Strategic Case Analysis

Prepared for:
Professor L. Oubre
Management 405
San Diego State University
April 28, 2008

Team 9:
John Chambers
Matt Daniel
Mike Magaddino
Andrew Mironov
Jeremy Sanders
Riley Solie-Vilker

Table of Contents
I

EXECUTIVE SUMMARY

Corporate Mission and Goals ................................................................................................... i

Strategy Statement .................................................................................................................... i
Summary of Action Plan .......................................................................................................... ii
Summary of Financial Implications ........................................................................................ iii
STRATEGY ANALYSIS

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General Environment ................................................................................................................ 1

SWOT Analysis ......................................................................................................................... 3
Porters 5 Forces Model ........................................................................................................... 4
Strategic Groups ....................................................................................................................... 5
Value-Chain Analysis ............................................................................................................... 6
Resource-based View ............................................................................................................... 8
Financial Performance & Ratio Analysis .............................................................................. 10
Balanced Scorecard & Strategy Map .................................................................................... 12
STRATEGY FORMULATION

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Porters Generic Strategies .................................................................................................... 14

Industry Life Cycle .................................................................................................................. 15
Corporate Diversification ....................................................................................................... 17
BCG Portfolio Matrix ............................................................................................................... 18
Porters Diamond of National Advantage ............................................................................. 19
Global Strategies .................................................................................................................... 20
STRATEGY IMPLEMENTATION

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Action Plan .............................................................................................................................. 22

Control and Governance ........................................................................................................ 24
Culture and Leadership .......................................................................................................... 25
APPENDIX 1: RECENT INCOME STATEMENTS ................................................................................ A
APPENDIX 2: KEY FORECASTING ASSUMPTIONS .......................................................................... B
APPENDIX 3: PRO FORMA INCOME STATEMENT AND CASH/CAPITAL INVESTMENT
NEEDS........................................................................................................................................................... C
APPENDIX 4: GREEN BOOK DESIGN SPECIFICATIONS ................................................................ D
APPENDIX 4: PRESENTATION SLIDES ................................................................................................ E

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Executive Summary
Executive Summary
Corporate Mission and Goals
The Company is committed to bringing the best personal computing, portable
digital music and mobile communication experience to students, educators,
creative professionals, businesses, government agencies, and consumers
through its innovative hardware, software, peripherals, services, and Internet
offerings. The Company's business strategy leverages its unique ability to design
and develop its own operating system, hardware, application software, and
services to provide its customers new products and solutions with superior easeof-use, seamless integration, and innovative industrial design.
Empowering individuals, one person-one computer, and doing so with elegance
of design and fierce attention to detail.
Strategy Statement
The Company believes continual investment in research and development is
critical to the development and enhancement of innovative products and
technologies. In addition to evolving its personal computers and related solutions,
the Company continues to capitalize on the convergence of the personal
computer, digital consumer electronics and mobile communications by creating
and refining innovations, such as the iPod, iPhone, iTunes Store, and Apple TV.
The Company's strategy also includes expanding its distribution network to
effectively reach more of its targeted customers and provide them with a highquality sales and post-sales support experience.
Apples strategy is to hire a new, business-savvy CEO and move Steve Jobs
from CEO to Chief Product Development Officer, where he will intimately focus
on the creation of the new GreenBook.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page i

Executive Summary
Summary of Action Plan
What:
Apple will move Steve Jobs from CEO to Chief Product Development Officer,
where he will intimately focus on the creation of the new GreenBook. A new,
business-savvy CEO will be hired to stabilize the company.
Why:
Steve Jobs has contributed to both the successes and volatlitly of Apple. By
placing Jobs as the head of product development, he will be able to better focus
on what he does best; by hiring a new business-savvy CEO, investors can be
less concerned about the risks that Jobs poses to the value of their shares. By
introducing the GreenBook, Apple can essentially command a greater market
presence and extend the product life cycle of the MacBook Pro, the product it will
be replacing.
When:
Steve Jobs will immediately assume the role of Chief Product Development
Officer, and will step down as CEO upon the identification of the ideal CEO. The
target launch for the new GreenBook will be the summer 2009.
Where:
The GreenBook will be made available world-wide via its 197 retail locations and
online store.
Who:
The GreenBooks target customers are students, educators, creative
professionals, businesses, government agencies, and consumers who are
looking for a new, engaging mobile computing experience. The product will have
additional appeal to those most concerned about protecting our environment.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page ii

