STRATEGIC MANAGEMENT - DRGORAD

NCRD Sterling Institute of Management Studies
A
Strategic Management Report
APPLE INC.
SUBMITTED BY:
Deepak R Gorad
Sachin Thete
Girish Suvarna
Sandeep Ramraje
Ganesh Shirsat
SUBMITTED TO:
Prof. Seema Laddha

CONTENTS
Introduction
Strategic Analysis
Vision and Mission Statement
Apple Value
Current and Past Strategies
Culture
PESTEL Analysis
SWOT Analysis
Strategic Challenge and Issue
Strategic Challenge and Future Strategy
Implementation and Change Factors
References

INTRODUCTION
India is the second largest mobile handset market in the world (after China), and is poised to become an
even larger market. Revenues of the Indian mobile handset market grew by 15% to touch USD 6.75
Billion in 2010-11 from USD 5.88 Billion a year back.
The mature Indian mobile consumers' increasing preference for high-end handsets and the younger
demographics' desire to use mobile Web technologies could see the smartphone markets revenues soar.
TRENDS IN THE INDUSTRY
- Emergence of Multi-SIM smartphones
- Shift in the OS
- Faster Processor
- Near Field Communication
Smartphone shipments are expected to rise sharply from 11.2 million units in 2011 to 73.4 million units
in 2015E comprising 25% of the total mobile handsets market in India. Growth in smartphones is likely
to surpass the overall growth in the mobile handset industry. The segment is anticipated to continue its
ride with a CAGR of 60% during 2011-2015, while the mobile handsets will register a CAGR of 13% in the
same period.
Market growth
While the global traditional phone market faces an ongoing recession due to the global
economic downturn, the smartphone market continues its rapid growth. Since 2007, a portion
of the smart phone market for the global cell phone industry is expanding in terms of sales
volume as well as total sales. According to research conducted by Credit Suisse in December,
2007, while the rate of global cell phone market growth would repeatedly fluctuate up and
down during the following four years, the smartphone market would experience tremendous
growth. A striking point is that it was predicted that the smartphone market would make up
nearly 50% of the entire cell phone market in 2010 in terms of total sales.

MARKET ANALYSIS
2.1 Shift of core value in the IT industry: Hardware to Software
Hardware technology was a major competitive factor in the traditional phone market, and
telecommunications companies offered content services through their own portals. However,
this was not profitable because there was no stable route to expose contents to consumers.
Nokia was the only operating system developer involved in the software market, but it is still
not enough to make a sensation (see Figure 2). Thus, the smartphone was unmarketable.
Customers’ desires placed emphasis on sound quality, camera quality, display quality, and
external design, which were determined by the hardware technology itself rather than on
content in the traditional phone market. Naturally, Nokia, Motorola, Samsung, LG, and Sony
Ericsson, which had attained hardware competitiveness, led the traditional phone market.
Based on IDC research in 2006, before the smartphone was popularized, Nokia sold 347
million units, Motorola sold 217 million units, and Samsung sold 118 million units. However,
only 10% of the units sold were smartphones.

