For Strategic Management, my group and I did a complete business analysis of Apple Inc.

2. Introduction

3. Apple Computers originated in Cupertino, California by three friends, Steve Wozniak, Steve Jobs, and Ronald Wayne. Wozniak was the computer nerd of the three and had been working on a computer design and once Jobs convinced him of finishing his model and selling it to the public the beginning of Apple computers was underway. On January 3, 1977 the hard work of the three friends became Apple Computer, Inc. Soon after Wayne sold his share back to Jobs and Wozniak. The two Steve’s continued on to create one of the most successful companies that would in future years be known for their computers, music devices, cell phones, and software worldwide. Apple took off after Wozniak’s Apple I adding numerous versions of the Apple, the Macintosh line, the iPod, iPhone, and iTunes products, and numerous other computer/software products to the Apple Computer, Inc. family. Apple has made its mark on the technology industry by continuing to be successful innovators that lead their numerous product markets.

4. Identification of the Current Corporate Level Long-Term Strategies and Tactics

5. Apple has two major long-term strategies and tactics that they focus on. The first being strategic alliances that they have with IBM, Microsoft, and AT&T. The alliances they formed with IBM and Microsoft have enabled Apple to further their computer growth and guarantee software that is available and familiar to consumers all over the world. The alliance with AT&T was a recent alliance that was formed when Apple came out with their iPhone. Their contract with AT&T ends in 2010, and the phone world is anxiously waiting to see if they will continue this alliance or create a new one. The second strategy is concentration on internal growth which they are implementing by developing new products for the markets they have already established and by finding new markets for their current products. For example Apple created a new market for their Macintosh computers by pushing them into the education market and creating their mark among students and teachers.

6. Identification of the Current Corporate Level Short-Term Strategies and Tactics

7. Currently Apple does not seem to have any short-term strategies and tactics. This could be very risky for Apple, but at the time being they seem to be successful without it. They may want to rethink their lack of strategy soon due to the illness of Steve Jobs and implement a plan incase they lose their leader.

8. Identification of the Current SBU Level and Tactics

9. Apple’s current strategies defined by Porter are product differentiation with a focus on a broad market. This can be seen by Apple’s many products including the iPod, the iPhone, and all their Mac books that are priced and designed to fit every person’s needs and wants. Apple’s current strategy defined by Miles & Snow is being a prospector. Apple creates new products and services, such as their iTunes when legally downloading music was needed, to changing market conditions. They also respond rapidly and try to be the first mover. By doing this they set a benchmark for their competitors and place their products in consumer’s mindset first.

10. Identification of Apple’s Current “Green” Efforts

11. Apple has been making large strides in order to make their company a “green” company. Looking at the transformation of their MacBook Pro from 2006 to 2008 you will see that they have gone from having BFR, PVC, mercury, and arsenic in their 2006 version to having none of them in their 2008 version. They have also been reducing their packaging to both save materials and to make it possible to store more packages on one mode of distribution, thus reducing the amounts of trips it would have had to make. Last but not least, Apple has also been putting more of their attention on getting more recycling centers set up for their products. One of their ways of doing this is having a program within their stores that allows a customer to bring in their old Apple product they don’t want anymore, and the store will take care of the recycling process. Apple’s efforts are a great way to start their journey to being a completely “green” company (Apple.com).

12. Current Mission and Need for Change

17. Apple’s most prominent threats are led by the economy ranked at 10. This top threat is an obvious one considering the prices of Apple products. For almost every product Apple has there is a similar low cost alternative and in the current economic times even people who would like to but Apple products will be forced to go with a lower cost substitute. The high rivalry among competitors in the technology industry makes it very important that Apple stay ahead of the curve with innovation. In this industry the company that has long-term success is the company that offers customers the newest and latest technology. Along with a slower economy comes the threat of decreased demand, this is a threat to Apple especially because of their limited product line.

18. Identification of the Internal Environments

19. Apple currently holds a very strong financial position. Over the last several years they have experienced an increase in their growth, sales, net profit, and stock price. One of Apple’s top financial strengths is the fact that they do not pay out any dividends. This enables them to re-invest the money into capital structures. Part of Apple’s financial strategy is to spend a high amount of money on R&D; allowing them access to the latest technology, which keeps them a leader in industry innovator.

20. Ratio Analyses, Z-Value, and g*

21. Apple’s current ratio is slightly lower than the industry which suggests that Apple has fewer resources to pay its debts. Although this is true, all of the competitors have fewer resources available to pay back their debt than Apple. This ratio suggests that Apple would be considered to have good short-term financial strength. When looking at the quick ratio it is clear that when Apple is compared to the industry, Apple is better able to meet their current liability obligations by using their liquid assets. When compared to Microsoft, HP, and Dell, Apple is more liquid. Apple’s return on assets is on the higher end when compared to the listed competitors. This suggests that Apple’s assets are profitable in generating revenue. The industry has a negative ROA, suggesting a low amount of earnings derived from each dollar of assets. This means the industry’s assets are not profitable in generating revenue. Apple has a low return on equity in comparison to its competitors. This means that Apple isn’t as efficient in generating profits from their shareholder’s equity. Again, the industry has a negative ROE, which makes Apple highly appealing. Apple has a significantly lower return on investment than the competition. This means that the Apple gains less money on their investments. Apple doesn’t pay out any dividends; they instead reinvest the money into active capital structures.