Executive Summary
Summary of Financial Implications
The net expected financial effect of the strategy is an increase of $4,500,000 of
expenditures in 2008 and $2,000,000 in 2009, along with a 2.28% increase in net
working capital to 22.28% of net revenues in 2009 and thereafter and a 9.92%,
decrease in fixed assets, after its 2008 high of 25%. The other, implicit financial
implication is to decrease the expected variance of future sales and thusly
increase the stability of net profits as the GreenBook essentially replaces the
MacBook Pro in Apples product portfolio and thus augments the firms industry
life cycle and serves to stabilize Apples stock price.
As Apple does no formal market research, it is not practical to forecast the
expected market share of the GreenBook, let alone the expected revenues
attributable to the product. As such, Apples financial forecasts assume that net
sales growth will be the already expected 24.7% for 2008 and incrementally
average down to the industry average of 13.2% by 2012. This implies that with
the discontinuation of the MacBook Pro, the GreenBook will assume its market
share and contribution to net revenues.
Other financial implications directly associated with this new strategy are an
increase of $500,000 in cost of sales in 2008 and $1,000,000 in 2009 to account
for the GreenBook's introductory marketing campaign.
Research and
development will also increase abnormally by $3,000,000 in 2008 and by
$1,000,000 in 2009 to account for the costs of creating the GreenBook. The
associated investment in working capital assumes that NWC will be 20% of net
sales in 2008 and 22.28% thereafter, which represents the ratio of 2008's
investment in working capital to net sales. The associated investment in fixed
assets assumes that FA will be 25% in 2008 and 15.08% thereafter, which
represents the ratio of 2008's investment in fixed assets to net sales. The
investment in fixed assets in 2008 will increase abnormally by $1,000,000 to
account for the GreenBook.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page iii

Strategy Analysis
General Environment
Demographics:
Aging Population (baby boomers)
- Baby boomers did not grow up with computers, but apple products make
it easy to learn.
- More people retiring, more time to check out apple products.
Rising Affluence
- More money in economy results in more money spent on new Apple
technologies.
Increased Life Expectancy
Socio-Cultural:
Higher Percentage of Women in Workforce
- Apple products more attractive and recognizable than any other products.
- Design conscious
Increase in Health Consciousness
- More people working out with iPods.
Postponement of Family Formation
- More disposable income to be spent on Apple products.
Increased Concern for Environment
- Customers demand environmentally friendly products.
- Apple recycles old products for customers that send in iPods and
computers.
Technology Driven
- Customers demand the best and newest products
- Constant release of newer versions of older Apple products.
Political/Legal:
Music for Sale Over the Internet
- Resulted in new legislation against the free downloading of music.
Technological:
Genetic Engineering
- Hardly any viruses for Apple software.
Emergence of Internet technology
- Largely accounts for PCs and Apples success
- Input some statistic for average amount of computers per household
Miniaturization of Computer Technology
- Improvements in mobility of products such as mp3 players, laptops, etc.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 1

Strategy Analysis
Economic:
Increased Global GDP
- Export more products
Increase in Minimum Wages
- Minimum wages has increased to $8.00 in CA, but federal wages remain
at $5.75.
Increased Unemployment Rate
- With a computer and the right skills, one can start their own business.
Global:
New Markets
- Emergence of Indian and Chinese markets.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 2

Strategy Analysis

External

Internal

SWOT Analysis
!
!
!
!
!
!
!

Strengths
Jobs creativity & drive
Brand Recognition
Product Differentiation
Control of hardware and OS
Opportunities
Green movement
Demand for all-in-one
products
Information age

!
!

Weaknesses
Jobs lack of formalities
No market research

!
!

Threats
Weak Economy
SEC Investigations

The overall strengths of Apple Inc. have been its brand name and the niche
market it has segmented for itself with a wide array of digital lifestyle products.
The company has many opportunities to further expand its market worldwide and
has done so by opening up new Apple stores in countries such as Japan and
Italy. They have also introduced products like the iPod, which has given them
added revenue, and sales that were new to the company when compared to the
previous computer sales.
The weaknesses Apple has internally are its lack of market share when
compared to its main competitor Microsoft. Price of Apple products are a lot
higher when comparing them to their close substitutes.
Threats that are external to the company would have to begin with Steve Jobs
the current CEO retiring. Mr. Jobs retired from Apple once before and the
company saw a drop in sales and only when Mr. Jobs returned to Apple did the
company start to turn around and become profitable. Viruses are currently not
affecting Apple products but the companys close substitute Microsoft has dealt
with these fatal errors for some time. As Apples market share continues to
increase the threat of viruses written for Apples will increase and may cause
customers to find safer products to use.
The economy affects all industries when a country is in a economic downturn.
Apple faces threats from these downturns because people tend to save and not
make big purchases.
Apple is also threatened by the SEC for tampering with options given to CEOs
and employees. The backdating issue is a major infraction and will not go over
well with shareholders and may affect Apples stock price.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 3

