Apple Strategic Audit

Current Performance Strong financial results for its fiscal 2010 first quarter; no debt. •Best quarter ever, recorded $15. 68 Billion in revenue. •Reported $3. 38 billion net revenue •283 retail stores in 10 countries. B. Strategic Posture 1. The company’s strategic posture is clearly stated, and is also back up by its strong performance. 2. Mission •Apple is committed to bringing the best personal computing and music experience to its customers. The company has a unique ability to design and development its own hardware and software. 3. Objectives Today, Apple is committed to lead the industry with its award-winning computers, OS X operating system and iLife and professional applications. The company’s objectives are clearly in line with its mission, and both internal and external environments. 4. Strategies •Continual investment in research and development critical to facilitate innovation of new and improved products and technologies. Apple is also committed to expand its digital footprint in the music industry, and worldwide expansion of its retail operations. The company’s strategies are in line with its mission, objectives, and both internal and external environments. .

Policies •Award-winning design. •User-friendly products. •High quality. •Environmental sustainability. •Unique customer experience. •Innovation. II. Corporate Governance A. Board of Directors 1. Six members-five outsiders and one internal. 2. Board members own a significant share of the stock 3. Stock is publicly traded-different classes of stock with different voting rights. 4. Board members contribute different skills to the corporation: retail operations, software technology, marketing experience, and environmental sustainability. Several of the board members have international experience. . Board members server for well over five years, some ten years. 6. Board members take the leading role in establishing and modifying the mission, objectives, strategy and policies. B. Top Management 1. Consist of highly skilled individuals in the computer industry. 2. Very experience in international operations based on performance. Not all executive from acquired companies considered top management. 3. The team has been responsible for the strong performance. Some are promoted from within and others are externally hired. 4. Have established an approach to strategic management. 5.

Highly involve with the company’s strategic management process. 6. Flat organization with constant communication with lower level management. 7. Decisions are made ethically in a socially responsible manner. 8. Highly concerned with the environment-carbon footprint. 9. Own significant amount of stock in the corporation. 10. Sufficiently skilled to cope with the future with several products in the pipeline. III. External Environment: Opportunities and Threats (SWOT) A. Natural Physical Environment: Sustainability Issues 1. Availability of raw materials for production. 2. Possible in shipment from China due to weather delays. 3.

No major threat of other natural environment. B. Societal Environment 1. Economic •Though economic times preventing some consumers to purchase high-ticket items. •Global economic crisis has resulted in tight credit markets, volatile fixed income. •Consumers may postpone spending. 2. Technological •Intense rivalry with Adobe and Google over the non-use of Flash on Apple’s portable devices. •Mobile technology and cloud computing have becoming increasingly important. •Apple dominates the music player market. 3. Political-legal •Pressure from EU countries requiring iPod player and iTunes online store compatibility with rival offerings. 2006 investigation by SEC over the company’s issuance of stock options to top management. •Growing legal battle with Nokia and HTC over patent infringements.

•Stolen 4th generation of iPhone prototype. •Several congress inquiries and investigations on iPhone exclusivity, and negative effects on competition. •Persistent legal action by competitors. 4. Sociocultural •Growing needs on mobile devices and cloud computing technology, consumer and business applications. •Focus on the use of technology in education and delivering tools to help educators and students learn. Consumers demand for single device as they face the economy by cutting on additional gadgets. •Convergent device eliminating the need for multiple gadgets. •High demand for low cost smart phones. C. Task Environment 1. The company is confronted by aggressive competition in all areas of their business. Customers continue to demand highly quality products that are environmentally sound. 2. Rapid technological advances in hardware and software. 3. Threats of new entrants are low considering Apple’s reputable products, huge capital requirements, strong R&D and market strategy required. 4. Bargaining powers of buyers are low.

Builds its own OS, some application software, music player and peripherals. 5. Threats of substitute products and services are high due to intense competition from other firms such as Microsoft, Google, and HP. 6. Rivalry among competing firms is high. 7. Relative power of unions, governments, and special interest groups are medium. 8. Key factors in the immediate environment currently affecting the corporation are customers, competitors, and suppliers. 9. Apple’s services and products relating to music, and other creative content, has encouraged significant competition from other companies.