Strategic Analysis – Apple Inc. Page A-1
Porter’s 5 Forces Analysis
Business segment or industry being considered:
Portable Personal Computer Manufacturing and Sales
Overall Industry attractiveness:
Rivalry
Between
Competitors
Supplier
Power
Buyer
Power
Threat
of
Substitutes
Threat of
Potential
Entrants- Reliance on underlying, proprietary standards
- Few chip designers, one dominant player
- High switching costs from suppliers
+ Suppliers reliant on industry for distribution and
consumption
Supplier Power
Threat: 4
Attractiveness: 2
+ Economies of scale
- Outsource to OEMs for production
+ Several large, entrenched players
with well established brand loyalty
- Convergence of mobile devices,
mobile phone makers entering
market
- OEM forward integration
Potential Entrants
Threat: 3.5
Attractiveness: 2.5
+ Consumer
dependence on
computers, high
demand
- Varying needs, ‘latest
and greatest’ v. ‘just
good enough’
+ Difficulty of switching
to/from proprietary
platforms
Buyer Power
Threat: 3
Attractiveness: 3
- Feature-rich ‘smart’ phones
- Alternate forms of
entertainment
+ Central hub for leisure,
entertainment, information,
and work
Substitutes
Threat: 2.5
Attractiveness: 3.5
- Commoditized product, intense price
competition
- Intense competition for large corporate
contracts
- Breakneck product/technology lifecycle pace
- Products based on standardized components,
difficulty in differentiation
Competitor Rivalry
Threat: 5
Attractiveness: 1
The industry is moderately attractive overall. The established players have a history of success and
innovation, but competitors who fall behind the fast moving technological curve, or cannot
compete efficiently on price or differentiate effectively are eliminated. The power asserted by
buyers and the dominance of suppliers puts strain on the industry’s profits. While new entrants
are possible, the cost in dollars and time of successful branding are a hindrance. While some users
may move most of their computing activities to truly mobile devices like smart phones personal
computers are likely to remain a tech staple for the foreseeable future.
Threat Level: 3.6/5
Attractiveness: 2.4/5

Strategic Analysis – Apple Inc.
Value Chain Analysis
Value Chain Activity Corresponding Firm Practice, Policy, or Procedure
1. General Administration A greener Apple – reduction in energy use in production and
transportation to match trend in green business.
Strong cash position – allows the firm to internally finance
expansion and development without cost of capital.
2. Human Resources
Management
Selective hiring process – find and attract talent
Generous employee benefits program – retain industry-leading
talent.
3. Technological Development Research & Development – expenditure increased about 66%
from 2007 to 2009
Patent filing – protection of important inventions and innovations
in the US and worldwide
4. Procurement Positive relationships with suppliers – EICC member, working to
improve working conditions, created and enforces a “Supplier
Code of Conduct.”
5. Inbound Logistics Automated receiving systems – reduce facility footprint and space
requirements.
Delegate raw materials acquisition – offer supervision to OEM
partners who carry out acquisition.
6. Operations Utilizes OEM’s economies of scale – offshore production to save
money on costs of build.
Internal design – design and conceptualize products internally
7. Outbound Logistics Economical/Stylish Packaging – eye-catching packaging takes up
less space and weight, reducing shipping costs and costs of
disposal.
Apple Stores/Authorized Retailers – working to maintain
standards over presentation of products for sale.
Direct shipment – ship products from China to consumer to
minimize inventory buildups in costly locations.
8. Marketing and Sales “Get a Mac” Ads – Various direct/indirect favorable comparisons
1. General Administration
2. Human Resources Management
3. Technological Development
4. Procurement
5.
Inbound
Logistics
6.
Operations
7.
Outbound
Logistics
8.
Sales and
Marketing
9.
Service

General Environment Analysis
Environment Threat (& why?) Opportunity (& why?)
Economic
1. Recovering economy
1. Signs of economic turnaround are present,
but many consumers are unconvinced and
spending less. Apple’s premium portable
computers may be out of consumer price
ranges.
1. Economic recovery will cause
consumer spending. Apple’s high
quality may attract customers.
Demographic
1. Flattening of wages – leveling affluence
1. Rising prices and stagnant wages leave
workers and families with less money to
spend on perceived luxury goods.
1. known for high quality,
dependability, and long-lasting
products will attract customers
seeking value for their money.
Political/Legal
1. Potential FCC Internet Regulation
2. Healthcare Reform
1. FCC Internet Regulation may stifle
innovation on the Internet, reducing new
methods for Apple to capitalize on the
power of the internet.
2. Apple’s useful portable devices could
be leveraged in ‘modern’ healthcare
settings, funded in-part by
government money, increasing
demand.
Technological
1. Device Convergence
2. Shortening Product Lifecycle
1. Apples broad line of devices may become
obsolete with the advent of multi-use
portable devices.
2. Increased pressure to innovate may result
in missed opportunities and inventory
losses.
1. As a leader in portable devices Apple
can innovate and lead the way in
platform convergence.
2. High R&D commitments may propel
Apple to lead the industry by out-
innovating competitors
Sociocultural
1. Increasing desire for on-the-go devices
2. Greater concern for the environment
1. Apple’s portable computers may lose
relevance among new on-the-go devices.
2. Device manufacturing will be equated with
pollution and climate change.
1. Apple can lead innovation in on-the-
go devices utilizing R&D portable
knowhow.
2. Apple’s lead in environmentally-
sound practices will be a marketing
advantage.
Global
1. Developing Chinese economy
2. Potential world-wide climate regulation
1. The developing Chinese economy will
require higher wages for factory workers.
2. Emissions regulation will impose huge
burdens on Apple’s production costs.
1. Massive population with increased
buying power for Apple’s products.
2. Apple has already made steps to
improve environmental-friendliness,
can be used to the firm’s advantage.
Economic
Demographic
Political/Legal
Technological
Sociocultural
Global