Strategy Analysis
Porters 5 Forces Model
Threat of New Entrants (High):
! Economies of scale Producing mass quantities of electronics becomes
cheaper with higher quantities, but parts can be purchased and various
value-chain activities can be outsourced.
! Product differentiation Apple excels at creating unique products and so
maintains a distinct advantage over competitors.
! Capital requirements Development of new electronics products can be
costly and time-consuming, whereas mimicking existing products is
relatively easy for competitors.
! Access to distribution channels Storefronts and distributors are valuable,
traditional distribution channels, but online marketing mechanisms and
computer superstores are enabling new competitors and Apple alike.
! Cost disadvantages independent of scale Microsoft Windows is the
favored operating system of many computer manufacturers and so
software companies develop products that are often not initially Applefriendly.
The Bargaining Power of Buyers (Low):
! Volume Most buyers are consumers and so rarely purchase in large
volumes.
! Switching costs Apples products work well together and its software is
custom-designed, so switching costs are relatively high for heavily
committed consumers.
! Standardization Most Apple products contain proprietary software that
does not easily interface with non-Apple products, thus minimizing the
threat of standardization.
The Bargaining Power of Suppliers: (Low):
! Hardware/Software suppliers Apple is one of the few companies that
controls both its own hardware and operating system, along with many
software applications and accessories.
! Substitute products many substitutes for Apple products diminish the
bargaining power of the companys suppliers.
The Threat of Substitute Products: (Medium-High):
! Mimicking Apple is an industry leader, but this means that competitors
tend to mimic Apples products, which quickly can be seen as substitutes
by consumers.
The Intensity of Rivalry: (High):
! Numerous competitors many other companies produced the same
products as does Apple, though Apples products are uniquely appealing
to certain market segments.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 4

Strategy Analysis
!
!

Industry growth the electronics industry has been slowing, and is

expected to continue to slow, although it has been expanding
tremendously over the past decade.
Research & Design high R&D costs can be prohibitive to competing
firms, especially during recessions, where Apple traditionally increases
R&D spending in order to emerge from the downturn on the top.

Strategic Groups
Technology Industry:

High

Price

Gateway
Lenovo

SanDisk
Creative

Microsoft
Toshiba
Acer
Samsung

Apple
Dell
HP

Low
Low

Breadth of Product Line

High

Use of Strategic Group Analysis:

! Helps identify who the most direct competitors are and on what basis they
compete.
! Raises the question of how likely or possible it is for another organization
to move from one strategic group to another.
! Strategic Group mapping might also be used to identify opportunities
! Can also help identify strategic problems

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 5

Strategy Analysis
Value-Chain Analysis
Primary Activities:
! Inbound Logistics
o The Company attempts to mitigate these potential risks by working
closely with these and other key suppliers on product introduction
plans, strategic inventories, coordinated product introductions, and
internal and external manufacturing schedules and levels.
o The Companys purchase commitments typically cover its
requirements for periods ranging from 30 to 150 days.
o The Company performs a detailed review of inventory each fiscal
quarter that considers multiple factors including demand forecasts,
product life cycle status, product development plans, current sales
levels, and component cost trends. The personal computer,
consumer electronics and mobile communications industries are
subject to a rapid and unpredictable pace of product and
component obsolescence and demand changes.
! Operations
o Efficient plant operations to minimize costs.
o Hardware, operating systems, and software all built by Apple.
o Use of environmentally-friendly manufacturing techniques.
o Appropriate level of automation.
! Outbound Logistics
o To ensure a high-quality buying experience for its products in which
service and education are emphasized, the Company has
expanded and improved its distribution capabilities by opening its
own retail stores in the U.S. and internationally.
o To improve access to the iPod product family, the Company has
significantly expanded the number of distribution points where
iPods are sold.
! Marketing and Sales
o The Company distributes its products through wholesalers,
resellers, national and regional retailers and cataloguers.
o The Company believes that sales of its innovative and differentiated
products are enhanced by knowledgeable salespersons who can
convey the value of the hardware, software, and peripheral
integration, demonstrate the unique digital lifestyle solutions that
are available only on Mac computers, and demonstrate the
compatibility of the Mac with the Windows platform and networks.
o The Company further believes providing a high-quality sales and
after-sales support experience is critical to attracting and retaining
customers.
o The Company also staffs selected third-party stores with the
Companys own employees to improve the buying experience
through reseller channels.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 6

Strategy Analysis
!

Service
o Companys service and support contracts, including the AppleCare
Protection Plan (APP) and Mac.

Support Activities:
! Procurement
o Deal with Samsung guarantees 40% of its production capacity to
Apple.
o Effective procedures to purchase advertising services.
! Technology Development
o The Company continues to develop new products and technologies
and to enhance existing products in the areas of computer
hardware and peripherals, consumer electronics products, mobile
communication devices, system software, applications software,
networking and communications software and solutions, and
Internet services and solutions.
o The Company continues to believe that focused investments in
R&D are critical to its future growth and competitive position in the
marketplace and are directly related to timely development of new
and enhanced products that are central to the Companys core
business strategy. As such, the Company expects to increase
spending in R&D to remain competitive.
! Human Resource Management
o Apple hires people who love Apple products and are never satisfied.
! General Administration
o Weekly review of products under development.
o Close oversight of all products by Steve Jobs.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 7

