Apples Strategic Audit Report from Liu Shi Hao

Running Head: Strategic Audit Report for Apple Company 1

Strategic Audit Report for Apple Company

Liu Shi Hao (Dax)

Embry-Riddle Aeronautical University Worldwide Campus

September 30th, 2015


Table of Content

Table of Content-----------------------------------------------------------------------------2

Summary--------------------------------------------------------------------------------------3

History of Apple Company--------------------------------------------------------------4, 5

Mission and Vision Statement for Apple-------------------------------------------6, 7, 8

Corporate Governance

Board of Director-----------------------------------------------------------9, 10, 11

Senior management----------------------------------------------------------------12

External Factors Analysis Summary------------------------------------------------13, 14

Internal Factors Analysis Summary-------------------------------------------------15, 16

Strategic Factors Analysis Summary------------------------------------------------17, 18

TOWS Analysis----------------------------------------------------------------------------19

Implementation of Recommended Strategy--------------------------------------------20

Reference-------------------------------------------------------------------------------21, 22


Summary

In my strategic audit report, I am going to analyze Apple Company. Apple

Company is one of my favorite technology companies that produce, develops,

manufactures, and sells smart phones and other high-tech products. One of their

most famous products is iPhone and they also have a lot of other high-tech devices,

such as iPad, iPod, Macbook tablet, Apple TV, Nano, and Apple Watch. In this

report, I would love to introduce Apple Company’s history, the process of how

Apple Company went from almost bankruptcy to a 700 billion dollar market

capacity company, Apple Company’s products, Apple Company’s Mission and

Vision Statements’ analysis, members of Apple’s Board of Directors team and

Senior Management team, Apple Company’s external and internal factors analysis,

Apple’s strategic factors analysis summary, Apple’s TOWS analysis, a

recommended strategy, and my reference page. In my opinion, Apple Company is

a great and long-term company for investors to invest. A lot of people including

you may not believe that Apple is good company, but after reading my strategic

audit report, you will probably change your mind and start investing Apple

Company.


Brief history of Apple Company

Three people in a garage, Steve Jobs, Steve Wozniak, and Ronald Wayne

first found Apple Company. The name, Steve Jobs, might be the most popular

name that most of the people have heard when they first hear Apple Company.

However, without Steve Wozniak and Ronald Wayne, the world may not have

iPhone, iPad, and iMac today. At the beginning, Steve Jobs tried to convince

Ronald Wayne to take over 10% of Apple Company’s stock and wanted him to be

the decision maker for Apple’s future. However, Wayne backed out 12 days later,

and sold his holding 500$, that would be worth $72 billion in today’s stock price.

Apple Company, which is also named as Apple Computer, Inc, is a

multinational company that creates and develops computer software, computer

system, potable smart phones, personal computer, and other electronics. One of the

most famous and well-known products from Apple is their iPhone. IPhone has

different series, such as iPhone first, second, third generation, iPhone 4, iPhone 4s

which is the upgraded version of iPhone 4, iPhone 5, 5s, 5c, iPhone 6 and iPhone 6

plus, and iPhone 6s and iPhone 6s Plus. Apple Company also has other high-tech

electronic devices that people deeply like, such as iPad which has a big screen,

iPad Mini, Apple Watch, Apple TV, iPod and Nano which is used to store music,

and their future Apple Car. Apple Company also has a strong and huge chained


retail store called Apple Store. There are 461-chained Apple store all over the

world and Apple also has a great online music-downloading device called iTunes.


Mission and Vision statement analysis for Apple Company

Apple’s current mission statement is “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 is defining the future of mobile media and computing devices with

iPad." On the other hand, Steve Jobs’ mission statement was “To make a

contribution to the world by making tools for the mind that advance humankind.”

From Apple’s current mission statement that created by Tim Cook and

Apple’s Board of Director and management team, I can see that Apple regards its

products as a necessary part in our life. This mission statement includes a lot of

words that relate to “best”, such as “the best personal computers”, “Apple leads the

music revolution”, “Apple has reinvented mobile market”, and “Apple define the

future.” Apple wants to make their products perfect and make their products

involving into our daily life. What Apple wants is that when people are going to

make phone call or send text message, Apple wants everyone to use iPhone; when

people wants to read news online or create word document or power point, Apple

wants customers to use Macbook; and when people feel tired and fatigue from

work, Apple wants people to think about Apple’s iPod and iTunes first to relax. On


the other hand, according to Steve Jobs’ mission statement, I see that Steve Jobs

regarded Apple’s products as a tool to improve the quality of life for mankind.

Steve regarded Apple’s products as something that could help people to change our

life and to make our life better.

Apple’s current vision statement is that “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.”

