Apple Inc. The Apple II

Company Background

Mission & Vision

Apple's Five Force Model

Current Rivalry

Threat of New Entrants

Bargaining Power of Suppliers

Bargaining Power of Buyers

Threat of Substitute Products

Apple Inc. is the world's most formidable company. The company has grown to become one the world's most admirable companies through a deep dedication to innovation. The strategy in the last decade has revolved around the "digital hub" strategy that places the computer in the center of a more diverse gadget universe that includes media capabilities and communication technologies. This strategy has produced tremendous success. However, at the same time this success has created new obstacles for the company. This analysis will consider the current 2013 annual report and discuss Apple's current position as well as make recommendations for its future strategy.

Company Background

The Company designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications and the Company's products and services include iPhone®, iPad®, Mac®, iPod®, Apple TV®, a portfolio of consumer and professional software applications, the iOS and OS X® operating systems, iCloud®, and a variety of accessory, service and support offerings (Apple Inc., 2013). Apple sells and delivers digital content and applications through the iTunes Store®, App Store™, iBooks Store™, and Mac App Store and through a worldwide network of retailers, some company owned and others are retail partners. Apple Inc. sells its products to consumers; small and mid-sized businesses ("SMB"); and education, enterprise and government customers. The Company's fiscal year is the 52 or 53-week period that ends on the last Saturday of September.

Mission & Vision

"To make a contribution to the world by making tools for the mind that advance humankind."

-Steve Jobs (The Economist, 2009)

There seems to be some debate about whether or not Apple actually has an official mission statement. The quote above was from Steve Jobs in the 1980s and though it is inspiring, it is not Apple's official statement. In fact, the official statement for Apple is unpublished, if it exists, which leads many people to try to decipher it. One attempt is as follows (Blodget, 2013):

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.

However, this mission statement would be fairly uninspiring and is not likely to be Apple's actual mission. Furthermore, the annual report also fails to make mention of the company's mission. However it does describe the business organization as (Apple Inc., 2013):

The Company is committed to bringing the best user experience to its customers through its innovative hardware, software and services. The Company's business strategy leverages its unique ability to design and develop its own operating systems, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative design.

However, this serves as more of a description than an actual mission. It could be the case that Apple is so confident in its ability that it simply never took the time to formalize a mission. Whatever the case maybe, Apple's lack of a mission is certainly an interesting aspect of the company. Obviously Apple is one of the most successful organizations on the planet, and therefore the company's formal mission statement is not necessarily a predictor of its success.

Apple's Five Force Model

Current Rivalry

Apple's product mix is broad; the competition has to be thought of in different markets. For example, Apple is subject to fierce competition in the PC market and related industries, which have a relatively low switching cost. Pressure in this market is exerted by major players such as IBM, Dell, HP and Toshiba. In the delivery of media content Apple's iTunes and iPod face considerable pressure from other online sources as well as from illegal downloading. The iPhone is constantly competing with companies such as Motorola, Palm, Blackberry, Windows and Android-Based phones.

Threat of New Entrants

Again, since Apple is involved in so many unique markets, the threat of new entrants must be considered on a market by market basis. That being said, the costs of raising enough capital to compete with a company like Apple are so high, that this eliminates the threat of new entrants in most markets.

Bargaining Power of Suppliers

Apple's bargaining power is incredibly high. Most of Apple's suppliers are at Apple's mercy to at least some extent. Apple however...

Therefore it is actually in both parties best interest if Apple treats its employees fairly.
Bargaining Power of Buyers

There are different perspectives that can be used relative to Apple's products and this is actually at the core of Apple's business model. If you didn't like your Apple notebook or iPad you could switch it for another pretty easily. However, if you have the notebook, the desktop, the iPad, and the phone then the switching costs for any one device would be higher because these devices are made to seamlessly work together. Therefore in this case switching costs to purchasing a new computer could be considered high. The integration factor helps to "lock-in" consumers to Apple product mix.

Threat of Substitute Products

Of all the different competitive forces that Apple faces, the threat of substitute products is probably the most challenging. Apple operates on the frontlines of innovation. Therefore if another company can beat Apple to a new innovation, then this will provide a significant threat to the company. Apple must constantly keep some of the world's top talent internally so that it can constantly be in the driver's seat of the innovative process.

SWOT Analysis

Strengths

Brand Awareness

Innovative

Supply Chain Efficiency

Customer Loyalty

Weaknesses

Environmental Issues

Human Rights Issues

Management Issues

Opportunities

Maintain Market Share

Find New Niches

Continue to Diversify

Threats

Competitive Pressure

Negative Publicity

Economic Downturn

PESTEL

Political

Virtually every market that Apple operates in is relatively politically stable. Apple's products are luxury goods that are primarily to the advanced economies and therefore there is minimal political risk.

Economic

The global economy has faced a fair amount of uncertainty since the Global Recession of 2008. However, since Apple operates in global markets it is fairly well diversified and isn't tied to any one market. This offers Apple a level of protection against economic downturns in a particular area.

Social

Apple niche has developed in many social circles. Apple has built its own culture that tries to differentiate from the typical "PC" user. Therefore, Apple has significantly leveraged it social role.

Technological

Apple is on the edge of technological advancement and plays a key role in the development of this environmental factor. Apple has pushed the industry as a whole to innovate.

Environmental Factors

Environmental factors could be a source of trouble for Apple. One of its suppliers, Foxconn, has had a history of polluting its local environment in China. Apple could have other problems as well as the depletion of natural resources that are required in some of the products they produce.

Legal Factors

Apple has also had a fair share of legal problems. Most of their legal problems have come in the form of patent disputes. However, there have also been human rights issues in relation to their suppliers such as Foxconn. Although this doesn't necessarily directly affect Apple, it does have implications for the company such as negative publicity.

Discussion

Apple Inc. has been an innovator ever since the first Apple was produced. Apple's more recent breakthroughs were all a result of the way technology and devices are used together and is referred to as the "digital hub" strategy (Mortensen, 2010). This concept put the computer at the center of a broader device network that all communicated seamlessly together. This strategy has really paid off in the last decade as the iPad, iPod, and iPhone were all developed and quickly rose to prominence in the market. Furthermore this level of success has created a level of brand loyalty that is the envy of most businesses.

Not only has Apple dominated many segments in the consumer market, they also lead the world in production capacity. Apple's entire supply chain has been rated as the top supply chain in the world by Gartner's (Wailgum, 2011). Some of the categories that the supply chains were rated on included speed, agility, efficiency, responsiveness, and innovation. Another interesting aspect to Apple's production is that the entire process is outsourced. Apple sources its production to independent companies such as Foxconn in China.

It has been estimated that Foxconn currently produces about forty percent of the world's entire electronic goods production as well as represents China's biggest exporter (Wingfield, 2012). However, at the same time this operation has caused Apple a significant amount of negative publicity. The company has been notorious for using poor working conditions, long hours, and polluting the environment.

Apple must somehow find a way to clean up the environmental and social issues that are related to companies like Foxconn. It must also devise a communication plan to communicate with its…