Selection Our team chose Apple Computer, Inc. as the organization to profile and pursue for our strategic plan. Apple provides a challenging opportunity. The company has consistently been engaged by strong competitive forces, yet may continue to possess a unique competitive advantage. However, this advantage is contingent on product positioning and can only be beneficial if Apple exploits this positioning strategically. Background Steve Jobs and Steven Wozniak founded Apple Computer in 1976.

The company .".. designs, manufactures and markets personal computers (PCs) and related personal-computing solutions for sale primarily to education, creative, consumer and business customers" (Yahoo, 2003, par. 1). Over the years, the company has had several, high profile Chief Executives, including John Scully, Gil Am elio, and Steven Jobs. Today, the 10, 000 employees of Apple are again under the direction of Chairman and Chief Executive Officer, Steve Jobs from their headquarters in Cupertino, California, where the company was founded. Throughout the past 15 years, the company has reinvented itself on numerous occasions, causing their momentum to slow.

Apple has developed strategies directed toward K - 12 schools, businesses, graphic artists, PC users, and music lovers. Because of its choices, Apple is currently well behind personal computer industry leaders in terms of market share and other financial performance measures. Since returning to Apple, Steve Jobs has focused the company's efforts on being competitive in the industry. Apple has developed and introduced new, innovative products, including the iPod MP 3 player, online music services, and a new line of powerful notebook computers. Strategic Issues The Evolving Personal Computer Industry Apple should actively adjust its strategy in accordance with competitive changes in the market. Apple competes on many fronts and in a global environment full of competitors.

Apple has four main challengers: Dell, Compaq, Hewlett-Packard (HP), and IBM. It disregards competitive threats from PC companies that do not have national brands, even though they account for 23 percent of the North American market and 50 percent of the European and Asian markets. In addition to PCs, Apple competes in microprocessors and operating systems. In this arena, Apple accounted for only 3. 6% of worldwide 2002 revenues from new licenses as compared to its competitors' 2001 revenue of roughly 90% (Wang, Y.

, & Yoffie, E. , 2003). Apples' Current Strategy Apple has internal concerns to consider in its overall strategy. So far, Apple has: (a) reduced company perks, forcing all its employees to travel coach, and ending Apple's paid sabbatical plan: (b) centralized responsibilities and functions and eliminated work units that duplicate effort; and (c) outsourced manufacturing tasks. Apple has also opened company-owned boutiques and suburban malls across the United States to exclusively sell its products.

The introduction of the eMac signifies Apples first entry into the low-priced consumer market. Apple ships its new computers with two operating systems: (a) an older Macintosh Operating system (OS) version 9 and (b) a UNIX-based Mac OS X, both of which may run at the same time. This UNIX-based OS is instrumental in getting independent software developers (ISV) to commit to delivering 1, 200 applications for the OS X (Wang, Y. , & Yoffie, E. , 2003). Financials The Apple Computer 2000-2002 Income Statement shows a noticeable drop in Total Revenue and Gross Profit.

Like other computer companies, 2001 appeared to be a weaker year for Apple. Both Apple and Dell stock prices fell by about 50 percent in late-2000. Apple was able to rebound in 2002 by increasing both total revenue and gross profit by roughly the same amount, keeping the cost of revenue relatively flat. Currently, shares in Apple Computer are trading at approximately $20 per share with a 52 week high and low of $23.

32 and $12. 72 respectively (Apple Computer Inc. , 2003). The balance sheet reflects Apple has reduced some if its long-term assets and increased its current assets, according to the increase in inventory, net receivables, and short-term investments.

Accounts payable increased from 2001 to 2002, marking the only increase in liabilities from 2001 to 2002. As expected, stockholder's equity showed some signs of struggling in 2001 to rebound in 2002 (Apple Computer Inc. , 2003). Compared to Dell, Hewlett Packard, and Microsoft, Apple is last in percentage growth and actual revenue.

Apple fares well concerning gross profit at 27. 52 percent, but is below the industry average of 37. 26 percent. It is important to note that Microsoft skews the industry average with a gross profit margin of 82. 33 percent. Apple's operating margins are negative at -88 percent compared to the industry average of 94 percent.

Apple did have an EPS of -0. 05, which is above the industry average of -0. 17, but below the three other companies (Apple Computer Inc. , 2003). The following charts Apple's five-year financials (Smith Barney, 2003). Subject and Purpose In the mid 1990 s, Apple Computer was clearly in decline.

The corporate board of directors had ousted its founders and its executives were attempting to match the strategies of the many Microsoft Windows-and-Intel processor-based (Wintel) computer manufacturers. The company was attempting to be just like the rest of the computer world. This led to several decisions that resulted in poorer operating system stability. By the latter half of the 1990 s, the company's founder, Steve Jobs, returned and hired on a handpicked executive staff. One of the key people Jobs hired was Compaq Computer Corporation executive Timothy D. Cook.

