SEMESTER III

Project IV Report
On
STRATEGIC & MARKETING AUDIT OF
APPLE INC.
Danda Yoga Krishna
PRN- 1013
UNDER THE GUIDANCE OF
Dr. B.R. Londhe

EXECUTIVE SUMMARY
This report is a marketing audit on Apple Inc. Apple Inc., is a major
manufacturer of personal computers and other digital devices,
including the popular digital music player, the iPod, and the online
music service known as the iTunes Music Store. With headquarters in
Cupertino, California, Apple designs, produces, and sells personal
computer systems for use in business, education, government, and the
home. It also creates its own operating system software, server
software, and World Wide Web browser. In addition to these products,
Apple also makes printers, monitors, scanners, a cell phone, a digital
video system, Web services, and networking products. Apple also
operates a chain of retail outlets. The Companys customers are
primarily in the consumer, SMB, education, enterprise, government
and creative markets. Apple has no set geographic target area in
particular. By leveraging the expansive reach of the internet and
multiple distribution channels, Apple serves both domestic and
international markets. The market demographics served by Apple are:
1. Middle/Upper income people who can and are willing to pay a bit
more for a better user experience; 2. Individuals in a profession that
require high-powered computing performance and expansion
capabilities, networking functionality, and seamless integration with
complementary products, such as professionals in media and design;
3. Music enthusiasts and fans especially between the ages 12-35; 4.
People who like to have fun with technology.
Swot Analysis:
Strengths:
1. Strong Brand Equity
2. Successful business model
3. Unique Retailing Strategy
4. The Apple Halo Effect
5. Expansive opportunities due to
new focus.
Opportunities:
1. Strategic relation with Nike.
2. Less expensive new product
lines.
3. Multiple streams of revenue.
Major Competitors:

Weakness:
1. Uncertain health of Steve Jobs.
2. Weak brand in emerging markets.
3. Vulnerable to acquisition.
4. Rumours of faulty products.
5. Apple TV less promising
Threats:
1. High level of competition.
2. Substitution effect.
3. Vulnerable to leaks and law suits.
4. Cannibalization of IPod by IPhone.

Against the Mac: HP, Dell

Against the IPod: Creatives Zen, Microsofts Zune and
SanDisks Sansa players.
Against ITunes and Apple
TV: Napster and Rhapsody/Real Player
Against IPhone: Nokia, Sony Ericsson, Motorola and Blackberry.
With favorable trends, it is reasonable to assume that Apple will
continue to increase in its sales, earnings, and market share just as
long as it keeps developing and acquiring new strengths. Competitors
will find it difficult to compete against the company if Apple continues
to strive for innovation, as it is its mission, continuing its welldeveloped marketing plan, further developing more high quality
products, and taking advantage of its opportunities.
Strategy Summary:
The Companys business strategy leverages its unique ability to design
and develop its own operating system, hardware, application software,
and services to provide its customers new products and solutions with
superior ease-of-use, seamless integration, and innovative industrial
design. The Company believes continual investment in research and
development is critical to the development and enhancement of
innovative products and technologies. In addition to evolving its
personal computers and related solutions, the Company continues to
capitalize on the convergence of the personal computer, digital
consumer electronics and mobile communications by creating and
refining innovations, such as the iPod, iPhone, iTunes Store, and Apple
TV. The Company desires to support a community for the
development of third-party products that complement the Companys
offerings through its developer programs. The Companys strategy also
includes expanding its distribution network to effectively reach more of
its targeted customers and provide them with a high-quality sales and
post-sales support experience
This report has focused the analysis specifically on Apples line of
portable digital music players, especially in the U.A.E. The marketing
mix that has been implemented for this line is as below:
Marketing Mix
Product:
Price:
- 4 classes of Ipods differentiated by Premium pricing strategy has been
size, hard disk capacity and other
used.

features like user interface and

internet connectivity.
- Strong brand image and packaging
that has won various design
distinction awards
Promotions:
Apple through ABM, their
independent marketing company
has used many promotional
strategies successfully such as
advertisements in usual media like
magazines and newspapers, instore advertising, sponsorships, tiein-promotions, premiums, cross
promotions and retailer contests.

Ipod Shuffle-1GB: AED 199; 2GB:

AED 299
Ipod Nano-8G: AED 649; 16GB: AED
849
Ipod Classic-120GB: AED 1,099
Ipod Touch-8GB: AED 999; 16GB:
AED1299; 32GB: AED1499
Placement:
Apple Ipod uses indirect distribution
in the U. A. E, through ABM. ABM
provides functions such as:
Fragmenting bulk supplies of
inventory, Giving financial services
to retailers and Increasing ease of
customer purchase. They have a
retailer network that aligns with
their brand image.

As most people agree, Apple is a company leading the herd into new
realms, discovering new technologies and new civilizations, boldly
going where no company has gone before. Unfortunately, it seems not
even Apple could escape recession completely, since their cool down
has started already, despite the excellent results shown by some of the
latest sales reports. But the fact is phones and computers have
become increasingly essential to society and consumers will still buy
them if the recession turns into a depression and there are a couple of
suggestions that can be made to capitalise on these consumer needs.
Under the present situation when consumers would hesitate to shell
out premium prices, it would be a most appropriate time for Apple to
make their pricing more flexible. By marketing their products under
various promotional schemes that offer discounts as frequently as
possible Apple could capture that segment of the target market that
have always been aspiring to own the brand and its products but have
never been able to afford to do so. Apple is also notoriously famous for
its cult marketing. It is suggested that Apple could focus more on cult
marketing their products to the youth market through strategies like
sponsoring events for youth like rock concerts and sports competitions.
Getting them hooked on to the brand and making them Apple fanatics
would go a long way in enhancing Apples market leadership in the
future. In terms of product attributes, Apple is reputed for its
innovation and technological and aesthetic superiority. For ensuring the

success of Apple, this is the way it has to remain. However Apple could
channel this innovation in collaborating with other successful brands
like auto manufacturers through various strategies like co-branding for
bringing them closer to and sustaining market leadership.

TABLE OF CONTENTS
A.

STRATEGIC ANALYSIS
B.
BEST OF APPLE MARKETING
STRATEGIES
C.APPLE MARKETING AUDIT (PRODUCT
IBANGLE)

Introduction to the Organization

The story of Apple, Inc. begins April 1, 1976, when Steve Jobs,
Stephen Wosniak, and Ronald Wayne founded it. A mutual friend first
introduced Jobs and Wosniak in 1971. The relationship grew closer as
they both became members of the Homebrew Computer Club. As an
interest, Wosniak manufactured microcomputers that were less
expensive than other existing microcomputers. Steve Jobs recognized
Wosniaks abilities, and Jobs was able to convince Wosniak that as a
team, they could manufacture personal computers for sale. Wosniak
was the brains with his designs and natural ability while Jobs had the
ability to strategically push the computers to market (Gadchick, 2012,
p. 11). In January 1977, Jobs, Wosniak, and Mike Markula incorporated
the company as Apple Computers Inc. Mr. Markula funded
approximately $250,000 for growth. Wayne sold his ownership stake
back to Wosniak and Jobs for approximately $800 dollars.
The company first created the Apple I computer in Jobs garage.
The Apple I differed from other computers at the time by utilizing a
MOStek 6502 processor in lieu of the industry standard Intel 8080
processor. Wosniak was able to utilize the MOStek processor and create
the computer with fewer parts than industry norm, yielding a price that
was less than competition. The original market demographic for the
Apple I was to individuals who were interested in computers and
electronics. In 1977, the company grossed approximately $774,000 in
sales for the Apple I.
In late 1977, Jobs and Wosniak introduced the Apple II at the
West Coast Computer Fair in San Francisco, CA. The Apple II was
developed as a general-purpose computer. The specs for the Apple II
maintained the same MOStek 6502 processor and also included color
graphics as well as an audiocassette drive with storage capacity of 4kb
of Read Access Memory (RAM). The first three years of the launch of

the Apple II yielded sales of approximately US$139 million deeming the

computer a success.
The company introduced its third computer in 1980 as the Apple
III. The computer ran eight applications, but the continuous technical
problems caused the removal of the Apple III from the market. The
Apple III re-launched in 1981 with 128kb RAM, updated software
system, and a lower price of $3,495 USD, but it did not yield a
successful campaign.
Apple acknowledged that major issues with the first three
computer models were each operated under different operating
systems, limiting market share. Jobs recognized the issue and
immediately revamped the concept by creating a new computer and
new operating system through the utilization of the talents of hardware
and software designers. This led to the development of the Macintosh
(Mac) personal computer. The Mac was released in 1984, along with its
operating system, Mac OS, which was able to run on all Apple
computers. The 1984 Mac had 128kb of memory and a 32-bit
microprocessor. The original Mac was smaller, less costly, more
accessible, easygoing, and flexible. The computer was able to be
utilized for graphics, not just for calculations as most computers
performed at the time. Despite its advantages, the Mac suffered from
several problems, in particular, its lack of compatibility with IBM
personal computers, making it difficult to sell Mac computers to large
corporations that were already using IBMs, (Murray, Goode, & DiMuro,
2009, p. 8).
In 1984, the company experienced less than stellar performance
from the sales of the Mac. The sales projections for 1984 were moving
80,000 units while only approximately 20,000 were sold. In 1985, Mac
sales averaged 2,500 units per month. The Apple board was not
pleased with sales, and Steve Jobs left Apple in 1985. Jobs left Apple
and decided to start his own venture he called NeXT, a company
dedicated to the creation of personal computers for students. NeXT
experienced eight unsuccessful years until finally realizing growth in
1993. During this time period, Apple was experiencing a decline as
competition increased, lack of innovative products, and hardware and
software pricing decreases, (Murray et al., 2009, p. 18-19).
In 1996, the existing CEO Gil Amelio hired Steve Jobs as an
informal advisor to Apple Computers with no contractual commitment.
During this same period, Apple also purchased NeXT from Jobs for the
amount of $400 million USD. Starting from the last quarter of 1997,
Apple Computers posted profits in three consecutive quarters and
named Steve Jobs as the interim CEO in 1998. Jobs launched the iMac

in 1998. The iMac was marketed directly towards first time computer
buyers and individuals shifting to Macs from other computer platforms.
Steve Jobs was officially named CEO of Apple Computers, Inc. in 2000.
He remained focused on the iMac computers and gained market share
by releasing new models of the Macs.
In 2001, Apple Computers, Inc. introduced the first version of
iTunes. iTunes, at the time, was equivalent to Microsofts Media Player
that had the ability to burn CDs for playback. A few years later, Apple
launched the iTunes Music Store which allowed customers to purchase
music and would later modify its capabilities to allow Windows users
access.
Fast forward to 2007, the company removed Computers from
the name to become Apple Inc. The change of name was to recognize
their strategic focus was no longer on personal computers. Apple
focuses on multiple facilities of electronic media; iPhone, iPad, iPod,
iTunes, iMacs, Mac Minis, Apple TV, and all platforms revolving around
the iOS operating systems.
In January 2011, Steve Jobs announced that he was taking an
indefinite leave of absence due to health issues. Tim Cook, the Chief
Operating Officer at the time, took over as interim CEO. After a long
bout with pancreatic cancer, Steve Jobs passed away in October 2011.
Tim Cook was named as the full time CEO. Under Tim Cook, the
company has released iCloud, a software platform that allows media
sharing between multiple devices, iBooks, iPhone 5, and the recently
released iPad mini. Apple has remained a publicly traded company with
most investment houses classifying the company at 4 out of 5 stars
and a strong buy.

II

Identification of the Industry and the

Competitors

In order to properly identify what industries Apple belongs and who its
competitors are, we have to look at the main products offered by the
company. There are six main products:
1 Mac which is a line of personal computers (PCs) designed,
developed, and marketed by Apple Inc.
2 iPhone line of smartphones designed and marketed by Apple
Inc.
3 iPad line of tablet computers designed and marketed by Apple
Inc.
4 iPod line of portable media players designed and marketed by
Apple Inc.

