Week 8 Case Analysis Apple

Apple, Inc. in 2015

Before beginning this exercise,
you will need to read the Apple case. You will also need to review the
analytical tools and concepts in Chapter 4, 5, and 10.

The following questions will be
covered in this exercise.

1. What are the chief elements of
Apple’s overall competitive strategy? How well do the pieces fit together? Is
the strategy evolving?

2. What are the key elements of
Apple’s strategy in computers, personal media players, tablet computers, and
smartphones? Are those strategies successful?

3. What does a competitive
strength assessment reveal about Apple’s domestic computer business, as
compared to the leaders in the domestic computer industry? Use the methodology
in Table 4.3 to support your answer?

4. Does it appear that the
company’s competitive positions in personal media players, tablet computers,
and smartphones are stronger or weaker than its position in computers? What
steps should it take to ensure that the iPad becomes a major contributor to the
company’s overall performance?

5. Does it make good strategic
sense for Apple to be a competitor in the computer, personal media player,
smartphone, watches, and tablet computer industries? Which of the five products
lines—computers, tablet computers, personal media players, watches, or smartphones—do
you think is most important to Apple’s future growth and profitability? Why?
Should any of the product lines be discontinued?

6. What is your assessment of
Apple Computer’s financial performance the past three years? (Use the financial
ratios in the Appendix of the text as a guide in doing your financial
analysis.)

7. What strategic issues confront
Apple in 2015? What market or internal circumstances should most concern Tim
Cook and the company’s senior leadership team?

8. What recommendations would you
make to Apple to address the strategic issues confronting it in 2015 and
sustain its impressive growth in revenues and earnings?

1.

value:

14.28 points

Required information

A. What are the chief elements of
Apple’s overall competitive strategy? How well do the pieces fit together?

Select “yes” for the possible
strategy elements below that are part of Apple’s strategy and choose “no” for
those that are not.

1. A low pricing strategy.

2. Apple employs a differentiation
strategy linked to innovation with its three core products – computers,
personal media players and mobile phones.

3. Apple’s strategy focuses on
smartphones, specifically the iPhone.

4. Apple strives to meet the needs
of a global market by offering customers innovative new products and improved
existing products.

5. Apple entry into the mobile
phone industry has increased competition with companies such as LG, and
Samsung.

6. The company strategy revolves
around premium pricing.

7. Apple designs and develops its
one proprietary systems and software technologies, allowing for strict
protection of intellectual rights.

8. A customer loyalty program for
repeat buyers.

B. Is Apple’s strategy evolving?

Select “yes” for the possible
elements below that are part of Apple’s evolving strategy and choose “no” for
those that are not.

1. Apple focused on the computer
industry by introducing innovative products.

2. Apple does not have immediate
plans for the introduction of new products or technology.

3. Apple continues to introduce
innovative products in the computer industry but recently has focused a great
deal of strategic attention and resources on meeting the needs of customers in
the converging digital electronics and computer markets.

4. Apple is focusing its efforts
in international markets with the introduction of the iWatch.

5. The introduction of the iWatch
marks a clear evolution in Apple’s strategy.

6. Apple’s entry into the mobile
phone industry with its iPhone and the tablet computer industry with its iPad
are evidence of a further evolving strategy.

2.

value:

14.28 points

Required information

A. What are the key elements of
Apple’s strategy in computers? Are those strategies successful?

Select “yes” for those statements
that accurately describe Apple’s strategic plan, and “no” for those statements
that are not accurate.

1. Differentiated products –
Apple’s proprietary operating system, strong graphics-handling capabilities and
sleek designs differentiated Macs from PCs.

2. Apple computers use operating
systems, technology, and programs that are unique to Apple, but which are
common to the iPad, iPod, and iPhone.

3. Broad product line – Apple’s
computer product line consists of several models in various configurations.

4. First mover advantage

5. Premium pricing strategy –
Apple computers were priced at a steep premium compared to PCs and laptops
offered by Dell, HP, and other rivals.

