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Apple Computer 2005

Forest David: Francis Marion University

A. Case Abstract

This is a comprehensive strategic management case that includes the companysfinancial statements, organization chart, competitor information, and industry trends.Sufficient internal and eternal data are provided to ena!le students to evaluate currentstrategies and recommend a three"year strategic plan for the company.

#pple $omputer, %nc., located in $upertino, $alifornia, designs, manufactures,and mar&ets personal computers '($s) and related soft*are, peripherals, and personalcomputing and communicating solutions. #pple is a mem!er of the S+( -- and the#SD#/ 0--. %ts products include the Macintosh line of des&top and note!oo&computers, the Mac 1S 2 operating system, the i(od digital music player, and a portfolioof soft*are and peripheral products for education, creative, consumer, and !usinesscustomers. #pple sells its products through its online stores, direct sales force, third"party *holesalers and resellers, and its o*n retail stores. #s of Septem!er 34, 3--,#pple operated 005 stores in the United States, and 6 additional stores in $anada, 7apan,and the U8. %n addition to its o*n hard*are and soft*are products, #pples retail storescarry a variety of third"party hard*are and soft*are products. 9evenues for the periodending Septem!er 3-- *ere 0;.< !illion, up 5< percent from Septem!er 3--4 and up034 percent from Septem!er 3--;.

B. Vision Statement'proposed)

To !ecome the glo!al leader in computer and digital music products.

C. Mission Statement 'actual)

#pple $omputer is committed to protecting the environment, health and safety ofour employees, customers and the glo!al communities *here *e operate. =erecognize that !y integrating sound environmental, health and safety managementpractices into all aspects of our !usiness, *e can offer technologically innovative

products and services *hile conserving and enhancing resources for futuregenerations. #pple strives for continuous improvement in our environmental,health and safety management systems and in the environmental >uality of ourproducts, processes and services.

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'(roposed)

The #pple commitment to ecellence is its mission to provide computers and service '3)for people '0) that meet the highest standards of value and relia!ility. #pple is one of theleaders in the computer industry and produces some of the !est"selling computers and

digital music products in the *orld ';). #pple provides the highest level of >uality andvalue for our customers '?). Those are timeless fundamentals. =e also apply innovativetechnology to our core !usiness '4) to ma&e our products irresisti!le to customers,!eneficial to society, and profita!le to our company '). =e strive to provide additionalopportunities for gro*th and enrichment of company personnel *hile maintaining a *or&environment for all employees '


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C"M Competiti#e "ro$ile Matrix

Apple %" Dell

Critical Success

&actors

'ei(!t )atin( 'ei(!ted

Score

)atin( 'ei(!ted

Score

)atin( 'ei(!ted

Score

Mar&et Share

(riceFinancial (osition(roduct /uality$onsumer @oyalty#dvertisingManagementAlo!al Epansion%nnovation=e! Development

-.0-

-.0--.0-.0-.0-.-4-.-5-.-5-.04-.-

3

3;444434;

-.3-

-.3--.4-.5--.5--.05-.34-.03-.5-.0

;

;4;33;333

-.;-

-.;--.5--.4-.;--.-6-.06-.03-.36-.0-

4

4;;;;;;3;

-.4-

-.4--.4-.4-.4-.03-.06-.06-.36-.0

otal *.00 +.2, 2.-* +.0

External &actor E#aluation /E&E Matrix

1e External &actors 'ei(!t )atin( 'ei(!ted

Score

Opportunities

%ncrease in *orms and virus on ($s. -.0 4 -.5-

@arge population 'Aen 2 + B) *hich are etremelyindividualistic and name !rand conscious.

-.0 4 -.5-

Aovernment crac&do*n on pirating music off the %nternet. -.- 4 -.3-

Much of the *orld is still *ithout computers. -.0- 3 -.3-

(eople enCoy small electronic gadgets. -.0- 4 -.4-

!reats

$ompanies not seeing #pple as compati!le *ith theirsoft*are.

-.0- 3 -.3-

Dell and ( are maCor competitors. -.0- ; -.;-%ncreasing competition *ith music do*nloads. -.- 4 -.3-

$ompetition produces similar products at often half the price. -.0- ; -.;-

The population at large un*illing to use Macintosh. -.0- 3 -.3-

OA3 *.00 +.20

E. 4nternal Audit

Stren(t!s

0. iTunes Music Store is a good source of revenue, especially *ith the i(od and itsavaila!ility on =indo*s platform.