Cook took on Apple's supply chain, making dramatic improvements. By 1999, the computer maker had cut inventories by 94 percent (Bartholomew, 1999, p. 36). Bartholomew's Industry Week article also explains how Apple surpassed Dell Computer's inventory turns, targeted custom order delivery to five days, and began "using SAP AG's R/3 system" (Bartholomew, 1999, p.

36). Apple Computer, Inc. produces the Macintosh line of workstation, desktop, and laptop computers and peripherals. These are bundled with the company's UNIX-based operating system, Mac OS X. Recently the company has added network server variants, the iPod music player, Apple Store online, and brick and mortar Apple Stores. The Macintosh has 3 basic lines of computing platforms: The desktop line, which includes eMac, iMac, and Power Mac; The laptop line, which includes iBook and PowerBook; and the server line, which includes Xserve and Xserve RAID.

These computers range from an all-in-one price of about $800 (eMac) to computer-only price of about $3, 000 (dual-processor Power Mac G 5). These offerings span the Motorola G 3, G 4, and G 5 processors, which correlate to the Intel Pentium series. A major difference between these chips is the Motorola chips are reduced instruction set computer (RISC) while the Intel chips are complex instruction set computer (CISC) processors. In the last few years, Mac OS X has replaced the Mac OS 8.

x and 9. x versions (though OS 9. 2. 1 runs in emulation within OS X).

Apple based this latest operating system on Berkley Software Design, Inc. (BSD) UNIX and added a robust graphical user interface. Some contend the realistic market share for Macintosh computers is 10 to 12 percent, due to greater reliability (Farr, 2003, par. 3). In conventional terms Apple's 2. 3 percent market share puts it well below the industry leaders (Fried, 2003, par.

2). One of the key considerations for corporate growth is increasing market share in a selected industry. While market share is not a perfect indicator of well being, increasing market share certainly means a broader customer base from which to draw profit margins. One likely means for Apple to gain market share for its Macintosh computer line is to reduce prices. To accomplish this without harming profit margins, Apple should reduce the costs of bringing Macs to market without harming marketing efforts. The Apple Stores (both online and brick and mortar) are a marketing effort and should not be the primary area to reduce costs.

Additionally, current Mac customers have certain expectations in terms of computing experience, system reliability, and ease of use, which Apple should maintain... Apple should concentrate on gaining market share through improvements to the technologies it uses to bring the Mac to market. This effort could include supply chain, manufacturing, hardware and software components, and several other efforts. Background The Personal Computer Industry The personal computer industry has been known for its dynamic improvements, innovations, and fierce competition for over two decades. The major competitors in the industry include Apple, Dell, Compaq, IBM, and Hewlett-Packard (HP). Additionally, personal computer companies that do not have national brands account for twenty-three percent of the North American market and fifty percent of the European and Asian markets (Wang, & Yoffie, 2003).

Apple Computer within the Industry Apple computer was founded by Steve Jobs and Steve Wozniak in 1976. Apple revolutionized the industry with its user-friendly computers. Apple suffered its first failure in 1980 with the recall of Apple III. It recovered from the failure by increasing the Apple III's random access memory (RAM) (Knight, 2001). Today, Apple Computer's position within the industry is better explained with a SWOT analysis: (a) Strength: Apple's strength is in its multi-media applications and user-friendliness.

It is, undoubtedly, the leader in the fields of graphics and publishing. The business savvy CEO, Steve Jobs, is also an internal strength for the company (b) Weakness: Even with the introduction of the Mac OSX, Apple still lacks the portability and open-systems standard that the industry demands from its server and client computers. This weakness prevents Apple from being seriously considered as a networked enterprise-wide solution. (c) Opportunities: Once Apple succeeds in having a portable system that conforms well to the industry standard; it could be accepted by the business users as a viable system for an enterprise-wide solution (d) Threat: Apple has four innovative competitors that increasingly reduce their products' prices. Apple must be willing to further cut its products' pricing and further reduce its operating cost to be able to increase its market share. Furthermore, it must continuously consider offshore opportunities like its competitors.

Key Issues The first key issue is Apple Computer realized it needed to change the leadership of the company. It was not afraid to make the appropriate changes necessary to bring back Steve Jobs, but also took a leader from a competitor, Timothy Cook. This type of change in leadership will have a lasting effect on how Apple will do business in the years ahead. The second key issue is Apple's market share in the personal computer market.

Apple Computer has a current market share of 2. 3 percent of the market with an expected market share by some analysts being between 10 and 12 percent. Apple Computer has a lot of room to improve. Apple could improve upon its strength of being a leader in the graphical and multimedia applications market.