For my personal opinion, I think that Apple has a really well rounded vision

statement. Apple Company mentioned that it has been focusing on innovating new

products and I believe that Apple made several achievements on that. For example,


in Steve Jobs’ period, he thought that Apple should not use their huge amount of

cash to do stock buy-back and creating new products that are not related to smart

phones. And Steve Jobs thought that giving money back to investors or large

company shareholders and stock buy-back were wasting money. On the other

hand, not only does Tim Cook support stock buy-back and giving money back to

investors, but he also supports create new products, such as Apple Watch, Apple

TV, Apple Pay, and the future Apple Car. The current Apple Company that led by

Tim Cook breaks the traditional business model, instead of living under Steve

Jobs’ shade. I like Apple’s spirit “making everything as perfect as possible.” I

believe it is a strong and successful move and I also believe that Apple will create

more and more impressive products that amaze and improve our life.


Corporate Governance

Board of Director team of Apple Company:

1. Timothy D. Cook

CEO of Apple Company

Nationality: United States of America

Internal directors

Has been the company since August 2011

2. Arthur D. Levinson, Ph.D.

Chairman of the board and Chief Executive Officer


External director

Former chairman and CEO of Genentech

Served as the Chairman of Genentech, Inc from September 1999 to September

2014

3. Andrea Jung

Joined Apple’s board of directors on January 7th, 2008

Canadian-American

External director

Became President and CEO of Grameen America in April 2014


4. Ronald D. Sugar, Ph.D.

Former Chairman of the Board and CEO of Nonthrop Grumman Corporation.

External director

Appointed to Apple’s Board of Directors on November 17th, 2010 and served as the

Chairman of the Audit and Finance committee.


5. Albert A. Gore Jr.

Former Vice President of the United States

External directors

Joined Apple’ Board of Director on March 19th, 2003


6. Susan L. Wagner

External directors

Co-founder and directors of Black Rock

American

Joined Apple on July 17th, 2014

Serve as Audit Committee

7. Robert A. Iger

Chairman and CEO of The Walt Disney Company


Joined Apple’s Board of Directors on November 15th, 2011

Served as Nominating Committee Chair Audit Committee

Nationality: United States of American


Senior Management team of Apple Company:

1. Tim Cook – CEO

2. Angela Ahrendts – Senior Vice President Retail and Online Stores

3. Eddy Cue – Senior Vice President Internet Software and Services

4. Craig Federighi – Senior Vice President Software Engineering

5. Jonathan Ive – Chief Design Officer

6. Luca Maestri – Senior Vice President and Chief Financial Officer

7. Dan Riccio – Senior Vice President Hardware Engineering

8. Philip W. Schiller – Senior Vice President Worldwide Marketing

9. Bruce Sewell – Senior Vice President and General Counsel

10. Jeff Williams – Senior Vice President Operations


External Factors Analysis Summary:

FACTORS WEIGHT(Out of 1)

RATING(1-5)

WGTDSCORE

COMMENTS

OPPORTUNITIESO1 High demand of Apple’s

iPhone 6, iPhone 6 plus, iPad, Mac tablet and Apple Watch

0.15 5 0.75

Every year Apple launchs its new iPhone, it is always a hign demand from all over the world. Especially, the launch of iPhone 6 and 6 plus has a tremendous demand

O2 Extensive amount of cash flow Apple has that can be used for acquiring other companies, developing new products, and stock buying-back.

0.1 5 0.5

One of the biggest advantage of Apple company is that it has a lot of cash that cannot be used within a short period of time. Apple could utilize these cash to develop new iPhone, make Apple Watch better, and create more new technology on their products

O3 Apple Pay usage 0.08 4 0.32 Apple Pay is a smart idea. It could make Apple company becoming the third transcation party, which means that Apple could hold the money, and then release it.

O4 Rapid growth of smartphone, tablet, and mobile payment market in Asian and Indian

0.1 4 0.4

China and India are growing fast. Apple could find a good opportunity and market in both contries

O5 More and more providers of parts, such as screens, camera, processor, and metal shell, for Apple Company

0.05 4 0.2Parts are cost. More provider or supplier could give Apple more options to choose which company to use. And also, decrease the cost of purchasing parts

THREATST1 Overdepending on the sale

of iPhone 6 and 6 plus in China market 0.15 5 0.75

China is a big market, and could help Apple making a lot of profit. However, if Apple overdepends on Chinese market, there will a obvious downtrend for Apple when the demand in China decreases

T2 The growth and development from other competitors 0.15 4 0.6

It is a potenial risk for Apple Company. Microsoft’s surface and Chinese XiaoMi smartphone are


growing really fast. T3 Decreasing sale on iPad

and iPad mini 0.05 3 0.15According to news that I have read recently, the sale of iPad is decreasing. Less innovation may be the problem

T4 Currently strong U.S dollar0.12 4 0.48

More than 30% sale comes from oversea. If dollar is more and more valued, Apple may face decrease in revenue

T5 Less and less innovation ability 0.05 4 0.2

Even though, iPhone 6 and 6 plus made a great success, investors and consumers are still looking for more new technology

TOTAL SCORES 1.00 4.35

Internal Factors Analysis Summary:


FACTORS WEIGHT RATING WGTDSCORE

COMMENTS

STRENGHTSS1 Innovative products 0.15 4 0.4 Apple Company has great

and innovative design and management team.

