Strategic Analysis of Apple Inc. - Brian Masi

Strategic Analysis of Apple Inc.

Brian Masi

Capstone Strategy Course (MGT440), Professor Linda Cohen

Barney School of Business, University of Hartford

December 15, 2009

MGT 440, December 2009 Masi

Strategic Analysis – Apple Inc. i

Table of Contents

Overview

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

Apple Inc. Strategy Facts: Scope, Generic Competitive Strategy, and Value Creation ...... 2

Strategic Analysis

1. Industry Forces and Attractiveness ................................................................................ 3

2. Competitive Landscape and Strategic Groups ............................................................... 6

3. Key Resources and Capabilities ...................................................................................... 8

4. Apple Inc. Value Chain and Strategy Implementation ................................................. 10

5. Trends and Opportunities

5.1. General Environment Analysis ............................................................................ 14 5.2. Diversification ..................................................................................................... 17 5.3. New Value Creation Opportunities ..................................................................... 19

6. Recommendations and Conclusion ............................................................................. 21

Appendices

A1: Porter’s 5 Forces Analysis .......................................................................................... A-1

A2: Strategic Group Maps ............................................................................................. A-2.1

A3: Key Resources & Capabilities ..................................................................................... A-3

A4: Value Chain Analysis ............................................................................................... A-4.1

A5: General Environment Analysis .................................................................................. A-5

Resources

Works Cited ..................................................................................................................... R-1


Strategic Analysis – Apple Inc. Page 1 of 21

OVERVIEW

Executive Summary

Apple Inc. (Apple) has managed to create substantial value in the highly competitive personal computer industry, by innovating and forging a path considerably different from those of the largest competitors in the industry, successfully differentiating its products from those of the competition by choosing to focus on quality, design elegance, and superior customer service, while outsourcing actual manufacturing to trusted original equipment manufacturers. Yet, despite the advantages Apple has created for itself, the stiff competition within the industry and other external factors present formidable challenges to the firm.

The personal computer/notebook market is becoming increasingly commoditized, leading to intense rivalry among competitors within the industry, driving prices down and creating potentially destructive price wars. Utilizing key resources and capabilities including industry-leading design teams, talented software and hardware engineers, backed by a sizeable research and development budget, which is responsible for a portfolio of thousands of patents, and under the strategically brilliant stewardship of CEO Steve Jobs, Apple has successfully innovated its way to a comfortable market position commanding premium prices. Unfortunately, Apple cannot rest on its laurels. The position is not permanent and Apple must continually find new ways to maintain profits and create value for customers and shareholders. The maturing personal computer market is becoming saturated, leaving fewer new buyers and more replacement buyers. To continue to grow, Apple must also look to new and expanding markets as sources of revenue.

After considering Apple’s strategic war chest; the firm’s core competencies, key resources, and capabilities and given its current situation within the industry and the compounding factors in the form of trends from the general environment, it is clear Apple stands to create considerable value through continued related diversification. The firm’s history of category-defining products like the iPod and iPhone provide sufficient evidence that it is well-equipped to continue its path of innovation, by creating a digital lifestyle convergence device that bridges users’ on-the-go digital lives and their at-home digitals lives. The proposed device will be powerful and feature packed, while leveraging the Apple system of seamless integration to create a compelling user experience, presented in an elegant package showcasing the firm’s industry-leading industrial design capabilities, to create the next must-have consumer electronics product.



OVERVIEW Apple Inc. Strategy Facts

Scope The focus of this project is the Mac portable personal computer line of Apple in the United States, a part of its Americas division. Apple is a publicly owned Fortune 100 company based in Cupertino, California. The firm operates primarily in the personal computer industry of the wider technology sector. Apple designs, produces, and sells a line of personal computers as well as mobile phones, portable digital media devices, software, and related peripherals and accessories. The firm sells internationally though a mix of direct sales, online and retail stores, wholesalers, and resellers. Generic Competitive Strategy Apple is pursuing a broad differentiation strategy. Apple differentiates by offering high-quality, exceptional design, and personalized service. The scope of their strategy is broad targeting customers ranging from unsophisticated beginner users to specials needs power-users. Value Creation Apple outsources the basics of production to third-party original equipment manufacturers (OEMs) that can achieve cost savings through vast economies of scale while in-housing elements of design to attract and retain users. Apple excels in the areas of industrial design and user interface and focuses on these areas to deliver a product that is both highly stylish and at once ergonomically natural and useable. Apple’s people-friendly devices and highly personalized one-on-one customer service create a one-of-a-kind value proposition that commands a higher-than-average price.



STRATEGIC ANALYSIS 1. Apple Inc. Industry Forces and Attractiveness

Analysis and Conclusion For the purpose of illustration, the industry analysis of Apple Inc. will focus specifically

on the portable personal computer manufacturing and sales and on the United States market, although many of the firms involved in the industry produce, market and sell internationally. Considering the threats faced by firms operating in this industry the industry is moderately attractive overall. Many firms within the industry have thrived, but competition is very high, while suppliers and buyers have moderate influence over the competitors. There are several avenues by which new competitors may enter the market, but they face substantial hurdles in successfully establishing a viable brand. Finally the threat of substitutes is credible in some use-cases, but will not completely usurp personal computers in the foreseeable future. See Appendix A1 for accompanying template. Rivalry Between Competitors While once an industry defined by few large companies and extremely expensive products, pursuing a niche audience, the advent of the personal computer (PC) has caused an industry explosion which now includes dozens of manufacturers pursuing many millions of customers in the United States. As a result of the penetration of computers into everyday life and business the PC is becoming more and more a commodity product. For most users, and business economy is more important that performance specification and other ‘bells and whistles.’ The result has led many manufacturers to pursue low-cost and best-cost provider strategies. Those at the lowest end compete on rock-bottom prices foregoing all but the most basic features. Those in the middle range including Dell, HP, and Lenovo compete for customers offering a range of options for varying prices. The similarity of their products due to industry standard setting also leads to price competition that drives down prices and squeeze margins. The desire of companies to buy large numbers of PCs for the lowest bid available also exercises considerable downward pressure on prices offered by these firms. The nature of technological development also imposes increased competition on the members of the industry. The technology behind many key components of PCs continues to become more efficient with increased processing power and less energy consumption. ‘Moore’s Law’ predicts that the number of transistors on a processing chip roughly doubles every eighteen to twenty-four months.1 While is more an estimate than a ‘law’ industry leaders like Intel, Inc. have kept this pace for decades. This perpetual innovation and development puts pressure on computer manufacturers to streamline production and refresh products at a pace largely unseen in business for centuries.2 Supplier Power Suppliers have considerable leverage over the manufacturers of portable personal computers. While many industry standards like universal serial bus (USB) and wireless