Apple has the opportunity to provide a system that is more compatible with existing systems so that business owners will be more confident about making a change to Apple. The last key issue is the threat of the four main competitors that compete for market share. Apple, with the help of the new management, has taken steps to reduce costs to offer a lower priced computer. Inventory costs have been reduced 94 percent. For Apple Computer to grow in the existing market they should either find their niche market and focus on that or they are going to need to make some changes in the product so that it is more interactive with the existing business systems and could make gains in this market segment. Mission, Vision, and Values Mission Statement "Apple ignited the personal computer revolution in the 1970 s with the Apple II and reinvented the personal computer in the 1980 s with the Macintosh.

Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings" (Apple, 2003. par. 33) Vision Statement Apple Computer -- Making a contribution to the world by making innovative tools for the mind that advance humankind. Value Statements Apple Computer will maintain integrity, an innovative atmosphere, and high regard for society.

To these ends, Apple will reward honesty, open minds, effective work, and social responsibility in employees. Furthermore, Apple will strive to meet customer product demands promptly and establish appropriate social programs. Apple Computer is committed to protecting the environment, health, and safety of employees, customers and the global communities where we work and live. We recognize that by integrating sound environmental, health, and safety management practices into all aspects of our business, we can offer technologically innovative products and services while conserving and enhancing resources for future generations. Apple strives for continual improvement in our environmental, health and safety management systems and in the environmental quality of our products, processes and services. Apple emphasizes the following items.

SS Practicing Integrity: We believe that honesty is the best policy. We are upfront and open with our actions, and maintain high ethical and moral standards in our business practices. SS Cultivating Leadership: We promote the growth of our people. We empower them with knowledge and resources to get results, grow our business and lead our markets. SS Valuing Customers: We find practical and effective means to meet the needs of our customers through Excellent Execution Every time. We measure our success by that of our customers.

SS Creating Transparency: We openly share information, knowledge and the best ideas across the organization, realizing that we are dependent on each other for Apple's success. SS Driving Innovation: We always evaluate what we are doing to continually challenge our methods and ask how we can simplify and improve our business. We never rest on our laurels but pause to recognize our achievements and celebrate success. We believe a crazy idea to change the world, could. SS Supporting Diversity: We promote an environment where people are valued and rewarded on the basis of their efforts and ideas, without regard to their race, gender or creed. Grand Strategies Apple Computer serves a niche market for education, consumer, and professional markets.

Low-cost leadership was lost to Apple in the 1980 s when it made the decision not to switch to the Intel microprocessor (Lettice, 2003, par. 1). Since then, Apple and IBM jointly developed the Motorola PowerPC microprocessor, whose technical differences from the Intel processor claim to offer advantages, at a higher cost. Apple now has a choice of grand strategies: differentiation or focus.

Apple's generic strategy is differentiation. Apple products have a distinctive appearance and emphasize ease of use and sell at a premium. Apple has a strong background in four of the seven skills, the resources required for effective differentiation, and may have a good background in two others (Pearce & Robinson, 2002). Apple might benefit from the following grand strategies. Concentrated Growth Apple's differentiation makes concentrated growth for its distinctive products a natural strategy. Apple customers expect it to continue enhancing product performance in terms of plug and play operation.

Growth on these terms would be within Apple's core competency and enhance potential market gains in business markets. Market Development Apple has an ongoing marketing effort to convince consumers to switch from other computers to the Macintosh lines. This market development strategy should continue the attack on the Wintel competitors. Apple should double its efforts to combat the consumer perception that it will be hard to find hardware compatible with Macintosh computer software. Product Development Apple has shown its ability to develop new products, such as the recent introduction of the iPod and Apple music store, that are compatible with Windows.

Apple should develop products that compensate for weaknesses and capitalize on strengths. Innovation A strategy incorporating innovation is the most important strategic decision for Apple. While the Newton personal digital assistant (PDA) is an example of Apple's failure to successfully profit from innovation, the vast PDA market is testimony to this innovation. Long Term Objectives Apple's Long Term Objective is to grow its market on the Motorola PowerPC platform by offering innovative and leading edge products that showcase their distinctive appearance and ease of use. It should focus on retaining its share of the education, consumer, and professional markets. Apple should increase its promotion and creation of Wintel-compatible products such as the iPod and Apple music store to gain a diverse share of the market.

These products, like their flagship Macintosh product, substantiate its branding as innovative, ergonomic, and thought leading. Interviews A recent discussion with Steve Jobs focused on several points with regard to Apple Computer and the technology industry. Strategically, Jobs believes that the company has and will continue to be innovative with regard to products such as the iPod. The success of the iPod, according to Jobs, has added a 40 percent increase in product distribution (Jobs, 2003).

