APPLE CASE:

Internal analysis:
Apple has faced its initial success due to the product features and
strong distribution network:
Supply Chain
Strong distribution channel policies depended on
independent distribution rather than own sales persons,
offered high margins, dealer training, cooperative advertising
and point of sale displays (45% profit margin for the dealers).
In 1981, company took over its own distribution and service
operations
Outsourcing production, cost minimization, just in time, strict
quality standards
Apple provided training sessions to educate their dealers
about their products
R&D & Product Development
Initially focused on providing new features, it would be the
first company that combined those new features into one
product first personal computer manufacturer to offer a
floppy disk drive, easy to understand written instructions. Also
focused on appearance of the computer for differentiation.
However, later on were benchmarking their own products for
their newer models and were bringing about scientific
advances instead of engineering improvements
Marketing
Stimulational marketing focus on increasing the size of the
pie than the share of the pie
Marketing Council across the divisions to review all marketing
activities and plans
From the very beginning, Jobs was focused on marketing. They
gave Apple the image of a $100m company when they had
just set up. Created the Apple logo and the four color glossy
ads
Organization Structure:
Initially the organization had a casual outlook, it worked to Apples
advantage as everyone was equally committed and had missionary
zeal as they were empowered to pursue the company objectives;
however as sales grew, the management tried to formalize the
company into a professional structure, which stifled creativity and
independence within the employees who were used to a certain
degree of freedom.

As a result of restructuring, job descriptions were not clearly

defined. Lack of a proper organization structure, and responsibility
of each person was not clear. Communications between divisions
was poor , they were unable to segregate roles and responsibilities,
which led to frustration among employees as they did not know
what they were supposed to do, hence a lack of shared goals. The
entrepreneurial spirit was killed from the attempt at systematizing
and hence some managers left
Further, was not geared up to develop the policies and organization
structure, the Apple management lacked the expertise to properly
develop into a professional organization and instead relied on the
initial success factors to maintain growth rates, despite a fall in the
sales growth from 185% YOY in 1980-1981 to 75% YOY from 19811982:
Despite initial software developed due to transparency, limited
software now available as Apple did not license its OS to 3rd
party firms (some doubt on this point so use at your own risk)
Five product divisions and separate functional divisions
present this is not an effective way of structuring the
company as it makes responsibility within depts. Ambiguous.
should be organized along functional departments and sub
departments for the products, so that clear lines of
responsibility are present
The restructuring process was not able to keep pace with the
companys growth, due to lack of long term planning and
strategic management
External Analysis:
Technological:

Fast advances in technology allowed newer models to

incorporate them, and reduce the cost and have better
reliability as well. However, constraints were the lead-time to
develop software as well as peripheral hardware accessories,
which took years. However, Apple was not bringing about any
major technological improvements
Barriers that prevented people from becoming consumers of
the computer industry: people were afraid of them, computers
took a long time to learn, difficult to use, software was
incompatible - - Apple made their computers easy to use, and
quick to learn (LISA took an avg of 20 minutes to learn via self
teaching as compared to several hours for other computers).
Apple responding to these consumer by mkaing its computers
user friendly, small, compact, neat in appearance, attractive
graphics, lower case and upper case keyboard as well in the
Apple 3
R&D 15.3% increase in 1981, $3.8 bn.

Competition:
At first it was a new industry Apple had to convince
consumers to purchase personal computers, not to fight off its
competition. Stimulational marketing being done at this point
External programmers develop applications for the different
operating systems Apple published its technical
specifications which made it easier for programmers to write
applications initially as Apple was the first company to be
transparent about its specifications
New entrants: easy to set up, venture capital available, easy
to imitate the technology, access to distribution channel was
not easy and a lot of competition existed in this area.
Franklins Ace 100 was a copy of Apple but much cheaper;
Ongoing lawsuits with Apple but its sales were growing; others
as well
Those brands with a lack of reputation or limited distribution
focused on superior performance at cheaper prices. Apple was
not responding to this competition, and instead kept its prices
high with lower performance
Mail order was being used by many brands; however, Apple
did not allow this, and were facing court cases from some mail
order houses as well
Apple 3 provided low performance hence did not attract the
professional and office segments as much as before, as it did
not meet the expectations, further competitors were offering
specialized systems which Apple did not offer
Apples competitors IBM, DEC, Data General, Texas
Instruments, HP, Japanese - Sharp, NEC, Sony, - Xerox, Wang
Laboratories, Olivetti, Zenith, Atari, Fortune, Covus, Altos
Computer
IBM rumored to plan production of 1 million units personal
computer in 1983.
Japanese desktop production tripled in 1981 to 333,000 units,
had a 90% share of their own market. Three Japanese firms
also started producing desktops in US, Ireland and Singapore.
Apple is not responding to the Japanese threat by lowering
prices or increasing performance of their computers
Japanese govt jointly with leading firms providing R&D
programs to their domestic industry to compete with US ($1bn
given from 1972 to 1982). Japanese companies also doing
R&D separately
Although US spending on R&D much higher than Japanese
($22bn from 1971 to 1981), it was mainly for military purpose
and there was a lot of doubling as well
Cooperative R&D ventures are being considered in the US
no information about Apple on this co-opetition

Microsofts MS-DOS was written by software firms, who had

financial incentives to promote the use of their systems by
hardware and software developers

Economic
Consumers preferred that their newly bought systems would
be useful for several years as they have spent a significant
amount of money on it, and newer models coming out very
quickly would negate that
Apple 3 was too expensive for the home segment,
European market did not upturn as anticipated, hence US
computer exports rose only 4.5% in 1982.
Demographics:
Market segmentation: the market is increasingly becoming
segmented into the four broad categories: home, small
business, office & professional and education. However, Apple
is not responding to the segments as their products are too
expensive for the home market, and the performance is not
up to the requirements of the professional and office
segments, and they are not provided specialized solutions

1.

