Issues on Strategic Audit - Essay Example

Issues in Strategic Management: Strategic Audit Exercise (Apple Computers Inc Background and Problem Identification Having started the journey in 1976 Apple Inc. has seen many milestones. Today it appears that Apple Computer Inc. is the sole successful escapee from the IBM and Microsoft hegemony in the personal computer field. Headquartered in Cupertino, California, Apple Computer designs, manufactures and markets personal computers and related software, services, peripherals, and networking solutions. The company also designs, develops, and markets portable digital music players along with related accessories and services, including the online distribution of third-party music, audio books, music videos, short films, and television shows. The company primarily operates in the Americas, Europe and Japan. Apple experienced good success during the late 1980s but after that there were testing times during the 90s. John Sculley, previously the CEO joined Apple in 1983. Sculley came to Apple with the valuable experience of the 'Cola-War' between Coke and Pepsi. Steven Jobs, more of technology oriented initially found this approach little weird, but later gave Sculley a free hand. Gradually, over the years, Apple has succeeded in regaining the lost glory to a great extent. Feb 27 edition of Business Journal (2007) points out that the ipod helped in this transformation process with the sale of over 90 million ipods since its launch in 2001. After this successful parade of its ipod, Apple has now taken up another ambitious product called 'iphone'. This gadget is an integration of an iPod, a mobile phone, a portable computing machine and a digital camera. With touch controls and an internet communication device the iphone is an innovative product from the armory of Apple. Slated for a full-fledged launch in June 2007, iphone also has the Wi-Fi connectivity and Bluetooth features and it is based on quad-band GSM + EDGE technology. Now it is to be seen how Apple can mobilize its resources to convert this venture into another success story. Over the years Apple has also established a dependable value chain with strong links with its suppliers and distributors, but the spat with its arch rival Microsoft will not allow Apple to take things lying down, it'll have to be on the path of innovation with regular inputs from market. Though the iphone promises to be a cult item that may influence the industry to follow suit, yet there are certain finer edges which need to be smoothened before Apple expects an ipod like revolution. For example ipod became such a craze owing to its compatibility with the most popular music format-MP3, and the most popular operating system-Windows. But it at the moment industry analysts are keenly watching the verbal dual between Apple and Microsoft. On the one hand Apple has issued a warning about MS Vista being a security threat to the ipods while on the other hand Microsoft chief Bill Gates underlined the importance of the 'software part' when asked for his views on Apple iphone. He sought to downplay the technological advancement and innovative features that Apple has put in it. This dual promises more fireworks in near future. Resources Audit Such an audit is done to identify different types of resources available to the company. Some of the resources that Apple Inc. could mobilize for carrying out its business are; Financial resources: The Company has been able to post a record revenue billion and record net quarterly profit of $1.0 billion, or $1.14 per diluted share for its fiscal 2007 first quarter ended December 30, 2006 (Apple, 2007). During the operations Gross margin was 31.2 percent, up from 27.2 percent in the year-ago quarter. What is the source of strength is that the International sales accounting for 42 percent of the quarter's revenue. The very fact that the company has been able to sustain the onslaught of Microsoft and IBM provides an insight into the strength of its financial resources. Company's consistent track record of dividend indicates that Apple values its investors for providing the financial strength. Human Resources: Managing the human resources well is considered an art now a days. Apple has proved to be a rewarding company for its employees. It is on the basis of its human resources that Apple is able to successfully continue its R&D activities and provide a challenge to the competitors. As of September 30, 2006, the Company had 17,787 full-time equivalent employees and an additional 2,399 temporary equivalent employees and contractors. Physical resources: Company has a huge establishment of production and R&D activities at many locations worldwide, which gives it the required strength in making use of the potentials at these localities. Goodwill: Goodwill is basically an intangible resource, which cannot be earned overnight. A company has to put in lot of efforts to earn the goodwill and much more efforts are required to retain the goodwill. Unlike some of its competitors, mainly Microsoft, Apple has been successful in warding off the controversies. Once a controversy erupts, it requires more resources to douse the fire. In fact, it would be very difficult for Apple to sustain such controversies because the media communication budget of Apple is much less than that of Microsoft. In fact it spent $83 million in measured media on Mac for the first nine months of last year (2006), less than a fifth of what Microsoft is spending to launch Vista (Bulik, 2007). Brand identity: The 'Apple' brand, with one bite missing, is well known brand amongst most consumers as well as non-consumers. Therefore Apple enjoys a high degree of brand awareness and brand recognition for its range of products throughout the markets. Apple has proved to be quite successful in its marketing communication campaign while taking on the competitors. After the recent launch of Microsoft Vista, Apple has been quick to issue