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Apple Incorporation - Case Analysis

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Apple Incorporation Case Analysis Submitted by: Billy Sainz MGT 6359 Dr. Jifu Wang University of Houston - Victoria Fall 2004 Table of Contents Executive summary 04 Company history 04 Company Strategy 05 External analysis 07 General environment analysis 07 Demographic segment 07 Economic segment 09 Political/legal segment 10 Socio-cultural segment 11 Technological segment 12 Five forces model of competition 12 Threat of new entrants 12 Bargaining power of suppliers 13 Bargaining power of buyers 13 Threat of substitute products 13 Rivalry among competing firms 13 Opportunities 13 Threats 14 Industry Structure 16 Market size 16 Industries' dominant economic features 16 Distribution channels 16 Competitors: strongest - weakest 16 Rivals anticipated strategic moves 17 Economies of scale 17 Key success factors 17 Technology related 17 Manufacturing related 18 Distribution related 18 Marketing related 18 Skills related 19 Organizational capabilities 19 Driving Forces 20 Internal Analysis 22 Organizational description 22 Corporate Vision/Mission 23 Long and short range objectives 23 Financial objectives 23 Strategic performance 24 Employee relations 25 Products and services 25 Corporate culture, values, and morals 26 Core competencies 26 Financial Performance 27 Liquidity 27 Merchandise inventory turnover Current ratio Inventory turnover in days Operating cycle Profitability 28 Return on assets Return on operating assets Return on total equity Net profit margin Gross profit margin Long Term 29 Debt ratio Debt Equity Debt to tangible net worth Investor 30 Earnings per share Price/earnings ratio Percent of retained earnings Dividend payout Dividend yield Year-end market price 30 Strengths 31 Weaknesses 33 Recommendations 34 References 38 Executive Summary Apple Computers started the movement into the personal computing arena in 1977 but through changes in management and differences of opinion together with missed opportunities it lost its competitive advantage to companies like Microsoft, Dell, and Gateway. Apple operates in various lines of the computer and music industry today and its operations include not only the designing but also the manufacturing of its computers and software. ...read more.


Apple also lacked a work system of cross-functional product development teams and needed business-oriented managers with leadership skills to lead teams that could agree on new businesses. This put Apple in a position of not being able to fulfill its requirements for: 1) Defining its environment and understanding its strategy, 2) Lacked a work system, 3) Needed a management process for specifying workable goals and objectives, and 4) Lacked leadership teams to provide direction. Apple was missing four out of the seven segments from Michael Beer's Organizational Fit Model. Employees were not sure of the company's strategic directions and were receiving different priorities from R&D and marketing. This again came from lack of functional leadership team cohesiveness in setting one direction for the company. Managers did not want to lose control of their power and moving into cross-functional business teams meant just that plus not having an effective leadership retarded any efforts in that direction. The work system and management process require that communications lines be effective and Apple's was not. Trust and communication were extremely low in the Apple world. In 1991, John Scully came in and gathered the top 70 managers for an off-site. Lack of lower management involvement made it more difficult to solve problems. Apple's work on the iPod has shown the improvements of its organizational fit. Teams within Apple have been able to coordinate the work so that they are able to go to market ads and provide packaging that is not only aesthetic but also functional. iPods serve as THE digital music play and provide an avenue where Apple can market the Reflective level with messages and images designed within the Apple culture (800ceoread, 2004). Driving forces Companies are often faced with the affects of the driving forces. Driving forces are part of the external analysis and provide the company with insight on opportunity and threats that it must contend with. ...read more.


Apple already has data accumulated that shows employees obtain so much training and then 'abandon ship' for better paying positions elsewhere. Franchisees would not just leave since they have a vested interest in the success of the store. Cons: Being so wrapped up in opening stores that management does not want to admit failure if profits start dropping off. Each store opening should be viewed economically so that the law of diminishing returns is applied overall. When the numbers show that the company is approaching the even mark or goes negative then it must consider whether to continue support of the existing stores or cutback of the less profitable. Apple has a number of avenues open for them and has made a strong comeback. Profits look good in the future as the economic picture expands and improves. It was able to make profits during the slow times so it should be able to do much better as everything improves. Its biggest challenge will be determining the best way to continue supporting of its operating platform when it holds only 2% of the market share. It seems rather costly with the continued losses. Management evaluation is needed in this area for sure. Apple's opening of retail shops has opened the doors for bring products to the consumer. It should consider franchising to reduce it overall costs of operations. All advertising should include blurbs about store openings near customers. Apple should aggressively promote hardware, software, and peripheral products through its retail outlets. Market awareness might help increase market share beyond the 5% it once held a few years ago. Apple should also take its profits and spend it wisely so that growth and innovations continue. It must realize that not all of its ventures will be profitable and must determine the best approaches that should be taken when a sector begins to produce those needed profits. The four recommendations above can help provide direction for Apple but they must reevaluate continuously since the market is moving quicker each day. ...read more.

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