2.

3.
4.

5.
6.

STRENGTHS
High sales growth
(74% in 1983 to $
583m) and earnings
growth (55% to $61m)
Strong distribution
channels; high
margins to retailers
(45%), provided
training for dealers,
other promotional
material
Published its technical
specifications
The only computer
that supported
Visicalc (competitive
advantage) for 11
months; first mover
advantage
Easy to use floppy
disk drive (Apple was
first brand to offer)
User friendly

1.
2.
3.

4.

5.

6.
7.

WEAKNESSES
Hardware was not
upgraded in 6years
Capacity constraints
Dealers preferred
computers with
extensive software as
margins for software was
higher, Apple lacked this
(use at your own risk)
Large amounts of
software was sold
through mail orders
(Apple did not follow this
procedure)
Apple 3 had slower
processing, half the RAM
and lower disk storage
than others
Apple 2 was too
expensive for the home
market
Apple 2 did not meet the
needs of the professional

computer
7. Provided easy to
understand
instructions
8. JIT & other cost
minimization
9. Sourcing out to focus
time away from
production
10.
Apple 2E used
better technology in
memory chips
11.
Can do attitude of
Wozniak and Jobs
when they started off

OPPORTUNITIES

and office segment

8. Company lacked a
proper organization
structure; lines of
responsibility not clear,
poor communication
among divisions despite
Marketing Council, other
functional divisions being
there
9. Information systems
lagged behind
10. Apples OS not
available for license
11. Apple was improving on
its older products and
not bringing any major
innovations

SO STRATEGIES
(Intensive/Advantage
)

1. Utilize advances in 1.
microelectronics to
make better
machines
2. Utilize advances in
software to develop
more software and
applications
3. Utilize advances in
hardware to make
faster machines
that are more
reliable and
cheaper
4. Make the operating
system to
dominate in the
personal computer
market
5. Continue to cater
to consumers
needs by providing
more user friendly
solutions
6. Increase R&D to
develop better

WO STRATEGIES
(Improving internal
structure)
1.

technology to
incorporate in the
computers
7. Cooperative R&D
ventures
8. Exports to Europe,
Asia and other
markets Make
product cheaper to
compete

THREATS

1. In 1983, more than 1.

100 manufacturers
producing 150
models challenge
of maintaining
leadership
2. low barriers to entry
as technology easy
to imitate and
venture capital
readily available
3. Retailers preferred
products with
extensive software
due to higher
margins
4. Advances in
technology not
incorporated
immediately
5. Consumers wanted
to purchase systems
that would be useful
for years
6. Brands imitating
Apples products and
having sales growth
despite litigation
7. Dual
microprocessors by

ST STRATEGIES
(Threat Reduction)

WT STRATEGIES
(Defensive)

1.

some companies
which could become
popular
8. IBM expected to
produce 1 million
units of personal
computers in 1983
9. Entrance of Japanese
firms into the US
market, and rapid
expansion of
Japanese firms,
threat of price
competition implied
10.
Japanese had
90% share of their
own market
11.
Japanese govt
provided a joint R&D
program, and
Japanese firms did
R&D on their own as
well
12.
Delayed upturn
of the European
market
13.
US computer
imports increased by
30%
14.
Emergence of
low cost producers
Korea, India, Brazil
etc
15.
Microsofts OS
(MS-DOS) was
written by software
firms, hence more
software available
for MS-DOS (use at
your own risk)
16.
Other
competitors were
offering specialized
systems; Apple
risked losing market
share due to this

Minor Problems:
Management not responding to competition (low cost competitors
with better performance, imitated products, Japanese threat, IBM,
specialized solutions)
The organization structure is not able to keep up with the fast pace
growth as the management does not have the knowhow to develop
systems for this
Not focusing on major improvements on the hardware, just relying
on strong distribution channel for continued success
Limited software available for Apples DOS due to no licensing of its
software, and was not responding to the fact that more software was
available for MS-DOS (use at your own risk)
Apple not catering to increasing segmentation of the markets, and is
not targeting these markets separately
Major Problem:
The top management at Apple (Steve Jobs and Steve Wozniak)
lacked the expertise of developing a professional organization, and
they relied on their initial success factors to continue bringing about
success despite changing environment and circumstances due to
their arrogance, and they were following management by
extrapolation
Strategic Alternatives:
- Incorporate technology to develop machines with better specs
- Increase number of models to provide variety
- Specifically target each segment with a particular model e.g.
introduce cheaper model for the home segment, more
powerful model as well as customized solutions for the
professional segment
- Provide incentives to software firms to develop more software
for Apple (use at your own risk)
- Should reorganize according to McKinseys 7s
- Should follow functional departments with cross functional
teams and not separate product divisions to clearly define
roles and responsibilities and to improve communication
between departments
- They should do SHRM that includes tapping into the tacit
knowledge of employees and using it to the advantage of the
company in order to come up with breakthroughs and
technological innovations