Las Piñas Campus

Phone : (02) 8872-7041

Subject:
Strategic Management and Decision Making

Case study of
Apple inc in 201

Submitted by:

CHEMA C. PACIONES

Submitted to:
Dr. Ronaldo A. Poblete, CMITAP, CFMP, CATA, CAEA
Professor

JULY, 2020
Background of the Case

The company started off as “Apple Computer” by Steve Jobs and Steve Wozniak,

a pair of 20-something college dropouts in 1976. Jobs then went to work and

transformed “Apple Computer” into “Apple Inc.” with innovative and technologically

sophisticated non-PC products in 2000’s. By 2010, the company also viewed itself as a

“mobile device company.” Apple became the fourth- largest PC vendor in the US market with

an 8% share by the end of 2009. Its market capitalization went to $220 billion in spring of 2010

through multi-million dollar marketing campaigns such as the successful “Think Different” ads

and catch slogan. Apple promoted itself as a hip alternative to other computer brands. It also

highlighted its computers as the world “greenest line-up of notebooks”. The goal of Apple is to

differentiate its products amid intense competition in the PC and mobile device industry.

Apple’s strategic management

The success of Apple Inc. has been based on its ability to integrate into its

model of business operation a management that is strategic. Through strategic management

diligent involvement, Apple Inc. has been able to ensure that it is not maneuvered; a strategy

that has enabled the company for the past 3 decades to emerge as successful in the

competition. However, believing that Apple Inc. has not gone through some setbacks would be

illogical. In fact, this is one of the companies that have their good testimony of how the tread of

emerging as successful in an already established market can be challenging. However, Apple

Inc. has been able to maintain a steady pace as it makes effort to continue with the market

analysis, which has been enhanced through having a strategic plan that has been implemented

properly, and through capitalizing on strengths that have been highlighted, the analysis has

indentified. In the philosophy simple terms, the strategic management is perceived to be

basically important to every leading business in any sector of the economy. A model example
happens to be presented by Apple Inc. on how the strategic management incorporation can

assist in making a firm to successfully be able to meet its expectations and objectives (Yoffie

and Slind, 2008).

Through the strategic management development, Apple Inc. has benefited in many ways

despite the challenges that have been witnessed in the process. Emerging as an industrial giant

in the modern business is not an easily achievable goal, but will require a strategy in place that

clears the path to success. Internal growth has in one way or the other enhanced the

competitive growth of Apple Inc. and through maintaining an aggressive business tread, its

importance has been realized in the lucrative success that has been enjoyed by Apple Inc

(HBSWK, 2004).

In technology, Apple Inc. has advanced from the initial computer industry to involvement

of the peripherals which has been based on its products and services that have been on a wide

scope. The Apple’s mission highlights a company that is with no doubt in the process of

revolving the technology industry. The short term goals of Apple have not been well defined,

which presents one of the major shortcomings Of Apple Inc’s strategies. Due to its major goal

which has in the past been aimed at ensuring that the customers are provided with the best

personal computers globally, finding other specific objectives has proved difficult to Apple. Of

late, it has been realized that due to the modern emerging competition, Apple Inc. has continued

losing its customers to the alternative companies that are offering their products at a lower

market price, especially in the iPod music; this has strongly been attributed to the increasing

hackers of the code and the piracy. Other challenges facing has been failure to draw a specific

target to a customer group that is focused and failing to take advantage of the customers that

already exist. Product integration failure coupled with the technologies that are available readily

has been another challenge that has continued to establish itself into this company, which has

been critical its success. These problems have however not been very critical to the business.

The inability of Apple Inc. to be comparable to other companies has been based on the fact that
 Apple has not been specializing in one product scope , thus providing a more

complicated scope of products. This can be an advantage as well as well as a disadvantage.

Looking at Apple Inc. initial mission, the specification has been based on the computer

development. With a new product development (consider the iPhone), a new mission was

redefined, leaving uncertainty in evaluation of Apples initial goal (Freedman, 1998).

PROBLEM STATEMENT

What should Apple Inc. do, amidst growing competition and challenges, to thrive and

maintain its status as a successful full-fledged digital convergence company?

