Business Policies – BUS 490

Assignment

Apple Inc.®

By:
…………………..
I.D No: …………………..

Supervised by:
…………………………

Summer 2011
 Table of Contents

Description Page

1. Introduction 3

2. External Environmental Analysis 4

3. Internal Environmental Analysis 6

4. Critical Success Factors 8

5. Problems 12

6. Recommendations 13

7. Conclusion 14

8. References 15

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1. Introduction:

Brief history & Development of the company:

Apple Inc. is an American multinational corporation that designs and markets consumer
electronics, computer software, and personal computers. Established on April 1, 1976 in
Cupertino, California, and incorporated January 3, 1977, the company was previously
named Apple Computer, Inc., for its first 30 years, but removed the word "Computer" on
January 9, 2007, to reflect the company's ongoing expansion into the consumer
electronics market in addition to its traditional focus on personal computers. As of
September 25, 2010, Apple had 46,600 full time employees and 2,800 temporary full time
employees worldwide and had worldwide annual sales of $65.23 billion.

The company's best-known hardware products include the Macintosh line of computers,
the iPod, the iPhone and the iPad. Apple software includes the Mac OS X operating
system; the iTunes media browser; the iLife suite of multimedia and creativity software;
the iWork suite of productivity software; Aperture, a professional photography package;
Final Cut Studio, a suite of professional audio and film-industry software products; Logic
Studio, a suite of music production tools; and iOS, a mobile operating system. As of
August 2010, the company operates 301 retail stores in ten countries, and an online store
where hardware and software products are sold.

For reasons as various as its philosophy of comprehensive aesthetic design to its

distinctive advertising campaigns, Apple has established a unique reputation in the
consumer electronics industry. This includes a customer base that is devoted to the
company and its brand, particularly in the United States. Fortune magazine named Apple
the most admired company in the United States in 2008, and in the world in 2008, 2009,
and 2010.The company has also received widespread criticism for its contractors' labor,
environmental, and business practices.

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2. External Environmental Analysis:

PEST Analysis:

Political Analysis:

Apple design, develop and market numerous product and service lines. They sell their
products to education, consumer creative professional, business and government
customers. While apple seems to display numerous products and conduct business on
different segments, it is legitimate to wonder what the company is really good at.

Economic Analysis:

Through January 2005, Apple has opened 102 retail stores. Although these launches are
potentially beneficial, Apple stores are hurting the resellers’ business and not all of them
will survive. Considering that the company’s resellers still account for more than 50% of
its domestic sales, the company is facing the risk of cannibalization and might deeply
suffer.

Social Analysis:

Why is Apple holding so much cash? Having too much cash in reserve might either mean
that the company does not know yet how to allocate it or that they may have some risk
concerns about future potential investment.

Technological Analysis:

Apple is clearly one of the handful of companies where the fortunes are seen to be
intricately tied to the person in charge. The star quality and the visionary talents
associated with the company are certainly contributed to the success of the company.

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Competitor Analysis:

Apple keepa a close eye on the competition, such as Sony, Dell, Creative, Samsung, and
others who are coming out with MP3 players, usually after Apple’s launch, that may have
more features or priced lower. These alternative players are substitutes for the price
conscious shopper that does not need the hippest and most expensive MP3 players.

Though Apple has the lead in this market, competitors are responding to Apple’s
customer feedback and incorporating requested features in their own players to cut into
Apple’s market share. For example, competitors integrated voice recording into their
MP3 players, which separate third party peripheral for only certain models of the Apple
iPod. In a few cases, some companies are making players that look almost exactly like
Apple’s iPods. One such company that makes a couple of iPod clones is Luxpro with its
Pico and Elegant MP3 players. Other then a few subtle differences that are noticed on a
second glance, Luxpro’s Pico is almost a clone of the iPod Nano, and the Elegant looks
almost exactly like the iPod Shuffle. Other companies have MP3 players that look some
what similar to the Apple players, but generally have noticeably different navigational
controls.

Competitors may counter Apple’s move with aggressive pricing on existing players to
sway those who are debating which players to get. Another risk is that Apple is
depending on other manufacturers to deliver the main component of their iPods. What
would happened if, for some unforeseen reason, that the manufacturer could not deliver
part or all of the shipment? If this happens, Apple would be in the same shortage
situation they were trying to avoid by paying in advance.

One way Apple could avoid any memory shortages in the future is to acquire as much
memory as it can to build up its internal reserves. Apple could then focus on keeping a
fully stocked memory warehouse. The down side to this is that quite a bit of their money
would be tied up in memory sitting in a warehouse.