5 Apple TV digital media receiver developed and sold by Apple

Inc.
6 Software different software developed for all of Apple Inc.s
products.
Analyzing this range of products we can identify that Apple mainly
belongs to four industries: computer hardware, computer software,
digital distribution, and consumer electronics.
Companies who engage in assembling and manufacturing
computers, computer hardware, and computer peripherals compose
the computer hardware industry. From the perspective of computer
hardware industry, the following competitors can be identified: Dell
Inc., Hewlett-Packard Company, Research In Motion Limited, Samsung
Electronics, etc.
The computer software industry can be described as the
designing and developing of computer programs and related data that
provide the instructions for telling computers what to do and how to do
it. This industry is considered to be one of the most innovative and
fastest growing sectors of the global economy. The main competitors of
Apple in this industry are Microsoft Corp. and Google Inc.
The digital distribution industry implies the delivery of media
content such as audio, video, software, etc. using online delivery
mediums, such as the Internet. The main competitors in this area are
Google Inc. with YouTube, Windows Corp. with its Windows Azure
content delivery service, NetFlix, Amazon with Amazon CloudFront, etc.
The consumer electronics industry involves the manufacture,
distribution, and sale of communications and entertainment devices
such as cell phones, digital and video cameras, MP3 players, VCRs,
DVDs, televisions, etc. From the viewpoint of this industry, the main
competitors are Samsung Electronics, Google Inc. with its Motorola
devices, Amazon with its Kindle tablets, Dell Inc., Hewlett-Packard
Company.

III

Analysis of the Industry

Strategic Groups and Competitors

When we look at Apples business operations, we realize that
there are many strategic groups in which it has a stake in. The most
obvious is the Personal Computer (PC) industry where it first opened its

doors for business. Its competitors come from many groups/subgroups

in this highly competitive industry.
The first group involves home/business computers which includes
Hewlett Packard, Dell, Gateway, Alien-Ware, Acer, Lenovo, etc. The
next group includes software design. Competitors in this group include
Microsoft (Windows), Linux (Open Source), Google (Android), and RIM
(Blackberry). There are several software subgroups that include music,
video, security, e-books, etc. A few well-known competitors are Napster
(music), Amazon (video, music, and e-books), Microsoft (Internet
Explorer), and Google (maps).
The next subgroup involves server markets and competitors of
this subgroup include HP, Sun, SGI, and IBM that provide high
performance computing, web-serving centralized storage, etc. Apples
Mac products hold less than 5 % of the total U.S. PC market and less
than 3 % of the international market. This includes notebooks/netbooks
as well. One could also view networking as part of this group.
Networking competitors include Cisco, Net-gear, etc. Much of Apple
ideologies can be attributed to Steve Jobs whose computer ideas
morphed across various industries (Pui-Wing Tam, 2001).
The next industry that needs to be mentioned involves the music
player arena. Apple transformed this industry overnight with the
iPod/iPod-Touch. Few competitors have come close to stealing market
share from Apple. The few who have tried include Microsoft (Zune),
Scandisk, Samsung, and Creative Labs. Apple has used its software
(iTunes) to gain a competitive advantage over its rivals. iTunes has
significantly boosted the iPods popularity.
The third industry in which Apple operates includes the smart
phone market. Apples iPhone innovation transformed the mobile
phone industry. The iPhone has been updated six times and dominates
more than 60% of the mobile phone industrys total market share.
Apples smart phone market competitors include Samsung, Nokia,
Microsoft, Sony RIM, Motorola, etc. who have attempted to imitate the
touch screen, app store, and other technological advances that Apple
has made almost essential for smart phones. There are also subindustries that Apple has entered. Apple practically developed the
tablet PC market with the iPad innovation. Some notable tablet PC
competitors are Amazon (Kindle Fire), Windows (Windows tablet PCs),
and Samsung (Samsung Galaxy Note). This industry is the most active
subgroup in the PC industry at the moment and has decreased demand
for home PCs as a result. Apple is also trying to compete in the internet
TV/media player industry with its Apple TV/Icloud offerings which is
competing with D-Links (Boxee), Rokus (Roku 2), and Western

Digitals (WD Media Player) respectively. Apple TV has been refined

several times and has given Apple another revenue source (McMahon,
2012). These represent Apples main strategic groups and competitors
that it is competing with for market share.

Intensity of Rivalry Among Existing Competitors

The PC industry is highly competitive and consolidated due to
the aggressive pricing policies, after sale services, holistic support,
online direct selling, intensive marketing, innovative ambitions, and
profound product design ideologies. As a result, Apple has sunk a lot of
its cash flow reserves into R&D in order to justify higher profit margins
from within the industry. One could point out that since the market is
dominated by a small number of large companies, an oligopoly market
structure comparison is not unrealistic. Companies have become
interdependent on one another as many hardware components are
intertwined causing sales, market share gains, and ROI margins to put
companies in competitive spirals. Therefore, rivalry intensities are at
all-time highs because PCs have become perishable products that
become outdated within a few years. As a result, new equipment is
necessary to keep up with industry standards concerning performance.
Perishable products create a temptation for management to slash PC
prices and sell them while they still hold some value before ultimately
becoming outdated. For consumers, switching costs are low because
hardware components are standardized, making innovative design
realities much harder to use as a competitive advantage. One
advantage that Apple has used to differentiate itself from its direct
competitors involves product integration. This involves linking the iPod,
iPhone, iPad, and Apple TV with iTunes by using it as a loading-station
for its various media product offerings. Most of Apples direct
competitors have been unable to duplicate this competitive advantage
since Apple has spent a lot of its cash flows on R&D. Taking this a step
further, Apple has also opened its own retail store locations that
specifically service its products to improve its technical support and
product services overall. Another unique strategy that Apple has
developed involves one of its closest competitors Sony. Apple has
partnered with Sony to make certain iPod mechanical components.
This displays a win-win outcome concerning this competitive rivalry.
Apple has consistently met its large customer base expectations of
developing innovative products holding Apples profits high and losses
at a minimum (Apples Mac, Oct 2012). Some notable competitive
rivalry realities include HP who outsourced most of its production to
Asia to lower costs, Dell, who won significant market share with its
direct selling and build-to-order strategies, Lenovo, who has focused its
bread and butter strategies in China, and Acer, who secured its spot in
Europe by acquiring Packard Bell. That being said, Apple has developed

a cult following amongst its users and sales have increased as a result
of its pop-culture differentiation advertising schematics, such as, white
ear buds for I-products. Surprisingly, Apple has been able to buy
from and sue its direct competitors at the same time (Samsung Coo,
Oct 2011).

Threat of New Competitors Entering the Industry

When you think about the threat of new entrants into the PC
industry, you would think entry would be easier considering the
number of competitors is small, but this is far from reality. There is
several entry barriers that exist that make it difficult for smaller PC
companies to make a successful impact in comparison to larger
companies. The most obvious cost involves the elevated direct cost of
manufacturing. Most companies in the PC industry produce their own
parts in some capacity, for example, Dell, HP, Apple, etc., and high
factory fixed costs to establish/maintain said factories are capitalintensive. This reality allows established companies to take advantage
of economies of scale. Smaller firms that are willing to compete will
have higher average costs that make it harder to achieve higher
margins/lower costs in order to survive and compete successfully. The
PC market also lacks high levels of brand loyalty. Implying that certain
items lack a level of preferred preference by customers as a result of
lower product quality, low patent protection, diminishing brand
advertising efforts and high product standardization realities. However,
Apple is the exception to the rule since the company has relied heavily
on brand loyalty and word of mouth marketing. Another entry barrier
involves input costs from parts not produced by a hardware firm.
Companies like Microsoft and Intel who produce input technology have
significant supplier power because they produce standard industrial
products. With monopolistic influences, these companies can drive up
costs and smaller companies with decreased buying power will have a
tougher time negotiating lower prices. Larger PC firms also have the
luxury of spreading overhead costs, marketing/advertising expenses,
and fixed costs over large volume orders. This is advantageous
because it gives larger firms more flexibility to make balance sheet
adjustments that smaller firms will not have the luxury to exploit.
Product/service support and maintenance costs are other barriers that
can create profit burdens for smaller companies. It is fair to say that
most businesses and individuals lack the necessary know-how to repair
computer hardware and software unless they are the parent
manufacturing company. Therefore, smaller computer companies must
have the necessary technical information, staffing, and know-how to
correct any end user problems that its customers experience;
otherwise, they will become irritated and less likely to buy its products
or services in the future. This is where a larger company like Apple has

an advantage. It has already experienced certain industrial growing

pains. In the past, Wall Street has underestimated Apples growth
potential on multiple occasions (Peers, July 2011). Another large entry
barrier involves a heavy investment into R&D. R&D investments
require a lot of reserve cash flows in order to stay ahead of the
technology curve and remain relevant. It is harder for start-up firms to
develop their own parts because they lack the necessary resources
that larger firms are afforded because of established brand awareness
realities. Apple is working on a new multimedia messaging service
known as MMS that will transform the way people text message (Apple
Inc., Sept 2012).

Threat of Substitute Products or Services

Substitute and compliment products are a major threat for the PC
industry for companies similar to Dell, Gateway, IBM, HP, etc., but this
is not a problem for Apple in general. A lot of consumers know that
these companies all use similar software offerings, Microsoft Windows,
indicating that Apples largest competitors manufacture products that
are close substitutes for one another. Apple has the ability to gain
and maintain a firm grasp on specific demand markets. Apple has
developed its own operating system which has allowed the company to
differentiate itself and charge higher prices for its offerings
respectively. Apple is not a substitute for Microsoft Window loyalists
and vice versa with Apple loyalists. Historically, Apple and Microsoft
have put safeguards to eliminate cross compatibilities with their
products which have hurt the PC industry overall by limiting both
companies to acquire new potential customers on both sides. That is
not saying that Apple is not addressing these concerns with Apple Boot
Camp. Apple Boot Camp allows Apple computers to interface with
Microsoft computers, but I would argue that certain Microsoft users
would be wary to replace their PC with a Mac due to consumer high
demand inelasticity. As a result, Apple has stuck with developing its
own software. Apple and Microsoft have a love-hate relationship that
goes back as far the 70s and 80s (Vascellaro, Jan 2012). Apple
realizes that competing with other companies can be tough so it has
addressed this concern by developing products like the iPod, iPhone,
and iPad etc. that are direct complements with its Mac computers. It all
has to do with cross selling to your established consumer following
base to open up new untapped cash flow opportunities for Apple to
exploit. This strategy has allowed Apple to attract Microsoft loyalists by
selling popular products like the iPod, iPhone, and iPad to consumers
packaged with its Mac computers that are compatible with one another
and create a competitive advantage that Microsoft has been unable to
match. When we examine each product individually, the iPod does not
have many close substitutes, the iPhone does have close substitutes

and the iPad is seeing close substitutes as the tablet PC market

continues to expand. The iPhone can be replaced with basic phones or
any VoIP service (Vonage) and the iPad can be replaced with e-readers
or other smart phones depending on user preferences. I would also like
to mention two more forces in Porters amended model that influences
PC compliments. The first one involves complementors as value adding
institutions involving specific products. This can be seen with third
party software sold with computer bundles. In other words, a PC or Mac
is more valuable if it comes with added software to enhance its uses.
The second force involves the relative power of special interest groups,
unions, and governments who can exert their own agendas on firms
like Apple that can influence how complimentary products are
marketed and sold. In other words, if Apple develops a lasting
monopolistic power over its offerings that lock out existing competitors
like Microsoft did, then the iPod, iPhone, and iPad could lose market
exclusivity as an industrial leader. Thus, Apple has made its products
compatible with Windows to avoid Microsofts past mistakes with its
product offerings. The users of the iPod, iPhone, and iPad tend to be
educated users who do not want their i-products associated with
negative outside forces like unfair labor practices that Nike had in the
90s (Anonymous, March 2012).

Bargaining Power of Buyers

When we discuss the bargaining power of buyers in the PC
industry, we see the competitive buying position of consumers is high
overall. This is mainly due to the low switching costs associated with
buying PCs respectively. The PC industry is very competitive when we
look at the various options and features available and generally
speaking, computers perform the same functions but with hardware
differentiators. Technology changes every three to five years in the PC
industry. This represents the main price differentiator among most
home PCs, laptops, netbooks etc. PCs are built with several categories
in mind that includes: high end gamers, casual users, business users,
media users etc. As a result, each PC that is built contains different
hardware specifications to meet each users individual needs. High end
gamers want more RAM for faster real time gaming, casual users want
basic hardware to surf the internet/check e-mail, and business users
want a balanced machine so multitasking can be completed efficiently
and in a timely manner. Anyone of these user categories could
customize a PC according to specific hardware user preferences giving
end users the power to ultimately control architectural designs. As a
result, customers can be the engineers of their PCs which make it more
difficult for PC firms to gain significant market share since there are
many options available to choose from. That being said, the opposite is

true for Apple. Apple has manufactured many of its component parts in
house including its own hardware and software. Apples Mac is set well
above PC industry default pricing models because Apples brand is
unique and one of a kind. Some would say that this is a problem for
Apple since most Windows based PCs are much cheaper than Mac
based alternatives. However, Apple realizes this, but it is going after a
specific target market that wants an alternative to Window user
interfaces. Apple continues to develop all of its technological upgrades
in house making it harder for buyers to dictate price and policy that
has a huge impact on Apples core business strategy. Apples core
followers see the Mac as a luxurious product like a Mercedes, BMW,
etc. are viewed in the auto industry. If the stock market indicates the
true value of a company then Apple is worth a lot right now (Kessler,
2012). If we look at other items that Apple sells in iTunes like videos
and music, then consumer buying power remains low as well.
Consumers cannot dictate media prices because the parent company
ultimately determines their prices and only uses Apple as a selling
medium for their offerings. The bottom line indicates that Apple limits
a lot of buyer power because it manufactures a lot of its own parts in
house which gives it more control. Another too Apple has added to its
arsenal is the new iPhone mapping software (Sherr and Efrati, 2012).