1 Intel Corp. Moore’s Law. Retrieved 2009-12-09

2 Apple Inc. SEC 2009 Form 10-K Filing. Page 16



technology are open and issued by independent or collaborative standards bodies like the USB Implementers Forum (USB-IF, universal serial bus) and Institute for Electrical and Electronics Engineers (IEEE, wireless standard 802.11n) manufacturers also rely on privately owned standards. Often the technology must be licensed or requires entrance to a paid-membership industry group for use. For instance, for the specifications and use of the PCI-Express/Express Card standard, which is present in nearly all personal computers, membership to the industry group PCI-SIG is required.3 In addition, the relative concentration of suppliers for some inputs puts pressure on competitors. Within the personal computer industry, central processing units (CPUs) are sourced from a duopoly, Intel Corp. and Advanced Micro Devices, Inc. (AMD). Despite having two options, the semi-conductor market is dominated by Intel, with AMD licensing technology from Intel for use in production of their CPUs.4 Despite having compatible chip technologies; these two companies use proprietary chip designs that require different motherboard socket designs. Because of this incompatibility in design, for a PC manufacturer to switch suppliers of CPUs they must also switch to a new type of motherboard, which drives up switching costs. Despite this power the chip manufacturers hold, they are not present in the PC manufacturing business and therefore are reliant on PC manufacturers for a bulk of their business. This leads to discounts for bulk purchasing and exclusivity agreements, which alleviates some pressure from the dominant suppliers. Buyer Power As in all industries buyers have the final say and exercise considerable influence over manufacturers. The variety of buyers with many, widely varying needs directly impacts PC makers who must adapt and react by offering broad product lines. The marked distinction between power users seeking the ‘latest and greatest’ and average users who need a product that is ‘just good enough’ poses an obstacle to manufacturers who want to tap as many customers as possible. Manufacturers are benefited by the wide acceptance and use of PCs which causes high demand for products. Proprietary systems and brand loyalty are also used to keep customers coming back. Highly compatible closed-systems are routinely used to keep customers within a circle of products provided by single companies. Threat of Potential Entrants There are many avenues by which a new entrant may enter the portable personal computer market; however there are several hindrances that may prevent successful entrance. Currently in the market there are several large, well entrenched players that have substantial brand recognition and loyalty, including Dell, HP, Lenovo, and Apple among others. Developing a successful brand among many others is difficult. These players also dominate and keep costs down with economies of scale, which cannot easily be achieved by a new entrant without substantial capital investment.

3 Sherwin, Lisa M. “PCI-SIG Delivers PCI Express Specification Extensions.” 2003-02-19

4 Farrell, Nick. “AMD Takes Intel Market Share.” 2009-06-10



Despite obstacles there are still possibilities for entrance. New entrants may come from newly established ‘lean’ organizations which rely primarily on third-party original equipment manufacturers (OEMs) for production. Established OEMs often operating in Asia have already achieved economy of scale and can pass these savings onto new firms that practice ‘re-branding’ as a market entrance plan. The increasing convergence of mobile devices resulting from the push of ‘smart-phones’ and ‘netbooks’ is bringing phone makers into the portable personal computer market. Nokia, a well established phone maker, has fired its first ‘test shot’ by planning to release a netbook of its own.5 Another mode of entrance is a result of forward vertical integration by OEMs. This trend has increased in popularity over the past decade, bringing companies like Acer, Inc. into direct competition with well-known industry giants. Formerly an unknown, by 2005 Acer had revenues of over $1 Billion in the United States, $8.17 Billion worldwide.6 Today Acer has over $16.5 Billion in revenues worldwide and oversees brands such as eMachines and Gateway.7 Threat of Substitutes The consumer technology sector has grown substantial over the past decade with the advent of alternatives to personal computers growing from PDAs and now feature-rich ‘smart phones’ The increase in technology in the average American living room. These developments result in the spread of consumer ‘technology dollars’ away from PCs. However, despite the spread it is unlikely that smart phones, like the iPhone or Blackberry, will significantly diminish the importance of PCs in the near future. This diversification of consumers’ ‘digital lifestyles’ presents an opportunity for diversification of PC manufacturers, a step many are already taking. Recommendations Based on the industry analysis, I recommend:

Create a differentiation strategy: The commodity PC market presents a perpetual downward pressure on prices, which erodes firm profitability. Developing and brand image that separates the firm from the competitive rat race will reduce the effect of destructive competition and pad margins.

Develop close relationships with suppliers: Because there are few suppliers of key components required in PC manufacturing developing close relationships with suppliers is of utmost importance. Rather than searching for the supplier of lowest cost, maintaining a collaborative and exclusive business relationship will help mitigate the power of suppliers and help to lock in attractive component prices.

Consumer electronics diversification: While the PC market has grown increasingly crowded with competitors and customers saturated other areas of consumer electronics continue to grow. Developing complementary products in other categories provides broader sources of revenue by accessing more customers in markets with less intense competition.

