Apple Inc Case Study

Memorandum

To: Steve Jobs, CEO, Apple. Inc

From: Oh Ryoun Kwon

Date: October 23, 2012 (the report based on the year of 2008)

Re: Recommendation of the maintaining recent success

Executive Summary

Apple Inc. has built its reputation during the enormous growth of the personal computer industry in the 20th century. As a highly innovative company, Apple has made several successful product introductions over the years. However, the issues with its strategic management also led the company to some serious failures on several occasions. Apple even reached a point where many thought they would not survive. Apple has to keep the PC product lines and focus on the music and mobile product lines with the product differentiation. The product differentiation aims to have an advantage over competitors by having outputs that are different to others in the market. Apple does this by making a unique product with leading edge technology. This can be seen with the iPhone and iPod range in Apple. Apple has constantly innovated its products to make it different from competition and better for the environment, so the recent growing is not the part of up-and-down history.

Introduction

Apple Computer Inc. was founded by Steve Jobs and Steve Wozniak in 1976. Apple's current strategic position as of 2008 is that its market share had declined and has a successful business from its products ranging from PCs to non PCs. Apple's recent industry entry is to the mobile phone industry with its recent product of the iPhone. Apple has already has its personal computer industry and personal media player industry which consist the MP3 player industry. Apple's strategic purpose is to leverage its ability through the design and development of its own products and provide its customers products which are ease-of-use. In 2008, the gross margins were not increasing despite the falling component prices. The market is not doing well and the huge concern is whether Apple could continue its impressive performance, leadership in its innovation and reclaim its original market leader position into the future. This memorandum uses multiple strategic business analysis tools to analyze the Apple's current situation, evaluate its internal and external environment and recommend how to maintain the recent success.

1. External Environment Analysis (PEST Analysis of Apple Inc.)

The PEST analysis provides an understanding of the external environment of year of around 2008. The external environment is separated into four segments: Political, Economic, Social, and Technologic. Apple Inc. should know what is happening outside of its company because the future strategy has to be based on the market's trend.

Political

-The 2008 United States presidential election will be held

Economic

-Downturn in economy from the subprime mortgage crisis in 2007

-Oil price rose steeply in 2008

-Credit markets froze in 2008

-Federal Reserve used innovation to change failed Banking system

Social

-People concerned with health and well-being

-Ubiquitous technology in ordinary life

-People prefer smaller technological devices

Technological

-Security issues because increasing critical data and services are used in electronically

-E-learning and distributed teaching and learning increased

-Kept growing of social networking

-Smartphones were developed

Table 1: PEST Analysis of the United States

STRATEGIC IMPLICATION

Conclusion: Apple's future sale might be depending on presidential election because in history, under Democratic, Dell grew at 93.8 per cent per year, according to Bloomberg data, while Apple fell at a 4.6 per cent annual clip. Under Republican, Dell has limped along at 3.8 per cent a year, while Apple grew at 47.5 per cent. Also, the poor economy of the U.S could effect on Apple's sale.

New Strategy: Apple can react with two ways from the current its external environment. First, Apple might need to reduce the price since customer will not spend a lot of money on products rather than the necessaries of life. Secondly, Apple might develop small secured devices that are useful in E-learning and social networking. While doing those two options, Apple may maintain and increase the market share and profit margin.

2. PC Industry Analysis (Porter's five forces analysis)

Every market including the financial industry can be evaluated through the use of Porter's five-force theory. Porter's uses the five forces, supplier power, barriers to entry, threat of substitutes, buyer power, and the degree of rivalry, as tools that help analyze a company's position against its competitors.

Threat of New Entrants: Low

Startup costs are extremely high so the probability of new entrants is low. The existing companies have capitalized on the distribution channels and have created strong branding awareness that makes it difficult for new comers to compete. The probability of success is so low that competitors pursue niche markets rather than trying to compete with the bigger companies. Apple positioned itself years before so it has created its space in the computer industry just as IBM, Hewlett-Packard, Gateway and Dell.

Bargaining Power of Suppliers: Low

The suppliers are plentiful and must compete with others to ensure that they will be able to retain the business of the computer companies. The position is low especially since the larger companies can readily switch to another supplier without any major repercussions.