BUSINESS AND ECONOMICS SCHOOL

HE08 HOTEL MANAGEMENT

BT31303 STRATEGIC MANAGEMENT
CASE STUDY
~APPLE IN 2008

Tutorial: Wednesday 1:00pm-2:00pm
Group 4:
Name Matric Number Signature
Irely Chong BB09110406
Mook Yee Hui BB09110205
Chieng Yong Howe BB09110390
Hadvianti Binti Handalin BB09110125
Vabrianus Urbanus BB09110417

Lecturer:
Prof. Dr. Syed Azizi Wafa Syed Khalid Wafa

Date of submission:
05 October 2011

PART 1: SUMMARY
!n 1
st
of April 1376, Apple Computer Company was developed by two youthful electronic
enthusiasts which are Steve jobs and Steve Wozniak. ]ob and Wozniak having been shared
interest in consumer electronic, a company to sell a primitive personal computer has started. !n
other hands, Apple Computer Company had started to put up for sale primitives personal
computer. Wozniak or as known Woz deliberate the computer purpose with entertaining only.
Woz had been shares interest to electronic consumers. Besides that, the apple company was
located at Steve jobs garage.
!n 1376, Apple ! was created and sold about 200 unit at $666 each. Wozniak was
working on a improvement to the machine, the Apple !!. Additionally, !n October 1376, Apple
Company a retired millionaire which is Narkkula, Narkkula committed to investing $2S0,000 to
the Apple business. !n end of 1380, Apple had sold more than 100,000 Apple !! products and
making the company as leader in the developing personal computer industry. !n 1380, Lisa and
Nacintosh had a two major projects were underway Apple. !n 1382, Nike Scott had left the
company. Narkkula has support to become chairman. Steve ]obs persuaded ]ohn Sculley to
]oin Apple as CEO.
From 1386 to 1331 is the golden year for Apple Company. The Apple Company had
gross margins on the Nac line reach SS. !n 1330, Apple sales hit $S.6 billion. !n 1334, due to
a combination of low gross margins and continuing high costs, Sculley left Apple, and he was
replaced by Nicheal Spindler. !n ]uly 1337, Nicheal Spindler was fired. Steve ]ob has return and
appointed interim CEO in April 1338. Steve ]ob started to develop the new product, and
emerged iNac in markets.
!n 2001, Apple introduced Titanium PowerBook C4 laptop.!n ]une 2007, Apple
introduced the iPhone. !phone had priced between $433~$S33. The !phone has goal was to try
and capture 1 of the total global market share. !n ]une 2008, Apple introduced the iPhone 3C
to run on a faster 3C network. Apple Company had fashionable electronic products in markets
now. The famous product of Apple Company such as Apple !pod music, Apple !mac and Apple
!phone has top demand consumer in globally markets.

PART 2: SWOT ANALYSIS

STRENGHT
1. Steve 1ob himself
In the case study is stated 'Apple could continue to maintain its growth rate, particularly
given concern that CEO Steve Jobs, considered the architect oI Apple`s revival, It`s like
Apple cannot be without Steve Jobs. Jobs is a proIessionalism who chase to perIection.
Furthermore, Jobs has strong and broad relationships with the parties that contributed to
Apple, e.g. Bill Gates, dealing with the music companies, world`s top recording artists.

2. Well-known brand

3. Innovation
Steve Jobs have the attitude that wants the best in his product creation. ThereIore, he
always comes out with new ideas to create new products that are more sophisticated that
Weakness
1. igher cost structure
2. Expensive
3. DiIIicult to develop
4. Not satisIy Ior user
5. Resignation oI CEO Steve Jobs
Threats
1. Strong competition
2. Slow Euro Zone economy
3. Lawsuits

Opportunity
1. Fast growing Industry-high barrier.
2. igh potential music phone
market.
3. Strategic Alliances
4. Extend new products to loyal
customers.
5. Technological innovation

Strenght
1. Steve Jobs himselI
2. Well-known brand
3. Innovation
4. Easy to Use
5. Good Marketing and Sales
6. Customer Loyalty

the previous product, in term oI its program, design oI the case, how to handle the
product either press the keypad or touch screen.

4. Easy to use
'the ultra-thin MacBook Air that weighed just 3 pounds and was only 0.76 oI an inch
thick at its widest point. Steve Jobs always do the innovation oI its products to be
smaller, lighter and easier to carry and use anywhere.