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3. Internal Environmental Analysis:

SWOT Analysis:

Strengths:

 Apple Computer Inc. is one of the oldest hardware manufacturers that control over
the product by manufacturing both computers and their operation system.
 Apple has high quality products which makes Apple different than its competitors.
 The designs are uniquely created to capture the customers’ eyes.
 Products are designed ergonomically and stylishly, for example, the ipod Nano, its
slim design fit easily the consumer's pockets and it is also light weight enough to be
carried around.
 Apple comes out with many different products to suit to the everyday demands of
people for example the itouch or ipone. An iphone enables consumers to enjoy music,
watch videos, surf the web and make phone calls, all these can be done by just a
device.
 Apple had constantly been creating new easy-to-use products since decades ago.
 The website provides the customers with guided tours of every product that they
offer.
 Apple knows how to diversify, from computers to ipods, and slimmer notebooks.
They never fail to catch up with the latest technology and creating different images
that attracts new consumers and keeps their existing consumers coming back for
more.

Weaknesses:

 Macintosh sales in the worldwide PC market still languished below 5%.

 It is reported that the Apple iPod Nano may have a faulty screen. The company has
commented that a batch of its product has screens that break under impact, and the

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 company is replacing all faulty items. This is in addition to problems with early iPods
that had faulty batteries, whereby the company offered customers free battery cases.
 Ending its long-standing relationship with IBM as a chip supplier and that it was
about to switch to Intel. Some industry specialists commented that the swap could
confuse Apple's consumers.
 Limited product range, Practically very less gaming capabilities.

Opportunities:

 Using third-party digital content and applications.

 Developing the iTunes Store.
 The favorable brand perception in the iPod, iPhone, and iPad could increase sales of
Macintosh computers.
 Success of Apple iPhone is a viable stepping stone for Apple to attract new users.

Threats:

 Apple's strategy of shifting its business into non-PC products had thrived so far, but
will it continue in the future?
 Would Apple's creation, the iPad, take the company to the next level?
 Even though with the smashing success of the iPod and the iPhone, challenges
abounded.
 Growth in iPod sales was slowing down.
 iPhone faced fierce competition in the smartphone industry.

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4. Critical Success Factors:

Contribution Factors:

Most innovative product: iPhone

Contribution factors:

1. Make calls by "simply pointing at a name or number." Get out of here... no buttons
to click. No clicking umpteen times before you find the number you want to call.
Point and Call. Welcome to the new touchscreen interface of iPhone. If you love the
iPod interface, iPhone will only make it better.

2. Visual Voicemail, is definitely an industry first, a new innovation, that lets users look
at a listing of their voicemails, decide which messages to listen to, then go directly to
those messages without listening to the prior messages. How useful is this? How
often and how long you have to wait to hear that all important message from your
very important friend, or boss until all the messages before are heard? If you are a
frequent cell phone user, the answer is all the time. Apple understands the users'
frustration as they check their voice mails, and Visual Voicemail will change the way
you listen to your voice messages, and even save you minutes spent in waiting to hear
that all important message.

3. SMS move over. No more clicking 3 or 4 or more times to get to that letter that you
want to type now. How about a touch keyboard that is predictive, full QWERT, and
even prevents mistakes. Finally, SMS will become easier, simpler, faster, friendlier,
and bigger!! If you love SMS, iPhone is it. Recent reviewers have indicated that SMS
on the iPhone needs a bit of getting used to; but once you do, you won't go back to the
old ways.

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4. A handy 2 megapixel camera, with that all important Photo management software.
Finally. Now you can organize the photos you take and use them for wallpapers,
emails, upload and download them to your PC or MAC, and watch them on a 3.5-inch
widescreen.

Corporate Strategy:

During the Mac's early history Apple generally refused to adopt prevailing industry
standards for hardware, instead creating their own. This trend was largely reversed in the
late 1990s beginning with Apple's adoption of the PCI bus in the 7500/8500/9500 Power
Macs. Apple has since adopted USB, AGP, HyperTransport, Wi-Fi, and other industry
standards in its computers and was in some cases a leader in the adoption of standards
such as USB. FireWire is an Apple-originated standard that has seen widespread
industry adoption after it was standardized as IEEE 1394.

Ever since the first Apple Store opened, Apple has sold third party accessories. This
allows, for instance, Nikon and Canon to sell their Mac-compatible digital cameras and
camcorders inside the store. Adobe, one of Apple's oldest software partners, also sells its
Mac-compatible software, as does Microsoft, who sells Microsoft Office for the Mac.

Business Strategy:

Apple is engaged in design, development and marketing of personal computers (PCs),

servers, communication devices, network solutions, portable digital music players, and
related accessories, software and services.

The company’s portfolio of offerings comprises Mac computing systems, iPods line of
portable digital music and video players, iPhone handsets, iPad portable multimedia and
computing device, and servers. The company’s software applications include Mac OS,
iLife, iWork and internet applications such as Safari and QuickTime, among others.

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The company mainly operates in the US. It is head quartered in Cupertino, California and
employs 34,300 employees. According to Apple’s mission statement, they lead the
industry with innovative computers, its OS X operating system, and are the driving force
of the digital music revolution with its iPod portable music players and iTunes online
music store.