5 Paul, Ryan. “Nokia’s little netbook gets AT&T subsidy, to cost $299.” 2009-10-14

6 Acer, Inc. “Acer America Corporate Overview.” 2007-03-20

7 Yahoo! Finance. “Acer Inc. Company Profile.” Retrieved 2009-12-05



STRATEGIC ANALYSIS

2. Competitive Landscape and Strategic Groups

Analysis and Conclusion The portable personal computer industry has many viable and successful competitors who, for the most part, offer similar products. While considering cost alone there are several groups that generally define the industry competition. Firm’s compete in groups at the low-end, middle range, upper-middle range, and high-end. Within these competitive groups price typically equates to number of features or capability. At the highest-end firm’s offer specialized products with certain consumer groups in mind. These firms compete on the basis of what the computer is designed to be used for, while firms at the lower end of the price spectrum compete essentially on price-value. See Appendix A2 for accompanying template. Extrinsic Dynamics – Price, Design, Quality, and Support Comparison of firms operating in the industry on the dimensions of price and design (ranging from functional to elegant) reveals a linear relationship [See Figure A2-1]. Those firms commanding the highest prices for their products opt for elegant (Apple) or intricate (Alienware) designs, while firms competing on low price offer basic functional designs (eMachines) to keep costs down. This paradigm remains true when considering build-quality and support as metrics as well [See Figure A2-2]. Apple offers portable computers constructed of solid aluminum blocks and strong polycarbonate plastics.8 Voodoo PC use sturdy well-designed computer cases with intelligent and efficient internal cable routing layouts to promote airflow and keep the computer running well. Other firms offering mid-range and low-end computers opt for more inexpensive plastics and materials while paying less attention to internal layout details. The comparisons of Price to Design and Design to Build Quality show similar relationships. Support is the final top-level extrinsic measures by which firms in the industry compete. The two extremes of high-price and low-price reveal similar support policies [See Figure A2-3]. Firms commanding the highest prices offer comprehensive support packages. Apple offers in-store one-on-one support to all customers and further warranty support. The premium price of their portables allows for the extra expense in providing this service. Intrinsic Dynamics – Customizability, Gaming Capability, Out-of-the-Box Features, System/Peripheral Integration Those firms that emphasize customizability on the part of the customer tend to offer computers built for high-performance applications, such as gaming. Gaming is an important driver of computer technology and the degree of customizability in features and specification as well as appearance is a driving force for manufacturers focusing their brands on gaming, like Alienware and Voodoo PC. The relationship between customizability and gaming capability remains linear [See Figure A2-4]. Firms have chosen their positions on these competitive dynamics and those not taken do not represent attractive segments to target. System/Peripheral Integration is a polarizing metric. Apple stands alone with its Mac portables.

8 Apple Inc. “Redesigned. Reengineered. Re-everythinged.” Retrieved 2009-11-30



They ecosystem they’ve developed provides seamless integration between their computers, software, iPods, iPhone, and other devices. Windows based PC manufacturers also make compatible peripherals, but they do not have the same level of integration as Apple. When considering out-of-the-box features some other, relatively large groups emerge. Brands like Dell, Lenovo, Vaio, Gateway, eMachines, and HP offer standardized functions built into Windows while Alienware and Voodoo PC offer a variety of pack-in games and features. Apple also ships copies of their iLife suite of programs including iPhoto and iMovie among other useful programs with every Mac. The ability for a user to do more than go online after setting up a Mac or Alienware PC is in significant contrast to other competitors [See Figure A2-5]. Recommendations Based on the strategic group map analyses, I recommend:

Focus on differentiated lifestyle branding: Apple has successfully developed a differentiated lifestyle brand and must continue to build on this foundation while resisting pressure to move to the middle to directly compete with Dell and HP.

Design innovation: Put additional emphasis on design development with internal resource allocation to continue to lead the industry in design.

Research user interface possibilities: As a mode of setting Mac computers apart from other PCs Apple must continue to innovate in user interface focusing on easy-of-use and intuitive menu functions.

Expand Apple store locations: Providing more points of direct contact with buyers will enable Apple to provide better service to customers and bring the Apple experience to more people.



STRATEGIC ANALYSIS

3. Key Resources and Capabilities

Analysis and Key Insights Apple’s most important resources and capabilities are Steve Jobs, the CEO, and the integrated system of hardware and software that the firm has developed and successfully marketed to derive value. Steve Jobs brought Apple back to tremendous success following a decline in relevance and heads the continued creation of billions of dollars of value. While Apple’s designers, programmers, and engineers each represent key resources the ability of the firm to exploit their abilities to create their entire software/hardware ecosystem is the firm’s key capability. Taken each individually, the resources only represent competitive parities and temporary advantages. The combination is their key capability that has established a sustainable and ongoing competitive advantage and above average performance within the industry. See Appendix A3 for accompanying template. Steve Jobs Apple founder and current CEO Steve Jobs is an incredibly valuable resource to the firm. His unique vision and approach to business established Apple as an industry leader in the beginning and he saved the firm from a downward spiral when he returned in the mid-1990s.9 Under his guidance the firm has rebounded and excelled in many markets, often defining categories of products. To Apple Steve Jobs is a valuable, rare, inimitable, and non-substitutable resource. Apple Stores – Retail Locations The introduction of Apple stores has provided the company with an important physical presence to act as both a sales location and an advertisement. The stores allow Apple to tightly control the image of the brand and provide excellent customer service. Apple tops many retailers in in-store sales, generating $4,032 per retail square foot per year, beating other retailers like Tiffany & Co. at $2,666 and Best Buy at only $930.10 This resource is of incredible value to Apple and a success that is a relative rarity in the industry. Matching success and impact like the Apple store model is difficult for other firms to achieve. Past experiments like Gateway stores have failed, while Sony Style stores founder in mediocrity. Relationship with OEMs Apple has outsourced all of its manufacturing processes to OEM partners in China, like Foxconn and Hon Hai Precision Industry while focusing on design internally. The relationships between Apple and their OEM partners are very close to provide Apple with excellent service and high quality products. Mutually beneficial business relationships are time-consuming and difficult to develop and maintain is of considerable value to Apple and puts them ahead of other manufacturers who may decide to outsource some production.

9 Deutschman, Alan. “The once and future Steve Jobs.” 2000-10-11.

10 Useem, Jerry. “Apple: America’s best retailer.” 2007-03-08.



Industrial Design Capability Apple’s incredible industrial design capability is a function of their innovative design teams, led by Jonathan Ive, senior vice president of industrial design, and the firm’s prioritization of design and outsourced production. Ive and the Apple design team hold many awards, with products being shown in permanent collections at various museums.11 This combination is valuable to Apple, rare among competitors, and difficult to imitate. Talented Software Development Teams Apple’s software developers are carefully selected and talented programmers. They’ve produced industry award winning software and the highly regarded iterations of Macintosh OS X operating system. They’ve provided Apple with important products, but developers of their caliber are not rare within the industry, nor are they difficult to imitate. Other firms can develop staff as talented or hire them away from Apple. Tailored Hardware/Software Systems One of Apple’s most important capabilities is their ability to develop and build highly integrative systems with software designed specifically for the hardware it runs on. The ‘closed system’ style of Apple is unique in the industry which typically relies on third-party software (i.e. Microsoft Windows running on a Dell computer). This capability comes from a combination of the design teams, software development teams, and hardware engineers employed by Apple. No other firm in the industry has a system like Apple’s and it would cost millions or billions of dollars to imitate, not regarding success. While other systems work for PC manufacturers they cannot achieve the same results as Apple’s integrated system. Recommendations Based on the analysis of firm resources and capabilities, I recommend:

Continue the expansion of Apple stores: The stores represent an important source of revenue for Apple and serve as an interactive advertisement for the Apple brand. Their success has been unmatched by any other industry player.

