and engineering. I work on new product development with passion and love, we do not
give attention to marketing research, I have never hired any consultants, I just work on making the
products better and try provide more value to the customers. Even the The Economist displayed the
release of iPad on its magazine cover page and declared Steve Jobs as the entrepreneur of the century.
According to the top 100 global brands report released in May 2011 by the most respected brand
researchers MillwardBrown, Apple Inc was declared number 1 global brand of the entire world.
On the occasion of launching iPad 2 in China April 2011, price of iPad 2 was fixed 20% higher than USA,
long queues of customers were witnessed outside Apple sales centers and several people landed in jails
because of fighting which erupted because of jumping lines. One man is reported to sell his kidney to
finance the purchase of iPad 2

Apples History
Steve Jobs and Steve Wozniak , a pair of 20 something college dropouts founded Apple Computer on
April Fools Day , 1976. Working out of the Jobs familys garage in Los Altos, California, they built a
computer circuit board that they named the Apple 1. Within several months they had made 200 units
and taken on a new partner A.C. Mike Markkula, Jr., who was instrumental in attracting venture
capital as the experienced businessman on the team.
Jobs mission was to bring an easy to use computer to market, which led to the release of Apple 2 in
April 1978. It sparked a computing revolution that drove the PC industry to $ 1 billion in annual sales in
less than 3 years . Apple quickly became the industry leader, selling more than 100,000 Apple -2 by the
end of 1980. In December 1980, Apple launched a successful issuance of common stocks for public .
Apples competitive position changed fundamentally in 1981 when IBM entered the PC market. The IBM
PC , which used Microsofts operating system and CPU from Intel was a relatively open system that
other producers could copy. Apple on the hand practiced horizontal and vertical integration. It relied on
own proprietary designs and refused to license its hardware to third parties.
IBM PCs not only gained more market share, but they also emerged as the new standard for the
industry. Apple responded by introducing Macintosh in 1984. The Mac marked a breakthrough in ease of
use, industrial design and technical elegance. However the Macs slow processor speed and lack of
compatible software limited sales. Apples net income fell by 62% between 1981 and 1984 sending the
company into crises. Steve Jobs recruited the Chief Executive of Pepsi Cola John Scully to turn around
the company by using his marketing and management skills. John Scully was appointed Chief Executive
and Steve Jobs became the head of research and product development.
After spending some time in the company John Scully concluded that there is nothing wrong with the
company it is Steve Jobs who is ruining and destroying the company by his rash and centralized style of
management. John Scully convinced the Board members and Steve Jobs was fired. Jobs was asked to sell
his shares and leave the company immediately.
In 1985 Steve Jobs left the company with tears in his eyes, he was forced out of the company which he
created and the man he hired John Scully to change the culture of the Apple conspired for his exit.
In June 1993 Scully was replaced by the President of the Board as the companys margin was
continuously falling. In 1996 a board member Amelio was made the Chief executive who was fan and
admirer of Steve Jobs. He was also aware that Steve Jobs new company Pixar ( 3D animation company)
was making huge profit with Toy Story and he had long term plans with Disney world.
Apple lost $ 1.6 billion under Amelio and the world wide market share tumbled to around 3% . Amelio
told the Board that the only hope of reviving the company is to get the man who created it.
In September 1997 Steve Jobs became the companys interim CEO

