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Apple Strategic Management Case Analysis

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Apple Strategic Management Case Analysis

  1. 1. © 2011 University of St. Thomas, Opus College of Business Apple: Strategic Management Case Study S. Bensen, A. El Haddi, K. Fitzsimmons, A. Hussein, H. Marotske Strategic Management, UST Executive MBA December 2012
  2. 2. 2
  3. 3. 3 1. Mac, the best PC’s in the world 2. Digital music revolution leader 3. Reinvented mobile Mission 4. Defining mobile media & computing devices future
  4. 4. 4 3. Intentional Misdirection Core Values Revealed 1. No External Agencies = No Disclosure = What Life? 2. Internal Teams 4. Innovation 5. Research Driven Strategy
  5. 5. 5
  6. 6. • Created 600,000 Jobs in the US • New announcement by Tim Cook “Assembled in the USA” (Source: NBC News) • “By itself, Apple’s iTunes and App stores make more money than The New York Times; Simon & Schuster, which publishes the best-selling “Steve Jobs” biography; Warner Bros. film studios, which owns the popular Batman film franchise; and Time Inc., the largest magazine publisher in the U.S. Combined.” -Edmond Lee Source: Bloomberg Recent News: Jobs by Jobs 6
  7. 7. 7 Apple, Inc. Now • Founded 1977 • HQ Cupertino, Ca. “The Mother ship” • Largest U.S. company ever • 72,000 Employees • 80% of revenue is from new products sold from Mid Sept to M/E Oct • 34 Patent Applications in October Competencies 1. Simple, Well Designed, User friendly 2. Innovative Culture of Design 3. Loyal Customers 4. Technology iOS 5. Energy Efficient Apple, Inc.
  8. 8. 8 Apple, Inc. 1. Operational Focus - Willing to release incomplete products 2. Wall Street - Engaging to increase dividends 3. Shifting Values - MBA vs. Liberal Arts 4. Relaxed Atmosphere - Leadership quiet yet demanding 5. Highly Ethical ?- Some might question • Procurement • Vendors Internal Assessment
  9. 9. Leadership Source: Mergent Online
  10. 10. 10 Governance $50k per year Serve one-year terms 3 Committees Source: Mergent Online
  11. 11. Apple's board of directors has three committees:  The Audit and Finance committee members are Ronald D. Sugar, Ph.D. (Chairperson), Robert A. Iger, and Arthur D. Levinson, Ph.D.  The Compensation committee members are Andrea Jung (Chairperson), William V. Campbell, Millard S. Drexler, and Albert Gore, Jr.  The Nominating and Corporate Governance committee members are William V. Campbell (Chairperson), Millard S. Drexler, and Albert Gore, Jr. 11 Committees Source: Mergent Online
  12. 12. 12 • Foxconn • Product Quality • Privacy • Sustainability • Intellectual Property Theft • Patents Source: The Telegraph Ethics
  13. 13. 13
  14. 14. 14 Management Effectiveness Revenue per Employee $2,023,349 Net Income per Employee $539,528 RIA % (Net) 28.08 ROE % (Net) 42.15 ROI% (Operating) 55.79 Profitability Ratios Gross Margin 44% Operating Margin 35% EBITA Margin % 38% Calculated Tax Rate % 25% Profit Margin (TTM) 27% Valuation Ratios Price/Earnings (TTM) 15.19 Price/Book (TTM) 53.3 Price/Cash Flow (TTM) 12.46 Asset Management Total Asset Turnover 1.05 Receivables Turnover 10.13 Inventory Turnover 112.12 Prop Plant & Equip Turnover 13.26 Cash & Equivalents Turn 14.98 Financial Analysis
  15. 15. 15 80% 2012 revenue from new products sold Mid Sept to Oct 31 - CNBC Industry Ratio Comparisons
  16. 16. 16
  17. 17. 17 Reinvention Change is Inevitable?
  18. 18. 18 Release history
  19. 19. LEADING INDICATORS & DEMAND DRIVERS 19
  20. 20. D = f(li1, li2, li3, …, lin)  Market Share: Stable  Search trends as an early indicator: Who has it?  Networking effect  Sharing  Social Nets  Social Networking capabilities 20 Demand And Adoption Rate Demand as a F(x) of leading indicators
  21. 21. Demographics World Progress Indicators 21 Economic Leading Indicators
  22. 22.  Product Drivers: 22 Leading Indicators: Product Drivers
  23. 23. 23 ANDROID iPhone Mobile browser counter as a leading indicator ?