Emphasize the integrated system in advertisements: Apple’s integrated system holds a significant advantage over other industry systems relying on Microsoft Windows, yet some customers have not experienced the seamless interoperability of all Apple products. This marketing angle will result in cross selling of more products to new and existing customers.

Seek exclusivity arrangements with OEM partners: Continue to build relationships with the closed Asian OEM partners and enter into exclusivity arrangements to lock out competitors and gain favorable business deals.

11

Apple Inc. “Executive Profiles, Jonathan Ive” Retrieved 2009-12-06



STRATEGIC ANALYSIS

4. Apple Inc. Value Chain and Strategic Implementation

Strategic Implementation Based on analysis of Apple’s practices, policies, and procedures the firm’s strategy for its

portable personal computer business is one of broad differentiation targeting a range of customers from sophisticated power users to inexperienced new users and from individual buyers to bulk purchasers like schools and businesses. The firm differentiates on exceptional design, consistent quality, and outstanding customer service.

The real evidence of Apple’s strategy reveals that their commitments are directly in line with their stated goals and strategy. Apple’s goal is to provide customers with the “best personal computing…experience” by offering products with “superior ease-of-use, seamless integration, and innovative industrial design” and a “high-quality sales and post-sales support experience.”12 See Appendix A4 for accompanying template. Risks to Apple’s System While Apple has been successful in implementing its strategy in the marketplace, some of the firm’s practices could be seen as risks and potential liabilities threatening future success. Most of Apple’s risk center around the firm’s near absolute dependence on OEMs and foreign factories for manufacturing and assembling their products. Although Apple gives their OEM partners guidelines for sourcing materials to be used in production they do not have direct control over procurement. The OEMs that derive profit from high volume with low margins will continually seek to reduce the costs of inputs to reduce pressure on their margins. Gradual slips in quality will adversely affect Apple if the low quality inputs begin to show in the final products. Customers who begin to notice reduced quality will not be able to justify the premium prices that Apple commands for its products. Similarly, quality control slips during the manufacturing processes carried out by OEMs can negatively affect Apple. More defective products making it through to end-users will hurt Apple’s image as a supplier of premium lifestyle products. Risk-Mitigating Factors

Despite the inherent risks of establishing a value chain completely reliant on foreign, non-subsidiary firms, Apple has had tremendous success in implementing a lean manufacturing structure. Because Apple is committed to the equitable treatment of workers in their partners’ factories and developing mutually beneficial relationships with their suppliers OEMs are more likely to work cooperatively with Apple regarding pricing and sourcing, rather than acting only self-interestedly.

As long as quality control issues remain relatively few and far between, Apple can easily patch up any holes in perceptions their overall quality. Because Apple is fortunate to have large, highly padded margins on their products, they can afford to do full replacements of defective devices. Apple’s reputation for having sterling customer service and their ability to take quick

12

Apple Inc. SEC 2009 Form 10-K Filing. Page 1



and decisive action to fix issues may leave customers with even higher regard for the firm, despite some issues. General Administration A greener Apple – Apple redesigned packaging for many of its popular products to be more lightweight and take up less space in shipment. This means reduced emissions during transportation and results in a savings for the firm. Apple has also made moves to reduce the number of harmful chemicals used in the production of its products. Strong cash position – Apple maintains a large cash reserves and carries a comparatively small amount of long-term debt.13 This enables Apple to finance expansion, capital purchases, and development internally with little reliance on third-party creditors. Human Resources Management Selective hiring process – Apple follows selective hiring practices to recruit and hire talented individuals. Generous employee benefits program – Apple offers a variety of attractive employee benefits to complement direct wages.14 The benefits system is used to entice, and retain industry-leading talent to benefit Apple. Technological Development Research and development – Apple increased research and development funding by nearly 66% from 2007 to 2009, in 2009 Apple spent $1.33 Billion on research and development.15 This is a commitment to continue to push innovation forward to keep ahead of competition. Patent filing – Apple believes in the importance of protecting its intellectual capital by filing patents in the United States and worldwide for its inventions and innovations. Apple currently holds a portfolio of several thousand patents.16 Procurement Positive relationships with suppliers – Apple works closely with its key suppliers to benefit all parties involved. Apple is a member of the Electronic Industry Citizenship Coalition (EICC) and works to ensure fair treatment of workers in OEM factories.17 Apple has also developed its own Supplier Code of Conduct to govern the actions of its suppliers.18 These beneficial steps foster positive relationships with suppliers.

13

Apple Inc. SEC 2009 Form 10-K Filing. Page 55 14

Apple Inc. “Jobs at Apple: Benefits.” Retrieved 2009-12-09. 15

Apple Inc. SEC 2009 Form 10-K Filing. Page 16. 16

Apple Inc. SEC 2009 Form 10-K Filing. Page 11. 17

EICC. “Electronic Industry Code of Conduct.” Version 3.0. 18

Apple Inc. “Apple Supplier Code of Conduct.” Version 3.1.



Inbound Logistics Automated receiving systems – Apple has implemented sophisticated automated receiving systems to speed up the receiving process and reduce facility footprint and storage space requirements.19 Delegate raw materials acquisition – Apple works with its OEM partners to delegate the raw materials acquisition process but provides some supervision for quality control purposes. Operations Utilize OEM’s economies of scale – Apple outsources production to third-party OEM partners to utilize their economies of scale while removing the burden of production management from the firm. Internal design – The design and conceptualization of current and future products is done internally at Apple, utilizing industry-leading industrial design teams and engineering knowhow. Outbound Logistics Economical/stylist packaging – In order to save money on shipment and entice customers Apple uses eye-catching packaging that takes up less physical space and weighs less. This reduces shipping costs and environmental effect while attracting customers to the firm’s products.20 Apple Stores/Authorized retailers – To control the firm’s brand image Apple sells through first-party retail establishments and through authorized retailers. Apple Stores act as advertisements for the brand and provide a human point of contact between the firm and its customers. Authorized retailers are held to certain standards to protect Apple’s brand image. Direct shipment – Apple.com online orders are shipped directly to consumers from storage facilities in China. This minimizes inventory buildup in more costly warehouse locations in the United States. Marketing and Sales “Get a Mac” Ads – Apple uses a series of television advertisements comparing the firm’s products to competitors using a variety of direct and indirect methods to build a lifestyle brand image. The ads are humorous and do not emphasize cost or feature-by-feature comparisons, opting instead to develop the firm’s image. Retail locations/Flagship stores – Apple stores across the United States serve as living advertisements for the company promoting the brand and lifestyle image. Flagship stores, like the 5th Avenue New York store are an attraction drawing visitors on novelty hoping to convert the visits into sales. Secretive and selective unveilings – By keeping secrets about product releases and holding invitation-only press events for product unveilings, Apple creates hype and suspension around product launches.

