1.

Introduction of Apple Inc.

1.1

History

The firm started off as Apple Computer, best known for its Macintosh line of computers in
the 1980s and 1990s. Despite a strong brand, rapid growth and high profits in the late 1980s,
Apple nearly went bankrupt in 1996.
Steve Jobs took over as CEO again in 1997 after being forced out of the firm in 1985. Apple
Computer was renamed Apple Inc. to reflect the firms expansion into consumer
electronics market with innovative non-PC products starting in the early 2000s. 1 Various
revolutionary products such as the iPod, iPhone and iPad were introduced into the market,
gaining a cult-like following behind the brand, with exponential growth and share price rising
more than 15-fold since 2003.2 Today, Apple stands as a global technology powerhouse,
surpassing its major competitors, including Microsoft, to become one of the worlds most
valuable companies.3
1.2 Current Business Strategy
Apple adopts a differentiation strategy with its distinctive marketing campaigns that position
itself as a hip alternative to other brands in the industry. Despite being a premium brand that
is capable of commanding high price margins, Apple is still able to undercut its competitors
pricing with the latest iPad 2 release by leveraging its balance sheet and its position as one of
the largest buyers to secure components at low prices.
competitive advantage.

1 Markoff, John, 2007.

2 Refer to Exhibit 1.

3 Helft, Miguel and Vance, Ashlee, 2010. 4 Bloomberg, 2011.

This further gives Apple a

1.2.1 Broad Target and Uniqueness

Apples strategy serves a broad target market by positioning itself as a full-fledged digital
convergence firm that seeks to enhance consumers digital life.
Apple never fails to build on its uniqueness to stand out from its competitors. Apart from
building on its strong brand and culture, it has delivered one innovative product design after
another, from the iPod scroll wheel to the multi-touch screen of the iPhone.
1.2.2 Porters Five Forces
Using the Porters five forces, this section analyses how Apple effectively positions itself with
its differentiation strategy.
Rivalry with Existing Competitors
Apple faces strong rivalry from its existing competitors due to the huge number of
competitors in the various industries in which it operates. In the Personal Computer (PC)
industry, its main competitors include large industry players such as Hewlett-Packard (HP)
and Dell, and in the Smartphone industry, Research In Motion (RIM) and Nokia.
However, Apples products are highly differentiated in terms of design and functionalities as
compared to its competitors products. As a result, Apple is insulated from intense rivalry due
to strong brand loyalty arising from its positive reputation for high-quality and unique
products.
Apple would be able to sustain this competitive advantage as long as it continues to innovate
and meet the expectations of its customers.

Bargaining Power of Suppliers

Hardware Components
The bargaining power of suppliers for hardware products is low as the industry is highly
saturated, causing suppliers to be competitive in their pricing.
Apple adopts a differentiation strategy which requires the firm to ensure that suppliers
provide high-quality components, driving up its supplier costs. However, Apple is partially
insulated from the impact of higher supplier costs due to the premium that the firm charges
for its products.
Furthermore, Apple purchases a large amount of raw materials, increasing its bargaining
power as a significant customer. Hence, Apple is able to secure components at a lower price.
Microprocessors
Intel has been dominating the PC Computer Processing Unit market with 80% of the market
share.4 To provide higher performance desktops and laptops, the entire Macintosh line is now
running on Intel chips, increasing Apples dependence on Intel. Therefore, Intel has a high
bargaining power as a supplier for its PCs.5
However, for non-PC devices6 that make up 60% of its revenue, Apple develops its own A4
and A5 chips which mitigates its over-dependence on Intel.

4 Yoffie, B. David and Kim, Renee, 2010, pp 5.

5 Includes desktops and laptops.

6 Includes iPod, iPhone and iPad.

Operating Systems (OS)

Apple develops its own Mac OS X for its PCs and iOS for its non-PC devices. Due to
incompatibility of the Mac OS with many software programs, Mac users may prefer to run
the Windows OS. This creates a dependency on Microsoft to provide the Mac-compatible
Windows OS.
However, since Apple is the third largest PC seller in the U.S. market, 7 Microsoft would also
be dependent on Apple to make the sales for the Windows OS. Hence, this interdependency
would result in a low bargaining power of Microsoft.
Bargaining Power of Buyers
Apple operates in markets for PCs, mobile telecommunication devices, consumer electronics
and related software which are highly competitively and saturated. With a large number of
firms operating in the industry, there are many competitor product substitutes. This increases
the bargaining power of consumers.
However, the uniqueness of Apples products and a loyal customer base reduce the price
sensitivity of customers. A strong research and innovation base allows Apple to produce
ground-breaking products such as the iPad. Coupled with strong brand marketing and
successful implementation of its pricing strategy throughout its product range, customers are
willing to pay for the firms products.
As long as Apple continues stay ahead of the curve by introducing innovative products and
builds on its brand marketing, it is likely that its customers will continue to be less
pricesensitive. Hence, the bargaining power of customers for Apple is medium.

