MEMORIAL UNIVERSITY OF NEWFOUNDLAND, FACULTY OF BUSINESS ADMINISTRATION

Apple INC
A Strategic Analysis
ABHISHEK SHARMA

201089513

Word Count 1450

Table of Contents

Executive Summary .............................................................................................................................................. 1

Issue Identification ............................................................................................................................................... 2

Analysis ....................................................................................................................................................................... 3

Options ......................................................................................................................................................................... 5

Recommendation................................................................................................................................................... 7

Appendices ................................................................................................................................................................ 8

Appendix A: Financials

Appendix B: Strategy Components

Appendix C: External Analysis

Appendix D: Internal Analysis

EXECUTIVE SUMMARY

Apple Inc grapples with the issue of maintaining a long term competitive advantage arising
from leadership innovation and premium brand image. Although presently the company
enjoys a sound financial performance, rapidly changing technology requires the need for
constant innovation. In light of short product life cycles, sustaining its current strategic
position without brand dilution requires that Apple significantly invest in research and
development over the long run. This task is made easy by the various resources at Apple’s
disposal as well as a favourable organizational structure and suitable management
preference. This also fulfills the expectations of most stakeholders.

1
ISSUE IDENTIFICATION

1. How can Apple balance the tension between increasing growth over the long term
without compromising it premium brand image?
2. Where should Apple Inc invest the deposits of cash on its balance sheet (expansion vs
R&D?) without falling behind in an industry with short product life cycles but high
customer expectations?

2
ANALYSIS

The present strategic orientation of Apple Inc is to sustain it current market performance
by being an industry leader through innovation in technology and by exceeding the
expectations of its customers through unique experiences. This strategic thrust derives
from Apple’s Mission and Vision Statement (Appendix A, Table 4). Apple has struck upon a
strategic fork in its path where maintaining technological innovation and a premium brand
may no longer be adequate to maintain its present financial performance in the long run. As
we can see in (Appendix C, Table 7) there are various threats and uncertainties looming
large in the broader environment that could severely damage Apple’s sustainable long run
performance. The potential tension between the environmental factors and Apple’s
abundant resource availability is exemplified by its cash position (Appendix A, Table 2),
albeit this tension is a benign one. Similarly there could also be a positive tension whereby
Apple needs decide which strategic direction it will choose to finance through its resources.
Here, strategy components like goals of long term profitability and growth vs the strategy
to focus on niche market high income individuals (Appendix B, Figure 3) could be
misaligned. Similarly, the breakneck product and technology lifecycles always makes Apple
vulnerable to obsolescence and displacement by rival firms (Appendix C, Figure 4).
Although Apple currently is in a comfortable financial position with over $40 billion in
profits as of 2012 (Appendix A, Table 1) and has increasing share prices (Appendix A,
Figure 2), close to 72% of Apples revenue stream is generated from smart phone and
tablets (Appendix A, Figure 1), which are two highly volatile product segments with respect
to product obsolescence. However, there are still opportunities in the environment which
Apple can capitalize on using its unique strengths. While, one the one hand there is always
the looming threat of technological change, Apple has a closed ecosystem. While at first
Apple’s closed ecosystem was a weakness for the business, this has now changed. First,
Apple now has a full range of apps, software and products that are interlinked and support
each other. The combination of customer loyalty and a closed ecosystem ensures that Apple
has a competitive advantage even in an uncertain technological climate. The summary of
the threats and opportunities emanating from the environmental factors are succinctly
summarized in (Appendix D, Table 8).

3
A closer examination of the stakeholder analysis is presented in Appendix B, Table 5. Some
the stakeholder expectations are actually contingent upon the others. The shareholder and
financial community’s expectations of sustained financial growth and continued
profitability obviously cannot be met unless customer expectations of experiencing
breakthrough, cutting edge technology are realized. On the whole, most of the expectations
of the internal as well as the external stakeholders are very well aligned. It suggests that
there will be no significant dissonance among the stakeholders if Apple chooses a
particular strategic direction. The organizational structure at Apple is presented in
Appendix D, Figure 1. Apple has a highly command and control structure, where “ideas are
shared at the top” (Lashinsky, 2011) and then percolates down to the rank and file. The
structure at Apple could most aptly be categorized as functional with an entrepreneurial
spirit (Lashinsky, 2011). For a company of its size, Apple’s startup like structure makes it
adept at abrupt course corrections in strategic direction (Lashinsky, 2011), thereby easing
the tension between strategy and organizational structure.