19

Harps, Leslie H. “Materials Handling Technology: Toy or Tool?” 2002-05. 20

Apple Inc. “Apple and the Environment.” Retrieved 2009-11-28.



Service Apple Genius – Apple stores house the ‘Apple Genius Bar’ where customers can talk with an Apple specialist known as a ‘genius’ about problems with their device. This human interaction with a first party service provider builds a rapport with customers and offers a stark contrast to endless phone service calls.21 Included and extended warranty – Apple offers an included 90 day warranty against defects and issues with its products. Customers can also purchase extended warranties through ‘Apple Care’ to protect their product. Free consultation – Customers can bring in their device for a free consultation regarding issues problems with no commitment, whether it is in or out of warranty. The customer then has the option to pursue different avenues of resolving the issue without an upfront charge. Etc. Recommendations Based on the value chain analysis, I recommend:

Implement first-party quality checks in OEM factories: Despite working closely with OEM partners, Apple must always protect its image of quality. Implementing random quality check sampling and ‘quality audits’ in OEM facilities will ensure issues are caught early and that Apple’s OEM partners stay honest with their own quality control processes.

Make productive use of unused cash: While having a large cash buffer is important to a firm, idle cash is not being used effectively. During the yearly capital budgeting process Apple should set aside a sizeable portion of unused cash for investment. Unused cash does not create value for Apple, investing it in the near-term will provide benefits in the future to finance expansion and large capital purchases.

Continue a wise expansion of Apple Stores: Apple’s retail stores have been massively successful, that success can be furthered in new locations within the United States and abroad. During the expansion process Apple must practice extreme caution to avoid over-saturation, the Starbucks effect, to retain the halo surrounding the stores and maintain their status as a destination.

21

Apple Inc. “Apple Retail Store: Genius Bar.” Retrieved 2009-12-09.



STRATEGIC ANALYSIS

5. Trends and Opportunities

Although firms worldwide are facing the possibility of restrictive carbon emissions regulation, Apple is uniquely positioned to lead the electronics industry in promoting ‘green’ production, while taking full advantage of opportunities arising from new technological trends surrounding convergence devices and sociocultural preferences concerning the fully-integrated, mobile digital lifestyle. 5.1. General Environment Analysis Despite Apple’s considerable resources and capabilities, various trends within the General Environment pose considerable threats to the ongoing success of the firm. Proper planning and action will allow the firm to marginalize these threats while leveraging core competencies to take full advantage of emerging opportunities to create value for customers and shareholders. See Appendix A5 for accompanying template. Economic Environment Recovering economy22 – While the economy in the United States has shown some improvement and there are signs of full recovery looming the outlook is not certain currently. The uncertainty leaves consumers weary of big-ticket purchases like computers. Apple’s premium pricing position leaves the firm at a disadvantage to less expensive competing products. However, when consumers directly feel the improving economy and spending increases Apple will well positioned. Consumers seeking to ‘treat’ themselves following the economic upturn may be attracted to Apple’s premium portables, viewing them as luxury goods. Apple, known for its quality, dependable machines, and excellent customer service may also be seen as presenting a better value than the competitors with fewer frills at lesser prices. Demographic Environment Flattening of wages -- leveling affluence – Over the past several years the American middle class has experienced increasing costs across many indicators including, healthcare costs and the CPI, but wages have remained relatively stagnant. Apple’s high prices may send potential customers into the hands of competitors when they are unable to justify Apple’s high price tags. Counter-intuitively Apple’s perceived value has directly benefited them during the economic downturn; they’ve continued to experience growth while other competitors suffered.23 Political/Legal Environment Potential FCC Internet Regulation – The debate over ‘Net Neutrality’ has entered the political arena, with bills being drafted in Congress and the FCC waiting in the wings to impose

22

Reuters. “Stocks Rise as Recovery Hopes Lift.” 2009-12-11. 23

Dhaliwal, Amandeep. “Apple’s Q4 results beat analysts’ estimates; quarterly profit rises to $1.67 billion.” 2009-10-20.



regulation if need be. Changing the way the Internet operates may de-incentivize new innovation which could reduce future value to be derived by Apple.24 New and innovative technologies are routinely iterated on by hardware companies who strive to offer the best methods of integration in their new products. Reducing this innovation may stifle new value creation for Apple. Healthcare reform – The push for modernization of the American healthcare system in proposed reform legislation would provide government money for infrastructure development and implementation by care providers. Adaptability of Apple’s key portables in innovative health-centric ways could provide new sources of revenue. Technological Environment Device convergence – The possibility that ordinary personal computers (and portable personal computers) will become less relevant through increased device convergence is very real. Apple’s products laptops will be less important in users’ daily use as their multi-function devices meet most of their needs. Apple stands currently as a leader in innovation and portable technology. They are conveniently positioned to become a market leader in convergence devices by iterating on their current portable devices and mobile devices like the iPod Touch and iPhone. Shortening product lifecycle – An ever increasing pressure to innovate because of shortening product lifecycles could result in missed opportunities due to market entry times and losses on obsolete inventory. Apple’s lean manufacturing value chain is adapted to rapid turnover and can be leveraged to combat the threat of inventory obsolescence. Apple currently invests billions of dollars in research and development which can be leveraged to position Apple at the head of industry innovation, staying ahead of competitors in lifecycles shifts. Sociocultural Environment Increasing desire for on-the-go devices – The importance of the Internet and connectivity is driving a demand for access anywhere, using high-speed wireless technologies. Smartphones, and other ultra-portable ‘connected’ devices, that allow users to carry access to the Internet wherever they go are fast-growing compared to traditional personal computers. Apple and other manufacturers face a loss of relevance in the new technological landscape, driven by consumer preference. Again, Apple’s substantial investment in research and development in highly popular devices like the iPhone place Apple at the forefront of this transition. Greater concern for the environment – The production and shipment of Apple’s devices are considerable sources of carbon emissions and pollution, which may come under scrutiny as consumer concern for the environment continue to grow. Apple has already made commitments to ‘greener’ manufacturing practices as well as implementing the use of eco-friendly components, and packaging. This proactive step can be used as a marketing tool to garner greater respect from concerned customers. Global Environment

24

Swanson, Bret. “Net Neutrality’s Impact on Internet Innovation.” 2009-11-20.