3. Developing o*n soft*are and hard*are.;. #pples niche audience provides the company *ith some insulation from the direct

price competition.4. 9evamping des&top and note!oo& lines.. =e! technology can !e used to improve product a*areness and sales.5. @o* de!tmore maneuvera!le.

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?. Aood !rand loyalty.

'eanesses

0. =ea& relationship *ith %ntel and Microsoft.3. =ea& presence glo!ally.

;. Dependency on ne* product launches.4. =ea& presence in mar&ets other than education and pu!lishing.. Slo* turnaround on high demand products.

&inancial )atio Analsis '7anuary 3--5)

6ro7t! )ates 8 Apple Computer 4ndustr S"9500

Sales '/tr vs year ago >tr) 5.- 06.-- 04.3-

et %ncome 'BTD vs BTD) ;6;.?- ?6.uity 0?.< ;4.5 0.;

9eturn on #ssets 00.5 03.- 3.?

9eturn on $apital 0?.< ;3.5 ?.4

9eturn on E>uity '"Bear #vg.) 5.< 0?.- 00.uidation

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4. !e 4nternal9External /4E Matrix

!e 4&E otal 'ei(!ted Score

Strong #verage =ea&

;.- to 4.- 3.- to 3.


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@. Boston Consultin( 6roup /BC6 Matrix

)elati#e Maret S!are

igh 0.- Medium .- @o* -.-

igh J3- Stars Question Marks

4ndustr Sales

6ro7t! )ate

Medium - Cash Cows Dogs

@o* "3-

uestion MarsSe(ments )e#enue "ro$it E&E 4&E 6ro7t! )ate )elati#e Maret S!are

Domestic 4L 3L ;. 3.5 0? -.;

%nternational 45L 46L ;.- ;.- -.3

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1. S"M

Strate(ic Alternati#es

1e 4nternal &actors 'ei(!t

"roduce 'intel

compatible

products

Expand production

into Asia

Stren(t!s AS AS AS AS

iTunes Music Store is a good source of revenue,especially *ith the i(od and the availa!ility on=indo*s platform.

-.0 4.-- -.5- ;.-- -.4

#pples niche audience provides the company *ithsome insulation from the direct price competition.

-.0- """ """ """ """

9evamping des&top and note!oo& lines. -.0- """ """ """ """

@o* de!tmore maneuvera!le. -.-5 0.-- -.-5 4.-- -.34

Developing o*n soft*are and hard*are. -.04 """ """ """ """

Aood !rand loyalty. -.- 4.-- -.3- ;.-- -.0

=e! technology can !e used to improve producta*areness and sales.

-.0- 4.-- -.4- ;.-- -.;-

'eanesses

Dependency on ne* product launches. -.-5 """ """ """ """

=ea& presence in !usiness arena. -.-? 0.-- -.-? ;.-- -.30

Slo* turnaround on high demand products. -.-; """ """ """ """

=ea& relationship *ith %ntel and Microsoft. -.0- 4.-- -.4- 0.-- -.0-

=ea& presence in mar&ets other than education andpu!lishing.

-.-4 3.-- -.04 4.-- -.36

SBOA3 *.00 *.,- *.-+

1e External &actors 'ei(!t

"roduce 'intel

compatible

products

Expand production

into Asia

Opportunities AS AS AS

%ncrease in *orms and virus on ($s. -.0 0.-- -.0 ;.-- -.4@arge population 'Aen 2 + B) *hich are etremelyindividualistic and name !rand conscious.

-.0 0.-- -.0 4.-- -.5-

Aovernment crac&do*n on pirating music off the%nternet.

-.- 0.-- -.- 4.-- -.3-

Much of the *orld is still *ithout computers. -.0- 0.-- -.0- 4.-- -.4-

(eople enCoy small electronic gadgets. -.0- """ """ """ """

!reats

$ompanies not seeing #pple as compati!le *ith theirsoft*are.

-.0- 4.-- -.4- 3.-- -.3-

Dell and ( are maCor competitors. -.0- 0.-- -.0- ;.-- -.;-

%ncreasing competition *ith music do*nloads. -.- """ """ """ """

$ompetition produces similar products at often half theprice.