Functional Strategy:

The company recorded revenues of $42,905 million during the financial year ended
September 2009 (FY2009), an increase of 14.4% over 2008. The increase in revenues
was mainly due to growth in sales of iPhone handsets, and third-party digital content and
applications from the iTunes Store. The operating profit of the company was $11,740
million in 2009, an increase of 41% over 2008. Its net profit was $8,235 million in 2009,
an increase of 34.6% over 2008.

Additionally, Total Assets increased by 43.49% to US$11,551M. Total Liabilities

increased by 37.36% to US$4,085M, but Total Debt remained at US$0. Shareholders
benefited in 2009, as Shareholder's Equity increased by 47.08% to US$7,466M.

In the first quarter of 2010, Apple adopted the new accounting principles on a
retrospective basis. As a result, the company’s financial statements have been adjusted to
reflect the retrospective adoption of the new accounting principles. Hence, its financial in
the current report may not match with previously reported figures. Several factors to
explain the upward financial trend were the increase in net sales of iPods by US$3.2B,
which was a 248% increase. Other music related products and services also had an
increase in net sales of 223%. The company also experienced smaller increases in the net
sales n retail, peripherals and other hardware, Macintosh computers, and software,
services and other sales. There were no decreases in the net sales of all products, but Net
sales per Macintosh and iPod fell due to new pricing strategies and the introduction of
lower end products such as the iPod Shuffle.

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Organizational Culture:

Apple was one of several highly successful companies founded in the 1970s that bucked
the traditional notions of what a corporate culture should look like in organizational
hierarchy (flat versus tall, casual versus formal attire, etc.). Other highly successful firms
with similar cultural aspects from the same period include Southwest Airlines and
Microsoft. Originally, the company stood in opposition to staid competitors like IBM by
default, thanks to the influence of its founders; Steve Jobs often walked around the office
barefoot even after Apple was a Fortune 500 company. By the time of the "1984" TV ad,
this trait had become a key way the company attempts to differentiate itself from its
competitors.

As the company has grown and been led by a series of chief executives, each with his
own idea of what Apple should be, some of its original character has arguably been lost,
but Apple still has a reputation for fostering individuality and excellence that reliably
draws talented people into its employ, especially after Jobs' return.

Corporate Social Responsibility:

Unfortunately, the Corporate Social Responsibility for Apple does not match its
innovation initiatives. As a matter of fact, Apple does not have any Corporate Social
Responsibility efforts. What they have is a Supplier Responsibility which is totally not
enough.

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5. Problems and Issues:

Problems and Issues that Need to be Addressed:

The main problems and issues with Apple are distribution. Historically, Apple would
come out with a computer and you would order 50, but only get five, this time also it is
the same and they have no clear lines of distribution; probably due to the heavy demand
on Apple products allover the world.

Under Apple recent changes to its distribution system, customers began buying their
computers directly from Apple, rather than from a distributor.

Mac resellers, along with Creative Computers, the company that operates MacMall, all
report weak sales of the G3 products due to lack of clear distribution system.
.
Apple declined to discuss its distribution into the channel pending the formal release of
its fiscal results. Although the latest events bode well for the Apple, analysts are taking a
wait-and-see approach.

Eight analysts today reconfirmed their "hold" ratings on the company, and one upped the
rating to a "weak buy" from "hold."

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6. Recommendations:

There is a wide variety of possible marketing channels that Apple is recommended to

pursue to implement its PC conversion strategy, including:

 Retail outlets owned by Apple or by an independent merchant or chain.

 Wholesale outlets of their own or those of independent distributors or brokers.

 Sales force compensated by salary, commission, or both.

In this way, Apple resellers would see that the computer distribution system improved by
applying this distribution recommendations, helping them meet strong demand for the
company products.

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7. Conclusion:

In this report I have concentrated on Apple Inc.’s background, external environmental

analysis including PEST and competitors models, internal analysis including SWOT
analysis, critical success factors including factors, strategies, and finally
recommendations and conclusion.

Over the past 30 years Apple has amplified from computer design to developing
consumer electronics. Apple uses a differentiation business strategy, which means that all
employees and departments work together in the creation of their products. Since the
employees work together our products tend to be more productive. Apples main business
initiative is customer relationship management. When working with or purchasing from
Apple you are promised top notch customer service and assistance.

Apple uses many different types of internet business models. Business to Business e-
commerce is used in the selling of computers to help operate everyday proficiency in
other businesses. Business to Consumer e-commerce is the selling of iPods, computer,
and other products to different individuals rather than businesses. Business to
Government e-commerce is the process of selling of any Apple products to government
operated organizations.

In running their business Apple finds it very important to use database warehouses. They
feel this way because it is a huge collection of business information that is collected from
many different databases.

Apples product line has grown rapidly in the past few years. What I found to be the most
interesting about Apple is how they are very innovative and early adapters. Apple is
usually the first company to come out with a new product line before anyone else. This is
very risky but it seems to be working to Apples advantage. This shows that taking risks
can sometimes make you instead of break you.

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8. References:

1. http://www.apple.com/

2. http://team8mis.blogspot.com/

3. http://tech.fortune.cnn.com/

4. http://topics.nytimes.com/

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