Strategic Plan of Apple Inc - Case Study Example

? Case Study Apple Introduction Apple Inc. is one of the leading US based global multinational organization headquartered in California. The organization designs, develops and sells computer software, personal computer and consumer electronic goods. The organization was founded in the year 1976. Apple Inc. operates within consumer electronics, computer hardware, software and digital distribution industry (Augenti, 2010). The organization is popular for its creativity and value addition in product categories. The major product lines of Apple Inc. are Mac Computers, iPod music player, iPad tablet computer, iPhone smart phones, iTunes media browser and software including iOS and OSX. It is the second largest global information technology organization and mobile phone makers in the world. The study will develop a strategic plan for Apple Inc. in order to improve its position in the mobile phone and computer industry. The proposed recommendation plans will help the organization to maintain the leadership position in the industry. Porter’s five force model analysis will help to find the impact of external environment factors on the business performance of Apple Inc. A strategic analysis tool has implemented in this study to reveal the competitive strengths and weakness of the organization. Strategic Issue Recently, Apple Inc. is suffering from two issues. These are loss of market share in the Smartphone industry and loss of operating income. It is evident that, apple dominated the Smartphone industry with its iOS, but over past few years the organization lost its market share due to Google’s open source android with OS. Moreover, effective product innovation and development by the competitors, such as HTC and Samsung has reduced the market share of iPhones. Therefore, due to effective loss in market share it was difficult for Apple Inc. to get applications and software for Macintosh (Trott, 2008). It has caused loss of operating income. However, the study will try to overcome the issues by proposing suitable recommendation plans. Analysis The current market position of Apple Inc. is strong. The organization have created niche for them. The organization develops and follows new product and marketing techniques. Over the years Apple Inc. is continuously presenting new products. Innovation and value addition in the products have caused a significant annual profit, a healthy company as well as a strong stock price of products. The tendency to own a product of Apple is drastically increasing among the kids and young target people. The organization has implemented cost based pricing strategy for the products. Apple Inc. organization is only focusing on the innovation of product attributes. It has both negative and positive impact. Apple Inc. pays huge cost behind the R&D team. Though the organization has created a potential customer base around the globe, but high R&D cost has forced the organization to sell the products in high prices (Hitt, Ireland & Hoskisson, 2012). Several potential competitors like Dell, HP, Samsung, Sony and Nokia are selling the similar product line in low price level comparing to apple. Due to effective value addition and innovative product line the organization has able to position themselves as the second largest organization within the industry in terms of market share (Figure 1, 2 & 3). Porter’s Five Force Analysis The porter’s five force analysis model will help to determine the impact external environmental threats on the business performance of Apple Inc. Buyer’s bargaining power Bargaining power of the buyers is high moderate due to the existence of several potential and leading competitors. It is evident that, the price of the products of Apple Inc. is relatively higher than its competitors. Moreover, low product switching cost can be a significant threat. But effective product differentiation strategy, high brand identity and significant buying volume has helped Apple to achieve the advantages of economies of scale (Muller, 2011). Supplier’s bargaining Power Bargaining power of suppliers is low due to the high availability of suppliers in global market place. The organization can switch to the other supplier in order to save supplier’s cost. The switching cost is low. Threat of Substitutes Treat of substitute is high for Apple. The switching cost is low. Moreover, the people of middle income group are tending to shift towards the low cost PCs and mobile phones. The Chinese electronics products are available in low price in global market. This china price war has reduced the sales figure of Apple. Moreover, continuous introduction of low cost smart mobile phones by Samsung and Nokia has affected the business performance of iPhones. Threat of New Entrants The new organizations have to face several entry barriers in order to enter in this competitive and saturated market. Critical technological and legal barriers, existence of several leading global players and huge capital requirement can force the new players not to enter in the industry. Industry Rivalry The consumer electronics, computer hardware, software and digital distribution industry has become saturated and competitive. Due to high number of buyers and potential