Strategy Analysis
Resource-based View
Tangible Resources:
! Financial
o Firms Cash account and cash equivalents:
! $9,352,000,000
o Firms Capacity to raise equity:
! 1,800,000,000 Shares Authorized
! 872,328,972 Shares Issued
! 17,066,404 Shares in Treasury
! 927,671,028 Available for Issuance
! Physical
o Plant and Facilities:
! 197 Stores (23 International)
! Cupertino, California, 2.4 million square feet of facilities for
Research and Development and corporate functions
including 1 million square feet for the future development of
the companys second corporate campus.
! Cork, Ireland, 367,000 square feet of facilities for
manufacturing and customer support call center
! Sacramento, California, 805,000 square feet of facilities for
warehousing, distribution operations, and customer support
call center.
! Newark, California, 107,000 square feet for data center
! Additional facilities outside the U.S. totaling approximately
129,000 square feet.
! Current Facilities are well maintained and in good operating
condition.
! Technological
o Patents, copyrights, trademarks:
! 2,327 Patents held
! 327 Live Trademarks
! 453 Copyrights
! Organizational
o Superb strategic planning processes finding new ways to apply
companys strengths to new markets and products.
o Business primarily managed on a geographical basis separating
into operating segments of the Americas, Europe, Japan, and
Retail.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 8

Strategy Analysis
Intangible Resources:
! Human:
o Experience and Capabilities of Employees:
! Highly Experienced and innovative staff in product design
and software development.
o Managerial Skills:
! Steve Jobs as Visionary Leader of firm.
! Innovation and Creativity:
o Technical and scientific skills:
! Premier provider of technology solutions for graphic artists
and web designers.
o Innovation Capacities:
! Extremely Innovative firm at using core competencies to
expand and create a Digital Lifestyle for its customers.
o Brand Name:
! Recognizable Brand Name reflecting innovator in computer
technology.
! Reputation
! Reputation with customers for quality, reliability, and leadingedge products.
Organizational Capabilities:
! Excellent customer service available through stores.
! Educated sales staff to match customers with the right product.
! Innovative products in Digital Industry.
! Excellent Product development capabilities.
! Incredible Leadership.
! Ability to design sleek and attractive products.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 9

Strategy Analysis
Financial Performance & Ratio Analysis
As can be seen from the below table, Apple has increased its leverage and
reduced its liquidity, thus providing for increased profitability, P/E ratios, and MTB
ratios. Further supporting evidence comes from the turnover ratios, which
suggest that inventory is sitting idle longer and receivables are taking longer to
collect. Industry data support these statements, but also suggest that Apple is an
industry leader, as it is overall more profitable and its stock is traded at higher
than average P/E and MTB ratios. Further, as can be seen from the Stock
Comparison Chart that follows, Apples stock has outperformed that of its
competition since Steve Jobs return in 1997, although the volatility of the stock
has also increased as can be witnessed by steep movements at high volumes.

Apple Inc.
Ratio Analysis

Liquidity
Ratios

Leverage
Ratios

Turnover
Ratios

Profitability
Ratios
Market Value
1
Ratios

Current ratio =
Quick ratio =
Cash ratio =
Total debt ratio =
Debt-equity ratio =
Equity multiplier =
Times interest earned ratio =
Cash coverage ratio =
Inventory turnover =
Days' sales in inventory =
Receivables turnover =
Days' sales in receivables =
Total asset turnover =
Capital intensity =
Profit margin =
Return on assets =
Return on invested capital =
Return on equity =
Price-earnings ratio =
Market-to-book ratio =

2005

2006

2007

2.9564
2.9090
1.002009
0.3536
0.5471
1.5471
N.Av.
N.Av.
59.9273
6.0907
11.3630
32.12189
1.2060
0.8292
0.0958
0.1156
0.1051
0.1788
$ 34.15
$ 6.11

2.2422
2.2004
0.9878
0.4197
0.7233
1.7233
N.Av.
N.Av.
50.8037
7.1845
5.5953
65.2332
1.1226
0.8908
0.1030
0.1156
0.1006
0.1992
$ 33.96
$ 6.77

2.3611
2.3239
1.0057
0.4267
0.7442
1.7442
N.Av.
N.Av.
45.8150
7.9668
4.9898
73.1490
0.9471
1.0559
0.1456
0.1379
0.1214
0.2406
$ 39.04
$ 9.39

N.Av. = Not available

1

Based on diluted EPS and diluted book value, and market price per share as of fiscal year end: 29-Sep-07, 30-Sep06, and 24-Sep-05.
Assumptions
1. All liabilities represent interest-bearing debt.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 10

Strategy Analysis
Stock Comparison Chart

Source: Yahoo! Finance,

http://finance.yahoo.com/charts#chart5:symbol=aapl;range=2y;compare=dell+hpq+msft+^YHOh879;indicator=volume;cha
rttype=line;crosshair=on;logscale=on;source=undefined

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 11

Strategy Analysis
Balanced Scorecard & Strategy Map
How do Customers see us? (customer perspective):
Time: The amount of time it takes to innovate, manufacture, and distribute a new
product.
Quality:

The quality and reliability of hardware and software products.