7 Ogg, Erica, 2010

Potential Entrants
The industry poses substantial barriers to potential entrants with Apples established brand
presence in the market, providing it with a strong differentiating factor. Potential entrants will
not only find difficulty in winning the market share over, but also require a significant
investment of resources to compete with Apples constant innovation of products.
Products Substitutes
With competitors eager to ride on Apples waves of success, substitutes for its products in the
electronics industry are aplenty, posing a potential threat to its business. However, Apple has
positioned itself effectively against its competitors substitute products with a strong brand
that has gained it a loyal base of Apple Fanatics. Therefore, the threat of product substitute is
medium.
Based on our analysis of the Porters Five Forces, Apples differentiation strategy has
enabled to firm to compete effectively in the competitive landscape while maintaining
reasonable bargaining power with its suppliers and buyers.8

2.

SWOT Analysis

This section of the report will examine the opportunities and threats of the external
environment and the firms strengths and weaknesses.
2.1

Promising Opportunities

2.1.1 The Shift from the PC to Mobile Era

Since the mid-1990s, demand for phones with increased functionalities and enhanced
aesthetics has increased tremendously, with smartphones rising to prominence in the
following decade.9 These high-end phones bring multiple functions together, serving as a
mobile phone, Internet browser, PDA device and media player.
8 Refer to Exhibit 2.

Currently, there are more than 1.3 million mobile applications compared to 50,000-75,000 PC
applications in the market. 500 million smartphones and tablets, as compared to 380 million
PCs, are expected to be sold in 2011.10 In an IBM survey conducted with 2,000 enterprise IT
professionals, majority of the respondents thought that "within the next five years, more
developers will be working on mobile applications and cloud-based architecture than
traditional computing platforms for enterprise".

11

These results further suggest the good

future prospects of the mobile industry.

With the successful launch of the iPhone and iPad, Apple is set in the right direction to
continue to leverage on its existing core competencies to tap on this growing opportunity.

2.1.2 Emerging Markets

Despite the shift towards the mobile era, the PC industry is still considerably viable especially
in emerging markets, as it is propelled by growing internet demand. 12 As of 2010, more than
one billion PCs were used worldwide and it is forecasted that this trend will continue for the
next 3 years, with exponential increases in the Asia Pacific and Middle East/Africa regions.13
Research has shown that consumers in these emerging countries are buying and using more
consumer electronic products. In 2010, these consumers are more than 2.5 times as likely to
9 Yoffie, B. David and Kim, Renee, 2010, pp 10.

10 Lai, Eric, 2011.

11 Finley, Klint, 2010.

12 Yoffie, B. David and Kim, Renee, 2010, pp 4.

13 Refer to Exhibit 3.

buy a smartphone in the following year and twice as likely to have bought a computer in the
past year as compared to consumers in mature markets.14
This is evident in India where the appetite for consumer technology is one of the strongest in
the emerging markets as consumer spending on mobile phones and computers remain
especially strong.15 Consumers in Africa are also becoming more connected and eager to
consume digital content as the price of bandwidth falls.16
Another study has shown that Chinese consumers are as keen on Apple's sleek gadgets as
international consumers and that Apple has a lot to gain from the Chinese market. For
instance, Lenovo currently holds approximately 30% of the Chinese market and Lenovo's
Chairman has observed that "if Apple were to spend the same effort on the Chinese consumer,
we (Lenovo) would be in trouble".17
China has also outperformed mature markets in the netbook and e-book market. A survey of
consumers across eight countries ranked Chinese consumers first in the use of leading age
consumer technologies. For example, 17% of Chinese respondents own an e-book, ahead of
U.S.s 5% and Germanys 2%.18 This presents an opportunity for Apple to build on the
worldwide success of the iPad as an e-book reader.