-.0- """ """ """ """

The population at large un*illing to use Macintosh. -.0-

SBOA3 *.00 0.5 2.*5

SM OA3 A)AC4VE;ESS SCO)E 2.,+ +.,,

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3. )ecommendations

Strate( *

1pen t*enty computer retail stores 'not Cust peripherals and accessories). #pple currently

operates stores throughout the United States *ith only peripherals and accessories for theircomputers. #dding the hard*are should generate more hands"on a*areness and use alreadyesta!lished locations.

This *ill increase product accessi!ility for those *ho *ish to vie* items other than Cust

accessories and increase a*areness of the originality of #pples products.

T*o percent increase in sales representatives for the computer hard*are.

Estimated cost of million per store K 0-- Million Total.

Strate( 2

Epand into the #sian mar&et over a five"year period !y !uilding a manufacturing facility andhead>uarters in ong 8ong and epanding sales throughout #sia. Estimated cost !illion.

Strate( +

#dd more features to current products including ne* i(od, Shuffle, and Macintoshenhancements and po*er.

- million is the estimated cost for 9esearch and Development.

M. E"S:EB4 Analsis

#mount eeded: ,0-- MStoc& (rice: ?Ta 9ate: 35L%nterest 9ate: L Shares 1utstanding: 643M

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;. Epilo(ue

%n 7anuary 3--5, Disney announced that it *ould !e selling even more videodo*nloads through #ppleNs iTunes storefront than the parties had agreed to in 1cto!er3--. Iideo i(od o*ners *ill no* !e a!le to purchase a *ider spectrum of content from#H$, ES(, Disney $hannel, and S1#(net. From condensed college foot!all !o*lgames !roadcast on #H$ to classic animated shorts from DisneyNs thic& vault, Disney is

!ac&ing #pple all the *ay. Disney $E1 Ho! %ger is !est friends *ith Steve 7o!s, *hohappens to o*n a maCority sta&e in (iar. Surging sales of #ppleNs i(od digital musicplayer, *hich no* also plays videos, in 3-- helped lift the companyNs stoc& !y morethan 03-L. Many analysts epect a repeat in #pples stoc& performance in 3--5.

$E1 Steve 7o!s unveiled #ppleNs ne*est products at the annual Mac*orld$onference and Epo in San Francisco in mid"7anuary 3--5. #pple is offering a ne*i(od Shuffle, a ($ that runs on %ntel chips and an iMac ($ that acts much li&e a digitaltelevision tuner and recorder. The ne* Shuffle includes a small screen that sho*s *hatsong the device is playing. 1ne of the &noc&s against the Shuffle is that since it doesnNthave a screen, a listener canNt see the name of *hat song is playing, or *hich song is netin the deviceNs listening >ueue. #pple may not epand the size of the ShuffleNs memory

!eyond 0giga!yte, or 34- songs, as the company *ouldnNt *ant to canni!alize on itspopular i(od ano player, *hich comes in 3AH and 4AH models. #pple also sells a 03"mega!yte Shuffle that hold up to 03- songs.

#pple sold 33. million i(ods in its 3-- fiscal year, and could come close todou!ling those sales in its 3--5 fiscal year, *hich !egan in 1cto!er 3--. #pple says ithas sold more than 36 million i(ods since unveiling the device in late 3--0. #pple !eganmoving to an all"%ntel processor lineup in 3--5 and plans to complete the move !y mid"3--?. %n #pple Macintosh computers, the %ntel chips *ill replace microprocessorsprovided !y %nternational Husiness Machines $orp. 9oger 8ay, president of EndpointTechnology #ssociates, said #pple could de!ut its first %ntel chips in a ne* iHoo& or(o*erHoo&s laptop computer. O#pple has long touted its strength in the consumer

'note!oo&) mar&et, !ut moving to %ntel could provide a !ig gain in epanding its presencein the !usiness 'laptop) mar&et,O 8ay said.

#lso in 3--5, #pple is to release some version of an iMac computer that acts li&ea digital television tuner and recorder. #pple too& a step in that direction in 1cto!er 3--,*hen it revamped the iMac to include Front9o*, a soft*are application that includes aremote control to manage and run the computerNs digital video and audio content.

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#pple reports its first">uarter results on 7anuary 06. #nalysts estimate #pple *illearn ; cents a share, on !illion in revenue, up from ; cents a share, on sales of ;.!illion in the same period a year ago.

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