Apple has opportunities for growth through technological innovation, global expansion, and strategic alliances. However, threats include increased competition from Dell, HP, and Android phones. Apple's financial position is strong with high profitability, but it faces threats from the economic recession and decreasing demand. Overall, technological innovation and expanding globally are Apple's most important opportunities, while economic challenges pose the largest threats.

1. Evaluation of the External Environment

2. Introduction

3. 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 Steve’s 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 Wozniak’s 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.

4. Identification of the Current Corporate Level Long-Term Strategies and Tactics

5. 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.

6. Identification of the Current Corporate Level Short-Term Strategies and Tactics

7. 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.

8. Identification of the Current SBU Level and Tactics

9. Apple’s current strategies defined by Porter are product differentiation with a focus on a broad market. This can be seen by Apple’s many products including the iPod, the iPhone, and all their Mac books that are priced and designed to fit every person’s needs and wants. Apple’s current strategy defined by Miles & Snow is being a prospector. Apple creates new products and services, such as their iTunes when legally downloading music was needed, to changing market conditions. They also respond rapidly and try to be the first mover. By doing this they set a benchmark for their competitors and place their products in consumer’s mindset first.

10. Identification of Apple’s Current “Green” Efforts

11. Apple has been making large strides in order to make their company a “green” company. Looking at the transformation of their MacBook Pro from 2006 to 2008 you will see that they have gone from having BFR, PVC, mercury, and arsenic in their 2006 version to having none of them in their 2008 version. They have also been reducing their packaging to both save materials and to make it possible to store more packages on one mode of distribution, thus reducing the amounts of trips it would have had to make. Last but not least, Apple has also been putting more of their attention on getting more recycling centers set up for their products. One of their ways of doing this is having a program within their stores that allows a customer to bring in their old Apple product they don’t want anymore, and the store will take care of the recycling process. Apple’s efforts are a great way to start their journey to being a completely “green” company (Apple.com).

12. Current Mission and Need for Change

13. Apple’s current mission statement is: “Apple ignited the personal computer revolution in the 1970 with the Apple I and reinvented the personal computer in the 1980’s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating systems and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market with its revolutionary iPhone.”<br />Apple’s mission statement is not very good, because it is more of description of their company rather then an explanation of their direction and purpose. <br />Opportunities and Threats- Assessment of Remote Environment <br />Opportunities10- Technological Innovations-T10- Global Expansion-I9- Increase in world mobile technology market-I9-Increased use of MP3 technology-T8- Increase online sales-E7- Create more compatibility with Microsoft-T Threats 8- Recession-E8- US Market Saturation- E7- Drop in US consumer spending-E6- Environmental Concerns-Eco5- Viruses-T 4- Regulation-P <br />Totals: Opportunities-53 Threats- 38 <br />These two lists illustrate that Apple’s 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.

14. 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 Apple’s 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 concerns. Apple needs to combat this threat by making environmentally friendly products and expanding their recycling program. Threats(10)- Bargaining Power of Consumers(9)- High Rivalry Among Competitors (7)- Substitute Products(6)- Bargaining Power of Suppliers (5)-Increased pressure from music industry to raise MP3 prices(5)- Ease of Entry for New Companies Assessment of Industry (Task) Environment<br />Opportunities(10)- Business Consumers(10)- Public Contracts(9)- Green Products(8)- Strategic Alliances (7)- Continue to Produce High Quality Products (6)- Increase brand loyalty by entering new markets<br />Totals: Opportunities-57 Threats-43 <br />In the industry environment Apple again has more opportunities than threats. Traditionally schools and businesses have gotten contracts with PC manufactures such as Dell and Hewlett-Packard, this gives Apple an opportunity to try to break into these markets and show that Apple computers have a place in the office and in schools. Another opportunity that we feel is very important is the growing demand for green products. If Apple can produce products that are environmentally superior to other products on the market it could give them a competitive advantage and give consumers a valid reason to spend the extra money that Apple products cost. Apple is a very independent company mostly because of Steve Jobs; we feel that this has created an opportunity for them to make strategic alliances with other cell phone carriers and technology industry companies. Apple is known for their high quality and extreme brand loyalty, these two factors have created an, “Apple Culture,” and Apple has an opportunity to enter new markets and add more members.

