RINKU KUMAR

1. Evaluation of the External Environment a. Introduction i. Apple Computers originated in Cupertino, California by three friends, Steve Wozniak, Steve Jobs, and Ronald Wayne. Wozniak was the computer nerd of the three and had been working on a computer design and once Jobs convinced him of finishing his model and selling it to the public the beginning of Apple computers was underway. On January 3, 1977 the hard work of the three friends became Apple Computer, Inc. Soon after Wayne sold his share back to Jobs and Wozniak. The two Steves continued on to create one of the most successful companies that would in future years be known for their computers, music devices, cell phones, and software worldwide. Apple took off after Wozniaks Apple I adding numerous versions of the Apple, the Macintosh line, the iPod, iPhone, and iTunes products, and numerous other computer/software products to the Apple Computer, Inc. family. Apple has made its mark on the technology industry by continuing to be successful innovators that lead their numerous product markets. b. Identification of the Current Corporate Level Long-Term Strategies and Tactics i. Apple has two major long-term strategies and tactics that they focus on. The first being strategic alliances that they have with IBM, Microsoft, and AT&T. The alliances they formed with IBM and Microsoft have enabled Apple to further their computer growth and guarantee software that is available and familiar to consumers all over the world. The alliance with AT&T was a recent alliance that was formed when Apple came out with their iPhone. Their contract with AT&T ends in 2010, and the phone world is anxiously waiting to see if they will continue this alliance or create a new one. The second strategy is concentration on internal growth which they are implementing by developing new products for the markets they have already established and by finding new markets for their current products. For example Apple created a new market for their Macintosh computers by pushing them into the education market and creating their mark among students and teachers. c. Identification of the Current Corporate Level Short-Term Strategies and Tactics i. Currently Apple does not seem to have any short-term strategies and tactics. This could be very risky for Apple, but at the time being they seem to be successful without it. They may want to rethink their lack of strategy soon due to the illness of Steve Jobs and implement a plan incase they lose their leader.

2. Opportunities and ThreatsAssessment of Remote Environment

Opportunities 10- Technological Innovations-T 10- Global Expansion-I 9- Increase in world mobile technology market-I 9-Increased use of MP3 technology-T 8- Increase online sales-E 7- Create more compatibility with Microsoft-T Totals: Opportunities-53 i. Threats- 38

Threats 8- Recession-E 8- US Market Saturation- E 7- Drop in US consumer spending-E 6- Environmental Concerns-Eco 5- Viruses-T 4- Regulation-P

These two lists illustrate that Apples opportunities far out way their threats. With a score of 10 in the opportunities column technological Innovation is by far the most important thing that Apple needs to accomplish in order to continue being successful. In the technology industry innovation is essential to long term market presence. Global expansion is also very important for Apple because there is a huge consumer market in foreign countries that Apple has not even started to serve. Alone with expanding to foreign markets Apple can take advantage of the large mobile technology market of consumers wanting handheld devices like the iPhone. When the iPhone was released in Europe the sales were much higher than expected. With a score of 8 we feel that an opportunity for Apple is an increase in online sales. Apple has stores all over the United states and they are currently opening stores in many other countries even with this fact many consumers would prefer to shop online and Apple has a very user friendly website where people can long on and get exactly what they want. Apple could use marketing tactics to get more consumers to use this form of purchasing their products. The threats facing Apple in their remote environment are definitely challenging the first being the recession. We ranked the recession as an 8 and we believe that because Apples products are at the higher end of prices in the technology industry, consumers being hit by the recession make choose to go with a lower cost substitute. Also ranked with an 8 is market saturation, Apple currently holds a commanding 70% of the MP3 and online music sales market. Although this shows their amazing success in these markets in the past it also shows a possible weakness in the future. If consumers already have an ipod they are less likely to buy the newest version especially with the current economy. Another threat to Apple is the rise in consumer awareness of environmental

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concerns. Apple needs to combat this threat by making environmentally friendly products and expanding their recycling program.