Steve Jobs and the Apple Turnaround
Steve Jobs moved quickly to reshape Apple. He hired Taiwanese contract assemblers to manufacture
Mac products and revamped Apples distribution system from smaller outlets to national chains. Apple
15 product lines were slashed to just four categories- desk tops and portables for consumers and
professionals. Apple launched a website to set up direct sales for the first time. Internally, Jobs focused
on reinvigorate innovation. Apple slashed its inventory and increased its spending on R & D.
Jobs first real coup came with iMac in August 1998. This was a window based machine with eggshell
design. Following Jobs return , Apple posted a $ 309 million in 1998 fiscal year, reversing the previous
year s $ 1 billion loss.
Jobs wanted to change the image of the company and Apple to be a cultural force. Apple promoted
itself as a high end alternative to other computer brands. Apple ads were placed in popular and fashion
magazines.
PC Manufacturers
The four top PC vendors Hewlett-Packard(HP), Dell, Acer and Lenovo accounted for 55% of world wide
shipments . Industry leader HP had staged an impressive comeback following a rough period with the
acquisition of Compaq computers in 2002.
HP was also the world largest technology company diversifying into services, servers and storage.
Around two thirds of HPs PCs were sold outside the US. HP also had a strong retail presence through
110,000 world wide outlets. Dell on the other hand stumbled, its distinct combination of direct sales and
build to order manufacturing was a hit in the corporate market. Yet Dell was late to catch the consumer
boom. Founder Michael Dell returned as CEO in January 2007 and emphasized computer friendly
products, reentered retail distribution and pushed for international expansion. Still Dell struggled with
cost controls and poor margins. In 2009 Dell was the only top PC manufacturer to loose its world wide
market share.
Acer and Lenovo, active in emerging markets both benefitted from acquisitions of high profile US PC
brands . In 2007 Taiwan based Acer bought Gateway a leading US PC brand and became the third largest
PC vendor in the world. Acer also acquired Packard Bell a PC maker with strong presence in Europe.
China based Lenovo came into front ranks of PC vendors in 2005 when it acquired IBM money loosing PC
business for $ 1.75 billion. Lenovos greatest strength was its dominant position in China where it
commanded 33% of the market.
Suppliers to the PC industry fell into two categories. Those that made products such as( memory chips,
disk drives, and key boards) come from many sources and those that made products notably micro-
processor and operating systems that had just few sources. Products in the second category are
supplied by two firms Intel and Microsoft.
( For More details see Exhibit 1& 2)
From Apple Computers to Apple Inc.
Apples shift towards digital hub strategy was initiated by the debut of the iPod in 2001, followed by the
iPhone in 2007, then the iPad in 2010. These product lines set Apple on a path toward becoming a full
fledge digital convergence company. The change in the name from Apple Computer to Apple Inc. In
2007 marked the official repositioning of the company.
The iPod Sensation
While the prospects of for the PC Macintosh improved, it was the iPod that set Apple on the explosive
growth path. The iPod was initially one of the many portable digital music players based on the MP3
standard. Thanks to the sleek design , simple user interface and large storage it soon became the icon of
the digital age. The first iPod stored up to 1000 songs the other MP3 players could only store one hour
of music.
The iPod nano for example had gross margins of 40%. The biggest cost component for the nano was
flash memory. Apple agreed to pay $ 500 million up front in 2005 to intel, Samsung and Toshiba to
ensure uninterrupted supplies of flash memory. Released in 2007 the Touch was the first iPod that built
in wifi, 3.5 inch screen and a multi touch graphical interface. Some 50 million iPod Touch devices have
been sold in 2010. Apple has been charging of $ 75 to $100 higher than the competition. Competitors
like Creative, SanDisk, Samsung all were struggling in front of iPod even Microsofts Zune line of music
player could not create any impact in the market.
Competitors found themselves facing a major disadvantage with the emergence of iTunes store.
iTunes : Two features which dramatically differentiated Apple iPods were its iTunes desktop software
which synchronized iPods with computers and its iTune Music store. The iTune was the first legal site
that allowed music down loads on pay as per song basis. By February 2010, iTune has sold 10 billion
songs and featured the world largest catalog. Over 8000 movies titles could be rented or downloaded
by iPod Touch owners.
The launch of iTunes store had a tremendous impact on the sales of iPod. Before the launch of iTune
store Apple sold on average 113,000 iPods per quarter. After iTunes launch, iPod sales shot up to
733,000 units per quarter and exploded thereafter. An Apple exclusive digital protection software
ensured copy rights by limiting down load of one song to five computers by one user.

