Apple Case Analysis

• Issues and Outlook

• SWOT Summary– External Analysis– Internal Analysis

• Strategic Recommendations– Mission– Goals– Strategic Action Plan

Issues and Outlook:1993 and Beyond

• Is Apple successful?

• Past/current strategy?

• What are the main concerns/issues that confront Apple?

• Where is Apple headed in the future?

Comparative Market Share (%)by Revenue

0

5

10

15

20

25

30

1986 1987 1988 1989 1990 1991

IBM Apple

Packard-Bell Compaq

Dell

Financial Snapshot:Revenue and Net Income

(in $millions)

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

1987 1988 1989 1990 1991

Revenue

Net Income

Breadth of Breadth of Competitive Competitive

ScopeScope

Source of Competitive AdvantageSource of Competitive Advantage

BroadBroadTargetTargetMarketMarket

NarrowNarrowTargetTargetMarketMarket

CostCost

CostCostLeadershipLeadership

CostCostLeadershipLeadership

Differen-Differen-tiationtiation

Differen-Differen-tiationtiation

Apple’s Business Level Strategy

Focused Focused Differen-Differen-

tiationtiation

Focused Focused Differen-Differen-

tiationtiation

Focused Focused Low CostLow CostFocused Focused

Low CostLow Cost

UniquenessUniqueness

External Analysis

• Influences from Remote Environment

• Influences from Competitive Environment

• Promoters of / Barriers to Change

• SWOT Summary

• Competitor Analysis

Analysis of the General Environment

Political/Legal

Political/Legal

DemographicDemographic EconomicEconomic

TechnologicalTechnological

GlobalGlobal CompetitiveEnvironmentCompetitiveEnvironment

SocioculturalSociocultural

Industry Growth(in $billions)

0

5

10

15

20

25

30

35

40

45

1982 1986 1990 1994

DesktopsPortablesServersTOTAL

Threat of Threat of Substitute Substitute ProductsProducts

Threat of Threat of Substitute Substitute ProductsProducts

Threat of New

Entrants

Threat of Threat of New New

EntrantsEntrants

Threat of Threat of New New

EntrantsEntrants

Analysis of the Competitive Environment

Rivalry Among Rivalry Among Competing Firms Competing Firms

in Industryin Industry

Rivalry Among Rivalry Among Competing Firms Competing Firms

in Industryin Industry

Bargaining Bargaining Power of Power of BuyersBuyers

Bargaining Bargaining Power of Power of BuyersBuyers

Bargaining Bargaining Power of Power of SuppliersSuppliers

Bargaining Bargaining Power of Power of SuppliersSuppliers

Microprocessor VolumeInstalled Base - Millions of Units

0

25

50

75

100

1988 1989 1990 1991

IntelMotorola

Strategic Group Map Pre-Windows

Price

Premium

Low

Strategic Focus - Differentiation

Broad Narrow

Apple

IBM

Sun

Clones

Compaq

Strategic Group Map Post-Windows

Price

Premium

Low

Strategic Focus - Differentiation

Broad Narrow

Apple

IBM

Sun

Clones

Compaq

Internal Analysis

• Resource-based View Analysis of:– Core Competencies– Core Weaknesses

• Value Chain Analysis of:– Value-enhancing Activities– Value-diminishing Activities

• Promoters of / Barriers to Change

SupportActivities

Primary Activities

Value Chain Analysis

Technological Development

Human Resource Management

Firm Infrastructure

Procurement

Inb

oun

d

Log

isti

cs

Op

erat

ion

s

Ou

tbou

nd

Log

isti

cs

Mar

ket

ing

& S

ales

Ser

vice

MARG

IN

MARG

IN

MARGIN

MARGIN

SWOT Summary

• Strengths

• Weaknesses

• Opportunities

• Threats

Revised Mission/Intent Statement

“Apple ………………………………..”

• Definition of Industry• Description of Core Values• Description of Basic Strategic Approach• General Identification of Customer Base

Revised Mission

• To position Apple as the world leader in man-machine interfaces though the development of ergo- and cerebro-nomic software and interface devices required for electronic and electromechanical applications.

Goals

Financial• • •

Strategic• • •

Goals

• 20% ROS by 1994

• 40% Share of O/S Market by 1994

• Develop 3 New Interface Devices by 1994

• Achieve full interoperability with– Intel and RISC microprocessors by 1993– Top 4 Software Vendors by 1993

Strategic Action Plan

• Strategic Action #1– Details about specific value chain activities– Resources required– Expected benefits (re: a particular SWOT item)

• Strategic Action #2– Details about specific value chain activities– Resources required– Expected benefits (re: a particular SWOT item)

Milk Mac

• No new manufacturing and R&D investment in existing hardware products

• Outsource next 3 years’ production to Malaysia:– Send VP Mfg. and 3 Engineers on “Sourcing

Mission”

Benefit: Decrease COGS from 53% to 33%

Apple Core• “Open system” O/S (a.k.a. Pink)

– not processor specific– head-to-head with Windows– increase installed base– increase ISV applications

• Shift 80% of R&D budget to Core

Benefit: Increase ROS from 5% to 20%(NOTE: O/S production has COGS average 19% percent of sales vs. 66% in hardware manufacturing.)

Apple’s Recent Actions

1994• Layoffs and Mfg.

Rationalization• Pushed Pink

– H-P joined Apple and IBM

• Sculley resigns; Spindler is new CEO

1993• Cut Mac prices 26%

– down from a 20-40% premium

• PowerPC with IBM and Motorola– PowerMac– PowerBook laptop

• Overseas expansion; Japan (2% to 15%)

• Newton (PDA)

1995• Attack educational and

desktop pub markets• License Mac O/S (aka

Copeland)• Record revenues; $69

million net loss• Fujitsu starts price war

in Japan

1996-98• Terminated Taligent

and Kaleida• Jobs and Woz are back• Accepted $150 million

from MSFT• Intros iMac

Actual Results: 1991-97

-$2,000

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

1991 1992 1993 1994 1995 1996 1997

Revenue Net Income R&D Cost of Sales

Stock Price

Comparative Market Share (%)by Revenue

0

5

10

15

20

25

1988 1989 1990 1991 1992 1993 1994 1995 1996

IBM Apple

Packard-Bell Compaq

Dell

Revenue Comparison (in $millions)

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

1991 1992 1993 1994 1995 1996 1997

Dell

Compaq

Intel

Microsoft

Apple

Profit Comparison (ROS %)

(20)

(10)

0

10

20

30

40

1991 1992 1993 1994 1995 1996 1997

Dell Compaq Intel Microsoft Apple