APPLE INC.

2015 1
CASE ANALYSIS

Presented by:
Aarohi Gurjar 16053
Anubha Shrivastava 16061
Shubham Neekhra 16100
PGDFM 2016-18 Batch
 Company Overview 2
Apple Inc. is an American multinational technology company headquartered in
Cupertino, California that designs, develops, and sells consumer electronics,
computer software, and online services.
The company's hardware products include the iPhone smartphone, the iPad
tablet computer, the Mac personal computer, the iPod portable media player, the
Apple Watch smartwatch, and the Apple TV digital media player.
Apple's consumer software includes the MacOS and iOS operating systems, the
iTunes media player, the Safari web browser, and the iLife and iWork creativity
and productivity suites.
Its online services include the iTunes Store, the iOS App Store and Mac App Store,
Apple Music, and iCloud.
 Apple: Early Years (1976-85) 3
On 1st April 1976, Steve Jobs & Steve Wozniak, with a team of around 20 college dropouts,
founded Apple Computer in Los Atlos, California.
By the end of 1980, Apple became the leader in PC Industry & launched a successful IPO after
selling 100,000+ units of Apple II, an easy-to-use computer, which was released by Apple in
April, 1978.
Apple practiced horizontal & vertical integration & relied on its own proprietary designs,
refusing to license its software to 3rd parties.
In 1981, Apples competitive position changed fundamentally when IBM entered the PC
market & gained more market share with its relatively open system PC design, which used
Microsofts DOS as OS & Intel microprocessor.
Between 1981 & 1984, Apples net income fell 62%.
In 1984, Apple introduced Macintosh, which had ease-of-use, industrial design & technical
elegance. But, its slow processing speed & lack of compatible software limited its sales.
Apple suffered major crisis, as a result of which, Steve Jobs, the founder & soul of Apple, was
forced out of the company in 1985.
 Years of John Sculley (1985-93) 4
In 1985, John Sculley, the executive recruited by Steve Jobs, was appointed Apples new CEO.
Sculley pushed Mac into new markets like desktop publishing & education. This strategic
move helped Apple recover its worldwide market share & by 1990, Apple became the most
profitable PC company in the world.
In 1990, Sculley took the Chief Technology Officer title and attempted to move Apple into the
mainstream by becoming a low-cost producer of computers with the launch of the Mac Classic,
a $999 computer.
Other significant strategic decisions taken by Sculley were forging an alliance with IBM &
undertaking a cooperative project involving Novell & Intel to rework Mac OS to run on Intel
chips that boasted faster processing speed.
These projects led to a full-scale assault on PC Industry and yet, Apples gross margin dropped
14points below the companys 10 year average.
In June 1993, Sculley was replaced with Michael Spindler, the companys president.
 Spindler & Amelio (1993-97) 5
From 1993 to 1996, Michael Spindler worked as Apples CEO.
He scrapped the cooperative project to put Mac OS on Intel chips & announced that Apple
would license a handful of companies to make Mac clones.
In an attempt to recover Apple from losses, Spindler tried to slash costs, cut 16% of Apples
workforce & pushed for international growth. But, Apple had lost its momentum.
At the end of 1995, Apple & IBM parted ways on their joint ventures.
In 1996, Apple incurred a loss of $69million in its first fiscal quarter & the company appointed
another new CEO, Gilbert Amelio, an Apple board member.
Amelio made some restructuring efforts & Jobs also returned to Apple as a part-time advisor.
But, Apple lost $1.6billion & was at the verge of bankruptcy.
 Steve Jobs & the Apple Turnaround 6
In September 1997, to save Apple from bankruptcy, Jobs became the companys interim CEO.
Microsoft made 5year commitment to develop core products like Microsoft Office for the Mac.
Jobs halted the Mac licensing program as the Mac clones were cannibalizing Apples profits.
He believed deeply in focus & reduced Apples product lines to just 4 categories (desktop &
portable Mac, for consumers & professionals), making it one of the narrowest product lines
among companies of comparable size.
In 1998, Tim Cook was hired for streamlining Apples Supply-Chain.
Jobs focused on Innovation & Apples spending on R&D was increased.
Apple launched website to set-up direct sales.
Jobs brought the culture to follow extreme practices of secrecy, including a closed door
policy in Apple & violation of this culture of confidentiality became one of the major grounds
for termination from Apple.
 Steve Jobs & the Apple Turnaround 7
In August 1998, Apple introduced the iMac, the $1299 all-in-one computer.
With iMac, Apples sales outpaced the industrys average for the first time in years & Apple
posted a $309million profit in 1998.
Jobs attempted to break away Apple from its tired, tarnished image & make it a cultural force.
Through multimillion-dollar marketing campaigns, Jobs tried to promote Apple as a hip
alternative to other computer brands & differentiate the Macintosh amid intense competition
in the PC industry.
Apples successful ad campaigns & effective slogans included Think Different, The ultimate
all-in-one design, It just works & greenest line-up of notebooks.
Apple made many achievements in computers, MP3 players, phones & tablets.
Tim Cooks Major Strategic Initiative 8
On 9th March 2015, Tim Cook, Apples new CEO, announced the Apple Watch, his
first major strategic initiative.

Challenges for 2015:

Sales of iPod & iPad drastically decreased & of Mac remained relatively small.
Smartphone competition became intense & low-cost competitors like Xiaomi were taking the
market by storm.
Apples share of worldwide PCs remained in single digits.
Apple became increasingly dependent on iPhone, which accounted for 69% of its revenue.

