PROJECT NAME: Apple Inc.

COURSE NAME: Basics of Management

COURSE CODE: MGT 201

GROUP NUMBER: 41

SEMESTER: IVth

SECTION: S4

GROUP MEMBERS:

Harhsit Sharma (U101115FCS097)

Gulshan Singh (U101115FCS094)

Hitesh Yadav (U101115FCS098)

Gourang Aggarawal (U101115FCS092)

Hussain Abbas (U101115FCS099)

B.Tech IInd Year IVth semester 2015-19 Batch.

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 Acknowledgement

We would like to thank Raj Kumar Kovid Sir for providing us this opportunity to
do this project. Over the course of project we learned a lot about the state of
the IT Services Industry. This project helped us relate with the concepts which
were taught in class and their practical implications.

For example concepts such as Business model became clear over the course of
this project. It was quite an amazing experience working on this project as over
the course of our research we came across some interesting finds related to the
IT sector. Overall it was a fun filled experience working in a team and we would
definitely like to undertake more such projects in future.

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INDEX
 Overview
 Verticals
 Product Portfolio
 Business model
 TimeLine
 Organizational Structure
 Organizational culture
 Competitive Analysis
 The challenges ahead
 Our Advice

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Brief Overview
Apple is an American multinational company, and it’s headquarter is situated in California. It designs,
develops, and sells consumer electronics, computer software.

Apple Incorporative
Apple was founded by Steve Jobs in the year of April 1976

Apple was incorporated as Apple Computer, Inc. in the year of January 1977

Apple’s current CEO is Tim Cook.

It was renamed as Apple Inc. in January 2007 to show that it has shifted focus towards computer
electronics and technology.

The Apple went on sale in July 1976.

In 1984, Apple launched its first pc, the Macintosh and was the first of its series to be sold without a
programming language.

World's largest information technology company by revenue.

Accounts for approximately 1.25% of the total United States GDP.

World's largest technology company by total assets.

World’s second largest mobile phone manufacturer.

In terms of market capitalization Apple is the largest publicly traded corporation in the world.

Company employs 115,000 permanent full-time employees as of July 2015.

As of March 2016 Apple maintains 478 retail stores in seventeen countries.

In year ending in September 2015 its worldwide annual revenue was totaled $233 billion.

The company enjoys a high level of brand loyality.

Reference: www.apple.com/about/ visited on 20/02/2017

Verticals
 In terms of technology, Apple for the last 35 years has championed a vertical model, and the
model features both an integrated hardware-and-software approach.
 When one company controls the end product as well as its component parts is termed as
Vertical integration.

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  For an instance we can take, iPhone and iPad devices they have hardware and software both
designed by Apple.
 Apple has set the pace for mobile computing due to this integration itself.
 “Companies can emulate the Apple model, but it will not happen overnight,” stated by
Lawrence Hrebiniak, who is a Wharton management professor.
 The whole world knew about the Apple’s integration efforts when they revealed the third-
generation iPad by the company.
 Core intellectual property that include system design, semiconductors, battery chemistry
and software resulting from the vertical integration is because of Apple’s ownership.
 The features of the product like power consumption has been advanced by the employees
precisely because Apple controlled the parts which are used to make up the iPad.
 Increase in its market share because of Apple’s successes in technology.
 It is the company’s control of ecosystem that is desired by the Apple’s competitors. It is
important for a company to distinguish between a motivation to manage the interface
between hardware and software of the product and a desire to manage one’s ecosystem.
 Apple again and again keep on coming with a newer version of its previous models just to
create a more seamless user experience and it makes the customers to invest more in Apple
products.
 According to the survey of analysts Apple’s software ecosystem is the key which is driving
sales long term.
 According to a survey of analysts it was said that vertical integration is not desirable for all
products, but you need multiple models in the technology industry. If every technology
based company trys to follow Apple, then it would lead to a degree of novelty and
innovation lost.
 The function of command and control structure which was laid by the former CEO Steve Jobs
may be one of the factors of Apple’s success.
 Vertical approach does not provide a significant advantage to a company if a company is
unable to stay ahead of the competition for a regular period of time.
 When Apple first came in the computer market its integrated approach didn’t work as per
expectations for the company benefits. But after sometime Apple found a way to balance
vertical integration with an outsourcing model.
 Apple focuses on design and integration of its model.