Their smart phone, iPhone, make the traditional market

different and their iPad even make some people

give up laptopS2 Brand loyal

customers0.05 4 0.2 Apple has loyal groups of

customers. Some people even lined up in front of

apple’s retail store overnight before new

iPhone release.S3 Virus free IOS

system0.10 4 0.4 Apple creates IOS

system, which is the fastest system and is virus

free. Apple helps customers to avoid

getting virus when they use their phone and

laptop.S4 Apple looks for

diversified development for

their products

0.15 3.5 0.35 Not only does Apple Company focus on

developing on their smart phones, but they also

develop iPad and music system. Also, they start

developing Apple car that will blend into our life in

the future.S5 Apple try to make

their products as aesthetic as possible

0.05 3 0.15 For example, the first edition of iPhone is

rounded edge, and then it becomes cutting edge,

and then the screen becomes bigger.

Especially, Apple’s logo is a talented design. The

logo is simple, but aesthetic and has


representativeness.

WEAKNESSESW1 Decreased market

share for iPad0.10 3 0.3 The demand of iPad

started decrease last quarter because they

haven’t developed much technology on it.

W2 Low market share in their software

industry

0.10 4 0.4

W3 Expensive price for their iPad

0.10 4 0.2 Their new iPad, which is iPad pro cost over 1000

dollar and it does not have 64 GB memories.

64 GB memories is what most people buy.

W4 Declined sale for iMac

0.10 3 0.15 Mac book laptop is one of their main source for

income.W5 Less focus on

marketing issue to create awareness

0.10 3 0.3

TOTAL SCORES 1.00 2.85

Strategic Factors Analysis Summary:


SWOT#

FACTORS WEIGHT RATING WGTDSCORE

COMMENTS

S1 Innovative products 0.15 5 0.75 Apple Company has great and innovative

design and management team. Their smart phone,

iPhone, make the traditional market different and their

S2 Apple try to make their products as

aesthetic as possible

0.1 4 0.4 For example, the first edition of iPhone is

rounded edge, and then it becomes cutting edge,

and then the screen becomes bigger.

Especially, Apple’s logo is a talented design. The

logo is simple, but aesthetic and has

representativeness.S3 Apple looks for

diversified development for

their products

0.1 4 0.4 Not only does Apple Company focus on developing on their

smart phones, but they also develop iPad and

music system. Also, they start developing Apple car that will blend into our life in the future.

W1 Decreased market share for iPad

0.1 4 0.4 The demand of iPad started decrease last quarter because they

haven’t developed much technology on it.

W2 Declined sale for iMac

0.1 3 0.3 Mac book laptop is one of their main sources for

income.O1 High demand of

Apple’s iPhone 6, iPhone 6 plus, iPad,

Mac tablet and Apple Watch

0.15 4 0.6 Every year Apple launchs its new iPhone,

it is always a hign demand from all over the world. Especially, the launch of iPhone 6

and 6 plus has a tremendous demand


O2 Extensive amount of cash flow Apple has that can be used for acquiring other

companies, developing new

products, and stock buying-back.

0.1 4 0.4 One of the biggest advantage of Apple

company is that it has a lot of cash that cannot be

used within a short period of time. Apple

could utilize these cash to develop new iPhone,

make Apple Watch better, and create more

new technology on their products.

T1 Overdepending on the sale of iPhone 6 and 6 plus in China

market

0.1 4 0.4 China is a big market, and could help Apple making a lot of profit.

However, if Apple overdepends on Chinese

market, there will a obvious downtrend for

Apple when the demand in China decreases.

T2 The growth and development from other competitors

0.05 4 0.2 It is a potenial risk for Apple Company.

Microsoft’s surface and Chinese XiaoMi

smartphone are growing really fast.

T3 Currently strong U.S dollar

0.05 3 0.15 More than 30% sale comes from oversea. If dollar is more and more valued, Apple may face

decrease in revenue.TOTAL SCORES 1.00 4.00


TOWS Analysis:

Apple Company TOWS Analysis Internal Factor

External Factors

Strengths (S)

S1: Innovative productsS2: Aesthetic products

Weaknesses (W)

W1: Decrease market share of iPadW2: Products recall influence company’s reputation and add expenses.