14 Hartley, Charles, 2010.

15 Refer to Exhibit 4.

16 Appfrica, 2010.

17 Elmer-DeWitt, Philip, 2011.

18 Hartley, Charles, 2010.

Apple currently has not spent the same amount of effort in China as compared its competitors
such as Lenovo. Despite it being increasingly difficult to obtain any official Apple products
within China, the firm's products are in high demand.19
The market potential of emerging economies should not be overlooked as it represents huge
opportunities that Apple can tap on. By penetrating and establishing a presence in these
markets, Apple would be able to increase its global market share, allowing it to build on its
momentum as one of the fastest growth firms in the world.
2.1.3 Consumer Digital Lifestyle
Consumers of the 21st century are increasingly more engaged in a wide variety of
technologybased activities. 20 They are more entrenched in the digital lifestyle with the usage
of computing devices such as PCs and smartphones becoming part of their daily lives. 21 Such
trends in the consumer lifestyle correlate to the growing consumer electronics market
demand.
Apples Digital Hub strategy to position itself as the center of its consumers digital lifestyle
has an advantage to capture this target market segment. Apple focuses on connectivity among
its various products that would fit the needs of its tech-savvy consumers. This strategy will
enable Apple to continue to pursue the opportunities of the growing consumer electronics
market as a means of profitable and sustainable growth.

19 Griffiths, Sarah, 2010.

20 Refer to Exhibit 5.

21 Hogan, Kurt M., 2011.

2.2 Significant Threats

2.2.1 Intense Competition
Global markets for consumer electronics are considered fast-cycle markets22 that are highly
competitive and subjected to rapid technological changes. Apple huge success in major
product lines attracts strong competitive responses, emphasising the need to innovate and
differentiate to out manoeuvre its competitors.
Consolidation in the PC market, such as the possible Lenovo and NEC merger 24, has resulted
in larger and potentially stronger competitors. Price competition has been particularly intense
as competitors, such as HP23 which sell Windows-based PCs, are aggressively cutting prices
and lowering product margins. If Apple is unable to compete effectively, it faces the risk of
losing its PC market share.
The success of the iPhone caused the competition in the mobile telecommunications industry
to intensify significantly as competitors such as Samsung, LG and Sony Ericsson attempt to
imitate some of the iPhones functionality and designs within their own smartphones. 24
Companies also collaborate to offer solutions that are more competitive than those they
currently offer. For instance, phones that run on Google-backed Android OS have grown in
popularity over the last 12 months due to its lower pricing and similarity to the iOS.
Androidpowered phones currently match Apples strong position in the U.S. with an OS
market share of 27%-28%.25 In February 2011, Nokia and Microsoft partnered to take on
Apple and
22 Ireland, R. Duane, Hoskisson, Robert E. and Hitt, Michael A., 2011. pp 133.
2011.

23 Hanlon, Mike, n.d.

24 Gikas, Mike, 2008.

24

Ausick, Paul,

Google in the growing smartphone industry.28 Give these circumstances, Apple will risk
losing its market share if it does not continue to innovate and develop future iOS releases and
iPhones that outperform those by its competitors.
The iPhone and iPod Touch allowed Apple to enter the portable gaming devices market.
Firms such as Nintendo and Sony that were not thought to be Apples direct competitors are
now drawn into the fray with games being a big hit on the mobile devices. This enlarged
scope of competitors encompasses firms that have long dominated their markets in which
Apple may not have the experience or resources to compete. Furthermore, competitors such
as Sony have since added the music player functionality on its PlayStation Portable devices,
potentially decreasing the demand of the iPod Touch.
The launch of the iPad in April 2010 also produced an immediate competitive response, with
at least a dozen companies from Android, Samsung to HP scrambling to announce plans to
ship tablets in 2010.26 Though Apple currently commands over 82% of the tablet market
share30, the nature of the industry suggests that it is only a matter of time before the
competitors narrow Apples lead. Apple needs to be proactive and reactive by continuing to
keep itself ahead of the curve, as it has done with the launch of iPad 2 in March 2011.
The instantaneous success of the App Store has also sent competitors rushing to offer their
own application stores. Though there are over 350,000 applications available on the App
store, Googles Android Market is fast catching up with 250,000 applications to date, an
increase of 150% within the last 6 months. As the success of the App Store is heavily
dependent on third-party developers, the availability and quality of applications for Apples