22. Apple has a current Z-Score of 3.018. This z-score indicates that Apple has a very good financial standing and is not in any immediate danger of bankruptcy. Apple’s g* is -1.03. This indicates negative growth, which is mostly due to their high increase in assets. Even though their growth is shown to be negative, they are still having successful growth and can make it positive again.

23. Income Statement, Balance Sheet, and Cash Flows

24. This comparative income statement for Apple, the technology industry, and three major competitors shows why Apple is such a successful company. When comparing Apple’s sales to Microsoft, Dell, and HP one may conclude that Apple isn’t selling nearly as much; however, Apple is a much smaller company than the competitors presented above. When comparing cost of goods sold, Apple’s remains relatively low compared to Dell and HP, but are significantly higher than Microsoft. This could indicate that although Apple’s products are relatively expensive, they are able to produce their products at a lower cost than Dell and HP. However, Microsoft appears to produce their products at the lowest cost. It is worth noting that Apple spends the least amount of money on administrative expenses when compared to Microsoft, Dell, and HP. Lastly, Apple by far has the highest earning per share on its stock.

25. Apple has the lowest amount of inventory on hand when compared to Microsoft, HP, and Dell. Part of Apple’s strategy is to invest their capital into assets which are actually active because inventory creates an expense. Apple currently has the highest amount of long term investments in relation to its major competitors. This indicates that Apple’s management is focused on long-term growth. Apple and Microsoft are the only firms in this data set who actually have a higher level of equity in comparison to their liabilities. This is crucial for Apple because it allows them to generate enough equity from their resources to pay off their debts.

26. This year Apple has experienced its first negative cash flow in four years. This is not only due to the fact that they spent more than double the amount of money on capital expenditures than last year, but that they weren’t able to generate enough money from their operating activities to offset the major expenditures. This suggests that Apple needs to work on increasing their revenue and decreasing their expenses in order to see a positive cash flow next year.

27. Profitability Explanation

28. Apple is showing a great level of profit for several reasons. First, and probably the most important is that they do not have any long term debt. The continually choose not to provide dividends in order to reinvest the money into capital infrastructures. Apple also has a very small amount of liabilities in comparison to the industry and its competitors. They generate enough equity from their resources to cover their short term debt. Another great indicator of their profitability is their high earnings per share. Apple is also currently growing faster than the industry. In order to sustain their profitability they need to make sure to continue to increase their growth rate.

29. Industry Financial Numbers and Explanations

30. The industry as a whole is doing quite well. When comparing the industry and Apple’s income statement it’s clear that both have experienced an increase in sales and have come out with a positive net income. Apple’s sales constitute about 33% of the entire industries sales. Considering the size of Apple and the amount of time they have been a major player in the industry, they are surely showing their potential. Both the industry and Apple have an extremely high earning per share when compared to Dell, HP, and Microsoft. This demonstrates the attractiveness of Apple for investors along with their profitability. When comparing balance sheet statements, the industry has a lot of inventory on hand, a lot of long term debt and current liabilities. In fact, the industry has more liabilities than it has generated equity. Clearly, the industry as a whole has a difficult time generating enough equity from their resources to pay off their debts. However, Apple has no problem here. They are very capable of paying off their debts. In conclusion, Apple is currently performing better than the industry.

31. Financial Problem or Success Statement

33. Apple is currently growing faster than the industry. Apple’s growth rate is 9.30% while the industry is at 5.37%. Although the industry is in a strong position, Apple’s growth is soaring due to their innovative strategies.

34. Market Share vs. Industry and Competitors for 5 Years

35. Apple’s current market position is very strong. Microsoft, HP, and Dell currently hold a higher percentage of the market than Apple. Although this is true, Apple has proven to be an industry innovator. Virtually every product they have developed has created a huge sensation among consumers. Apple’s marketing efforts are truly one of kind. They rely heavily on guerilla tactics and celebrities to draw consumers in. The only downfall Apple faces is the fact that its competitors such as Microsoft, HP, and Dell have been able to create strong brand names over a long period of time. Apple has just recently become a major competitor in the industry. Even though this is true, they have done an impeccable job sustaining their position. They have successfully proven to provide high quality products and create a very strong brand name.

36. Marketing Tactics

37. Humorous commercials

38. Hip and fun campaigns

39. Cutting edge technology

40. Easy to use operating systems

41. User friendly Products

42. Environmentally Friendly Products

43. Innovation

44. Sleek Designs

45. Apple has an unmistakable marketing style and it has been very successful for them in the past few years. Apple is known for their humorous commercials and hip and fun campaigns which draw in the young and the young at heart. Apple provides products that are cutting edge and in their commercials and ads they try to communicate that to the consumers. Another thing that they try to convince their viewers of is the easy to use operating system and products. In most Apple commercials they show actual games or apps that can be run on their products this is to draw in their potential customers and show them why they can’t live without the specific Apple product.