APPLE Inc.
I. Introduction
Apple Inc. was previously known as Apple Computers Inc. is an American based
multinational company. It designs and manufactures software products. The
founders of Apple were Steve Jobs, Stephen Wozniak and Ronald Wayne. This
giant American conglomerate was established in Cupertino, California in the
middle of the Silicon Valley on April 1st, 1976 and incorporated on January 3;
1977.This organization is among the Fortune 500 companies. (Young&Simon,
2005)
The nature and scope of this organization is to create innovative and tech savvy
hardware and software which are unique, stylish and very functional at the same
time. The company’s best known hardware products are Macintosh computers,
ipod and the latest one iphone. In software segment MAC OS X operating
system, itunes media, ilife a suite of multimedia and creativity software, Final cut
studio for audio and film industry. It has more than 200 retail stores in eight
countries and an online store where all apple hardware and software are sold
online. (Cruikshank, 2005)
This project on Apple Inc is highlighting the founders, foundation, products of the
company, Its PESTEL and SWOT analysis and some other. It will show the
success of this company and about its strategies adapted to overcome tough
competition.

II. STRATEGIC ANALYSIS
1. Vision and Mission statement
In real sense apple has no real vision and mission statement but there are certain commitments which
they make like At Apple they believe in there Responsibility to minimize the environmental impacts of
our operations andproducts.
There are some authors who have compiled a mission statement for apple like “Apple is committed to
bringing the best personal computing experience to Students, educators, creative professionals and
consumers around the world through its innovative hardware, software and Internet offerings.”
(Freiberger&Swaine, 2000)
2. Apple value
=>Empathy for customers and users,
=>Achievement and aggressiveness,
=>Positive social contribution,
=>Innovation and vision,
=>Individual performance,
=>Team spirit,
=>Quality and excellence,
=>Individual reward and
=>Good management. (Wozniak, Smith, 2006)