When we examine the value chain analysis (Appendix D, Table 8) it become apparent that
Apple’s core activities lie at end of the primary value chain, namely marketing, sales and
after sales service. Combined, the primary activities of sales and marketing and the
secondary activities of technology development contribute 58% of the value addition of an
I-Phone and form the basis of competitive advantage for Apple (Kraemer, Linden &
Dedrick, 2011). Although present sound financial performance may serve as a source of
temporary competitive advantage, other resources and organizational capabilities like
industrial design capability, innovation and brand consciousness are additional resources
and embedded capabilities that create a sustained competitive advantage leading to an
above normal financial performance (Appendix D, Table 9). This again corroborates our
earlier statement on the high value generating activities in the chain lie in sales, marketing,
after sales service and technological innovation.

4
OPTIONS

Some of the options available for Apple Inc are:

Growth through brand dilution and retail expansion: Apple currently targets a select
market segment. Its products are high end and command premium prices because the
brand is highly valued. However, there are various emergent threats (Appendix D, Table 7):
possible market segment saturation, uncertain macro variables (Appendix C, Table 6),
rapid technology obsolescence and narrowing product lifecycles (Appendix C, Table 6). One
of the ways that Apple can finance for future growth is through brand dilution. Apple can
come up with a cheaper line of products which cater to the general market. To achieve this,
there would have to be distinct market segments and highly differentiated products in the
premium line so that offering ordinary product line would not completely erode brand
parity for the premium market segment. The lower value market segment would act as a
new source of revenue stream. This would also entail that Apple aggressively expand its
distribution channels and retail outlets.

Develop strategic partnerships with suppliers: There are few big manufacturers and
suppliers of key components and electronic items like Foxconn the Taiwanese electronics
manufacturer. Therefore, developing close relationships with suppliers like Foxconn would
not only result in lower cost through economies of scale, but also maintain a collaborative
and exclusive business relationship with the supplier. This would also help mitigate the
power of few big suppliers. However, as we saw in the value chain analysis (Appendix D,
Table 8) manufacturing activity unfortunately does not add significant value along the
chain.

Do not change strategic direction: Continuing with the present strategic direction would
be the path of the least resistance. After all why fix what is not broken? This option would

5
also seem appealing because of the enviable position of Apple vis a vis other industry
leaders (Appendix D, Table 10).

Stay ahead through new product innovation and branding: Another option could be to
foster continuous development of complementary as well as completely new products in
various other categories. This would grant Apple broader sources of revenue and strategic
advantage by building on the existing brand value and cause significant first mover
advantage. It would also resolve the benign tension of abundant unutilized resources and
capabilities (Appendix D, Table 9) with its strategic goals (Appendix B, Figure 3). A strategy
of continuous innovation also addresses the tension between environmental threats
(Appendix D, Table 7) and organizational strategy.

6
RECOMMENDATION

Based on the strategic analysis, I recommend the following option: Stay ahead through new
product innovation. Product innovation has many dimensions. Firstly, Apple would have to
focus on a differentiated lifestyle and product branding and must continue to build on this
exclusive foundation. It must resist the pressure to compete with middle of the road brands
like Nokia, Samsung, Dell and HP. Also, Apple will need to focus on design development by
using its immense internal resources and to continue to lead the industry in design and
innovation. On the software, Apple must continue to innovate in new user friendly
interfaces focusing on easy to use and intuitive menu functions. Apple is uniquely and
favourably placed in terms of its resource capabilities, organizational structure and
management preferences to implement the strategy of product innovation. Additionally,
Apple can maintain brand equity by providing innovative marketing solutions in the
forward links of the supply chain. For instance, more points of direct contact with buyers,
emphasis on product differentiation and unique branding will enable Apple to bring the
unique Apple experience to more people.

