apple case competition
DESCRIPTION
Presentation I made for a case competition at GWTRANSCRIPT
Jonathan Diamond w Katie Edwards w Natasha Fong-CohenKatherine Oglietti w Mustafa Onerci w Leilani Pallares
Apple’s Strategic Goals and Challenges Moving Forward
3
Agenda
IV. Recommendations
III. Potential Strategies
I. Current Situation
• Main Problem• Apple’s History• Mission Statement
II. Analysis
4
Agenda
IV. Recommendations
III. Potential Strategies
II. Analysis
• Company Strategy• SWOT Analysis• Value Chain• Financial Analysis
• Product Lines• Competitive
Strengths• Industry
Attractiveness
I. Current Situation
5
Agenda
IV. Recommendations
III. Potential Strategies
I. Current Situation
II. Analysis
• Develop new markets
• New geographic markets
• Enter new segments• Improve operations• Create value
through stock price
6
Agenda
IV. Recommendations
I. Current Situation
II. Analysis
III. Potential Strategies
• Develop new products • New geographic markets• Product lines
8
Apple’s main challenge moving forward
I. Current Situation
How can Apple continue to increase shareholder value?
9
2007
Developing innovative products is critical
I. Current Situation
1976 20101984 1991 2001
Wozniak/Jobs Sculley Jobs
Personal Computers
NOW• iMac• 8% market share• Still the heart of Apple??
THEN• Apple II• 10,000 units sold• Just the beginning…
Notebook Computer
NOW• Macbook Air• Portability and power• Critical acclaim for design
and ease of use
THEN• Powerbook• Early adoption of future
mobility demands
Personal Media Player
NOW• Different product lines• Audio, video, wifi• 10 billion+ iTunes sales
THEN• 8gb model• Revolutionized
listening to music for a generation
Mobile Phone
NOW• Regularly updated models• Innovative technologies• Most popular smartphone
Tablet Computers
NOW• Ignited a market• Industry leader• Competitors on its heels
10
The products are the mission for Apple
Apple Mission Statement
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 reinvented the mobile phone with its revolutionary iPhone and App Store, and has recently introduced its magical iPad which is defining the future of mobile media and computing devices.
“
”I. Current Situation
11
II. Analysis
• Company Strategy• SWOT Analysis• Value Chain• Financial Analysis
• Product Lines• Competitive
Strengths• Industry
Attractiveness
12
SWOT Analysis
STRENGTHS• Marketing• Product R&D• Top engineering talents
OPPORTUNITIES• Emerging markets• Telecommuting trend
WEAKNESSES• Centralized decisions• Prices too high for some
consumers• Cannibalization
THREATS• Competitors in many
industries• Intell. property loss• Trends change rapidly
II. Analysis
13
Core competencies along the value chain
II. Analysis
Supply Chain Mgmt.
Operations Distribution Sales & Marketing Services Profit
Margin
Product R&D, Technology and Systems Development
HR Management
General and Administrative
14
Apple performed well financially
II. Analysis
2009 2008 2007 2006 20050%
5%
10%
15%
20%
25%
60%
62%
64%
66%
68%
70%
72%
As Percentage of Sales
Selling, general and administrative (SG&A)Total operating expensesOperating incomeNet incomeCost of sales
• Earnings improved consistently despite the economic downturn• Increasing sales• Increasing operational
performance
15
Apple performed well financially
II. Analysis
• Return on equity did not improve much
2009 2008 2007 2006 20050%
5%
10%
15%
20%
25%
30%
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
ROE & EPS
ROE Earnings per common share-diluted
16
Apple performed well financially
II. Analysis
ROE =
Profit Margin
Profit
Sales
Asset Turnover
EquityTotal Assets
Equity Multiplier
Total AssetsSalesx x
17
Apple performed well financially
II. Analysis
2009 2008 2007 2006
$(2,000)
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Free Cash Flows
• Free cash flow was around $10B• Mainly financed debt• Apple managed to defer its payments
18
Product Line: Personal Computer
II. Analysis
• Shift in preference to notebooks• Strength in music & graphics processing• Critical acclaim in design• Focused differentiation strategy
19
Product Line: Personal Media Player
II. Analysis
• Dominating market position for players and downloads
• Industry beginning to decline
• Live streaming• Cannibalization
2005 2006 2007 2008 2009 $-
$1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000
$10,000
iPod and Music Services Sales
iPod SalesOther music related products and services
20
Product Line: Mobile Phone
II. Analysis
• Phones rebounded strongly from recession, particularly smartphones
• Developing countries offer most growth opportunity
• RIM dominates business segment• Android and Mobile 7 are an
emerging threat; iPhone has decreasing product differentiation
• High brand loyalty and low price sensitivity
21
Product Line: Tablet Computer
II. Analysis
• Market is growing 37% annually from 2010-2014
• Apple is the leader • Competitors starting to catch
up
22
First, these products are competitive…
II. Analysis
Personal Computer Personal Media Player
Mobile Phone Tablet Computer0123456789
10
012345678910
7.3 7.356.55
7.15
Competitive Strength Rating Cutoff
23
…these industries are most attractive…
II. Analysis
Personal Computer Personal Media Player
Mobile Phone Tablet Computer0123456789
10
012345678910
7.4
5.95
7.85 7.6
Industry Attractiveness Rating Cutoff
24
…and together, we create a matrix!