  24. 24. EXTERNALITIES 24
  25. 25. 25 Smart Phones: Competitors
  26. 26. 26 iPhone, Droid or Windows Phone ?
  27. 27. 27 Mobile computing: Laptops & Notebooks
  28. 28. 28 Banking: $$$$$$$$ Educational Financing Distribution • Kiosks • Digital • Cloud • Direct • Apple Stores • Retail • VARS • Education • App developers • Effective Designers • Infrastructure • Talent (Well trained workforce) • Apple University • $$$$$$$$$$$$$$$ • Manufacturing, Suppliers, Partners (100+) iPhone iPad iCool Patents Design Manufacturing R&D, IP Innovation Marketing Quality Value Chain & Business Model
  29. 29. • Design • Miniaturization • Security • Ease of Use • Reliability • Marketing 29 Open Systems Improve + Innovate “Closed” Systems Cool! Secure Reliable Reduced Cost of production Improved Sales & Margins V A L U E ++ + $$ $ FreeBSD Key Success Factors
  30. 30. 30 B2B Market B2C Market BOP $ Enterprise + Government SMB $$$$$ Class $$$$$$ Affluent Premium Pricing Education Target Market G
  31. 31. INDUSTRY GROWTH & MARKET SHARE Smart Phones: 71% CAGR for the next 4 yrs. Cloud computing: 20% CAGR Mobile dev. in general: 25% 31 *nomic 02 *provisioning Carrying Capacity ??? Convergence Value Chain & Business Model
  32. 32. 0 10 20 30 40 50 60 70 iPhone Android Other 2011 2012 32 Smart Phone: Market share growth
  33. 33. 33 X Apple as a Mobile browser leader In 2010 The mobile worldwide market in 2010
  34. 34. 34 X X X X X iPhone Mobile market share 2012
  35. 35. • Apple has 68% of the tablet market • Cannibalization of iPad by the mini iPad? • Google & Others Tablets Open source to the rescue?  App store: Closed platform ? 35 What about the iPad ?
  36. 36. 36 OPPORTUNITIES THREATS Rapid Technological Changes Highly Competitive Market Continual Timeliness of R&D Patent/Copyright Violation Multiple Distribution Network Weak Outsourcing manufacturing New Management (Midas touch?) Growing demand: Education Enterprise and Government Consumers Mobility & Nomadic computing Media devices TV, Tailored Shows, MOD Growing incomes in ASIA and other emerging nations. External Scanning Analysis
  37. 37. 37 Industry Environment Sociocultural Forces Political-Legal Risk Economies Technological Factors Workers at an Apple supplier facility in Shanghai assemble parts for the MacBook Pro Societal Constraints
  38. 38. 38 Niche Market INNOVATION High Advertising Budget Patent Violations China/others Strong Brand FAKE iPhone anyone? Global Demand Existing Patents(i.e. Google’s 17000!) Supply Costs Supply Shortages Price Increases Outsourcing Process High Customer Loyalty High Demand Uniqueness Buyers SubstitutesSuppliers New Entrants Industry Competitors Porter’s Five Forces
  39. 39. 39 Apple’s Sustainable Product Differentiation Cost of Apple Product Apple Pursues Niche Market Differentiation Strategy – Defensive Pass Cost on to Customers Oligopoly Market (Niche)
  40. 40. Capabilities VISION 2020 Future Goals Current Strategy Assumptions New Technology Innovative Products Creative Solutions Strong Market Position Diversified Portfolio Inspire the World, Create the Future Robust Top Line Growth Fluctuating operating & net profits (S) (W) Segmentation Targeting Positioning Promote new Value for Core Networks • Industry • Partners • Employees Expand Global Penetration (SW Asia) Promote Top Line Products Company that goes after its goals Change = Action Same Threats as all Competition • Raw Material Pricing • Intense competition • Increasing regulations Competitive Analysis - Porter
  41. 41. TOWS Matrix: Strengths/Opportunities 41 TOWS Matrix: Strengths/Opportunities External Scanning Internal Assessment Opportunities 1. Demand in Education 2. Demand in Enterprise & Government 3. General Use Demand 4. Demand for Mobile Communications 5. Demand for Media Devices 6. APPLE Television 7. Strong growth opportunities in emerging nations 8. Rising wages in China Strengths 1. Global Company 2. Strong Brand Image 3. Diverse Distribution Avenues 4. Design, Manufacturing & Marketing expertise 5. Wide Market Circle 6. Reputation for Innovation 7. Master with 3rd party digital content 8. Compatible with Windows platform 9. Horizontal and Vertical Integration 10. Financially Sound 11. Entrepreneurial culture 12. Customer loyalty S/O Strategies: GROWTH Continue aggressive international growth strategies S1-O7 Strengthen partnerships with Education S12-O1 Increase APPLE television content S4/S6-O6 Capitalize on the smart-phone revolution S4,S7- O4,O7 Continue to aggressively develop mobile app market S6-O4,O5,O7