Bargaining Power of Suppliers

When we look at supplier power in the PC industry, we see that it
is a force to be reckoned with. Some might say that this does not affect
Apple because it produces its own operating system, Mac software,
etc., but it is important to remember that most of its Mac computers
are powered by internal chips made by Intel, AMD, IBM etc. So why
does this phenomenon occur within the PC industry? The answer is
simple. These firms sell products without any real substitutes. They
possess a diversified operations portfolio that empowers their business
transactions to be non-reliant on one specific sector or sectors, and
they exercise dominating business strategies in the PC industry overall.
Intel seems to have the largest supplier power advantage because of
its long term contract with Dell and a new alliance with Apple who had
previously used IBM chips. Although, one could point out that IBM has
made up for this shortfall by supplying its chips to Microsofts X-Box. So
how much power does a company like Intel really possess? Most
industrial analysts would conclude that its power level includes
monopolistic qualities which allow Intel to raise its prices on hardware
companies. As a result, companies like Apple would follow by raising
their prices accordingly and pass the added expense on to the
customer. Although, Apple may not be directly affected by price
fluctuations that is passes on, it will be indirectly affected by its
existing customer reactionary mannerisms that persuade them to

switch to rival PC computers that use Windows and are much cheaper
when price comparisons are made. To make up for this industrial
inequity, larger companies like Apple can buy in bulk allowing for lower
unit prices while smaller lesser known companies who cannot buy in
bulk will be charged a premium. Larger PC companies have also
formed alliances with Intel and AMD concerning R&D that create cost
synergies that ultimately leads to lower negotiated individual unit
prices. Overall, Apple is vertically integrated and possesses certain
competitive advantages when discussing supplier power. When Apple
developed the iPod, iPhone, and iPad, it integrated all three with
iTunes. The company is able control its own supplier power by not
outsourcing its media delivery software to an outside firm. In the last 35 years Apple has taken a strategic strategy risk by opting for Intel
chips which allows its Mac to branch out and expand its own market
share. This reality might increase Intels power over Apple but Apple
could make up for it with increased sales to Window loyalists that could
offset or produce additional profits over the incurred risk of increasing
chip costs to Apple respectively. In recent years Apple has decided to
work with competitors and suppliers in order to reduce operating
expenses and increase ROI margins (Carani, Sept 2012). Critics have
said that Apple needs to avoid large cross compatibility ideologies
otherwise user preferences for Mac competitors will change. Apple has
to keep a balance between expanding its market share and keeping its
industrial identity (Vascellaro, July 2012).

Potential Profitability of the Industry

Since Apple operates within many business industries, it is hard
to focus on one alone so I will mention several companies from several
different industries. I will classify each company into the following
categories in relation to Apples influence over them which are
destroyed, damaged, challenged, and benefitted. Let us begin with the
companies that have been destroyed by Apple in some capacity.
Hewlett Packard does a lot of business by selling printers because the
iPad has taken a considerable share of its PC market share. In 2011,
the company almost decided to sell its $40 billion revenue PC division
and leave the industry altogether. HPs entry tablet the Touchpad also
bombed in every aspect of its product life cycle in 2011 and Best Buy
was stuck with over 200,000 unsold units to pawn off on any person
who would buy it for 80% off its retail price at $99.00. Dell is the next
company that has been hurt very badly by Apple. Apples market
capital surpassed Dells in 2006 and Steve jobs wrote an e-mail to

Apple shareholders that stated Apples profits of 29 billion are actually

larger than Dells entire market place. The third company is RIMM
(Blackberry) who has dominated the mobile phone industry with its
Blackberry devices because of e-mail, text messaging, etc., but the
iPhone came in and toppled its dominance as the industry leader for
smartphones. In 2008, RIMMs stock was trading at $144.00 per share,
and by the end of 2011, it was trading for $20.00 a share. To add insult
to injury, when RIMM brought out its Blackberry Bold 9900 critics said
it was too little too late. The final company that was devastated by
Apple is Nokia. Nokia once claimed more than 50% of total market
share in the mobile phone industry. Today, Nokia holds about 15% of
the market and abandoned its own mobile phone software in favor of
Microsofts Windows 8 OS with the Lumina.
Next, we will look at some companies that have been damaged
by Apple. It is not irresponsible to say that Apples triple threat (iPod,
iPhone, and iPad) has made Microsoft more vulnerable over the last
decade. Under Stevel Balmers command, Microsoft has failed to
compete with Apples triple threat product combination. It has failed to
produce a single product to take away significant market share from
Apple. Balmer famously said that he would never let his kids use an
iPod or Google signifying Microsoft missed an entire business
computing operational shift. In 2010, Balmer displayed his that has
blinded his leadership visions while running Microsoft by suggesting
that Linux was a larger competitor for Microsoft than Apple. The next
company is Sony whose Walkman was replaced by the iPod when it hit
the market with a bang. Their Vaio laptops are being slowly replaced by
iPads as well. That being said, their chipsets are powering Macs, but
their PC business has dropped off.
The next category involves challenging by Apple. The main
company that starts off this category is Google. Google bought Android
and made it a legitimate iPhone competitor by recruiting a major smart
phone competitors. Google has battled Apples many patents and
expanded their patent portfolio by acquiring Motorola for $12.5 billion.
The final company in this category is AT&T who was so eager to covet
the iPhone that it let Apple dictate its own terms. AT&Ts actions may
have changed the mobile industry overnight.
The final sections cover companies that have benefitted from
Apple. ARM Holdings which designs the processor cores for the iPad
and iPhone have profited from Apple ROI margins. Apple has invested a
billion dollars in Sharp who makes Apple laptops and LCDs. This has
since produced ample returns for Sharp. Corning GLW makes the
Gorilla glass for the iPod Touch, iPhone, and iPad respectively. This has
helped increase its bottom line. Sprint is another company that has

benefitted because it got the iPhone in 2011 when Apple was loosening
the reins on their iPhone distribution plans. Sprint shareholders
experienced a boost for dividends paid from the agreement. Foxconn is
another relevant company because it manufactures many Apple
products, and STMicroelectronics follows close behind because it
produces the Accelerometer Gyroscope for new generation iPads.
Finally, Qualcomm makes the wireless baseband chips for the iPhone 4
and 5. Apples R&D efforts to help improve the iPhone have helped it
generate more than $40 billion in profits in 2012 (Badenhausen, Oct
2012). Apple has redesigned its core products and is looking for new
venues to branch out into. It is only a matter of time before Apple
starts buying companies like Twitter in order to dominate social media
like it has the electronic industry (Ingram, 2012).

What are the Critical Success Factors for the

Industry?
In all of the industries that Apple has operated within, it seems to
have a good grasp concerning its product offering basket within each
industry that it operates and contributes to its successes each year.
The first critical success factor that Apple has adopted includes
advertising and differentiation. Apple has been a major player when it
comes to advertising its brand to the masses. In 1984, Apple launched
the Super Bowl commercial initiating the think different campaign in
the 90s and it did the iPod people campaign in the 2000s
respectively. Apple even got an artist to do a special painting of its iPod
that is now hanging in New Yorks Museum of Modern Art. Apple also
developed its trademark white ear buds to differentiate i-product
owners from non-i product owners.
The second factor that Apple has mastered involves a wellrecognized and cherished brand name. In 2011, Apple was named the
most recognizable brand name in the U.S. and every 2-3 business
quarters Steve Jobs or an Apple spokesman would hold a pop-culture
unveiling event to showcase its new innovative product offering. Some
people also said Steve Jobs was crazy to fire Sears as Apples main
product distributor and open Apple retail shops. However, this move
has paid off big for Apple as a result. He also expanded Apples
distribution network through iTunes. iTunes has become Apples
signature online marketplace for Apple related products (e-books,
videos, music, TV shows etc.)
A third factor includes breath of product lines since Apples triple
threat has influenced many different industries ranging from the music
industry to the mobile phone industry. In addition, Apple started the
tablet PC business overnight. Apples impact on the stock market is

also relevant because it increased the EPS of the S&P 500 by 3% in the
fourth quarter in 2011 (Ray, April 2012). Other smaller factors include:
a solid strategic plan, large cash reserves on its balance sheet,
excellent supply chain management, relevant information systems,
and excellent retail locations/operations. Apple is looking to add VOIP
capabilities on the iPhone 6, and it must continue to use its
competitive advantages to stay ahead of its competitors (Fitchard,
April 2012).

IV

Analysis of the Macro-Environment Political

and Legal forces Affecting the Industry

Since the iPhone hit the scene 5-6 years ago, one of the main
political roadblocks for the iPhone has been so called grey markets.
This occurs when store owners import products from a foreign country
at a discounted price and resell them in their own store fronts at a
lower price compared to authorized retailers. Grey markets exist in
countries where a product like the iPhone is not currently or readily
available for purchase. Grey markets fill this void. The iPhone is readily
available in most western countries but not in countries like Brazil,
India etc. where grey markets are perfectly legal. Thus, the iPhone
market in these countries is opened up prematurely without Apples
consent. Apple will lose potential new sales before it can enter the
untapped market places. As a result, bootleggers will get a head start
on questionable iPhone distribution business dealings that would be
illegal in the U.S. Another political force involves China joining the
World Trade Organization. Chinas joining means lower
investment/market barriers for Apple to exploit lower labor costs and
gaining new iPhone market share from new cash flow sources. A legal
issue facing Apple continues to be Digital Rights Management (DRM)
protections/DRM hacking concerns. This battle involves copyright
infringement barriers that Apple must carefully abide by. Apple has
avoided potential lawsuits by striking deals with Media company owner
licensing and royalty distribution agreements that have kept Apple on
the right side of the law. Apple wants to avoid fates similar to those
suffered by Napster and other companies that have employees illegally
downloading files. Apple has accomplished this by integrating iTunes
into its strategic strategy. Another political barrier for the firm has been
pressure from EU companies for the iPod/iTunes combo to be
compatible with rival music products. This is the same fate Microsoft
suffered with Windows source code because rival software/third party
software was not compatible either in many cases. Microsoft was
forced to open up its source code to the industry. Apple was one of the
first companies to introduce its own format for music sold through
iTunes in their own AAC music format. Apple tried to protect its market

share by making it harder for its songs sold through iTunes to be

incompatible with other mp3 players in the beginning. Since then,
Apple has relaxed some of these barriers by accepting the mp3 format
on its iPod but continues to use iTunes as its main product loading
default hub for the iPod. Another legal issue hit Apple in 2006 when the
SEC investigated the firms issuance of stock options to its top
managers because of fears of insider trading and back door deals.
Another legal factor that presented itself involved the theft of its
iPhone 4 prototype that mysteriously disappeared. This criminal act
proves how valuable Apples R&D efforts were and how greatly the firm
influenced the mobile phone industry. Finally, Apples legal battle with
Nokia and HTC over patent infringements has also been a problem for
Apple over iPhone imitation technologies that can help rival firms steal
market share away from Apple.