Jobs recognizes that the days of innovation are far from gone and cites companies like eBay and Google as examples. This level of optimism is apparently a requirement for success in the technology industry today and Jobs is an optimist (Jobs, 2003). Today, Apple is one of only two companies making money in the personal computer business. The recent downturn in this market has affected the strategic approach of many technology-oriented companies. Jobs suggested that today must be about the future of technology and "turning out more new products... ." (Jobs, 2003, par.

1). A company that looks at research and development as an expense rather than an investment may find themselves left behind as the economy increases. Finally, Jobs feels that the professional and educational markets have suffered in recent years, yet they have doubled the consumer market share, which stands between 5 percent and 10 percent (Mossberg, All Things Digital). This may be indicative of future opportunities. SWOT Analysis Strengths Apple computer's first strength has to do with internal management.

Steve Jobs is a proven leader and has been able to resurrect Apple Computer from its decline. Strong, proven leadership can reformulate a company's strategies and get a company back in line. Realizing the changing personal computer industry, Jobs was able to reduce costs to help increase the profits. Jobs returned the company to profitability in 1998 for the first time in 2 years. Apple simplified the personal computer with the Macintosh line. The Mac operating system was the reason for the eventual launching of Windows for the IBM compatible computers.

This ease-of-use continues to be a mainstay for Apple Computer. Apple is also well known for its multi-media applications. They have been a niche computer for those individuals that utilize computers for multi-media. Apple's QuickTime program has been a leading contender for a video and audio viewing programs. Weaknesses Apple Computer's weakness relates to its functionality with the open-systems standards and the portability that are needed to operate on a network. This weakness limits the target market for Apple.

The Mac OS X platform is still working out issues and businesses will not invest in a new computer infrastructure without having a system that gives them a reasonable comfort level and is easily interchangeable with other computers. The Mac OS X is still not proven. Opportunities Apple has a tremendous opportunity regarding the portability of systems. It is a market that Apple Computer has not yet explored or targeted. While Apple offers a variety of desktop models including the i-Mac, e-Mac, Power Mac, and the G 4 series of computers, there is only the single PowerBook line for mobile computing. Apple computer has made drastic changes to allow connectivity to a Windows environment (Apple, 2003).

There is limited file sharing and more types of files will need to be able to be shared if Apple is going to contend in the business market. Apple's newest notebook also has the ability for wireless connectivity. As they improve upon this technology, this will make people take a second look at Apple for both personal and business computers. Threats Apple faces fierce competition from its four innovative competitors. The price of computers continues to drop and the performance increases. Newer, more effective ways to do business and build computers needs to be explored everyday to get a step on the competition.

Apple Computer does not enjoy a large market share of the personal computer industry. As Apple's technology increases, so does that of the competition. They have a leg up because they operate on the same basic type of computer platform where the Apple platform is proprietary. These companies can take advantage of strategic alliances to increase their knowledge bases, suppliers, and ultimately make a better, less costly computer. Porter's Five Forces Analysis Supplier Power Apple's proprietary approach; limits it to a select number of suppliers for all but the most prevalent commodity items.

Its suppliers are almost solely dependent on Apple for their own survival. Apple cannot gain any benefits from economies of scale because it controls 100 percent of the supplier's scale. Supplier's can cut production and severely restrict Apple's ability to grow or respond to market demand over the short term. Apple could purchase larger quantities of goods to minimize the risk a supplier could interrupt its delivery cycle. If its forecasting is adequate and the market does not fluctuate too drastically, this could be a decent strategy. The downside of this strategy is Apple could create huge inventories of products or parts that it has to write off.

Buyer Power Since Apple is a sole supplier, buyer power is tremendous. Its buyers have many other acceptable alternatives to Apple and could easily leave Apple on the sideline because they found a better deal. Apple's approach to selling to the education and creative markets makes its buyers stronger. Since these relatively vertical markets are their sole market, Apple's personal computer strategy is based on unsubstantiated logic that its technology will survive. Rivalry Apple's primary rivals are IBM, Hewlett Packard, and Dell.

These are very tough competitors because they are all heavyweights in the industry with well-known brands and reputations. Apple has tried several strategies to compete against these companies. The most successful has been product differentiation. Its personal computer products are well known in the industry as having style, pizzazz, and a very good fit for a niche market. Historically, artists and educators have almost a cult appreciation for Apple's products. Apple is experimenting with new distribution channels by opening mall stores and offering its products online.

The success of this initiative will become evident within the next 2-5 years. Apple is offering a lower-cost Apple eMac solution in an attempt at price competition. Since Apple's brand signifies customer satisfaction and high-performance, it will be difficult for Apple to adjust their brand to the commodity pricing. Barriers to Entry Apple has cornered the market on barriers to entry. It has remained mostly proprietary with all of its personal computer products. This has created a huge barrier to entry because it is illegal for anyone to reverse engineer Apple's system and offer a competing solution.