The iPhone
Hailed as Time Magazines Invention of the Year the iPhone represented Apple bid to reinvent the
phone. Two and half years of development efforts had been devoted to the phone , guarded under
intense secrecy even within the company s own employees . The estimated development cost was
around $ 150 million.
Entry into mobile phones was considered risky by market analyst. The industry was dominated by Nokia,
Motorola and Samsung with 60% market share. In addition the products were characterized by short life
cycles, including radio technology where Apple had little experience. In the US market a handset
manufacturer is usually dependent on the operator to provide a subsidy which could lower the price of
new handset by as much as $ 150 or more. Nokia was dominating the market with attractive hard ware
designs and user friendly interfaces, multimedia functions. Then smart phones rose to prominence with
internet browsing , emails and media players.
The iPhone , however changed the rules in the industry. A revolutionary 3.5 inch touch screen interface
placed commands at the touch of users fingertips without a physical keyboard. The first model was
priced at $ 499 for an 8GB model. At that time other mobiles from competitors were costing $ 300.
The first generation iPhone sold about six million units over five quarters. With the 3G model, iPhone
revenues exploded to $ 25 billion by the end of 2010. Within three years, the iPhone went from zero to
38% of Apples total revenue. In terms of global smart phones sales ,the iPhone was the biggest growth
story capturing more than 26% of the market
Competitors: Apple has two main competitors in smart phone category . RIMs black berry smart
phones delivered one of the best e-mail experiences and was a popular chance among corporate
consumers. The leader in smart phones was Nokia . The company strength lied in Europe and emerging
markets such as India, China and Pakistan. Googles free Android OS is an open platform that allowed
mobile users to use it for free Android had gained 4% market share. This OS can be a potential threat to
iPhone.
Limitations of the iPhone: Complaints included customers wanted a physical key board, especially
people handling high volume of e-mails. The battery life was weak . The iPhone did not support flash
technology which meant that the device video could not be played on some platforms.
The iPad
The launch of the iPad in 2010 was yet another bold move by Jobs to redefine an industry positioned
between smart phone and laptop, the iPad was priced at $ 499 to & 829. The computer tablet featured a
9.7 inch screen for reading books, watching movies and some business productivity applications.
Between 2008 and 2010 Jobs bought two microprocessor designs for about $ 400 million. The iPad
became the first product of Apple to run on its microprocessor. Battery life of iPad is 10 hours.
More than 450,000 iPads were sold during its first week on the market. Computer tablets prior to iPads
launch accounted for less than 1% of the market. According to Job the iPad would kill the note book.
The hype over iPad had produced an immediate competitive response. At least dozen companies have
started producing these computer tablets, HP, Samsung , LG , Panasonic, Toshiba have already launched
tablets in the market. Chinese companies have also launched computer tablets at half the cost.
Indian IT minister announced that we will be launching a computer tablet copy of iPad in 2012 at $ 35
so all students can afford it.
One Failure : Apple TV was announced in 2007, it was an attempt by Apple to bring digital video content
directly into the living rooms. Customers were supposed to download contents from iTunes store and
view on Apple TV. Sales were extremely slow and probably the only failure product approved by Steve
Jobs.
Apple Inc. and the Challenges
Apples evolution from a PC manufacturer company to a mobile communication company has been a
spectacular success. Most of the credit goes to one man Steve Jobs. Market understands this fact and
without Jobs at the top, company may struggle to maintain its number 1 position in the world.
Fully aware of this fact Steve Jobs came to his home and called Timothy D. Cook , his heir apparent, and
Chief Operating officer of Apple Inc. Jobs told him to conduct the share holders meeting in 2011 as he
will not be attending the annual meeting with the shareholders this time because of his deteriorating
health condition and asked him to put his name for election in the Board so the market should not get
wrong signals. He also stated that just a rumor of his heart attack pulled down the share value by 10%
last week and any negative report about his health may bring the share value down dramatically.
Steve Jobs continued and started discussing the challenges faced by Apple Inc. He sated that iPod sales
are stagnant in 2010 & 2011 on the other hand Microsoft has introduced Window 7, which led to
resurgence in PC sales. Job stated I am not satisfied with our PC market share which is only 5%
Timothy D. Cook sitting in his office next morning thought about the risks and challenges which he faces
in case of Steve Jobs permanent disappearance from the company. Influence of Steve Job in product
development and innovation was huge. Steve Job style of management has been centralized he would
communicate with 100 people and would personally approve and supervise all the innovations.
No one use to complain because most of the time Job was right, he was always the smartest man in the
room. Cook realized it would be difficult to bridge the gap which Steve Jobs absence will create.
Cook was worried due to the highly volatile and competitive nature of the industries in which the Apple
Inc. competes, he must continually introduce new products, services and technologies, enhance existing
products and services, and effectively stimulate customer demand for new and upgraded products just
like Steve Jobs.
Cook was also worried that Steve Jobs had the ability to hire talented people and retain them on long
term basis. Experienced personnel in the technology industry are in high demand and competition for
their talents is intense, especially in the Silicon Valley, where most of the Companys key personnel are
located. Because of Jobs absence it would be difficult to retain key personnel.
Although most components essential to the Apples business are generally available from multiple
sources, certain key components including but not limited to microprocessors, enclosures, certain liquid
crystal displays (LCDs), certain optical drives, and application-specific integrated circuits (ASICs) are
currently obtained by the Company from single or limited sources, which subjects the Company to
significant supply and pricing risks. Cook thought that he would like to reduce the risk in this area
Suddenly his phone started ringing there was somebody from the stock market who wanted to know
about the health condition of Steve Jobs , Cook replied No Comments.
The man responded without Steve Jobs Apple Inc. can become bad apple
"Cook is a star, just a different kind of star from Steve," said New York-based business analyst, who
recommends buying Apple shares and doesn't own any himself. "He's arguably one of the best supply
chain managers in the world, if you look at working capital management, cash-flow management, cash
conversion cycles -- all those great metrics." He has done tremendous work in Apple and the gap left by
Steve Jobs can be filled by Cook. He handled the company in a professional manner during the absence
of Steve jobs for six months in 2007 for liver transplant operation.
Apple Board has been criticized many times by the press for lacking in corporate governance as Steve
Jobs was always reluctant in asking independent non executive directors to sit in the Board. Steve Job
was also very critical that he took CEO of Google as independent external director on the Board but he
is trying to copy the success of iPhone and leading Google towards smart phone industry after
becoming aware of what Apple Inc. was doing.

