Hbr Apple Case

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MGMT 5303
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CORPORATE & BUSINESS STRATEGY
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CASE STUDY 1– APPLE
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dUE: monday, JANUARY 23, 2012

“Apple Inc. 2010”
By Group 5:
Gautam Pangaonkar
David Mead
Mark Deveny
Lindsey Liotta

Apple’s Performance
Glance at the history:
Apple in 2001 had to go through hardships and it was a critical year for the company. The revenue fell from $8 billion in 2000 to $5.7 billion in 2001. The operating income had turned from a profit of $522 million to a loss of $344 million. Sales in the U.S and Europe had fallen by 30%. In Japan, sales and margins drastically reduced by 50%. Meanwhile Apple’s competitors such as HP, Dell, Intel, Microsoft etc., were blooming. Shown below is the graphical representation of the Years vs Total Revenue for the above mentioned companies (in millions of dollars).

Figure I: A look on the competitor’s side

Apple’s Net Sales by Product Category, 2002-2009 (in millions of dollars)

Figure II: Product wise distribution - Apple
Present:
Apple has managed to increase its revenues from $5 billion to $65 billion by 2010 and revenues are predicted to reach $100 billion in the coming years. Increase in Gross Margins = 23% to 40%.
Operating Profits = Increased to $18 billion through a loss of $344 million in 2010. Net Assets = $48 billion.
Return on Sales and capital are 28% and 39% respectively.

Range of Products| Quantity| % of Sales|
iPods| 300 million| 70%|
iPhone| 100 million| |
iPad| 25 million| 95%|
iTunes| 12 billion songs, 450 million TV episodes, 35 million books| |

Steve Jobs and the Apple turnaround:
IBM had made a comeback in the PC industry and emerged as the new standard. Apple introduced Macintosh in 1984, but because of the slow processor speed and lack of compatible software, its income fell 62% between 1981 and 1984. Jobs was forced to leave. When the new immediate CEOs, John Sculley, Spindler and Amelio, could not get Apple back on it’s feet, Steve Jobs was asked to return as CEO. He quickly moved in, adapted himself to the situation and Apple posted a $309 million profit in its 1998 fiscal year. Main Explanations for Performance

After Steve Jobs became CEO in 1997, he led Apple’s transition into a “mobile device company”. Apple products, characterized by their ease of use, industrial design, and technical elegance, inspired a unique customer loyalty to the brand. Demand was spurred on by Apple’s marketing machine, which created extraordinary hype for the company’s new product introductions. With cutting edge innovation, particularly in non-PC products, profits soared in the late 2000s.

While competitors cut R&D spending and relied on suppliers to provide standardized PC components, Apple increased R&D and built upon its strength of innovation in the development of the Mac. Using a vertically integrated supply chain, Apple cut costs through improved inventory management. Apple subsequently established symbiotic relationships with key suppliers, Intel and Microsoft. The Mac was envisioned as the “hub” for consumers’ digital lifestyle and marketed via premium price differentiation to home consumers, the largest segment of PC buyers.

The introduction of the iPod coincided with Apple’s repositioning as a digital convergence company. A key feature that differentiated the iPod from other music players was the synchronization ability with iTunes desktop software and the iTunes store. The iTunes store provided Apple with significant first mover advantage that boosted iPod sales.

Apple further progressed as a mobile device company through the introduction of the revolutionary iPhone in 2007. An unprecedented revenue sharing agreement with AT&T spoke to the power of the Apple brand, and the...
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