Session #7
Strategic
Management
Dr. Mark H. Mortensen
Session 211 and 212
M-W PA 407
© Copyright 2011 Mortensen Consulting Group LLC
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You Will be Prepared for Today
Iff You:
Studied for the quiz
 Have read the Apple case study
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Quiz: Chapters 1-3
Fall 2010
(c) Copyright 2010 Mortensen Consulting Group LLC
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Something BIG is happening
this week. . .
Fall 2010
(c) Copyright 2010 Mortensen Consulting Group LLC
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Apple Case Study
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Apple Case Study: Outline
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Case Study Background – The nature of
competitive advantages over time in highly
competitive, innovative industries.
What should Apple do?
 Define
the Central Issues
 Define the firm’s goals
 Identify the constraints
 Identify the alternatives
 Select the best alternative
 Develop an implementation plan
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Apple: Case Study Background(1):
Apple History
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Competitive advantages in the 1980s made
Apple the most profitable PC company in the
world (What were they?)
But “on a glide path to history” (What? Why?)
Four successive CEOs (Sculley, Spindler,
Amelio and Jobs) sought to reposition Apple in
the PC Industry and to create a sustainable
competitive advantage.
(What did they try? What succeeded? What did
they decide not to do?)
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Competitive advantages in the 1980s that made
Apple the most profitable PC company in the world
Ease of use
 Dominance in creative industries (design,
desktop publishing), as well as education
 Buyer loyalty
 Proprietary operating system
 Strong branding
 Excellent industrial design
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Why was Apple “on a glide path to
history”
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Low market share, increasing competition
and change in the market to a
commodities point of view for PCs put
Apple’s differentiation strategy at risk.
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CEOs’ Strategies
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Sculley – low-cost producer; “hit products” every 6-12
months; Mac Classic vs. IBM clones; Powerbook laptop;
Newton PDA; Taligent with IBM for new OS; PowerPC
chips from IBM
Spindler (1993-1996) – reinvigorate core markets; killed
Intel chip; licensed Mac OS to clone makers; killed
Taligent; layoffs
Amelio (1996-1997) – servers & other high-margin
devices; cancelled nextgen Mac OS; ended licensing
program; bought NeXT (Jobs)
Jobs – iMac; outsourced manufacturing; direct sales via
website; image; industrial design
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Apple: Case Study Background(2):
The Mac Business in the 21st Century

Technology & Innovation
 Cutting
edge experience
 High-end
 Differentiated from Wintel machines
 Intel Chipset
 Overhauled Mac OS X in 2001 (UNIX)
 Proprietary Apple-developed applications

Distribution & Sales
 Retail
stores
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Apple: Case Study Background(3):
The Evolving PC Industry
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The dynamics of the PC industry have radically
changed in the last 20 years.
Buyers
Rivalry among suppliers
Barriers to entry
Complements to the PC industry
Supplier vs. Manufacturers balance of power
Substitutes
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Apple: Case Study Background(4):
Apple Beyond Macintosh
iPod
 iTunes
 Apple TV
 iPhone
 iPad
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Questions for Apple Case Study

Has Steve Jobs finally solved Apple’s
long-standing problems
With respect to the Macintosh business?
b. With respect to its broader strategic position?
a.

Going forward, what should Steve Jobs
do?
(c) Copyright 2008 Mortensen Consulting Group LLC
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Doing a Case Study -1

Read the case thoroughly. Read the case
thoroughly. Read the case thoroughly.
 The
first time to get an overview of the industry, the
company, the people and the situation.
 Read the case again more slowly, making notes as
you go.