Developing Chinese economy – The Chinese economy continues to grow despite worldwide economic contraction. As the economy becomes more developed, increased wages nationwide will increase the costs of production for Apple and its OEM partners. The increase in quality of life and disposable income to Chinese citizens will provide a larger customer base for Apple to tap into. Potential world-wide climate regulation – It is possible that the Copenhagen talks will result in real commitments from the international community regarding emissions caps and taxes. Strict Carbon emissions regulations will impose a considerable financial burden on the production of Apple’s products, driving up costs and shrinking margins. Again, Apple’s initiative in implementing ‘green’ practices sets them apart from many competitors who will also feel the burden of regulation. Recommendations Based on key trends in the general environment discussed above, I recommend:

Emphasize value for consumer dollar: Apple is known to provide considerable value regarding quality, satisfaction, and service for its products. These traits should be expressed explicitly to convey the value of their products when compared to competitors.

Campaign for real network neutrality: The debate over net neutrality is being muddied by moneyed interests to obscure the issues. To protect innovation and future value for Apple, the firm should advocate for open networks without packet or content discrimination.

Convergence devices within the Apple system: Apple is already a leader in the smartphone market and should shift competencies to new, innovative, convergence devices that take advantage of Apples system of simple, easy to use, integrated devices and applications



5.2. Diversification

Apple already has a well-positioned diversified strategy, but can continue to broaden its scope while creating value in related and unrelated markets including eBooks and medical equipment. Current Diversification

Apple has already implemented a successful strategy of diversification, both related and unrelated. Beginning as a company which produced full-sized desktop computers Apple now offers a line of desktops, notebook computers, mobile digital media players, and a mobile phone, among many other devices. Apple has also entered the content distribution business, selling music and applications for its devices as well as renting digital video, playable across many of its most popular devices. Despite this broad range of diversification, there are still opportunities for Apple to further diversify. Related Diversification As discussed in the General Environment Analysis above, the world of consumer electronics technologies is converging on a point of highly portable, rich media, Internet connected devices. Apple has already entered this market with the highly popular iPhone, which performs many of the most desired functions. The growing consensus is that a tablet format device may be the next step, bridging the divide between laptops and smartphones. Apple’s patents dealing with touch screen technology and experience developing the iPhone and iPod Touch will translate perfectly to a larger form, highly functional tablet device. A growing category in digital technology is the ‘eReader’ device, which allows consumers to transport and read books in a digital format. While the Amazon Kindle is currently the leading product in this market, the category is still young and could be redefined. If Apple could incorporate an e-book reader into a convergence device, or develop a successful standalone device it would be wise of them to diversify the iTunes store to include e-book downloads in addition to music, movies, TV shows, and podcasts among other types of content already available. This is one of the next logical progressions of the iTunes store which has come very far from its initial offering of music only. Unrelated Diversification In the United States medical equipment and devices are a growth area of the economy. As new healthcare legislation is enacted the importance of modernizing our system will come to the forefront. Apple’s high quality portable devices would provide excellent platforms for care providers to utilize in streamlining care. In order to gain the most value from this growth area without considerable risk or heavy capital investment Apple should work with medical equipment manufacturers and care providers to establish Apple’s devices, particularly a future tablet, as a standard for medical technology platforms. Using a combination of new digital medical technologies developed by medical equipment manufacturers and current technology for connectivity Apple could open its portable and mobile platforms open for development of unique and efficient medical tools. Examples of potential products would include digital thermometers and blood pressure



monitors that connect via USB or the Apple proprietary Dock Connector to an Apple device to automatically log measurements and do real-time analysis based on historical values to identify trends that may pose health risks. Recommendations Based on the above, I recommend:

Capture convergence device markets: Utilizing research and development commitments and market head starts including the iPhone, Apple should work to define the approaching market for convergence devices that bridge the gap between portable computers and mobile phone.

iTunes Store eBook distribution: Apple should add affordable eBook options to the variety of digital media available through the iTunes Store, compatible with all Apple devices.

Medical equipment platform: Work closely with established medical device manufacturers to create a digital medical device platform designed to become an industry standard in modernization through state-of-the-art care administration systems.



5.3. New Value Creation International New Value Creation

Currently the Apple iPhone uses a single cell network radio compatible only with GSM networks (i.e. AT&T and T-Mobile in the United States). While GSM networks are implemented worldwide, CDMA networks (i.e. Verizon and Sprint in the United States) a competing standard are also widespread and used by millions of people. Introducing a new model of the popular iPhone device utilizing an innovative Qualcomm cell phone radio chip that combines GSM and CDMA capabilities for a fully capable smartphone that can be used worldwide on any network would expand the number of potential customers Apple could target worldwide.

Despite the immense popularity of the iPhone in the United States and worldwide, many customers, unwilling to switch cell providers, cannot use the device, despite desiring a phone of its caliber. Currently there are over 500 million users on CDMA networks worldwide.25 Making one small change in the iPhone would allow the phone’s use on all CDMA networks and open it up to millions of potential users. In the United States it can be assumed that many current iPhone users would re-buy the phone in order to switch to the Verizon network, which receives top marks in customer satisfaction, while AT&T comes in last, despite the popularity of the iPhone.26 If the United States is a model that can be used to interpret CDMA user desire for the iPhone worldwide, there is a potential for substantial value creation by implementing the dual-band iPhone model. Socially Responsible and ‘Green’ New Value Creation Apple has already implemented the ‘Apple Recycling Program,’ which allows customers to recycle old computer systems and peripherals with the purchase of a new Mac27 and offers incentive to recycle old mp3 player and mobile phones through the program.28 The program helps to reduce the amount of electronic waste put into landfills. Electronics recycling is important because there are many toxic and environmentally harmful chemicals in electronics that can leech into the ground if improperly disposed of. Samsung, a preferred supplier of Apple, recently announced an initiative to promote electronics recycling while raising funds to benefit San Francisco Bay Area public schools’ lunch programs. Proceeds from the recycling program will be matched by Samsung to help feed hungry children through the free and reduced-price lunch programs and expand meal options.29 Apple should join its partner in encouraging education about environmental issues while promoting electronics recycling and benefiting local schools. In addition to the money for improved lunch programs provided by Samsung, Apple can match contributions with computers for Bay Area schools to help children learn and become better equipped for the technological future. As the program grows more successful similar initiatives could be rolled out in other cities in California, the home of Apple, and across the country, where children most need help.