Economic Forces That Affect the Industry

The most obvious economic force impacting Apples product
offerings revolves around branding its product lines as premium
products which makes them much more expensive than other
competitors rival offerings. During the current recession consumer
spending power will decrease due to premium products being viewed
as luxurious items. A lot of consumers will choose cheaper alternatives.
Thus, pricing becomes a major obstacle for poorer customers. Apple is
specifically targeting countries that have strong middle and upper
classes that most developed countries possess like the U.S., Europe,
Australia, etc. Developed countries are also excluded because they are
much poorer and have limited infrastructures that cannot support the
iPhones vast capabilities. iPhone sales could be hindered globally.
Economic inflation has been an economic opportunity for Apple
because it has purchased foreign currency to offset the dollars decline
in value and the firms international revenues have increased as a
result. Apple is very efficient when it comes to managing its balance
sheet and this has actually led to the capital it has invested in its
operation to turn negative. A negative turn means Apple gets paid
faster for its products than it can make them (Winkler, July 2012). The
firm has learned a lot from its past economic struggles in the late 90s
and early 00s when it ultimately launched the iPod. The launch
increased Apples sales and volume orders to levels never experienced
by the company. Apple has also become the second largest dividend
payer behind AT&T at 10.43
billion yearly according index analysts (Shirley, 2012). Apples own
sales reputation has been a burden because everyone expects every
new Apple product to become a cash cow. This stigma backfired on
Apple in May 2012 when Apple was sued over Siri commercials. As a

result, Apple decided to give refunds to disappointed iPhone 4S owners

over these TV commercials that certain users thought were misleading
(Cline, May 2012). Recently, a large economic force hit Apple when
Scott Forestall, head of Apples new map App, was forced out when he
refused to sign an apology letter over the negative publicity associated
with the new mapping software he designed for the iPhone 5. John
Bronett, Apples head of retail operations, was also let go because he
had discontent with Apple store employees over low pay. Both were at
odds with other Apple executives over the firms long term goals and
both left on less-than friendly terms. Apples entry into the smaller
tablet market was only a matter of time even though certain Apple
executives resisted the iPad minis development (Lessin, Oct 2012).
Demand for Apple products worldwide appear to be healthy, and there
has not been a serious contender that has been able to take significant
market share from Apples line of products overall.

Social Issues Affecting the Industry

One of the main strengths that Apple has always strived for
involves its ability to make products with trendy and sleek designs.
Most of its products offerings are white in order to make it easy for
people to recognize them. For i-product owners, the only appropriate
time to upgrade their gadgets is when a newer version of an Apple
product comes out. Any other option would be socially unacceptable.
Apple was also one of the first companies to advertise the 12 and 17
inch laptops. It did so by including Yao Ming and Verlle Troyer
advertising the 12 inch PowerBook for Yao and the 17 inch PowerBook
for Verlle to signify that Apples laptops could be used by anyone no
matter what their social status or height measurements were. Social
demand trends are also changing with declining PC sales and
increasing tablet PC sales. Portability attitude shifts from bulky to
mobile. Apple has also created social consumer expectations
concerning i-product compatibility standards. In other words,
consumer products need to be compatible with Apple products and
have docking stations in order for consumers to use them with
everyday products that include stereos, digital picture frames, car
radios, etc. Apple has done a great job by making other firms adapt
their product lines to Apples designs because it involves product
designs that people can use in everyday social settings. Apple has also
made smaller versions and more color options available for its other
products like the iPod Nano, iPod Shuffle, and the most recent iPad Mini
in order to attract new market customers who want Apple products
available in more sizes and colors that fit their lifestyle preferences.
The firm has also developed Apps for its Apple store to complement
educational realities that include digital learning opportunities through
its iPad. This includes endeavors like e-books, watching video teaching

lessons, and audiobooks for enhanced learning capabilities for

everyday students. Apple has also created public social launch parties
that have turned into media events for its new product launches. In the
past, it was all about what Steve Jobs was going to unveil that would
change our lives over the next few years for the better. Recently, Apple
has developed new services like iCloud, a service that allows users to
store their media products online and allows people to access it
through wireless devices. iCloud can improve lifestyle convenience for
Apple customers. In Nov. 2012, the firm was awarded a patent for
artificially turning e-book pages on its iPod. The patent may seem
weird, but Apple wants people to think of flipping e-book pages as an
innovation that is only unique to Apple R&D product efforts. This is just
another example of Apple social ingenuity.

Technological Forces Affecting the Industry

The foremost technological issue concerning Apple deals with
technology itself because technology gets outdated every 3-5 years.
As a result, new product innovations outpace expired outdated
technology. Apple needs to continue to invest in R&D in order to
maintain its competitive advantage in the market place. Apple has
done a great job with products like the iPod that is categorized as a
product with more subtle types of changes as Porter put it. In other
words, these types of products are known as sustaining innovations.
They are updated technologically speaking with game changing
technological advances that no rival firm has been able to match.
Apple has done this by taking advantage of technological relationships
with third party companies who offer unique innovative capabilities.
Apple relies on Sony for its batteries, Wolfsons for the codec DAC,
Toshiba for its disk drives, etc. allowing Apple to maintain its core
strategic strategies within the market places it operates within. Apple
is also a firm that exploits new innovative technological advances
before its competitors do. It was the first company to take advantage
of touch screen technology by incorporating it in the first iPhone,
making a Wi-Fi enabled internet mobile phone, etc. The firm made it
easy to use for the masses and made it harder to copy for Apples
direct competitors. It also opened up the iPhone for third party apps to
operate on to make it more appealing to non-Apple enthusiasts.
Another technological problem for Apple has been its own protective
nature for its own core product offerings. Apple has tried to protect its
products from contamination with safeguards such as codec limiting
file format types like the AAC format for its musical downloads, MOV

video file format for its video downloads, making the iTunes software
for loading its media products exclusively, making software
compatibility barriers for its Macintosh computers, etc., and has
created headaches for new and existing Apple/PC users alike. Another
problem for the firm is that it sometimes tries to be too innovative with
its products. A recent example involved the firm making a
technological change to the iPhone 5 aka mapping software and the
backlash it received from its core fan base users. Another example
occurred in Nov. 2012 when it abandoned its message beta for its OS X
Lion software. Apple realizes that the best way to remain ahead of its
competitors is to hire the best and brightest talent pool and create a
popular company to work for. Apple is currently trying to design set top
boxes like its Apple TV for enhanced internet TV viewing experiences.
This is one area that Apple has not been able to dominate and it is
trying learn from product market failures in order to design a new set
top box with features that consumers expect. Apples new iPad Mini is
expected to rival Amazon Kindle Fire which is a whole new niche
market where Apple is trying to conqueror significant market share
comparable to how the original iPod did a few years earlier.

Threats and Opportunities of Organization

When we look at the potential opportunities for Apple, wireless
connectivity, and networking products represent massive new growth
opportunities that Apple can expand into. Apple has started the
process by developing Airport, a wireless networking technology that
allows users to create a computer network and connect to the internet
without networking hardware, cables, or additional phone lines. This
technology also allows Apple users to expand any Wi-Fi networks
range, print wirelessly, play music wirelessly on speakers etc. Another
opportunity for Apple to consider is the Super Wi-Fi technology that is
the next big thing to hit the computer industry. It is now being used on
a limited basis through 3G carrier networks leaving customers at the
mercy of a carriers mobile service. Traditional Wi-Fi networks run off
microwave signals, but Super Wi-Fi networks run off old TV frequencies
that can go for miles and miles while penetrating through walls. Super
Wi-Fi security systems can also protect entire corporate/college
campuses, track household pets, help medical patients with
emergency situations, etc. Apple needs to get into the bidding for
tower rights and property assurances in order to build a specific Super
Wi-Fi network that Apple users can access thus creating new ROI
streams for the firm in the future. Another opportunity for Apple
includes developing Apple components that are more efficient and
environmentally friendly. This can range from batteries that last longer
to Apple recycling programs for safe disposal to alliances with Green

companies for more efficient parts. Another opportunity for the firm
involves the development of new supply chains in developing countries
where untapped market potential can bring about new realities for
improved strategic direction. Apple should develop relationships with
middlemen in order to better understand foreign markets and use this
knowledge combined with its current market experiences to grab new
customers and build brand loyalty. This is true for the Chinese market
place where natural resources are used for Apple products and positive
organizational alliances/commitments will ensure the rapid growth of
Apples three main products (iPod, iPhone and iPad). By doing this,
Apple can use its trend setting strategy to achieve a cult following
internationally to expand its end user base in developing countries.
Apples stock is expected to increase exponentially if and when it
expands into third world markets that have yet to be developed and
transformed for developed technologies (Lessin, Oct 2012). One of the
most obvious threats to Apple has been created as a result of its own
successes in the market place that can be referred to as cocky
comfortableness. Basically it means that Apple gets too confident by
thinking its products will remain industry leaders without innovative
strategic planning. Such an attitude will allow a competitor to develop
a product under the radar and steal significant market share from
Apples big three i-products. In other words, Apple should not let
their foot off the gas when it comes to strategic innovation. Another
threat has to do with the tablet PC industry that Apple defined early on
with the introduction of the iPad. It includes an increase in market
competitors that can develop into direct competitors if Apple does not
continue its innovative strategy. Amazon is a great example because it
is a company that no one thought would revolutionize the tablet PC
market further with its development of the 7 inch Kindle Fire. Apple
missed this potential market completely and Amazon became a direct
competitor that Apple had to respond to with the iPad Mini creation.
Another potential threat has to do with the ongoing recession that
could impact Apples pricing models for all of its products. Hidden
inflation can appear out of know where and can force companies like
Apple to raise the prices of their products. The increased cost is passed
onto consumers, or could force the firm to discontinue products with
limited ROI future potential. Apple has to watch products that have
dominated the market place a long time and are in the latter stages of
the product life cycle. One such product involves the iPod because
there have been many different versions. Its earning ceiling has
dropped over the years because of the vast array of mp3 and video
players in the market today. Music playing features are being
incorporated into other everyday products like cell phones and have
reduced the need for iPods even further. The iPod is integrated into the
iPhone/iPad respectively. Apple has to realize that some of its newer
products could be indirect competition for its older products as

technology improves within various industries (Badenhausen, Oct

2012). Microsoft Windows 8 is also a new threat to Apple because of
the innovative idea to incorporate tablet software functions into
desktop operating system software. If Windows 8 takes off and
becomes the new norm, Apple will have to incorporate some of its iPad
technologies into its Macintosh brand which could include apps, touch
screen monitors etc. Another threat includes VUDU, Netflix, Amazon,
and other companies that stream live video, movies, TV shows etc. to
TVs for entertainment revenue. Being good at everything is a large
threat because being the best requires product upgrades and
maintenance that can be hard even for a company like Apple to sustain
and maintain.

What is the organizations measurement and

control system?

Apple has maintained financial strength through the turbulences

of the market over the last few years. Apples strategy is based on a
differentiation strategy. They rely on innovative and unique products
and services to gain a competitive advantage while competitors
appear to be competing mainly with a low-cost strategy (Apple, Inc.,
2012). Apples differentiation focus can be seen in their research and
development expenses. From 2010 to 2012, research and development
expenses have almost doubled along with their current liabilities.
However, their operating income has tripled from 2010 to 2012. In
addition, Apples financial reports indicate that they do not have any
current long-term or long-term debt (2012 Yahoo!, Apple Inc. (AAPL)).
Apple experienced an increase in sales in all of its products and
services during 2011 and 2012 except for the iPod and Desktop
product categories. These products have seen a decrease in sales
since 2010 (Apple, Inc., 2012).

Profitability and Performance

Along with sales of products and services, Apples financial
statements are growing as well. Net income margin has increased from
2010 to 2012 by 6% to 27%. Apple has also experienced an increase in
gross profit margin, return on assets, return on equity, and return on
sales. All of these measurements indicate that Apple is increasing their
profitability. Apple suggests that their success in this area is due to
their constant focus on innovation and differentiation (Apple, Inc.,
2012).
Despite Apples increased profitability and positive performance,
competitors have not experienced the same increases. Google and
Hewlett-Packard Company have managed to maintain their profitability
margins over the past three year. Research in Motion Limited and

Microsoft have not been as lucky. They have experienced a decrease.

Even though Apple has experienced an increase and its
competitors have not, Apples net income margin is still less than that
of Google and Microsoft. Apples gross profit margin is 44% compared
to Googles 65% and Microsofts 76% (2012 Yahoo!, Apple Inc. (AAPL);
2012 Yahoo!, Google Inc. (GOOG); 2012 Yahoo!, Hewlett-Packard
Company (HPQ); 2012 Yahoo!, Microsoft Corporation (MSFT); 2012
Yahoo!, Research In Motion Limited (RIMM).