7
Appendix A
Financials
Table 1: Apple Inc, Income Statement (All numbers in thousands)

Period Ending 2012-09-28 2011-09-23 2010-09-24

Total Revenue 156,508,000 108,249,000 65,225,000

Cost of Revenue 87,846,000 64,431,000 39,541,000

Gross Profit 68,662,000 43,818,000 25,684,000

Operating Expenses
Research Development 3,381,000 2,429,000 1,782,000

Selling General and Administrative 10,040,000 7,599,000 5,517,000

Non Recurring - - -

Others - - -

Total Operating Expenses - - -

Operating Income or Loss 55,241,000 33,790,000 18,385,000

Income from Continuing Operations

Total Other Income/Expenses Net 522,000 415,000 155,000

Earnings Before Interest And Taxes 55,763,000 34,205,000 18,540,000

Interest Expense - - -

Income Before Tax 55,763,000 34,205,000 18,540,000

Income Tax Expense 14,030,000 8,283,000 4,527,000

Minority Interest - - -

Net Income From Continuing Ops 41,733,000 25,922,000 14,013,000

Non-recurring Events
Discontinued Operations - - -

Extraordinary Items - - -

Effect Of Accounting Changes - - -

Other Items - - -

Net Income 41,733,000 25,922,000 14,013,000

Preferred Stock And Other Adjustments - - -

Source: Yahoo Finance, 2013

Table 2: Apple Inc, Comparative Balance Sheet

Balance Sheet

View: Annual Data |

Period Ending 2012-09-28 2011-09-23 2010-09-24

Assets
Current Assets
Cash And Cash Equivalents 10,746,000 9,815,000 11,261,000
Short Term Investments 18,383,000 16,137,000 14,359,000
Net Receivables 21,275,000 13,731,000 11,560,000
Inventory 791,000 776,000 1,051,000
Other Current Assets 6,458,000 4,529,000 3,447,000

Total Current Assets 57,653,000 44,988,000 41,678,000

Long Term Investments 92,122,000 55,618,000 25,391,000
Property Plant and Equipment 15,452,000 7,777,000 4,768,000
Goodwill 1,135,000 896,000 741,000
Intangible Assets 4,224,000 3,536,000 342,000
Accumulated Amortization - - -
Other Assets 5,478,000 3,556,000 2,263,000
Deferred Long Term Asset Charges - - -
Total Assets 176,064,000 116,371,000 75,183,000
Liabilities
Current Liabilities
Accounts Payable 32,589,000 23,879,000 17,738,000
Short/Current Long Term Debt - - -
Other Current Liabilities 5,953,000 4,091,000 2,984,000

Total Current Liabilities 38,542,000 27,970,000 20,722,000

Long Term Debt - - -
Other Liabilities 16,664,000 10,100,000 5,531,000
Deferred Long Term Liability Charges 2,648,000 1,686,000 1,139,000
Minority Interest - - -
Negative Goodwill - - -
Total Liabilities 57,854,000 39,756,000 27,392,000
Stockholders' Equity
Misc Stocks Options Warrants - - -
Redeemable Preferred Stock - - -
Preferred Stock - - -
Common Stock 16,422,000 13,331,000 10,668,000
Retained Earnings 101,289,000 62,841,000 37,169,000
Treasury Stock - - -
Capital Surplus - - -
Other Stockholder Equity 499,000 443,000 (46,000)

Total Stockholder Equity 118,210,000 76,615,000 47,791,000

Net Tangible Assets 112,851,000 72,183,000 46,708,000

Source: Yahoo Finance

Table 3: Apple Inc, Cash Flow

Annual Data |

Period Ending 2012-09-28 2011-09-23 2010-09-24

Net Income 41,733,000 25,922,000 14,013,000
Operating Activities, Cash Flows Provided By or Used In
Depreciation 3,277,000 1,814,000 1,027,000
Adjustments To Net Income 6,145,000 4,036,000 2,319,000
Changes In Accounts Receivables (6,965,000) (1,791,000) (4,860,000)
Changes In Liabilities 9,843,000 8,664,000 8,302,000
Changes In Inventories (15,000) 275,000 (596,000)
Changes In Other Operating Activities (3,162,000) (1,391,000) (1,610,000)