15. Apple’s threats in the Industry Environment are led by bargaining power of consumers. We ranked this threat a 10 because consumers hold a lot of power in the technology industry and because Apple’s products are at the higher price points of the industry consumers have many lower cost options. The high rivalry among competitors in this industry also poses a threat to Apple. In the United States it seems that people are either PC users or Mac users and it is difficult to switch a person from one side to the other. Since PC computers are much more popular and most people have had more exposure to them Apple faces an uphill battle in converting PC users. Apple’s itunes online music store generates huge profits for the company and a threat to this is the music industry pressuring Apple to raise the prices on online music. If Apple and other online music providers were forced to raise prices this would severely hurt their bottom line. Assessment of Competitive Environment <br />Opportunities(10)- Global Expansion(9)- User friendly products(8)- Loyal Customer Base(7)- Contracts with Schools and Businesses Threats (8)-Dell (8)- Hewlett Packard (6)- Android and new Android phone (6)Low cost substitutes <br />Totals: Opportunities- 34 Threats-28<br />Apple’s competitive environment is very intense and the rivalry’s are fierce. In the competitive environment we again feel that Apple’s 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.

16. Apple’s 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 Apple’s 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. Summary- Most Crucial Opportunities and Threats<br />Opportunities(10)- Technological innovation(10)- Global expansion(9)- Increase in world mobile technology market(8)- Creating more compatibility with Microsoft products (7)- Strategic AlliancesThreats(10)- Economy(8)- High rivalry among competitors (7)- Decrease in demand(7)- Dell / HP(6)- Low cost substitute products<br />O-T Final Score= 2.5 <br />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 Apple’s greatest strength’s 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 PC’s 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.

17. Apple’s 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.

18. Identification of the Internal Environments

19. 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 Apple’s 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 Apple’s 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.

20. Ratio Analyses, Z-Value, and g*

21. Apple’s current ratio is slightly lower than the industry which suggests that Apple has fewer resources to pay its debts. Although this is true, all of the competitors have fewer resources available to pay back their debt than Apple. This ratio suggests that Apple would be considered to have good short-term financial strength. When looking at the quick ratio it is clear that when Apple is compared to the industry, Apple is better able to meet their current liability obligations by using their liquid assets. When compared to Microsoft, HP, and Dell, Apple is more liquid. Apple’s return on assets is on the higher end when compared to the listed competitors. This suggests that Apple’s assets are profitable in generating revenue. The industry has a negative ROA, suggesting a low amount of earnings derived from each dollar of assets. This means the industry’s assets are not profitable in generating revenue. Apple has a low return on equity in comparison to its competitors. This means that Apple isn’t as efficient in generating profits from their shareholder’s equity. Again, the industry has a negative ROE, which makes Apple highly appealing. Apple has a significantly lower return on investment than the competition. This means that the Apple gains less money on their investments. Apple doesn’t pay out any dividends; they instead reinvest the money into active capital structures.

22. Apple has a current Z-Score of 3.018. This z-score indicates that Apple has a very good financial standing and is not in any immediate danger of bankruptcy. Apple’s g* is -1.03. This indicates negative growth, which is mostly due to their high increase in assets. Even though their growth is shown to be negative, they are still having successful growth and can make it positive again.

23. Income Statement, Balance Sheet, and Cash Flows

24. This comparative income statement for Apple, the technology industry, and three major competitors shows why Apple is such a successful company. When comparing Apple’s sales to Microsoft, Dell, and HP one may conclude that Apple isn’t selling nearly as much; however, Apple is a much smaller company than the competitors presented above. When comparing cost of goods sold, Apple’s remains relatively low compared to Dell and HP, but are significantly higher than Microsoft. This could indicate that although Apple’s products are relatively expensive, they are able to produce their products at a lower cost than Dell and HP. However, Microsoft appears to produce their products at the lowest cost. It is worth noting that Apple spends the least amount of money on administrative expenses when compared to Microsoft, Dell, and HP. Lastly, Apple by far has the highest earning per share on its stock.

25. Apple has the lowest amount of inventory on hand when compared to Microsoft, HP, and Dell. Part of Apple’s strategy is to invest their capital into assets which are actually active because inventory creates an expense. Apple currently has the highest amount of long term investments in relation to its major competitors. This indicates that Apple’s management is focused on long-term growth. Apple and Microsoft are the only firms in this data set who actually have a higher level of equity in comparison to their liabilities. This is crucial for Apple because it allows them to generate enough equity from their resources to pay off their debts.

26. This year Apple has experienced its first negative cash flow in four years. This is not only due to the fact that they spent more than double the amount of money on capital expenditures than last year, but that they weren’t able to generate enough money from their operating activities to offset the major expenditures. This suggests that Apple needs to work on increasing their revenue and decreasing their expenses in order to see a positive cash flow next year.

27. Profitability Explanation