Threat of Substitutes Introducing substitutes that directly compete with Apple would be illegal. This helps it prevent direct substitutes. Yet, there are numerous alternatives in the personal computer industry that are very formidable competitors. These include HP, Compaq, IBM, and Dell.

There is also the un-branded personal market that offers even more price competitive substitutes. Value Chain Analysis Apple's primary activities in inbound logistics and operations are well provided through third-party manufacturers such as Foxconn Electronics, Inc. and available offshore manufacturers. Apple excels in its remaining primary activities of outbound logistics, marketing and sales, and service. Yet, if one examines Apple's value chain, it is perhaps in outbound logistics, marketing and sales that the company can make improvements. Apple's in-store and online direct-marketing may be analyzed after they have been broken into separate activities and separate distinct functions.

It is recommended that both chains are examined as they complement one another. One example is the interaction between the two systems as they provide differentiation to the buyers. Apple may allow customers to design a system online and physically pickup the product in-store. Customers can have online orders shipped or delivered from the closest Apple store.

Unlike Gateway, Apple can take look at both value chains separately and the resulting value when combining both. It can separately benchmark online and in-store performance with competitors. Benchmarks may include activity costs, differentiation, and speed to provide or deliver. Short-term Objectives and Tactics Apple has several short-term objectives to support the two stated long-term objectives. The first long- involves maintaining a lead in certain differentiation qualities and maintaining market share of existing market segments.

It also implies increasing technical improvements to software compatibility with major established hardware and software configurations. The second long-term objective focuses on creating more peripherals but also implies a push for cross-platform compatibility and portability. From Apple's long-term objectives, several short-term objectives become evident. Maintain Differentiation and Quality Leadership Apple's differentiation relies on high quality products, but also products with a distinctive look, functionality, and reliability. This differentiation will disappear as the competitive industry attempts to copy these qualities.

Apple should continue innovating in hardware design, plug-and-play functionality with an intuitive nature, and extensively test new software while fixing problems discovered in deployed applications. Maintain Market Shares Apple maintains a small but reliable share of the educational, consumer, and professional computer markets. Recent backsliding in educational markets, the result of concerted industry marketing efforts, indicated Apple should give market consumers better reason to use Apple computer equipment. This objective deals with the marketing aspects of market share, as other objectives will ensure there is content to market. Extend Product Compatibility Apple exists in a computing world that is mostly Wintel-based.

To leverage existing infrastructure, Apple should extend the compatibility of the Mac OS X. QuickTime and iTunes have versions compatible with Windows. The objective to extend product compatibility should focus on technology to enhance use of any hardware to run Apple product software. Extend to Other Operating Systems The popularity of the Apple iPod has created an opportunity to introduce other Apple peripherals and software. Apple should develop windows versions of iLife products (iMovie, iPhoto, iTunes, and iChat) and, where appropriate, Apple brand peripheral hardware to complement these products. Financial Data Apple Computer has made some drastic financial improvements in the last 5 years.

There have also been major fluctuations in some key financial ratios. Apple has been able to cut the amount of debt in relation to both assets and shareholder's equity. The current liabilities have been roughly at the same level while the total liabilities have fluctuated, they have reduced total liabilities. In 1998, Apple Computer had a debt-to-equity ratio of 1. 61.

This measurement was drastically reduced in 1999 to. 66 and has been shrunken to. 54 in 2002. The high debt-to-equity ratio in 1988 was due to a loss in other equities as well as a much lower total equity position due to much lower common stock and retained earnings. There was an increase in common stock in 1999 that helped reduce this measure and allow Apple to finance it's operations not only with debt instruments, but also with equity.

The total debt ratio also shows a reduction in debt in relation to assets from 1989-1992. In 1989, the total debt ratio was. 62 and was reduced to. 35 in 2002. Apple has also improved its liquidity. Net working capital to assets improved from.

51 in 1998 to. 59 in 2002. This measure did see a high of. 60 in 2001, suffering only a slight decline to 2002, as did all of the liquidity measurements. The current ratio and the quick ratio were 2.

43 and 2. 14 in 1998 respectively. Apple has improved these measures through 2002 with values of 3. 25 and 2.

96. All three measurements show that Apple has increased its liquidity by having more current assets such as cash, marketable securities, and accounts receivable than current liabilities. Apple Computer has also had a strategy to improve efficiency. Measures like inventory turnover, average collection period, asset turnover, and fixed asset turnover have all shown greater levels of efficiency. Apple was able to improve its turnover on both assets and fixed assets over the 5-year time frame.

The average collection period for receivables also decreased. Apple is able to get payment quicker in 2002 than in 1998. Collecting receivables quicker allows Apple to either pay off debt quicker or make use of the funds much quicker than before. The inventory turnover was 17.