25

CDG. “3Q 2009 Subscriber Statistics.” Retrieved 2009-12-12. 26

Paczkowski, John. “AT&T Ranked Last in Consumer Reports’ Best Cellphone Service Survey.” 2009-12-12. 27

Apple Inc. “Apple Recycling Program: Computer and Display Recycling.” Retrieved 2009-12-14. 28

Apple Inc. “Apple Recycling Program: iPod and Mobile Phone Recycling.” Retrieved 2009-12-14. 29

Business Wire. “Samsung Green Recycling Program Raises Funds for San Francisco Public Schools.” 2009-12-14.



This program will not only benefit the environment by reducing electronic waste and promoting sustainable practices by educating the public about the importance of conservation, but it will make a direct impact in the lives of young children, and benefit Apple in the future. The publicity associated with the charitable program will foster goodwill and promote Apple’s image of a socially responsible company. Further, introducing children to the firm’s products is likely to have a positive effect on product sales in the future. Recommendations In summary, I recommend:

Dual-band GSM/CDMA iPhone worldwide: Offering a new model of the iPhone using an innovative dual-band chip will make it compatible with all cell networks worldwide and dramatically increase the potential user base.

Collaborative recycling benefit with Samsung: Join and enhances Samsung’s charitable efforts to promote electronics recycling while benefiting children in public schools.



STRATEGIC ANALYSIS

6. Recommendations and Conclusion

The Ultimate Convergence Device Given the external environment and sociocultural and technological trends and Apple’s unique strengths including the firm’s resources and capabilities, including unmatched industrial design teams, talented device engineers, patents and innovation dealing with user interface and usability a logical next step for Apple is to develop a market defining convergence device, likely a tablet. The firm should leverage its close OEM partnerships and internal knack for design and usability to develop an innovative device that fits into Apple’s unique system of seamlessly integrated devices and applications to bridge the gap between consumers’ personal computers and their mobile phones. Apple’s internal engineers will use what the firm has learned from its iPhone, iPod, and Mac lines to develop an intuitively usable device packed with useful functions leveraging Apple’s iTunes Store content including the ecosystem of third-party applications developers to unleash the full potential of the platform. The award winning design team can leverage its talent to create the next must-have product regarded for its design simplicity and elegance making it not only a functional device, but a fashion statement. Finally, Apple’s close work with its preferred OEM partners will make the tablet a reality, focusing on build quality and dependability. Modern Medical Device Platform Once developed the Apple convergence device will provide a wide range of functions and powerful processing capability that can be applied to the field of medical care to enhance efficiency and modernize the industry. Apple should work with medical device companies and care providers to develop a set of criteria for necessary capabilities for consideration in developing the platform. The device will function as an integral part of an overhauled recordkeeping, care giving, and medical administrative system modernized for the twenty-first century. The device and software it runs will make use of compatible equipment to measure, document, and file measurements, symptoms, and diagnosis in an easily accessible and fully-portable medical files system. The system will help to streamline care giving, administration, and claims filing, by eliminating mountains of paperwork and cumbersome filing systems. Partner with Samsung to Benefit Children and Environmental Education

As a smaller, yet important initiative Apple should partner with Samsung to further the San Francisco Bay Area electronics recycling and environmental education program while working to directly benefit children of local public schools by improving the school lunch program and providing better technology to enhance learning.


Strategic Analysis – Apple Inc. A-i

APPENDICES

[See Page A-1 for the beginning of the Appendix Section]


Strategic Analysis – Apple Inc. Page A-1

A1: Porter’s 5 Forces Analysis Business segment or industry being considered: Portable Personal Computer Manufacturing and Sales

Overall Industry attractiveness:

Rivalry Between

Competitors

Supplier Power

Buyer Power

Threat of

Substitutes

Threat of Potential Entrants - Reliance on underlying, proprietary standards

- Few chip designers, one dominant player - High switching costs from suppliers + Suppliers reliant on industry for distribution and consumption

Supplier Power

Threat: 4 Attractiveness: 2

+ Economies of scale - Outsource to OEMs for production + Several large, entrenched players with well established brand loyalty - Convergence of mobile devices, mobile phone makers entering market - OEM forward integration

Potential Entrants

Threat: 3.5 Attractiveness: 2.5

+ Consumer dependence on computers, high demand - Varying needs, ‘latest and greatest’ v. ‘just good enough’ + Difficulty of switching to/from proprietary platforms

Buyer Power


- Feature-rich ‘smart’ phones - Alternate forms of entertainment + Central hub for leisure, entertainment, information, and work

Substitutes

Threat: 2.5 Attractiveness: 3.5

- Commoditized product, intense price competition - Intense competition for large corporate contracts - Breakneck product/technology lifecycle pace - Products based on standardized components, difficulty in differentiation

Competitor Rivalry


The industry is moderately attractive overall. The established players have a history of success and innovation, but competitors who fall behind the fast moving technological curve, or cannot compete efficiently on price or differentiate effectively are eliminated. The power asserted by buyers and the dominance of suppliers puts strain on the industry’s profits. While new entrants are possible, the cost in dollars and time of successful branding are a hindrance. While some users may move most of their computing activities to truly mobile devices like smart phones personal computers are likely to remain a tech staple for the foreseeable future.