CULTURE
Apple has a tradition of felicitating scientists and mathematicians. There logo of a
half bitten apple. Apple logo is for giving respect to Sir Isaac Newton for inventing
the law of gravity and the half bitten apple is for the mathematicians Alan Turing
who committed suicide by eating an apple which he had laced it with cyanide. He
was regarded as on of the fathers of computers. The company’s attire is very
casual enabling employees to work in a fun environment.
There culture is to be unique and to be innovative with sleek and stylish design
and very functional. This culture has gained global acceptance.
5. PESTEL Analysis
Political
Apple Inc started as a start up by Steve Jobs and Steve Wozniak initially so they
had to face a lot of problems regarding there company registration and other
paper works. Today Apple lists at NASDAQ as APPL and this firm has strong
rivalry partners like Microsoft, IBM and Google so there share prices clash
against each other (The New York Times, May, 2007) the heavy taxes at US and
UK are a major block age. Initially apple launched its much awaited iphone and
then Google launched an iphone too. In political aspect apple had a lot of
financial turmoil so the founder Steve Jobs was asked to resign and later on
again in late 1997 was asked to rejoin as the CEO to handle the company and it
was under Steve Jobs reign that Apple Inc was joined in the Fortune 500
companies lobby. Apple had to face a lot of problems while entering Indian
market specially with there iphone as there was lot of hurdles while selecting the
telecom company with the union broadcasting minister of India for entering as a
company providing handsets. Then they joined hands with Vodafone Essar and
Bharti Airtel later on. (Wozniak and Smith, 2006)
Economic
Apple products are a bit priced higher than its competitors. The economic
condition stands strong at present at the stock markets and it enjoys an
overwhelming trust over its CEO Steve Jobs but due to long illness of Pancreatic
Cancer has made its investors fear. By 2002 its major chunk of revenue was
generated by its desktops and others by notebooks, ipods and other products.
But by 2005 it has shifted its revenue generating portfolio by its diversified
products which was covered in same proportion by desktops, notebooks, ipods
and others but in recent times iphone has taken a major chunk of it and trying to
compete with its rivalry Google with there iphone and some new rivalry like
NokiaN96, Blackberry Bold, Samsung Omnia. (The Wall Street Journal,
November, 2008)
Social
Socially Apple has made many social gatherings to attract its customer as it
made an extensive advertisement at the Beijing Olympics Games, 2008 and they
set up many kiosks where they allowed customers to experience the apple
products. Recently at the Wall Street Job Fair last year they made a booth of
there own as a publicity stunt and hire employees and it was a first time online
job fair where some other major companies too participated.

Technological
In terms of technology apple has stayed always a step ahead against others. As
in reinventing and tying up with rivalry like IBM and Microsoft. Technological up
gradation has always been a target of apple. Ipod has been reinvented several
times with latest players to make it consumer friendly.
Environmental
Apple Inc has done in the past and is currently also contributing to save the
environment. They had announced that by the end of 2008 they will eliminate
Polyvinyl Chloride and brominated flames retardants in its products, and arsenic
in all glass flat panel display.
In June 2007 Apple upgraded the MacBook Pro, replacing cold cathode lamps
with mercury-free LEDs and arsenic-free LCD glass,] and has since done this for
all notebooks. Apple has also phased out BFRs and PVCs from various internal
components. Apple also offers detailed information about the emissions,
materials, and electrical usage of each product. Apple has also begun to
advertise how environmentally friendly their new laptops are including television
spots and magazine ads, in addition to touting these facts on their website.
Lawful
Apple Inc does all its operations under the US Trade Legislation guidelines. In
1986 the companies wasn’t enjoying a good time due to many legislative failures.
Then in 1993 the company was loosing acceptance for which in 1997 Steve Jobs
the founder was asked to join as the CEO of the company. There were many
break downs in the corporate affairs of the company with many cases filed
against the company as they refused to accept and adopt the new standards set
for manufacturing software and hardware as they were creating there own
products.(Simon,2007)
SWOT Analysis
Strength
One of the oldest and reputed hardware companies. They have a control over
there products as they usually interlink all there products. All the products run via
software developed by apple so as to enable the users to buy apple products.
They have a store dedicated to only apple products as apple products lover can
browse through the stores and are restricted to buying apple products only.
Apple launches its products in a very stylish and hippy manner as launching at
schools and universities and making a fun interactive launch parties. It has a
reputation of delivering some of the highest quality products which are stylish,
sleek and very portable and especially the half bitten logo of the fruit apple
attracts a lot of customers. Its present CEO Steve Jobs has a good reputation
among its investors and very well renowned man in this industry. They only deal
with best players in the industry like for there iphone for there networking
purpose they are working with AT&T which is the best wireless service provider
in United States and the world. Opening of online stores for downloading itunes
and games was a major hit for them as this has lowered the distribution cost and
made it possible to profit on games that are sold for a few dollars and by this