Leverage
Leverage is another field of measurement that Apples financial
reports indicate they are performing well. Leverage indicates how a
company is using borrowed funds in its operations. Ratios such as
debt-to-asset, debt-to-equity, and long-term debt-to-equity can be
used to measure leverage. The higher these ratios are for a company,
the higher the risk involved with the investment can be for investors.
Over the past three years, Apple has managed to slightly decrease its
debt-to-asset and debt-to-equity. Long-term debt-to-equity has held
constant at zero due to Apples zero balance in long-term debt during
2010, 2011, and 2012. One approach Apple can use to improve their
debt-to-asset and debt-to-equity is by lowering the accounts payable
balance.
Research in Motion Limited and Microsoft managed to decrease
their debt-to-asset, debt-to-equity, and long-term debt-to-equity in
their latest reported fiscal years, Google held these three fields
relatively constant, and Hewlett-Packard Co. increased all three
measures.
An important leverage measurement tool for current or potential
shareholders is debt-to-equity as it indicates the level of funds being
used from creditors associated to that of shareholders. Compared to
competitors, Apple ranks in the middle. Apple has lowered this rate,
but they are still higher than Research in Motion Limited and Google.
As aforementioned, one method Apple can use to lower this rate is to
lower the accounts payable balance.

Liquidity
Liquidity measures a companys ability to cover its short-term
debts. The most common measures include, the current ratio, quick
ratio, and working capital. Apple has experienced a decrease in the
current and quick ratio. This indicates that Apple has decreased its
ability to pay short-term debt obligations. Apples current assets and
current liabilities have both increased from 2010 to 2012; however, the
current liabilities have increase at a greater rate. It appears the
accounts payable are the main factor for the increased current
liabilities. Apples current and quick ratio has dropped from
approximately 2.0 to 1.5 over the three-year period. Working capital at

Apple dropped from in 2011 from 2010s reported $21 billion but
picked back up in 2012 to $19 billion (2012 Yahoo!, Apple Inc. (AAPL)).
Apples competitors except for Hewlett-Packard Co. enjoy a
current ratio greater than 2.0. Microsoft and Google have quick ratios
of, respectively, 2.57 and 5.92. Googles high quick ratio is due to their
reporting of zero inventories. Working capital of Apples competitors
ranges from $579 million to $52 billion.
Apples current ratio and quick ratio performance is only better
than Hewlett-Packard Co. who has not had the greatest success story
during recent years. Apples figures are not alarming; nonetheless, it is
something that should not be overlooked. Their working capital ranged
in the middle of its immediate competition. Apple could lower current
liabilities or increase current assets at a greater rate than current
liabilities to combat the recent decrease of the current and quick ratios
(2012 Yahoo!, Apple Inc. (AAPL); 2012 Yahoo!, Google Inc. (GOOG);
2012 Yahoo!, Hewlett-Packard Company (HPQ); 2012 Yahoo!, Microsoft
Corporation (MSFT); 2012 Yahoo!, Research In Motion Limited (RIMM)).
Financial Analysis Measurements
APPLE, INC.
29-Sep-12
Stock Price

24-Sep-11 25-Sep-10

$664.07

$400.74

$289.75

Current Ratio

1.50

1.61

2.01

Quick Ratio

1.48

1.58

1.96

Asset Turnover

0.89

0.93

0.87

8.19

6.36

3.11

Debt-to-Asset

0.24

0.22

0.19

Debt-to-equity

0.49

0.52

0.57

Long-Term Debt-toEq
uit
y

0.00

0.00

0.00

Sales to Working
Ca
pit
al

Gross Profit Margin

0.44

0.40

0.39

Return on Assets

0.32

0.29

0.25

Return on Equity

0.35

0.34

0.29

Return on Sales

0.36

0.32

0.28

(2012 Yahoo!, Apple Inc. (AAPL))

Google
30-Dec-11
Stock Price

30-Dec-1030-Dec-09

$645.90

$598.86

$622.73

Current Ratio

5.92

4.16

10.62

Quick Ratio

5.92

4.16

10.62

Asset Turnover

0.52

0.51

0.58

0.00

0.00

0.00

Debt-to-Asset

0.20

0.20

0.11

Debt-to-equity

0.25

0.25

0.12

Long-Term Debt-toEq
uit
y

0.05

0.00

0.00

Gross Profit Margin

0.65

0.64

0.63

Return on Assets

0.17

0.19

0.21

Return on Equity

0.17

0.18

0.18

Return on Sales

0.33

0.37

0.35

Sales to Working
Ca
pit
al

(2012 Yahoo!, Google Inc. (GOOG))

Hewlett-Packard Company
30-Oct-11
Stock Price

30-Oct-10 30-Oct-09

$27.31

$40.58

$45.50

Current Ratio

1.01

1.10

1.22

Quick Ratio

0.86

0.97

1.08

Asset Turnover

0.98

1.01

1.00

0.00

0.00

0.00

Debt-to-Asset

0.70

0.68

0.65

Debt-to-equity

2.35

2.08

1.83

Long-Term Debt-toEq
uit
y

0.58

0.38

0.35

Gross Profit Margin

0.23

0.24

0.24

Return on Assets

0.07

0.09

0.08

Return on Equity

0.18

0.22

0.19

Return on Sales

0.07

0.09

0.08

Sales to Working
Ca
pit
al

(2012 Yahoo!, Hewlett-Packard Company

(HPQ))
Microsoft
29-Jun-12
Stock Price

$30.14

29-Jun-11 29-Jun-10
$24.57

$21.83

Current Ratio

2.60

2.60

2.13

Quick Ratio

2.57

2.56

2.10

Asset Turnover

0.61

0.64

0.73

0.00

0.00

0.00

Debt-to-Asset

0.45

0.47

0.46

Debt-to-equity

0.83

0.90

0.86

Long-Term Debt-toEq
uit
y

0.16

0.21

0.11

Gross Profit Margin

0.76

0.78

0.80

Return on Assets

0.18

0.26

0.29

Return on Equity

0.26

0.41

0.41

Return on Sales

0.30

0.40

0.40

Sales to Working
Ca
pit
al

(2012 Yahoo!, Microsoft Corporation (MSFT))

RESEARCH IN MOTIONN LIMITED

2-Mar-12
Stock Price

25-Feb-11 26-Feb-10

$13.79

$65.99

$70.88

Current Ratio

2.08

2.06

2.39

Quick Ratio

1.78

1.89

2.12

Asset Turnover

1.34

1.55

1.47

Sales to Working
Ca
pit
al

0.00

0.00

0.00

Debt-to-Asset

0.26

0.31

0.25

Debt-to-equity

0.36

0.44

0.34

Long-Term Debt-toEq
uit
y

0.00

0.00

0.00

Gross Profit Margin

0.36

0.44

0.44

Return on Assets

0.11

0.36

0.32

Return on Equity

0.12

0.38

0.32

Return on Sales

0.08

0.23

0.22

(2012 Yahoo!, Research In Motion Limited

(RIMM))

Key Performance Indicators

There are many items that Apple uses to measure their success
in the industry. The competition of the industry pushes Apple to focus
on constantly providing consumers with new and innovative products
throughout the year. The demand for Apple to consistently deliver new
and innovative products on a regular basis has a great influence on
Managements review of the company. Inventory, research and
development, patents, intellectual rights, timely delivery of products,
and retaining key personnel are all part of Managements
measurement. Management considers revenue recognition, marketable
securities, inventory control, warranty costs, income taxes, and legal
matters to be top indicators of their financial performance.
As it is for most companies, successfully recognizing revenue
values is a focus of Apples management team. The goal is to
recognize revenue values when they are certain they revenues will be
experienced. Management must account for potential incentive
rebates and other partial revenue recognition measures in hopes to
avoid recognizing revenue that is in fact not revenue. Apples goal is to
not over account for revenue due to the adverse impact the revenue

reductions will have on reporting and ill-advised managerial decisions.

Successfully recognizing gains and losses of marketable securities is
also a goal of Apples management team. Just as for revenue,
Management does not want to over report values of marketable
securities. Success for revenue recognition and reporting marketable
securities is measured by Apples ability to not report over estimations
(Apple, Inc., 2012).
Apple sets inventory requirements based on demand forecasts,
industry and product trends, and product life cycles. Apples intent is to
not be caught with large amounts of inventory on hand in the event of
a sudden decline in demand. A sudden decline in demand could be due
to technological advancements, competitor announcements, and/or
other changing market conditions. Apple attempts to keep inventory
commitments in periods of up to 150 days, depending on the product
and/or demand. A low inventory level at the end of the estimated
period indicates that Apple was successful (Apple, Inc., 2012).
Warranty costs are difficult to prepare for. Apple estimates
warranty costs on a quarterly basis. Their goal is to stay below the
quarterly estimate. In the event that warranty costs are higher than
the estimate, operations could be negatively impacted. This is an
indicator of product and Managements performance during the
measured periods (Apple, Inc., 2012).
Legal and other contingencies are important indicators of Apples
performance. As seen in many recent court battles, the technologybased industry has many risks associated with rights and
infringements. Apple realizes the possibility of losses being incurred
due to legal proceedings and claims. These amounts are also
estimated for reporting periods. Staying below the estimated value is a
success for Apple. One or more legal proceedings and/or claims being
settled against Apple in excess of the estimated value for the reporting
period can have negative impacts (Apple, Inc., 2012).
Apple uses historical estimates as a strategy to measure the
performance of the previously stated areas. The goal is to stay within
the estimate to avoid adverse impacts on their reporting periods. Apple
considers it a success when actuals are below the estimated values for
each of the performance indicators.

VI

Analysis of the Organization

Apple is a prestigious company who has been around for over

thirty years, and in those years, they have become in terms of earning,
one of the top if not the top company in the world. Their foundation

begins the overall mission or the statement they live by and that is
where apple is unique. However, their official mission statement is,
Apple designs Macs, the best personal computers in the world, along
with OS X, Life iWork and professional software Apple leads the digital
music revolution with its iPods and iTunes online store. Apple has
reinvented the mobile phone with its revolutionary iPhone and App
Store, and has recently introduced iPad which is defining the future of
mobile media and computing devices. This does not sound much like
a mission statement more of a list of accomplishments. Although there
is a statement used often that sound much more like a mission
statement is, Apple is committed to bringing the best personal
computing to students, educators, creative professionals, and
consumers around the world though its innovative hardware, software
and internet offerings. This statement is all about inspiration and
setting goals to stand out in the world by creating products that are
superior to the competition. In their statement, safety is also a concern
as well, but it is also expressed how apple is always looking towards
the future. A successful company is always looking towards the future
and getting ahead of the curve such as Apple, whose fourth quarter
earnings were almost two billion dollars which comfortably puts them
in the top five of fortune 500 companies.
Throughout the years, Apple has had a vision in terms of selling
their product and reaching their quota of customer satisfaction. For
them, they do not want to be limited to one group of individuals; their
vision consists of making computers and electronic products for
everyone including professors, corporate America, and students. Their
diversity does not end with computers, their iPods, iPads, and other
accessories have shown how this company has increased their
popularity over the years with the public. Starting from the creation,
apple has always maintained their vision of diversity and consists of
making products and advancing those products to better adapt to
other companies and the growing trend of new products.
The foundation of this company lies within their core values and
how they believe business should be ran. On manuelcorpas.com,
apples guidelines are displayed and it is written as a promise. For
example, a few of their promises are We believe that were on the
face of the Earth to make great products, We believe in the simple, not
the complex, We believe that we need to own and control the primary
technologies behind the products we make. For Apple, it is all about
gaining a personal relationship with the consumers and to show them
that first and foremost, their main goal is to make sure their product
are the best. Overseeing the day to day operations and the overall
company can be a difficult job to say the least. From their website
apple.com, The governance structure of the Corporation is designed

to be a working structure for principled actions, effective decisionmaking and appropriate monitoring of both compliance and
performance. To Apple, the structure itself is based on having the
company run smoothly and effectively and to make sure no position
has too much power because with a company of this size, a system of
checks and balances is a necessity. Further examination of the
document shows that each position of major power has been displayed
and a description of what they do on a day to day basis is shown.
To Apple, their core competency consists of two things:
innovative design and technology and this goes directly with their
Think Different campaign. Apple wants to wow their consumers
and provide a product that will amaze and satisfy the world. They also
want to buy different because they want to set the standard and
provide a different experience involving such amenities as workshops
and rewarding their customers for loyalty. Another part of their core
that is not talked about is how they focus on lower-priced products.
Fool.com talks about apple and their ideologies: The real innovation of
Apple's business model exposed itself when the company focused its
core competencies on lower-priced products. Introductory Apple
products like the iPod series have had great mass-market appeal,
which directly addressed the perception that Apple only catered to
high-end markets. Instead of cannibalizing its high-end products with
lower-cost product offerings, Apple is capitalizing on an inverse effect.
This is another part of Apples diversity, that they recognize that they
cannot always go after high end markets because that is not always
the best situation and a lot of times smaller markets are what make a
company strong. The uniqueness with this plan is that Apple seems to
be a company that adapts on the fly and understands what needs to
be done in order to adequately be prepared for the future and in some
cases, set the trend.
In order for Apple to maintain their success and continue to
dominate the market, they must have goals for their short and long
term future. For Apple, they want to continue to improve their product
every year and keep consumers coming back for more. This is part of
the reason why they annually make iPhones and other products, this
seems to be a statement that we are here to make you happy and to
keep you excited for the future. This also includes making all products
compatible with each other, with todays society it is all about
simplicity, presentation, and features. A couple of their short term
goals include: Apple Inc. plans to keep creating and releasing
computers and consumer electronics that are more user-friendly.
Secondly, Apple Inc. will focus more opening more stores even on
international locations to help increase sales.

