AppleIncCaseStudy

Ezequiel Ares
Mar. 12, 2014 ASSIGNMENT QUESTIONS
1. What are the chief elements of Apple’s overall competitive strategy? How well do the pieces fit together? Is the strategy evolving?
The company strategy of Apple Inc. involves a focus on customer service, constant innovation for their products, and the pursuit of increased profits. Their company strategy can be described as a focused differentiation strategy with emphasis on premium pricing, a small amount of quality products, and emphasized differentiation for their products over those of the competition. The company strategy is not explicitly stated and deeper aspects of their strategy are unknown to the public. The company is a multi-national corporation with globally recognized products such as the Mac computer, iPad, iPod, and iPhone. The company has and will continue to expand into foreign markets with much of the production facilities located in China so they do practice outsourcing. Apple Inc.’s core competency is innovation, which they are able to use to bring the most innovative products to the market meeting customer demand and preferences simultaneously. Apple Inc. is able to sell their high quality products at a premium price in more locations than rival companies are. They are also able to advertise their products in a compelling manner to a global consumer base. Apple Inc. focuses on offering high quality/high performance products, high innovation capabilities/technological skills, and high customer service to a global market.

2. What are the key elements of Apple’s strategy in computers, personal media players, tablet computers, and smartphones? Have its strategies in its core businesses yielded success? Explain.
The mission statement of Apple Inc. explains a little about the products and services they offer. It states “Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and has recently introduced iPad 2 which is defining the future of mobile media and computing devices.” (Farfan, Pg.3) Apple Inc. uses its resources effectively to give electronics consumers the highest quality products that meet their preferences and needs adequately. Their main source of revenues comes from iPhone sales, which shows that their strategy in the Smartphone section of the industry is definitely working. They have also yielded success in the dismal personal computer industry and continued success in the tablet market as well. Apple Inc. is perhaps most aggressive competitively in the smart phone section because of high earnings but should also capitalize and invest heavily in new and emerging technologies like the tablet which show great profitability in the long run.

3. What does a competitive strength assessment reveal about Apple’s computer business, as compared to the leaders in the computer industry? Use the methodology in Table 4.3 to support your answer. Does it appear that the company’s competitive positions in personal media players, tablet computers, and Smartphones are stronger or weaker than its position in computers?
Apple Inc. held roughly 10% of the market share for phones, tablets, and personal computers collectively in 2013. A market forecast estimates that this will increase to 14% of the combined market share for phones, tablets, and personal computers in 2014. Important key success factors that are critical to the Apple corporation are quality/product performance, reputation/image, technological skills, and new-product innovation capability, all of which Apple excels. The chart below shows the total shipments of devices worldwide by industry leaders and the expected shipments for 2014, which shows Apple’s projected increase to 14%. (9to5Mac, Pg.1-2)

iPhone ownership in the U.S. was up from 35% in 2012 to 42% as of 2013. Samsung was at 22% ownership for the Android Smartphones in 2012 and were at 26% in 2013. (FierceWireless, Pg.1-2) The chart below shows the increase in iPhone ownership for Apple Inc. but also showed an increase in smart phone ownership for rivals Samsung and LG as well.

The computer industry is at a 10% decline overall as of 2013. Apple Inc. managed only a 1% gain in Mac computer sales. However, Mac sales were still lower compared to their sales for 2011. Apple Inc. faces lower profits due to the current condition of the computer market but must keep aware of changing market conditions and be both active and reactive. Below is the chart that shows global Mac sales for the past two years. (ComputerWorld, Pg. 1-2)

Apple Inc. is still the global leader in the tablet market but their percentage of the market share has decreased from 60.3% in 2012 to 32.5% in 2013. Samsung, the second highest leader, has been able to increase their market share from 7.6% in 2012 to 18% in 2013. The tablet market is expected to grow at a much higher rate than the phone market or the computer market. If Apple is not careful, Samsung’s size, resources, and capabilities will allow them to lead in market share. The table below shows the distribution of market share for major industry leaders for 2012-2013.

4. Does it make good strategic sense for Apple to be a competitor in the computer, personal media player, Smartphone, and tablet computer industries? Are the value chain activities that Apple performs in computers, personal media players, tablet computers and Smartphones very similar and “compatible” or are there very important differences from product to product? Which of the four products lines---computers, tablet computers, personal media players, or Smartphones---do you think is most important to Apple’s future growth and profitability? Why?
Apple Inc. is managing to make profits in all sections of their industry with their Mac computers, iPhones, and iPads. They should continue to offer all of their products to keep their reputation intact and not appear to look weak to rivals. Market forecasts indicate that their market share for these three products should increase in 2014. They are the leaders in the tablet and Smartphone markets but must be aware and react to Samsung’s competitive efforts, which is a larger company that has also made progress in recent years. The most important of the product lines is the iPhone, which accounts for a large amount of their total revenues. Apple Inc. is in good competitive position in all sections of the industry but must be careful not to lose any ground in the precarious personal computer market. Apple Inc. also must not stretch itself too thin by trying to engage in too many markets but must continue to offer a limited amount of appealing products that fit customer demand and have long-term profit sustainability.