Threat Level: 3.6/5

Attractiveness: 2.4/5


Strategic Analysis – Apple Inc. Page A-2.1

A2. Strategic Group Maps

Alienware

Voodoo PC

Mac

Dell

HP

Lenovo

eMachines

Gateway

Vaio

Functional Design Elegant

Low

P

rice

Hig

h

Figure A2-1

Minimal Gaming Robust

Capability

Min

imal

C

ust

om

izab

ilit

y

H

igh

Alienware

Voodoo PC

eMachines

Gateway

Dell

HP

Vaio

Mac

Lenovo

Figure A2-4

Basic Support Extensive

Min

imal

P

rice

H

igh

Alienware

Voodoo PC

Mac

eMachines

Gateway

Vaio

Dell

HP

Lenovo

Figure A2-3

Low Quality of High

Build

Funct

ional

D

esig

n

E

leg

ant

eMachines

Gateway

Lenovo

Dell

HP

Alienware

Voodoo PC

Vaio

Mac

Figure A2-2



Table A2-1 Competitive Dynamics

Firm/Brand

Pric

e

Desig

n

Custo

miz

ability

Support

Syste

m/P

erip

hera

l Inte

gra

tion

Quality

of B

uild

Gam

ing C

apability

Out-o

f-the-b

ox F

eatu

res

Alienware 5 4 5 3 3 5 5 3

Apple Mac 4 5 3 5 5 5 3 5

Dell 3 3 4 2 3 3 4 2

eMachines 1 2 2 1 3 1 2 2

Gateway 1 2 2 1 3 2 2 2

HP 3 3 4 2 3 3 4 2

Lenovo 3 2 3 3 3 3 3 2

Sony Vaio 4 4 4 3 3 4 4 2

Voodoo PC 5 4 5 3 3 5 5 3

Basic System/Peripheral Robust

Integration

Ou

t-o

f-th

e B

ox

Few

Fea

ture

s

Man

y

Alienware

Voodoo PC

Mac

Dell, Lenovo,

Vaio, Gateway,

eMachines, HP

Figure A2-5



A3. Key Resources & Capabilities

Resource/ Capability Please fill in as many key

resources/capabilities as possible, but make sure to include at least one of each type (e.g., tangible resource, intangible

resource, and capability).

Is i

t v

alu

able

? (yes/no)

Rar

e? (yes/no)

Inim

itab

le?

(yes/no)

No

n-

sub

stit

uta

ble

? (yes/no)

Competitive Consequence?

Mark: (1) Competitive disadvantage, (2) competitive parity, (3) temporary

competitive advantage, or (4) sustainable competitive advantage?

Performance Implications? Mark: (1) Below average,

(2) Average, (3) Average/Above average, or (4) Above average profits

Steve Jobs Y Y Y Y 4 4

Apple Stores - Retail locations Y Y Y N 3 3

Relationship with OEMs Y N Y N 2 2

Industrial Design Capability Y Y Y N 3 3

Innovative Product Design Y Y Y N 3 3

Talented software development teams

Y N N Y 2 2

Tailored hardware/software combinations

Y Y Y Y 4 4



A4. Value Chain Analysis

Value Chain Activity Corresponding Firm Practice, Policy, or Procedure

1. General Administration

A greener Apple – reduction in energy use in production and transportation to match trend in green business. Strong cash position – allows the firm to internally finance expansion and development without cost of capital.

2. Human Resources Management

Selective hiring process – find and attract talent Generous employee benefits program – retain industry-leading talent.

3. Technological Development

Research & Development – expenditure increased about 66% from 2007 to 2009 Patent filing – protection of important inventions and innovations in the US and worldwide

4. Procurement

Positive relationships with suppliers – EICC member, working to improve working conditions, created and enforces a “Supplier Code of Conduct.”

5. Inbound Logistics

Automated receiving systems – reduce facility footprint and space requirements. Delegate raw materials acquisition – offer supervision to OEM partners who carry out acquisition.

6. Operations

Utilizes OEM’s economies of scale – offshore production to save money on costs of build. Internal design – design and conceptualize products internally

7. Outbound Logistics

Economical/Stylish Packaging – eye-catching packaging takes up less space and weight, reducing shipping costs and costs of disposal. Apple Stores/Authorized Retailers – working to maintain standards over presentation of products for sale. Direct shipment – ship products from China to consumer to minimize inventory buildups in costly locations.

8. Marketing and Sales “Get a Mac” Ads – Various direct/indirect favorable comparisons

1. General Administration

2. Human Resources Management

3. Technological Development

4. Procurement

5. Inbound Logistics

6. Operations

7. Outbound Logistics

8. Sales and Marketing

9. Service



against competing products, selling on quality and image. Retail Locations/Flagship Stores – living ads with strong branding and image promotion. Secretive & Selective Unveilings – creation of hype and suspension around product launches.

9. Service

Apple Genius – Helpful 1-on-1 interaction and service on products with 1st party provider. Included and Extended Warranty – protect against defects and issues, build positive image. Free Consultation – In- or out-of-warranty consultation to determine issues before billing.



A5. General Environment Analysis

Environment Threat (& why?) Opportunity (& why?) Economic

1. Recovering economy

1. Signs of economic turnaround are present, but many consumers are unconvinced and spending less. Apple’s premium portable computers may be out of consumer price ranges.

1. Economic recovery will cause consumer spending. Apple’s high quality may attract customers.

Demographic 1. Flattening of wages – leveling affluence

1. Rising prices and stagnant wages leave workers and families with less money to spend on perceived luxury goods.

1. Apple, known for high quality, dependability, and long-lasting products will attract customers seeking value for their money.

Political/Legal 1. Potential FCC Internet Regulation 2. Healthcare Reform

1. FCC Internet Regulation may stifle innovation on the Internet, reducing new methods for Apple to capitalize on the power of the internet.

2. Apple’s useful portable devices could be leveraged in ‘modern’ healthcare settings, funded in-part by government money, increasing demand.

Technological 1. Device Convergence 2. Shortening Product Lifecycle

1. Apples broad line of devices may become obsolete with the advent of multi-use portable devices.

2. Increased pressure to innovate may result in missed opportunities and inventory losses.

1. As a leader in portable devices Apple can innovate and lead the way in platform convergence.

2. High R&D commitments may propel Apple to lead the industry by out-innovating competitors

Sociocultural 1. Increasing desire for on-the-go devices 2. Greater concern for the environment

1. Apple’s portable computers may lose relevance among new on-the-go devices.

2. Device manufacturing will be equated with pollution and climate change.

1. Apple can lead innovation in on-the-go devices utilizing R&D portable knowhow.

2. Apple’s lead in environmentally-sound practices will be a marketing advantage.

Global 1. Developing Chinese economy 2. Potential world-wide climate regulation

1. The developing Chinese economy will require higher wages for factory workers.

2. Emissions regulation will impose huge burdens on Apple’s production costs.

1. Massive population with increased buying power for Apple’s products.

2. Apple has already made steps to improve environmental-friendliness, can be used to the firm’s advantage.

Economic

Demographic

Political/Legal

Technological

Sociocultural

Global


Strategic Analysis – Apple Inc. Page R-1

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Strategic Analysis of Apple Inc. - Brian Masi