Performance The customer service and product support after initial purchase.
and Services:
How well the products perform compared to the competitors
products.
Cost: The cost compared to any of the many competitors that offer similar
products.
What must we excel at? (internal business perspective):
Hardware and software development times We must reduce this time in order
to help maintain customer loyalty.
Innovative technologies We must continue to create new and innovative
technologies in order to maintain our competitive advantage
Quality We must only release products of high quality to maintain our image of
excellence.
Can we continue to improve and create value? (innovation and learning
perspective):
Developing new hardware.
Developing new software.
Developing gaming systems and applications.
How do we look to shareholders? (financial perspective):
Profitability: We must make money, however you need to spend money to make
money. Give the product development ample money and expect them to turn out
award winning products.
Growth:
We must gain additional market share in the computer industry
while increasing our profits.
Shareholder value: With innovative products and obtaining additional market
share, the value of the company to the shareholders will remain strong.
Goal:
Reorganize executive board to optimally deploy talents and stabilize long-term
share price

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 12

Strategy Analysis
Means to achieve goal:
Remove Steve Jobs from CEO and make him the chief product development
Officer. Develop the GreenBook.
Financial
Customer
Internal Process
Innovation & Learning
Remove Steve Jobs from CEO and make him the chief product developer
Allocate
Make the
Place Jobs as
Hold monthly creative
money for
company less
chief product
meetings to help create
R&D
volatile and
developer
new products
there for
Higher CEO
decrease
with a stronger
customer risk
business
background
Develop the GreenBook
Use a large
Builds
Build off current Incorporate new
portion of the
customer
technologies to
features never before
R&D budget
loyalty
produce the
used into the
to develop the
because its a
GreenBook
GreenBook
GreenBook
unique
as quickly as
product
possible.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 13

Strategy Formulation
Porters Generic Strategies
Overall Cost Leadership- iTunes was the first program that allowed users to
purchase songs from an online music store and with the help of the iPod
consumers could purchase their favorite songs instead of buying the whole CD.
Now owning your favorite songs on a portable device is as easy as owning
iTunes software and an iPod. The best example for Apples cost leadership is the
iPod and the iPhone. Both products initially came out on the expensive side but
over time they both went down in price to entice new customers.
Differentiation- The iPod original did not have any special features to it other than
it being great for holding music. Further down the line Apple introduced similar
differentiated products like the iPod video, and shuffle.
Focus- Apple has focused on the ideas of Steve Jobs who brought the first at
home personal computer to the world in the 1980s, and then again after his
return from a battle with colon cancer he returned to Apple to introduce the
MacBook and soon after the iPod and not so long ago the iPhone. PDAs have
been around for ages but the problem Steve faced was customers only put
information into their PalmPilot while Mr. Jobs wanted his customer taking
information out! The iPhone was the product that allowed the internet, the
increasingly popular YouTube, and the iTunes music store to be offered in the
palm of your hand.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 14

Strategy Formulation
Industry Life Cycle
As can be seen below, Apple has product lines in all stages of the product life
cycle. As such, Apple as a company is largely in the maturity stage of the closely
related industry life cycle. Apple has been defending its market share for many
years, as evidenced by its introduction of new and improved versions of the Mac,
MacBook, and iPod. The new iPhone is largely a touch-screen version of the
iPod that also acts as a cellular phone. iTunes, Apple TV, and Mac Mini are all
suffering from competitive and managerial pressures. As a company, Apple is
essentially a portfolio of its products, and should be recognized as such.
Strategy: defend market share through continued introduction of new
products, such as the GreenBook, and extend product life cycles by
continued re-engineering of Apples core product lines.

Sales/
Profits

iMac

iPod + iTunes

MacBook Pro
iPhone

MacBook Air

Apple TV

Mac Mini

Time

MacBook
Air
MacBook Air

The MacBook Air is a relatively new product that essentially

modifies, and thus partially cannibalizes the MacBook, which
is not evaluated here. MacBooks have long been seen as
stylish laptops, and the MacBook Air leads its peers by
building upon a success product and introducing new
technology.
Strategy: increase market awareness
through an aggressive advertising campaign to precede
that of the GreenBook.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 15

Strategy Formulation
iPhone
iPhone

The iPhone was a big hit last year, but competitors are quickly
threatening its continued success. New software applications and
functionality are being introduced to the markets, but more
consumer demand is clearly needed. Strategy: create consumer
demand through development of synergistic capabilities with
desktop and laptop series, especially with the GreenBook.

MacBook
Pro
MacBook Pro

iMac
iMac

The iMac is Apples flagship product. A related product is the Mac

Pro, which is merely a more powerful version of the iMac, and as it
is an extension of the iMac, it is not evaluated here. Strategy:
defend market share and extend product life cycle through
introduction of new functionalities.

iPod +
+ iTunes
iPod
iTunes

Apple
TV
Apple TV

The MacBook Pro is largely a more powerful version of the

MacBook. The GreenBook will essentially be another
augmented version of the MacBook, and so the Macbook
Pro should be considered for discontinuation as it
cannibalizes sales, and cost leadership is not an Apple
tradition. Strategy: create consumer demand and extend
product life cycle through discontinuance of MacBook
Pro and introduction of new functionalities for the
MacBook.