II. Analysis
Industry attractiveness
Weak Average Strong
High
Medium
Low
Competitive Strength
Personal Computers
Size=
Relative
Revenue
Personal Media Player
Mobile Phone
Tablet Computer
25
III. Potential Strategies
• Develop new markets• New geographic markets• Enter new segments• Improve operations• Create value through
stock price
26
Evaluating Apple’s alternatives
III. Potential Strategies
How can Apple continue to increase shareholder value?
Develop new products
New geographic markets
Enter new segments
Improve operations
Value through stock
Through growth Other options
27
Evaluating Apple’s alternatives
III. Potential Strategies
How can Apple continue to increase shareholder value?
• WHAT: Idea generation• WHY: This is what Apple does!• HOW: Continue to fund R&D
Develop new products
New geographic markets
Enter new segments
Improve operations
Value through stock
Through growth Other options
28
Evaluating Apple’s alternatives
III. Potential Strategies
How can Apple continue to increase shareholder value?
Develop new products
• WHAT: Emerging markets• WHY: Growing middle class• HOW: Targeted products/B&M
New geographic markets
Enter new segments
Improve operations
Value through stock
Through growth Other options
29
Evaluating Apple’s alternatives
III. Potential Strategies
How can Apple continue to increase shareholder value?
Develop new products
New geographic markets
• WHAT: Business-consumer• WHY: Large market opportunity• HOW: Custom. products
Enter new segments
Improve operations
Value through stock
Through growth Other options
30
Evaluating Apple’s alternatives
III. Potential Strategies
How can Apple continue to increase shareholder value?
Develop new products
New geographic markets
Enter new segments
• WHAT: Vertical integration• WHY: Control of product quality• HOW: Bring manufact. in-house
Improve operations
Value through stock
Through growth Through increased margins
31
Evaluating Apple’s alternatives
III. Potential Strategies
How can Apple continue to increase shareholder value?
Develop new products
New geographic markets
Enter new segments
Improve operations
• WHAT: Increase EPS• WHY: Increase sharehold. value• HOW: Repurchase of shares
Value through stock
Through growth Other options
32
IV. Recommendations/Implementation
• Develop new products • New geographic markets• Product lines
33
Apple should continue to innovate
IV. Recommendations
Short term Long term
• Focus R&D resources on cloud
• Innovate this new market
• Seek out acquisitions for capabilities
• Decentralized innovation process
• Stronger relationship between R&D and marketing
• Market research through crowdsourcing and developers
34
Emerging markets are opportunities
IV. Recommendations
Short term Long term
• Brazil and China• Increase local
responsiveness• Contracts with
international telecom companies
• Targeted products (with less functionalities and cheaper price)
• Increased brick & mortar presence
35
Each product line needs a strategy
IV. Recommendations
iPod
iPad
Computers
iPhone
• Develop paid subscription svc.• Consider reducing # of
products in the iPod line
• Develop capacity to integrate PC technology
• Market is growing 37%
• Focus on notebooks• Expand in emerging markets
through focused differentiation
• Improve differentiation through product features/capabilities
• Expand into emerging markets through partnerships
36
Creating a plan for change
IV. Recommendations
• Reinforce culture• Establish organizational structures to change• Decentralize innovation process• Gain buy in from the Board of Directors
37
Continuing the Steve Jobs Legacy
IV. Recommendations
Increasing shareholder value by…• Improving current product lines• Position ourselves long-term for success• Developing new innovation• Entering new geographic markets
38
Appendix
SWOT Analysis (iPad)
SWOT Analysis (iPod)
SWOT Analysis (iPhone)
Popup (Notebook)
Competitive Strength
Industry Attractiveness
Porter’s 5 Forces
Questions?Personal Computer Industry
PC Market Share
Popup (Desktop)
SWOT Analysis (iMac)
Popup (Media Player)
Popup (Mobile Phone)
Popup (Tablet)
39
Appendix: Competitive Strengths
Competitive Strength Measure Importance Weight