warnings on its website about potential damage to iPods when connecting to Vista PCs. It has also solicited feedback from customers about such problems. Microsoft must be feeling the pinch as Apple is also running a TV ad that pokes fun at Vista security. But industry analysts and market watchers have been waiting for more from the stable of Apple in near times to come. Apple has therefore quite successfully leveraged its brand image for differentiating its product offering and drive profitable sales. Strong brands of course help in not only commanding a premium pricing for some of its products like i-phones/ i-pods, but also helps in creating barriers to entry within the market. Intellectual property: Apple Inc holds rights to patents and copyrights relating to certain aspects of its computer systems, iPods, peripherals, software, and services. The 'Apple' logo is of course a well known registered trade mark for the company. In addition Mac, i-pod, i-tunes, i-phone, i-tunes store etc. are the trademarks associated and registered with the company. Investing to retain and acquire more of such patents is an ongoing process and apple is actively following the path for more such products and services. Value Chain Analysis Innovation, excellence and value go hand in hand in today's competitive environment. Customers and the target market are crucial stakeholders for any organisation. Configuring value means defining, creating, branding and pricing the offer (Mark Gabbot, 2004). Organisations adopt different types of value addition strategies to grow in a business. These could involve trying out different types of market-product combination, carrying out the business according to a certain sets of principles, segmenting the market in their own way, or relying on the feedback of customers for shaping the final output. Value chain analyzes the business strength of an organization and compares it to the strength of competitors. Michel porter suggested that business activities can be grouped into two categories; Primary activities: Which the company indulges in, for creating a product and delivering it to the consumer Support Activities: These are the activities which play a supportive role in increasing the effectiveness of the strategies of the company. The Porter's value chain lays out how an entity (e.g. firm, industry, and nation) organizes its activities to design, produce, market, deliver and support its goods and services. Analysis of how value activities performed and interrelated Amongst the Primary activities Apple has been managing the raw material supplies, knowledge sources, consultancies, supplier etc. which form an integral part of the inbound logistics. The company has so far thrived on its core competency of 'making the technology easy to use'. The 21st century is proving to be particularly success oriented for Apple with its range of i-phone/ i-Pods and i-Tunes being very much popular amongst the youth segment. For most of the company products like MacBook Pros, MacBooks, and iPods, the final assembly is done by third-party vendors in China, thus making it a less costly production venture at outside locations. The outbound logistics that Apple has been taking care of are the distribution networks, inspecting the quality of finished goods, planning out marketing and sales strategies etc. As part of its aggressive marketing campaign, another crucial primary activity, Apple has been very active in highlighting the weaker points of Vista and Apple PR machine is in an overdrive after the reports that some iPods have malfunctioned with an upgrade to Vista operating systems. Preparing the marketing communication strategies have of course been outsourced to marketing agencies, which are provided valuable inputs from the company. In a strategic tie up with one of its competitors, the production of PowerPC G5 processor, used in current Power Mac, Xserve, and iMac G5 products has also been outsourced to IBM by Apple. Optimum value configuration is achieved by the company with active support activities from; Infrastructure: Apple has a huge infrastructure in the form of buildings, machinery etc. spread over many countries. This decides the number of customers it can cater at a given time and the kind of workload it can take on. Human resources: It is said that the strength of a chain is as good as the weakest link. Therefore every element in a value chain has a crucial role to play. To come out with a value product the human resources need to be made quality and value conscious. Apple takes good care of its human resources by way of offering them attractive remuneration and other perquisites. Technology development and procurement: Continuous investment in R&D activities is an important element for value creation. In fact, today technology plays an important role in almost every part of the business process. Be it the e-procurement, IT enabled services, e-business etc. technology has a say everywhere. References: 1. Apple (2007). Available online at http://www.apple.com/ 2. Apple reports first quarter results, available online at, http://www.apple.com/pr/library/2007/01/17results.html (March 6, 2007) 3. Bulik, Beth Snyder (2007), Apple plan: Lead consumers into temptation--and away from Vista, Advertising Age, 2/12/2007, Vol. 78, Issue 7 4. Datamonitor (2006), Company Profile-Apple Inc. Datamonitor USA 5. Segan, Sascha (2007), The iPhone: Mac or I'Pod, PC MAGAZINE March 6, 2007 6. White Paper (May 2006), The New Apple of Malware's Eye: Is Mac OS X the Next Windows Available online at http://i.i.com.com/cnwk.1d/html/itp/mcafee_Appleofmalwareseye.pdf 7. Business Journal (2007), Apple COO: iPhone on track for June launch, available online at http://sanjose.bizjournals.com/sanjose/stories/2007/02/26/daily36.html 8. Gabbot, Mark (Editor), (2004,) Introduction to Marketing, A value exchange approach, Pearson Education Australia (a division of Pearson Australia Group Pty Ltd.) Read More