The iPod is one of Apples most successful products, though

its prosperity is dwindling as evidenced by its intense
competition and quasi-cost leadership strategy. iTunes is
closely related to the iPod as purchases made for the iPod
are not easily played on other players.
Strategy:
breakaway positioning; defend market share and extend
product life cycle through introduction of new
functionalities for iTunes purchases on the iPod and
transferability of iTunes purchases onto other players.

Apple TV was ill conceived. The major error made by management

was the misjudgment of the demand for the product. Consumers
want to view movies from their PCs on their TVs, not their photos
and other content. Strategy: consolidate efforts into those of
the GreenBook to offer the Apple TV technology in the new
product.

Team 9: Chambers, Daniel, Magaddino, Mironov, Sanders, and Solie-Vilker

Page 16

Strategy Formulation
Mac Mini
Mac
Mini

Mac Mini was ill conceived. The idea was noble and logical, but a
lack of market research forecasted the demise of this revolutionary
product that was never introduced properly. Strategy: exit; the
product is no longer beneficial to the companys portfolio and
is a drain to its resources.

Corporate Diversification
Apple, Inc. prides itself on its ability to produce the majority of its operations
internally. Recently, Apple formed a strategic alliance with Intel to outsource the
creation of their central processing units (CPU). This move allowed Apple to
focus on software and hardware development. The speed and quality with which
Intel is able to produce CPUs is far beyond Apples capabilities. Apple is now
able to operate more efficiently by cooperating with Intel as a business partner.
In the end, this was the right move despite Apples preference to operate
internally.
Apple has delegated a huge portion of their operations to Intel, and are now able
to re-focus their internal operations. Now more than ever, internal development
is a key means by which Apple can expand their business. Apple is known for
their intensive research and development, unique product design, and highquality sales and post-sales experience. For Apple to become more successful
they must extend their product lines, and find explore ways to capture more
market share.

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Strategy Formulation
BCG Portfolio Matrix

44%

Industry Growth Rate

40%

15%
10%
8%

5%

80%

70%

30%

20%

6%

2%

Market Share
Product
Market Share Growth Rate
Notebook Computers
17.60%
14.10%
Mp3 Players
70.10%
5%
Desktops
6.30%
8%
Smartphone
27%
44%
Servers
2.30%
5.10%

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Strategy Formulation
Porters Diamond of National Advantage

Domestic
Rivalry

Factor
Conditions

High Salaries,
Abundant
resources,
Large pool of
skilled labor,
stable
infrastructure

Domestic
Demand
Conditions

Related and
Supporting
Industries

Many types of tablet PCs already available, all

competitors have ability to produce tablet
PCs, competition is extremely high

Huge market that

continues to grow,
customers demand
innovative technologies,
highly educated
customers, extremely
loyal customers

Foreign
Demand
Conditions

Education, communication, transportation, raw

materials, and manufacturing industries are all very
well developed

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Strategy Formulation
Global Strategies
The two opposing forces that firms face when they expand into global markets
are cost reduction and adaptation to local markets.
Pressures to Lower Costs:
The markets for consumer electronics, personal computers, related software and
peripheral products, digital music devices and related services, and mobile
communication devices are highly competitive. Over the past several years, price
competition in these markets has been particularly intense. The Company's
competitors who sell personal computers based on other operating systems have
aggressively cut prices and lowered their product margins to gain or maintain
market share. Apples financial condition and operating results can be adversely
affected by these and other industry-wide downward pressures on gross margins.
Apples product features, relative price/performance, product quality and
reliability, design innovation, availability of software and peripherals, marketing
and distribution capability, service and support, and corporate reputation have
allowed them to keep their high-end prices without feeling the pressures to lower
costs. The fact that Apple is the only participant in the personal computer
industry that controls the design and development of the entire personal
computer (from the hardware and operating system to sophisticated applications)
helps too.
Pressures for Local Adaptation:
Apple Inc. manages its business primarily on a geographic basis. Its reportable
operating segments are comprised of the Americas, Europe, Japan, and Retail.
The Americas segment includes both North and South America. The Europe
segment includes European countries as well as the Middle East and Africa. The
Retail segment operates Apple-owned retail stores in the U.S., Canada, Japan,
the U.K. and Italy. Another operating segment is the Asia-Pacific segment, which
includes Australia and Asia but not Japan. Apple owns a 367,000 sq. ft.
manufacturing facility in Cork, Ireland that also houses a customer support call
center.
There is low pressure to adapt to local markets due to the fact that all of Apples
products are standardized for all of their worldwide markets. Part of Apples
business strategy is to expand its distribution network to effectively reach more of
its targeted customers and provide them with a high-quality sales and post-sales
support experience. To do so the Company sells its products worldwide through
its online stores, its retail stores, its direct sales force, and third-party wholesalers,
resellers, and value-added resellers.
In a joint venture between Apple Inc. and South Software Park Development Co.
Ltd. Apple-SSP Development Ltd. was created. The new company will focus on

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Strategy Formulation
developing core technologies for the next generation of personal computing on
the PowerPC platform with Mac OS in Chinese-speaking markets.
At the end of fiscal 2007, the Company had opened a total of 197 of its own retail
stores, including 174 stores in the U.S. and a total of 23 stores in Canada, Japan,
U.K. and Italy. The Company has typically located its stores at high-traffic
locations in quality shopping malls and urban shopping districts.
One of the goals of the retail initiative is to expand the Company's installed base
through sales to customers who currently do not already own the Company's
products. By operating its own stores and locating them in desirable high-traffic
locations, the Company is better positioned to control the customer buying
experience and attract new customers. The stores are designed to simplify and
enhance the presentation and marketing of the Company's products and related
solutions. To that end, retail store configurations have evolved into various sizes
in order to accommodate market-specific demands.