25 Kellogg, Don, 2011. 28 CBC News, 2011.

26 Dybwad, Bard, 2010. 30 Yarow, Jay, 2011.

devices may suffer if developers focus their efforts in writing applications for competitor
platforms. This would ultimately decrease the demand for Apples mobile devices.
2.2.2 Risk of International Operations
A large and growing portion of Apples revenue is derived from international operations. Over
the last three years, international sales have been increasing and accounted for 56%, 47% and
44% for FYs 2010, 2009 and 2008 respectively.27 Therefore Apple risks violating the complex
foreign laws and regulations, including foreign exchange controls, labour laws and anticompetition regulations the latest being that Apple is accused of creating a music download
monopoly. 28 Compliance with such regulations increases the costs of doing business in foreign
jurisdictions. Significant foreign operations also expose Apple to movements in foreign
currency exchange rates against the greenback. The weakening of U.S. dollar since the recent
global financial crisis has led to Apple to raise international pricing to offset the foreign
currency exposure, potentially reducing demand for its products.29

27 Refer to Exhibit 6.

28 Thomasch, Paul and Levine, Dan, 2011.

29 Apple Inc. Form 10-K 2010, pp 19.

2.3

Strengths

2.3.1 Strong Marketing Efforts

One of the greatest strength of Apple is its impactful marketing efforts which produced a
potent concoction of a strong global brand and celebrated products.
Brand Marketing
Apple is one of the most established and reputable IT brands globally. Its popular
multimillion dollar marketing campaigns included successful Think Different ads and
catchy slogans such as It just works, which positioned the firm as a chic alternative to its
competitors .30
Apple also promoted its computers as the worlds greenest lineup of notebooks that are
recyclable and energy-efficient.31 In 2007, the U.S. Environmental Protection Agency ranked
Apples notebooks as the most environmentally-friendly portable computers. 32 In 2011,
Climate Counts placed Apple in its top category of corporate climate responsibility.33
As a result of its massive marketing efforts, Apple has built a very loyal customer base that
advocates the brand, enabling it to not only recruit customers, but also retain them. This
provides a platform for Apple to introduce new products, such as the iPod and iPhone.

30 Yoffie, B. David and Kim, Renee, 2010. pp 4.

31 Apple Environment Website, n.d.

32 Macnn news, 2007.

33 Climate Counts Org, 2011.

Besides, Apple branding is so successful that it is able to license its Made for iPod logo,
which serves as a form of advertisement and a revenue source as it earns an estimated 5% of
the retail price of such products.34
Ecosystem of Products
Apple ingeniously created an ecosystem of products contributing to the firms revenue and
enhancing its product marketing. An example would be the iPod accessory market. It was
estimated that for every $3 spent on an iPod, consumers spent another $1 on iPod add-on
products. These exclusive iPod add-ons of over 2,000 different items signal that Apples
player is superior to many other MP3 players, which had fewer accessories.35
The emergence of iTunes also revolutionized the sales of iPod. The iTunes desktop software
and music store differentiate the iPod from its competitors products and reinforce
consumers decision to purchase the iPod. With the launch of the iTunes store in 2003, iPod
sales flourished with Apples market share of MP3 players increasing from 12% in 2003 to
70% by 2005.36

The App Store, an extension of the iPhones ecosystem, was introduced as part of iTunes
which consumers were already very familiar with. Since its introduction, the App Store has
broken the 10 billion download mark in less than 3 years. 37 With Apple taking a cut of 30% of

34 Yoffie, B. David and Kim, Renee, 2010. pp 8.

35 Darlin, Damon, 2006.

36 Zook, Chris, 2007.

37 The Telegraph, 2011.

the developers App sales, this contributes to its revenue stream.

38

Furthermore, the

popularity of the Apps also helps to boost sales of the iPhone and other non-PC devices.

Retail Strategy
Apple launched its retail strategy in 2001 to increase customer exposure to its products. Its
stores carry its full range of products exclusively with well-trained sales personnel promoting
product advantages to potential buyers alongside in-store presentations. Apple specialists are
also present to provide technical support. The enhanced consumer experiences helped to
further differentiate Apple from its competitors.
With annual sales of about $4,500 per square foot as compared to Tiffany & Cos $2,750 and
Best Buys $930 in 2007, Apple retail stores were a tremendous success. 39 This retail
division, with an average of 288 stores, grew to account for 15% of Apples total net sales in
2010.40
Besides, Apple explored other retail revenues such as entering into a partnership with Best
Buy, the worlds largest electronics retailer. By having its own retail space within Best Buys
stores, Apple was able to expand on its physical presence.
shipments increasing 34% during the last quarter of 2007.51

