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Apple Incorporation – Case Analysis

Apple Computers started the movement into the personal computing arena in 1977 but through changes in management and differences of opinion together with missed opportunities it lost its competitive advantage to companies like Microsoft, Dell, and Gateway. Apple operates in various lines of the computer and music industry today and its operations include not only the designing but also the manufacturing of its computers and software. Apple continues to pursue the personal computer market but not as intently as in the years before.

It has opted to change directions a little by venturing into the music world through the marketing of iPod, a digital music player, and iTunes. The opening of 65 new retail outlets, including one in Japan, has precipitated its move into this new world. Apple continues to work on providing innovative products for its customers but marketing to such as small market has caused some problems. Its market share has been reduced to below 5% and its operating system differs considerably from the Wintel operating system used my dominant Microsoft.

Costs of maintaining this difference have increased in comparison to those utilizing the competitive operating system. Software designers are not as enthused about writing programs to support Apple’s operating

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system because of limited potential sales. The advantages that seem to come into Apple’s laps are quickly removed because competitors are able to copy, steal, and share them. The one advantage that Apple possesses is its operating system but it has failed to convince the world of its superiority. The operating system in possession has not encountered the problems that Microsoft and its fellow operating systems have encountered.

Microsoft upgrades have been plagued with virus and other programming problems, including the ability of hackers breaking into the system and accessing ones computer from another remote spot. Apple has not capitalized on these problems. It has gained a few customers but nothing in the numbers required to turn the company upwards in reclaiming considerable market share. Apple customers are a devoted group that understand the superiority that they possess but convincing the other 95% of the world because a rather large task.

This case study is to begin with a general environmental analysis that will encompass the demographic, economic, political/legal, socio-cultural, and technological segments. It will cover Porter’s five forces and provide insight of the opportunities and threats that Apple faces. The industry structure will be dismantled so that market size, distribution channels, strongest and weakest competitors, and anticipated strategic moves of rivals is captured. Economies of scale and key success factors will be listed along with financials so that a direction can be logically surmised.

Read also: Apple Value Chain

An internal analysis will also be included so that Apple’s mission, vision, and financial objectives are understood. Products and services will be dissected, as will its corporate culture, values, and morals. The core competencies will be noted together with value chain analysis so that Apple can better define it true advantages for continued successful operation in the future. Recommendations will be provided, listing the pros and cons of each, so that Apple management can consider implementation for strengthening their position within the computer and digital music industries.

Company History History of Apple, (2004); History of Apple, Inc. (2004) In April 1976, college dropouts, Steve Wozniak (26 years old) and Steve Jobs (21 years old) founded Apple Computer. They actually partnered up a few years before when Wozniak, was a self-taught engineer, began building boxes that allowed people to make long-distance phone calls for free. The sell of a few hundred of the boxes led to a continuation that resulted in Wozniak working on the Apple I computer box. The team had sold their van and two calculators to raise the $1300 in start-up money prior to building them in Job’s garage.

The team sold over 200 to computer hobbyists in the San Francisco Bay area. Wozniak began working on the Apple II and Jobs hired high school computer enthusiasts for building of circuit boards and for designing software. Steve Jobs came up with the idea of placing the circuitry into an attractive modular beige plastic container. Both were trying to provide customers (computer enthusiasts) with a smaller user-friendly computer. Jobs sought the help of Regis McKenna, a successful advertising relations firm owner, to develop an advertising strategy for the company.

McKenna designed the Apple logo and advertised it personal computer magazines. By June 1977 sales reached $1 million and in 1978 they increased to over 35,000 computer sales. Growth continued at miraculous rates that in 1980 the company went public and sales were up to $117 million. Wozniak left three years later and Steve Jobs hired Pepsi Company’s John Scully as president. The company experienced a few failures and in 1984 the unveiling of the Macintosh set the stage for Apple’s rise and recognition as a household name.

Jobs and Scully difference of opinion led to Jobs leaving in 1985. This is about the time that Bill Gates and Microsoft were asking Apple to license its products and make the Microsoft platform an industry standard. Apple had established itself as a player in the corporate world with entry into the desktop publishing world, with the Mac Plus and Laser Writer printers. Competition in the late 1980s from the Microsoft Windows operating system combined with Apple’s failure of the Newton hand-held computers caused earnings to drop dramatically.

John Scully resignation and the workforce reductions took its toll as the company tried to shift gears to licensing its operating system to Macintosh clone producers. The strategy of marketing the licenses with intent of building market share actually backfired and lost Apple considerable amount of money and market share. Software was created to allow the Macintosh to connect to IBM-based systems and Apple’s sales soared to over $4. 07 billion. In 1997, CEO Gilbert Amelio purchased Steve Job’s company NeXT software with hope of creating Apple’s next generation operating system.