References : http://business.time.com/2012/03/16/how-apple-made-vertical-integration-hot-again-too-hot-maybe/1/

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APPLE’S PRODUCT PORTFOLIO
 The products that are best identified with Apple includes following:
 Hardware
 Mac computers (i.e. iMac, Mac Mini, MacBook, MacPro, MacBook Air, and MacBook Pro)
 iPod portable digital media players (like iPod Shuffle, iPod Nano)
 iPhone smartphones, evolving as follows:
 First generation iPhone, iPhone 3G, iPhone 4, iPhone 5, iPhone 5S, iPhone 5C, iPhone 6s,
iPhone 6s Plus all are models of iphone.

 iPad tablets, evolving as follows:

 iPad (iPad first generation, iPad 2, iPad 3, iPad 4)
 iPad Mini (iPad Mini first generation, iPad Mini 2, iPad Mini 3, iPad Mini 4)
 iPad Air (iPad Air first generation, iPad Air 2)
 Apple Watch smartwatch, Apple TV, Computer accessories

 Software
 Operating systems (OS X and iOS), iTunes (media player), Safari
 Creativity and productivity suites (eg: iWork and iLife)

 Services
 iTunes Music Store, App Store (for Mac and iOS), iCloud, Apple SIM (SIM card service for
iPad)
 Provides Quality Product with Premium Offerings.

 Apple employees are coming up with one of the best product strategy called “very good
products” also called “great product” strategy.
 This strategy focuses on quality over quantity.
 The “great product” strategy mainly focuses on quality over quantity.
 Aside from producing the hardware, smartphones and tablets, Apple has managed total
control over its platform, which is not something that can be completely said to the Apple’s

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 rival platform i.e. Android. So it implies Apple has control of both hardware and software
product whereas Android only has software control.
 The customer experience is one of the part of Apple’s product strategy.
 Customers tends to develop an attachment a brand which they purchase so, Apple
employees were smart enough to go on with the brand preference and it ensured the
customers to keep coming back to apple.

References: https://www.cleverism.com/apple-product-strategy/

Apple Business model

We all know Apple makes cash. But how? Apple sells its products through the retail channel, taking
part in the role of wholesaler, while also selling directly to consumers through stand-alone retail
stores and online stores.
Now we'll explain the elements of Apple’s Business Strategy.

FY 2001: $5 billion revenues. Net loss of $25 million.

FY 2007: $24 billion revenues. Net profit of $3.5 billion.

FY 2010: $65 billion revenues. Net profit of $14 billion.

FY 2015: $234 billion revenues. Net profit of $53 billion.

A very few corporations witness such growth in their revenues and profits. These stats shows how
world class product can change the phase of company upside down. Apple launched iPod in October
2001, iPhone in June 2007 and then iPad finally in April 2010. And they kept on releasing improved
version of these product respectively every year. And it created fortune for them in terms of
revenues and profits. Well, from this we are able to say that Apple has been specializing in these 4
business strategies:

 Creating best UX through vertically integrated model

 Building user friendly platforms for content and apps across Apple devices
 Expanding the network of company-owned retail stores
 Outsourcing manufacturing

Apple's Vertically Integrated Business Model

Well, we already recognize that Apple focuses on providing best UX and their answer to this is, own
it completely. They design and develop their own OS, hardware, application software system and

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services and thus integrates them to provide easy-to-use superb products. Additionally their
customers has to rely on them too if anything goes wrong.

In short, Apple isn't dependent on any of its partners for any technical breakthrough. They innovates
on their own. Their product differentiation helps them in maintaining premium pricing. Once
combined with low cost sourcing and products assembly strategy, Apple improves their business
profit margins.

Apple's Lines of Business

The company sells numerous products like iPad, Mac's, Mac, iTunes, iPhones, iPads, Software, and
Services, and Accessories.

We can group then in 3 lines of business:

• Computer Hardware & software

• Mobile Devices

• The iTunes store

Computer Hardware & software

It is the longest running line of business for Apple. The corporate has continuously followed that
hardware and its software both are helpful, and software and hardware integration cannot be
underestimated. This allowed Apple to concentrate on the quality and also the usability, at the cost
of market share for its Macintosh line of products.

Macs are sold by Apple, using 3 completely different business models.

 Apple acts as wholesaler to a small group of retailers that are approved mackintosh retailers.
 Apple sells Macs direct to customers through its web site.