5. Good marketing and sales
It can be seen Irom the increased sales oI Apple`s product Irom 3 to 8.5 in 2004.
alo eIIect oI the iPod and iPhone would drive strong sales going Iorward.

6. Customer loyalty
Although the price oI Apple`s product is very expensive, but reIer to the table on the
sales oI Apple`s product line Irom 2003 to 2007 are on the rise and this shows that there
are loyal customer and new customers has purchase Apple`s product.
WEAKNESS
1. igher cost structure on the research and development that its rivals like Compaq.
2. This company brands are expensive as compared to another brand oI competitors.
3. It is more diIIicult to develop applications than the IBM PC and its clones in Macintosh
project.
4. Lack oI relationship between retailers, it cause the product line oI Apple become poor.
S. The iPhone`s Ieature is not satisIy Ior user, example slower data network and did not
contain a GPS location-Iinding Iunction.
6. Resignation oI CEO Steve Jobs had inIluence the sales oI company because oI his
important reputation in Apple Company.

OPPORTUNITY

1. ast growing industry-high barrier.
The industry has a Iast growth. Everyday new and innovative products Ilood the markets.
Almost every week new products oI mobile phone to laptop advertised. Apple is one oI
the major players oI the industry aIter Dell, P, Acer and Lenovo. All oI these existing
brands make the entry barriers high. So, when the entries barriers high, the entry oI new
players into this industry are hard. They need to have a diIIerentiated strategy to beat the
existing companies iI they really want to enter the industry. This gives Apple`s Inc.
opportunity to Iocus on developing new models to compete with existing companies and
do not have to worry about threats Irom the new player, at the same time to IulIil
customers` needs and demand. Means, the competitors can be minimizing only to the
existing company.

1. High potential music phone market.
Demand oI online music is increasing, as well as the increasing downloads oI the music
and MP3 players in market. The demand oI music and MP3 players through online
became highly marketable. So, this is opportunity to Apple`s to market iTunes to attract
more customers.

2. Strategic Alliances
Apple`s have a successIul alliance with AT&T, which provides Apple with the
opportunity to improve their iPhone`s technology. Apple was able to lower the iPhone`s
price to consumers, as well as, up-grade the iPhone`s network coverage. In addition,
Apple entered into partnerships with YouTube and Google in order to provide their
iPhone users with cutting edge 'search, mapping, and video Ieatures. These
partnerships allow Apple to Iurther diIIerentiate their products and add value to their
users. In the same way, Apple`s reputation as an innovator and creator oI easy-to-use
cutting edge products continues to strengthen Apple by keeping Apple on the radar oI the
technologically savvy consumer, as well as providing support Ior Apple`s product
diIIerentiation strategy.

3. Extend new products to loyal customers.

The improvement oI liIe quality produce generation whom stylish and concerned more
with the brand. The young generation in particular is very trendy and they love to show
oI the new things as a Iashion statement. Apple provides their customers with technically
superior products such as iPods vs. other MP3 players and Macs vs. PCs, etc., and
aggressively pursuing hardware and soItware updates. Apple included their main
activities so well that it is transparent to the consumer where one activity begins and the
other ends. A perIect example oI this is Apple`s willingness to develop soItware to run
Windows XP on its new Intel-based iMac and then post it online Iree to iMac users. In
such an environment, customer service merely becomes the realization oI receiving a
little more than expected.

4. Technological innovations
Innovation in technology in Apple`s products has led Apple to control its expertise in
iPod, iPhone, iTunes, and iWorks suite oI products. It is really the strongest opportunities
Ior a company to be independently manuIacturing Irom scratch to Iinished product with
application and peripherals. Apple starts Irom its new ideas oI product design, designs it
through its own resources and Iunding, then manuIactures it and Iinally markets it
entirely.

THREATS
1. Strong competition
Apple is conIronted by strong competition in all areas oI its business. The market
Ior the design, manuIacture, and sale oI personal computers and related soItware and
peripheral products is highly competitive. This market continues to be characterized by
rapid technological advances in both hardware and soItware development, which have
substantially increased the capabilities and applications oI these products, and have
resulted in the Irequent introduction oI new products and signiIicant price, Ieature, and
perIormance competition.

