Profitability:

1. Adding Value and Raise Price:

When Steve Jobs joined in September 1997, Apple announced that Microsoft would invest
$150 million in Apple to develop core products like Microsoft Office for the Mac. He
immediately halted the Macintosh licensing program and hired Tim Cook to revamp the
distribution system and streamlining the supply chain. More emphasis was given to focus on
limited product rather than spending on different products. Macintoshs loyal customers
allowed Apple to sell its products at a premium price. Following steps were taken to add
values and raise the price which eventually led to increase in Sales:
a) Product Assortment was given priority over Product Variety. Instead of just
broadening different products, Jobs believed in concentrating on more focussed
products.
b) Innovation was reinvigorated and R&D budget went up significantly (R&D/ Sales was
12% for Apple, as compared to 1% for Dell and 7% for HP in 1997).
c) Preference was given on product elegance and simplicity.
d) Introduced a new OS based on UNIX, considered more stable by computer
professional.
e) Upgrades were done more frequently as compared to Microsoft.
f) Large investments were done to shift Apple to Intel Chips.
2. Reducing Cost:
Following steps were taken to reduce the Cost:
a) Reducing the Inventory to decease the Inventory Carrying Cost.
b) Hired Taiwanese contract assemblers to manufacture Mac products
c) Followed Closed door policy which allowed very limited access to maintain secrecy
and therefore avoided any leakage of information which might have incurred
financial losses.
The launch of iMac posted a profit of $300 million in 1998. Therefore Jobs strategy to
reduce unnecessary costs and concentrating on more focussed products to increase the
value paid dividends.

Profit Growth:
1. Sell More in Existing Markets:
IBM was considered to be the mainstream in the in the Personal Computer industry when
Apple was pioneering the first computing device. In the 1990s, there were thousands of
manufacturers coming up with the Windows OS combined with Intel Processor. Jobs made
the following implementation to penetrate the market:

a) Injected multimillion-dollar Marketing campaigns with varying and attractive slogans

to attract the Customers.
b) Developed a proprietary set of applications by building programs such as iPhoto,
iWeb, iTunes.
c) Adopted a new Distribution strategy by opening eye catching Retail stores.
d) Differentiated Apple by highlighting its products as energy efficient and used
recyclables materials.
2. Enter new Markets:
Apple shifted towards more digital hub strategy by introducing media products such as iPod,
iPhone, iPad. These products played a significant role in bringing consumers into the stores
and exposing them to the Mac. Following products were launched to enter the new markets
in various segments:
a) iTunes: Apple It was the first legal site that allowed music downloads on pay-persong basis. Its launch had a galvanic impact on the iPod sales as its sales shot up to
304,000 units in one quarter and exploded thereafter.
b) iPhone: A very risky move as the industry was dominated by major giants like
Samsung, Nokia, Motorola with 60% market share. But its launched revolutionized
the mobile industry with 44% of total Apples revenue came from the sale of
iPhones(after 4 years of its launch).
c) App Store: Apples App Store was introduced as a part of iTunes which already had a
huge following. It is considered as one of the key driver behind the iPhone sensation.
In FY 2011, Apple generated $6.3 billion in revenues from the sales of music, books
and applications.