Total Cash Flow From Operating Activities 50,856,000 37,529,000 18,595,000

Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures (8,295,000) (4,260,000) (2,005,000)
Investments (38,427,000) (32,464,000) (11,075,000)
Other Cash flows from Investing Activities (1,505,000) (3,695,000) (774,000)

Total Cash Flows From Investing Activities (48,227,000) (40,419,000) (13,854,000)

Financing Activities, Cash Flows Provided By or Used In
Dividends Paid (2,488,000) - -
Sale Purchase of Stock 665,000 831,000 912,000
Net Borrowings - - -
Other Cash Flows from Financing Activities (1,226,000) (520,000) (406,000)

Total Cash Flows From Financing Activities (1,698,000) 1,444,000 1,257,000

Effect Of Exchange Rate Changes - - -

Change In Cash and Cash Equivalents 931,000 (1,446,000) 5,998,000

Source: Yahoo Finance

Figure 1: Revenue breakdown by product lines

Source: http://www.wingsofreason.com
Figure 2: Share Price

Source: Yahoo Finance

Appendix B
Table 4: Mission, Vision and Statement of Principles

Mission Statement:
“Apple is committed to bringing the best personal computing experience to students,
educators, creative professionals and consumers around the world through its innovative
hardware, software and internet offerings."

Vision Statement:

“We believe that we are on the face of the earth to make great products and that's not
changing. We are constantly focusing on innovating. We believe in the simple not the
complex. We believe that we need to own and control the primary technologies behind the
products that we make, and participate only in markets where we can make a significant
contribution. We believe in saying no to thousands of projects, so that we can really focus
on the few that are truly important and meaningful to us. We believe in deep collaboration
and cross-pollination of our groups, which allow us to innovate in a way that others cannot.
And frankly, we don't settle for anything less than excellence in every group in the
company, and we have the self-honesty to admit when we're wrong and the courage to
change. And I think regardless of who is in what job those values are so embedded in this
company that Apple will do extremely well."
Apple’s Principles of Business Conduct:

Apple’s success is based on creating innovative, high-quality products and services and on
demonstrating integrity in every business interaction. Apple’s principles of business
conduct define the way we do business worldwide. These principles are:
• Honesty. Demonstrate honesty and high ethical standards in all business dealings.
• Respect. Treat customers, suppliers, employees, and others with respect and courtesy.
• Confidentiality. Protect the confidentiality of Apple’s information and the information of
our customers, suppliers, and employees.
• Compliance. Ensure that business decisions comply with all applicable laws and
regulations.

Source:

Apple Statement of Business Conduct

CNN Money.com.

Apple investor relations

 Leadership in technology
Figure 3: Strategy Components: and design innovation,
bringing forth unique
customer experiences,
maintaining a sustained
long-term customer
relationship, profitability
and growth

Goals
Cutting edge, differentiated and
Smart phones, Tablets, I-
innovative products, a unique
Pods, Computers, other
customer experience, long term
hardware accessories,
satisfactory relationship in a
music products, software
unique digital ecosystem
Value
Young Professional and Proposition
Students, the creative
minded, application Product
developers, trend Core
Market
Activities
conscious, high income Focus
individuals and households
in North America, Europe, Research, innovation,
Australia and East Asia design, customer service,
marketing, supplier
relationships

Crosson, M., Rouse, M., Fry, J., & Killing, J. (2012). Strategic Analysis and Action (8th ed.). Toronto: Prentice Hall
Table 5: Stakeholder Analysis

Internal stakeholders

Stakeholders Expectations
Front Line and Administrative Employees • Satisfactory pay
• Stimulating work environment
• Opportunities for training and
professional development
Shareholders • Sustained profitability
• Increased share prices
• Dividend Payment
Board of Directors • Strong financial performance
• Research and development
breakthroughs
• Bold and decisive leadership
• High performing workforce
Researchers, Engineers and Programmers • Stimulating work environment
• Cutting edge research in an engaging
climate
• Management support and continued
research and development funding
• Recognition of research achievement
Strategic Partners (Suppliers) • Supplier Employee education and
development program
• Integrated procurement and supply
chain information systems between
the Original Equipment Manufacturer
(Apple)—Electronics Manufacturing
Services (Foxconn)
• Health and Safety and Environmental
Audits
Factory Labourers • Safe Working Environment
• Fair benefits and compensation
External Stakeholders