Over the past several years, price competition in the market Ior personal
computers has been particularly intense. Apple`s competitors who sell Windows-based
personal computers have aggressively cut prices and lowered their product margins to
gain market share in response to weakness in demand Ior personal computing products.
Apple`s results oI operations and Iinancial condition have been, and in the Iuture may
continue to be, adversely aIIected by these and other industry wide pricing pressures and
downward pressures on gross margins.

2. Slow Euro Zone economy
The Euro zone economy slowed down in 2005. The GDP growth Ior the year 2005
was estimated at 1.3, as compared with 2.1 in 2004. The slowdown was
accompanied by higher oil prices and increased unemployment. In the short term,
corporate spending in France could be adversely aIIected with political unrest over the
new labour law. Economic activity in the region is Iurther aIIected threatened by the
housing price bubble that may burst. Europe is one oI the key markets Ior the company
and continued slowdown and political uncertainties in the Euro zone could reduce
spending on inIormation technology products and adversely aIIect its revenues.

3. Lawsuits
Apple is subject to certain legal proceedings. Apple Corps has sued Apple Computer
claiming that it has broken a 1991 agreement in which each agreed not to enter into the
other`s Iield oI business. Apple Corps, started by the Beatles in 1968, argues that Apple
Computer has inIringed its territory by entering the music business and is seeking to Iorce
Apple Computer to drop its apple logo Irom the iTunes Music Store and pay damages. In
addition, Apple Iaces several other lawsuits related to patent inIringement, Ialse
advertising and unIair business practices. These legal issues could have a material impact
on its Iinancial condition in addition to the brand image.

PART 3: PROBLEM STATEMENT

The main problem is Apple should take the steps to improve its corporate perIormance and to
strengthen its position in its most important markets.
List of problem statement:
1. The prices of Apple`s product are seemed more expensive luxury items.
Especially Ior iPhone, the price is around RM1750-RM2000 per one. The iPhone was
positioned at the high end oI the smartphone market. The iPhone was diIIerentiated
Irom established smartphone oIIerings by revolutionary touch screen design that
replaced the traditional mechanical keypad and allowed users to quickly and easily
switch between Iunctions. Instance oI the price oI new model Nokia is only around
RM1100. Based on my perception, the price oI Apple`s product are seemed more
expensive luxury items because its design is extremely unique iI compare than other
smart phone.

2. Sale had declining
Apple`s worldwide market share, which had been Iluctuating between 7 and 9
since 1984, had sunk to 4. it make Apple`s track to lose $378 million on revenues oI
$7 billion, on top oI a $740 million loss in 1996.

3. Entry with high threats in computer and hardware
Open Source soItware such as the Linux Operating System and MicrosoIt threaten
Apple. The low (oIten, Iree) cost oI the soItware may allow it to overtake Apple,
especially in developing markets such as China.

4. Threats from substitutes in music industry
II the major record labels (Universal, Sony BMG, EMI, and Warner) negotiate better
terms with new competitors to iTunes, Apple may be unable to provide some oI the
music content that they currently oIIer. The major music labels dislike Apple`s dollar
per song pricing. They would preIer to earn higher proIits with 'variable pricing.

PART 4: ALTERNATIVE STRATEGIES

List of alternative strategies:
1. Business Strategy Low-cost production
As the PC has become a more commodity-like product, price competition has
become severe in the industry. The price oI PC has declined since 1990`s. Cost cutting
is now critical Ior PC producers to cover the decreasing proIit margin. Apple`s used
Business Strategy Low-cost production at Dell distributions its positive growth rate,
while other major Iirms are experiencing negative growth rates.
While all companies have seen a slow in sales and a loss oI proIits, Apple has
seen a greater loss in its computer revenues. They are seen more as high-end items
and more expensive luxuries rather than as necessities. Otherwise, lower quality
computers Irom customized computers manuIactures in order to save money because
oI many people are preIer to buy cheaper products. Thus, this would lean Apple
towards developing a lower priced computer that could compete with these personal
computer models.
owever, this strategy has been tested beIore with the Mac Mini. Based on
investigation oI Apple, the sales oI Mac Mini were cannibalizing on the sales on other
more expensive models. This previous Iailure should be viewed as a warming and
disclaimer against any Iurther pushes into the low-cost market.