33 in 1998 as a result of a large inventory figure in 1997. This was one of the strategies Steve Jobs fixed when he became CEO again. The inventory turnover reached a high point of 219. 51 in 2000, but has since declined to 147. 82 in 2002. The spike in 2000 was due to the highest sales over the 5-year time frame.

All of the profitability ratios reflect reduced net profits, returns on equity, and returns on investment. 2001 reflected the worst of the 5-year figures all registering negative. Apple also finished 2001 with a negative net income. A smaller sales figure in relation to fixed expenses was the cause for the negative net income and negative profitability ratios. They have increased in 2002 but are not to the levels that they were once at in 1999 and 2000. Apple expects profitability ratios to increase due to newly introduced products and services.

With a down year in 2001, the trend from 2002 is to continue to increase the profitability of Apple again. New services will provide greater revenue to cover the fixed costs and as the efficiency of the new services increases, so will the profit margin of the products and services. Apple is leveraged appropriately and is able to cover its current liabilities with the current assets. Apple Computer Inc. (AAPL) 2002 2001 2000 1999 1998 Leverage Ratios Long-term debt ratio 0. 07 0.

07 0. 07 0. 09 0. 37 Total debt ratio 0. 35 0. 35 0.

40 0. 40 0. 62 Debt-to-Equity 0. 54 0.

54 0. 66 0. 66 1. 61 Liquidity Ratios Net working capital to assets 0. 59 0. 60 0.

51 0. 53 0. 51 Current ratio 3. 25 3.

39 2. 81 2. 77 2. 43 Quick ratio 2.

96 3. 16 2. 58 2. 52 2.

14 Efficiency ratios Asset turnover 0. 93 0. 84 1. 33 1. 30 1. 39 Fixed asset turnover 9.

69 10. 91 21. 66 18. 42 14. 25 Average collection period (days) 32. 77 48.

29 37. 36 48. 67 61. 13 Inventory turnover 147. 82 187. 64 219.

51 90. 57 17. 33 Profitability ratios Net profit margin (%) 1. 32% -0.

17% 10. 11% 10. 56% 6. 24% Return on investment / assets (%) 1. 23% -0. 14% 13.

49% 13. 71% 8. 71% Return on equity (%) 1. 62% -0. 62% 21. 80% 25.

33% 21. 75% Competitive Issues Leadership, innovation, and relationships drive Apple Computer's competitive position. Under the direction of Steve Jobs the organization has been able to generate attention to its product. The creation of iTunes has allowed the company to develop a product that is indifferent to the operating system or platform and it provides Apple with an audience.

The iPod provides similar competitive advantages as it breaks down the barriers created by OS and platform. Consumers will respond to innovation, regardless of brand and Jobs expects to reach 100 million paid downloads by April of 2004 (Levy, 2003). Not only will this generate revenue, it also creates a registered and valuable target audience that Apple must recognize. Apple has created relationships. These strategic alliances are an additional mechanism for creating advantages by growing their audience. A relationship with Pepsi Corporation will jointly market iTunes and AOL has agreed to direct ."..

its 25 million users... to the iTunes store for music purchases and [that are] billed directly on their AOL accounts for the downloads" (Levy, 2003, par. 3). Marketing Apple Computer must carefully evaluate its pricing structure.

"Apple has long struggled with the fact that its products cost more than many competitors. While Gateway, eMachines and other manufacturers have PCs with 1. 7-gigahertz Celeron processors for $400, Apple's most affordable computer costs $800. Most Apple computers cost at least $1, 000" (Fortt, 2003, par. 6). The company must appreciate that regardless of innovation, boldness, or consumer following, price does matter.

Consumer impressions must be a marketing concern. "Despite the technology industry's crushing economic woes and Apple's shrinking market share, the company looks healthier than some of its competitors" (Fortt, 2003, par. 17). This is because Apple has focused consumers on features, thus consumers are making Apple purchases based on features and not price. They cannot compare against the competition on price.

"The price-performance comparison for Apple is not up to par with Windows boxes. In order for Apple to reach the mainstream market and switch them over to the Mac, they need to address the price-performance ratio" (Fortt, 2003, par. 18). The company has established various distribution channels including Apple stores, online sales, direct field sales representatives, and other traditional retail such as CompUSA. Sales representatives generally concentrate on institutional organizations and provide a strong presence at the educational level. The Apple stores and other retail outlets have provided the organization with some recent success.