VII

Analysis of the Organization

Apple follows a vast differentiation strategy; they differentiate

making and providing high-quality, exclusively designed and
personalized products and services. Using this strategy they target
wide range of customers, from ordinary beginner users to specials
needs power-users.
May be there is nothing more proud for Apple than their
innovations. It is obvious from Apple history that innovations took the
company where they stand today. For example, Apple was one of the
first, who developed PDA market, when in 1993 they introduced their
Newton. In 1998, they introduced easy-to-use iMac, and have updated
it since after. In 1999, they developed and presented highly stable
operating system, and continuously update it. In 2001, made a big step
in digital lifestyle, when launched their iTunes and later on introduced
the iPod. In 2003, Apple released the worlds fastest PC (Mac G5), with
dual 2.0GHz PowerPC G5 processors. In June 2007, another
revolutionary product was released and upturned the whole industry,
the iPhone. Steve Jobs described it as a revolutionary mobile phone
and a breakthrough Internet communications device. The iPhone was
also the first Apple-branded consumer device to run on OS X. One of
the latest innovative products is iPad, unveiled in 2010. Apple
positioned the iPad as the first device in an entirely new market
segment, making the claim that it would be better at many tasks than
either smartphones or traditional laptops.
Although Apple deals in a wide range of products, the company
treats every product line in a unique way. Each product of Apple is
treated as a standalone business unit. Thus, five main business units
should be distinguished: Mac business unit, iPod business unit, iPhone
business unit, iPad business unit, and iTunes business unit.
Even though Apple treats each product as a separate business
unit, all the business units follow corporate strategy adjusted to its
industry. The fact of Apple updating its entire product at least once a
year proves their emphasis on differentiation. Apples activities on
developing new products and regular upgrades for existing ones let
them to comply with its goals and mission. Apple has the following
mission statement, Apple designs Macs, the best personal computers
in the world, along with OS X, iLife, iWork and professional software.
Apple leads the digital music revolution with its iPods and iTunes online
store. Apple has reinvented the mobile phone with its revolutionary
iPhone and App Store, and is defining the future of mobile media and
computing devices with iPad. And following goal: Apple Inc. is
committed to bringing the best personal computing, mobile

communication and portable digital music and video experience to

consumers, students, educators, businesses, and government agencies
through its innovative hardware, software, peripherals, services, and
Internet offerings.
Comparing Apples strategy with its competitors, it should be
noted that Samsung Electronics, in the first place, pursuing the cost
leadership strategy, meaning it increases profits by reducing costs,
while charging industry average prices. Contrary to Porter, who stated
that two strategies should not be implemented in same time, Samsung
Electronics successfully combines cost leadership with differentiation
strategy, where they use their innovations wisely.
Talking about Hewlett-Packard Inc. we should note that they
currently implement a turnaround strategy, which means the strategy
dedicated to corporate renewal. Thus, HPs president and chief
executive officer Meg Whitman outlined progress made over the past
year to stabilize the business and lay the foundation for a multiyear
turnaround. She noted that operating and organizational models have
been integrated, centralized and streamlined, and a talented executive
team is in place to execute the strategy. It is obvious that this strategy
is implemented in order to be able to achieve their objectives, which
are following:

To achieve sufficient profit to finance our company growth, create

value for our shareholders and provide the resources we need to
achieve our other corporate objectives;
To grow by continually providing useful and significant products,
services and solutions to markets we already serve-and to
expand into new areas that build on our technologies,
competencies and customer interests;
To provide products, services and solutions of the highest quality
and deliver more value to our customers that earns their respect
and loyalty;
To help HP employees share in the company's success that they
make possible.

Taking Microsoft Corp. we should note that they implement

differentiation strategy aimed on accessibility. They take a strategic
approach to accessibility by:

Continuing our longstanding commitment and leadership in

developing innovative accessibility solutions;
Making the computer easier to see, hear, and use by building
accessibility into Microsoft products and services;

Promoting innovation of accessibility in the development

community and working with industry organizations to encourage
innovation;
Building strong collaborative relationships with a wide range of
technology organizations to raise awareness of the importance of
accessibility in meeting the technology needs of people with
disabilities.

Lets identify Apples strengths, weaknesses, opportunities and threats

by completing SWOT analysis:

Strengths
Established brand name
Customers loyalty
Cultural, fashion identity
Proprietary technology
Strong research and
development capabilities
Strong international presence,
Apple operates in 114 countries
Diversified company, not
dependent on only one industry
Strong financial position
Strong product lines in Mac,
iPod, iPhone, iPad

Opportunities
Apple can develop good
relationship other companies
for joint ventures
Diversification into related and
unrelated business
Expand horizons of operations
with new countries and
industries
Production of computer antiviruses, which are increasing
on PCs

Weaknesses
Dependence on third party
provider
Apples market share is far
behind from major competitor
Microsoft
Companys products are
expensive compared to
competitors
Higher research and
development costs
Higher channel costs compared
to major competitors like Dell
Weak presence in corporate
segment
Apples technological products
have short lifecycles
Threats
Powerful competitor Google
with their Android OS
Many similar substitute
products
Competitive products are
mostly Windows-base which
has a larger customer base
Media piracy: iPod users
illegally downloading music for
free instead buying at iTunes
Very high speed of technology

Increasing online shopping

Corporate segment

development
Apple products are more
expensive than those of
competitors, thus Apple misses
a significant share of market

Despite the success of Apples strategy, after SWOT analysis

several strategies still could be suggested. One of the strategies is an
internal growth strategy, which could be pursued by opening new
stores in existing locations, starting operations in new countries,
providing more of direct contact with buyers and to bring Apple
experience to larger amount of customers, increase online services and
sales, etc. Internal growth strategy is good in following ways, it does
not disrupt organizational goals, it will not bring crushes in corporate
culture, and it is relatively cheaper comparing to external growth
strategies, especially acquisition. The most significant disadvantages
of this strategy are: it is a quiet time consuming and in some way risky,
for example if start operations in new countries.
Second, strategy is a vertical backward integration, in this case,
Apple will be less dependent on suppliers, and will allow them to
manufacture more and better products, ease up control of all
manufacturing processes, and thus improve quality. Vertical integration
has following advantages: improve supply chain coordination, reduce
transportation cost, gain access to downstream distribution channels,
give more opportunities to differentiate by means of increased control
over inputs, increase entry barriers to potential competitors, expand
core competencies, etc. It also has significant disadvantages: lock
company deeper into same industry, may require drastically different
capabilities, poses problems of balancing capacity at each stage of
value chain, etc.
Third, strategy is strategic alliance, which will help Apple to
increase its market share and become more competitive, especially
with Microsoft. And of course continue with their differentiation
strategy and being highly innovative. Among the advantages of
strategic alliances are following: gaining capabilities, eases access to
target markets, sharing financial risks, achieve synergy and
competitive advantage, enlarge companys distribution channels,
broaden business and political contact base. There are also some
significant disadvantages: diverse or conflicting operating practices,
cultural barriers, clash of egos and company cultures, time consuming
in terms of communication, trust-building, and coordination costs,
becoming too dependent on another firm for essential expertise over

the long-term, sharing of future profits, barriers to future financing

opportunities, etc.
Lets also consider Apples performance using key performance
indicators in the following table:
Table 1. Key Performance Indicators Of Apple, 2010 - 2012
Indicator
Earnings per share
(EPS)
Return on equity
(ROE)
Return on assets
(ROA)

2010

2011

2012

$15.15

$27.68

$44.15

29.32%

33.83%

35.3%

18.64%

22.28%

23.7%

Current Ratio
(Current
2.01
1.61
1.5
Assets/Current
Liabilities)
Quick Ratio
((Current Assets1.96
1.58
1.48
Inventories)/Curren
t Liabilities)
Debt/Equity
0.57
0.52
0.49
(Note. Constructed by the author using the data of Apple Inc. Three
Year Financial History and Wikinvest. Year 2012 is based on three
quarters of 2012.)
Considering key performance indicators we can see that Apple
significant improvements in their performance during last three years.
For example, earnings per share increased almost three times if
comparing 2012 and 2010. Return on equity and return on assets also
improved, on average by 5%. Apple shows a steady improvement in
debt/equity ratio, which confirms the right direction. In addition to
improvements, Apple had slight decline in current and quick ratio, of
course the changes are not very significant, but it does not show a
good trend.

VIII. Analysis of the OrganizationFunctional

Strategies
Apple as a corporation is well run and is structured properly to
optimize their success. Their marketing, finance, operation, and HR

work together for a common goal and that is the problem with some
companies, the structure itself makes it impossible for them to realize
the full potential of the company because too many people have
power. The financial strategy is to make money but do it in a way
where they dont lose as much money trying new ideas. They feel that
they can make that money in the having the best and highest priced
electronics. In order to make money, you must invest and in situations
you lose money and this also fits into appealing to the customers
because they want to make money by designing cutting edge
technology. Apple focuses on long term employees wanting to create a
consistent company as a result most of their management team was
promoted from within. Internal hires produce better long term returns
for investors. Apples management avoids the spot light and instead
stays focused on the company.
There a few reasons that Apple runs so smoothly and for years,
the question has arisen: How do they do it? The answer can be
complicated and simple all in one. A story written in cnn.com tries to
decipher the secret to this giant of a company and one major reason is
the fact that Steve Jobs ran everything, of course there is a board that
can make decisions as well, but in the end he ran everything. Another
positive is that One of Apple's greatest strengths is its ability to focus
on just a few things at a time, an entrepreneurial trait difficult to
imagine at a corporation with a market value of $320 billion. Saying no
at Apple is as important as saying yes. "Over and over Steve talks
about the power of picking the things you don't do," says one recently
departed executive. Obvious? Perhaps. Yet few companies Apple's size
-- and very few of any size -- are able to focus so well and for so long.
A downfall of a lot of companies is that they tend to focus on too many
projects and do not pay attention to the details and that can cause
within the structure of the company itself.

VIII Improvement and Change Initiatives

Apple is a company that became successful by differentiating

their products and services from its competitors. Many companies
compete on a low-cost strategy, while Apple offers unique products
and services at a premium. In order to offer a product consumers will
pay a premium for; Apple invests a large amount of resources in
research and development (R&D) activities along with marketing and
advertisement activities. Apple continually relies on these areas for
success and does not appear to slow down any time soon. R&D costs
have consistently increased over the previous three years (Apple, Inc.,
2012).