2. Strategic Alliance
Create more strategic alliance to expand specific products or for RSD. At this
time, Apple has made strategic alliances with !BN, Nicrosoft and ATST, where the
result of the alliance brings many benefits and profits to Apple. For examples,
alliances with !BN enable Apple to further their growth of computers, developing a new
computer operating system allows both hardware formats to communicate. The alliance
Apple's with Nicrosoft enhances guarantees software, which is commonly available and
familiar to consumers around the world. The alliance with ATST enables Apple's to
produces new product, iPhone that brings a successful to their company profits.
However, Apple's contract with ATST ended last year, 2010. Therefore, to take
over opportunities and open up more markets around the world, especially

iPhone mobile products markets, Apple's should continue their corporations or making a
new alliance with other industry or companies.

3. ocusing on a niche marketing
The company will Iocus on its core competencies in order to stay successIul.
Apple's customers are incredibly dedicated. Many people that buy Mac computers
continue to buy more Mac computers as well as other Apple branded products,
hardware, and soItware. Even though this is deemed as a niche market, Apple would
be Ioolish to try to take the world oI MicrosoIt and PC distributors head on. The
diIIerence in market shares is Iar too large. By Iocusing on their current customers
and slowly expanding this base, Apple will try to better position itselI Ior a Iuture attempt
to capture back the market share that it maintained many years ago. Apple brand
computers because they wanted an Apple machine. Due to this increasing amount
oI dedication to the company, Apple was able to charge a higher price Ior their high-end,
high-quality computers. This allowed them to stabilize Iinancially as well as
discover a new identity as a company.

PART 5: EVALUATION O ALTERNATIVE STRATEGIES

1. Business Strategy Low-cost production
Advantages
II Apple company pursue the 'Business Strategy Low-cost production, the advantage is
can enable the company to earn above average proIits despite the presence oI strong
competitive pressures. Every activity oI the organization must be examined with respect
to cost. For example, products must be designed Ior ease oI manuIacturing,
manuIacturing Iacilities and equipment should continually be upgraded and production
must take advantage oI economies oI scale. On the other hand, this strategy requires a
company to implement tight controls across its operations, avoid marginal customer
accounts, and minimize spending on advertising and customer service. This strategy
mostly successIully implemented in a price-sensitive market and can lead to strong
market share and proIit margins.

Disadvantages
This strategy also involves risks. For example, technological changes may make the
company's investments in Iacilities and equipment obsolete. There is also the possibility
that other competitors will learn to match the cost advantages oIIered by the company,
particularly iI inIlation helps narrow the gap. Finally, low-cost producers risk Iocusing on
cost to such an extent that they are unable to anticipate necessary product or marketing
changes.

2. Strategic Alliance
Advantage
1. They gain better access to attractive country market Irom host country`s government
to import and market products locally.
2. Apple's can receive contributions of technology or even technological superiority in
industry.

3. Allow an exchange of both technologies, and at the same time enable them to
identify the weaknesses of their technology, thus improving the weaknesses.
4. Shared risks: when there is much uncertainty and instability in a particular market,
both industry and company can share the risks. The competitive nature of business
makes it difficult for business entering a new market or launching a new product. So,
create a strategic alliance can reduce or control a firm's risks.
5. Take advantage oI partner`s local market knowledge and working relationships with
key government oIIicials in host country. It is very important to get working
relationship with local government oIIicials, (social capitals).
6. Capture economies oI scale in production and/or marketing, when they operate
together, they can use the same machine or equipment to produce products and use
the same marketing channel Ior both products.
7. Fill gaps in technical expertise or knowledge oI local market; they will learn technical
knowledge Irom each other.
8. Share distribution Iacilities and dealer networks, they can use the same agent or
retailers to reduce the logistic cost and penetrate the market more easily; they can use
the put-together technical and Iinancial resources to attack the rivals.
9. UseIul way to gain agreement on important technical standards, it is easier to set up a
standard Ior the products with a joint eIIort.
10. Can reduce the cost and more eIIicient to penetrate the market by doing the
Iollowings:
a) Joint research eIIorts
b) Technology-sharing
c) Joint use oI production and distribution Iacilities
d) Marketing/promoting one another`s products.
Disadvantages
1. Overcoming language and cultural barriers
2. Dealing with diverse or conIlicting operating practices
3. Time consuming Ior managers in terms oI communication, trust-building, and
coordination costs
4. Mistrust when collaborating in competitively sensitive areas