6. Apple is competitively priced
compared to its closest rivals.

7. Lack of price competitiveness.
Apple’s strategy of premium pricing has reduced its competitiveness in the
computer industry.

B. What are the key elements of
Apple’s strategy in personal media players? Are those strategies successful?

Select “yes” for those statements
that accurately describe Apple’s strategic plan, and “no” for those statements
that are not accurate.

1. First mover advantage

2. Fashionable perception – the
iPod’s sleek styling, ease of use, integration with iTunes and digital music
purchases coupled with the eventual price decreases and differing models.

3. App store and iTunes support –
by integrating the downloading abilities of iTunes, Apple launched iTunes to
success.

4. Focus on only music playing
devices and an undifferentiated iPod style.

5. Apple entered the market as a
late mover and consistently possessed over 70% of the market.

6. The name iPod became a generic
term used to describe digital media players, allowing for greater market share.

7. Apple’s media players are
comparably priced to its closest competitor.

8. Apple’s differentiation
strategy yields unmatched brand recognition and consumer loyalty.

C. What are the key elements of
Apple’s strategy in smartphones? Are those strategies successful?

Select “yes” for those statements
that accurately describe Apple’s strategic plan, and “no” for those statements
that are not accurate.

1. First to market innovation.

2. Apple’s iPhone constantly
increased access speed with each model and introduced many other innovative
additions, such as built in GPS, video-calling and camera and video capability.

3. Low ratings in customer
satisfaction studies due to numerous software upgrades.

4. Changing phone sizes, Apple
increased the size of its iPhone models from the 3.5 inch iPhone 4, to the 4
inch iPhone 5, 4.7 inch iPhone 6, and 5.5 inch iPhone 6 Plus. The increase in
phone sizes moved Apple into the phablet market.

5. Lack of innovation with each
iPhone introduction.

6. Fashionable perception – Apple
has made smartphones a fashion accessory and status symbol demanded by many
consumers.

7. The Apple iPhone’s integration
with iTunes which had over 43 million songs as of 2015, as well as iMatch or
iCloud services that integrated apps, iBooks, and iTunes added functionality to
the iPhone far beyond voice communications.

D. What are the key elements of
Apple’s strategy in Tablet Computers? Are those strategies successful?

Select “yes” for those statements
that accurately describe Apple’s strategic plan, and “no” for those statements
that are not accurate.

1. Apple was a late entrant in the
tablet computer market, launching its first iPad in 2010. Tablet computers had
been in the market since the late 1990s, but only Apple’s version had gained
any significant interest from consumers and business users.

2. Apple’s iPad failed to meet
consumer needs leading to decreased market share.

3. Apple reduced the size and
thickness of its iPad models and launched the iPad Air in late 2013 to address
consumer criticism.

4. Apple’s tablet computer prices
dropped dramatically from 2012 when its 64GB iPad 2 retailed for $829 to 2015
with the iPad Air and iPad Air 2 models, which retailed for $399 to $499.

5. Apple’s differentiation allows
for increased pricing with each introduction of their tablets.

3.

value:

14.28 points

Required information

A. What does a competitive
strength assessment reveal about Apple’s domestic computer business, as
compared to the leaders in the domestic computer industry, Dell and HP? Use the
methodology in Table 4.3 to support your answer.

Review the information on
competitive strength assessment in Chapter 4 to help you with this activity.?In
the table that follows, do a weighted competitive strength assessment for
Apple, Dell, and HP using Table 4.3 in Chapter 4 as a guide. Review the various
competitive strength measures as shown in the table. If you ?determine that one
or more of the measures are inappropriate or not needed, then insert a
“0” in the boxes for that row. Enter importance weights for each of
the competitive strength? measures that you decide to use in your assessment.
Then, for each of the three companies, assign a rating from 1 to 10, where 1 =
very ?weak, 5 = average, and 10 = very strong. ??

