Apple, Inc.
Formulation Presentation
March, 7 2008
Mathew Lugo, Brooks Johnston, Jessica-Anne
Stoudemire, Kerri Barringer, & Ben Ponds
Executive Summary
Presented by: Kerri Barringer
Apple Profile
Products: Desktop
computers, laptops,
digital music players,
software
Markets: High-end,
technology-savvy
users
Size: $8.3 billion in
sales in 2004
Industry:

Key Players:




Dell
Hewlett-Packard
Microsoft
Keys to success:


Innovation
Quality support services
Apple’s Mission & Vision
Mission: Apple is in the
business of innovating,
manufacturing, and
marketing/selling
computer hardware and
software solutions, related
peripherals, and
communications
equipment.
Vision:

To be a leading
innovator of new
technologies that
change the way people
go about their daily
General Sector of the External
Environment
Presented by: Ben Ponds
Operating Environment
Economic Factors
 Intense growth – dependent on machines
 Demand for product services & support
Social Factors
 Wireless communication
 Powerful & portable devices
Political Factors
 Copyrights protection
Technological Factors
 Strong rivalries among top competitors
 Continuously changing products
Ecological Factors
 Pollution
 Corporate Social Responsibility
Summary
 Product support services
 Powerful & portable devices
Industry Analysis
Presented by: Matt Lugo
Porter’s Five Force’s Model
1. Rivalry Among Existing Competitors

Innovation; First to enter the market
2. Substitute Products

Competitors with similar products
3. Powerful Suppliers

Forward Integration
4. Powerful Buyers

Backward Integration
5. Threat of Entry


Advanced Knowledge
Capital Requirement
Competitor Profile: Hewlett Packard
Hewlett-Packard
Company provides
various products,
technologies,
software, solutions,
and services
worldwide.
Sector: Technology
Industry:Diversified
Computer Systems
Products: Servers,
Business Critical
Systems & Software
Competitor Profile: Dell
Engage in the
design, development,
manufacture,
marketing, sale, and
support of various
computer systems
and services
worldwide.
Sector: Technology
Industry: Personal
Computers
Products: Desktops,
Mobility Products,
Software &
peripherals
Competitor Profile: Microsoft
The world's #1
software company
provides a variety of
products and
services, including
its Windows
operating systems
and Office software
suite.
Sector: Technology
Industry: Application
Software
Products: Video
game consoles,
servers and storage
software, and digital
music players.
Apple’s Position within the
Industry
Personal Computers


Lack customer &
product service
Competitors dominate
market
Multi-Media
Peripherals

Innovative; first to
enter the market
Apple needs to focus
on product
differentiation to avoid
becoming a lowmargin commodity,
especially in terms of
digital music and
communications.
Value Chain Analysis
Presented by: Brooks Johnston
Value Chain Analysis
Supporting Activities:

General Administration:


Human Resource Management


Identify new-product market opportunities &
environmental threats, public image & corporate
citizenship
Recruit, train, motivate, challenge, and promote the
most talented employees
Procurement

Good relationship with suppliers,
Value Chain Analysis
Primary Activities:
 Technology Development
 Research & development leading to product and process
innovations, timeliness of technology developments,
encourage creativity
 Operations
 Product design, productivity of equipment, effective
quality control systems
 Marketing and Sales
 Identify customer segments, innovate sales &
advertising, image of quality, favorable reputation, brand
loyalty
 Service
 Ability to provide replacement parts or tech support,
warranty/guarantee, quality of customer education &
training
Core Competencies & Competitive
Advantage
Procurement

First computer software company to negotiate with
RIAA to allow consumers to legally download music
online
Technology & Development

Main objective is to be the leading innovator of new
technologies that change the way people live their daily
lives
Marketing & Sales

Identify specific customer segments and needs, develop
an image and reputation of quality, innovative
advertising
Strengths Relative to Rivals
iPod & iTunes software revolutionized the music
industry, worked with RIAA to develop deal
Considered the BMW or “cool” computer system
to own
PC is a mature industry/product—Apple found
new ways to spark demand
Successfully differentiate products
Brand Image and Recognition
Weaknesses Relative to Rivals
Apple’s market share is low as prices for
windows-based machines fall
Apple has limited number of suppliers to obtain
raw materials
Apple uses third-party music content—potential to
limit music or limit availability in the future
Promotional activities focus on core groups—
misses the larger audience of PC’s for nongraphics based business and home users
Cell phone vs. iPod
Industry Specific Competitive
Advantages
Development of innovative new
technologies
Dell grew successfully by eliminating the
middle-man and selling direct
Microsoft is #1 software company
HP is currently the #1 PC manufacturer
Financial Analysis of Apple
Presented by: Kerri Barringer
Operating Income and Net Income
1,000,000
800,000
Dollars (in thousands)
600,000
400,000
Operating Income
200,000
Net Income
0
2000
2001
2002
-200,000
-400,000
-600,000
Years
2003
2004
Asse ts, Liabilitie s, Stockholde r's Equity
9,000,000
8,000,000
7,000,000
Dollars (in thousands)
6,000,000
5,000,000
Total As s ets
Total Liabilities
Total Stockholder's Equ
4,000,000
3,000,000
2,000,000
1,000,000
0
2000
2001
2002
Years
2003
2004
Net Profit Margin
15
10
5
0
2000
2001
2002
2003
2004
Percent
-5
Apple
Dell
-10
HP
Industry
-15
-20
-25
-30
-35
Years
Current Ratio
4
3.5
3
2.5
Years
Apple
Dell
2
HP
Industry
1.5
1
0.5
0
2000
2001
2002
2003
2004
Total Debt to Equity
2
1.5
1
0.5
Apple
Dell
HP
Industry
0
2000
-0.5
-1
-1.5
2001
2002
2003
2004
Revenues/Total Assets
2.5
2
1.5
Apple
Year
Dell
HP
Industry
1
0.5
0
2000
2001
2002
2003
2004
SWOT Summary & Core Issue
Presented by: Matt Lugo
SWOT Summary
Strengths:


Innovation; first to enter the market
Product & Market Development
Weakness:

Customer and Product Services
Opportunities:

Strategic Alliances with leading communication firms
Threats:


Forward integration
Becoming a low- end commodity
Core Issue of Apple
Apple needs to focus on product
differentiation to avoid becoming a lowmargin commodity, especially in terms of
digital music and communications.
Long Term Objective & Strategic
Scenarios
Presented by: Ben Ponds
Long Term Objective
Technological Leadership
Product Development
 Quality Support Services

5-year Expectations
By 2010 most cell phones will have mp3
capability.
High quality customer support services will
be in great demand.
Future Scenarios for Apple
Best Case
 Leader in music capable cell phones
 Unsurpassed customer support
Worst Case
 Become a low-scale commodity
 Fail to integrate quality support services
Most Likely
 Continue to successfully differentiate out products
 Retain strong support and service operations
Possible Objective Shifts
Worst Case Scenario

Competitive position
Best Case Scenario
Productivity
 Public responsibility

Corporate Level Business
Alternatives
Presented by: Brooks Johnston
Corporate Level Strategic
Alternatives
Enter communications industry

Establish relationship with cell-phone carrier
Expand customer service capabilities

Add brick & mortar locations that focus on
training clinics to use Apple products, service
their product problems, Apple “Geek Squad”,
etc…
International Corporate-Level
Alternatives
Global brick & mortar locations
Nearly 2.4 billion people living in China
and India alone, accounts for 37% of the
global population
Major areas of economic growth are in newmarkets (China & India), and in product &
service expansion
Strategic Alliances as CorporateLevel Alternatives
Establish relationship with cell phone
carrier

Entrenched in professional media creation
markets, provide fundamental intellectual
property to be used in consumer oriented
software
Acquisition & Restructuring
Corporate-Level Alternatives
Apple is limited to the number of suppliers
it can use to obtain raw materials
Some key components are subject to
industry-wide availability constraints and
pricing pressures
Apple needs to find multiple component
suppliers
Possibly acquire suppliers
Keys to Success
International

Country specific economic, social, political,
technological, and ecological factors
Strategic Alliances

Challenge in negotiating contract terms &
copyright agreements
Acquisition and Restructuring

Finding multiple component suppliers
Long-Term Objective: Technology
Leadership
Enter communications industry:

Focus on product development and
differentiation in areas of digital music and
communication
Expand customer service capabilities:

Global brick & mortar locations that focus on
quality support services (training and tech
support)
Business Level Strategic
Alternatives
Presented by: Jessica-Anne
Stoudemire
Business Level
Strategic Alternatives
Strategic Business Units

Multimedia Devices and Software


iPod, iTunes, etc.
Computers

iMac, iBook, etc.
Computer Hardware
 Computer Software


Safari, iMovie, etc.
Generic Competitive Options
Differentiation
Focus Differentiation
Differentiation: Pros and Cons
Cons:
Pros:



Larger market than focus
differentiation
High customer loyalty
Reputation for innovative
products

No cost advantage

Hard to sustain due to
imitation
Could achieve greater
differentiation with
focused marketing

• Relevant Rival: Microsoft
Focus Differentiation:
Pros and Cons
Pros:



Cons:
Ability to meet
targeted segment’s
needs
Ability to adapt to
segment’s changing
needs or demands
High customer loyalty
within segment



Less opportunities for
growth
Targeted segment’s
demand has large
impact on revenue
Non-focus oriented
competitors can better
compete in pricing
• Relevant Rival: Dell
Generic Competitive Option:
Differentiation
Grand Strategies
Market Development
 Product Development
 Innovation
 Strategic Alliances

Generic Competitive Option:
Focus Differentiation
Grand Strategies:
Concentrated Growth
 Concentric Diversification
 Strategic Alliances
 Product Development
 Innovation

Strategic Choice
In order to achieve the long term objective
of technological leadership it is
recommended that Apple establishes a
strategic alliance with a leading
communication provider