38 Apple iOS Development Program Website, n.d.

39 Marsal, Katie, 2008.

40 Apple Inc. Form 10-K 2010, pp 38.

41 Krazit, Tom, 2008. 51 Krazit, Tom, 2007.

41

This worked well, with Mac

2.3.2 Horizontal and Vertical Integration

Another unique strength that Apple has over its competitors is that it is one of the few firms in
the PC industry that adopts both horizontal and vertical integration.
Horizontal Integration
Apple adopted a digital hub strategy, expanding its production line to include non-PC devices
such as iPod, iPhone and iPad products that deliver a cutting-edge tightly integrated user
experience. This horizontal integration by expanding the product range created synergies as
Apple was able to develop various products based on the knowledge of application software
and content from its Mac products. It also had the opportunity to launch these new product
lines to its existing base of loyal Mac users.
Horizontal integration expanded and strengthened Apples business, with the iPhone and the
iPod currently representing about 51% of Apples net sales.42
Vertical Integration
Apple demonstrates vertical integration with its PC and music market, where it is able to
integrate the content, hardware, software, online service and retail stores under its firm.
However, unlike vertical integration of the past, Apple engages in contract manufacturing,
where hardware is manufactured by third-parties such as Foxconn and Asus. These companies
manufacture Apples products according to its precise design specifications. Hence, Apple
still retains full control of the manufacturing process.
Besides, Apple has taken a step further by manufacturing its own A4 and A5 processors to
power iPhones and iPads, and producing its proprietary iOS for the non-PC devices. 43 It also

42 Apple Inc. Form 10-K 2010, pp 34.

43 Lyons, Daniel, 2010.

took over P.A. Semi, a chip company.44 With this platform control, Apple is able to optimize
the use of different components and create products with a performance advantage over its
competitors.
Vertical integration allows Apple to have control over design, innovation and production
throughout the vertical chain. Hence, it is able to enhance the quality of its customers
experiences and possess unparallel pricing strength to outperform its competitors.55

2.3.3 Research and Development

Apples R&D encompasses the product development process where it relies on its proprietary
designs and keeps key design decisions in-housed. Jobs is also a vital part of this design
process with his hands-on involvement.45 As a result, Apple is able to produce best-sellers,
from the iPod scroll wheel design to the ultra-thin MacBook Air, which sets Apple apart from
its competitors.
Apple is also recognized for designing products using its unique components. An example
would be its own A4 chip, specifically designed for mobile devices that required efficiency
and speed. It came up with proprietary developed applications to support its Macintosh line
as well.46
This commitment to R&D allows Apple to produce sophisticated but easy-to-use products and
deliver well-integrated user experiences.

44 Martellaro, John, 2008.

55

Flynn, David, 2010.

45 Burrows, Peter, 2005.

46 Yoffie, B. David and Kim, Renee, 2010, pp 7. 58 Macworld, 2009.

2.4 Major Weaknesses

2.4.1 Business Strategy
Apples premium price differentiation strategy has its pitfalls given the intense rivalry of the
industry. Without constant innovation to set itself apart from its competitors, Apples
products may appear overpriced in comparison to its rivals. An example was the Mac Mini
which failed to outdo the Windows desktop in terms of functionality. Consumers could get a
desktop with more functions and faster performance at a lower price, 58 resulting in less than
ideal sales for the Mac Mini.
Given the broad range of products launched from its Digital Hub Strategy, Apple has to divide
its organizational resources and capability to manage the various product arms. This has
incurred opportunity costs for Apple as it could have focused on the more profitable target
segments and utilise its resources more efficiently in generating higher returns. Certain less
receptive ventures such as the Mac Mini and Apple TV prove the case in point and could also
highlight the weaknesses of over diversifying its business.
2.4.2 Reliance on Steve Jobs
The success of Apple, since Jobs return to the firm in 1997, has been immensely attributed to
his leadership. Apples fortune has been linked to the iconic CEO and the stock market has
been reacting adversely to news of Jobs series of medical leave following treatment for
pancreatic cancer in 2004 and a liver transplant in 2009.47 It is without a doubt that many see
Jobs as the sole reason for Apples success especially when uncertainty of Jobs health is able
to cause a stir among shareholders. The question remains as to whether the management team
and new products in Apples pipelines are able to see Apple through continued success in the
absence of Jobs.