Rating Score Rating Score Rating Score Rating Score
Costs relative to competitors' costs
0.2 1 1 2 0.4 2 0.4 1 0.2
Ability to benefit from strategic fit with company's other businesses
0.2 10 2 8 1.6 8 1.6 10 2
Relative market share 0.15 3 0.45 10 1.5 5 0.75 8 1.2Competitively valuable capabilities
0.15 9 1.35 9 1.35 9 1.35 9 1.35
Brand image and reputation 0.1 9 0.9 9 0.9 9 0.9 9 0.9Profitability relative to competitors
0.1 8 0.8 10 1 7 0.7 6 0.6
Ability to match or beat rivals on key product attributes
0.05 7 0.35 3 0.15 8 0.4 9 0.45
Bargaining leverage with suppliers/buyers; caliber of all iances
0.05 9 0.45 9 0.45 9 0.45 9 0.45
Competitive Strength 7.3 7.35 6.55 7.15
Personal Computer Personal Media Player Mobile Phone Tablet Computer
Back to Appendix
40
Appendix: Industry Attractiveness
Industry Attractiveness Measure Importance Weight
Rating Score Rating Score Rating Score Rating Score
Intensity of competition 0.25 10 2.5 8 2 10 2.5 9 2.25
Cross-industry strategic fit 0.2 10 2 8 1.6 9 1.8 10 2
Market size and potential growth rate
0.1 8 0.8 3 0.3 10 1 10 1
Emerging opportunities and threats
0.1 3 0.3 2 0.2 7 0.7 8 0.8
Resource requirements 0.1 1 0.1 7 0.7 3 0.3 2 0.2
Industry profitability 0.1 7 0.7 5 0.5 6 0.6 5 0.5
Seasonal and cyclical influences
0.05 5 0.25 5 0.25 5 0.25 5 0.25
Societal, political, regulatory, and environmental factors
0.05 5 0.25 5 0.25 5 0.25 5 0.25
Industry uncertainty and business risk
0.05 10 0.5 3 0.15 9 0.45 7 0.35
Overall weight industry attractiveness scores
7.4 5.95 7.85 7.6
Personal Computer Personal Media Player Mobile Phone Tablet Computer
Back to Appendix
41
Appendix: PC Market Share
Back to Appendix
27%
24%11%
8%
8%
21%
Market Share in 2009
Hewlett Packard
Dell
Acer
Apple
Toshiba
Others
69,829Total Shipments
2000 2005 2006 2007 2008 2009 -
5,000
10,000
15,000
20,000
25,000
30,000
Hewlett PackardDellAcerAppleToshibaOthers
Market Share 2005-2009
43
Appendix: Pop-up (Desktop)
Back to Appendix
Personal Computers
NOW• iMac• 8% market share• Still the heart of Apple??
THEN• Apple II• 10,000 units sold• Just the beginning…
44
Appendix: Pop-up (Media Player)
Back to Appendix
Personal Media Player
NOW• Different product lines• Audio, video, wifi• 10 billion+ iTunes sales
THEN• 8gb model• Revolutionized
listening to music for a generation
45
Appendix: Pop-up (Mobile Phone)
Back to Appendix
Mobile Phone
NOW• Regularly updated models• Innovative technologies• Most popular smartphone
46
Appendix: Pop-up (Notebook)
Back to Appendix
Notebook Computer
NOW• Macbook Air• Portability and power• Critical acclaim for design
and ease of use
THEN• Powerbook• Early adoption of future
mobility demands
47
Appendix: Pop-up (Tablet)
Back to Appendix
Tablet Computers
NOW• Ignited a market• Industry leader• Competitors on its heels
48
Appendix: Porter’s 5 Forces
SUBSTITUTES BUYERS NEW ENTRANTS
SUPPLIERS RIVALRY
Personal Computer
MEDIUM-HIGH MEDIUM LOW HIGH HIGH
Personal Media Player HIGH MEDIUM-
HIGHMEDIUM-
HIGH MEDIUM HIGH
Mobile Phone HIGH HIGH MEDIUM MEDIUM HIGH
Tablet Computer HIGH LOW-
MEDIUM MEDIUM MEDIUM LOW
Back to Appendix
49
Appendix: SWOT Analysis (iMac)
STRENGTHS• Critical acclaim in design• Strength in music &
graphics• Very cool, trendy
OPPORTUNITIES• Halo effect• Growing middle class in
emerging markets
WEAKNESSES• Premium pricing• Learning curve• OS Compatibility
THREATS• Most growth driven by
low-end portable PCs• Economic recession
Back to Appendix
50
Appendix: SWOT Analysis (iPad)
STRENGTHS• High demand• Quality design• More functional than
other tablets
OPPORTUNITIES• International growth• Mobile workforce
productivity• Leverage cloud tech.
WEAKNESSES• High price point keeps
out some consumers• Product limitations
(can’t make calls)
THREATS• E-readers (Kindle)• Competitors are
catching up• Better microprocessors
Back to Appendix
51
Appendix: SWOT Analysis (iPhone)
STRENGTHS• Buyers not price
sensitive• Controls launch• Brand loyalty
OPPORTUNITIES• Smartphone market is
strong• Increasing international
demand
WEAKNESSES• Increasingly limited
product differentiation• Low appeal to business
consumers
THREATS• Android• Windows Mobile 7
Back to Appendix