Stakeholders Expectations
Customers • Breakthrough, cutting edge devices
and technology
• User-friendly, multifunctional
environment
• Reasonable price
• Brand Equity
• Superior customer service
• Satisfactory repair and warranty
policy
Competitors • Technology leadership
Financial Community • Superior and sustained financial
performance
Consumer and Labour Rights Groups • Fair consumer rights practices
• Healthy and safe labour conditions
• Fair labour compensation
Environmentalists • Sustainable environmental practices
• Minimized waste and emissions
Government • Positive contribution to the economy
• Creation of jobs
• Tax payment
• Meet the information needs of
society
Appendix C
External Analysis
Figure 4: Porter’s Five
+ Economies of scale
Forces - Outsource to OEMs for production
+ Several large, entrenched players with well
established brand loyalty
-Technology Convergence

Threat of
Potential
Entrants

-Price competition in certain product categories

- Breakneck product/technology lifecycle pace +Customer dependence
- Products based on standardized components, -High demand
-Difficulty in differentiation -Varying needs, ‘latest and greatest’ v. ‘just good enough’
+ Difficulty of switching to/from proprietary platforms

Rivalry
Supplier Buyer
Between
Power Competitors Power
-Reliance on underlying,
proprietary standards
- Few chip designers, one
dominant player: Foxconn
- High switching costs from
suppliers
+ Suppliers reliant on industry The industry is moderately attractive. The established players have a
history of success and innovation, but competitors who fall
for distribution and
behind the fast moving technological curve, or cannot compete
consumption
Threat of efficiently on price or differentiate effectively are eliminated. While
new entrants are possible, the cost in dollars and time of successful
Substitutes branding are a hindrance.

- Other feature-rich smart phones, tablets

and PCs
- Alternate forms of entertainment
+ Internet hubs for leisure,
entertainment, information and work
Table 6: PEST Analysis
Political/Legal
Economic
• Economic Recovery
• Developing Chinese economy
Socio/Cultural
• Increasing taste for cutting edge
portable devices
• Greater concern for the
environment
Technological
• Device Convergence
• Shortening Product Lifecycle
Threat
• Political Instability and labour
unrest in China
• Intellectual property rights
violations
• No signs of immediate economic
turnaround, consumers are spending
less. Apple’s premium portable devices
may be out of consumer price ranges
• The developing Chinese economy
will require higher wages for factory
workers
• Apple’s portable computers may lose
relevance quickly
• Device manufacturing will be
equated with pollution and climate
change
• Apples broad line of products may
become obsolete
• Increased pressure to innovate may
result in missed opportunities to
exploit matured cash cow product
lines and result in inventory losses
Opportunity
• Opportunity to shift manufacturing
bases to low income countries
• Proceeds from compensation could
be used for R&D
• Quantitative Easing 3 in the US may
stimulate the economy and economic
recovery will raise consumer spending.
• Massive population with increased
buying power for Apple’s products.
• Apple can lead innovation in high
tech mobile, PC and Tablet devices
• Apple’s lead in environmentally-sound
practices will be a marketing
advantage
• As a leader in portable devices Apple
can innovate and lead the way in
technology convergence
• High R&D commitments may propel
Apple to lead the industry even in the
future by out-innovating competitors
as it does now
Appendix D
Internal Analysis
Figure 5: Apple’s Corporate Structure (Source: CNN Fortune)
Table 7: SWOT Analysis

Strengths

1. Customer loyalty combined with expanding closed ecosystem

2. Strong financial performance: Apple’s financial performance is one of the best
among many companies.

3. Apple is a leading innovator in mobile device technology: Apple has been chosen as
the most innovative company in the world for the 3rd time in 2012.