Weighted scores and sum of the
weighted ratings for each company will be generated in Sum of weights and Total
Rating/Score rows at the ?bottom of the table.

B. Based on your assessment and
calculations, does Apple have a net competitive advantage over some or all of
these rivals?

Select “yes” if the statement
accurately describes conclusions that can be drawn from the competitive
strength assessment of Apple ?and its two key rivals, and select “no” if the
statement is not accurate.

1. Dell and HP are the strongest
players in the computer industry.

2. Apple’s competitive strength is
their increased market share of 50% as compared to HP and Dell.

3. Increasing customization,
software compatibility, and decreasing prices would almost certainly increase
Apple’s market position.

4. Dell and HP are stronger in
quality/product performance relative to Apple.

5. Relative to Apple and Dell, HP
is strongest in market position.

6. Overall, Apple is weaker in
peripheral synchronization capabilities, and reputation/image as compared to
Dell and HP.

7. Of the three rivals, Apple is
the strongest in terms of new product innovation capabilities.

8. Of the three rivals, Apple is
the weakest on terms of customization availability and software compatibility.

4.

value:

14.28 points

Required information

Does it appear that the company’s
competitive positions in personal media players, tablet computers, and
smartphones are stronger or weaker than its position in computers?

Select “yes” for the statements
that accurately describe a stronger or weaker competitive position between
personal media players, tablet computers and smartphones, and choose “no” for
those that are not.

1. Apple has consistently held
over 70% of the market until the widespread adoption of smartphones
cannibalized the portable media player market.

2. Apple’s competitive position
had been much stronger than its position in the computer industry, however
these trends are now reversed.

3. Between 2013 and 2014, iPod
sales dropped by 45%, and in 2014, Apple discontinued the iPod Classic.

4. The very low barriers to
entering the media player, tablet, and computer segment make it easier for
competitors to enter into this market with new and innovative products.

5. iTunes Store expanded to offer
consumers the ability to purchase and download videos, movies, and television
shows that could be played on iPods, iPhones, or Apple TV devices.

6. Apple’s competitive position in
computers is much stronger than its position in smartphones.

7. The iPhone was the second
best-selling smartphone in fiscal 2012, behind Samsung, and maintained that
position through fiscal 2014.

8. Apple’s total market share has
been slipping as Huawei, Lenovo, LG, and others have increased.

9. Apple is a strong #1 among
smartphones in international markets.

10. The popularity of the iPhone
has contributed to the success of the entire smartphone industry, which almost
doubled, from 725 million units in 2013 to 1.3 billion in 2014.

11. Apple is a strong #2 among
smartphone vendors in 2014

12. Google’s Android operating
system was the leading smartphone platform worldwide in 2014 (76% of shipments
in fourth quarter of 2014 ran on Android).

5.

value:

14.28 points

Required information

Does it make good strategic sense
for Apple to be a competitor in the computer, personal media player,
smartphone, watches, and tablet computer industries? Which of the five products
lines—computers, tablet computers, personal media players, watches, or smartphones—
do you think is most important to Apple’s future growth and profitability? Why?
Should any of the product lines be discontinued?

Select “yes” for the statements
below that are accurate and choose “no” for those that are not.

1. It has made strategic sense for
Apple to compete in the computer, personal media, smartphone, tablet computer,
and recently Apple Watch markets.

2. There are many similarities in
Apple’s value chain activities when comparing activities in developing,
manufacturing, and marketing computers, digital music players, smart phones,
and tablet computers leading to competitive advantages.

3. Apple’s value chain does not
have similarities leading to disadvantages in activities such as developing,
manufacturing, and marketing computers, digital music players, smartphones, and
tablet computers.

4. Apple’s operations and service
are different for each product due to the significant differences in product
specifications such as size and function, particularly when comparing computer
with non-computer products.

5. The specifications and thus,
value chain dissimilarities for non-computer Apple products are different with
the exception of the iPod and iPhone, which use the same technology.

6. Apple’s strong position in smartphones
and dominance in tablet computers make the two product categories very
important to Apple’s long-term success.