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Strategy Implementation
Action Plan
Who:
Apple will be coming out with the GreenBook for people of all ages who are
looking for a multipurpose computer configured for the workplace and home. The
computer will offer something for everyone by including gaming, touch screen
instead of a mouse for easy adjustments to word documents and Internet
searching. The artistic users will be able to utilize the stylus feature to draw.
Countries around the world typing in different languages will be able to change
the keyboard to incorporate characters that are left out of traditional keyboards.
Not only are children and older generations going to be able to use the
GreenBook but big business will thrive off of the added efficiency of touch screen
technology eliminating the use of a mouse which takes away time from formatting.
All of the Apple stores staff will be trained to recommend unique ways of getting
the most out your GreenBook especially leaving your case in the sun to generate
power for your computer to run off of.
What:
Apple Inc, will be going further in the global market than it ever has before.
Typically price deters consumers from taking the next step in purchasing the user
friendly Apple but now with added features such as dual touch screen interfaces
people around the world will see the added benefits of going Green. The ease of
simply touching where you want to go on the Internet will redefine how web site
developers create their sites. This new technology will make using a GreenBook
more conventional than ever before because people wont have to search for a
cursor on the screen, theyll simply touch where they want to go and the cursor
will automatically appear for them. Not only will a customer be receiving the latest
and greatest in technology developments they can count on purchasing a lasting
product that is protected from spills and bruises due to its rubber coating and
waterproof seal.
When:
Apple doesnt test their products. Instead they come up with an idea and go for it.
Therefore the GreenBook will be available as soon as production is finished and
marketing has had time to create hype about he new laptop for sale.
Where:
Global markets will be penetrated instantaneously because of the keyboard
interface being able to change into a variety of languages. Their will be set
configurations to select from but the final make up of what a customer uses to
type will be finalized by their wants, needs and demands. The multi power
adapter will also encourage GreenBooks expansion into new markets. No longer
will consumers search for adapters to use their computer, the GreenBook will be
compatible with every power source no matter what the voltage may be.

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Strategy Implementation
How:
The current market for laptops has been saturated with similar products from
multiple producers. The next innovation in technology recently has come from
Apple because Steve Jobs has knack for knowing what consumers want. The
consumer nowadays is focused on the environment and the latest in what
technology has to offer. Because the GreenBook is an environmentally friendly
product that incorporates touch screen technology, a waterproof seal, and shock
absorbing design it can be used be an entire family, especially kids. Learning
software will come packaged with the GreenBook as well as graphic arts
applications to utilize the drawing capabilities and lasting durability will entice any
consumer.

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Strategy Implementation
Control and Governance
The Role of the Board of Directors:
The role of the Board of Directors is to oversee the CEO and other senior
management in the competent and ethical operation of the Company. To
perform this duty the directors will constantly review, discuss, and set standards
to guarantee the continuing success of the Company.
Directors bring a wide range of experience and knowledge to the Company. To
ensure the continued diversity of the board, the board believes that there should
be at the least a majority of independent directors who meet the criteria for
independence established by the NASDAQ Stock Market. Also, the Nominating
and Corporate Governance Committee will be responsible for seeking and
receiving recommendations and review the qualifications of potential directors.
The board will provide an annual review of the performance of all officers of the
company, including the CEO. The CEO performance review will be used by the
board to determine if the CEO has provided exceptional leadership of the
Company.
These reviews should be used in determining executive
compensation. The board should also perform an annual self-evaluation to
determine if the board and its members and committees are performing
effectively.
To responsibly serve on the Companys board requires a considerable amount of
time and attention. It is the duty of all board members to spend the time needed
and meet as often as needed to properly perform the boards duties. It is
therefore the belief of this board that no member shall serve on more than two (2)
boards of public companies in addition to the Companys board. It is also the
belief of this board that the CEO shall not serve as the Chairman of the Board as
well as not serve on more than two (2) boards of public companies in addition to
the Companys board.
The Role of the Auditor:
The Company had prior to the Sarbanes-Oxley Act, adopted a policy of auditor
independence banning its auditors from non-financial consulting services to the
Company. After the enactment of the Act, the Company met with its auditors to
discuss the provisions in the Act relating auditor independence.
In accordance to this policy, all auditing services are to be performed by KPMG,
as approved by the Audit Committee.