D. Summary of External Factors •Competitive mobile industry. •Big players with deep pockets- Google, Nokia, Microsoft, Sony, HP. •Competitive factors affecting the mobile industry include: price, product quality, service. •Rapid changing technologies and standards. •Apple must continue to innovate to keep in pace with technological changes and the consumer demands. •Apple’s products are trendy and stylish. •Positions its products as higher quality and higher price. •Though economic times preventing some consumers to purchase high-ticket items. •Apple dominates the music player market. Pressure from EU countries requiring iPod player and iTunes online store compatibility with rival offerings. •2006 investigation by SEC over the company’s issuance of stock options to top management. •Growing needs on mobile devices and cloud computing technology, consumer and business applications. •Threats of new entry very low due to huge capital requirements, strong R&D, and market strategy required. IV. Internal Environment: Strength and Weaknesses (SWOT) A. Corporate Structure 1. The company is structured around its portfolio of products. 2. Decision-making authority is centralized at headquarters. 3.

The corporation is organized based on some combinations of functions, projects, and geography. 4. Structure is clearly understood by everyone in the corporation. 5. Present structure consistent with current corporate objectives, strategies, policies, and programs, as well as with the firm’s international operations. B. Corporate Culture 1. It’s all about the brand 2. The company projects a humanistic corporate culture and a strong corporate ethic, characterized by volunteerism, support of good causes or involvement in the community. 3. The company has a unique visual and verbal vocabulary, expressed in product design and advertising. . Products are designed around people. 5. Apple still has a reputation for fostering individuality and excellence that reliably draws talented people into it employs. 6. Apple has the highest brand and repurchases loyalty of any computer manufacturer. 7. Apple is extremely concerned with environmental sustainability. 8. Make products recyclable, and longer lasting battery life. 1. Apple’s culture is compatible with the employees’ diversity and backgrounds. 2. A great majority of the employees believe that there is no better place to work. 3. Employees at Apple run their own show and work in a challenging and creative environment. . Strong focus on career opportunities and employability security, compensation, and benefits offered to the employees by the company. 5. The company does take into consideration the values of the culture of each nation in which the firm operates. C. Corporate Resources 1. Marketing •Apple believes in high quality buying experience with a knowledgeable salesperson. •Invested in programs to enhance reseller sales. •Provide direct contact with its products over those of competitors. •Increasing points of distribution for iPod product family. •Horizontal expansion of its retail initiative. Apple store are located in high traffic location. •Provide a new retail experience to customers and attract new ones. •Just like product design is essential, stores were designed to enhance the presentation and marketing of personal computing products.

•Apple employs experienced and knowledgeable personnel to fulfill its objective and goal of providing a unique retail experience. •Apple has a competitive advantage over its competitors (local and international) in terms of market analysis and marketing mix. •Able to charge a premium for personal computing devices. The started in a niche that is growing exponentially with every new product. •Product life cycle is short, part of the company strategy of always innovating to maintain competitive advantage. •Often releasing products within months of prior models. •Strategy seems to be working very well, keeping competitor focus on models. •Company is well position in the international arena. •Close to half of revenue derives form the int’l markets •Minor adjustments in different countries. •Customers are the company supreme marketing tools.

•Top management considers environmental sustainability when making decision. Role of marketing manager is maintaining a competitive advantage, and explore new growth opportunities through vertical and horizontal growth. 2. Finance •Apple’s financial performance continued to strengthen over the last several quarters. •The company reported significant growth in net revenues driven by the strong performance of its Mac and iPhone sales. •Another way to consider financial performance is to evaluate how Apple’s stock price performed against the market and against its main competitors. •Apple’s performance has been improving greatly in the years. The company substantially improved its key measures of profitability in the last few fiscal years. •In terms of return on assets, return on equity and profit margin, Apple strengthened financially and now has similar ratios to that of its competitors and the overall computer hardware industry. •Apple historically held very little long-term debt. •The company has strong liquidity measures over its competitors, industry, and market in general. •During periods of strong financial performance, Apple accumulated cash.