5. Clash oI egos and company cultures

6. Dealing with conIlicting objectives, strategies, corporate values, and ethical standards
7. Becoming too dependent on another Iirm Ior essential expertise over the long-term

3. ocusing on a niche marketing

Advantage
First oI all, it allows Apple`s to Iocus on a particular segment oI the market
and get more proIits Irom it. This technology industry is vast ocean oI consumers and
it would be virtually impossible to please each and every person swimming in it. That
would be like swimming to each and every part oI the ocean to promote a particular
product or service.
Common sense would tell Apple`s that is a very ineIIective method because it
would take a lot oI time and energy just to get to a small part oI the big market. What
is more practical is to approach a sector that is manageable and could respond quickly
to the promotional eIIorts made. A business can establish more solid relationships
with a group oI people who are more likely to respond to the promotional measures,
and thus are more likely to bring in proIits through Iocusing a niche market.

Niche marketing is also quite aIIordable compared to mass marketing. Since
only a small portion oI the market is being addressed, smaller costs are at stake to go
about the promotional campaign. Apple`s also has the option to devote more budgets
to better quality promotional schemes. Because only a small part oI the market has to
be addressed, they can spend more on quality promotional materials instead oI
producing a lot oI cheap and useless items.

Disadvantages
Niche marketing is bound to have its own set oI cons. Firstly; it would be
diIIicult Ior a product to get known to a very wide audience iI niche marketing is
implemented. This method would be Iutile iI Apple`s goal as a company is to make
the company brand a household name. Since Apple`s would be addressing just a small

part oI the market, that small segment would be the only one to gain awareness oI the
oIIerings.

Corporate giants who rely on bulk sales to earn millions would not really
succeed iI their products or services are promoted only to a Iew sectors. It is important
to catch the attention oI the entire market to gain massive volumes in this kind oI
business. As such, mass marketing would be more advantageous in this scenario.

PART 6: THE BEST STRATEGY AND 1USTIICATION

From the evaluation oI alternative strategies, we will choose strategic alliance as our alternative
strategy to solve the problem since it shows a stronger on the basis oI our identiIied criteria.
This will help Apple in optimizing cost and development process with innovation. Besides to
sustain and compete in the market companies go Ior strategic alliances just to reduce the cost and
gain high proIit margins. So, it is the best alternative and the one we will choose.

PART 7: IMPLEMENTATION
The implementation is divided into two, shows as below:
Short-Term Implementation Long-Term Implementation
The IBM-Apple joint venture, Taligent, will
develop the new generation OS called "Pink".
1. IdentiIy market segmentation
2. Expand the market
3. Overcome all obstacles in using
strategic alliances.

SHORT-TERM IMPLEMENTATION
The IBM-Apple joint venture, Taligent, will develop the new generation OS called "Pink".
Apple and IBM believe Pink will be major breakthrough in soItware technology because Pink
will be able to run on Apple's installed base oI Motorola chips, the new IBM chip (RS6000), and
the Intel chip. By creating joint ventures, Apple and IBM show their commitment to achieving
inter-operability. Apple believes IBM's RS6000 RISC microprocessor is the best technology in
the industry, and IBM-Apple-Motorola has Iormed an alliance to launch "PowerPC" as the new
generation oI computer.

LONG-TERM IMPLEMENTATION
1. Identify market segmentation
Market segmentation strategy involves dividing the market into groups, where individuals have
similar needs and wants Ior services and products. BeIore one market's products or services, one
needs to understand their customers, and Iind ways and means to satisIy their wants. This is
imperative to stay ahead oI the competition and build the brand. A clearly deIined market
segmentation strategy will help create a market to cater to groups oI individuals that will make
economic sense to mass produce and distribute. Apple should set its very diIIerent products apart
Irom the rest oI the computing crowd.

2. Expand the market
In the opinion oI the public, Apple products only owned by rich people where it is Iar
more expensive than other brands. Apple only can win a small group oI Apple users just
because oI the price. To compete with other brands and would like to get more users,
Apple should consider reducing its price while also able to make proIits.

3. Overcome all obstacles in using strategic alliances.
Communication barriers in using the strategic alliances will delay the process in the
business. Apple can train their employees to learn a Ioreign language to communicate
with other party Irom other counties. Besides, the trust-building is also very important in
doing business to see the parties can walk together with in getting more proIits in the
Iuture.