Opportunities (O)

O1: High demand of smart phonesO2: Huge amount of cash flow

SO Strategies

S1/O1-Apple has good management, engineering, and design team. They work together to create high-quality smart phone and make it impressive. That’s the sale of every generation of their iPhone will hit new peak.

WO Strategies

W1/O2- Apple has a huge amount of cash in their hand. Not every company has such huge amount of cash. Apple could use these cash to develop new product and new technology on their iPad, so that the sale of iPad could rise. The sale of iPad is one of Apple’s main incomes and is also one of the most favorable products that customers like.

Threats (T)

T1: Over depending on Chinese market T2: The growth and development from other competitors

ST Strategies

S2/T2- Apple designs aesthetic products, especially their iPhone. However, Apple Company sometimes over depends on Chinese market. For example, Apple adds rose-red color for iPhone 6s, which most Chinese ladies like. Creating new technology on the phone is more important.

WT Strategies

W2/T2- Right now in the current market, there are a lot of competitors against Apple Company and their products, such as Microsoft’s Surface against iPad; Samsung’s Galaxy and Nokia’s Lumix against iPhone. If Apple has too much recalls due to bad software, it is cost too much expense and delay the production line. Also, it is going to be bad for Apple’s reputation and give other competitors chance to catch up.

Implementation of Recommended Strategy


According to the TOWS matrix and other matrix, I think that Apple

Company has an experienced, talented, and united management and design team

and Apple has a huge amount of cash in hand. So I would suggest that Apple

Company could put more attention and focus on upgrading its current products and

developing new products. Recently, I read new about the sale condition of Apple’s

iPad. I realized that the sale of iPad has already decreased. And right, Apple is

going to launch its iPad Pro. In my opinion, in order to occupy both smart phone

and small and big tablet market, Apple should forecast what people need and why

the sale of iPad has decreased. iPad, which belongs to small tablet market, is one of

the main incomes for Apple Company and people deeply like it. So I think Apple

should send a team or a group to socialize normal people who buy Apple products,

and get to know them why they like Apple, why some of them don’t like Apple,

Apple products’ advantages and disadvantages, and feedbacks. Or Apple could set

up a website opening to people, so people could go to the website and submit their

own feedback and thinking for Apple Company. Not only would this help Apple

Company know where their disadvantages at, but it would also help Apple

Company to provide and develop better and better products.

Reference


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differ from Steve Job's original ideals? Retrieved from

http://www.investopedia.com/ask/answers/042315/what-apples-current-mission-

statement-and-how-does-it-differ-steve-jobs-original-ideals.asp.

2. Rowland, C. (2015, September 3). Apple’s Vision Statement & Mission

Statement - Panmore Institute. Retrieved from http://panmore.com/apple-mission-

statement-vision-statement.

3. Apple - Press Info - Apple Leadership. (n.d.). Retrieved from

http://www.apple.com/pr/bios/.

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Macworld UK. Retrieved from http://www.macworld.co.uk/feature/apple/history-

of-apple-steve-jobs-mac-computer-1984-3606104/.

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http://www.scribd.com/doc/15908770/Apple-Computer-Inc-Case-Study#scribd.

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http://investor.apple.com/corporate-governance.cfm.

http://investor.apple.com/corporate-governance.cfm

http://www.scribd.com/doc/15908770/Apple-Computer-Inc-Case-Study#scribd

http://www.macworld.co.uk/feature/apple/history-of-apple-steve-jobs-mac-computer-1984-3606104/

http://www.macworld.co.uk/feature/apple/history-of-apple-steve-jobs-mac-computer-1984-3606104/

http://www.apple.com/pr/bios/

http://panmore.com/apple-mission-statement-vision-statement

http://panmore.com/apple-mission-statement-vision-statement

http://www.investopedia.com/ask/answers/042315/what-apples-current-mission-statement-and-how-does-it-differ-steve-jobs-original-ideals.asp

http://www.investopedia.com/ask/answers/042315/what-apples-current-mission-statement-and-how-does-it-differ-steve-jobs-original-ideals.asp


7. Apple - Press Info - Sue Wagner Joins Apple's Board of Directors. (n.d.).

Retrieved from https://www.apple.com/pr/library/2014/07/17Sue-Wagner-Joins-

Apple-s-Board-of-Directors.html.

8. Blodget, H. (2013, August 3). Apple's 'Mission Statement' - Business Insider.

Retrieved from http://www.businessinsider.com/apples-new-mission-statement-

2013-8.

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http://www.businessinsider.com/apples-new-mission-statement-2013-8

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https://www.apple.com/pr/library/2014/07/17Sue-Wagner-Joins-Apple-s-Board-of-Directors.html

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Apples Strategic Audit Report from Liu Shi Hao