4. Brand reputation: Apple has a reputation of highly innovative, well designed, and
well-functioning products and sound company performance. Apple brand is valued
at $87.1 billion and was the second most valuable brand in the world in 2012.
5. Retail stores: Apple’s retail stores ensure high quality customer experience; provide
direct contact with knowledgeable staff and increases brand awareness.
6. Strong marketing and advertising teams: Apple can sell pricier products, build
superior stores and advertise their products in a compelling manner.

Weaknesses

1. High price: Apple’s products cost much more than its competitors devices. When
there’s such a fierce competition, Apple products price becomes a weakness because
consumers can easily opt for similar quality but lower price products.

2. Incompatibility with different Operating Systems: The iOS and OS X are quite
different from other OS. Due to such differences, both in software and hardware,
users often choose to stay with their accustomed software and hardware (Microsoft
OS and Intel hardware).

3. Decreasing market share: The less market share Apple has, the less it can influence
its potential customers and persuade them to jump into using Apple’s closed
ecosystem products.
 4. Patent infringements: The firm is often accused of infringing other companies’
patents and has even lost some trials. This damages Apple brand and its financial
situation.

5. Changes in management: Apple has lost Steve Jobs in 2012 and Tim Cook became
the new CEO and this will have an impact on company’s management.

6. Long-term gross margin decline: Current Apple’s gross margin is one of the highest
in the tech industry but analysts fear that due to increasing component prices and
competition current margins will not be sustained.

Opportunities

1. High demand of iPad mini and iPhone 5: iPad mini sales will increase Apple’s market
share in the tablet market and, will strengthen firm’s competitive advantage.

2. iTV launch: iTV launch will support Apple TV sales and the products’ ecosystem.

3. Growth of tablet and smart phone markets.: Growth of tablet and smart phone
markets is a good opportunity to expand firm’s share in these markets.

4. Damages from patent infringements: Apple patents are often infringed by its
competitors. Thus, collecting the damages from the companies that do so is a viable
opportunity to not only increase the cash reserves.

5. Mobile advertising market: Apple has developed iAd advertising platform, which
allows advertising on Apple iPhone, iPad and iPod touch. The growth of mobile
advertising market is an opportunity which could be further seized upon.
Threats

1. Rapid technological change: Companies are under the pressure to release new products
faster and faster. The one that cannot keep up with the competition soon fails. This is
especially hard when a company wants to introduce something new, innovative and
successful.

2. Rising pay levels for Foxconn workers: Pay levels for Foxconn’s workers have risen
steadily from 2010 to 2012. Foxconn is the main manufacturer of Apple products and
the rising pay level for Foxconn’s workers will likely raise the prices for Apple products.

3. Breached IP rights: The companies that breach Apple patents might not be discovered
soon and may benefit from it, while weakening Apple at the same time.

4. Price pressure from Foxconn over key components: Due to intense competition over
components and no viable OEM-EMS partnership alternatives Apple may be asked to
pay even more.

5. Strong dollar. Apple earned more than half of its revenues from outside US. Dollar
appreciation against other currencies reduces potential profits from those countries.

6. Android OS growth: Android OS is the main competitor for iOS in mobile device market.
The domination of Android decreases iOS power over influencing consumers to join
Apple.
7. Competitors’ in online music market: Apple faces threat from online music stores, such
as Amazon, Wal-Mart and online music subscription companies, such as Spotify.
Sources:

Fast Company

Forbes Magazine

Macdaily News

Asia Cnet

Forbes Magazine

Apple Press Information

Business Insider
Figure 6: Apple Value Chain:

Table 8: Value Chain Analysis

Primary Activities

Inbound Logistics • Most components are generally available from multiple

sources; a number of components are obtained from
single or limited sources.
• Hardware products are manufactured by outsourcing
partner primary in Asia e.g. Foxconn.
• Delegate raw materials acquisition: Apple works with
its OEM partners to delegate the raw materials
acquisition process but provides some supervision for
quality control purpose.
• Apple has implemented sophisticated automated
receiving systems to speed up the receiving process and
reduce facility foot print and storage space
requirement.
Operation • “Green Apple”: Elimination of toxic substances in Apple
products. Every product is claimed to be free of BFRs
and other harmful toxins
• Utilize original equipment manufacturers economies of
scale:
• Outsourcing production to third party OEM partners to
utilize their economies of scale while removing the
burden of production management from the firm.
Outbound logistics • Use of a variety of direct and indirect distribution
channels: Apple retail stores, online stores, direct sales
force, 3rd party cellular network carriers, wholesalers,
retailers and value added resellers
• Improve distribution capacities by expanding the
 number of its own retail stores worldwide
• Economical packing - Apple employs teams of design
and engineering experts who develop product
packaging that’s slim and light yet protective.
• Efficient packaging design not only reduces materials
and waste, it also helps reduce emissions produced
during transportation