apple keeps 30% of the proceeds of software sales through its online store.
Consistency is another key factor as each product is linked with there upcoming
product via software or other source. (Deutchman, 2000)
Weakness
Apple as a giant conglomerate has few drawbacks. The major weak point is the
high price of the products and the software which runs the products are only
apple friendly product as almost all there products are interlinked to each other
disabling users using different brands not to shift there brands. They focus a lot
on the engineering of the product rather than marketing of the product as apple
Inc products usually are marketed in form of viral marketing or via mouth word
Selling which strength but it reaches only to section of people who uses internet
and attend colleges or work in MNC as they are the only type of people who are
educated about the new products. So in this way they are keeping themselves
aloof from a very huge chunk of market. There strategy went wrong in Indian
market with there iphone as there marketing communication to the sales and
distribution model went wrong and most importantly pricing of the product was
too high for the Indian masses. (Lance&Woll, 2006)
Opportunity
Apple has a tradition of putting up entry products with low cost as bringing ipod
and iphone at 199$ at US to attract a pool of customers and then they have
ample of opportunity to retain them back with there interlinked and consistent
product line. It creates opportunities for themselves and later on work upon it. In
recent time’s apple has created market in other countries as well like African
countries, India, Middle East and some other undisclosed countries. Podcasts
are downloadable from radio and later on formatted to be listened in ipod and a
subscription charge to be paid and this will generate revenue for the company.
Flexibility to its users is an opportunity on which apple banks a lot it hooks back
the customers by keeping on innovating and changing the product line in there
every launch each year customers eagerly wait for the next apple launch.
(Kunkel, 1997)
Threats
Pressure form Competitors is the biggest threat, IBM, Microsoft, Google all these
giant IT firms are also lined up with same sort of product portfolio. Apple
launched its iphone so did Google also came up its version iphone. Marketing
strategy went wrong in India with there iphone due many factors primarily with
the high price tag. Since technology is changing at a rapid pace so apple needs
to keep on changing its products so to meet up to its users needs. The changing
Environment is forcing apple to develop new products to keep it different. Bad
health condition of CEO and founder Steve Jobs due to cancer is making its trust
worthy investors fear as Steve Jobs has a good reputation over its investors. One
of the biggest threat is its high price in compare to other companies offering
same sort of product like NokiaN96, Samsung Omnia, Blackberry Bold phone by
RIM (Research in Motion) are offering the same service in iphone category with
Google iphone also and in ipod segment many other companies have also come
up with same type of models like Sony, Philips, Trandscend, Sandisk and others.
The other biggest threat is its software sharing relationship with other companies

as apple is very much particular with the software sharing with others disabling
users to play music or open files in other operating system so this doesn’t make it
a user friendly product so users.(Hertzfeld, 2004)
FINANCIAL ANAYSIS
INDUSTRY RATIO COMPARISON:

SWOT ANALYSIS
PORTER FIVE FORCES

SUSTAINABLE PRODUCT DIFFERETATION
RELATIVE SALES GROWTH

Net CASH FROM SALES
ASSET TURNOVER
INVENTORY TURNOEVR
NET PROFIT MARGIN

Strategic Challenge and Issue
The biggest strategic challenge and issue is cut throat competition from its rivalry
partners, IBM, Microsoft, Google, Sony, HP and Dell in terms of producing the
same product and apple has the highest price among all. Google has also
launched there version of iphone called as G-Phone which features Android
operating system. The apple iphone in India was a failure. Manufactured by HTC.
Apple being a big player in US but failed to mark a strong position in the Asian
market where it had many strong contenders like Sony of Japan, Philips, LG. All
these companies manufacture the same products which apple manufactures and
that too with low price in compared to apple’s high price.
Apple has recently issues software 2.2 for ipod touch and iphone to solve
multiple problems which could lead to leak of sensitive information as the same
was with RIM’s Blackberry where the encryption code was impossible to be
tracked. There are some more areas where apple need to safeguard there
hidden secrets as apple is bloogers favorites topic so they go for that extra mile
to find confidential facts as recently 19 year Harvard student leaked some facts
of the apple for which apple later on prosecuted the student. Since apple is a
very big IT giant so it attracts tough competition for others so apple spends
millions on marketing of the products and as it comes with a high price so if the
economic condition of the market falters then it will severely affect consumers
purchasing power. (Lyons, 2007)
Apple needs to work on its unlocking procedures strictly as in Singapore many
stores illegally were unlocking the iphones at a very cheap rate with no
notification to the apple company. So Orange has been selected to distribute it.
Early in 2005 when apple switched from IBM as a chip supplier to Intel, so that
time industry specialists thought the swap of apple could lead to consumers
getting confused so this type of shift should be done carefully. (Linzmayer, 2006)
V. Strategic Options and Future Strategy
For overcoming all these strategy there need to be a future strategy. The strategy
applied by apple in India was a failure due to many reasons like pricing kept too
high so the pricing to be kept low by cutting down unnecessary expenses. They
got everything wrong from pricing, marketing communication to the sales and
distribution model. There need to be a strong link as far consumer confidence is
concerned. India being the world’s second largest and fastest growing telecom
and handsets market by Standards and Poors survey and also by Reuters. In this
way apple has lost the trust of Indian consumers by the poor failure of marketing
of it s iphone and gave more space to rivals Nokia, Samsung and Blackberry.
The marketing should have been done on a grand scale to make itself known to
Indian masses too other than the educated people, though it was higher segment
of class but it failed on deaf ears. Other than its CEO Steve Jobs made a global
announcement that the iphone would be charged at 199$ globally. This built a
false hope in the mind of consumers who wanted to buy it and turned away those
Who could have actually bought it? Apple will aim to become the hub of the