"In our own retail stores, we " re continuing to do about 40 percent of our CPU business to people who do not own a Mac, said Greg Joswiak, Apple's director of hardware marketing. That is a pretty big number given how big the competitive market is. He said business was up 80 percent in CompUSA stores in the previous quarter" (Fortt, 2003, par 13). Timelines Environmental Issues The future of Apple Computer and the success of their strategic approach is likely to be affected by various environmental elements including economic, political, social, and technological issues. Economic The economy will largely affect the success of the organization. Careful attention must be given to the economic conditions in both the United States and throughout the world.

Ultimately, Apple Computer relies on personal disposable income for home computer sales as well as business and government revenue for business and institutional sales. A decline in such would prove challenging for the organization. Furthermore, the labor market, as it relates to wages and labor supply, is also an important issue to monitor as this can directly affect the cost structure for the organization. Political From a political standpoint, government legislation regarding importing and taxation should be diligently monitored.

Because important inputs are supplied by sources outside the United States, legislative changes could affect the company's business process as well as their ability to get new product to market quickly. Social There continues to be strong emphasis on education in the United States. This emphasis seems to be combined with limited financial resources for both K - 12 and higher education institutions. Yet, from a social standpoint, our communities recognize the value of a good education as well as the need for exposure to technology as part of the curriculum. As Apple continues to focus on the education market, this environmental component could have an affect of the success of their strategic approach. Technological The technological environment is a concern.

Today, there is a continued race to toward rapid innovation and development of new technology. Those that achieve such are have the potential of receiving tremendous benefit and are labeled leaders. Yet, this rapid pace dictates large investment requirements that can be difficult to meet for certain companies. Apple will have to use laser targeted focus and not lose sight of the product lines that it chooses to compete on.

By remaining strategic and committing to specific technological innovation Apple may have a competitive advantage. Planning Committee The strategic planning committee should include all departments. In reality, effective committees are relatively small and focused. Therefore, there will be several strategic planning committees, each concentrating on a different portion of the strategy. The company will kick off strategic planning each year with a two-hour "all hands" meeting to ensure everyone understands the big picture. There will be an Executive committee, whose function is to provide the overarching, top-level strategies.

Under the Executive committee will be several functional committees (e. g. Product Design, Product Engineering, Marketing, etc). These committees will meet to review progress and revise activities monthly.

The functional committees will include support functions. An experienced employee from the support functions will be part of each committee to ensure functions like human resource development understand and contribute to the strategic fit. Additionally, each quarter, the Executive committee will include the leader of each functional committee to allow better cross-flow between committees. Finally, informal and partial meetings may be held as required for specific purposes. Each committee is responsible to ensure it's initiatives fit with and capitalize on initiatives in other committees. The various committees are to define a set of measures that will allow it to meet strategic goals and supply data to build executive measures.

Decision Structure The decision regarding long term objectives and the main business focus is made by the top-level managers. Apple's organizational structure is a functional one. Steve Jobs is at the top as the CEO and is surrounded by leaders of each function of the business. All strategy formulation does come from these top-level executives. The lower level managers create the strategies or objectives become more detailed. They implement the processes and procedures to perform given tasks.

This type of organizational structure and decision structure is hierarchical. Decisions are simpler to come by and are only as good as the upper-level management. Risks It is important that Steve Jobs and his supporting managers chose to take on an appropriate level of risk that fits into Apple's mission and vision statements. There is an inherent risk to any type of change in strategy or creation of a new product or service.

Apple's expansion to comply with Windows based operating systems, selling music online via itunes program, and its product expansion to laptop computers. Any of these expansions could still fail. Apple does have a core business that it still needs to focus on and can fall back on is any of the expansion activities to fail. The only cost to Apple would be associated with the R & D of that new product and the actual rollout of it.

The strategies and roll out of the strategies are only as good as the leadership of Apple. The functional organization allows for specialization where it is needed and creates a centralized area for all of the strategies to be created. There can be limited ideas from upper-management and thus hold Apple back or force Apple to go in a direction that they did not want to go. Apple, like most companies faces some governmental risks. Maintaining close ties and having proper forecasting techniques will help Apple reduce this type of risk. Close to governmental risk is the risk associated with globalization.

This type of risk is associated with having business activities on foreign soil. There is also an opportunity risk that Apple has. This risk is the associate with an alternative strategy that was not chosen. There is always some sort of opportunity risk when a choice is made. Scenarios, Alternatives and Recommendation Apple is not, by any means, restricted to a few alternatives on strategy or objectives.

Its alternatives must be a series of appropriate responses to different scenarios in reply to various threats and opportunities in the industry. The company belongs to a very dynamic industry that is full of innovative competitors. To remain competitive and secure the ability to respond to every threat and opportunities, it must create scenarios and appropriate alternatives to each scenario. Linux operating system, for example, is deemed by major Information Technology vendors as the possible replacement to the Unix operating system.