Areas of consideration

Apple Inc.’s success is linked to the ability to use business strengths to

overcome weaknesses and threats, and to exploit opportunities in the industry

environment. A SWOT analysis of the company gives insights on the strategic actions of

the business, especially in maximizing its growth based on its strengths and

opportunities. The SWOT analysis framework is a strategic management decision-

making tool that determines the most pressing issues facing the company, based on the

internal business conditions and the external environment. In this case, the SWOT

analysis of Apple Inc. scans the business for relevant strengths, weaknesses,

opportunities, and threats (SWOT variables), with reference to various industries and

markets. The company is involved in the computing technology (hardware and

software), consumer electronics, cloud computing services, and online digital content

distribution services industries. This condition necessitates that Apple develop a diverse
set of strategies to ensure its competitiveness and business growth. This SWOT

analysis of Apple Inc. presents the strategic factors that influence the decisions of CEO

Tim Cook and managers in developing the business. With its operations in various

markets around the world, the company deals with different sets of SWOT factors based

on regional situations. Also, the Porter’s Five Forces analysis of Apple Inc. establishes

that the company faces the strong force of competition linked to the aggressiveness of

other technology firms, such as Google, IBM, Amazon.com, Samsung, Sony, Lenovo,

Dell, and PayPal. This competitive landscape requires innovative strategies and tactics

to achieve continuous business growth and development, and to fulfill Apple’s corporate

mission statement and corporate vision statement

Apple’s Strengths (Internal Strategic Factors)

This aspect of the SWOT analysis framework identifies the strengths that enable

the company to overcome weaknesses, take advantage of opportunities, and withstand

threats in its business environment. These strengths are internal factors specific to the

conditions within the business organization. In this case, the following are the most

notable strengths of Apple Inc.:

1. Strong brand image

2. High profit margins

3. Effective rapid innovation processes

Apple is one of the most valuable and strongest brands in the world. In the

context of this SWOT analysis, the company is capable of introducing profitable new

products by virtue of its strong brand image. In addition, Apple’s marketing mix or

internal strategic factor is a major strength because it maximizes profits, even when

sales volumes are limited. Moreover, the generic competitive strategy and intensive

growth strategies of Apple Inc. involve effective rapid innovation, which enables the

business to keep abreast with the latest technologies to ensure competitive advantages.

Based on this aspect of the SWOT analysis of Apple Inc., the company’s strengths are

difficult to compete with, thereby supporting continued leadership in the global industry

environment.

Apple Inc.’s Weaknesses (Internal Strategic Factors)

In this aspect of the SWOT analysis, the emphasis is on the weaknesses or

inadequacies of the company. Weaknesses are internal factors that are obstacles to

business growth.

The following business weaknesses are the most notable in the case of Apple:

1. Limited distribution network

2. High selling prices

3. Dependence of sales on high-end market segments

Apple Inc. has a limited distribution network because of the company’s policy of

exclusivity. For example, the company carefully selects the authorized sellers of its

products. The SWOT analysis framework considers this exclusivity strategy as a factor

that limits market reach. This weakness exists despite exclusivity’s advantages, such as

Apple’s strong control on the distribution of products. In addition, because of its

premium pricing strategy, the company has the weakness of the dependence of sales

on high-end market segments. High prices attract customers from the middle- and high-
income brackets, while preventing customers from low-income brackets to easily

purchase the company’s products. This internal strategic factor is a considerable

weakness because high-end market segments represent only a minority of the global

market. Based on the internal factors in this aspect of the SWOT analysis, Apple Inc.’s

pricing and distribution strategies impose limitations or weaknesses in the business.

Opportunities for Apple Inc. (External Strategic Factors)

This aspect of the SWOT analysis of Apple Inc. pinpoints the most significant

opportunities that are available to the business. Opportunities are external factors based

on the industry environment. These factors influence the strategic direction of business

organizations.

In Apple’s case, the following are the most significant opportunities:

1. Expansion of the distribution network

2. Higher sales volumes based on rising demand

3. Development of new product lines

Apple Inc. has the opportunity to expand its distribution network. Such

opportunity directly relates to the weakness of the company’s limited distribution

network. This SWOT analysis emphasizes the need for the company to change its

distribution strategy. An expanded distribution network can help Apple reach more

customers in the global market. In relation, the company has the opportunity to increase

its sales volumes through aggressive marketing, especially for mobile products. This

opportunity is linked to the rising demand for mobile access, as illustrated in the

PESTEL/PESTLE analysis of Apple Inc. Furthermore, the company has the opportunity
to explore new product lines. Its current product lines are highly successful. However,

with further innovation, the company can develop and introduce new products, like what

it has already achieved with the Apple Watch. Developing new product lines can

support business growth in the international market. Thus, this aspect of the SWOT

analysis of Apple indicates that the business has major opportunities for further growth

despite aggressive competition.