Define the central issue. Many cases will involve
several issues or problems.
 Identify
the most important problems and separate
them from the more trivial issues
 After identifying what appears to be a major
underlying issue, examine the related problems.
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Apple SWOT(1): PC Business
Strengths
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Fanatically loyal customers who pay for
yearly OS updates
Domination of niche markets
Industrial design expertise - “Cool factor”
Apple-owned software applications
FLASH technology procurement
agreements
Mobile Me & Apple Care
New Intel architecture
Hub for Apple iPod, iPhone, etc.
Opportunities
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Transition from desktop to
laptop
Netbook replacement
Digital hub strategy
Move to solid state disk
technology
Cloud computing
SaaS
Weaknesses
Higher prices
Low market share of the PC business
Low penetration of business computing
High cost of designing, manufacturing,
and supporting proprietary computer
architecture and OS
Many fewer software and peripheral
developers provide products for
Macintosh than for PCs mean lower value
for the “solution”
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Threats
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Price decline
Freeware OSs (LINUX)
Microsoft juggernaut
Jobs’ health
Succession Plan
Macintosh: MacBook (Air, Pro), Mac Mini, iMac, Mac Pro xServe, Airport, Time Capsule, Mobile ME, Apple Care.
Fall 2008
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Apple SWOT(2):
Consumer Electronics Business
Strengths
FLASH technology procurement
agreements
Integration with Macintosh, but works also
with Wintel
Device/iTunes integration
Mobile ME
Excellent user experience
Industrial design – “cool factor”
Agreements with record labels
Open computing environment
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Opportunities
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Video market explosion
Increasing complexity –
features and maintenance
Proliferation of important files
(image, video, audio) by
consumers
SaaS models and acceptability
Weaknesses
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Higher prices
Few video agreements with owners
DRM hassles
iPhone is more an entertainment
appliance than a SmartPhone for
business
Dependent upon constant product
innovation to succeed, not
structural attributes
Threats
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Myriad competitors (including
Microsoft) innovating as fast as
they can
Open source software (LINUX,
Android) coming out
Video DRM complexity
Jobs rumored sickness
iPod, iPhone, iPad, Apple TV, Apple Care, Mobile Me
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Doing a Case Study - 2
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Define the firm’s goals (only if applicable)
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Inconsistencies between a firm’s goals and its performance may
further highlight the problems discovered in step 2
Identifying the firm’s goals will provide a guide for the remaining
analysis.
Identify the constraints to the problem (only if applicable)
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The constraints may limit the solutions available to the firm
Typical constraints include limited finances, lack of additional
production capacity, personnel limitations, strong competitors,
relationships with suppliers and customers, and so on.
Constraints have to be considered when suggesting a solution.
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Apple’s Goals
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Observation: When you go to the www.apple.com web site, you get
information about their products. You have to search – hard – for
corporate information!
Apple's mission statement
Apple ignited the personal computer revolution in the 1970s with the
Apple II and reinvented the personal computer in the 1980s with the
Macintosh. Today, Apple continues to lead the industry in innovation
with its award-winning computers, OS X operating system 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. FAQs at http://www.apple.com/investor/
Product, Product, Product.
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Apple’s Constraints
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Fall 2008
Microsoft Office is the entrenched standard
application, although cheap competitors are
nipping at its heels, as well as OpenDocs-based
free software
The Wintel hardware architecture is well
entrenched – getting others to build hardware to
a new open standard to run OS-X would be very
difficult
Features to support large business use by IT
shops would be very expensive, and timeconsuming, to implement for Apple.
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Doing a Case Study - 3
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Identify all the relevant alternatives
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The list should include all the relevant alternatives that could
solve the problem(s) that were identified
Use your creativity in coming up with alternative solutions
Even when solutions are suggested in the case, you may be
able to suggest better solutions
Select the best alternative
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Evaluate each alternative in light of the available information
Resist the temptation to jump to this step early in the analysis
You will also need to explain the logic you used to choose one
alternative and reject the others.
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Alternatives – PC Business
Get out of the hardware business, keep the software
business, licensing the hardware to others
Keep to the niche with the proprietary software,
manage to profitability and expand tactically
1.
2.
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with the PC as the hub of the home entertainment system
as laptops move to silicon storage
as hardware running Windows
expand iTunes into application downloads for PC users
Attempt to Change the Game
3.
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Further bundling software and hardware support, offering a
“total package” for computing, building on the Apple Care
program – playing to the people tired of complexity and hassle
iPad as a multimedia terminal
Build on the Mobile Me offering to offer expanded backup and
recovery, SaaS, and cloud computing capability for heavy
graphics users. Thus, MACINTOSH/Mobile Me > iPOD/iTunes
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Alternatives –
Consumer Electronics Business
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Continue with the current consumer-focused strategy,
constantly innovating new products (where does Apple
TV fit?)
Expand into video distribution with Apple TV and iTunes,
building the catalog as done with iTunes
Expand into gaming segment with Apple-produced and
third party games, built on an Apple TV base and
incorporating MMPGs via cloud computing infrastructure
Expand into the business realm with:
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Corporate offerings based on iTunes and Mobile Me technology
as a platform
SaaS with major players such as SAP, Oracle, and
Salesforce.com
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Doing a Case Study - 4

Develop an implementation plan
 Plan
for effective implementation of your
decision. Lack of an implementation plan,
even for a very good decisions can lead to
disaster for a firm and for you
 Don’t overlook this step. It is important as a
future manager to be able to explain how to
implement the decision.
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Reminder for Next Session
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Read Chapter 4
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