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  Apple takes on the role of traditional retailer itself by selling Macs through its own bricks-
and-mortar retail stores.

Mobile Devices
The company's signature product are their mobile devices and tablets. They dominate the cellular
phone and tablet industries. Apple has targeted a lot on quality construction, and UX to develop its
software, hardware and cloud services and integrated them into their own mobile platform. They
evolved iPod into the iPhone by combining cellular technology with their app store that evolved later
on into the iPad product line combining computer functionality as well.

Apple’s approach to mobile devices is comparable to that of its computer business. Apple sells
iPhones and iPads through:

• The traditional retail channel of its own bricks-and-mortar retail stores.

• Partners

• Web channels

• The freemium business model (i.e. by providing free or discounted products in return for
long-term contracts in specific countries)

A final part of the mobile device product line is that the revenue coming in from the app store, that
is a variation of the razors & blades business model.

iTunes Store
iTunes Store originally was launched for iPod. Later on the iTunes store went on to become the
primary portal for media consumption in all Apple devices. When consumer buys a hefty priced
iPhone or iPad or other product, it's obvious he would want to use its all its services. However, Apple
doesn't provide them for complimentary. They expect us to pay for that experience too. The iTunes
store has expanded way beyond music; nowadays just as the company’s expansion, iTunes store has
moved from music to video to apps, and even to books.

The iTunes store has many innovative business models for Apple and its developer community. As
mentioned above, recurring revenue comes in with the razors & blades model.

App developers are able to use the freemium as well as razors &blades models in iTunes store. This
allows them to bind customers with free or low price apps. It helps them in earning future revenue
through other in-app purchases and ads within which apple additionally takes some share of each
and every service a user buys from its platform

Sources: http://www.digitalbusinessmodelguru.com/2013/02/analysis-of-apple-inc-business-model.html visited on 20/03/2017

https://revenuesandprofits.com/how-apple-makes-money/ visited on 20/03/2017

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TimeLine
● 1976 - Apple's history begins in the garage of Steve Jobs' childhood home (the Homebrew
Computer Club) in Los Altos, California, where Steve Wozniak and Jobs tested the first Apple I
computers. The computer later sells for $666.66.
● 1976 - Ronald Wayne designs the first Apple company logo.
● 1977 - Apple Computer Inc. incorporates on January 3, 1977. Apple introduces its first
successful product, the Apple II computer, for $1,298 after multimillionaire Mike Markkula
invests $92,000 in the company.
● 1978 - Apple begins development of the unsuccessful Apple III.
● 1980 - Apple launches its IPO and becomes a publicly traded company on December 12, 1980,
selling 4.2 million shares for $22 each.
● 1981 - IBM introduces a low-spec PC for $1,565, and eclipses Apple's market share within two
years, as the Apple Lisa misses its shipping target.
● 1982 - Steve Jobs is forced out of the Lisa project and takes over control of the Macintosh
project from Jeff Raskin, who subsequently resigns.
● 1983 - Apple launches the Lisa on January 19, 1983, but sells only 100,000 units due to the
personal computer's expensive $9,995 price tag, compatibility issues, and perceived slow
performance.
● 1984 - Apple's iconic "1984" commercial airs during a break in the third quarter of Super Bowl
XVIII on January 22, 1984.
● 1984 - Steve Jobs introduces the Macintosh at Apple's annual shareholders meeting on
January 24, 1984 for $2,495.
● 1985 - Steve Jobs resigns from Apple on September 16, 1985 following an internal power
struggle with Apple's Board of Directors and then-CEO John Sculley.
● 1994 - Apple releases its first PowerPC-based desktop computers and notebooks.
● 1997 - Apple is in financial trouble, with its stock reaching a 12-year low in the second quarter.
● 1998 - Apple announces the iMac on May 6, 1998.
● 1999 - Apple releases the iBook on June 21, 1999 based on the colorful iMac design.
● 2001 - Steve Jobs introduces the iTunes media player on January 9, 2001.
● 2001 - OS X is released on March 24, 2001 based on the NeXTSTEP platform.
● 2003 - Apple launches the iTunes Store on April 28, 2003 for digital music downloads.
● 2004 - the iPod mini on January 15, 2004.
● 2005 - the iPod shuffle on January 11, 2005.