47. Apple uses a multi-divisional structure within their company. They have Steve Jobs at the top as CEO and branch down to the COO and then branch down to their divisions that consist of: Worldwide Product Marketing, Software Engineering, Retail, Mac Hardware Engineering, iPhone Software Engineering, and Devices Hardware Engineering. Each of their divisions houses their own supervisors and employees.

48. Top Management and Executive Compensation

49. (Company News for Apple Inc.)

50. Direction of Top Management

51. The vision that Apple’s top management has is to continue to be the leading innovator in their markets. They have continuously captured their target market audience by producing the latest and greatest products before any of their competitors. They also want to push for more worldwide success by expanding their retail stores and iTunes into more foreign countries that have not be fully exposed to their products. By doing this they will increase their sales overseas and will become a worldwide phenomenon just like they did in the United States.

52. Stock Price Performance

53. Apple has had great success with their stock. It has been strong from the beginning and has been very strong as of late, currently selling at $194.34. Looking back at Apple’s stock it seems that though they look like they dip down here and there, they never go below selling for $50. This shows the strength of the company’s stock is for them (Yahoo Finance, 2009). As with any other product driven company, Apple’s stock heavily reflects the releases of their new products. This also favors Apple though because of their positioning as a market leader.

54. Proposed Mission, Vision, and/or Corporate Goals

56. Apple doesn’t seem to have defined any values for their company, so we propose that Apple should define values concerning the environment, their community, and the world to reach a level of understanding with their consumers.

58. Management Problem or Success Statement

59. Apple’s management is a marginal success because of the weaknesses they still do possess. We believe that Apple can easily become a strong success since their weaknesses are concentrated to mainly one area that can be turned around relatively quickly. Apple’s strengths are strong and will continue to be strong, which will hold them at the success level that they are at until their weaknesses can be improved.

60. Strategic Position

61. I.D. of Current Core Competencies

62. Product differentiation

63. Industry innovator

64. Brand loyalty

65. I.D. of Competitive Advantages

66. Apple’s greatest competitive advantage is differentiation of their products. Their computers and digital music devices set the standard for innovation and quality. They have various versions of almost every product including: Mac computers, software, iPhones, and iPods. Apple is well known for being an industry innovator. Apple guarantee’s their customers state of the art products that are not available anywhere else. In addition, Apple has managed to create a community of intensely brand loyal customers. These consumers who are proud to be a part of the “Apple culture” stand by their purchasing decisions with pride and commitment. In fact, most consumers who decide to go Mac, never go back to a PC.

67. I.D. of Top 5 Key Performance Indicators

68. Profits:

69. Stock Price: $201.46 Nov. 9, 2009 compared to $94.77 Nov, 11, 2008

70. R&D: +83% 2009 compared to +71% 2008

72. Along with strengths come weaknesses. Apple has several weaknesses which they need to address in order to remain a top player in the industry. The fact that they have a high beta could make them be perceived as a risky company. It could be seen as unattractive to spend so much money on R&D because so much is being devoted to one area instead of other areas of their infrastructure. However, without it, they wouldn’t be a leader in innovation. Social responsibility is something that is very important to consumers today. Apple currently does not highlight their efforts towards social responsibility. It’s well known that Apple relies too heavily on Steve Jobs. If he were unable to perform because of his illness or even have to leave the company, Apple would be in serious trouble. Although secrecy is important in protecting Apple’s ideas, it has caused them trouble in the past in regards to withholding information from their stockholders. Consumers are also well aware that Apple’s batteries have a poor performance and are a huge inconvenience to have replaced. The last weakness for Apple is the fact that they are not very compatible with Microsoft products, which deters many consumers.

73. Overall Problem/Success Statement

74. Apple is a success because of their product differentiation, innovation, and brand loyalty.

75. Conclusion and Discussion

76. Long-Term Prospects and Options

77. Some long-term strategy options that Apple has are to continue their internal growth by continuing to update their current products and services and to expand their “green” movement. By continuously updating their products and services they will continue to be the leading innovator in their markets and continue their long-term success. By expanding their “green” movement, Apple will become more appealing to consumers since the world’s population is looking for anyway to become a little greener. Another option would be to create more strategic alliances to expand their mobile phone carriers that support the iPhone. This would open up many more markets worldwide for them to take over.

78. SBU Level Options (Porter; Miles & Snow)

79. Apple’s current positions in both Porter and Miles & Snow should not be changed. We recommend that they continue to hold their current positions at differentiation (Porter) and prospector (Miles & Snow) because of the success that they have had with being the leading innovator with all of their products in the different marketsBibliography<br />Birnbaum, B. (2000). Strategic Thinking, A Four Piece Puzzle. Birnbaum Associates.<br />Company News for Apple Inc. (n.d.). Retrieved November 2009, from Reuters: http://www.reuters.com/finance/stocks/companyNews?symbol=AAPL.O<br />Yahoo Finance. (2009, November). Retrieved November 2009, from Yahoo: http://finance.yahoo.com/q?s=AAPL<br />Apple Retrieved November 2009: www.apple.com<br />