competitors the global electronic level has reached to the maturity level. Several organizations are following several competitive strategies in order to increase the global market share (O’Grady, 2009). Apple Inc. should continuously focus on the product value addition and innovation factor to survive within the competitive global market place. SWOT Analysis A strategic SWOT analysis table will help to determine the competitive strengths and weaknesses of Apple Inc. Strengths Strong global brand name and effective product differentiation strategy. Market leader in innovation and value addition in products. Apple Mac Book has the largest brand loyalty. Partnership with Intel. ITunes music stores are significant source of revenue. Strong R&D team. Weaknesses Small life cycle of products. Decreasing market share and operating income due to high R&D cost and expensive products. Limited presence in governmental and enterprise business arena. Opportunities Significant growth in consumer electronics market. ITunes player is highly marketable. Antivirus solution needs to be developed by Apply in order to provide solution for the increasing worms and viruses. Threats Economic slowdown and low disposable income of middle class people. High competition and existence of several leading competitors. Expensive software, hardware and several products are reducing the customer base. Financial Performance Analysis Key Financial Indicator All Values in Millions USD (except Per Share) FY 2009 FY 2008 FY 2007 FY 2006 FY 2005 Trend Analysis (CAGR) Revenue 42905 32479 24006 19135 13931 32% Gross Profit 17222 11145 8154 5598 4042 44% Net Income 8235 4834 3496 1989 1328 58% Current Assets 31555 34690 21956 14509 10300 32% Fixed Assets 15946 4882 3391 2696 1251 89% Current Liabilities 11506 14092 9299 6443 3484 35% Non-current Liabilities 4355 4450 1516 778 601 64% Total Liabilities 15861 18542 10815 7221 4085 40% Total Equity 31640 21030 14532 9984 7466 43% Total Assets or (Liabilities & Equity) 47501 39572 25347 17205 11551 42% Ratio Analysis   Ratios FY 2009 FY 2008 FY 2007 FY 2006 FY 2005 1 Current Ratio 2.74 2.46 2.36 2.25 2.96 2 Quick ratio 0.94 0.88 0.78 0.78 0.89 3 Inventory Turnover 53.28 63.31 91.55 101.61 119.87 4 Days Sales Outstanding 52.68 69.13 24.89 23.88 23.45 5 Fixed asset Turnover 14.52 13.23 13.10 14.94 17.05 6 Total Asset Turnover 0.90 0.82 0.95 1.11 1.21 7 Debt to Total Asset 33% 47% 43% 42% 35% 9 Profit Margin on Sales 19% 15% 15% 10% 10% 10 Basic Earning Power 25% 17% 20% 16% 16% 11 Return on Assets 17% 12% 14% 12% 11% 12 Return on Common Equity 100% 67% 64% 45% 38% From the above trend analysis of key financial indicator of last five years, it can be stated that growth of net income is higher than growth of revenue and it indicates that economies of scale has increased during this five year period of time. Again from the above ratio analysis it be said that liquidity position is very much strong and profitability is high. Efficiency ratios are showing efficient asset management in the organization. Overall Apple Inc is financially strong in all aspects. Conclusion and Recommendations Apple Inc. is one of the leading organizations within consumer electronics organizations. Value addition in products and implementing creativity in the product attributes are the competitive strengths of Apple Inc. The organization is suffering from two issues, such as loss of market share and operating income. In order to overcome these issues the following strategic recommendation plans can be proposed to Apple. In order to maintain their position as the leading player within the industry, the organization needs to focus on product differentiation strategy. Moreover, they should keep on introducing innovative electronic gadget as it is their core competency and the organization is popular for this product innovation among the global people. They need to focus on business operation cost reduction. High R&D cost is reducing the operating income. Therefore, they need to reduce other operational cost, such as supply chain cost. Implementation of Decentralized supply chain model will help the organization to reduce the manufacturing and logistics cost in global market. The organization is losing its market share due to high competition and prices war. Apple Inc. is following niche marketing strategy. The organization should implement competitive pricing strategy (Cooper, 2009). The global economic slowdown and low purchasing power have affected the buying decision of people. Therefore, the organization needs to implement mass marketing strategy. References Augenti L. (2010). How to Start a Home Based personal Trainer Business. New York: Globe Pequot. Cooper, R. (2009). Product Innovation and Technology Strategy. New York: Stage-gate International. Hitt, M., Ireland, R., & Hoskisson, R. (2012). Strategic Management Cases. Stamford: Cengage Learning. Muller, C. (2011). QApple’s Approach Towards Innovation and Creativity. Berlin: GRIN Verlag. O’Grady, J. (2009). Apple Inc. New York: ABC-CLIO. Trott, P. (2008). Innovation Management and New Product Development. New Jersey: Pearson Education. Appendices Figure 1: Smartphone Market Share Figure 2: Total Market Share (Apple) Figure 3: Apple PC Market Share Read More