7. The introduction of the Apple
Watch has catapulted Apple into capturing a greater market share than its
closest competitor.

8. Apple has dominated and
presently enjoys a strong market position in personal media players and digital
content; however, the wide scale adoption of smartphones has cannibalized the
portable media player market with iPod sales declining by 45% between 2013 and
2014.

9. Apple’s iPod products
contributed only 1.3% to Apple’s net sales in 2014 and there is no reason to
expect any improvement.

10. Apple’s performance in the
computer industry is promising in both the U.S and internationally with an increase
of 12% and 8% respectively.

11. Apple’s iPod products
contributed only 1.3% to Apple’s net sales in 2014, and there is no reason to
expect any improvement.

6.

value:

14.28 points

Required information

What is your assessment of Apple
Computer’s financial performance the past three years?

Select “true” or “false” for each
of the following statements concerning the data in case Exhibit

1. Use the financial ratios in the
Appendix of the text as a guide in doing your financial analysis.

2. In addition to the financial
ratios, you will also need to calculate compound average growth rates (CAGR)
for certain financial measures. The formula for calculating CAGR (in percentage
terms) is as follows:

CAGR % = [ending value ÷ beginning
value] 1/n – 1 × 100

(where n = the number of
year-to-year or period-to-period changes)

1. Between 2010 and 2012, Apple’s
performance weakened considerably.

2. Revenue growth for Apple
dropped to 9.2% between 2012 and 2013, and 7% between 2013 and 2014.

3. Apple reported its worst
quarterly results in the second quarter of fiscal 2012.

4. Net income increased (29.58%
CAGR) considerably since 2010, however growth is at a decreasing rate.

5. The company’s R&D as a
percentage of sales has remained relatively stable during the 2010 – 2014
period, fluctuating between 2.2% and 3.3% of net sales.

6. The company reported its worst
net sales growth between 2012 and 2013.

7. iPhone sales accounted for $102
billion of the company’s 2014 revenues of $182.8 billion.

8. Apple’s iPad tablet computers
were the company’s second largest contributor to total revenues with sales of
more than 30.2 billion during 2014.

9. Apple’s operating profit margin
has consistently increased since 2010.

10. Although Apple’s iPhone sales
increased by 12% in 2014, sales of the iPhone had experienced a 16%
year-over-year increase from 2012 to 2013.

11. Although Apple’s performance
between 2010 and 2012 had been exceptionally strong with revenues growing by
66% between 2010 and 2011, 44.6% between 2011 and 2012, the growth rate
weakened considerably.

7.

value:

14.32 points

Required information

What strategic issues confront
Apple in 2015? What market or internal circumstances should most concern Tim
Cook and the company’s senior leadership team?

Select “true” or “false” for each
of the following statements concerning strategic issues confronting Apple in
2015.

1. There are four main issues
confronting Apple in its quest to sustain its revenue and earnings growth;
first is the problematic product line; second, the global markets for computers
has become saturated; third, Tim Cook’s management team should be concerned
with the increasing competition; and fourth, the Apple watch may be the initial
test for Tim Cook.

2. The iPod is in the decline
phase of its lifecycle and the iPad appears to be in maturity.

3. Unit sales growth has increased
for all products except the iPod between 2013 and 2014, suggesting that
competition has decreased.

4. The global markets for
computers have become saturated, and both domestic and global demand began
falling in 2014. Competition is increasing both domestically and internationally
in this shrinking market.

5. The Apple watch has become a
huge success with increasing initial sales in 2015.

6. Apple’s iPhone market share
dropped each year from 2012 to 2014; Apple was the only major iPhone vendor to
have a decrease in market share.

7. Apple’s proprietary operating
system, which is comparable to Android is a factor contributing to its increase
in market share.

8. Apple is falling behind
competitors LG, Motorola, and Samsung in the smart phone market due to the
operating system and its lack if a lower priced model to compete with its
rivals.