Threats Facing Apple Inc. (External Strategic Factors)

In this aspect of the SWOT analysis, the focus is on the threats that the company

experiences from various sources, such as competitors. Threats are external factors

that limit or reduce the financial performance of businesses.

In Apple’s case, the following threats are the most significant:

1. Aggressive competition

2. Imitation

3. Rising labor cost in various countries

Tough competition in the industry is partly because of the aggressiveness of

firms. Apple competes with firms like Samsung, which also uses rapid innovation. In the

context of this SWOT analysis, aggressive competition has a limiting effect on Apple

Inc. Because of the aggressive behaviors of competing firms, it is necessary to have

strong fundamentals for maintaining competitive advantages. In addition, the company

faces the threat of imitation. This threat is significant because of the large number of

local and multinational firms that imitate the design and features of Apple’s products.

Moreover, rising labor costs involving contract manufacturers, such as those in China,
reduce profit margins or push selling prices even higher. Based on the external strategic

factors in this SWOT analysis, Apple Inc.’s performance could suffer because of

aggressive competition and imitation of product design.

Alternative courses of action

The Apple Inc.’s identified markets are: PC market (Macintosh), phone market (iPhone)

and other digital device markets (iPod Touch and iPad).

1. The first alternative course of action is international expansion like looking

into the China and other developing countries.

Pros: China has 616 million mobile subscribers, there are a lot of opportunities and

possibilities that Apple Inc. can do with that population of mobile subscribers.

Cons: International expansion would mean high expenses and costs.

2. One of Apple Inc.’s competitive advantages is its Research and

Development rapid innovation. The second alternative course of action is

based on this competitive advantage. It is to increase its budget allocation

on its R&D.

Pros: With the rapid changes in technology in this contemporary society, it is logical for

Apple Inc. to increase its budget allocation on its R&D. Furthermore, one of the core

strengths of the company is rapid innovation, an increase of budget on its R&D would

ensure that this core strength would still remain as one.

like sales, marketing, and advertising in order to give in to the increase of the budget

allocation on its R&D.

3. Capitalize on iPhone, iPad, and iPod growth

Pros: The brand is already strong. It is trusted and widely known

Cons: Expensive development

4. Employ on Market expansion and penetration.

Pro: Retail store strategy is effective and iTunes worldwide content is already popular

Con: Competition

5. To achieve this, Apple Inc has to increase its financing, carry out market

research to determine consumer satisfaction and how the company is

fairing in the market. Apple also needs to undertake an evaluation of the

actual and standard progress of its innovative products as a way of

checking market and product performance.

SWOT Analysis of Apple Inc. – Recommendations

The internal and external factors discussed in this SWOT analysis indicate

that Apple Inc. possesses major strengths to effectively address organizational

weaknesses. The company can also use these strengths to exploit opportunities, such

as the expansion of its distribution network. Moreover, the company can use its strong

brand image and rapid innovation processes to successfully develop and launch new

product lines. However, Apple faces the significant threats of aggressive competition
and imitation, which are major challenges affecting players in the global market for

consumer electronics, computer hardware and software, and online digital content

distribution services.

Based on the strategic issues highlighted in this SWOT analysis of Apple Inc., a

recommendation is to continue the aggressive and rapid innovation involved in

developing the company’s products. Such innovation reduces the adverse effects of

imitation on revenues. Also, it is recommended that the company further enhance the

automation of its production processes, and support the automation of its contract

manufacturers, as a way of addressing the rising labor costs involving Apple product

manufacturers. Another recommendation is to establish partnerships with more

distributors to improve the overall market reach of the company’s distribution network.

Conclusion

Apple Inc. is a leader in global product innovation. Over the years, the company has

introduced one of a kind technological advancement. However, due to the rapid

changes in technology, some of Apple’s contemporaries are becoming at par with them.

Thus, it is only logical for Apple Inc. to increase its budget allocation on its Research

and Development. Further innovation and improvement of their products will not only

maintain their competitive advantage but it will also boost their market penetration.
QUESTION:

1. Evaluate Apple Inc. Performance. what are the secrets of its success in terms

of strategic management?

2. What are the strength of Apple Inc. to successfully develop and lunch new

product lines?

3. Why does China matter so much to Apple?

4. What are the problems with predicting how the market and the competition will

change over the next few years? What are the implications for strategy

development of Apple Inc.

5. What lessons can other companies learn from Apple’s strategies over the years?