Apple has developed the iPhone, iPad, Mac, and iPod products
over the years and continuously update and improve these products.
R&D and marketing for new and improved products has proven to be a
success for Apple year after year. Apple has strategically developed
software and services for these products and has focused on being the
only company that offers these services. These services include iTunes,
App Store, iBookstore, and Mac App store (Apple, Inc., 2012). These
services have been a success over the years that Apple intends to
keep increasing along with their product line.
Despite Apples continuous success, they have recognized a growing
competition due to the increasing amount of technological
advancements. Apple cannot completely depend on the product to sell
itself anymore. Apple feels that a high-quality buying experience with
knowledgeable salespersons is the key to attract and retain
consumers (Apple, Inc., 2012). Focus has been turned to building sales
through retail stores and reseller programs. Retail stores are generally
located in high traffic areas. The intent of the high traffic locations is to
align the location with the selling experience. Apple feels that this
choice of locations will better position their salespeople to offer a highquality shopping and service experience. This is also an effort to allow
salespeople to put the products in hands of new and returning
consumers, and effectively show them the full capabilities of the
products (Apple, Inc., 2012).
Apple has also entered the education and enterprise and
Government markets. Apple launched iTunes U to offer mobile learning
products, services, and programs. This program is geared towards
teachers and students. Apple offers hardware and software to
enterprise and government consumers as well.
These initiatives require investments beyond R&D and
marketing. Apple has identified the need to retain valuable employees.
They are aware of the demands for highly skilled individuals in the
industry, and they intend to keep experienced and knowledgeable
employees working for Apple and out of the hands of competitors
(Apple, Inc., 2012).
Employees are not the only asset that Apple has to keep from
competitors. Patenting and copyrighting their technology, products,
and services is a high concern. Competition in the industry is
increasing aggressively, and Apple has to protect their technology,
products, and services. Apple admits that they file applications for
patents to protect products and services regularly (Apple, Inc., 2012). It
is important that Apple protect the investments poured in to R&D via
patents and copyrights. Due to the inclusion of third-party intellectual

property in their products, Apple is looking into new and/or renewal of

licenses for these aspects of their products. Apple has also identified
the risk of infringing on others rights and patents during the
development of technology, products, and services. The fierce
competition of the industry requires companies to protect themselves
from others infringing on their rights and patents. They also have to
establish protection from infringing on others rights and patents.
Apple has identified these risks, and aligned measures to do so (Apple,
Inc., 2012). Apple experienced these difficulties in China, where a
company threatened to impose a ban on Apples iPad product due to
copyright violations (News Under the Sun, 2012).
One main concern of the industry is the constant evolution and
shifting of technology and demands. This can be seen by the historical
dominance by Blackberry devices, Nokia, Dell, and Motorola, who are
now fighting to stay competitive in the industry. Apple has seen an
incomparable level of success, and one can only question if they can
maintain their competitive advantage (Investopedia, 2012). It is
imperative that Apple continues to create and offer new and innovative
products and services to stay competitive. Many competitors are
offering comparable products at lower prices. Apple has to prove that
their products are more advanced and worth the premium. As seen in
many industries, competitors are attempting to gain market share by
offering products at little to no profits, and in some cases, for a loss.
Economic conditions around the world have created a demand for lowcost items. Consumers are settling for low-cost products that have
almost as many capabilities as the industry leaders products and
services. Again, Apple has recognized this threat, and they are focused
on the continuation of the development and offering of new and
innovative products and services (Apple, Inc., 2012).

X. Conclusion and Future of Organization

Apples profile for future competitiveness and success stems
from four main factors of the company as described by Lashinsky
(2012); embrace secrecy, focus obsessively, hire disciples, and
overwhelm friends while dominating foes. The company must continue
to operate with a major emphasis on these four factors, and do them
right, in order to succeed.
Secrecy takes two basic forms at Apple external and internal,
(Lashinsky, 2012, p. 27). External is recognizable as Apple has had
success in keeping its products and practices hidden from competition
and the rest of the world. The internal secrecy is more dynamic in a
sense that it must continue in its corporate virtue of being transparent.
For instance, Lashinsky describes how after visiting a company store at

the corporate headquarters, a t-shirt for sale read, I VISITED THE

APPLE CAMPUS BUT THATS ALL IM ALLOWED TO SAY (2012). Apple
has marketed its ability to keep secrets. Everything at Apple is a
secret. The left hand does not speak with the right hand.
The company has a reputation to overly obsess with size, weight,
look, feel, and operations. These characteristics can describe the
devices Apple manufactures to the boxes the devices are placed. Even
on the software side, the look and feel of the software has been highly
honed before being released to the public. Obsessing over details and
bringing a Buddhist level of focus to a narrow assortment of offerings
sets Apple apart from its competitors, (Lashinsky, 2012, p. 40). The
company must continuously strive to be obsessively focused to remain
successful.
In January 2009, when Steve Jobs took his first leave of absence
from Apple, Tim Cook directed a conference with Wall Street analysts
following the release of Apples quarterly earnings. In order to describe
the factor of hiring disciples, it would be best to quote Tim Cooks
response to Wall Streets question of whether Tim Cook would succeed
Jobs if the CEO did not return. Tim Cooks response:
We believe that we are on the face of the earth to make great
products, and thats not changing. We are constantly focusing on
innovating. We believe in the simple, not the complex. We believe that
we need to own and control the primary technologies behind the
products that we make, and participate only in markets where we can
make a significant contribution. We believe saying no to thousands of
projects, so that we can really focus on the few that are truly important
and meaningful to us. We believe in deep collaboration and crosspollination of our groups, which allow us to innovate in a way that
others cannot. And frankly, we dont settle for anything less than
excellence in every group in the company, and we have the selfhonesty to admit when were wrong and the courage to change. And I
think regardless of whom is in what job, those values are so embedded
in this company that Apple will do extremely well. And, I strongly
believe that Apple is doing the best work in its history.
Tim Cook January 2011
(Lashinsky 2012, p. 65-66)
Mr. Cooks response to Wall Street is that of a true disciple, one
who is not only passionate about his role, but who lives and breathes
Apple. To succeed in a company where there is obsessive focus on
detail and paranoid guarding of secrets, and where employees are
asked to work in a state of permanent start-up, one must be willing to
mesh his/her personal ambitions with those of the corporation,
(Lashinsky, 2012, p. 68). These employees are the employees that

have been hired in the past and will need to be hired in the future for
the company to remain successful.
Finally, Apple must overwhelm friends while dominating foes.
Lashinsky (2012) describes a story about Steve Jobs and the release of
the first edition of the iPhone. Originally, a company that was acquired
by Cisco trademarked iPhone. A senior executive from Cisco fielded a
phone call from Steve Jobs where Jobs stated he wanted to use iPhone
for his product. The senior executive has stated that Jobs was tactful
while being extremely considerate. There were no negotiations or offer,
just that Mr. Jobs wanted the name. Shortly afterwards, the Apple legal
team filed suit saying that Cisco had abandoned the brand and could
not defend its intellectual property. Apple went forward and released
the iPhone while Cisco filed suit. As soon as Cisco and Apple came to
an understanding regarding the name, all correspondence from Jobs
stopped cold. What this story illustrates is Jobs ability to overwhelm
his competition. His strategy of consideration while being tactful led to
the success of his iPhone campaign.
As Apple has been rough and overwhelming to partners, Apple
also has a reputation of being outright mean with their enemies. ExApple employees have stated that when visiting suppliers, the only
right way is Apples way. Meaning, Apple would instruct their suppliers
what they needed, how it is to be manufactured, and the cost Apple
will pay for it, an overbearing attitude to those trying to help. In
addition, Apple launched an advertising campaign belittling PC users
and showing how a PC is more virus prone and while Mac is not. The
campaign struck directly at Microsoft and proved to be successful due
to the failure of Microsofts Vista operating system. The ad attack is
proof that Apple is willing to play hard to get its message out.
Expected results in terms of short-term profitability and survival
are strong. Apple has been a performing company in the eyes of Wall
Street. In addition, Wall Street has bought into Tim Cooks abilities and
experience he has under the guidance of Steve Jobs. As far as the longterm profitability, the company should remain focused on the four
factors for future competitiveness and successes (embrace secrecy,
focus obsessively, hire disciples, and overwhelm friends while
dominating foes). In addition, the company should remain committed
to innovations, beating competitors to new ideas in technology while
keeping things simple, not complex.

B. The Best of Apples Marketing Strategies

If one had to summarize Apple Inc.s marketing strategies in one word,
it would have to be differentiation. Apple makes huge efforts to
differentiate its products from its competitors. Heres a snapshot of
Apples marketing stratergies.

Success by design
Apples product strategy is simple. It incorporates superior design in all
its products so that these stand out from its competitors products.
Apples design philosophy is based on minimalism. It removes clutter
both from its products outward appearance as well as from their user
interface. It is no coincidence that Apple users rave about the
exceptional user interface of their iPads, iPods or iPhones. In addition,
Apple tries to exert control over the users experience with its
products. So, apart from the hardware, the company also develops the
software so that the user has the best possible experience.

Pricing
Apple is usually referred to as the technology industrys high-price
leader. However, of late, the company has been offering its products at
lower price points in a clear effort to expand its market. Even so, Apple,
at the launch of its products, targets early adopters with higher-thancompetition prices. It initially adopts skimming strategy and later
launches lower-price versions with fewer features (for instance, for the
iPod) or launches a newer version while continuing to sell older
versions at lower price points (for example, iPhone).

Distribution
Apple eschews big-box retailers. Apple spends considerable resources
to expand its stores so that it can get its prospects undivided
attention. Also, it allows the company to exercise control over the sales
process. According to Yukari I. Kane and Ian Sherr in Secrets from
Apples Genius Bar: Full Loyalty, No Negativity, the staff at these full
service stores are in fact trained not to sell. They are asked to provide
solutions to customers pain points. The company has more than 300
Apple retail stores worldwide, with the majority of the stores in the U.S.
In California alone, the company has more than 50 stores.

The hype
Apples promotion strategy is centered around creating hype. The late
Steve Jobs, founder of Apple, was known for hyping up. His theatrical
style and panache were successful in creating excitement before the
launch of Apple products. These efforts have succeeded in making
Apple products aspirational.

C. Marketing Audit of I Bangle

The marketing plan includes the fundamental for the introduction of a
unique and ingenious product known as iBangle by Apple Inc. The
analysis of internal and external of the organisation, competitive
environment enables the team to propose dynamic and constructive
strategies for iBangle to fulfil the companys objectives and strategic
mission. The iBangle will be introduced as another innovation of Apple
and marketed as mp3 player in portal music player (PMP) sector. This
also will enable Apple Inc to penetrate and dominate the PMP sector
and emerge as leader in innovation of unique products as well as
successfully gain market share. The marketing strategies are outlined
to gain market segment size of 102,665,043(targeted) male and
103,129,321(targeted) female of 15-64 years with forecasted sales
growth average at 4.8% over next 3 years and profit of USD 8,229,000.
The accomplishment and success of iBangle will be measured with the
capture of market share in PMP sector, as well as penetrating geoclustering targeted market in across the global.

Product Description

iBangle will be future version of iPod product and will be positioned

as the bracelet iPod that available in the market. It will be equipped
with 2GB capacity and different sizes to accommodate customers
wrist. The product will be able to provide exceptional music listening
experience and have multifunction as mp3 player as well as hand
accessory (bangle). The product also marketed as funky and matchless
alternative device for portal music device and packaged as unisex
outlook that be suitable to be worn by men and women. The product is
made of aluminium.

SITUATION ANALYSIS
INDUSTRY ANALYSIS
A) Usage
Apple Inc. has sold 22.1 million iPods during 2008 holiday season compared
to 4580 unit in 2005. The sale of 21.0 million units in Q1 of 2007 also shows
50% higher than Q1 of 2006. This shows steady growth of iPod since 2005.
Moreover, it increased about 383% from 2005. This projects strong value of
brand position in the customers. Therefore, we strongly believe that iBangle
can penetrate the usage trend since this is a variant of iPod.
Chart 1: iPod Unit Sales

B)

Trends

In 1960, 8-track player was introduced and followed by personal cassette

player in 1979 and later with walkman, walk disc player, until MP3 player and
MP4 player. The taste and trend of portable music players change

tremendously among customers. The factors that influence the evolution in

the trends are:-

Customer preference to better sound quality

The sizes of iPod and mp3 players are more compact and easy
to carry.
The storage capacity is bigger and customers can opt for
different sizes compared to other devices.
The introduction of storage format like mp3, acc, and wma
enable to customer to store more music compared to earlier
version.

The market trend is expected to show prolonged growth and future products
of portable players that have sophisticated design, features and benefits like
iBangle can gain customer interest as well as market demand

C) Profitability & Future Growth Potential

Apple had gain revenue of 48% from iPod Business Division in first fiscal of
2007, meanwhile other music related products contributed 9% of total profit.
We estimated that growth of average of 4% in sales based on forecasting
projection by year 2012 and expansion of 18.3% in population by 2015.