Although, the vendors may not be one-hundred percent correct on this assessment, it establishes the fact that Linux has gained acceptance as one of the major players in the industry. This is a certainty that Apple must capitalize. With an alternative strategy to incorporate the Linux operating system, Apple's long-term objective to grow its market on the Motorola PowerPC can continue. Additionally, Apple will find itself as a major competitor in the server technology market. Apple may, however, find it necessary to create a strategic alliance with an existing Linux developer and distributor that can develop a Linux operating system version that enhances the multimedia strength of Apple. The resulting combination will differentiate Apple's Linux system as a user-friendly multimedia and computing powerhouse.

For every alternative strategies and objectives created from scenario analysis, Apple must always remember to reassess and link its operations with its objectives. Links must also exist between its short and long-term objectives. Finally, both objectives must be linked to its strategy and vision. Stakeholder Impact Board of Directors The board will be expected to review our proposed strategies and accept them as written or ask for clarification. The board might choose to reject the strategies but that is not likely since our strategic planning sessions were conducted at their request. Once accepted, they are responsible for communicating the plans and expectations to the market and to our shareholders.

Regional Directors The regional directors will review the proposed strategies and to make sure we have answered all the questions the board might ask. They will provide regional level details and conduct their own assessments regarding the strengths of our recommendation. Once accepted, the regional directors will be responsible for the implementation of our strategic plans. This group will oversee the rest of the company and will make sure target milestones are met. Product Managers The product managers will be responsible for making the plan work. They must sign-on to the strategy and believe in our recommendations.

If this group doesn't buy in, the propensity for sabotage is too high. Once the strategic plan is accepted, this group will begin execution of the short-term tactics. Vendors Our vendors will play a significant role in delivering just-in-time components to enable portions of our strategic plan. We must level with them regarding our intentions and negotiate better deals if possible. Clients Our clients are the ultimate barometer for our plans. If they show their support by purchasing more and supporting our initiatives, we will know we have succeeded.

If they walk away, we should have a very quick indicator our plans are off target. Control and Monitoring As illustrated in the previous timelines, the control and monitoring will begin with the short-term objectives. We believe that successfully meeting the intended timelines described therein will enable us to successfully meet the long-term strategic initiatives. It is important that we immediately determine the status quo in SMART terms (Specific, Measurable, Attainable, Realistic, and Timely). Once these are defined, it is critical that we monitor our progress along these steps to make sure we stay on course. If we find an original assumption or constraint has changed, we will adjust our plans accordingly.

Conclusion Apple computer appears to be an innovative company. The company seems to be making strategic decisions to compete with the industry leaders. However, Apple should reassess its core competencies to stay competitive. It should look at the various external opportunities and threats together with its internal strengths and weaknesses. The company should build a strategy based on a sound fit of both its internal resources and external situations. The company's financial picture is unclear.

The precipitous market after the turn of the century has undoubtedly affected these finances. While the company's competitors were in a better financial position to absorb that situation, Apple's stock seems to have begun gaining value. We believe Apple's history of innovation, vision, and strategic positioning makes it an ideal candidate for this team's selection. Apple Computer Inc.

has been known in computer circles for their high-end, high-performance and easy to use computers. These have a near cult following in the graphic arts and multimedia industries. However, they have not gotten a lot of traction in the generic file server and commodity-like workstation market. Since their major competition, IBM, Dell, HP, etc. , have a strong foothold in this market, Apple should restructure their costs to maintain leadership in multimedia and desktop publishing, better compete in business markets, and find alternative channels that do not directly compete with those companies. Apple has been able to create this cult-like following by keeping their products proprietary and innovative.

Since they control the platform and the software, Apple has been able to insist on the higher quality and functionality that endears their loyalists. This came at a higher cost and lesser share of the market. As the Wintel solutions gain the functionality of the Apple solutions at lower cost, Apple has had to revisit their strategy to compete on these new terms. They must make their competing products cheaper.

To survive, they must also find alternative revenue streams to offset some of the losses in the PC market. The strengths and opportunities that drive Apple Computer's strategic approach are clearly recognized by the company's Chief Executive. Strategically, the company can capitalize on and create new opportunities for the organization by focusing its efforts on innovation and product development. There are several forces that will affect the company. However, recognizing each challenge can mitigate these forces and focusing on the strategic components will help the company achieve its long-term objectives. Analysis of Apple's value chain shows potential improvements in outbound logistics, marketing, and sales.

The short-term objectives for Apple include maintaining differentiation, maintaining quality leadership, maintaining market share, extending product compatibility and portability, and extending products and services to other operating systems. In the last five years, Apple's financials have shown some drastic improvements. Apple Computer's leadership, innovation, and relationships drive its competitive position. The marketing concern for Apple must be on consumer impression of cost parity: Apple computers cost more than the competition. Therefore, Apple must show the consumer that the added value of their computers meets or exceeds the competition. Apple.

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