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Strategy Implementation
Culture and Leadership
Apples Principles:
Loyalty - To customers and Apples Mission
Innovation - of computers
Technology - Developing synergies between advancements and products
Implementation - Putting technology into action
Responsibility - For making computing easy for everyone
Education - Teaching the minds of the future new ways to learn
Creativity - Inspiring laptops to make life easier
Apple Inc works in its own world. The company brought the first personal
computer to the marketplace and has been a market leader during most of Steve
Jobs tenure as CEO. The culture at Apple has been focused on innovation, and
product performance is the number one goal at Apple. Outperforming PCs in the
media sector for years has been the companys claim to fame and understanding
what graphic artists, video editors, and everyday students need in a computer
has been Apples core strength.
Steve Jobs has been the key to Apples success and under his eyes the
company has gone from the top to the bottom and back to the top. The brand
name that he has developed for Apple over the years is invaluable, but Jobs is
also the companys largest possible risk factor. He substitutes his vision for
marketing research and the companys product development efforts are based
on his whims.
Jobs domineering leadership results in Apple products that are continuously
improved, yet cannibalize the sales of other products previously released. This
resulting strategy is to discontinue profitable products as to maintain an image of
product superiority. The impact on the companys culture is the fostering of
obsessed product engineers and designers who seek to please Jobs or risk
losing their jobs.
In order to improve its culture of leadership, Apple Inc will have to take a step
sideways. Mr. Jobs will no longer be CEO and Chairman of the Board, instead he
will focus on product innovation and development. Caring for the customer will
ultimately become Jobs lasting impression on Apple Inc, because it will amplify
his strengths in designing longer lasting and more user-friendly products for
consumers to purchase in the future.
After many more years in research and development, Steve Jobs can retire a
hero to the world after creating the Green Book. This latest product will address
environmental issues, late breaking technology advancements in laptop design,
and durability stemming from the waterproof seal and recycled shock absorbing
rubber coating.

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APPENDIX

Appendix 1: Recent Income Statements

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APPENDIX

Appendix 2: Key Forecasting

Assumptions
1. Net sales growth will be 24.7% for 2008 and incrementally average down to the industry
average of 13.2% by 2012.
2. Cost of sales will hold at the arithmetic average of 69.34% of net sales, and will increase
abnormally by $500,000 in 2008 and by $1,000,000 in 2009 to account for the GreenBook's
introductory marketing campaign.
3. Research and development will hold at the arithmetic average of 3.59% of net sales, and will
increase abnormally by $3,000,000 in 2008 and by $1,000,000 in 2009 to account for the
GreenBook.
4. Selling, general, and administrative will hold at the arithmetic average of 12.76% of net sales.
5. Other income and expense will hold at the arithmetic average of 1.86% of net sales.
6. The average tax rate will hold at the arithmetic average of 28.69%.
7. The investment in working capital assumes that NWC will be 20% of net sales in 2008 and
22.28% thereafter, which represents the ratio of 2008's investment in working capital to net sales.
8. The investment in fixed assets assumes that FA will be 25% in 2008 and 15.08% thereafter,
which represents the ratio of 2008's investment in fixed assets to net sales. The investment in
fixed assets in 2008 will increase abnormally by $1,000,000 to account for the GreenBook.

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APPENDIX

Appendix 3: Pro Forma Income

Statement and Cash/Capital Investment
Needs

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APPENDIX

Appendix 4: Green Book Design

Specifications
GreenBook
The new sleek environmentally friendly design that incorporates the MacBook Air,
your iPhone, and iPod combined to create the GreenBook.
-Two touch screens that join at the middle but separate when needed allow the
user to play games, give presentations, and function as a keyboard in any
language.
-Touch screen technology eliminates the need for a mouse and allows the user
to simply use their finger as the cursor so any mistake can be pointed out and
fixed with ease.
-Rubber coated casing made out of used car tires to avoid any slipping while on
your lap or someone tripping over your power cord and pulling your new
GreenBook to the floor. The rubber will be thick enough to avoid any damage
when dropped from three feet.
-Solar powered computer case with multi adapter power plugs so any country the
GreenBook is sold in can use the product right away. Or if a consumer decides to
travel anywhere in the world they can easily charge their computer.
-Water-proof sealed so any spillage wont affect your product. The guts of your
computer need to be protected rain or shine so Apple made this product fully
submersible.
-Translator ever wonder why we cant just have our own translator with us at all
times? Well now you can with the dual screens two people hold each screen
and read what the other is saying in their native tongue. Traveling to China
simply take your Greenbook and hand the person your speaking to a side of your
Greenbook and they can read in their own language in their language.
Keyboard
-Widgets, pianos, drawing, video games, customize your keyboard to do
whatever you want it to do. The touch screens allow you to customize your
keyboard so it looks and feels like multiple interfaces.
For example: Graphic designers can now work on their projects anywhere
anytime with the drop of a stylist. Apple took the Tablet PC and combined this
touch screen technology with the Nintendo DS so the dual screen design
enhances the computers functionality. No more mice.

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APPENDIX

Presentation Slides

APPENDIX

Appendix 4: Presentation Slides

Insert Slides Here.

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