47 Channel Newsasia Business News, 2011.

2.4.3 Apples Product and Expectations

With the successful mass appeal of Apples products, it has become increasingly difficult to
fully incorporate the various desires and expectations of consumers into the various devices.
One of such product limitation is the lack of a physical QWERTY keyboard for the iPhone
which is especially useful for business consumers to type long emails. It is also useful in
regions of colder climates where consumers wearing gloves can choose not to use the touch
screen which only detects the naked finger. Other notable limitations pertain to Apples
restrictive closed system that prevents certain applications and platforms, such as the popular
Adobe Flash, from running on products like the latest iPad which spots the iOS. The
criticisms are high with consumers considering open systems, like Android, that position
themselves to give users more choices. 48 These limitations could lead to performance below
expectations and a loss of certain customer segments.
With products being increasingly multi-functional, Apple also runs the risk of cannibalising
its own products. For example, the Apples iPad have been said to be cannibalising notebook
and iPod sales to the extent that the iPod Touch product line was expected to be
discontinued.49 This has the implication that Apple may have to maintain higher price
margins for the latest releases so that there will still be a net positive business impact even
after considering the cannibalisation effect.
With short product life cycles of the consumer electronics industry, Apple may find it
increasingly difficult to keep up with the overly-hyped expectations with some product
launches being merely a rehash of the last. In an interview with an analyst Gene Munster, it
was commented that investor reaction prior to the unveiling of the iPad 2 was
underwhelming.
48 Macstories, 2010.

49 V3.co.uk, 2010.

The iPad 2 was also said to be evolutionary, not revolutionary50 which had hardly any
impressive new features with consumers already turning their high hopes to iPad 3. 51 The
competition may now not be with the real competitors but with the consumer expectation it
sets.
The difficulties in meeting or exceeding expectations are in addition to the problem of market
saturation,52 a problem that any high growth firm will inevitably face. Apple has to constantly
come up with new products to attract new customers and ensure its company growth or risk
losing its current firm valuation which is again, based on expectations.
2.4.4 Corporate Social Responsibility
As a large firm under the media spotlight and public scrutiny, it is imperative that Apple
extends its responsibilities to its stakeholders and demonstrates commitment to its triple
bottom line: people, planet, profit. However, Apple has been known to receive widespread
criticism for its labour and business practices. 53 Although Apple has been reactive to such
allegations and standards have been said to be raised, the resulting negative perceptions may
prove to be difficult to reverse. Furthermore, allegations have continued to surface despite
Apples measures.54 Having such negative media reports may adversely impact and tarnish
Apples image. The growing negative sentiments of workers in China, an emerging economy

50 Bloomberg, 2010.

51 Osada, J., 2011.

52 AppleInsider, 2009.

53 The Washington Post, 2006.

54 Wired, 2010.

where Apples production predominantly takes place, may possibly cause Apple to lose a
huge consumer market that could provide future growth opportunities.55

55 The WSJs Digital Network, 2011.

3.

Recommendations of Future Strategic Actions for Apple

In light of our SWOT analysis, we have identified a three-pronged approach which Apple
may adopt.
3.1

Leverage on Innovation and Consumer Feedback

Given the nature of the industry where technological advancement is rapid with high risk of
product obsolescence, we recommend that Apple continues to invest in R&D in order to keep
up in the fast-paced industry. By constantly innovating and coming up with cutting-edge
products, Apple would be able to maintain its position as one of the industry leaders.
As Apple is adopting a differentiation strategy, it is imperative for Apple to leverage on its
strength in R&D to generate products that will meet the expectations of its customers.
Understanding the tastes and preferences of its consumers is the crux. It is important for
Apple to be receptive to both positive and negative feedback from its consumers and to
appropriately incorporate them into winning solutions.
An example would be recent criticisms on how Apples iPhone and iPad are incompatible
with the popular flash technology. Analysts have predicted that Apples decision not to
support Flash would have a limiting effect on the iPads sales potential. 56 Such product
limitations, as identified under our weakness analysis, may lead to a loss of certain customer
segments.
Though it is not feasible for Apple to act on every criticism, Apple should strive to improve
and re-invent with each new product launch to minimise product limitations without
compromising on its core values and product uniqueness. This will help to ensure that Apple
is able to remain as one of the leading firms in the industry.