Assessment of Competitive Environment

Opportunities (10)- Global Expansion

Threats (8)-Dell

(9)- User friendly products

(8)- Loyal Customer Base (7)- Contracts with Schools and Businesses Totals: Opportunities- 34 i. Threats-28

(8)- Hewlett Packard

(6)- Android and new Android phone (6)Low cost substitutes

Apples competitive environment is very intense and the rivalrys are fierce. In the competitive environment we again feel that Apples opportunities outweigh their threats. As previously stated Apple has a large opportunity to expand into global markets that have countless potential consumers. The user friendliness of Apples products in an opportunity for them, most people can learn fairly easily how to use Apple products such as their ipod products and their iphone. This is part of the reason that these products have been so wildly successful. In the future Apple has the opportunity to create more user-friendly products and continue to be successful. Apple currently has a very loyal customer base and the opportunity for the future is to expand this customer base by exposing more users to their products. Apple also has an opportunity to get public and private contracts with schools and businesses. Apples biggest threats in the competitive environment are Dell and Hewlett Packard both raked at an 8. Dell and Hewlett Packard both offer customers a range of prices and options to suit the tastes of almost everyone. This is a huge threat to Apple because their computers only appeal to customers with a higher price point. In these difficult financial times this could prove to be a problem for Apple. Another threat for Apple is Android and the new Android phone. These two items will rival Apples iphone and the iphone apps. With Android most of the apps are free and the Android phone and monthly service are less expensive than those of the Apple iphone.

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Summary- Most Crucial Opportunities and Threats Opportunities (10)- Technological innovation (10)- Global expansion (9)- Increase in world mobile technology market (8)- Creating more compatibility with Microsoft products O-T Final Score= 2.5 (7)- Strategic Alliances Threats (10)- Economy (8)- High rivalry among competitors (7)- Decrease in demand (7)- Dell / HP (6)- Low cost substitute products

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Apple has many great opportunities and also great threats in their future. The most important opportunity for Apple is technological innovation, in the past this has been one of Apples greatest strengths and this will continue to be the case in the future. Global expansion is an extremely important opportunity for Apple because there are so many consumers that they can reach around the world. Since Microsoft and PCs have traditionally been the operating system and computers used by the majority of the population it would benefit Apple greatly if they can create more compatibility with them. We also feel that an important opportunity for Apple would be to create more strategic alliances with cell phone carriers and with computer companies to create lower cost products. Apples most prominent threats are led by the economy ranked at 10. This top threat is an obvious one considering the prices of Apple products. For almost every product Apple has there is a similar low cost alternative and in the current economic times even people who would like to but Apple products will be forced to go with a lower cost substitute. The high rivalry among competitors in the technology industry makes it very important that Apple stay ahead of the curve with innovation. In this industry the company that has long-term success is the company that offers customers the newest and latest technology. Along with a slower economy comes the threat of decreased demand, this is a threat to Apple especially because of their limited product line.

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3. Identification of the Internal Environments a. Apple currently holds a very strong financial position. Over the last several years they have experienced an increase in their growth, sales, net profit, and stock price. One of Apples top financial strengths is the fact that they do not pay out any dividends. This enables them to re-invest the money into capital structures. Part of Apples financial strategy is to spend a high amount of money on R&D; allowing them access to the latest technology, which keeps them a leader in industry innovator.

b. Profitability Explanation i. Apple is showing a great level of profit for several reasons. First, and probably the most important is that they do not have any long term debt. The continually choose not to provide dividends in order to reinvest the money into capital infrastructures. Apple also has a very small amount of liabilities in comparison to the industry and its competitors. They generate enough equity from their resources to cover their short term debt. Another great indicator of their profitability is their high earnings per share. Apple is also currently growing faster than the industry. In order to sustain their profitability they need to make sure to continue to increase their growth rate. c. Industry Financial Numbers and Explanations i. The industry as a whole is doing quite well. When comparing the industry and Apples income statement its clear that both have experienced an increase in sales and have come out with a positive net income. Apples sales constitute about 33% of the entire industries sales. Considering the size of Apple and the amount of time they have been a major player in the industry, they are surely showing their potential. Both the industry and Apple have an extremely high earning per share when compared to Dell, HP, and Microsoft. This demonstrates the attractiveness of Apple for investors along with their profitability. When comparing balance sheet statements, the industry has a lot of inventory on hand, a lot of long term debt and current liabilities. In fact, the industry has more liabilities than it has generated equity. Clearly, the industry as a whole has a difficult time generating enough equity from their resources to pay off their debts. However, Apple has no problem here. They are very capable of paying off their debts. In conclusion, Apple is currently performing better than the industry.

d. Financial Problem or Success Statement i. Apple is currently experiencing financial success. Although Apple has seen an increase in their profitability, sales, stock price, and assets the industry. Some major factors that need to be improved upon are increasing their ROA, ROE, and ROI. In addition, they need to work on decreasing their cost of goods sold because as of now it represents over 60% of their expenses. They also need to make sure that their growth rate continues to increase.