Board of Directors of Apple Inc. announced on October 7, 2011 that Timothy D. Cook will replace the
legendry chief executive of Apple Inc.
Steve Jobs died on October 5, 2011

(End of Case Study)

Appendix: Selected Financial Data






Selected Financial Data of Apple Inc
The information set forth below for the five years ended September 24, 2011, is not necessarily
indicative of future financial results

Appendix 1 US Dollars in Millions
2011 2010 2009 2008 2007
Net sales . . . . . . . . . $108,249 $ 65,225 $ 42,905 $ 37,491 $ 24,578
Net income . . . . . . . $ 25,922 $ 14,013 $ 8,235 $ 6,119 $ 3,495
Earnings per common share:
Basic . . . . . . . . . . $ 28.05 $ 15.41 $ 9.22 $ 6.94 $ 4.04

Total assets . . . . . . $116,371 $ 75,183 $ 47,501 $ 36,171 $ 24,878
7
Total liabilities . . . . . $ 39,756 $ 27,392 $ 15,861 $ 13,874 $ 10,347
Total shareholders
equity . . . . . . . . . . . . . $ 76,615 $ 47,791 $ 31,640 $ 22,297 $ 14,531
(a) The Company did not have any long-term debt during the five years ended September 24, 2011.
Long-term obligations exclude non-current deferred revenue
(b) The company s financial strength is considered to best in the entire industry of America