digital home, offering eight key products and services to connect PCs and digital
content to the HDTV-stereo audio-visual infrastructure in consumers' homes. To
fulfill this strategy, we predict that Apple will launch new products, re-engineer
the Apple Store, and expand into in-home installation services. (Gownder,
Quivey, 2008)
In terms of environment keeping free apple should adopt healthy practices of
keeping there products from emitting heat thus reducing the heat level to the
atmosphere. Though they are doing such works but can do more like Dell
computers have went further of recycling free including pickup from anywhere.
Lowering the cost of products and maintaining the same quality standards can
form joint – ventures Knowledge Management More number of retail stores for
easy access Continuous innovation to expand. Apple should fear the shift of ipod
towards mobile phones as they can also play music files and videos, so careful
marketing up gradation of the product is necessity for the long run where
consumers are shifting the taste quiet often. (Kahney, 2008)
Apple software can be made accessible in certain cases as there are many other
online itune stores too like Napster. If a subscriber is paying for downloading a
song or game which can be easily accessed via other free downloading sites
then why will a user go to apple online store? So the online store should charge a
very nominal charge or a one time payment of registering themselves and then
use as in today’s stiff competition scenario apple has no more monopoly in the
market where many other companies have come out with the same sort of
product with less price tag, so this demands innovation at regular intervals.
VI. Implementation and Change Factors
Implementation of the strategies and changes are to be made. Pricing strategy to
be worked upon again for the Indian market and re-launch it in a slow skimming
strategy. The online store to be made more accessible as making it low entry
cost for downloading and setting up apple store at other places also other than
US and other developed nations. Change is demand of time so change
management to be handled perfectly as if a company do not change itself then
they won’t able to survive in the long run in this fast changing environment.
(Smith, 2007) Though apple is good in innovating products but being a market
leader it has to increase its R&D practices in a more high level to stay afloat in
this tough market and keep its market share intact and keep on growing. Apple
should further work upon its marketing strategies to sell more and more products

REFRENCES
Cruikshank, J.L.2005.The apple way: 12 management lessons from the
world’s most innovative company.U.S.A: Mc Graw hill companies.
Deutschman, A.2000.The second coming of Steve Jobs. New York:
Broadway Books.
Douglas, P. 2007.How apple got it strategy wrong. The Wall Street Journal,
November 10, p.9.
Freiberger, P.,Swaine, M.2000:Fire in the valley:The making of personal
computers.Boston: Mc Graw-Hill Companies.
Wozniak, S., Smith, G.2006.IWOZ: Computer geek to cult
icon.San.Fransisco: W.W. Norton and company, Inc.
Young, J.S and S, W.L.2005. ICON Steve Jobs: the second act in the
history of business. U.S.A: John Wiley Sons, Inc.
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