Big Question or Issue to Deal:

Announcement of the Apple Watch: was it the Right Strategic Decision for Apple or not?
 The Macintosh and Apples 9

Digital Hub Strategy

In 2001, marking Apples 25th anniversary, Jobs presented his vision
for the Macintosh in what he called the digital hub.
He believed that the Mac had a real advantage for consumers who
were becoming entrenched in a digital lifestyle, using digital
cameras, portable music players, and digital camcorders.
The Mac could be the preferred hub to control, integrate, and add
value to these devices.
In simpler terms, it has created content stores and devices to
consume content.
We are living in a new digital lifestyle with an explosion of digital
devices. Its huge enough for any one.
 Moving Beyond the iPhone: The 10
iPad
Steve Jobs wasnt satisfied with the spectacular success of iPhone
Released iPad on March 2, 2010. It was more intuitive and easier to use than a PC.
Popular activities on iPad included e-mail, playing games, watching full- length videos and
shopping online.
By the end of 2014, Apple sold nearly 240 million iPads and built $30 billion business
iPad was priced from $499 to $829 and tablet owners viewed it as a device to consume content
rather than produce it.
Apples business model for iPad was slightly different from earlier products.
Potential competitors for tablets were- Googles version of Android, Amazon and Microsoft
windows based tablets.
Cook announced partnership with IBM to develop enterprise apps for iPad and iPhone
CEO was prepared to launch iCloud in October 2011.
 Beyond i-Phone & i-Pad 11

Spectacular Revenue Growth By Booming i-Phone And i-Pad Sales

Apple Watch Entered In September 2014 In Wearable Technology
Basic Model was at $349 while gold was as high as $17000.
Significant competition from Pebble, Samsung, google, LG, Motorola
Apple pay also was announced by Cook on same day
It accounted for 2/3rd of mobile payments
Other notable products like Mac Mini and Apple TV were disappointments as they failed
to live up to the expectations
 Porters Five Competitive Forces
12
Model for Apple Watch
With each new invention Apple
creates there are always imitators
Threats of who follow suit
new entrants

Apple is inviting app

designers to begin Those who will buy
Rivalry- Bargaining
creating new apps for Bargaining smart power of the product are likely
power of glasses,
buyers new adopters who
the Apple watch- suppliers smart
bargaining power of clothing already own many
them Apple products

Threat of
Substitutes
Google, Samsung, Sony
 Apple Inc. in Next Decade 13
While Cook claimed that apple watch, Apple Pay and corporate consumers were big areas for
growth, apples product pipeline was the strongest.

Can Apple Watch and Apple Pay be the next iPhone and iTunes?
Apple popularized both smartphone and tablet which created multi-billion dollar worldwide
markets. Same Cook thought could be done with smartwatches
The miniaturization of technology perfectly goes with our physical and mental needs.
But right now neither our wrists nor our technology is ready for such an incursion.
Also, battery life of apple watch just isnt there yet.
Apple watch is not capable of stand alone use and requires nearby iPhone to function
properly
Expensive for $349 and would last only for a few years
 Analyzing Competitive Advantage: 14
Threat of Substitute Product

Threat from Substitutes

Availability of close substitutes High
Switching cost for switching to substitutes High
Substitute's price-value equation Better
Profitability of the producers of substitutes High
 Analyzing Entry Barriers 15

Barriers to Entry
Economies of scale High
Product differentiation creating price premiums High
Brand identity requiring brand building by entrant High
Switching cost for switching to other competitors High
Access to channels of distribution Limited
Capital requirements Large
Access to technology/Distribution channels Easy
Access to raw materials Easy
Other Advantages Independent of Scale High
Expected Retaliation High
Government protection against entry Substantial
 Analyzing Bargaining Power of Buyers 16

Bargaining Power of Buyers

Intrinsic Leverage
Buyer concentration relative to industry Low
Volume of Buyer's purchases Low
Availability of substitutes to industry's products Many
Switching costs(to alternate products) High
Buyer Information/ Expertise High
Price Sensitivity
Product Differences Low
Brand Identity High
Contribution to quality of buyer's final product/experience High
Contribution to cost of buyer's final product/experience High
Buyer's profitability Low
 17
Analyzing Bargaining Power of Suppliers
Bargaining Power of Suppliers
Supplier Concentration relative to your Industry concentration Low
Availability of substitute inputs for your industry Many
Switching cost for switching to other supplier/alternate inputs High
Contribution to quality of your product High
Contribution to cost of you final product High
Your importance to supplier High
 Analyzing Degree of Rivalry 18

Rivalry among Competitors

Degree of Industry concentration (No. of players and relative market shares) Low
Industry growth rate compared to economy growth rate Higher
Fixed or storage costs as percentage of total costs Low
Differentiation creating price premiums High
Switching cost for switching to other competitors High
Openness of terms of sales Open
Excess capacity in the industry - present and expected Larger
Strategic stakes - competitors only in this industry or diversified High
Homogenity of Competitors High
Barriers to exit
Cost of exit - if exiting industry High
Social and government restriction on exiting industry High
Strategic interrelationships between business and others Low
Emotional Barriers High
 4-Corner Competitive Analysis 19
Goals:
To make Apple Watch & Apple Pay a big success & remain a pioneer for innovation in
the Industry

Assumptions:
For iPhone, the greatest competition came from Android developed by Google
Googles competitor to Apples App Store called Play Store generated significant
revenue
In the Smartphone segment, Samsung, Xiaomi, Lenovo are prevalent

Resources:
Apple spends a lot on R&D and innovation which is its greatest resource

Future Strategy:
To shift the trend, towards Apple Watch & Apple Pay in the next decade
 20

Thank You!