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 ● 2005 - the iPod nano on September 7, 2005.
● 2006 - Apple releases the MacBook Pro with Intel architecture on January 10, 2006.
● 2006 - Apple releases the MacBook, the successor to the iBook, on May 16, 2006.
● 2007 - the iPhone on January 9, 2007
● 2007 - Apple releases the Apple TV on January 9, 2007.
● 2007 - Steve Jobs introduces the iPod touch on September 5, 2007.
● 2008 - Apple launches MacBook Air on January 29, 2008 and App Store on July 10, 2008.
● 2011 - Steve Jobs passes away on October 5, 2011, one day after Apple introduced the iPhone
4S and Siri.
● 2012 - Apple Maps launches on iOS 6
● 2014 - Tim Cook introduces the Apple Watch on September 9, 2014.
● 2014 - Apple Pay launches in the United States on October 20, 2014.
● 2016 - Apple releases the iPhone SE and smaller iPad Pro.

References : https://en.wikipedia.org/wiki/Timeline_of_Apple_Inc._products visited on 25/03/2017

Apple Inc. Organizational Structure

Apple’s organizational structure is effective in supporting business performance to ensure leadership
in the industry. However, further changes in this organizational structure can help improve Apple’s
capabilities, especially in the area of rapid and creative innovation and design.

Most significant characteristics of Apple’s organizational structure:

 Wheel and Spoke hierarchy
 Function based grouping
 Product based grouping

Wheel and Spoke Hierarchy

A bird’s-eye view of Apple’s organizational structure shows considerable hierarchy. In the past, Jobs
made all the major decisions. However, under Tim Cook’s leadership, Apple’s organizational structure
has slightly changed. There is now more joint effort among different parts of the company, such as
software teams and hardware teams.
Function Based Grouping.
The upper tier of Apple’s organizational structure has function-based grouping, which is an element
derived from the functional type of organizational structure. Each senior vice president who reports
to Tim Cook handles a business function

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Product Based Grouping.
The lower tier has product-based grouping. Below the senior vice presidents, there are many vice
presidents for different outputs or products. For example, Apple has a VP for iOS apps, a VP for iPad,
and another VP for consumer apps. This aspect of the organizational structure enables Apple to
address specific products or product components.

Apple’s Inc. organizational culture

Apple’s organizational culture has the necessary characteristics to ensure the company’s leading
position in the market. However, this organizational culture also presents some challenges to Apple in
optimizing its human resources.

Features of Apple’s Organizational Culture

 Top-notch excellence
 Creativity
 Innovation
 Secrecy
Top-notch excellence.
Apple’s organizational culture involves a policy of selecting only the best of the best workers.
Steve Jobs was known for fire employees who did not meet his expectations level. This
tradition in Apple’s organizational culture continues under Tim Cook.
Creativity
Apple employees are selected for their knowledge, skills, and creative abilities. The firm’s
organizational culture highlights the importance of creativity. Employees who works in
development processes and product design are uniquely creative.
Innovation
Apple’s organizational culture is also highly innovative. In fact, Apple is frequently appraised
as one of the most innovative companies in the world.
Secrecy
Steve Jobs developed Apple to have an organizational culture of secrecy. This secrecy is part
of the company’s strategy to minimize piracy of corrective information. Upon hiring, Apple
employees agree to this organizational culture of secrecy, which is reflected in the firm’s
policies, rules and employment contracts.

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References: https://www.sec.gov/Archives/edgar/data/320193/000119312514383437/d783162d10k.html visited on 16/02/2017

Apple Competitive Analysis

Apple Inc. has a huge disadvantage in terms of its completion, it has roots in every major digital
peripherals different companies from different sectors can eliminate apple as their competition if
apple doesn’t remain active in that particular sector, Apple is likely to lose the race in the mobile
market due to its more expensive phones rather than cheaper phones provided by google and
Samsung.

In the Mobile sector Apple’s main competition are known to be Samsung and Google, both of these
companies offer cheaper alternatives compared to Apple’s devices. In the software race also Apple
has a huge drawback due to its Apple store. Android market is 10 times vaster than iOS market
which serves as a huge disadvantage to Apple.

The main rival to the iOS store is the Google Play Store which is deemed to be more developer
friendly, Microsoft is another competitor but due to its low popularity in the market it does not pose
a threat to the iOS store currently.

