Strategic Analysis of Apple Inc.

October 2015

•Introduction to Apple Inc•Industry Definition•SWOT Analysis•Key resources•Products and Services•Main competitors of Apple•Competitive Advantage•Generic Strategy Followed by Apple•Financial Situation•Conclusion

Content

Introduction To Apple Inc

PresentationApple Inc. (Apple) is US technology company of

92, 600 employees, with retail stores in 16 countries and online stores in 39 countries. From its headquarters at Cupertino, California (USA), Apple is serving four industries worldwide: computer hard ware, computer software, consumer electrics and digital distribution. The current CEO is Timothy COOK (54 years old, since 2011).

Apple sales last year: $182.795 billion (2014)

Apple net income last year: $39.510 billion (2014).

History1976 With $1,300, Steve Jobs and Steve Wozniak

found Apple Computer, Inc.1982 Apple becomes the first personal computer

company to reach $1 billion in annual sales.1985 John Sculley assumes the helm after a

management shakeup that causes the departure of Jobs and several other Apple executives.

1996 Acquisition of NeXT brings Steve Jobs back to Apple as a special advisor.

1997 Steve Jobs is named interim chief executive officer.

2000 Jobs, firmly in command as CEO, oversees a leaner, more tightly focused Apple.

2001 The iPod is released; Apple opens its first retail store in Virginia.

2007 Launch of iPhone (1st generation) and Apple TV and Launch of the App Store next year.

5 October 2011 Death of Steve Jobs. 2013 Apple recruits Angela Ahrendts, CEO of the

luxury brand Burberry, and Paul Deneve, CEO of Yves Saint Laurent.

2014 Apple purchased Beats for $3 billion, a company that makes high-priced headphones as well as a streaming music service. 

2015 Apple released the Apple Watch line, which ranges from $350 for the entry-level Sport model to $17,000 for the most expensive Apple Watch Edition. 

 Vision Statement “We believe that we are on the face of the earth to

make great products and that’s 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.’’

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.”

Main long term objectivesThe broad differentiation generic strategy has

significant implications on Apple’s strategic objectives. So to effectively apply this generic strategy Apple has:

1- To lead the technology market by continuing to emphasize innovation through research and development and continually developing innovative products so that the firm always stands out against competitors.

2- To ensure that it keeps expanding its market reach, competing in all market segments with other players in the industry, through intensive strategies for growth (Product Development, Market Penetration, Market Development).

Industry Definition

In general Apple Inc. is operating in the technology industry. Within this big market, there are more specific sub industries where the company focus its development. These sub industries are: Computer software

Consumer electronics

Digital distribution

Mobile payement

Computer hardware

Industry Analysis (5 Porter’s 5 Forces model)Competitive Rivalry or

Competition with Apple

- High aggressiveness of firms (strong force)- Low switching cost (strong force)

Strong Force

Bargaining Power of Apple’s

Customers/Buyers

Bargaining Power of Apple’s

Suppliers

Threat of Substitutes or Substitution

Threat of New Entrants or New Entry

- Low switching cost (strong force)- Small size of individual buyers (weak force)

Strong Force

Moderate

Force

- High number of suppliers (weak force)- High overall supply (weak force)

- High availability of substitutes (moderate force)- Low performance of substitutes (weak force)- High capital requirements (weak force)- High cost of brand development (w f)- Capacity of potential new entrants (strong force)

Weak

Force

Weak

Force

THE INDUSTRY IS ATTRACTIVE

Suitable STRATEGY

Formulation

Moderate

Force

SWOT Analysis

Internal

External

Weaknesses- Limited distribution network- High selling prices-Sales limited mainly to high-end marketApple’s pricing and distribution strategies impose limitations in its business.

Strengths- Strong brand image- High profit margins-Effective innovation process

The company’s strengths are difficult to compete with.

Threats- Aggressive competition- Imitation-Rising labor cost in countries where Apple plants are locatedApple must take appropriate action to prevent or overcome these threats.