Analysis of Marketing Position a. Sales/Company and Industry Growth Including Regression ii. Apple is currently growing faster than the industry. Apples growth rate is 9.30% while the industry is at 5.37%. Although the industry is in a strong position, Apples growth is soaring due to their innovative strategies. b. Marketing Tactics Humorous commercials Hip and fun campaigns Cutting edge technology Easy to use operating systems User friendly Products Environmentally Friendly Products Innovation Sleek Designs

i. Apple has an unmistakable marketing style and it has been very successful for them in the past few years. Apple is known for their humorous commercials and hip and fun campaigns which draw in the young and the young at heart. Apple provides products that are cutting edge and in their commercials and ads they try to communicate that to the consumers. Another thing that they try to convince their viewers of is the easy to use operating system and products. In most Apple commercials they show actual games or apps that can be run on

their products this is to draw in their potential customers and show them why they cant live without the specific Apple product. c. Marketing Problem/ Success Statement This companys marketing efforts are a strong success because their campaigns are recognizable and memorable. Their products and branding have enabled them to create a culture that people want to be part of. Over the past 3 years Apple has continually increased their shareholder wealth and the profitability of the company (yahoo finance, 2009).

4. Strategic Position a. I.D. of Current Core Competencies i. Product differentiation ii. Industry innovator iii. Brand loyalty b. I.D. of Competitive Advantages i. Apples greatest competitive advantage is differentiation of their products. Their computers and digital music devices set the standard for innovation and quality. They have various versions of almost every product including: Mac computers, software, iPhones, and iPods. Apple is well known for being an industry innovator. Apple guarantees their customers state of the art products that are not available anywhere else. In addition, Apple has managed to create a community of intensely brand loyal customers. These consumers who are proud to be a part of the Apple culture stand by their purchasing decisions with pride and commitment. In fact, most consumers who decide to go Mac, never go back to a PC.

c. Overall Position i. Apple has many strengths which allow them to be the successful company they are. Because Apple keeps such a low amount of debt allows them to keep their capital available for other uses. Their high devotion to R&D enables them access to the latest technology to keep them in the position of an industry innovator. Apple has a very strong brand image which promotes quality and reliability. Part of their marketing strategy is to us celebrities in their advertisements in order to Apple in the consumers evoked set. Steve Jobs is the most valuable asset Apple has because of his drive and commitment. Without him, Apple wouldnt be where they are today. Secrecy is very important to Apple. Steve Jobs is the only person who fully knows every detail of the company and hes very apprehensive to divulge information about Apples products, software, and new developments. This is seen as a strength because it provides a smaller chance for competitors to copy. Being a multi-divisional structure is very important. It keeps the functions of the company working at what they do best rather than stretching out the top management. Innovation is definitely Apples biggest strength in the technological industry. They are the leaders of computer technology. ii. Along with strengths come weaknesses. Apple has several weaknesses which they need to address in order to remain a top player in the industry. The fact that they have a high beta could make them be perceived as a risky company. It could be seen as unattractive to spend so much money on R&D because so much is being devoted to one area instead of other areas of their infrastructure. However, without it, they wouldnt be a leader in innovation. Social responsibility is something that is very important to consumers today. Apple currently does not highlight their efforts towards social responsibility. Its well known that Apple relies too heavily on Steve Jobs. If he were unable to perform because of his illness or even have to leave the company, Apple would be in serious trouble. Although secrecy is important in protecting Apples ideas, it has caused them trouble in the past in regards to withholding information from their stockholders. Consumers are also well aware that Apples batteries have a poor performance and are a huge inconvenience to have replaced. The last weakness for Apple is the fact that they are not very compatible with Microsoft products, which deters many consumers. d. Overall Problem/Success Statement i. Apple is a success because of their product differentiation, innovation, and brand loyalty.

5. Conclusion and Discussion a. Long-Term Prospects and Options i. Some long-term strategy options that Apple has are to continue their internal growth by continuing to update their current products and services and to expand their green movement. By continuously updating their products and services they will continue to be the leading innovator in their markets and continue their long-term success. By expanding their green movement, Apple will become more appealing to consumers since the worlds population is looking for anyway to become a little greener. Another option would be to create more strategic alliances to expand their mobile phone carriers that support the iPhone. This would open up many more markets worldwide for them to take over. b. SBU Level Options (Porter; Miles & Snow) i. Apples current positions in both Porter and Miles & Snow should not be changed. We recommend that they continue to hold their current positions at differentiation (Porter) and prospector (Miles & Snow) because of the success that they have had with being the leading innovator with all of their products in the different markets.