Apple’s main competition were and are Microsoft and IBM in the personal computing sector but
through these past years Apple has made a huge comeback and is ready to take on both of these
giants together. Apple has always been pushed by the competition offered by Microsoft, IBM, HP
and Dell in the Computing sector and since iPhone and iPad has been launched the competition has
gone completely to another level.

http://www.visualcapitalist.com/time-machine-apple-microsoft-ibm-20-years/ visited on 27/02/2017

http://in.reuters.com/finance/stocks/companyProfile?symbol=AAPL.O visited on 27/02/2017

The above statistics show the return we get by investing 1000$ at that time on each of the company.
Clearly at that time Microsoft was at its financial peak and was ruling the digital device’s industry.

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But by looking at the below stats it is clear that Apple has grown a lot since then and is a worthy
competitor to both these companies.

https://www.strategicmanagementinsight.com/swot-analyses/apple-swot-analysis.html visited on 27/02/2017

http://www.visualcapitalist.com/time-machine-apple-microsoft-ibm-20-years/ visited on 27/02/2017

The challenges ahead

Apple faced some real problems in the year 2016 and, if the company wants to maintain its name and
status, they need to start addressing them as soon as possible.

Shipping
 Due to
 inaccurate demand forecasting, of higher component constraints
 lower yields than expected
 last minute issues or of changes to materials or manufacturing processes.
 These factors may affect the sales of Apple in the near future. Worse, people can't buy their
product in a timely fashion, which results in a terrible customer experience.

The horn effect:

 No updates provided to iMac since 2015, Mac Pro since 2013, and Mac mini since 2014.
 Due to Apple's last few major updates, the average customers are unable to update apple’s
product by themselves.
 The halo effect helped build a complete environment that provides far more value than the
sum of its parts.

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  The horn may result in the opposite. It may result in loss of a lot of hard-won gains Apple's
made over the last decade.

Customer preferences
 The biggest problem Apple faces today is the products it is making are maybe not the
products that future generation want; their products tend to be moving away from what
they want not towards, and that's across product lines.
 Many customers want more ports but Apple is releasing laptops with less.
 They are concerned about being thin but many customers would rather prefer having a
good battery and larger hard drive at the cost of thickness.
 Removing the headphone jack seemed particularly pointless.

PRICE SENSITIVITY
 Next challenge which Apple will face is to survive in a low-income market like India with its
current strategy.
 "In India, incomes are so low that not many customers can appreciate the full value of the
Apple services, and it will take a lot more effort for Apple to sell the Macs and iPads in Indian
stores compared to China," said Strategy Analytics' Ukonaho.
 India is a price sensitive market even more than China, and Apple's rather expensive
iPhones are out of reach for most Indians. According to World Bank data, an average Indian
lives on less than $3.10 a day.
 Apple has seen only slow growth in India. The Indian government also refused its plan to
import and sell used, refurbished iPhones. Indian market is dominated by Samsung
Electronics and Chinese brands like Xiaomi, LeEco etc.

MORE MARKETING
 Apple's brand awareness ranks 10th in India, below companies like Samsung, Sony,
Blackberry and some local rivals. Nearly half of respondents in a Morgan Stanley’s survey
said they do not know about Apple.

Apple faces challenges from seemingly every corner. Google wants to take over the iPhone with its
Android system and Pixel. Netflix wants to leave iTunes behind. Facebook wants to dominate the
Internet, controlling just about everything. Now Amazon has also jumped into the tablet business.
http://www.dqindia.com/dq-top20-meet-indias-top-100-it-companies/ -visited on 30/03/2017

http://fortune.com/2016/05/24/india-market-apple-tim-cook/ - visited on 30/03/2017

http://www.imore.com/biggest-problems-facing-apple-2017 - visited on 30/03/2017

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Our Advice:
 Apple should open the Mac architecture in future to leading computer manufacturers — such
as Wang, AT&T or DEC. It would help expand the platform and ensure Apple’s reputation as a
technological innovator. If Apple is taking away their customer's ability to do something, they
take on the absolute responsibility of doing it for their customers.
 Apple’s differentiation strategy has resulted in the huge success of its products in the past
decade but now a new market of cost leadership is rising especially in the east. So Apple
needs to maintain a balance between the two. A smart move for apple could be launching a
comparatively cheaper lower-end iphone as there are a lot of valuable commercial
opportunities to be gained at the low end.
 The biggest problem Apple faces today is the products it is making are maybe not the
products that future generation want. So they need to shift their product strategy to meet
the demands of future consumers.

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