Opportunities- Distribution network expansion- Rising demand for tablets and smartphones-Creation of new product linesMajor opportunities for growth despite strong competition.

Key resources

Resources Apple has a long history of innovation and tenacity in

the technology market in the face of stiff competition. The excellent Apple brand reputation and the quality

of the products of Apple are in high repute. Apple operates over 255 company controlled retail

stores across the US and 424 worldwide, most of which were located in high-traffic locations such as shopping malls and urban shopping district.

Human resource: Apple has an efficient management team and Steve Jobs has been the superexcellent leader of this team.

Most of the apple’s manufacturing, assembly work, logistics and transportation planning was outsourced, resulting in great efficiency and lower costs.

The excellent Apple brand reputation and the quality of the products of Apple are in high repute.

CapabilitiesAn important marketing capability of Apple is its

brand power. With super eminent customer-focused services strategy as well as the aggressive advertising strategy, excellent reputation, goodwill and image have been built up among the consumers.

The technological function of Apple stand with the latest and pioneer technology.

Apple implements a hybrid strategy which integrates the cost leadership and differentiation strategy.

The firm has a direct sale model used through internet, telephone, and company controlled retail stores.

It’s built a well-managed and integrated supply chain.

Products & Services

Products Apple TV

Headphones

Mac

iPod

iPhone

iPad

Services iCloud Mac App

Store

Apple Store Apple Pay

iOS App Store iTunes

Store iBooks

Value propositionApple has positioned itself to a certain type of

customer, wealthy people, innovators, people with good jobs, good lifestyle, etc. If Apple targets the poor, the trendy guys will stop buying Apple. This would hurt the brand more than the increasing sales because of lower prices, and in good times, where everybody has more money.

On the other hand, there are no really substitution products, there are no similar machines that we can buy to have the same user experience. PCs are the same competition to Apple as Ford is to Mercedes. PCs are the everyday workhorse for the masses; Apple is elegance, difference and privilege for the minority.

Main Competitors

Paypal in Mobile Payments• Simplicity, modest commission • Viral marketing, expanding to accept payment via mobile

text

Samsung in Smartphone market• The 2nd largest amount spent for R&D in the world, in

2014.

Microsoft in Computer Softwares• Brand loyalty & reputation, easy to use software• Strong distribution channels, robust financial performance,

acquisition of SkypeHewlett Packard in Personal Computers• The world’s leading PC vendor with more than 15% market

share.• Positioned in the chinese growing market.

Google in Entertainment Media & Distribution• Brand loyalty & reputation, easy to use software• Strong distribution channels, robust financial performance,

acquisition of Skype

Generic Strategy

Apple’s Generic Strategy (Porter’s Model)

Apple’s generic strategy is broad differentiation. This generic strategy focuses on key features that differentiate the company and its products from competitors. Through the broad differentiation generic strategy, Apple stands out in the market. For example, emphasis on elegant design combined user-friendliness and high-end branding effectively differentiate the company.  

The broad differentiation generic strategy means that Apple always aims to set itself apart from competitors not by price but by other key features beneficial to customers.

Financial Situation

Revenue2015: Annual Revenue Forecasts $ 233.2 billion2014: Annual Revenue $ 182.8 billion2013: Annual Revenue $ 170.9 billionNet Income2015: Annual Profit Forecasts $ 70.8 billion2014: Annual Profit $ 39.5 billion2013: Annual Profit $ 37.0 billionStock PerformanceDec 1980: stock price $ 22.0Oct 2015: stock price $ 111.6 (x 56 due to stock splits)$5 000 invested in 1980 = $ 1 635 227 in oct 2015.

Conclusion

With growing demand for high-quality, powerful, user-friendly, and cost effective products, Apple is undoubtedly the leader in terms of bringing these ideas to life, with outstanding value innovations.

The company realizes that rather than publicly announcing product development plans years in advance, products are better-received with an “awe” response if they are simply released when they’re finished. This is an excellent strategy when the goal is to keep consumers eager for the latest products and asking:

“What could they possibly

improve next ?”

Thank You