MARKETING OBJECTIVE
The marketing objectives of iBangle for Apple Inc as follows:-

To establish as market leader in creating and manufacturing

innovative products in IT industry
To enable Apple Inc to satisfy, fulfil and equipped the consumers
personality and lifestyle needs as well to increase Apple
popularity as an icon in digital lifestyle product
To establish as market leader in portal music player sector by
increasing market share
To enable Apple Inc to monopoly the portal music device sector
share by 75% by year 2012
To enable the Apple Inc revenue from iPod Business Division to
increase to 63% by year 2015

TARGET MARKET

Segment Identification
iBangle is a version of MP3 player that can be worn on wrist to be
launched within the portable music player (PMP) sector in U.S.
Segment Needs
iBangle will be a device that accommodate social needs of customer
such as it will be perceived as one of tools of digital lifestyle, fun and
cool device and sense of belonging within peer group, brand that need
to be owned, cultural lifestyle and others needs. It also cater personal
needs such as for customers that want to experience music without
tangled with wires when they performing the daily activities, luxurious
activities such as exercise, jogging, surfing and others activities.
Segment Trends
The current trend shows transcend from wired and bulky PMP to light,
easy, compact in size, more capacity, less wired or wireless and
multifunction players like MP3 players. The trends also change
towards wireless player, brand conscious and digital lifestyle.
Therefore, market opportunity for iBangle is far vaster due to trend
transformations.
Segment Growth Potential
According to statistic report, the segment growth can be projected
increase of 18.3% over next 5 years (2015) for 21 years and above
subsets. Meanwhile, the segment for 14-17 years old, anticipated
growth is 0.93% and 19-24 years old is about 10.52%.
Size of Segment (Population)
According to statistics report of CIA, the size of segment 15-64 years
old consists of 102,665,043 male and 103,129,321 female.

POSITIONING STRATEGY

Apple has been enable to create and revolutionised the portal music
player sector by adapting to visceral design, and manufacture creative,
innovative, and cool products such as iPods. Moreover, iPod managed
to became measurement against any portal music players since its
penetration into the market. Therefore, iBangle player will be adapting
strategy by being the ultimate must have mp3 player in the
perception of customers. The organisation will be adapting strategy of
product differentiation in marketing iBangle in the market. Moreover,
Apple also will be providing quality and excellent customer service for
iBangle customers.
Apple will be developing unique selling proposition (USP) for
iBangle by differencing iBangle from other mp3 player through its
designs, features, and benefits that shown below:

Benefits positioning: listen to music without tangles of wires and

wear it as accessory

Features: include multi-track touchpad, wireless ear headphones,

customised according to wrist size, better music quality, and
download music via Bluetooth

Product Positioning: the shape of bangle enable customer to wear

at wrist, portray cool look, personalised mp3 player (other people
might not notice the player) and the first mp3 player in the world
designed as bangle.

Even though iBangle main function is mp3 player, it also will be

marketed as hand accessory. Apple has strong brand personality
(image differentiation) among its customers and worldwide can
enable them to market iBangle to the targeted market more
efficiently. The features, benefits, and unique design of iBangle can
aid the company to create impression of must have mp3 player in the
cognitive mind of customers. The success of iPod in 2000 as shown
below is an example of people acceptance of Apple products.

MARKETING STRATEGY
Product Strategy
The core
iBangle is mp3 player that worn at wrist equipped with wireless ear
headphones to listen to music.
The actual product
The design of mp3 player is unique and innovative by Apple and be
worn wrist. It also can function as hand accessory. As for banding,
Apple logo is embedded on the bangle and the colour for iBangle is
silver to cater for unisex customer as well as to establish as stylish
bangle.
The trade name is iBangle, an Apple product. The brand personality
adapted for this product consist of stylish, cool, trendy, originality and
think different. The iBangle also equipped with 1 year warranty and
customer service.
Based on life product life cycle, iBangle is new product to the market
and

currently

comprehensive

no

imitation

marketing

products.

campaign

Therefore,

can

enable

proactive
iBangle

to

and
be

recognised immediately and sales of the product will be accelerating

progressively.

The unique design of iBangle will enhance its differentiation

among existing portal music players and generate advantages to

the product. Moreover, Apple is known to produce award winning

innovative products as stated below.
Apple had worn eight iF (International Forum) Product
Design Awards at CeBIT

13

2008 show in Hanover,

Germany for out of nine products that were submitted

for consideration.

The other factors that create differentiation for iBangle is the Apple
managed to create emotional benefits for its users. Therefore,
iBangle also can provide emotional benefit to customers in form of
maintaining simplicity, stylish design, easy to use and constructive
customer service.
The iBangle also considered green product since the main component
to manufacture iBangle is aluminium. Aluminium is one of the most
recyclable materials. This enable iBangle to gain status as eco-friendly
product and infiltrate environmental concern oriented customers.

The iBangle product has another distinguish advantage that is the

brand name of Apple. Apple had become one of the most powerful
icons in the IT industry due to its visceral design, unique products,
quality and features. Therefore, branding Apple logo on iBangle will
increase its value and perception among the customers.
Price Strategy
As for pricing strategy for iBangle, there are several factors should be
considered as such consumer demand, product lifecycle and
potential substitutes. The price of iBangle will be at USD 390.00.
This is because at initial introduction, only 10,000 units will be
produced and marketed in U.S.A. The profit margin is 30%. Apple Inc
should given important aspect toward customer demand.
Since Apple had be able to portray themselves as icon of PMP sector
through introduction of iPod generation, iBangle is can create massive

demand among customers due to its unique design and features. The
skimming price strategy will be adapted to market iBangle to the
customers. The price will be set at USD 399.00 at introduction stage
and price will be reviewed at later stage of product lifecycle.
The organisation also has advantages such there is no substitute
or imitation product like iBangle that available currently on the
market. However, potential substitutes produced by competitors is
possible, therefore Apple have to establish as market leader for
iBangle. This can create market demand for iBangle since it has unique
characteristics.
One of the examples of successful pricing strategy can be seen in sales
of iPod in the market and it shown in Chart 2.

Promotion Strategy
Objectives

To create strong awareness about iBangle throughout the target

customers (14 to 29years old) as well as parents
To penetrate and increase market shares in portal music player
sector and override competitors

One of the promotional important outputs is to portray iBangle as

the futuristic mp3 player and the coolest product for
everyone.
The media selection for promoting iBangle is varies for the selected
customers group. However, one of the most powerful media is Internet
media. The internet usage in United States is about 223 million in
2008. It shows creative advertisements via online can penetrate
the target customer faster and more efficient. Moreover, online store
also can boost the sales of iBangle.
Moreover, Apple also will be using electronic media as advertisement
arena to launch iBangle to the world. Apple is knows for creating
innovative, and unique advertisements to promote their products
such as in using slogan Think Different, use famous free
thinkers like Pablo, John Lennon, Mahatma Gandhi and others to
shows that Apple product is unique and different from others.
Therefore, unique advertisement such as constant advertisement
about iBangle at prime time TV shows, radio shows can create
brand awareness among the customers.
Other than that, Apple also will be using idols and international stars to
promote iBangle. Apple is planning using teen idol Hannah Montana as
teen ambassador to promote iBangle to teenagers group. Furthermore,
in order to penetrate the current trend and culture, iBangle will be
attached to celebrities such as Beyonce, Missy Elliot, and Jason Marz.
The product will be worn by these stars in the video clips and
photography session for magazines and events. The personalities from
sport arena such as Cristiano Ronaldo, and S. McGee also will be
recruited to promote iBangle. The celebrities spotted with iBangle can
create brand awareness among customer more massively. Apple will be
running advertisement on iBangle during important events like Super
bowl games, NBA, and World League. This is to target sport oriented
customers.
Apple also will sponsor prime time TV shows like Leverage and
C.S.I to promote iBangle for the young adults customers. The
advertisement of iBangle will be aired during the Showtime to capture
young adults attention on iBangle.

Table 2 shows the selection of media that used for iBangle

promotion

Place Strategy
Other than that, the company will be choosing distribution channels
such as
online stores
retail stores
direct sales
One of the most established distribution channels is Apple retails
stores. Therefore, iBangle will be launched and marketed at all Apple
retails stores across the country for the success of iBangle. Apple
managed to gain USD 1.45 billion from 208 stores in 2008 ensure that
retail store is one of the most successful distribution channels.
Moreover, online stores also another important distribution channel

that can aid the sales of iBangle and will be able to penetrate geoclustering segment more proficiently.

Average-Cost Pricing

A. Calculation
of Planned ProfitPROJECTION & EVALUATION
B. Calculation of Actual Profit if
1.0
FINANCIAL
if
10,000
Only
items Are Sold

items Are Sold

Calculation of Costs:

Calculation of Costs:

Fixed overhead expenses

$200,000

Labor and materials

700,000

Total costs

$900,000

"Planned" profit

3,000,000

Total costs and planned profit

$3,900,00
0

Calculation of profit (or loss):

$3,990,00
0

Minus: total costs

900,000
$3,090,00
0

Profit (loss)

Calculation of "reasonable"
price:
Expected total costs and
$3,900,000

Planned number of items to

be sold
"Reasonable" price

Fixed overhead expenses

Labor and materials
Total costs

$200,000
700,000
$900,000

Calculation of profit (or loss):

Actual unit sales x price (below)

planned profit

10,000

10,000
$390.00

Actual unit sales x price (below)

Minus: total costs
Profit (loss)

$3,900,000
900,000
$3,000,000

TABLE 4: Cost for iBangle Production

Cost Classifications for an
iBangle

Components
Total
cost

Variable

$180,00
0

$180,00
0

$0

Direct supervision

50,000

50,000

Social Security

20,000

150,000

110,000

110,000

85,000

$360,00
0

$490,00
0

$85,000

Advertising

$35,000

$0

$35,000

Promotion

20,000

20,000

Field sales

15,000

15,000

Product management

15,000

15,000

Marketing
management

20,000

20,000

Product development

50,000

50,000

Marketing research

20,000

20,000

Customer service

70,000

50,000

20,000

Testing

50,000

50,000

30,000

Fixed

Operating expenses
Direct labor

Materials
Operations overhead
Subtotal
Non operating
expenses

General &
administrative
Subtotal

$295,00
0

$50,000

$275,00
0

Total

$655,00
0

$540,00
0

$360,00
0

Based on Table 3 and Table 4, the price of iBangle for introduction stage will
be USD 390.00 will margin profit of 35%.
TABLE 5: Contribution Margin Statement for iBangle

Product: iBangle
Income Statement
31-Dec-10

Revenues (no. of units x price)

$3,900,000

Variable costs
Direct labor
Direct supervision/clerical

$180,000
50,000

Social Security

150,000

Sales force commissions

100,000

Customer service
Materials
Operations overhead (plant, etc.)

70,000
110,000
75,000

Total variable costs

Contribution margin rate (percent)

$735,000
30%

Contribution margin amount

$1,170,000

Fixed costs
Operations overhead

$10,000

Advertising

35,000

Promotion

20,000

Field sales

15,000

Product management

50,000

Marketing management

20,000

Product development

15,000

Marketing research

20,000

Based
on Table
of Ibangle
Customer
service5, projection profit contribution
50,000

Based on Table 5, projection of profit margin is 30% and iBangle profit

contribution to Apple revenue by 2010 is USD855, 000.

Based on break even analysis projection, the sales force need to sale
minimum 1071 units of iBangle and gain break even at USD 417,85

INCOME STATEMENT

IMPLEMENTATION PLAN

CONTROL MECHANISM AND EVALUTION OF

EFFECTIVENESS
Moreover, the marketing team also have to implement effective control
mechanism and evolution of effectiveness method in order to ascertain the
launch of iBangle is successful; the marketing strategies are efficient and
progress

constructively

according

to

projection

especially

in

sales

and

penetrating targeted market. The suggested apparatus had been designed to aid
the department to evaluate the effectiveness of iBangle marketing plan and
objectives are shown below:a. Constant market survey and research such as questionnaire
method, observation on consumer behaviourism will be
implemented in order to evaluate the acceptance of iBangle
among its customers.
b. Quality Control mechanism also will be introduced in order to
monitor the quality of iBangle since this is the debut to the
market. This will enable the team to capture any defects, faulty
parts that can occur after the customer purchase and use the
product.
c. Customer Service and technical support team will be
established to aid the customers regarding any problems,
defects, technical problems and others. This can ensure the
quality of iBangle will not be compromised.
d. The

department

also

will

generate

and

implement

comprehensive plan to monitor the sales of iBangle, the

re-evaluate the market needs, and prepare marketing strategies
to gain more customers in the future.
e. The department will conduct customer survey to obtain
report on the customers satisfaction toward iBangle to
gather suggestion improvements that might be needed to
enhance the second generation of iBangle in the future.

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http://apple2history.org/
http://apple.computerhistory.org
http://askmen.com/men/apr00/21c_steve_jobs.html
http://bsnotes.bs.uce.ac.uk/lecturers/Brian Houghton/Apple Channels BSc.ppt
http://bsnotes.bs.uce.ac.uk/lecturers/Brian Houghton/DMS 2 -2003/SBM

2001/Apple Env App Part 2.ppt

http://cbs.marketwatch.com/tools/quotes/profile.asp?
sid=609&symb=AAPL&sit

eid=mktw