Marketing and Sales • Creating and defining the market for innovative new
products
• Use of the “Apple Brand” to compete across several
highly competitive markets
• Strong focus on customer experience and a specific
demographic group and income group
• A Brand Personality that focuses on lifestyle,
innovation, and people driven product design
• Retail Locations/Flagship Stores
• Secretive & Selective Unveilings: creation of hype and
suspension around product launches
Service • Customer friendly environments, intensive training for
employees
• Extension of the Apple Culture
• Apple Genius: Helpful 1-on-1 interaction and service
on products with 1st party provider.
• Included and Extended Warranty: protection against
defects and build positive image.
• Free Consultation: In-or out-of-warranty consultation

Support Activities
General Administration • “A Green Apple”: Reduction of Energy use in production
and transportation
• Strong Cash Position: Internally finance expansion and
invest in Research and development

Human Resource • Promote Apple as a desirable place to work

Management • Selective Hiring to find and attract talent
• Generous employee benefits program to retain talent
Technological • Research and development: 32% spike in R&D spending in
Development 2012
• Patent filing: protection of important product innovations
Procurement • Positive relationship with supplier’s, primarily Foxconn
• The adoption and implementation of supplier code of
conduct
Table 9: VRIO Framework for Resources

Resource/Capability Valuable Rare Inimitable Organized Competitive Performance

to Exploit Consequence Implication
Cash Y Y N Temporary Above
Competitive Normal
Advantage
Apple Stores - Retail Y Y N Temporary Above
locations Competitive Normal
Advantage
Strategic Y N Competitive Normal
Relationship with Parity
OEMs
Industrial Design Y Y Y Y Sustained Above
Capability Competitive Normal
Advantage
Innovative Product Y Y Y Y Sustained Above
Design Competitive Normal
Advantage
Talented Software Y N N Competitive Normal
Development Teams Parity
Apple Brand Y Y Y Y Sustained Above
Consciousness Competitive Normal
Advantage
Sources for framework:
Crosson, M., Rouse, M., Fry, J., & Killing, J. (2012). Strategic Analysis and Action (8th ed.). Toronto: Prentice Hall.
Table 10: AAPL vs. Industry Leaders, Key Indicators

Statistic Industry Leader AAPL AAPL Rank

Market Capitalization Apple 400.96B - 1/2
P/E Ratio (ttm) DELL 10.51 9.68 2/2
PEG Ratio (ttm, 5 yr expected) DELL 0.95 0.51 2/2
Revenue Growth (Qtrly YoY) Apple 17.70% - 1/2
EPS Growth (Qtrly YoY) Apple -0.40% - 1/2
Long-Term Growth Rate (5 yr) Apple 18.98% - 1/2
Return on Equity (ttm) Apple 38.41% - 1/2
Long-Term Debt/Equity (mrq) N/A
Dividend Yield (annual) Apple 2.50% - 1/2

Source: Yahoo Finance

References:

1. Crosson, M., Rouse, M., Fry, J., & Killing, J. (2012). Strategic Analysis and Action (8th
ed.). Toronto: Prentice Hall.
2. Apple Press Information (2013, 01,23). Apple Revenue Breakdown . Apple Inc.
Retrieved from : http://www.apple.com/pr/library/2013/01/23Apple-Reports-
Record-Results.html
3. Apple Inc. "Apple Recycling Program: Computer and Display Recycling." Apple
Inc. 2012. Retrieved from: http://www.apple.com/recycling/computer/
4. Apple Inc. Apple Retail Store: Genius Bar. Apple Inc. 2012.Rtrieved from:
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