5. What is your assessment of Apple Computer’s financial performance the past three years? (Use the financial ratios in the Appendix of the text as a guide in doing your financial analysis.)
Apple Inc.’s current profit margin is 21.28% and its operating margin is 28.31%. In 2011, their operating margin was slightly higher at 31.2%. Their stock price is $524.19, which is a 1.22% drop. Return on assets is at 14.61% and return on equity is at 28.82%. Their revenues were $173.99 billion with their net income at about 37 billion. Estimated earnings per share are at $40.23. (YahooFinance:AAPL, PG.1-2) Although there was a small drop in the stock price I believe that Apple Inc. is in a good position in the industry. However, they must be aware of the continued decline in demand in the personal computer market and Samsung’s ability to expose weaknesses and capitalize on all opportunities to maintain their dominance.

6. What recommendations would you make to allow Apple to strengthen its position in its most important markets? What steps should it take to ensure that the iPad becomes a major contributor to the company’s overall performance?
Apple Inc. already uses an aggressively competitive strategy to advertise their products to consumers worldwide and is adamant about gaining new carriers for their iPhones. The iPhone is their strongest product with the most sales and generates the most profit amongst the other product offerings. Apple Inc. should always focus on the smart phone industries and any emerging changes to keep their competitive advantage. The iPad must be handled carefully because of the incredible potential of the product and the large expected increase in the market demand and overall sales. Apple Inc. must make the iPad continue to be more appealing and appropriate for their customer’s demands and do this better than the competition. Their share in the tablet market has dropped in the last few years while Samsung has increased their market share over the last few years. Apple Inc. should continue to apply their focused differentiation strategy to make the iPad and all other product offerings the best available within the industry. Apple Inc. should strive to maintain it’s reputable brand name that is recognized worldwide as a leader in quality personal electronics and innovation.

Works Cited

Farfan, Barbara. Apple Inc. Mission Statement is not very innovative and barely a mission at all. 2014. Pg.3. Retrieved from http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/Apple-Inc--Mission-Statement.htm
Apple’s total device market share to grow from 10% to 14%-new forecast. 9to5Mac:AppleIntelligence. 2014. Pg.1-3., Retrieved from http://9to5mac.com/2013/06/24/apples-total-device-market-share-to-grow-from-10-to-14-new-forecast/

Goldstein, Phil. NPD: Apple, Samsung grab 68% of U.S. Smartphone ownership in Q4. 2014. Pg. 1-3. Retrieved from http://www.fiercewireless.com/story/npd-apple-samsung-grab-68-us-smartphone-ownership-q4/2014-01-16

Keizer, Gregg. Mac sales jump 19% when compared to terrible Q4 2012. 2014. Pg.1-3. Retrieved from http://www.computerworld.com/s/article/9245820/Mac_sales_jump_19_when_compared_to_terrible_Q4_2012.

AppleInc.(AAPL) Key Statistics. Yahoo:Finance. (Pg.1-2). Retrieved from http://finance.yahoo.com/q/ks?s=AAPL.

Cited: Farfan, Barbara. Apple Inc. Mission Statement is not very innovative and barely a mission at all. 2014. Pg.3. Retrieved from http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/Apple-Inc--Mission-Statement.htm Apple’s total device market share to grow from 10% to 14%-new forecast. 9to5Mac:AppleIntelligence. 2014. Pg.1-3., Retrieved from http://9to5mac.com/2013/06/24/apples-total-device-market-share-to-grow-from-10-to-14-new-forecast/ Goldstein, Phil. NPD: Apple, Samsung grab 68% of U.S. Smartphone ownership in Q4. 2014. Pg. 1-3. Retrieved from http://www.fiercewireless.com/story/npd-apple-samsung-grab-68-us-smartphone-ownership-q4/2014-01-16 Keizer, Gregg. Mac sales jump 19% when compared to terrible Q4 2012. 2014. Pg.1-3. Retrieved from http://www.computerworld.com/s/article/9245820/Mac_sales_jump_19_when_compared_to_terrible_Q4_2012. AppleInc.(AAPL) Key Statistics. Yahoo:Finance. (Pg.1-2). Retrieved from http://finance.yahoo.com/q/ks?s=AAPL.