•This strengthens Apple’s position should they choose to access the capital markets. Currently, Apple is debt free and with over $40 billion of cash on hand. •Increase in iTunes music store was primarily due to substantial growth of net sales in the U. S. and expansion in Europe, Canada, and Japan. •Increase in Mac sales was due to strong demands for the company’s desktop and notebook products. 3. Research and Development (R&D) •Apple is getting big returns in its R&D over other large tech companies. •Apple spent a total of $4. 6 billion in R&D over the last four years. •Revenue in 2006 was $25 billion. •Revenue in 2009 was $43 billion, up 72%. Innovation is part Apple’s DNA, competitive advantage, and core competency. •Competitors are not able to keep up with R&D and new product release. •Apple enters a market, take it over, raise the bar whether it’s in notebooks, music, cell phones, or tablet computing device. •Apple’s R&D is extraordinarily cost efficient. 4. Operations and Logistics

•Outsourced most manufacturing, thus reduces operating cost. •Manufacturing of many components used in final products performed by third-party vendors like China. •Markets products to end-users, and resellers through online retail stores. •Apple and AT&T alliance. Best Buy considered as exclusive reseller. •Apple’s operations and logistics are clearly stated and can be seen through the company performance. •Its operations are consistent with providing experience to customers. •In the tech industry, outsourcing is key to remain or gain a competitive advantage. 5. Human Resources Management (HRM) •Very good relationship with employees. •Employs experienced and knowledgeable staff to achieve its objectives and goals. •Apple has 14,800 full-time employees and 2,200 temporary employees and contractors. 6. Information Technology (IT) •Rapid technological advances. R&D is a key competency. D. Summary of Internal Factors •Apple carries high brand equity and is one of the most established brands. •Lot of finance for development of personal computing device. •Extensive base and customers. •Loyal customers. •Social trends-people becoming tech savvy and changing their devices. •High potential software. •International opportunities.

•Powerful online presence. •Originality of products and services. •The company is structured around its portfolio of products. •Decision-making authority is centralized at headquarters. •Apple is extremely concerned with environmental sustainability. Make products recyclable, and longer lasting battery life. •Apple believes in high quality buying experience with a knowledgeable salesperson. •Invested in programs to enhance reseller sales. •Product life cycle is short, part of the company strategy of always innovating to maintain competitive advantage. •Often releasing products within months of prior models. •Strategy seems to be working very well, keeping competitor focus on models. •Apple’s financial performance continued to strengthen over the last several quarters. •The company reported significant growth in net revenues riven by the strong performance of its Mac and iPhone sales. •Currently, Apple is debt free and with over $40 billion of cash on hand. •Innovation is part Apple’s DNA, competitive advantage, and core competency. •Outsourced most manufacturing, thus reduces operating cost.

•Manufacturing of many components used in final products performed by third-party vendors like China. •Very good relationship with employees. •Rapid technological advances. V. Analysis of Strategic Factors. A. Situational Analysis (SWOT) 1. Strength •High brand equity. •Debt-free. •Lots of cash on hand. •Extensive customer base. •Customer loyalty. Quality products. •Strong retail and online presence. •Knowledgeable staff. 2. Weaknesses •Unique brand-no diversification. •AT&T exclusivity in USA. •Dependence on 3rd party providers. 3. Opportunities •Growing niche of tech savvy. •High potential software. •Growing mobile industry. •International opportunities. 4. Threats •Immense competition. •New powerful entrant-Google.

•Many similar substitute products. B. Review of Mission and Objectives 1. Current mission is appropriate. 2. Objectives appear to be in line with current mission. VI. Strategic Alternatives and Recommend Strategy A. Strategic Alternatives Current strategy appears to be working very well and is in line with objectives and mission. •Only feasible strategy for Apple is growth, anything else would not fulfill current mission, objective, and goals. B. Recommend Strategy •End current exclusivity with AT&T. •More aggressive horizontal growth, specifically in the international market. •Offer consumer specific customization of products. •Lowering cost of product while maintaining high quality. •More aggressive marketing. VII. Implementation A. Board members should implement a more aggressive program to expand current international operations.

B. With over $40 billion of cash on hand, Apple has more than enough for growth and acquisition. C. Minor changes to standard operating procedures to support new growth programs. VIII. Evaluation and Control A. Current information system will need to be expanded for growth opportunities. B. Apple will need more standards and measures to control suppliers in the international markets. Work Cited Thomas L. Wheelen, & David J. Hunger (2010). Strategic Management and Business Policy: Achieving Sustainability. New Jersey: Pearson Education Inc. Other information found on www. apple. com

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