Strategic Analysis of Apple
A Strategic Analysis of Apple Corporation
Timothy Pivovarnik
Jeff Shaver
Adam Siler
Richard Sterling
Dave Strubbe
EXECUTIVE SUMMARY 3
HISTORY OF APPLE 4
THE PC INDUSTRY 10
THE ONLINE MUSIC INDUSTRY 12
THE FUTURE OF APPLE 12
PERSONAL COMPUTERS A SHIFT IN STRATEGY 12
APPLE IN THE LIVING ROOM 14
STRATEGIC ALLIANCES AND ENTERTAINMENT 15
EXTERNAL ANALYSIS 17
TECHNOLOGICAL ENVIRONMENT 17
Brand Awareness Style at a Premium 17
Interoperability 18
Technology and the Digital Lifestyle 18
REGULATORY ENVIRONMENT 20
INDUSTRY ANALYSIS USING PORTER 'S FIVE FORCES MODEL 21
WHICH EXTERNAL THREATS ARE MOST SIGNIFICANT 23
ADDITIONAL EXTERNAL THREATS 25
SECURITY 25
VERTICAL INTEGRATION OF COMPETITORS 25
VALUE CHAIN ANALYSIS 26
TECHNOLOGY AND PRODUCT DESIGN 27
PRODUCTION 27
SALES AND MARKETING 27
CUSTOMER SERVICE 28
LEGAL SERVICES 28
SWOT ANALYSIS 29
STRENGTHS 29
WEAKNESSES 30
OPPORTUNITIES 31
THREATS 31
FINANCIAL ANALYSIS 32
2ND QUARTER 2006 32
HISTORICAL PERFORMANCE 33
STOCK PRICE PERFORMANCE 34
PROFITABILITY MEASURES 35
LIQUIDITY AND LEVERAGE MEASURES 35
PRODUCT UNIT SALES 36
OPERATING SEGMENTS 36
MARKET VALUE ANALYSIS 37
PRO-FORMA INCOME STATEMENT 38
PROJECTED FREE CASH FLOW AND EQUITY VALUATION 39
STRATEGY 40
PRODUCT DIFFERENTIATION 40
STRATEGIC ALLIANCES 44
CONCLUSIONS 48
REFERENCES 49
Executive Summary
Apple Computer 's 30-year history is full of highs and lows, which is what we would expect in a highly innovative company. They evolved throughout the years into an organization that is very much a representation of its leader, Steven Jobs. Apple made several hugely successful product introductions over the years. They have also completely fallen on their face on several occasions. They struggled mightily while Jobs was not a part of the organization. Apple reached a point where many thought they would not survive. When asked in late 1997 what Jobs should do as head of Apple, Dell
Timothy Pivovarnik
Jeff Shaver
Adam Siler
Richard Sterling
Dave Strubbe
EXECUTIVE SUMMARY 3
HISTORY OF APPLE 4
THE PC INDUSTRY 10
THE ONLINE MUSIC INDUSTRY 12
THE FUTURE OF APPLE 12
PERSONAL COMPUTERS A SHIFT IN STRATEGY 12
APPLE IN THE LIVING ROOM 14
STRATEGIC ALLIANCES AND ENTERTAINMENT 15
EXTERNAL ANALYSIS 17
TECHNOLOGICAL ENVIRONMENT 17
Brand Awareness Style at a Premium 17
Interoperability 18
Technology and the Digital Lifestyle 18
REGULATORY ENVIRONMENT 20
INDUSTRY ANALYSIS USING PORTER 'S FIVE FORCES MODEL 21
WHICH EXTERNAL THREATS ARE MOST SIGNIFICANT 23
ADDITIONAL EXTERNAL THREATS 25
SECURITY 25
VERTICAL INTEGRATION OF COMPETITORS 25
VALUE CHAIN ANALYSIS 26
TECHNOLOGY AND PRODUCT DESIGN 27
PRODUCTION 27
SALES AND MARKETING 27
CUSTOMER SERVICE 28
LEGAL SERVICES 28
SWOT ANALYSIS 29
STRENGTHS 29
WEAKNESSES 30
OPPORTUNITIES 31
THREATS 31
FINANCIAL ANALYSIS 32
2ND QUARTER 2006 32
HISTORICAL PERFORMANCE 33
STOCK PRICE PERFORMANCE 34
PROFITABILITY MEASURES 35
LIQUIDITY AND LEVERAGE MEASURES 35
PRODUCT UNIT SALES 36
OPERATING SEGMENTS 36
MARKET VALUE ANALYSIS 37
PRO-FORMA INCOME STATEMENT 38
PROJECTED FREE CASH FLOW AND EQUITY VALUATION 39
STRATEGY 40
PRODUCT DIFFERENTIATION 40
STRATEGIC ALLIANCES 44
CONCLUSIONS 48
REFERENCES 49
Executive Summary
Apple Computer 's 30-year history is full of highs and lows, which is what we would expect in a highly innovative company. They evolved throughout the years into an organization that is very much a representation of its leader, Steven Jobs. Apple made several hugely successful product introductions over the years. They have also completely fallen on their face on several occasions. They struggled mightily while Jobs was not a part of the organization. Apple reached a point where many thought they would not survive. When asked in late 1997 what Jobs should do as head of Apple, Dell
References: Apple Computer (2006). Corporate Web Site retrieved 29 March 2006 from http://www.apple.com/macmini/ Apple Computer, Inc 1st Quarter 10Q. Retrieved March 19, 2006 from http://www.apple.com.html Apple Reports Second Quarter Results. Retrieved April 23, 2006 from http://www.apple.com.html Associated Press (March 29, 2006). Apple, Beatles Face Off Over iTunes Music Store. Wall Street Journal Online. Retrieved 4 April 2006 from http://online.wsj.com/article_print/SB114355415653810027.html Barney, J Bartiromo, Maria. (2/8/2006). Apple Computer Analysis. Transcribed interview retrieved from LexisNexis Academic database on 4/17/2006. Boddie, John. (August 29, 2005). Behind Apple 's Strategy: Be Second to Market. Ret