  42. 42. 42 TOWS Matrix: Strengths/Threats External Scanning Internal Assessment Threats 1. Industry constantly evolving 2. Highly Competitive Market 3. Outsourcing Difficulties 4. Inability to meet R&D requirements 5. Imitation of Apple products 6. Violation of patents and copyrights Strengths 1. Global Company 2. Strong Brand Image 3. Diverse Distribution Avenues 4. Design, Manufacturing & Marketing expertise 5. Wide Market Circle 6. Reputation for Innovation 7. Master with 3rd party digital content 8. Compatible with Windows platform 9. Horizontal and Vertical Integration 10. Financially Sound 11. Entrepreneurial culture 12. Customer loyalty S-T Strategies: External Fix-it Aggressively pursue new product development i.e.; wearable & pen computing S6-T4 Strengthen partnerships with band width vendors i.e.; international market S1-T1-T2 Evaluate niche market concentration S12- T1,T2 Eval Backward/FWD Integration (S9:T3)
  43. 43. 43 TOWS Matrix: Weaknesses/Opportunities External Scanning Internal Assessment Opportunities 1. Demand in Education 2. Demand in Enterprise & Government 3. General Use Demand 4. Demand for Mobile Communications 5. Demand for Media Devices 6. APPLE Television 7. Strong growth opportunities in emerging nations 8. Rising wages in China Weaknesses 1. Subject to supply shortages & price increases 2. Difficulty controlling outsourcing processes 3. Accusations of infringement upon patents of other organizations 4. Dependence on iPhone and iPad –limited variants 5. Lack of different price points with products 6. Dependence cellular network providers 7. Cost of product W-O Strategies: Internal Fix-it Improve domestic supply chain (W1-O3) Aggressively continue to pursue R&D product development (W4-O1-07) Continue to develop superior product(s) at lower cost point (W7-O7)
  44. 44. TOWS Matrix: Weaknesses/Opportunities 44 Internal External Scanning Assessment Threats 1. Industry constantly evolving 2. Highly Competitive Market 3. Outsourcing Difficulties 4. Inability to meet R&D requirements 5. Imitation of Apple products 6. Violation of patents and copyrights Weaknesses 1. Subject to supply shortages & price increases 2. Difficulty controlling outsourcing processes 3. Accusations of infringement upon patents of other organizations 4. Dependence on iPhone and iPad –limited variants 5. Lack of different price points with products 6. Dependence cellular network providers 7. Cost of product W-T Strategies: Eliminate/Survival Strive to avoid patent infringement within tech community (W3-T4,T6) TOWS Matrix: Weaknesses/Threats
  45. 45. Relative sales growth rate: g = 100(Sn - S(n-1) ) /Sn-1 45
  46. 46. 46 Flush with Cash: Lets do Backward and Forward Integration Backward Integration: Purchase of carriers • i.e. Nortel Networks (Done!) • WiMAX? • Cable or others with a market cap of 100B? Forward Integration: • Kiosks • Service Providers
  47. 47. 47 Conclusion
  48. 48. 48 LOW COST DIFFERENTIATION Broad Target Low cost Differentiation Narrow Target Cost focus Focused differentiation Competitive Advantage
  49. 49. • Factory Orders Report • Gross Domestic Product (GDP) • Housing Starts • Industrial Production • Jobless Claims Report • Money Supply • Mutual Fund Flows • Non-Manufacturing Report • Personal Income and Outlays • Producer Price Index (PPI) • Productivity Report • Purchasing Managers Index (PMI) • Retail Sales Report • Trade Balance Report • Wholesale Trade Report 49 Economic Indicators
  50. 50. • Business Outlook Survey • Consumer Confidence Index (CCI) • Consumer Credit Report • Consumer Price Index (CPI) • Durable Goods Report • Employee Cost Index (ECI) • Employee Situation Report • Existing Home Sales 50 Economic leading indicators: work in tandem!

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