56 Maisto, Michelle, 2010.

3.2 Leadership
Jobs has become an icon that strongly represents the firm and its prospects. He has, after all,
played no small role in designing and developing Apples core products and has grown to
define Apples renegade culture. His skill at salesmanship has been dubbed the reality
distortion field and is evident during his keynote speeches (colloquially known as
Stevenotes) which have been known to move the stock price.57
In discussing Apples weaknesses, however, there is a concern of how Jobs health problems
and leave of absence would leave investors and shareholders alike unsettled. It has become
apparent that Jobs is indeed the soul of the firm and his absence will prove to be an
uncertain transition for the firm.
Therefore, it is our recommendation for Apple to prepare for eventualities and transition of
leadership. Despite Apples efforts of having the next line of management team in the
pipelines with plans for future products, it is equally, if not more critical, for Apple to put a
new face on the leadership of the firm. The increased visibility of its leader would reassure
stakeholders of Apples future prospects.
Apple should gear itself for the future and groom its successor to be of Jobs calibre. The
internal managerial labour market should be used to select an insider as the new CEO. Due to
the internal successors experience and understanding of the firms culture, he/she will be
better positioned to carry on Apples culture and differentiating strategy.58
From within the firm, Jobs successor should be able to effect Apples brand differentiation
and transcend orthodoxy by adopting a transformational leadership style. This will serve to
continue Apples strong ability to innovate and to stay ahead of its competitors. At product
57 AppleInsider, 2007.

58 Ireland, R. Duane, Hoskisson, Robert E. and Hitt, Michael A., 2011, pp 314.

launches, Jobs successor should be able to front the firm and its values and connect with the
audience by exuding passion, energy and enthusiasm. Fans will be rallied and the hype
created will continue to keep consumers excited and looking forward to the next
revolutionary Apple product. In essence, Apple will be fronted by a new face representing
everything Apple is thus far.
With a clear leader to succeed Jobs in taking charge of the firm while connecting with the
followers, stakeholders and shareholders can be reassured that the firm is in good hands and
will not be losing its vigour in the technology and entertainment industry.
3.3 Target Emerging Markets
As discussed in our opportunities analysis, the market potential of emerging economies
represents huge opportunities that Apple can tap on. We have two recommendations at which
the firm can implement to increase its presence in these markets.
3.3.1 Launching a New Product Line
Many emerging economies may not have the infrastructure to support some of Apples
products. Mobile and Wi-Fi networks may not be in place. Other issues in such markets
include the premium pricing of Apple products which may exceed what consumers and
businesses are able to afford.
One of the ways Apple can increase market presence is to develop simple but adequate
products specifically for these markets. Apple can leverage on its expertise in research and
innovation, as well as its strong balance sheet to obtain bulk discounts from suppliers to drive
costs down. Given the limitations in certain emerging markets, product features which are not
supported by the infrastructure such as the 3G network will be dropped for the new product
line. This reduction of features will enable the products to be relatively more affordable to
consumers of these countries.

Brand dilution can be avoided by keeping the product line separate from the mainstream. The
products will not be marketed as a cheaper alternative as product quality standards will still
be maintained. The marketing and the launching of these products will also be done
exclusively within these targeted markets.
3.3.2 Expand on Its Current CSR Initiatives
Throughout its history, Apple has focused on the use of technology in education and has been
committed to delivering tools for the education sector. Some of the firms initiatives in the
education sector include having an online education store, which allows students and
educators to purchase most of its available products at a discount, as well as support mobile
learning through the iTunes U (for University) programme where students and teachers can
share and distribute educational media through iTunes.59
However, such initiatives are not implemented in many education sectors in less developed
cities across emerging economies such as Brazil, Russia, India and China. Given the rapid
and unpredictable pace of product obsolesces, there is a likelihood that Apple will be faced
with excess inventory,60 due either to inaccurate forecasting or the unpredictable consumer
behaviour. Apple could donate, or sell at a discount, these excess stocks to schools and aid in
upgrading the schools infrastructure, as well as enhancing the learning experience of youths.
This initiative can be an expansion of Apples CSR programme and will increase Apple s
visibility and brand awareness in these emerging economies. In the long run, when these
markets mature, Apple will be well poised ahead of its competitors to roll out its full product
range.

59 Apple Education Website, 2011.

60 Apple Inc. Form 10-K 2010, pp 12.

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