The move did not work and in 1998 CEO Amelio was thrown out and Jobs was placed back into the CEO position. Jobs quickly moved into a deal with Microsoft, cut cloning company licenses, stopped production of Newton handheld devices and printer products, and integrated its Claris software into its main offices. During this timeframe, Apple successfully introduced the iMac and iBook product lines and continues to push them in the consumers and education markets. It also has G4 portable and desktop versions that are marketed with focus on the designing and publish markets.

Company Strategy History of Apple, (2004); History of Apple, Inc. (2004) The transformations that occurred during the years from inception to present day have included many strategic management variations that drove the equipment and software changes. Wozniak and Jobs initial strategy was to create a small desktop user-friendly computer for the computer enthusiasts. Strategy shifted to manufacturing of the Apple II for the consumer industry. As sales increased, management continued to alter its strategy in order to capture as much market share as possible.

It decided to work on the Apple III so that it could break into the office market dominated by IBM. This drive became so strong that Apple prematurely released the Apple III without it undergoing extensive line testing. The product was defective, production was halted and problems repaired but Apple never sold as many of the Apple IIIs as it did of the Apple II. Some management decisions in strategic direction do prove to be wrong so Apple management regrouped and increased R&D spending to the tune of $21 million.

Jobs was determined to create an un-intimidating computer that anyone could use and he pushed this strategic concept by introducing the Lisa computer complete with mouse, hand-controlled pointer, and displayed pictures that substituted for keyboard commands. The strategy shifts can easily be compared with the increase in the customer focus. The move of the spotlight from the computer enthusiasts to the office market consumer is a large increase in directional focus. Jobs vision was to create a “people’s computer” designed for people with little technical knowledge.

During this trek it was suppose to take away some of IBM’s business office market share. The introduction of the Macintosh in 1989 did do that but it was a short-lived core competency that could easily be duplicated. In fact, in the same year, IBM marketed a new operating system that mimicked the Macintosh’s ease of use so Apple began to look at multi-tasking functions. During his time as CEO, John Scully had moved the company into the consumer and education computer industry.

Apple had also expanded into the global markets during its first few years. The best of strategies cannot overcome the problems that result due to management unrest or battle of strength amongst management. When Scully was forced out, Michael Spindler licensed Apple’s technology to outside firms that eventually ate away at profits. Spindler was also responsible for the introduction of the Power Macintosh in the mid 90s that served as another example of Apple having the right products needed by the market but not the right people to help promote them.

Management under Spindler grossly underestimated demand and the resulting $1 billion of unfilled orders caught the eyes of Wall Street and the stock plummeted 15 percent. Gil Amelio replaced Scully and drastic directional change ensued but even his best-cost cutting strategy took the company from a $70 per share price to $14 and market share decreased from 16 percent to 4 percent. The strategy was good but management was not. Amelio did accomplish the purchase of NeXT along with bring Steve Jobs back as the advisor that eventually took his job. Strategy was realigned with the intent of what had once been.

Jobs cut out the licenses, eliminated 15 of 19 products, and withdrew Apple from the printer, scanner, and portable digital assistant business. Apple, under the direction of Jobs, became focused on desktop and portable Macintoshes for professional and consumer customers. The move was a refocusing of Apple’s strategy to supplying a computer that was not only reasonably priced but also popular. Ten months of hard work resulted in the introduction of the iMAC so as the 1990s exited Apple had refocused its strategy as a pared-down version of its previous self.

Apple is presently concentrating its business strategy on the digital hub, retail, and the educational sectors. Apple’s 2003 annual reports noted that it is committed to bringing the best possible personal computing experience to students, educators, creative professionals, businesses and consumers around the world. It will do this through it innovative hardware, software, peripherals and Internet offerings, including Mac(tm) and the iTunes(r) Music Store(tm). Apple believes that personal computing has entered a new era.

It seeks to provide a pathway for linking digital devices so that the consumer can add value through the interconnectivity. Apple feels that its position in being the only personal computer company that designs and manufactures the entire computer provides it an advantage in positioning to offer digital hub products and solutions. Apple continues with its 2001 program of retailing. It opened 65 retail stores in 2003 and nine during the first quarter of 2004. One of the stores in 2004 was Apple’s first international store located in Tokyo, Japan.

Stores are strategically located in quality shopping malls and in urban shopping districts. The retail outlets are intended to expand its customer base by bringing in first time computer buyers and attracting those wanting to switch to the Macintosh platform. It can control the retail experience and enhance it by employing knowledgeable personnel and by providing post-sale advice and support. It also offers many third-party products that complement the Company’s own products. Apple continues to provide technological products for the educational sector.

It feels that classroom instruction will be enhanced through the integration of technology and that students will be able to attain higher levels of achievement while schools maximize their investments. The last important business strategy sector is the creative profession. This sector is one of the most important markets for Apple’s hardware and software products. The company designs its hardware solutions with the creative professional in mind. Specific customer focus is part of Apple’s strategy.

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